High-net-worth (HNW) can mean many things, but it typically refers to individuals who have at least $1 million in liquid assets (cash, assets that can be converted to cash quickly, excluding their primary residence, or a combination of the two). To be considered high-net-worth, individuals must have a net worth of $1.5 million or $750,000 in investable assets. No multi-industry level of wealth must be met to be considered a high-net-worth individual. [1]
HNW individuals could get exclusive services from financial institutions. This includes access to specialized investment accounts. Some financial advisors work exclusively with HNW individuals, helping them grow their wealth and reach their financial goals.
A credit card company may offer HNW individuals an invitation-only card with unique perks like unlimited spending, luxury hotel upgrades, and 24-hour concierge services. Financial advisors typically categorize their clients as either high-net-worth or not. This can influence the type of financial advice they give based on the person’s economic capabilities, assets, and specific needs.
Individuals may check if they are considered high-net-worth by looking into their liquid assets, including their checking accounts, savings accounts, money market accounts, public securities, and mutual fund shares. [1]
Assets that are harder to liquidate are usually not factored in by most financial institutions. Land, vehicles, and other assets are typically excluded when determining whether a person has a high net worth.
Here, we will focus on HNW individuals and why they might consider investing in real estate, specifically private placement. Typically, HNW individuals utilize various investment vehicles, including equity funds, real estate investment trusts (REITs), private funds, mutual funds, exchange-traded funds (ETFs), and occasionally hedge funds or venture capital (indirectly).
Conversely, some savvy investors consider including real estate assets in their investment portfolio for diversification. However, real estate investing can offer more than just diversification. Real estate investments, encompassing both commercial and residential properties, offer a diverse range of benefits to investors. Let’s take a closer look.
WHY HNW INDIVIDUALS MIGHT CONSIDER REAL ESTATE INVESTING
Although it involves some level of risk, investing in real estate can offer numerous benefits. Passive investors can enjoy great returns, tax advantages, passive income, and a predictable cash flow if they choose the right sponsor or fund. With a strategic approach, HNW individuals could leverage real estate to build wealth over the long term.
Unlike traditional investment options, real estate generally provides active investors with a tangible asset, meaning it’s a property they can see and physically touch. With the right investment property and a well-defined strategy, active investors can gain more control over their investments and returns. Understanding the various benefits of real estate is essential for those considering active or passive investment in the sector.
We must first differentiate between active and passive investors. In multifamily real estate, active investors are individuals or partners who participate in the renovation, construction, property management, or acquisition labor involved in a deal. Passive investors are limited partners whose liability is limited to the amount of their investment in the offered product. They do not actively participate in renovation, construction, property management, or acquisition labor.
Real estate investing is known for its potentially strong and predictable cash flow. Cash flow is a catch-all term typically used to describe the income a property produces after all operating expenses have been paid. [2]
A real estate property can generate cash flow, typically through rental income from tenants. The tenant is the correct term for specific property lease agreements, such as office, industrial, and retail properties. In contrast, resident is the preferred term for persons residing or living on a property. So, someone renting a self-storage unit may be referred to as a tenant, while someone who lives in an apartment community is referred to as a resident.
A single-family property can earn from the rental payments made by its resident(s). A multifamily property, such as an apartment community, can generate a strong cash flow because it has multiple revenue streams, the most significant being occupied units and residents paying rent. In many cases, equity is built up, and cash flow strengthens over time as the property owner pays their mortgage. Passively investing in real estate could be ideal for HNW individuals looking for a source of passive income and working toward retirement.
TAX BREAKS & DEDUCTIONS
Real estate investing offers various tax benefits, including deductions for mortgage interest, property taxes, depreciation, and other expenses. These numerous tax breaks and deductions can help reduce an investor’s taxable income, allowing them to potentially save money at tax time.
Generally, active investors can deduct the reasonable costs of owning, operating, and managing a property. And because the cost of buying and improving a real estate investment property can be depreciated over its useful life, investors can benefit from decades of deductions that lower their taxable income. [2]
APPRECIATION
Real estate investors could profit from rental income and property-dependent business activities. However, they can also earn from appreciation. [2]
Property appreciation can occur in two primary forms: natural (market) and forced appreciation. Real estate properties have the potential to appreciate (increase in value) over time, leading to capital gains for investors. Well-chosen properties in growing markets might offer substantial returns, contributing to long-term wealth accumulation.
With a suitable investment property, active and passive investors can profit when it’s time to sell. And because rents tend to rise over time, it has the potential to lead to greater cash flow.
PORTFOLIO DIVERSIFICATION
We mentioned earlier that real estate investing can be an ideal way to diversify your portfolio. This is because real estate has a lower correlation with other major asset classes. In some cases, it could even have a negative correlation. [2]
Unlike other investment options, which can be volatile, some real estate investors claim that the stability of multifamily properties is a key advantage. And because of the low correlation with public securities, your real estate investments may continue to generate returns even when public securities do not.
It simply means that real estate investing can be a strategic way to lower your portfolio volatility. It also presents investors with an opportunity for higher returns per unit of risk.
Real estate can offer diversification benefits, as it often behaves differently from traditional financial assets. Including real estate in a portfolio might help reduce overall risk by spreading investments across multiple asset classes.
LEVERAGE
Leverage refers to utilizing various financial instruments or borrowed capital, such as debt, to enhance the potential return of a particular investment. Investopedia offers the following example: if a 20% down payment on a mortgage gets you 100% of the house you want to buy, this is an example of leverage. Therefore, real estate is a tangible asset and can serve as collateral, which is why financing is readily available. [2]
Real estate can be purchased with borrowed money, allowing active investors to utilize leverage and control a more extensive asset base with a relatively small initial investment. This can amplify returns if the property appreciates in value.
