Syndication basics
Real Estate vs Stocks: Returns, Risk and Diversification
Key numbers
- Private RE net return
- 7.66% a year, 1998-2022
- Listed REITs, same study
- 9.74% a year
- Correlation with large caps
- 0.55, lag-adjusted
- NPI values, 2Q22 to 4Q23
- -14.39%
- Institutional target
- 10.7% of portfolio (2025)
Nareit/CEM (Nov 2024), NCREIF (Jan 25, 2024), Hodes Weill and Cornell (Oct 2025).
The short answer
In real estate vs stocks, stocks have done better over the long run once fees are counted. A 1998-2022 study of 200+ pension plans found private real estate returned 7.66% a year net, behind listed REITs and U.S. large caps. Private real estate still diversifies partly, with a 0.55 lag-adjusted correlation to stocks, but it is illiquid and not recession-proof.
Key numbers
- Private RE net return
- 7.66% a year, 1998-2022
- Listed REITs, same study
- 9.74% a year
- Correlation with large caps
- 0.55, lag-adjusted
- NPI values, 2Q22 to 4Q23
- -14.39%
- Institutional target
- 10.7% of portfolio (2025)
Nareit/CEM (Nov 2024), NCREIF (Jan 25, 2024), Hodes Weill and Cornell (Oct 2025).
- Stocks have led after fees. Private real estate returned 7.66% a year net in 1998-2022, behind listed REITs and large caps (Nareit-sponsored study).
- Diversification is partial. Lag-adjusted, private real estate had a 0.55 correlation with U.S. large-cap stocks.
- Values can fall without a recession. NCREIF property values fell 14.39% from mid-2022 to late 2023, and levered properties fell further.
- Depreciation mostly delays tax. In our example, the same $60,000 profit left a stock fund $1,500 ahead after 2026 federal tax.
In this guide · 10 sections
- Real estate vs stocks: which has done better?
- Is real estate an alternative investment?
- Where do investors put money outside of stocks?
- How does private real estate diversify a stock-heavy portfolio?
- Is real estate a good hedge against inflation?
- Is real estate recession-proof?
- What percentage of a portfolio should be in private real estate?
- How do taxes compare for stocks and private real estate?
- Why might stocks still be the better core investment?
- What should you ask a sponsor before adding private real estate?
The record
Real estate vs stocks: which has done better?
Stocks have done better than private real estate over the long run in the best large-sample data available, once fees are counted.
CEM Benchmarking studied more than 200 U.S. pension plans from 1998 to 2022. Nareit, the trade group for real estate investment trusts (REITs), sponsored the work. It found private real estate returned 7.66% a year net of fees, against 9.74% for listed REITs. U.S. large-cap stocks also beat private real estate over the period.
The same study shows why the comparison is closer than the headline suggests. Once reporting lags were removed, private real estate swung about as much as a listed asset: 17.7% volatility, against 19.4% for REITs. Fees explained part of its return gap. Large pensions that ran direct real estate in-house matched REIT net returns. Those that used outside core, value-add and fund-of-funds managers trailed.
Stocks carry their own trap: most of the market's gains come from a few companies. Hendrik Bessembinder's study in the Journal of Financial Economics (2018) looked at U.S. common stocks since 1926. About 4 in 7 returned less over their lifetimes than one-month Treasury bills. That is one reason most investors own stocks through broad index funds.
The guide to private real estate vs REITs covers the listed side of real estate.
| Question | Stock index fund | Private real estate offering |
|---|---|---|
| Who can buy | Anyone with a brokerage account | Many offerings are accredited only |
| Typical entry | Any amount | Usually $25,000 to $100,000 |
| Getting money out | Sell on any trading day | Hold 3 to 7 years; usually no market |
| How it is priced | Market price, every day | Appraisal or sponsor estimate |
| How returns arrive | Price gains and dividends | Distributions, then a sale |
Beyond the market
Is real estate an alternative investment?
Private real estate is usually counted as an alternative investment, meaning an asset outside the traditional mix of publicly traded stocks, bonds and cash. Endowment surveys, for example, count real assets inside "alternative and other strategies." Listed REITs are a gray area: they own property but trade like stocks. In the CEM data, lag-adjusted private real estate returns moved with them at a 0.90 correlation.
