Reader note: This is part one of a four-part series
When most of us hear "The Kennedys," we think of America's most prominent, if beleaguered, political family. Whatever you think about their politics or private lives, you've got to be impressed with how the family has managed intergenerational wealth. Deep down, we all want to invest like a Kennedy.
There are many stories—some factual, some unsubstantiated, most somewhere in between—that describe how the family patriarch, Joe Kennedy earned his fortune: banking; insider trading (legal at the time); and liquor importation. But that was just the beginning.
By the 1940s, Joe was worth more than $100 million and he turned his attention from accumulation to preservation. And with that, his focus shifted to real estate. With the help of expert advice, and in concert with several other investment opportunities and wise structuring, it proved to be the financial foundation for generations to come.
In 1945 Joe made a deal that became the centerpiece of the Kennedy fortune: for just under $13-million he bought the Merchandise Mart in Chicago, the world's largest commercial structure. In 1998, the family sold it for $600-million.
Real estate is an important component of any balanced high net worth portfolio and has many positive attributes, both behavioural and practical. Unlike equities and public markets, commercial real estate valuations are made infrequently; there's no daily price volatility as there is feeding the fervor of stock watching and market timing. Also, returns are inflation adjusted, as rents can potentially keep pace with inflation.
Smart real estate investing can definitely pay off, as hard assets, well-located in vibrant markets, tend to perform well relative to other asset classes.
Given the usefulness of real estate in an investment portfolio, it's helpful that there is a wide variety of investment options available to investors of all account sizes. With proper research and due diligence, each can make for an excellent real estate investment vehicle that has the potential to provide good returns.
Publicly traded real estate investments are typically held by mass affluent investors, as the barriers to entry are very low. These options include real estate investment trusts (REITs), public companies with substantial real estate holdings and real estate mutual funds.
For high net worth clientele, there is separate array of privately held investment options available, including:
- Commercial real estate (office buildings, shopping malls, industrial parks)
- Residential real estate (homes, condos, apartment buildings)
- Recreational real estate
- Land for future development
- Real estate development and value-add opportunities to existing properties.
- Real estate Limited Partnerships (Open and Closed End)
- Syndicated investments