How family offices approach real estate investments
Table of Contents
Family offices offer a comprehensive range of services tailored to the financial needs of wealthy families. These private wealth management advisory firms serve high-net-worth (HNW) individuals and families. [1]
Their services often include investment management, estate planning, tax planning, charitable giving, and financial education for future generations.
Family offices offer a highly personalized approach, differing from traditional financial advisors and aiming to preserve family wealth across generations. They can be either a single-family office, which serves only one family, or a multi-family office, which serves several families. [1]
The primary goal of a family office is to centralize management, providing oversight of all financial matters while ensuring alignment with the family’s values and long-term goals.
For family offices, real estate is often a key component of their diversified portfolios. With their longer-term perspective and strong focus on wealth preservation and growth, they can see the value and potential of real estate investing.
This article will discuss why family offices recommend investing in real estate and how to approach this strategy.
WHY REAL ESTATE?
There are several key reasons why family offices often recommend real estate investments to high-net-worth individuals. Real estate has become a popular investment asset for family offices due to its appreciation and income potential. There are also multiple ways to get into real estate investing, meaning HNW individuals have plenty of options depending on their budget, risk tolerance, and preferences. [2]
BENEFITS OF REAL ESTATE FOR HNW INDIVIDUALS:
TANGIBLE ASSETS
Real estate is a tangible asset, which means it holds intrinsic value and provides a sense of security for wealthy families who own them. Unlike intangible and sometimes volatile stocks or bonds, real estate is a physical property that can be seen, touched, and utilized. [2] This quality offers psychological comfort and ensures the asset has value independent of market fluctuations. Holding something concrete is a significant advantage for family offices managing generational wealth.
WEALTH PRESERVATION AND GROWTH
Real estate has historically been a reliable avenue for preserving and growing wealth. Property values tend to appreciate, especially in prime locations, offering HNW individuals a stable way to protect and increase their wealth. Family offices often recommend real estate because it provides a balanced mix of safety and potential for growth. Over the long term, real estate can generate significant returns, helping preserve the purchasing power of wealth against inflation and economic downturns. [2]
STEADY CASH FLOW
Real estate investments can provide a steady stream of income through rental payments. This cash flow is appealing to wealthy families specifically because it offers regular, predictable returns that can support lifestyle expenses or be reinvested in other ventures. Family offices value this consistency, as it helps plan and maintain liquidity. Additionally, properties like commercial real estate or multifamily properties such as apartment communities and condominiums can generate higher yields, making them attractive investments for those looking to supplement other income sources.
INFLATION HEDGE
Family offices often recommend real estate as a hedge against inflation. As inflation rises, the cost of goods and services, property values, and rental income increases. So, real estate investments can keep pace with or even outstrip inflation, preserving their true value. Real estate offers a reliable solution for HNW individuals concerned about protecting their wealth from the eroding effects of inflation. [2]
ESTATE PLANNING
Estate planning is a key focus for family offices, and real estate plays a crucial role. Real estate properties can strategically pass to future generations, helping to ensure that wealth remains within the family. Real estate also allows various legal structures, like trusts, to minimize estate taxes and protect assets from creditors. Family offices can provide a solid foundation for multigenerational wealth transfers by incorporating real estate into their estate planning.
TAX BENEFITS
Real estate investments even come with various tax benefits that are particularly advantageous for HNW individuals. These can include deductions for mortgage interest, property depreciation, and operational expenses, which can significantly reduce taxable income. In some places, there are also favorable capital gains tax treatments for real estate. Family offices are well-versed in these tax advantages and often recommend real estate to help optimize portfolio tax efficiency. [2]
COMMERCIAL REAL ESTATE INVESTMENTS
Commercial real estate investments involve properties used for business purposes, including office buildings, retail spaces, and industrial properties. Family offices often approach commercial real estate investing with a long-term strategy focused on wealth preservation, steady income generation, and portfolio diversification. [2]
Unlike institutional investors who might seek short-term gains or rapid portfolio turnover, typically, family offices prioritize investments that offer stable cash flows and the potential for capital appreciation over time.
They may favor core properties in prime locations—such as office buildings, retail centers, industrial properties, or multifamily housing—that have a lower risk profile and are likely to maintain value across market cycles. The objective is to secure assets that provide consistent rental income while preserving or growing the principal investment for future generations. [2]
In addition to direct property acquisitions, family offices often utilize opportunistic investments through real estate funds or joint ventures with established developers. This allows them to access larger projects or specialized markets that might otherwise be out of reach.
Family offices tend to be highly selective, conducting thorough due diligence and leveraging their extensive networks to identify off-market opportunities. Financial analysis, tax considerations, and the desire to align with the family’s broader values or mission steer their investment decisions.
