Marek Zmysłowski Blog

If you’re an individual investor and you want exposure to real estate, the worst possible way to get it is to go out and buy a building.

I know how that sounds. Real estate is the asset class everyone trusts — tangible, provable, the thing your parents told you to buy. But “tangible” is exactly the problem. The moment you own a physical building, you’ve traded a financial decision for an operational one, and most individual investors are not equipped to run an operating business on top of their capital allocation.

You can’t diversify with a few apartments

Unless you’re deploying serious institutional capital, you can afford a handful of units. And the data backs this up: most individual landlords aren’t running portfolios, they’re holding one or two properties and calling it a day. Pew Research’s analysis of U.S. Census data found that individuals own the overwhelming majority of small rental properties precisely because they tend to stop at one or two units, while businesses accumulate the larger holdings. Roughly three-quarters of single-unit rentals in the country are owned by individuals — and almost none of those individuals own more than a couple.

That’s not diversification. That’s concentration risk wearing a landlord costume. Real diversification means spreading exposure across asset classes — residential, hospitality, logistics, retail, land — and across regions with different economic cycles. With two or three properties in one city, you have neither axis covered.

Real estate is hyper-local, and that cost compounds

Sam Zell — arguably the most successful real estate investor of the last fifty years — put it as plainly as anyone has: “real estate is a local market, by definition.” He spent a career arguing that national trends tell you almost nothing about whether a specific building in a specific neighborhood is a good bet. Every region has its own lawyers, its own architects, its own appraisers, its own permitting culture, its own unwritten rules about who you need to know to get things done. None of that transfers. If you try to diversify by buying in a second region, you’re not diversifying a portfolio — you’re starting a second small business from zero, with a whole new set of professionals to vet and mistakes to make while you learn.

Cross a border and multiply all of that by ten. Global transaction-cost data puts this in hard numbers: buying and then selling a property in some countries can eat up close to a fifth of the property’s value once you count transfer taxes, stamp duties, notary fees, and agent commissions on both sides — before you’ve made a single dollar of return. And that’s before factoring in a different legal system, a different title system, a different tax treatment, and contracts in a language you may not fully control. Real estate is inherently political: zoning changes, rent control, a sudden shift in short-term rental rules, squatters’ rights that differ wildly by jurisdiction. A single regulatory change can turn a good asset into a multi-year legal fight — and that fight will consume far more of your time and energy than the return justifies.

It’s illiquid, and your life isn’t static

Even in a straightforward domestic sale, U.S. sellers typically give up somewhere around 8–10% of the sale price to commissions and closing costs. That’s the orderly exit. The moment you need to sell in a hurry — a divorce, a health scare, a job that suddenly requires you to relocate — the discount gets brutal. Analysts who study forced and distressed sales in illiquid assets like real estate put the typical haircut at 25–40% below fair value, because a buyer who senses urgency negotiates like it.

Direct real estate assumes your circumstances hold still for years. They won’t. You’ll change jobs, change cities, change relationships, inherit a family situation you didn’t plan for. A portfolio of physical buildings can’t flex with any of that. You can’t sell 15% of an apartment on a Tuesday because your plans changed. You’re stuck holding an illiquid, undiversified, operationally demanding asset — precisely when you can least afford the distraction.

There’s an ironic twist here for anyone tempted to quote Warren Buffett to justify going all-in on one or two properties. Buffett has famously argued that “diversification is protection against ignorance” and makes little sense once you truly know what you’re doing. Fair enough — but the whole point of hyper-local real estate is that “knowing what you’re doing” in one neighborhood teaches you almost nothing about the next one. Buffett’s logic only holds for someone who can go deep in a handful of businesses over decades. In real estate, going deep in one micro-market is precisely what prevents you from ever safely going deep in another.

So — public REITs and funds?

The instinct is to say: fine, skip direct ownership, buy public real estate funds instead. But this trades one problem for another. Long-run studies of public REITs — including a widely cited two-decade analysis from Morningstar — put their correlation with the broad U.S. stock market at roughly 0.6, and other academic work on crisis periods finds that correlation climbing even higher when markets are actually falling, which is exactly when you’d want real estate to behave differently. The large public players in real estate are so big that they are the market. Their scale doesn’t give you an edge over the market — it makes them a proxy for the market, with a meaningful chunk of the same correlation to broader equities and none of the alpha that made real estate attractive in the first place. You’re not investing in real estate anymore; you’re investing in a large, liquid, closely-tracked index with a real estate label on it.

The actual answer: curated private structures

The middle ground is private markets — but private markets are hard to access and even harder to evaluate on your own, which is exactly why direct ownership feels like the “safe” default. The better answer isn’t to pick individual private deals yourself. It’s to find structures where the sourcing, diligence, and legal work have already been done by people who specialize in a specific region and asset class — private instruments, often structured like bonds or yield-bearing positions, that let you gain curated exposure without becoming the landlord, the permit-chaser, or the lawyer’s client.

This is the model we’ve been building into the Samaná Landbank Trust: a regulated, multi-jurisdictional structure, securitized through Luxembourg and Swiss financial market infrastructure, with audited governance. It’s not a pitch for a building. It’s an attempt to give investors what direct ownership can never offer — real, curated, liquid-enough exposure to a specific real estate market, without asking you to become an operator.

The lesson isn’t “avoid real estate.” It’s: stop confusing owning a building with investing in an asset class. They are not the same thing, and only one of them is a full-time job you didn’t sign up for.

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Sources

• Pew Research Center, “As national eviction ban expires, a look at who rents and who owns in the U.S.” (2021), based on U.S. Census Rental Housing Finance Survey
• Sam Zell, quoted via Novel Investor
• Global Property Guide, “Real Estate Transaction Costs by Country”
• Zillow, “How Much Are Closing Costs for Sellers?”
• Ridgewood Investments, “The Hidden Cost of Illiquidity + Smart Borrowing in Real Estate”
• Morningstar / SparkRental analysis of REIT–stock market correlation; ScienceDirect, “Co-movement across European stock and real estate markets”
• Warren Buffett, quoted via Goodreads