Where do investors put money outside of stocks?
The main options outside stocks are bonds and cash, listed REITs, and private investments such as real estate, private credit and private equity. Large institutions lean on private markets heavily.
U.S. college endowments held 54.1% of their assets (dollar-weighted) in alternative and other strategies in fiscal 2025, according to the NACUBO-Commonfund study. The share ranged from 11.9% for endowments under $50 million to 62.2% for those over $5 billion.
For individuals, private real estate usually means a syndication of one property, a sponsor's fund of several, or a non-traded REIT. Mor Milo, Relli's co-founder and CEO, frames it as an addition, not a swap:
"I think you should deploy capital into both. I don't think they're mutually exclusive."
Mor Milo, Relli co-founder and CEO, in Stock Market or Real Estate? (June 7, 2026)
On Relli, investors compare private real estate offerings from many reviewed sponsors in one place. Most offerings on Relli are for accredited investors, and the sponsor confirms eligibility before you invest. See how Relli works.
Diversification
How does private real estate diversify a stock-heavy portfolio?
Private real estate diversifies a stock-heavy portfolio partly, not fully, because its returns still move somewhat with stocks. After removing reporting lags, its annual returns had a 0.55 correlation with U.S. large-cap stocks from 1998 to 2022 in the CEM data. Its correlation with long-term bonds was 0.17. That is a real difference from owning more stocks, but it is not independence.
Reported numbers can make the gap look bigger than it is. Private property values come from periodic appraisals, so they lag and smooth what the market is doing. In 2020 and 2021, office REITs fell 30.2%. Over the same years, the private Open End Diversified Core Equity (ODCE) office index never dropped below its end-2019 level, according to Nareit. The buildings were similar; the pricing method was not.
The case is strongest for someone whose wealth already rides on one company. Examples are an employee holding restricted stock units (RSUs) or a founder after a sale. J.P. Morgan's 2024 study of catastrophic stock declines looked at companies whose shares fell 70% or more and never recovered. It found that 54% of them were profitable at their peak.
The guides on RSUs and real estate and investing after selling a business cover those cases.
Inflation and downturns
Is real estate a good hedge against inflation?
Real estate has at times kept pace with inflation, but it is not a reliable hedge in the short run. 2022 was the test: U.S. inflation peaked at 9.1% in June 2022, and market values in the National Council of Real Estate Investment Fiduciaries (NCREIF) property index then fell 14.39% through the fourth quarter of 2023, because higher interest rates outweighed higher rents.
The guide to real estate as an inflation hedge covers which property types pass inflation through fastest and how real estate compares with TIPS and gold.
Is real estate recession-proof?
Real estate is not recession-proof, and borrowed money makes its losses deeper. In the 2008 financial crisis, NCREIF's unlevered property index lost about 8.3% in its worst quarter, while its levered properties lost about 12.6%.
The guide to recession-resistant real estate compares how each property type held up in 2008-2009 and 2020, and what to check in a deal before a downturn.
Portfolio share
What percentage of a portfolio should be in private real estate?
The right percentage of a portfolio for private real estate depends on how long the money can stay locked up. No rule sets it. The share also depends on how much of your wealth is already in property.
For reference, institutions targeted an average of 10.7% of their portfolios for real estate in 2025. That was the first decline in 13 years of the Hodes Weill & Associates and Cornell University survey. Institutions held about 0.9 points less than that target.
Those figures describe large institutions with permanent capital and full-time staff, not a recommendation for an individual. Three questions matter more for a household:
- Could you leave this money untouched for 7 years or longer if the sponsor extends the hold?
- How much of your net worth is already in your home, rental property or one company's stock?
- Could you absorb a total loss on any one offering, which the Securities and Exchange Commission (SEC) warns is possible in a private placement?
After tax
How do taxes compare for stocks and private real estate?
