Creating Portfolios That Are ‘Not for the Faint of Heart’

“With every passing week, it gets just a little bit scarier as to how this will all end,” she said.

In April, Mr. Glein secured three small-business loans through the federal Paycheck Protection Program to support the bowling centers and the restaurant, the Ale House Pub & Eatery. Although most of the couple’s commercial tenants have paid their rent, some have requested rent reductions, and one has gone out of business.

Economists and investment experts said real estate investment played an important role in any diversified portfolio. It “generates higher cash flow than the stock market, behaves differently than other asset classes of stocks and bonds, and is one of the few areas of investing that are highly tax efficient for the individual investor,” said Douglas Abbey, a lecturer on real estate at the Stanford Graduate School of Business.

Mr. Abbey, who has decades of experience as a real estate investor, said his first rule was to buy property with a “forever time horizon” that will endure because it’s in a good location.

“Like a good bottle of cabernet, you want real estate to get better in 20 years rather than turn to vinegar,” he added.

Residential real estate, namely apartment properties, generates the most stable return with the least risk for individual investors, even during the pandemic, he said. Everybody needs a place to live — a reality that Ms. Smith, the Los Angeles investor, has consistently encountered. But that drives up the price, which reduces the yield, Mr. Abbey added.

He said the biggest hazard for investors in income-producing real estate was “overleverage,” or taking on too much debt in a business in which downturns and recessions are a given — something the Gleins said they have been careful to avoid.

Another means of investing is through real estate investment trusts — companies that hold, manage or finance income-producing real estate — by purchasing shares on a stock exchange, in a mutual fund or in an exchange-traded fund. Equity REITs dominate this market. Some focus on apartments, office buildings, industrial warehouses and shopping centers.

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