How Do Passive Real Estate Investors Choose the Best Asset Classes for Long-Term Wealth?

Choosing where to place your capital in real estate is one of the most consequential decisions you’ll ever make as an investor. With dozens of asset classes competing for attention — from Airbnb rentals to industrial outdoor storage — knowing which ones truly deliver and which ones quietly destroy wealth is a skill that takes years (and millions of dollars) to develop.

In this episode of the Real Estate Investing Club, host Gabe Petersen sits down with Mark Khuri, co-founder of SMK Capital Management, a private equity real estate firm that has invested across more than a dozen asset classes since 2010. Mark manages a nationwide portfolio spanning roughly three dozen states and reviews 700+ deals per year — investing in only six or seven. His perspective on what makes a real estate investment genuinely worth owning is as hard-earned as it gets.

Short Answer: The best asset classes for passive real estate investors seeking long-term wealth are mobile home parks and tax-exempt affordable multifamily housing. Both benefit from a chronic national shortage of affordable housing, low new-supply risk, consistent occupancy, and favorable financing. Avoid new construction, office, hotel/motel, Airbnb, and indoor malls — where risk-reward ratios are unfavorable.

How Did Mark Khuri Build the Data to Know Which Asset Classes Win?

Not every investor has the luxury of stress-testing their thesis across a dozen asset classes before committing to a strategy. Mark Khuri did — and the process took nearly a decade.

Mark started in real estate as a child, watching his parents count laundry machine coins in upstate New York in the 1980s. He made his first formal investment in 2005, buying distressed single-family and small multifamily properties directly from banks during the 2008–2012 recession at prices 50–60% below prior peak values. By 2010, he left his finance career and co-founded SMK Capital Management with his father (SMK = their initials).

From 2010 to 2017, SMK ran two parallel strategies: acting as an active GP on deals while simultaneously investing personal capital as an LP across mobile homes, self-storage, student housing, oil wells, vacant land, short-term notes, and more. The result was a rich, real-world dataset on risk-reward, operator quality, and asset-class resilience across multiple economic cycles.

As Mark explains: “We compared and contrasted risk reward, operators, sponsors, real estate sectors. We had a good amount of data that we could essentially pull a thesis from for the next 10 years.”

By 2017, they saw the writing on the wall — deeply discounted foreclosures were drying up, competition was rising, and margins were being squeezed. SMK pivoted to its current model: partnering with best-in-class operators across preferred asset classes and raising capital from an accredited investor network as LP, co-GP, or JV structures.

Which Real Estate Asset Classes Should Passive Investors Avoid — and Why?

Before understanding where to put your money, it’s worth knowing where experienced operators refuse to go. Mark’s “do not invest” list is longer than his “buy” list, and every exclusion is rooted in risk-reward logic.

Here are the asset classes SMK actively avoids:

• New Construction / Development: High execution risk, no cash flow in year one, and returns that — in Mark’s view — don’t justify the risk. “We constantly find ourselves saying no on many of the new construction development deals out there.” If you want to explore this side of the market, read our guide on ground-up development wealth to understand what it truly takes.
• Office: Structural headwinds from remote work have made office a risk-reward nightmare. SMK hasn’t invested here in years.
• Hotel / Motel / Airbnb / Short-Term Rentals: Sporadic revenue, high seasonality, unpredictable demand cycles, and higher operating expense ratios make these a poor fit for income-focused investors. For those who still want to explore this niche, see our post on Airbnb rental arbitrage strategy.
• Student Housing: Enrollment volatility and seasonal occupancy patterns create risk that doesn’t justify the returns. (See also: student housing real estate strategy.)
• Indoor Malls: The secular decline of brick-and-mortar retail at the mall level is well-documented.
• Highly Niche / Illiquid Sectors: If the buyer pool at exit is thin and uncertain, SMK passes. “We try and always look at our exit — in five, seven, 10 years when we go to sell, are there going to be more or less buyers for this type of real estate? We try and stay away from those that are going to be less.”

The common thread: every excluded asset class either lacks consistent cash flow from day one, has a thin or shrinking buyer pool at exit, or carries execution and cyclicality risk that makes projected returns unreliable.

Why Are Mobile Home Parks Mark Khuri’s #1 Passive Investment Pick?

Mobile home parks have been SMK’s highest-conviction asset class since they first invested as LPs in 2012. The reasons are structural, not cyclical — and for long-term passive investors, they represent one of the most durable income vehicles in real estate.

Here’s why Mark rates them #1:

1. An Almost Impossible-to-Replicate Supply Moat
New mobile home communities simply cannot be built in desirable locations at affordable price points. Zoning restrictions, NIMBYism, and municipal opposition make new supply nearly impossible. As Gabe noted from his own experience: “We’ve even tried to expand parks that we own that have additional acreage and they won’t allow us to add sites to land that we already own.” This constraint means existing parks hold pricing power that few other asset classes enjoy.

