You may not be familiar with modern portfolio theory, but you probably know its core tenet: Investors should diversify among uncorrelated assets to maximize returns while minimizing risk.
Soren Godbersen at EquityMultiple makes a strong case that if you subscribe to modern portfolio theory, private equity real estate belongs in your portfolio. In fact, he points to data that shows it actually boosts your risk-adjusted returns.
I couldn’t agree more—which is why I invest in private real estate through many channels and along many timelines.
These investments serve different purposes in my portfolio. Some generate instant and ongoing income, others offer liquidity, and still others offer high long-term growth. The equity investments also provide me with tax deductions and depreciation.
Short-Term Real Estate Investments
Contrary to popular belief, you do have options for short-term real estate investments beyond public REITs. These investment choices don’t come with the same volatility or correlation to stock markets.
The following real estate investments typically let you access your money within a year. Use them for immediate income, liquidity (in some cases), and diversification.
Real estate notes
Some real estate-related notes repay in a year or sooner. EquityMultiple offers some, as do 7e Investments, Norada Capital, and others. They may or may not allow non-accredited investors or be backed by real estate deeds or liens, but you have plenty of options.
Earlier this year, in fact, our Co-Investing Club invested in a nine-month note with Norada at 15% interest. So far, it’s paid us monthly interest like clockwork (not that I’m endorsing any specific investment; just sharing our experience).
But you don’t have to go through a company. If you know any real estate investors personally, you can always offer to lend them private notes as well.
Groundfloor notes
Groundfloor deserves its own subsection,…