High-Net-Worth Individuals (HNWIs) are increasingly shifting capital away from REITs (Real Estate Investment Trusts) and into direct real estate investments, and for good reason.

In today's volatile economic environment, wealthy investors are looking for greater control, higher returns, and more robust tax strategies. While REITs once offered an easy, passive way to gain exposure to real estate, they now fall short in delivering the customization, profitability, and wealth preservation that direct real estate can provide.

Below, we break down the top 3 reasons HNWIs are moving capital from REITs to direct real estate deals and how this strategic shift is helping them build long-term wealth.

1. Greater Control Over Assets and Investment Strategy

One of the biggest motivators for HNWIs to abandon REITs is the lack of control.

When investing in a REIT, you're essentially buying shares in a company that owns real estate; you have no say in which properties are chosen, how they’re managed, or when they're sold. Investment decisions are made by fund managers with little to no input from investors.

In contrast, direct real estate investing offers:

• Full decision-making power over property acquisition, financing, and management
• Ability to choose high-growth markets (e.g., Southeast Charlotte, NC)
• Flexibility to invest in multifamily, commercial, or development projects that align with personal goals

This hands-on approach gives investors the ability to mitigate risk, enhance returns, and align their portfolios with long-term financial plans.

2. Higher Returns and More Income Potential

REITs typically offer modest dividend income, but they lack the upside potential of direct real estate ownership.

Most REITs are required to pay out 90% of taxable income as dividends, limiting their ability to reinvest or grow the portfolio. Plus, REIT performance is closely tied to stock market volatility, which can lead to unpredictable returns.

Direct real estate deals deliver:

• Rental income from appreciating assets in high-demand areas
• Long-term property value growth (especially in emerging markets like Charlotte, NC)
• Equity build-up through leveraged investing
• Higher internal rate of return (IRR) potential

Wealthy investors are targeting institutional-grade real estate developments that produce double-digit returns, outperforming most REITs over time.

Example: Catalyst offers access to exclusive development deals in booming real estate corridors with high ROI potential.

3. Superior Tax Advantages and Long-Term Wealth Preservation

Perhaps the biggest financial advantage of direct real estate over REITs lies in the tax benefits.

With REITs, investors typically receive dividends taxed at ordinary income rates, with minimal tax planning flexibility. There are no depreciation benefits, and tax efficiency is often sacrificed.

Direct real estate offers significant tax strategies, including:

• Depreciation deductions to offset rental income
• 1031 exchanges to defer capital gains and reinvest tax-free
• Cost segregation to accelerate depreciation and reduce taxable income
• Estate planning advantages through wealth transfer structures

These strategies not only minimize taxes but also help HNWIs preserve wealth across generations, making direct ownership a smart long-term play. 

Catalyst, structure deals to maximize tax efficiency, allowing investors to grow and preserve capital more effectively.

Why Direct Real Estate Is the Smart Move in 2025

With economic uncertainty and rising inflation, HNWIs are prioritizing investments that offer stability, control, and long-term growth. Direct real estate deals check all these boxes and more.

REITs may still have a place in diversified portfolios, but for high-net-worth investors seeking customized strategies and superior returns, direct real estate is the clear winner.

Work With a Trusted Real Estate Investment Partner

Suppose you're looking to make the move from REITs to direct real estate. In that case, it's critical to partner with an experienced developer and asset manager who can guide you through high-yield opportunities.

Catalyst specializes in institutional-quality real estate development with a proven track record in high-growth markets like Southeast Charlotte.

We help HNWIs:

• Access off-market, high-return real estate deals
• Structure investments for optimal tax efficiency
• Build long-term wealth through direct real estate ownership

Ready to Move Beyond REITs?

Discover smarter, more profitable real estate investing.

Schedule a consultation with Catalyst today and unlock exclusive access to high-performing direct real estate deals.