Residential real estate is a solid asset class to invest in for the long-term with potential for capital gains. But, there are a few negatives that are hard to avoid compared to ASX shares.
Investing in a house as an investment property likely means being negatively geared if a loan funds a large majority of the purchase. In other words, investors are making a cash flow loss each year, so the investor would need to fund that loss from their own personal finance budget.
On the other hand, there are ASX shares with exposure to real estate that can deliver solid capital growth and very attractive passive income. Let me tell you about two of my favourite ways to tap into the real estate theme on the ASX.
Centuria Industrial REIT (ASX: CIP)
Industrial property is a good place to invest in, given the rising value of land and growing demand for those sorts of facilities. I think one of the most important things that makes a good real estate investment is the potential for rental growth, which should drive the long-term value of property.
Industrial property is in demand because of growing usage of online shopping, refrigerated facilities for food and medicine, and rapid growth of data centres. A rising population is also a useful tailwind for the industrial space.
Another positive for this ASX share is the lack of industrial property supply, which has helped lead to an incredibly low vacancy rate across Australia's cities.
All of the above is helping the business drive its rental income higher. In the FY26 half-year result, the business reported like-for-like net operating income (NOI) growth of 5.1%.
In the coming years, the ASX share could see significant rental growth as contracts come up for renewal because the portfolio has a 20% average under-renting as of HY26, thanks to significant market rental growth in the last few years.
In terms of the positive passive income, Centuria Industrial REIT is projected to pay an annual distribution of 16.8 cents per unit. That translates into a forward distribution yield of 5.6%, at the time of writing.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
The other ASX share I want highlight as an option that gives exposure to real estate is Soul Patts, an investment conglomerate.
It has a diversified portfolio across various sector, but arguably its biggest exposure is to property, with different investments.
The business reported that at the end of the first half of FY26, its portfolio value – the net asset value (NAV) – was $13.8 billion.
Soul Patts now owns the entirety of the Brickworks business, Australia's largest bricks manufacturer, as well as a number of other building products such as masonry. On top of that, the acquisition gave it ownership of Brickworks' multi-billion portfolio of industrial property assets.
The ASX share now owns investments in distribution centres, manufacturing buildings, data centres, land held for development, agriculture and retirement living.
On the returns side of things, Soul Patts reported in the HY26 result its NAV has seen a compound annual growth rate (CAGR) of 11.1% between HY23 and HY26.
Impressively, Soul Patts has increased its regular annual dividend per share every year since 1998 and it currently offers a grossed-up dividend yield of 3.6%, including franking credits, at the time of writing.
The post 2 ASX shares I'd much rather buy than an investment property appeared first on The Motley Fool Australia.
Motley Fool contributor Tristan Harrison has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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