The average capitalization rate on commercial properties excluding hotels was 7.2% as of the fourth quarter last year, Real Capital data show. Cap rates are a property's net income divided by the purchase price.

Investment-grade U.S. corporate bond yields were 4.01% as of March 7, according to the Bank of America Merrill Lynch index. Rates for 10-year certificates of deposit averaged 1.48% as of March 7, according to Market Rates Insight, based in San Anselmo, Calif.

Clients from athletes to entrepreneurs have moved 3% to 5% of their cash into real estate deals in the last year as a way of adding assets that may protect portfolios from inflation and stock market volatility, said Rick Flynn, head of the family office group for Rothstein Kass, an accounting and advisory firm in Roseland, New Jersey, serving those with a net worth of at least $10 million.

Not Complicated

"Families are really excited because everything else they've been sold in the last five years had a lot of complicated structures that they never really understood, whether it's a hedge fund or a structured product," said Toby Moskovits, chief executive officer of Heritage Equity Partners in New York, whose firm has advised families who invested $30 million in apartment deals in the past six months.

The building Parekh bought has a major tenant, Petco Animal Supplies Inc., he said. Investors have an equity stake in a partnership that owns the property and get a share of its cash flow and future appreciation based on how much they contributed, said Parekh. His firm told investors they would receive at least a 10% return on their investment annually after it collected the monthly rent and paid bank debt.

Holding Period

Individuals are tying up their money for an estimated holding period of 10 years to 15 years, according to the operating agreement, Parekh said. The property may be sold earlier, he said. Parekh takes a fee of less than $350 a month for managing the property and a portion of the property's cash flow after investors are repaid, he said. Parekh, 34, used to acquire and manage real estate investments in New York for Washington D.C.-based Carlyle Group, the world's second-biggest private-equity firm, he said.

Investors who concentrate their money in one or several properties may take on more risk, while investing in a real estate investment trust, or a REIT, provides more diversity across the market and greater liquidity, said Craig Leupold, president of real estate research firm Green Street Advisors Inc. in Newport Beach, California. The Bloomberg REIT Index of 124 publicly traded property owners, including apartments, office buildings and shopping centers, climbed 23% in the past year.

"You have to be very careful of being lured by yield," said Lew Altfest, president of New York-based Altfest Personal Wealth Management, whose clients have a minimum of $1 million in investable assets. If a property owner defaults, a family could end up managing a property, be involved in litigation and incur legal costs before a property can be repossessed and put up for sale, Altfest said.