This patient and disciplined approach enables them to weather market volatility and capitalize on long-term trends in the commercial real estate sector.
RESIDENTIAL REAL ESTATE INVESTMENTS
Compared to commercial real estate, people deem residential properties stable investments as they continue seeking places to live. Residential real estate is, therefore, a low-risk addition to a diversified portfolio. [2]
Family offices may focus on prime locations like luxury urban centers or sought-after vacation destinations, where real estate values are more likely to appreciate over time. The emphasis is on acquiring high-quality, income-generating properties that can provide steady cash flow, such as multifamily properties, luxury apartments, or rental properties in affluent neighborhoods.
Additionally, these offices may engage in value-add strategies, purchasing properties that require renovation or repositioning and subsequently increasing the property’s value and income potential.
Along with direct property investments, family offices can also invest in real estate funds or partner with developers to access larger or more complex projects outside their direct expertise or capacity. These investments provide a way to diversify real estate exposure across different geographies and property types, mitigating risk while capitalizing on market opportunities.
With residential real estate, family offices can help HNW individuals take advantage of the constant demand for housing. [2]
MULTIFAMILY REAL ESTATE INVESTMENT OPPORTUNITY FOR ACCREDITED INVESTORS
Real estate is critical to family office investment strategies, offering stability and growth potential.
Whether investing in commercial or residential properties, family offices approach real estate with a long-term, diversified strategy that aligns with their broader goals of wealth preservation and generational legacy.
However, most family offices will add real estate syndication to a diversified portfolio—for HNW individuals. This is an ideal choice for wealthy families because most deals are exclusive to accredited investors.
While most people can access residential and commercial real estate investment opportunities, real estate syndication deals are far more exclusive. HNW individuals should capitalize on this because syndication offers significant benefits.
Real estate syndication allows investors to enjoy all the benefits of owning a real estate property without the headaches that usually come with it. It is no secret that real estate investing has its own set of risks and challenges. This is how syndication works.
A syndication deal involves multiple real estate investors pooling their funds together to purchase a single real estate property. This makes larger real estate properties more accessible and less risky to acquire. As most investors would know, large multifamily properties like condominiums and apartment communities tend to be more difficult to purchase/expensive for a lone investor. This makes it risky to acquire the asset alone despite the potential for strong cash flow. [3]
With real estate syndication, this large barrier to entry disappears by having multiple investors contribute a share of the capital. This means investors do not have to take on all the risks alone. They only need to worry about their share rather than the entire thing. It is a safer way to enjoy the continuous income generated by these larger properties.
Apart from the substantial capital required, property management is another common challenge associated with real estate investing. Apartment communities are difficult to manage because of their multiple residents and units. However, the syndicator oversees property management in real estate syndication.
A syndicator, or a sponsor, puts the syndication deal together. They serve as the general partner (GP), while investors serve as limited partners (LPs). The GP takes care of everything from creating the business plan to executing it. [3]
Syndicators manage the day-to-day operations of the investment property. On the other hand, investors are limited partners (LPs). They only provide a portion of the capital and pay certain fees to get the syndication running. Beyond that, they do not have to worry about anything else. This makes real estate syndication a true passive investment.
In return for their investment, LPs earn a share of the property’s cash flow, which may be distributed monthly or quarterly. Every deal is different, so due diligence is still necessary. Depending on the deal structure, investors may earn a share of the equity upon resale. Remember that that profit split should be specific in the private placement memorandum (PPM) or syndication agreement. [3]
Real estate syndication is possible with any real estate type. However, because of the strong, predictable cash flow associated with multifamily properties, multifamily syndication is especially popular among investors.
CONNECT WITH AN INSTITUTIONAL REAL ESTATE OWNER/OPERATOR
Most syndication deals are exclusive to accredited investors because they have the financial sophistication and investment knowledge to assess these deals properly. Their net worth and annual income protect them financially if a deal falls through.
After all, even multifamily syndication has its risks. For example, multifamily syndication is not exempt from being illiquid—just like other real estate investments. These deals tend to last for years, so investors must be comfortable with not having access to their funds for a significant period. [3]
Therefore, it is essential to choose a trustworthy syndicator, much like picking a competent family office. A syndicator with a record for excellence can make smart investment decisions regarding real estate properties.
BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, an award-winning, vertically integrated owner/operator, BAM Capital’s investment strategy creates forced appreciation while mitigating investor risk. Today, the brand has over $1.2 billion in AUM and ~6,500 apartment units.
Remember that no investment is without risk. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.
Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance, and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information.
