What Are The Rich Investing In Right Now?

Question

Family offices included in this study had at least a $500MM net worth.

On average these family offices had 9% of their investable cash into real estate and infrastructure.

Within the real estate sector, 30% of family offices reported they plan to increase their exposure to residential real estate in the next year.

Another 30% are looking to maintain their current exposure to residential real estate.

Multifamily was a specific goal for some family offices because of the mixture of low supply and high interest rates which have made housing affordability more difficult for residents. These 2 factors are projected to continue pushing strong demand for apartments and residential rentals.

7% of family offices claimed they plan to invest in more office space. 4% in more retail13% are looking to expand their footprint in industrial with 28% saying they’ll maintain their current exposure.

Other emerging asset classes were data centers, sustainable food production, and biotech.

Claude Goodman · Answer

That explains why the prices of Multifamily are so high now relative to inflation and interest rates....Cash buyers are willing to accept current CAP rates which are below inflation rates and below lending rates.

Evan Polaski · Answer

@Claude Goodman, while I don't have research to back this up directly, the ultra wealthy have always had an allocation of their portfolio in real estate, most commonly commercial real estate, and that includes multifamily.

While the allocations may shift a little here and there, I do not believe there is any real additional demand from the ultra high net worth now versus 5-10-15 years ago.  When I started my career in 2007 (pre-financial crisis), the team I was on was targeting advisory groups that work with many family offices, all of whom were seeking real estate investment across asset classes.

The biggest reason I think prices are so high and will remain high is because there is an overall housing shortage, there is limited land in areas people want to live in, there is zoning that mitigates the ability to add new supply in any meaningful way, and ultimately, it is the rise of forums like these, Instagram, all the gurus that have platforms now to sell their course to teach others how to make money in real estate.  It is this marketing that is getting people interested, and these courses that often make it out be "easy".  This effect is creating a wave of real estate investors like never before, that are bidding up properties.

The ultra rich are not looking at buying a 20 unit apartment (unless they made their wealth in real estate), they are going into institutional funds as an LP.  They are buying into large scale deals, where their $10+mm check is sitting alongside others like it on portfolios of 1,000s of units.

Evan Polaski · Answer

@Claude Goodman, while I don't have research to back this up directly, the ultra wealthy have always had an allocation of their portfolio in real estate, most commonly commercial real estate, and that includes multifamily.

While the allocations may shift a little here and there, I do not believe there is any real additional demand from the ultra high net worth now versus 5-10-15 years ago.  When I started my career in 2007 (pre-financial crisis), the team I was on was targeting advisory groups that work with many family offices, all of whom were seeking real estate investment across asset classes.

The biggest reason I think prices are so high and will remain high is because there is an overall housing shortage, there is limited land in areas people want to live in, there is zoning that mitigates the ability to add new supply in any meaningful way, and ultimately, it is the rise of forums like these, Instagram, all the gurus that have platforms now to sell their course to teach others how to make money in real estate.  It is this marketing that is getting people interested, and these courses that often make it out be "easy".  This effect is creating a wave of real estate investors like never before, that are bidding up properties.

The ultra rich are not looking at buying a 20 unit apartment (unless they made their wealth in real estate), they are going into institutional funds as an LP.  They are buying into large scale deals, where their $10+mm check is sitting alongside others like it on portfolios of 1,000s of units.

Gretchen Guarino · Answer

Hi Justin, I'm seeing high net worth individuals investing in Multifamily Apartment Buildings in my local market here in Buffalo. Both U.S. and Foreign Nationals!

What Are The Rich Investing In Right Now?

Most Popular Reply