2. Near-Recession-Proof NOI Growth
Equity Lifestyle Properties (ELS), the largest mobile home park REIT, publishes a historical NOI chart going back to 1985. That chart shows positive NOI growth through the dot-com crash, through 2008–2009, through COVID, and through the recent rate cycle. Mark describes it plainly: “When other real estate sectors are down from an NOI standpoint, mobile homes continue to chug along and have positive NOI growth. We just don’t see that with almost anything else.”

3. Affordable Housing Tailwinds That Aren’t Going Away
The U.S. faces a chronic affordable housing shortage across every state. Mobile home parks provide the lowest-cost unsubsidized housing option in most markets. As homeownership becomes increasingly out of reach for working families, demand for manufactured housing communities is structural and growing.

4. Tenant Stability
Unlike apartments or self-storage, mobile home park residents own their homes and simply rent the land. Moving a manufactured home costs thousands of dollars. This creates extraordinary tenant stickiness — occupancy rates remain high even in downturns. Read more on this dynamic in our deep-dive on mobile home park investing.

For a look at modern AI-driven strategies for this asset class, see: mobile home park investing AI strategies 2025.

What Is Tax-Exempt Affordable Multifamily — and Why Does Mark Love It?

Tax-exempt multifamily (also called tax-abated affordable housing) is Mark’s second-favorite asset class, and it’s one that most casual investors have never heard of. Once you understand the structure, it’s hard not to see why it’s so compelling.

Here’s how it works, in Mark’s own words: “It’s a public-private partnership where we’re creating affordable housing. 50% of the units at the building are kept affordable by definition — a formula based on area median income. And by doing so, you get a 50 to 100% property tax abatement, usually for 99 years, transferable to the next buyer.”

The investment thesis has three pillars:

1. Dramatically Higher Yield: Property taxes are typically the single largest operating expense for a multifamily asset. Eliminating or halving that line item immediately improves cash-on-cash returns at acquisition — in a market where yield is hard to find.
2. Superior Financing: Freddie Mac offers dedicated loan programs for affordable housing: lower interest rates, longer fixed terms, and interest-only periods of seven to ten years. This meaningfully improves cash flow in the early years of a hold.
3. Stabilized Acquisitions: SMK targets already-stabilized properties at 90–95% occupancy in growth markets — not value-add turnarounds. The tax abatement is the value creation mechanism, not renovation risk.

For a broader look at affordable housing as an investment category, see our guide on affordable housing wealth. And if you’re thinking about how the capital stack works across different structures, our post on diversifying your real estate portfolio across asset classes and the capital stack is essential reading.

Is Self-Storage Actually Recession-Resistant? The Honest Answer.

Self-storage has long been marketed as the ultimate recession-proof asset class. The pitch: people downsize during recessions, demand storage, and rents hold. The reality — as both Mark and Gabe discovered through direct ownership — is more nuanced.

Mark explains the nuance clearly: “There’s data that shows self-storage rates in 2008 were up about 5% when everything else was down 30%. So during that downturn, they were definitely recession-resistant.” That’s where the reputation comes from — and it was earned.

But the current cycle has exposed a different vulnerability. Self-storage demand is driven by life-change events: moving, downsizing, changing jobs. The post-pandemic rate environment locked millions of homeowners into 2–3% mortgages, dramatically reducing housing turnover — and with it, storage demand. Meanwhile, developers over-built. The result: declining rents, declining occupancy, and a soft market across much of the country since 2022.

Gabe was direct about his own experience: “We owned five self-storage facilities. We have not found it to be recession resistant. When people aren’t moving, you lose occupancy.”

The takeaway is not that self-storage is bad — Mark recently made a new self-storage investment and remains selectively bullish. The takeaway is that every asset class has a cycle, and past recession-resistance doesn’t guarantee future performance. Read our full analysis on the self-storage market recession reality in 2025.

How Does SMK Capital Evaluate Passive Investment Deals? The Due Diligence Framework

SMK reviews two to three deals every single day and invests in only six or seven per year. That’s a conversion rate of roughly 0.6%. Understanding how they filter is as valuable as knowing what they buy.

Mark’s framework centers on one core question at the end of due diligence: “Do we feel a lot of conviction that this deal has a very high likelihood of meeting or beating the projected return?”

