Dec 7, 2024
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Billy Joel spent six years trying to sell his nine-bedroom, 11-bathroom, Florida mansion.
He purchased the property in 2015 for $22 million, and in 2022, he tried to sell it for $64.9 million.
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But things didn’t go according to plan — at least, not for Joel. After listing and delisting the mega-mansion, Joel eventually slashed the price by a whopping $22 million to close the sale.
That lengthy process is a cautionary tale for anyone considering a hefty real estate investment. Sometimes, putting all of your eggs in one high-value basket can be a bigger risk than it seems. All of the added costs of property ownership are often overlooked, and they can quickly make your investment seem much less worthwhile.
Even high-profile investments can face prolonged delays and financial disappointments.
Why Joel’s situation is a growing trend
Joel isn’t alone.
The housing market suffered from slower sales in September, when the pace of home sales dropped to its lowest level in more than a decade.
What’s at play? There are plenty of factors, but one is that it’s very expensive to own a home, even once you’ve paid off your mortgage — making it a less appealing investment than it appears at the outset.
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Other ways to invest in real estate if you don’t have a mansion to sell
In an interview with the New York Times, Joel revealed he pays $567,686 in property taxes for his Long Island mansion, which he also recently listed on the market. For context, that’s well above the average cost to buy an entire home in the US.
Beyond taxes, being a homeowner also means you’ll face rising maintenance costs. Maintaining a single-family home in the US costs around $18,118 every year, with that figure as high as $25,000 for states like Hawaii and California.
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And even though Joel struggled to sell his Floridian home, that’s not to say all real estate is struggling. According to the National Association of Realtors, the nationwide median house price was $404,500 — up 3% from last September. Meaning, for many homeowners, their asset’s value is slowly ticking up.
It’s really just about picking the right city and property in the first place.
With Fundrise, you get access to an expansive portfolio of alternative investment opportunities spanning real estate, private debt and venture capital. With over two million investors and managing over $7 billion in real estate assets alone, Fundrise is an accessible way to diversify your portfolio with the potential of yielding dividends every quarter. That’s something that owning a home just cannot offer.
To get started, all you have to do is share some details about your personal and financial background, along with your investment preference, and Fundrise will recommend a portfolio aligned with your goals.
Residential investments
And if you want access to the real estate market, but don’t want to go all-in like Joel did, there are ways to own just a fraction of a property.
For example, with Arrived, you can add rental assets to your portfolio for as little as $100.
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Through its user-friendly platform backed by Jeff Bezos, investors of all income levels can access SEC-qualified rentals and vacation homes with flexible investment amounts. Simply browse their curated selection of homes, choose shares, and start benefiting from the income and appreciation potential.
Commercial real estate investments
While commercial real estate volumes dropped 47% between 2022 to 2023, the average annual return on investment (ROI) is still 9.5%. This is slightly lower than the average ROI for residential real estate, which sits around 10.6%. But again, as Joel’s bad investment has shown us, diversification is a pretty alluring way to make sure you’re not stuck with one massive asset you’re trying to sell.
For those interested in further diversification through commercial properties, First National Realty Partners (FNRP) provides accredited investors with access to institutional-grade commercial real estate investments.
As a private equity firm, FNRP acts as the deal leader and offers white-glove service to investors. The team handles all the legwork for you, from the vetting and buying of properties to the leasing and management details. The firm then distributes its positive cash flows quarterly to investors, so you can increase your income without the hassle of buying and selling property.
How ETFs and REITS can help you avoid costs of owning real estate
You can also access real estate through real estate investment trusts (REITS) and ETFs, without needing to worry about any of those extra burdens of owning real estate directly.
To make sure you’re investing in the right REIT, services like Moby can give you the peace of mind you’re making the best investment for your needs.
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With Moby, you’ll get investment insights broken down into simple, easy to understand formats. They’re written by a team of former hedge fund analysts and financial experts who spend hundreds of hours weekly sifting through the latest financial news and data. And Moby's picks have beaten the S&P 500’s returns by almost 12%, on average.
If you prefer a collaborative approach to deciding on the best real estate investments for you, Public offers a community-driven platform for investment insights.
Public’s social investing features let you share ideas with their community of investors, and gain insights from your peers. The platform democratizes investing by offering a commission-free platform for trading stocks, REITs, ETFs, cryptocurrencies, treasuries, and even alternative assets.
You can also invest in private real estate investments, which can offer higher returns since they can invest in opportunities that simply aren’t available on the public market.
DLP Capital offers tax-advantaged, private REITs through various investment funds.
They’re primarily focused on acquiring or developing safe, affordable rental housing for working families across the burgeoning Sun Belt region. Investors in these funds can earn passive income through monthly, quarterly, or annual distributions while making a positive impact on American communities.
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Gemma Lewis is a freelance contributor with her CFA UK Certificate in Investment Management. She has navigated the ever-evolving world of financial technology as both a product manager and investment analyst, having earned her Master’s of Business from the University of St Andrews, and Bachelor of Commerce from McGill University. Her writing and commentary has been featured across top-tier publications, including Forbes, the BBC, Financial Times, Telegraph, Yahoo!, Motley Fool, and Fortune. If she's not writing, she's either reading, or running around and exploring the great outdoors.
