It’s no secret why people are exploring how to balance their portfolios with commercial real estate investments in the third-largest asset class in the United States. The returns are almost unmatched.
A $50,000 investment in commercial real estate in 2000 would have resulted in an average portfolio value of $215,821 by 2017*, while a similar $50,000 position in stocks or bonds would have grown to only approximately $125,000.
With commercial real estate showing strong returns that have held steady over the years, you may wonder why anyone would choose not to diversify their portfolio with investments in CRE holdings.
Until recently most investors were limited in how they could participate in the world of real estate investing. Unless you were a part of a commercial real estate firm’s private network, the options to get into real estate were limited to making a play in single-family (such as owning rental properties or flipping houses), or investing in Real Estate Investment Trusts (REITs) and commercial real estate (CRE) funds.
Today, however, the options for investors are greatly expanded. In fact, with the explosion of online crowdfunding and the passing of the JOBS Act in 2013, we’re witnessing a total transformation in how individuals can invest in real estate.
“Single family rentals can be a good place to start off in real estate investing. But, once investors begin to understand passive commercial real estate investments, it’s not uncommon to see them move away from owning single family rentals to redeploy their capital across a number of deals,” says CrowdStreet’s Vice President of Investments, Ian Formigle.
With this increased accessibility, investors are now choosing exactly which commercial real estate projects they’d like to invest in with access to an entire marketplace of expertly reviewed, single asset CRE opportunities.
Now that single asset commercial real estate is no longer out of reach, individual investors are maintaining a balanced three-leg investment approach (equities-bonds-real estate) without having to become landlords or house flippers.
CRE investors with CrowdStreet are enjoying average hold periods of only 2.1 years on realized offerings, with 50% of listings outperforming the target returns listed in the original pro forma.