The Role of Real Estate In Diversified Wealth Creation

By: Alan J. Steinberg

Don’t buy stocks. They’re volatile, unpredictable little pieces of paper that can plunge because of inflation, interest rates, recessions, bad management, geopolitical chaos, or a CEO deciding to tweet something catastrophic at 2 a.m. One day your portfolio is “building long-term wealth”; the next, you’re learning new vocabulary words like market correction, liquidity crunch, and panic selling. And that’s before we get to concentration risk, dividend cuts, emotional investing, or the timeless tradition of buying high and selling low.

In case it’s not clear, the above was written tongue-in-cheek. I would never advise someone to not invest in equities. There are pros and cons to investing in almost all asset classes, and successful long-term investing is rarely about choosing one investment category over another.

As President and CEO of a firm that has successfully invested in real estate for more than five decades, I was surprised to read the article “The Tradeoffs Passive Real Estate Investors Overlook,” written by a wealth advisor and published in the 5TJT on May 6, 2026. The article portrayed passive real estate investing as uniquely risky and materially inferior to public equities. I felt strongly compelled to respond and share my perspective.

The reality is that real estate has historically played a central role in diversified wealth creation for a reason. Investors have long allocated capital to real estate because it offers several characteristics that many other asset classes cannot simultaneously provide: income generation, tax efficiency, inflation protection, leverage, and ownership of tangible, income-producing assets.

The article also understated several structural advantages real estate has historically offered to its investors:

• Wealth creation in real estate often comes from simultaneous drivers. These include cash flow, appreciation, tenant-paid loan amortization, and tax benefits.
• Illiquidity is not always a flaw. For many investors, the inability to panic-sell during volatile markets can actually improve long-term outcomes.
• Real estate offers inflation protection. This occurs through rising rents and replacement costs, while fixed-rate debt becomes cheaper in real terms over time.
• Tangible, income-producing assets provide diversification. It is often advisable for investors to diversify into varying asset classes, rather than only into (increasingly concentrated) public equity markets.
• Real estate offers significant tax advantages. Depreciation, cost segregation, mortgage interest deductions, and tax-deferred cash flow can materially improve after-tax returns in ways public equities often cannot. Comparing raw stock market returns to real estate returns without accounting for tax-adjusted outcomes leaves out a substantial part of the equation.

None of these means real estate is risk-free. Passive real estate investing is certainly not without challenges. Poor underwriting, excessive leverage, weak sponsorship, or adverse market conditions can materially impair returns. Investors should carefully evaluate both the quality of the asset and the quality of the operator before committing capital.

However, many of the concerns raised in the article: illiquidity, leverage, market cycles, and manager quality, are not flaws unique to “passive real estate.” They are characteristics of real estate investment itself, one of the largest and most institutionally owned asset classes in the world for generations.

The only thing truly “passive” in passive real estate investing is that the investor delegates operational control and accepts reduced liquidity. The underlying investment remains real estate itself: tangible, income-producing assets that, when managed properly, have historically played a major role in long-term wealth creation. In fact, it is commonly known that 90% of millionaires have built or maintained their wealth through real estate investing. And if the broader argument is against real estate itself as an investment class, that is a much larger discussion, and one I could also happily refute.

The article also referenced extremely long holding periods, but many modern real estate syndications today are structured around 5-to-10-year business plans, not 20-to-30-year Manhattan-style legacy holds.

In addition, real estate investors are not pursuing acquisitions solely for current income yield. They invest because prudent leverage, operational improvements, rent growth, amortization, and long-term appreciation can meaningfully enhance equity returns over time. Of course, leverage also increases risk, which is precisely why underwriting discipline, debt structure, reserves, market selection, and sponsor quality matter so much.

Illiquidity can absolutely be a disadvantage for investors who may need immediate access to capital. However, for many long-term investors, reduced liquidity can sometimes encourage discipline and reduce emotionally driven decision-making during periods of market volatility.

Most importantly, successful passive real estate investment ultimately comes down to manager selection and alignment of incentives. A quality sponsor/syndicator co-invests meaningful personal capital alongside investors and benefits only when the investment succeeds. That alignment often differs substantially from many traditional commission-based financial advisory models.

None of this means real estate is universally superior to stocks. Both asset classes carry risks and advantages. The better question is not which investment is “good” or “bad”; rather, asset allocation should reflect an investor’s goals, liquidity needs, tax situation, risk tolerance, and temperament. Asset diversification is often a balanced solution.

For many investors—particularly those seeking income, tax efficiency, inflation protection, and diversification from public markets—carefully-selected passive real estate can play a very valuable role in a diversified long-term portfolio. 

Alan J. Steinberg is the President & CEO of Park Row Equity Partners (PREP), a robust multifamily real estate investment platform with a portfolio of 50+ multifamily properties and $560MM in assets under management. The firm’s mission is to provide easy access for those who wish to invest in real estate, a highly profitable yet often inaccessible asset class. ParkRowEP.com.