Private real estate does not reliably beat stocks after tax, because its depreciation mostly delays tax rather than removing it. Depreciation also changes the rate on part of the gain. The example below runs the same pre-tax profit through each path under 2026 federal rules for a married couple in the top brackets. It is general information, not tax advice.
Worked example
Each investment starts with $100,000 and makes $60,000 before tax over five years. The stock fund's gain all comes at the sale. The syndication pays $6,000 a year in distributions, which depreciation shelters during the hold, then returns $130,000 at the sale.
| Step | Stock index fund | Syndication |
|---|---|---|
| Cash during the hold | $0 | $30,000, untaxed when paid |
| Cash at the sale | $160,000 | $130,000 |
| Taxable gain at the sale | $60,000 | $60,000 ($130,000 minus a $70,000 basis) |
| Taxed at 28.8% | None | $30,000 of past depreciation: $8,640 |
| Taxed at 23.8% | $60,000: $14,280 | $30,000: $7,140 |
| Total federal tax | $14,280 | $15,780 |
| Profit after tax | $45,720 | $44,220 |
With the same $60,000 pre-tax profit, the stock fund kept $1,500 more after federal tax. The syndication paid out $30,000 years earlier and deferred the tax on it to the sale.
The trade-offs
Why might stocks still be the better core investment?
Stocks may still be the better core investment for most people, because they are easy to buy and easy to sell. Anyone can buy them, there is no minimum beyond the price of a share, and they can be sold on any trading day. Private real estate asks you to give up all three. The SEC's investor bulletin describes private placements as "highly illiquid" with a risk of total loss.
Before choosing it over more of the stock market, weigh what you give up:
- Liquidity: your money is usually locked up until the sponsor sells. The guide to how hard it is to sell early explains why.
- Fees at more than one level, from acquisition and asset management fees to the sponsor's share of profits.
- Concentration in one sponsor's skill, one market and often one building.
- Values you cannot check daily, set by appraisals or the sponsor's own estimates.
- Tax paperwork: a K-1 that can arrive as late as September, and sometimes returns in other states.
What should you ask a sponsor before adding private real estate?
A sponsor should answer four questions before you add private real estate to a stock portfolio.
How is the reported value set?
Ask who sets it, how often, and how it changed between mid-2022 and 2024.
How much debt is on the property?
Ask for the loan-to-value and when the loans come due, and how a 2023-style fall in values would hit your equity.
Where does the projected return come from?
Ask how much is income and how much depends on the exit cap rate assumed at the sale.
What do all the fees add up to?
Ask for total fees in dollars, and how net results on the sponsor's sold deals compare with a REIT index over the same years.
Sources
- Private Placements under Regulation D, Updated Investor Bulletin, SEC Office of Investor Education and Advocacy (updated Sep 21, 2026)
- Topic 409, Capital gains and losses, Internal Revenue Service (accessed Oct 20, 2026)
- Rev. Proc. 2025-32 (2026 inflation adjustments), Internal Revenue Service (tax year 2026 | accessed Oct 20, 2026)
- Topic 559, Net investment income tax, Internal Revenue Service (accessed Oct 20, 2026)
- 26 U.S.C. 469, Passive activity losses, Cornell Law School LII (accessed Oct 20, 2026)
- NCREIF Property Index, 4Q 2023 press release, NCREIF (Jan 25, 2024)
- NCREIF Indices Review webinar slides, 2Q 2026, NCREIF (Sep 2026)
- CEM Benchmarking study of REIT and private real estate returns, research note, Nareit (Nov 2024 | period 1998 to 2022)
- How REITs and private real estate performed through the pandemic, Nareit (Mar 4, 2022)
- NACUBO-Commonfund Study of Endowments, FY2025 asset allocation tables, NACUBO (2026 | fiscal 2025)
- Institutional Real Estate Allocations Monitor: target allocations to real estate decline, IREI (Hodes Weill & Associates and Cornell University survey) (Oct 21, 2025)
- The Agony and the Ecstasy (2024 update), J.P. Morgan Asset & Wealth Management (Oct 3, 2024)
- Do stocks outperform Treasury bills? (Journal of Financial Economics), Arizona State University, W. P. Carey School of Business (2018)
