Commercial Real Estate: The Game Changer for High Income Earners

According to a study by Tom Corley, author of Rich Habits, who studied the habits of the millionaires for five years, the one common theme and overriding secret to the success of these millionaires is real estate. And when we talk about real estate in terms of the wealthy and how they invest, we’re talking about commercial real estate (CRE), income-producing real estate in one of six classes, including multifamily, office, industrial, retail, hospitality, and special purpose.

The ultra-wealthy consistently allocate around a quarter of their portfolios to CRE, as evidenced by the allocation of the members of the ultra-wealthy investment club TIGER 21.

The reason for preference by the wealthy for CRE over residential real estate CRE offers more significant returns than traditional residential properties due to larger-scale projects and the dependability and deep pockets of business tenants.

Why Commercial Real Estate?

The reasons for commercial real estate’s appeal are multiple, but if you could boil it down to one point, it’s this. Commercial Real Estate (CRE) provides above-market returns more consistently and reliably over time than any other asset, including stocks. Over time, CRE is more consistent and less volatile. For instance, during the tumultuous economic year of 2022 with rampant inflation, commercial real estate still managed a positive return of 5.7%, whereas the S&P 500 experienced a significant drop of -18.1%.

A 2021 report by Wealth-X further supports the value of commercial real estate for building wealth, revealing that real estate was one of the top industries for wealth creation among high-net-worth individuals.

It’s no secret among the wealthy that real estate provides a tangible asset with increasing value over time, offering opportunities for both passive income through rent and long-term appreciation along with significant tax benefits.

Why High-Income Earners Are Drawn to Passive CRE Investment

High-income professionals seeking financial independence often face a dilemma: they want to grow their wealth but lack the time to actively manage investments. Besides the time requirements, the cost of acquiring commercial properties can also be prohibitive when going alone. That’s why many high-income earners looking to get their foot in the door of CRE investing go the passive route.

Passive CRE investing offers an ideal solution for busy high-income earners by providing the benefits of CRE ownership and investing without the burden of hands-on management. By investing in commercial properties passively, professionals can leave the heavy lifting to the seasoned experts without taking on 100% of the financial burden.

Passive CRE investing allows individuals to earn returns without the need for active property management. Although investors can participate through various vehicles like Real Estate Investment Trusts (REITs), real estate stocks, and real estate-focused exchange-traded funds (ETFs), savvy investors favor private options either through private real estate funds that invest in multiple properties or single-property-focused syndications. For high-income earners, private CRE funds and syndications allow them to benefit from lucrative returns from CRE while maintaining their busy careers or businesses.

The key benefits of passive CRE are:

Steady Income

CRE investments provide regular income through rent, allowing investors to earn passive cash flow while focusing on other pursuits.

Diversification

CRE investments can spread risk by investing with multiple funds/syndications across a variety of properties, property types, markets, and sectors. This reduces reliance on one asset class, providing balance to a portfolio.

Leverage Expertise

Passive investors can leverage the expertise of seasoned experts in specific sectors and geographic markets who handle everything from prospecting and acquisition to property management and disposition—freeing investors from day-to-day responsibilities.

Tax Advantages

CRE investors can take advantage of tax benefits such as depreciation and interest deductions, which enhance returns.

Tangible Assets

Unlike stocks or bonds, real estate is a physical asset. This can provide investors with the added security of knowing they can’t lose half the value of their portfolios in a matter of days, like with stocks, while benefiting from long-term value appreciation.

Why High-Income Earners Should Consider CRE

Evaluate your current investment portfolio. Ask yourself if your current allocations are putting you on the best path for achieving financial independence. Then ask yourself what adding CRE to your portfolio can do for you. For high-income professionals, passive CRE investments have long been appealing due to their scalability, low time commitment, and potential for stable returns. These investments allow individuals to allocate capital into a wealth-building asset class without diverting attention from their current demands.

Are you allocated to CRE? If not, start now!

Our new exclusive commercial real estate investment opportunity is now open, offering savvy investors a chance to diversify their portfolios. This opportunity offers investors entry into a premier lakeside town center with robust potential. Act now to secure your share in this exclusive, limited-time opportunity and position yourself at the forefront of tomorrow's thriving business landscape.