The key inputs to that conviction:

• Operator quality above all else: “Our sponsors and operators that we partner with are just damn good at what they do. We’d rather invest with them than try and compete with them.” People risk is the #1 risk in any passive investment.
• Day-one income: SMK will not underwrite deals that don’t produce distributions in year one. Cash flow is non-negotiable.
• Exit liquidity: Before buying, they model the sale. Will there be more or fewer buyers for this asset type in 5–10 years? Thin exit markets are disqualifying.
• Geographic diversification: SMK invests in ~36 states simultaneously, across portfolios of properties. No single metro makes or breaks the strategy.
• Ignore the pitch deck: Mark’s single most important piece of advice: “Don’t believe the pitch deck. It is a marketing tool. You have to do a lot of due diligence and deep dive into what’s actually happening under the hood.”

For LPs who want to avoid the most common mistakes when evaluating passive deals, our post on limited partner real estate investing mistakes is a must-read. And if you want to understand the legal structure side, check out our guide on legal structure for real estate syndications.

How Is AI Changing the Way Real Estate Investors Underwrite and Manage Deals?

Both Mark and Gabe are active users of AI tools — and the applications are expanding faster than most investors realize.

Mark uses ChatGPT and Perplexity for research, analysis, and writing across the business. But he points to property management software as the most operationally impactful category: “Think about dynamic pricing — what is the market rate of a self-storage unit today at 123 Main Street in this city? It’s been around for a few years, but it’s getting really, really attractive to have these types of softwares implemented at the property level for leasing, rental rates, determining what your competition’s doing down the street and being able to adjust pricing by the hour.”

This airline/hotel-style dynamic pricing is now deployed across multiple real estate sectors, and the operators using it are capturing meaningful revenue uplifts versus those who aren’t.

Mark also flagged a critical defensive use case: AI-powered tenant screening. Fraudulent applications — complete with fake pay stubs and fabricated identities — are a growing problem across the industry. AI tools that detect these fakes before a lease is signed are now standard across many of SMK’s projects.

Gabe shared his own experience using Perplexity for deal underwriting: “I threw this OM into Perplexity and said ‘underwrite this aggressively.’ It came back with all these red flags about the local metro and the specific P&L — and it said this is overvalued by 40%. It did it within five minutes.”

For a deeper look at how AI is reshaping real estate investing, see our guides on AI tools and strategies for real estate investors and AI real estate investing tools for 2025.

What Does SMK Capital’s Best Deal Tell Us About Timing and Execution?

In August 2020 — right in the middle of the COVID pandemic — SMK made what turned out to be one of its best investments ever: an apartment community in Phoenix, Arizona.

The setup: SMK had been raising capital for a strip retail portfolio when COVID hit. They paused, returned investor capital, and spent six months watching the data. By mid-summer 2020, they saw clear tailwinds: rent growth, cap rate compression, and surging buyer demand. They moved.

The plan called for renovating 30% of units and selling in three years. Their operators renovated about 20% of units in the first 15–16 months. Actual rents came in far above underwriting. Cap rates — which they had conservatively projected to expand — actually compressed dramatically.

The result: investors doubled their money in 18 months, at a 96% IRR.

Mark is transparent about the role of timing: “It was a combination of great execution on the business plan, also market timing — that was something we didn’t project.” But the discipline to pause, return capital to investors, gather data, and then move decisively when the evidence warranted it? That was entirely within their control.

The lesson: great deals are made by great operators who know when to hold, when to wait, and when to act. Our post on when to sell real estate — timing and strategy explores the other side of this coin.

Key Takeaways: What Every Passive Real Estate Investor Should Do Next

Mark Khuri spent 15 years building a private equity real estate firm by doing the unsexy work: reviewing thousands of deals, investing across a dozen asset classes, tracking every outcome, and building a thesis grounded in data rather than hype. Here’s what he’d want every aspiring passive investor to internalize:

• Focus on affordable housing — both mobile home parks and tax-exempt multifamily. The supply/demand imbalance is structural and long-term.
• Demand day-one cash flow. If a deal doesn’t pay you from the start, the risk profile changes fundamentally.
• Never invest based on a pitch deck alone. Do the due diligence. Get under the hood. Use AI tools to stress-test the numbers.
• Bet on operators, not just assets. The best deal with a mediocre operator will underperform a good deal with a great one.
• Think about your exit before you enter. Will there be more buyers or fewer for this asset in seven years?
• Take action early and often. As Mark puts it: “I would have taken even more action earlier on in my younger career.”

For more on building long-term wealth through passive cash flow, read our guide on cash flow wealth building. And if you’re thinking about how to raise capital to scale your own strategy, don’t miss our post on how to raise real estate capital without cold calling.

Connect With Mark Khuri & SMK Capital Management

Mark Khuri and SMK Capital Management work exclusively with accredited investors. Their investor network provides regular updates on what they’re investing in, what they’re passing on, and why — making it an excellent educational resource even before you’re ready to invest.

Visit: smkcap.com

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