Capital preservation means seeking to protect the money you’ve already made instead of betting on maximum returns through investments that carry a much higher risk of loss. While capital preservation plays don’t offer exceptional financial rewards, they can offer more peace of mind.
Affluent families tend to think about investments in three buckets: preservation, income, and growth. The preservation bucket protects seeks to preserve what you invested while offering modest returns, while income-producing assets seek to offer steady cash flows, and growth strategies seek opportunities to chase higher returns that beat equity benchmarks. None of these strategies come with guaranteed returns, and all have risks associated with them.
However, with the number of high-net-worth individuals growing 4.7% in 2024, and stock market volatility creating turbulence in publicly held assets, more savvy investors want to balance their growth and income investments with risk-adjusted assets like residential real estate.
Why Capital Preservation Matters for Affluent Families
Capital preservation focuses on protecting wealth rather than chasing aggressive returns that have a higher risk of jeopardizing what you’ve already built. This strategy can not only be executed through traditional means like treasuries but, in some cases, alternative investments.
Real estate as an asset class represents a massive portion of American wealth, with over $41 trillion invested in property across the country. Residential real estate has historically been a reliable way to preserve value because, at a minimum, this asset class meets a basic human need for shelter.
Property investors have beaten inflation approximately 85% of the time since 1985, a strong indication of real estate’s effectiveness for the preservation of capital. This is why it works so well:
- Real estate value growth potential: Property values tend to rise with population growth and economic development.
- Real estate inflation protection: Real estate tends to increase in value during inflationary periods when other assets like stocks lose value.
- Income: Rental income can provide a steady cash flow while preserving underlying capital.
Real Estate Portfolio Ownership as a Capital Preservation Strategy
Portfolio ownership through real estate funds lets you own pieces of multiple luxury properties instead of buying a luxury vacation home that sits empty most of the year. These are just three of the biggest benefits:
Diversification Across Multiple Markets
Portfolio diversification spreads your investments across different regions and property types instead of being tied to one location. You might own fractional luxury property investments in Tuscany vineyards, Caribbean beaches, Aspen ski properties, and cliffside villas in Cabo, all at once.
This geographic versatility provides downside risk management because economic problems rarely hit all regions simultaneously. Market downturns that hurt ski destinations could benefit beach properties, while an economic crisis in Europe may not have a significant impact domestically.
Professional Management & Maintenance
Professional teams support long-term capital appreciation objectives by dealing with every detail of running the property, while you focus on enjoying your investment. You get expert management that drives value without the headaches that ruin the experience for individual vacation homeowners.
Here’s what professional management handles:
- Property maintenance gets done before small issues become big problems
- Dedicated staff maintains a high level of service across all locations
- Concierge teams plan and coordinates your entire vacation
Equity Ownership vs. Timeshares
Equity-based ownership gives you a real stake in property that goes up in value over time. Timeshares just sell you usage rights with no underlying asset value whatsoever.
When you buy into a real estate fund offering portfolio ownership, you own a percentage of valuable physical real estate that can be sold and proceeds distributed back to you and other investors. Timeshares lose value almost immediately because you’re buying vacation weeks instead of property ownership.
Lifestyle Benefits That Enhance the Investment
While investing in a real estate capital preservation play may not offer the highest return potential, the lifestyle benefits allow you to use and enjoy the properties all while the professional management team seeks to drive asset appreciation over time. Your family creates memories in luxury homes while building equity, which makes the financial strategy feel extra rewarding.
These are some of the lifestyle benefits:
- Consistency vs. luxury rentals: Book high-quality accommodations every time instead of gambling on vacation rental quality.
- Legacy building: Create traditions and memories in beautiful properties that your family and friends will cherish for decades.
- Hassle-free ownership: Professional teams handle all the maintenance, vacation planning and other logistics while you focus on enjoying time with loved ones.
- Exclusive access: Stay in properties that aren’t available to the general public through traditional rental channels.
Common Challenges in Shared Ownership and How to Overcome Them
Many investors worry about losing control when they don’t own entire properties themselves. The fear of making decisions with other owners or having limited access can make shared ownership feel risky rather than beneficial. Equity Estates handles the property management which means decisions regarding the care, maintenance and improvement of properties are handled professionally.
The booking issue also scares people who imagine fighting for their preferred vacation weeks every time. Equity Estates solves this by aiming for a 60% occupancy rate across all properties, so there’s plenty of availability across more than 65 homes around the world.
How Equity Estates Manages Investment Risk
While no investment is without risk, Equity Estates carefully selects luxury vacation properties and destinations around the world, makes smart improvements designed to increase value and ensures each fund’s portfolio is diversified across locations and property types. The fund keeps occupancy rates low, so properties don’t get worn out from overuse, which means better availability for you and longer-lasting assets. Improvements happen regularly to keep properties competitive in luxury markets, and the 10-year liquidity path seeks to drive long-term capital appreciation with a clear exit timeline.
To learn about Equity Estates and how we can help you grow your capital while enjoying it, please reach out to our Investor Relations team at 404.445.8501 or click to schedule a call.
