Diversification & Multiple Home Ownership

With travel limited during the pandemic, the propensity for multiple home ownership grew substantially among the affluent between 2020 and 2021 as they sought secondary properties that were within an easy flight or driving distance from their primary residence.

Today, demand for second and third homes in multiple locations continues to drive the luxury market as affluent buyers take a long-view perspective of real estate. They are embracing multiple homeownership for a number of reasons, including: 1) real estate is considered a hedge against inflation, 2) lifestyle, or 3) generational wealth considerations.

The types of investment properties that they own generally reflect these varied reasons.

For investors who follow the buy and hold method, generating passive income and equity growth with an investment property could offer just the kind of stability that the affluent are looking for, if a recession does, indeed, materialize. These kinds of long-term investments could potentially sustain a family for a generation if they play their cards right.

In particular, adding a multi-family rental property to their investment portfolio could end up being very profitable over the next few years, given rents have recently soared to keep up with inflation. David Friedman, co-founder of WealthQuotient and the former Co-Founder and President of Wealth-X, noted that multi-family properties could represent the next evolution of diversification.

“Real estate is an effective hedge against inflation,” he said. “Interest rates are rising well. The wealthy are hedging their risk and exposure to these economic factors through the multi-family housing asset class, which offers multiple leasing parties within a portfolio for generating cash flow. Their graduation into multi-family housing as an asset class could represent the evolution of high-net-worth investors as they look to diversify and build their wealth.”

Looking ahead to their future plans, they remain especially interested in acquiring non-primary residences.