‘Location’ isn’t the only concern for advisors recommending real estate to clients

investmentnews.com:

The mantra for real estate investors has always been “location, location, location.” In the post-pandemic property environment, however, financial advisors are also increasingly being forced to choose between “public” and “private.”

The iShares US Real Estate ETF (IYR), which tracks publicly traded REITS, has taken a roller coaster ride to nowhere so far in 2023, returning a mere 2.2% while the S&P 500 is up almost 18%. Of course, the IYR, which currently yields 2.88%, continues to be weighed down by commercial real estate worries.

For those intent on seeking the stable returns that property investments have historically provided, the volatility in publicly traded real estate stocks now begs the question as to the best way to allocate to that sector. And it’s an especially significant choice now that investors can easily jettison their real estate holdings entirely in favor of steadier, and safer, yield plays like the two-year Treasury note, currently yielding a healthy 4.7%.

“When we think about public versus private, it really comes down to what type of investor you are,” said Bernie Wasserman, president of Participant Capital, a private equity real estate investment firm. “I think when you look at REITs, you have to be a bit sensitive. You have to be much more of a stock picker than an index buyer. We like private because the investment horizon is longer, you’re not pressured to allocate capital. You can be a little bit pickier, a little bit more selective.”

As to where Wasserman is finding the best deals, he says Florida continues to be a hot spot for development, particularly the Miami metro area, with Tampa and Orlando not far behind.

“We find capital still available for multifamily and that has been all the more