Michael Shawn is the founder of Peregrine Private Client.
Public equities have been on a historic run. Since 2009, the S&P 500 has finished lower only twice, and in most other years it has delivered double-digit gains.
Investors, of course, have reaped the benefits of that, but it has also pushed many advisors and asset managers to revisit what a portfolio is supposed to do beyond generating returns. Diversification is no longer just a question of how much to allocate to stocks and bonds. It also involves income, taxes, liquidity, inflation protection and planning needs that may unfold over many years.
That broader view is especially relevant for high-net-worth (HNW) and ultra-high-net-worth (UHNW) investors, many of whom are looking beyond public markets.
A 2026 Long Angle study found that HNW investors allocate 28% of their portfolios to private and alternative assets, including 10% to real estate investments. Meanwhile, UBS found that U.S. family offices allocate up to 54% of their portfolios to alternatives, including 18% to real estate.
Real estate stands out because it can serve several purposes at once, able to generate income, offer potential tax advantages, help offset inflation and preserve value over the long term.
To be sure, however, it also comes with real trade-offs. Among other things, property is harder to sell quickly than public equities, more exposed to fluctuations in interest rates and often expensive to own, improve and maintain.
For clients who want ready access to capital when markets shift, business needs arise or family priorities change, those limitations can create real hesitation. But for many HNW and UHNW clients, they do not argue against owning real estate. They argue for owning it with more care.
Let’s take a look.
Tax Advantages
The tax case for real estate starts with cash flow. A property may produce income while generating a lower current tax bill than many other income-producing assets. Depreciation is one reason, since it may reduce the amount of rental income an owner has to report, even if the property is holding its value or appreciating. Real estate also gives owners ways to remain invested without immediately triggering taxes.
Through a 1031 exchange, an owner may be able to sell one property and buy another while deferring capital gains taxes. For families that hold property for a long time, the step-up in basis can also reduce or eliminate taxes on gains that built up during the original owner’s lifetime. None of these tools is simple, and each requires careful planning. Used properly, however, they can help families keep more capital working for longer.
Estate And Legacy Planning
Real estate can be useful because it gives families something tangible to plan around. A property is not just a number on a statement. It has owners, tenants, expenses, decisions and responsibilities. Families can hold property through LLCs, partnerships or trusts, which can make it easier to define who owns what, who has control and how interests will transfer over time. That can be especially helpful when a family wants to pass down partial ownership gradually instead of forcing one large sale or transfer.
There is a more human side to this as well. A property gives the next generation real decisions to make. Who manages it? Should it be improved? Should income be distributed or reinvested? When does it make sense to sell? Those questions can help heirs learn how to manage wealth, not just receive it.
Inflation Protection
Real estate can help when prices rise. Many leases include scheduled rent increases, and some are tied directly to inflation. In certain net lease arrangements, tenants may also pay expenses such as taxes, insurance and maintenance, which can make the income stream more predictable for the owner.
Real estate is not a perfect inflation hedge. It is less liquid than public securities, and property values can be affected by interest rates, location and tenant demand. But compared with holding large amounts of cash or fixed income, real estate offers a different trade-off. The owner gives up some flexibility in exchange for the potential for income, rising rents and long-term appreciation from a physical asset.
Diversification
Real estate does not move exactly like stocks. Its value depends on factors such as local supply and demand, tenant quality, lease terms, financing costs, replacement costs and how well the property is managed. That separate set of economic drivers can be useful for families that already have enough liquidity elsewhere.
Owning real estate can add another source of return and income that is not tied directly to daily market swings. The trade-off is that real estate usually cannot be sold quickly. But for families with a long time horizon, that patience can be part of the appeal. The goal is not to replace public markets. It is to add an asset that follows its own economic drivers, produces income from leases and ownership, and can help address planning needs that stocks and bonds may not solve on their own.
Real estate requires patience, planning and careful execution. For high-net-worth and ultra-high-net-worth families, that complexity can be part of the value. Property can connect investment returns with tax planning, family strategy, inflation protection and long-term wealth preservation. That is why real estate deserves a larger role in the portfolio conversation, not as a replacement for public markets but as a complement to them.
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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