If you are a high earner, there is a good chance almost every dollar you have invested rises and falls with the same thing: the public stock market. Your 401(k), your brokerage account, your company equity, even the real estate funds (REITs) you may own, are all repriced together every trading day. The question worth sitting with is not “are stocks good?” They are. It is: is too much of my wealth dependent on a single market?
The answer for most people is not to abandon public markets. It is to add a measured allocation to assets that behave differently, produce cash flow, and do not move in lockstep with the S&P 500. Private real estate is one of the clearest ways to do that. This article walks through a practical framework for deciding how much of your portfolio might belong there, grounded in what large, sophisticated investors actually allocate.
If you are still weighing private real estate against the alternatives, our data-driven comparison of multifamily against stocks, bonds, and REITs is a useful companion to this piece.
1. Start with the number you are probably already at: near zero
Most individual investors hold almost no private real estate. Their real estate exposure, if any, is their primary home (not an income-producing investment) and perhaps a publicly traded REIT that, as we will see, behaves a lot like a stock. In practical terms, the private real estate allocation of a typical high-earner portfolio rounds to zero.
Now compare that to how institutions invest. Pensions, endowments, and insurers, the investors with the longest time horizons and the deepest research teams, treat real estate as a core building block, not an afterthought.
Target Real Estate Allocation: Institutions vs. a Typical Individual
Real estate as a share of the total portfolio
Institutional figure: Hodes Weill & Cornell / Cohen & Steers, institutions target roughly 10.8% of portfolios to real estate (2024), up over 20% since 2013, with about half of institutions reporting they are under-allocated. Individual figure illustrative. For education only.
Institutions target roughly 10.8% of their portfolios to real estate, and many report they are under-allocated to it, not over. Most individuals sit near 0%. That gap is the opportunity this article is about. You do not need to match an endowment, but the direction of travel is worth understanding.
2. Why “diversified” portfolios often are not
The reason the gap matters comes down to correlation, how much your holdings move together. A portfolio of stocks, stock-like REITs, and bonds can still fall largely in unison during a market shock, because so much of it is tied to the same public-market sentiment. True diversification requires an asset whose value is anchored to something else entirely: in the case of multifamily, to rental income and physical buildings rather than daily trading.
This is also why a publicly traded REIT is not a substitute for owning the underlying property. A REIT gives you real estate exposure with stock-market behavior. Private multifamily gives you the income and asset backing without the daily price whiplash. We unpack why the asset class holds up through cycles in Why Multifamily Remains the “Safe Haven” Asset Class in 2026.
The Endowment Model vs. the Classic 60/40
Illustrative portfolio composition
Illustrative. The “endowment model” popularized by large university endowments leans heavily on private and real assets to reduce reliance on public markets. Actual allocations vary widely by institution. For education only, not a recommendation.
The classic 60/40 portfolio (60% stocks, 40% bonds) keeps essentially all of its risk inside public markets. The endowment approach deliberately moves a meaningful slice into private and real assets, precisely so the whole portfolio does not depend on one engine. You do not have to go that far. The point is simply that adding a real, non-correlated allocation is a well-worn path, not an exotic one.
3. A simple framework for sizing your allocation
There is no single “right” percentage, and anyone who gives you one without knowing your situation is guessing. Instead, size the allocation against four honest questions:
Time horizon. Private real estate is patient capital, typically held for several years. The longer you can leave money invested without needing it, the more comfortably you can allocate.
Liquidity needs. These investments are not something you sell on a Tuesday afternoon. Your allocation should come from the portion of your wealth you do not expect to touch soon, never your emergency reserves.
Existing concentration. The more of your net worth already tied to public equities (including company stock), the more a non-correlated allocation can do for you.
Income goals. If part of what you want is cash flow rather than only paper growth, real estate’s distributions change the math in your favor.
Run through those, and most high earners land somewhere in the ranges below. Treat these as starting points for a conversation with your own advisors, not as personalized advice.
