Ten Factors to Help You Decide Whether Direct Participation Real Estate (DPRE) can Serve Your Interests

You probably didn’t learn about it in college, we’re pretty sure your high school didn’t teach it, and the media focus more on stocks, bonds, and other run-of-the-mill investment products with broader commercial appeal. A whole industry has been built around selling you these paper assets, not actual hard assets like Direct Participation Real Estate (DPRE). Does DPRE fall under the radar?

Like retail investments, DPRE offers potential for income, growth, and wealth preservation. But DPRE is different from retail investment products in significant ways. And they’re not for everybody, only accredited investors. The next few bullet points identify the main factors contributing to whether DPRE might serve your investment interests.

  • You favor investments with potential to create high-paying local jobs while serving the needs of local communities.
  • Deducting real estate depreciation and expense from your investment income might give your tax accountant an opportunity to reduce your tax liability.
  • Though you might own positions whose risk of loss exceeds your invested amount, you favor the limited downside risk of DPRE.
  • You believe you should diversify your investment portfolio. Diversification does not mean broad allocation to stocks and bonds. Rather, it means taking positions whose returns often don’t change in the same direction at the same time.
  • You appreciate how non-traded DPRE asset values are based on underlying value rather than on fickle market sentiment.
  • It’s no mystery to you: Buying shares in REITs is not the same as DPRE ownership. A REIT is a type of real estate company modeled after mutual funds. While REITs typically own real estate (although many own mortgages, real estate brokerages, etc.), investors in REITs do not own any real estate. REITs are paper assets in a company. Hence, REITs tend to be highly correlated to the stock market. Whereas DPRE investments grant actual ownership in specific properties.
  • A rushing confluence of demographic trends ultimately tied to the rising proportion of seniors, millennials renting longer, and homeownership rates consistently dropping across all age groups, provide what you believe are potential investment opportunities.
  • You already own positions in financial assets like stocks and bonds and you have a long-term investment time horizon.
  • Investments with a finite life give you the flexibility to structure your portfolio’s liquidity.
  • Holding a DPRE position in a retirement account might aid your retirement planning and tax liability.

DPRE investments are not for everyone. Only accredited investors have access to DPREs. Accredited investors everywhere can capitalize on senior living communities, apartment buildings, commercial buildings, and land development projects in the growing outskirts of the Twin Cities and a select few other high demand communities in the upper Midwest.

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