July 17, 2024


Living – be prepared

This Commercial Real Estate Fund Can Help You Hedge Against Inflation and Market Volatility

4 min read

Stocks continue to swing wildly as inflation remains at 40-year highs. And as interest rates start to rise to rein in that inflation, bond prices have fallen. 

Times like this clearly show the value of diversifying a portfolio beyond stocks and bonds. Real estate is one way to do that because this asset class generally doesn’t move in tandem with stock and bond markets.

Real estate also has another huge advantage: It’s a hedge against inflation. Properties can raise rents to adjust for rising prices. Plus, property values tend to increase along with inflation.  

How today’s savers can invest in real estate

For individuals, the opportunity to invest in real estate, particularly commercial real estate, has traditionally been limited because of the huge financial commitment that’s required. Only the wealthiest, for instance, could afford to invest in commercial real estate by acquiring, say, warehouses or office buildings. 

As an alternative, smaller investors have turned to buying one or two houses to rent out. Although that, too, can take sizable capital and time, especially if they manage the rentals themselves. 

But now CRE Income Fund offers a new option for accredited investors: the CRE Diversified Income Fund

This private real estate fund was launched in 2020 to buy and manage high-quality commercial real estate in growing markets across the country. The fund is designed to provide investors with a reliable income stream as well as potential capital gains through the appreciation of the properties. 

Total Returns for Commercial Real Estate by Sector in 2021











Source: National Council of Real Estate Investment Fiduciaries. 

Note: Total returns include income and appreciation.

Predictable income, plus the potential for capital gains

A key challenge for many investors is finding truly passive investments that generate predictable and substantial income. So, a big benefit of investing in real estate through CRE Income Fund is that it pays investors a stable monthly income – 10% annual yield – from a portion of the rents collected. 

What’s more, investors don’t have to scout out properties, tie up their money buying them, find tenants, then manage and maintain the buildings. The fund’s real estate professionals, who have experience buying and operating high-return investment properties, handle all the “active” work for you.

Over time, the underlying asset could also increase in value. And that can result in the opportunity to sell and realize a capital gain. 

Other benefits of the CRE Diversified Income Fund include: 

  • Sector and geographic diversification: The fund not only acquires different types of commercial real estate, but it also selects properties across the country.  
  • Tax efficiency: Investors are able to reduce taxable income on a part of their distributions through the use of depreciation. 
  • Limited liability: Investors have no liability beyond their investment.

Why commercial real estate?

The pandemic and subsequent national lockdowns will likely have a lasting impact on commercial real estate and the demand for space

Online shopping exploded during the first two years of the pandemic and shows no sign of letting up. Supply chain disruptions also are encouraging U.S. manufacturers to bring their offshore production back to the states. Wholesalers and other companies will want more storage space so they can control inventory and avoid supply interruptions. And there’s been an increase of investment in medical research, from COVID-19 vaccines to other therapeutic breakthroughs.

CRE Income Fund has identified four sectors that are well-positioned to benefit from these trends: 

  • Supply chain distribution 

With these targets in mind, the CRE Diversified Income Fund’s investments include several warehouse/distribution, cold storage and research & development facilities around the country.

The fund’s strategy

The CRE Diversified Income Fund targets properties in markets with high rental growth, low vacancies, a growing population and the potential for real estate appreciation. Each acquisition is made with an exit plan in place, with an anticipated holding period of several years. 

The fund reduces its risk by only leasing to investment-grade tenants. A portion of the rents collected are paid out to investors. The fund pays an annual 10% dividend yield with a targeted 12% to 14% annual return. 

What to know before you invest

The private real estate fund is open only to accredited investors, which include certain investment professionals and those with a higher level of income or net worth. The minimum investment is $10,000, a level that makes commercial real estate accessible to more investors.

The fund is not publicly traded on any exchange and may hold properties for several years before selling them. Investors should consider this a long-term investment, although they have an opportunity to redeem shares on a semi-annual basis. 

The bottom line is that investors are always looking for smart ways to diversify their portfolios. In today’s environment, however, finding ways to hedge against both inflation and market volatility is vital, too. For some individuals, investing in commercial real estate may be the answer. And these investors could benefit from checking out the CRE Income Fund. 

See how easy it is to begin investing in commercial real estate with CRE Income Fund

This content was provided by CRE Income Fund. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.

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