Getting Started
New to private markets, or want to add diversification while keeping most capital liquid. A first, measured step out of an all-public portfolio.
Established Investor
Comfortable with illiquidity, heavily concentrated in equities, and focused on durable, tax-advantaged income alongside growth.
Long-Horizon Diversifier
Long time horizon, strong cash reserves, and a deliberate strategy to reduce dependence on public markets, closer to how institutions think.
Illustrative ranges for education only. Your appropriate allocation depends on your full financial picture and should be determined with your financial, tax, and legal advisors.
Building Recession-Resistant Portfolios
Go deeper than this article. Our free guide shows how accredited investors use private multifamily to add durable income and lower volatility to a stock-heavy portfolio, with the frameworks we use to evaluate every deal.
Get Instant Access →4. What a measured allocation actually changes
Adding private real estate to a stock-heavy portfolio is not about chasing a bigger headline return. It is about improving the shape of the portfolio: adding a stream of cash income and dampening the swings. Because multifamily generates much of its return as distributions paid along the way, often quarterly, a slice of it raises a portfolio’s income profile while its low correlation helps steady the ride.
Illustrative Portfolio Profile: 60/40 vs. Adding a 10% Private Real Estate Sleeve
Directional illustration of income and volatility, not a forecast
Illustrative and directional only. Reallocating a portion of stocks and bonds into a private real estate sleeve tends to raise portfolio income and modestly reduce volatility because of real estate’s cash distributions and low correlation to public equities. Actual results vary by deal and market. Not a projection of returns.
Two features make real estate’s income especially useful. First, rents tend to reset with the market each year, which historically helps the income keep pace with inflation, something a bond’s fixed coupon cannot do. Second, the tax treatment is favorable: depreciation can shelter a large share of the distributions, so more of the cash you receive stays with you. We cover those mechanics in The 2026 Tax Playbook. Investors rolling gains from a prior property sale can also explore deferring taxes through a 1031 exchange.
5. How you fill the allocation matters as much as the size
Deciding on a number is only half the job. A 10% allocation to a poorly run deal is worse than 5% to a well-underwritten one. Once you have sized your sleeve, the questions shift to how the investment is accessed and who is running it.
Most high earners access private multifamily passively, as a limited partner alongside an operator who handles acquisition, financing, renovations, and management. If that structure is new to you, our guide to passive real estate investing explains how it works. The single biggest driver of outcomes is the operator: how conservatively they underwrite and how much of their own money sits alongside yours, which we explain in The “Skin in the Game” Rule. And because a well-run deal creates value rather than waiting for the market to hand it over, it helps to understand how forced appreciation works.
The bottom line
Keep your public market investments. The goal is not to replace your portfolio, it is to build a better one. Institutions target around a tenth of their portfolios to real estate; most individuals hold almost none. Somewhere between a first measured 5 to 10% step and an institution-style 15 to 20% is a range worth exploring, sized to your time horizon, liquidity, concentration, and income goals, and filled with a well-underwritten deal run by an operator with real skin in the game.
See How a Private Allocation Could Fit
Fidelity Business Partners invests its own capital alongside accredited investors in recession-resistant multifamily assets, with a focus on consistent quarterly cash distributions.
View Current Offerings Get in TouchThis article is for educational purposes only and does not constitute investment, tax, or legal advice, or a recommendation to buy or sell any security or to adopt any particular allocation. Allocation ranges and portfolio illustrations are hypothetical, directional, and provided for education only; they are not projections or guarantees of any outcome. Institutional allocation figures are drawn from widely cited public sources and are approximate. Your appropriate allocation depends on your complete financial situation and should be determined with your own financial, tax, and legal advisors. Private real estate offerings are available only to verified accredited investors and involve risk, including possible loss of principal and limited liquidity. Past performance and historical returns are not indicative of, and do not guarantee, future results.
