Dj Van Keuren | Co-Mgr Member Evergreen | Founder Family Office Real Estate Institute | President Harvard Real Estate Alumni Org
For single-family offices (SFOs), the mission often extends beyond simple wealth accumulation—it’s about preserving and growing wealth for future generations.
Among the many asset classes available to SFOs, real estate investing stands out as an effective vehicle for achieving multigenerational wealth preservation. With over 30 years of experience in real estate investing and family office structuring, I’ve witnessed firsthand how well-executed real estate strategies create sustainable wealth, offer stability and provide essential diversification.
Here’s why real estate is a smart choice—and what SFOs need to know when considering this investment strategy.
1. Stability And Low Volatility
Unlike the stock market, which is often subject to extreme fluctuations, real estate tends to appreciate steadily over time. This stability is crucial for SFOs, whose primary objective is to preserve capital for generations.
Real estate, particularly core assets like multifamily housing, Class A commercial properties and well-located single-family rentals, acts as a defensive asset class that can weather economic downturns. Even during recessions, people still need places to live, and businesses require commercial space, which ensures that well-chosen properties continue to generate income.
2. Consistent Cash Flow Through Passive Income
One of the key advantages of real estate investment is the ability to generate predictable and consistent cash flow through rental income. Single-family offices can structure their portfolios to include a mix of residential, commercial and industrial properties to create multiple revenue streams that offset market fluctuations. And SFOs can reinvest rental income into new opportunities or leverage cash flow for further investments.
3. Generational Wealth Transfer And Estate Planning Advantages
Family offices can pass real estate assets to future generations with minimal tax liability through proper estate planning and strategic tax structuring.
By utilizing vehicles such as:
• Family limited partnerships (FLPs).
• Grantor retained annuity trusts (GRATs).
• 1031 exchanges (to defer capital gains taxes).
• Opportunity zone investments (to mitigate tax burdens).
SFOs can ensure that heirs receive assets in a tax-efficient manner while maintaining cash flow and appreciation potential. Additionally, trusts can be structured so that real estate assets remain within the family for multiple generations without being liquidated.
4. Inflation Hedge
Real estate historically serves as a strong hedge against inflation. As property values rise and rents increase, real estate investors benefit from enhanced asset appreciation and growing cash flow.
SFOs can further protect against inflation by investing in sectors that perform well in inflationary periods. These property types include:
• Multifamily rentals (as rents adjust with inflation).
• Industrial properties (logistics and warehousing demand is increasing).
• Farmland (yields both cash flow and land appreciation).
5. Tax Advantages
One of the most attractive aspects of real estate for family offices is its tax advantages. Real estate provides opportunities to reduce taxable income through:
• Depreciation deductions (which allow investors to offset rental income)
• Mortgage interest deductions.
• Opportunity zones and tax-advantaged investments.
• 1031 exchanges to defer capital gains taxes.
• Cost segregation studies (accelerating depreciation benefits).
6. Philanthropy And Social Impact Opportunities
For many family offices, legacy is not just about financial wealth but also about the impact they leave behind. Real estate offers powerful opportunities for philanthropy and social impact investing:
• Affordable housing initiatives that provide stable housing for low-income families.
• Sustainable and ESG-friendly developments that align with family values.
• Community redevelopment projects that support local economies.
• Historic preservation efforts that maintain cultural heritage.
7. Long-Term Appreciation
The long-term appreciation of real estate is one of its greatest advantages. Over time, well-located properties often naturally increase in value, especially in high-demand markets with growing populations, strong job markets and constrained supply. When structured correctly, real estate investments allow family offices to benefit from both appreciation and cash flow. With a long-term, patient investment strategy, family offices could outperform more volatile asset classes.
Managing The Risks
While real estate investing offers family offices long-term wealth preservation, diversification and income generation, it also comes with risks.
One of the primary concerns is illiquidity—real estate is not easily bought or sold compared to stocks or bonds. A downturn in the market can leave investors with assets that are difficult to liquidate quickly, especially in specialized asset classes like office or hospitality properties. This makes real estate a long-term play, which may not align with the liquidity needs of every family office. To mitigate this risk, family offices should maintain a balanced portfolio with liquid assets and sufficient cash reserves to cover unforeseen capital needs.
Another major drawback is market cyclicality and economic downturns. Unlike fixed-income investments, real estate values fluctuate based on financial conditions, interest rates and local supply-demand dynamics. A recession or rising interest rate environment can depress property values and rental income, reducing returns or leading to losses.
Family offices should conduct thorough due diligence, stress test their portfolios for different economic scenarios and consider defensive investment strategies, focusing on recession-resistant asset classes (e.g., multifamily, industrial or healthcare real estate). Maintaining a disciplined, long-term investment approach can help navigate market volatility.
Other risks include management complexity, regulatory changes and concentration risk if a family office overinvests in a particular region or asset type. Offices can address these challenges by implementing professional property management, diversifying geographically and across asset classes, and staying informed on regulatory shifts that could impact property valuations or tax obligations.
Building A Real Estate Strategy
Strategic planning, diversified portfolios and a long-term perspective are key to successful real estate investing for family offices. With structured real estate investment strategies—whether through direct ownership, joint ventures or private equity real estate funds—SFOs can better ensure that their legacy endures, their wealth compounds and their future generations continue to thrive.
Real estate can be a foundational component of a single-family office’s investment portfolio. However, the key decision lies in how to invest—whether through direct ownership, REITs or partnerships with an experienced operator. If partnering with an operator, the primary focus must be on the team first, then the property. Even the most attractive real estate opportunity holds little value if the operator lacks the expertise to execute effectively. Failing to prioritize the right partner is one of the most common and costly mistakes I’ve seen single-family offices make.
From acquiring core assets and maximizing tax efficiencies to pursuing impact-driven investments, real estate remains a powerful vehicle for preserving wealth and sustaining a family’s legacy across generations.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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