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Fresh alternative asset insights and the latest news on real estate and private equity investing.

Investors’ View of Real Estate Brightens

  |  By Chris Shanahan, CISP®

With the US housing market on the rebound and the economy on the mend, real estate investors are taking a more positive view of the asset class and are relying on it to add diversification to their portfolios.

Those are two findings of a new report from research firm Preqin that asked institutional investors their views on real estate.

The No. 1 reason that surveyed investors said they are investing in real estate was for its diversification benefits.

Preqin attributed this to the asset class’s relatively low correlation to traditional asset classes and the diversity of property types, strategies and locations available on the market. 

Investors’ Main Reasons for Investing in Real Estate

Preqin also found a large proportion of respondents are investing in real estate because of its inflation hedging properties and its ability to generate a predictable and reliable income stream.

These results mirror what we see at PENSCO, where we help clients hold real estate in their self-directed IRAs. Many of our clients own real estate in their retirement account because of its diversification benefits.

But another popular strategy that our clients follow is to own single-family homes in their self-directed IRAs that they rent to tenants. This allows them to grow their IRA account by collecting monthly rent checks and benefiting from any potential home price appreciation.

Preqin’s report also found a large jump in investors’ perception of the real estate industry. Fifty-seven percent of surveyed investors had a positive view of the real estate industry in June, up from 37% in December. Investors who held a neutral view of the asset class appear to have become more positive.

Investors’ General Perception of the Real Estate Industry, December 2014-June 2015

What does this mean for real estate investment going forward?

Many investors said they will increase their exposure to real estate, with 78% of surveyed investors saying they expect to commit the same amount of capital, or more, to real estate in the next 12 months compared with the previous year.

In the longer term, 55% of respondents will look to maintain their allocations to real estate, but further growth in the asset class is expected as more investors are planning to increase their allocations than reduce them.

Investors’ Expected Capital Commitment to Private Real Estate Funds in the Next 12 Months Compared to the Last 12 Months

If you want to learn more about investing in real estate with your IRA, you can download our guide:

PENSCO’s Blog is purely for educational purposes.  PENSCO does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Individuals are encouraged to seek professional advice before making any investment decision. Investments are not FDIC insured and are subject to risk, including the loss of principal.