Go­ing It Alone

It’s pos­si­ble for clients to in­vest in real es­tate with­out an ad­viser, but it’s not the best idea.

Financial Planning - - EDITOR’S VIEW - —Chelsea Emery

WHEN MY HUS­BAND AND I BOUGHT OUR FIRST HOME, WE MADE A FEW mis­takes along the way. Among them, we bought the first house we saw, per­haps overly in­flu­enced by a back­yard hot tub and not wary enough of the town’s his­tory of rais­ing prop­erty taxes.

A few years later, my fa­ther moved cross-coun­try to buy a home just one mile from ours. Swayed by the beauty of a quiet street in a con­ve­nient lo­ca­tion, he over­paid by about 20%.

The com­mon thread in our hasty de­ci­sions: None of us was work­ing with an ad­viser at the time.

There are few times a client needs the ser­vices of an ad­viser more than when they are buy­ing, sell­ing, manag­ing or in­vest­ing in real es­tate. Tax plan­ning, re­tire­ment plan­ning, bud­get­ing and even fam­ily dy­nam­ics all play a role in these ex­pen­sive de­ci­sions, and ad­vis­ers can guide clients through all of them.

And as the va­ri­ety of real es­tate in­vest­ments has mush­roomed, even plan­ners who think they have a pretty good han­dle on un­lock­ing home eq­uity or pick­ing REITS may be­come over­whelmed.

“I was most sur­prised by the many dif­fer­ent, cre­ative ve­hi­cles avail­able to clients,” Se­nior Edi­tor Charles Paik­ert tells me. Paik­ert, who wrote the main fea­ture, “Away From Home,” says he was par­tic­u­larly in­trigued by one client’s tac­tic: “Buy­ing an RV to rent out to Airbnb cus­tomers — who would have thought?”

An­other in­trigu­ing idea: A San Fran­cisco wealth man­age­ment firm has part­nered with Amer­i­can In­fras­truc­ture MLP Funds to buy build­ings that house char­ter schools. With all the new pos­si­bil­i­ties and po­ten­tial for both risk and re­ward it be­hooves ad­vis­ers to get up to speed.

Ad­vis­ers can also play roles that reach far be­yond watch­ing the money. When clients seek to be­queath a fam­ily va­ca­tion home, an ex­pe­ri­enced plan­ner can craft a plan that may avert jeal­ousy or in­flated ex­pec­ta­tions that can dam­age re­la­tion­ships, ac­cord­ing to con­tribut­ing writer Don­ald Jay Korn, who wrote “Va­ca­tion Prop­erty Angst.”

“If ad­vis­ers get in­volved while orig­i­nal va­ca­tion home­own­ers are still alive and healthy, quite a bit of frus­tra­tion can be avoided,” Korn writes.

Per­haps quite a bit of frus­tra­tion could have been avoided if my fam­ily had sought the coun­sel of an ad­viser be­fore we made our real es­tate pur­chases. That’s one mis­take we won’t make again.

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