Why You Need a Real Estate Advisor on Your Wealth Management Team

Why You Need a Real Estate Advisor on Your Wealth Management Team

6 years ago 0 0 2517

As the end of 2016 quickly approaches and you ponder year-end donations and 2017 financial objectives, you should consider if you need someone to help you reach your goals—or to advise you on what those goals should be. Let’s take a look at your team. The Coach The Coach develops a game plan based on circumstances. Do you become your own coach, or do you consult with a wealth manager or financial planner to mold your circumstances and financial objectives into an effective financial plan? This is the first big call. The Roster Then, you must ask yourself: Who should be my team players? A typical team consists of a financial advisor, an investment manager, a CPA, an insurance advisor and an estate attorney. Now, the water becomes somewhat murky here because some of these players wear multiple hats. In certain cases, they work for a fee on your behalf.

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How Do You Get Started in Private Real Estate Investing?

6 years ago 0 0 2303

As young adults start to accumulate wealth, very few consider investing in real estate. But why? As stated in my previous blog, Private Real Estate Investing: A Game of Risk, real estate presents a unique set of challenges, including illiquidity, higher risk and the amount of required capital. In addition, most people enter the investing world through a friend who is an investment advisor (i.e. stock broker), and he or she sells stocks, bonds, mutual funds and other similar investment vehicles. When I started thinking about a career in real estate investments, a very successful private real estate promoter gave me a piece of advice: Start early with a small stake, and grow it. So, how do you start? Pool Capital Even if you do not have much cash, a smart way to get started is to organize a group of friends who are each willing and able to make

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Private Real Estate Investing: A Game of Risk

6 years ago 0 0 2649

Most people invest in equities, like stocks and bonds. They are liquid. They are transparent. The markets are regulated. With equities, you can follow your investment though various channels. And you are betting on companies more than individual people. Private real estate investing is different. The investment is illiquid. Current value of the asset owned is not easily determined. Often there is a sponsor or promoter who has discretion with regard to major decisions, and finally, debt is typically used to purchase the asset. These factors combined increase risk and put private real estate investments in the category of Alternative Investments. Getting Started To invest in a private real estate deal, an investor must be accredited. This means he or she can afford either to lose all equity or not have access to it for an indefinite period of time. Once this hurdle is cleared, I recommend all investors ask

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Mentoring 102: On-the-Job Mentoring

6 years ago 0 1 2438

Mentoring 102: On-the-Job Mentoring  So, your mentee has landed her first commercial real estate position. She’s excited, engaged and ready to learn the ropes and land some deals. Despite her enthusiasm and drive, she feels overwhelmed and doesn’t know where to start. This is where you come in. In my last blog, “Why Mentoring Is Key to Future Success,” we discussed how a mentor assists with the initial career decision. As promised, this blog addresses how mentors can help young professionals start with necessary fundamentals. This is important because like golf, if your set-up is poor, a bad swing will follow. Fortunately, most real estate companies now use the team approach. Teams can consist of junior and senior members or of professionals with complimentary skill sets. This approach by its nature gives the novice both a focus and a mentor. For small companies, less team opportunities exist, so individual mentoring

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How Financial Markets Impact Property Values

7 years ago 1 1 2549

Until the early 1980’s, real estate values were dependent on what I call real estate fundamentals—location, product quality, supply and demand. As a rule, financing provided investors and developers inexpensive, long-term capital but had insignificant impact on property value. Therefore, they held properties for long periods of time and often made money by paying down debt and by appreciating property values. Developers and owners had banking relationships as well. All of these factors equaled stable markets (except when developers became aggressive and tilted the supply/demand balance). Those were the Good Ole’ Days. Now, financial markets have a greater impact on property values, and here’s why: A shift in how private interest buys, develops and finances properties occurred. The Internet has made real estate a global asset. Traditional financing is not as readily available. 1980’s: A Marked Shift The 1980’s forced a major shift in real estate development and investment. Due

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A Tale of Two Restaurants

7 years ago 0 0 2750

I had the opportunity this fall to travel with my wife to South Africa for a couple of weeks. Between enjoying Cape Town and going out into the Savannah to see exotic animals, it was everything you’d imagine it to be. The only downside was the jet lag. Part of the experience was, of course, eating. South Africa is renowned for its vineyards, and it has a few high-concept restaurants that offer tasting menus of chef-selected pairings of dishes with wines. I was excited for one of these, in particular. It was the “bucket list” spot, the one everyone said I needed to go to. It was always booked, requiring reservations long in advance. Food critics around the world were raving. When the night finally came, everything about this place was…just OK. The atmosphere was a little stuffy, but OK. The food and wine were OK. And the price—well, let’s

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What Makes a Good Deal?

7 years ago 0 0 2790

Is this a good deal? As an investment sponsor, this is a question I get asked all the time. My clients want to feel good about placing their money into a particular real estate venture—and justifiably so! One easy response is: “We only promote good deals!” In one sense, that’s absolutely true. We make it our top priority to find and underwrite fundamentally sound real estate deals. But that fails to answer the real question behind the question, which is: “Is this a good deal for me?” Answering that question is not as simple as identifying a yield, internal rate of return, potential appreciation. Even if these all look good, a property’s characteristics or an investment’s financial circumstances may mean that it isn’t a good deal for some investors. We may not always know if a property purchase will turn out to be a “good deal” for a particular investor,

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Cutting Through the Brokerspeak

7 years ago 0 0 2682

If you’ve ever bought a house, you’ve heard some of the code words residential real estate agents put in their listings. That “contemporary design” may just be ugly as sin. The “convenient location” could be because you get stuck in rush-hour traffic within a quarter mile of the driveway. And don’t even start thinking about “open concept.” Commercial brokers have their own language as well, and it can lead the uninformed or unsophisticated buyer to overpay. For the uninitiated, it may take a while to pick it up on this language. But once you’ve heard the same phrases ad nauseam, it can be easy to get cynical about brokerspeak. Below are five of the most commonly abused phrases, along with the cynic’s interpretation. And, on a more serious note, what you really ought to think about when you see these phrases in a marketing package.   Below replacement cost! The

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Calculated Speculation

7 years ago 0 0 2734

A commercial real estate asset is a small business unto itself, operating in a micro-market that may be as big as a ZIP code or as small as a few city blocks. While portfolio investments like stocks, bonds and institutional real estate are heavily affected by macroeconomic trends like employment and interest rates, the financial performance of any given real estate asset is influenced much more strongly by what goes on around it. And even though these high-impact local events may seem to come out of nowhere, in reality they might be a long time coming. Armed with market knowledge, a strategic plan and conservative financing, investors can both capitalize on these trends and mitigate micro-market risk factors. Imagine these micro-market scenarios: A former manufacturing area on the edge of town has become a hot spot, complete with trendy restaurants, craft beer bars and converted loft apartments. Thanks to a

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The Right Spot in the Lineup

7 years ago 0 0 2722

An investment portfolio is a little like a baseball lineup. Smart managers know where to place batters with different skills in the right spot in the batting order. Similarly, when a portfolio is properly constructed, each investment plays a different role and they all work together to maximize team performance. Cash and government bonds are the “contact hitters” of a portfolio. They may not have a lot of flair, but they rarely strike out and will consistently do the little things to help the team, like legging out an infield single—or delivering a safe, moderate return. You want them near the top of your order. Stocks and mutual funds tend to “hit for average.” At any given moment, they may perform great or they may disappoint. But over the long haul, they consistently deliver opportunities to score. And then there are the “power hitters” of the lineup, the ones that

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