It seems like not a day goes by where the pages of the Wall Street Journal don't discuss in some way or another headwind facing commercial real estate, particularly for office real estate properties. So, it should not come as a surprise that a poll among readers of Wealth Management Real Estate Magazine and WealthManagmenet.com shows that individual investors still hold a preference for multifamily assets over other classes of commercial real estate.
The residential real estate market remains tight throughout many areas of the US, and multi-family assets are generally suited for tax-efficient strategies such as real estate investment trusts (REITs). REITs provide effective pass-through tax treatment for investment vehicles holding real property while also providing investors with streamlined tax reporting as these entities do not report on K-1s. Multi-family properties are particularly suited for holding through a REIT, and often real estate investment funds will be structured to include a REIT. Tax-exempt institutional investors also favor REIT structures because the REIT acts to block Unrelated Business Taxable Income. In structuring real estate funds or other real estate investment vehicles to invest in multi-family assets, consider whether a REIT would complement the tax and investment strategy.