HEDGING AGAINST INFLATION
Real estate is often considered an inflation hedge because property values and rental incomes tend to rise with inflation. This could help protect the purchasing power of an active investor’s wealth over time.
Real estate’s inflation-hedging capability stems from the positive relationship between GDP growth and demand for real estate. This means that as economies expand, demand drives real estate rents. In turn, this translates to higher capital values. [2]
Real estate maintains its buying power of capital by passing some of the inflationary pressure onto residents/tenants. [2]
Through research and the guidance of financial planners, HNW individuals can determine the real estate investment strategy that best suits their needs and goals. HNW individuals must consider their risk tolerance and real estate market dynamics to choose a suitable investment fund or property. Remember that, despite all these benefits, real estate investing still carries risks.
HNW INDIVIDUALS & REAL ESTATE PRIVATE PLACEMENT
Real estate investing, particularly multifamily investing, is attractive to HNW individuals because of its potential to offer strong and reliable cash flow. Even if one or two units in an apartment building become vacant, the remaining units will still generate rental income. At the same time, operators seek new residents to replace those who have left.
However, actively investing in multifamily real estate comes with two significant challenges: it has a large barrier to entry, as these buildings are significantly more expensive than single-family properties, and can be time-consuming; large multifamily properties require experienced landlords or property managers to keep them running smoothly.
The good news is that apartment buildings usually generate enough income to cover the cost of hiring a professional third-party property management company. A high-net-worth individual likely does not have the time to play the role of landlord and handle resident emergencies themselves.
However, even HNW individuals may think twice about investing a significant amount of capital in a multifamily building. The risk might be too big if you tackle this investment alone.
Fortunately for HNW individuals, a more convenient option is available in the form of a real estate private placement deal. Real estate private placement deals involve multiple investors pooling funds to purchase a property. They will provide a portion of the capital needed to buy the investment property and share its risks and returns.
These passive investors are led by a general partner, also known as a sponsor, responsible for finding the property, facilitating the transaction, and managing the property after the purchase. [3]
This deal can be applied to almost any type of real estate. Therefore, there are both commercial and residential private placements. However, commercial multifamily private placement deals are among the most popular with HNW individuals because of the potential benefits listed above. Multifamily properties can generate strong cash flow and continue producing income even if one or two residents leave.
Private placement deals are often exclusive to accredited investors and HNW individuals, so they enjoy an alternative investment outside the typical options. [3]
A private placement can be compared to a real estate investment trust (REIT) because both investment vehicles allow investors to participate in real estate without managing the property themselves. There are some differences, though, the main one being that REITs regularly distribute dividends, while funds primarily provide value through appreciation. REITs are also often traded on major public securities exchanges (except for non-traded or private REITs), providing liquidity and the flexibility to buy or sell shares quickly. On the other hand, investors have no control over which real estate properties a REIT comprises.
Multifamily private placement helps address the two most common issues that passive real estate investors face. You will not need to locate and purchase an apartment building on your own. You also do not have to handle property management since the sponsor will.
Passively investing in multifamily private placement typically requires less upfront capital from each participating entity because the costs are assessed and fairly distributed among the group. Even the risks are shared by the participating parties. A passive investor’s risk is limited to the capital they invest, while the sponsor assumes most of the risk and liability. This allows investors to participate in deals they usually would be unable to. [4]
Multifamily private placement can be a source of passive income. The Internal Revenue Service (IRS) describes passive income as “money generated from rental or business activity in which the first receiver makes income from a business in which the taxpayer does not materially participate.” [3]
As you may already know, proper passive investments are scarce. However, a multifamily private placement deal could potentially give investors a significant economic advantage while saving time and energy.
HNW INDIVIDUALS & BAM CAPITAL: MULTIFAMILY PRIVATE PLACEMENT
Some active investors getting started in multifamily real estate try to build their teams from scratch or create their own companies. But doing so takes significant time, energy, and resources. Companies do not just become industry leaders overnight. Instead, they may opt to work with established owners or operators who have proven track records to arrange deals for them.
Lean into what you know. Ask yourself if what you know best is actively running a business or passively investing. Instead of starting your own real estate company, consider outsourcing the work to BAM Capital and enjoy the benefits of working with an award-winning industry leader.
BAM Capital has been focusing on buying assets targeted as having strong profitability potential and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units. [6]
Remember that no investment is without risk. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.
For additional multifamily real estate insights, visit Pathways to Passive Wealth, BAM Capital’s new platform designed to make real estate investing more accessible, transparent, and achievable for aspiring and experienced investors.
Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect BAM Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. BAM Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.
© 2025 BAM Capital. All rights reserved.
SOURCES:
[1]: SmartAsset. (2024). “What Constitutes a High-New-Worth Individual?” https://smartasset.com/financial-advisor/what-constitutes-a-high-net-worth-individual
[2]: Investopedia. (2025). “Key Reasons to Invest in Real Estate.” https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp
[3]: SAMO Financial. (n.d.). “Why investing in a syndication is one of the top choices of the wealthy.” https://www.samofinancial.com/why-investing-in-a-syndication-is-one-of-the-top-choices-of-the-wealthy/
[4]: Janover Multifamily Loans. (2024). “Advantages and Disadvantages of Multifamily Syndication.” https://www.multifamily.loans/apartment-finance-blog/advantages-and-disadvantages-of-multifamily-syndication/
[5]: BAM Capital. (2025). “Current portfolio.” https://bamcapital.com/
