America’s wealthiest investors appreciate the value of real estate, and use rental property and commercial developments to build and consolidate their fortunes.
The likelihood of investing in real estate increases with wealth, and business owners, who make up the largest share of America’s richest, are the most likely to own rental and commercial property, according to Spectrem Group.
“Rental and commercial real estate plays a strategic role in building wealth. The properties can provide an income stream, and their value historically keeps pace with inflation. Real estate can also be efficiently passed from one generation to another,” said Catherine McBreen, managing director of Spectrem, a Chicago-based national market research firm specializing in the attitudes and behaviors of wealthy Americans.
Wealthy investors have capitalized on the advantages of income-producing real estate. Households with a net worth of $25 million or more invest 10 percent of their total assets in real estate, and 33 percent say they are likely to invest in commercial real estate in 2011. Business owners, which account for the largest percentage of the richest Americans, are also the most likely to own commercial real estate.
More than one-third of affluent business owners surveyed by Spectrem in April own rental property. Nearly 50 percent own commercial property and more than 10 percent own property overseas. Business owners are also most likely to own their primary residence, a second home and undeveloped property, which does not produce income but can appreciate in value.
Property ownership rates are high among the wealthy in general. Nearly 44 percent of investors with a net worth of $5 million or more own rental property, 30 percent own raw land, 25 percent own commercial property and 9 percent own overseas property. All own their primary homes and 54 percent own a second home.
Property ownership rates decline as wealth decreases. Ownership of rental property drops to 28 percent for investors with a net worth of $500,000 to $1 million, not including primary residence. Fourteen percent own commercial property, while 19.5 percent own raw land and 5 percent own overseas property. The rate of homeownership is 98.3 percent and 37 percent own a second home.