This real estate practice, and its related blog, has been launched with a single goal in mind… to help clients who believe real estate has the power to build wealth today and across generations.
Having worked in a family office setting for decades, and serving families as a trust real estate advisor for a corporate trustee, I have experienced a tendency in wealth management to question the future contribution of physical real estate to a family’s legacy, despite the strong emotional connection many families have to their real estate holdings, whether for investment or private use as a residence or vacation home.
The tendency is not misplaced, since the prudent investor rule for trust administration leans on the same modern portfolio theory used by financial advisors and wealth managers. Broadly stated, modern portfolio theory evaluates the prudence of investing in a specific investment relative to how that investment fits in with the rest of the portfolio, under the principle that a well-diversified portfolio would not be overweighted in any one investment or asset class.
What does this mean for real estate?
The first look is mathematical. Investor, trust, or family allocation to alternative investments like real estate assets should be limited to 20% of the relationship’s total wealth. Anything above the line puts the portfolio at risk of being non-compliant. Every asset should be evaluated for alignment with an investor’s overall objective and risk profile, a grid pre-determined by the managing institution.
What does this mean for family real estate?
The intrinsic familial value of a property or portfolio of properties may not be seen as “compliant,” which at the institutional level has become synonymous with “prudent.” A family office generating cash flow from real estate that supports family homes and opportunistic development opportunities may find itself fielding risk concerns from its wealth management team. If a property needs to be sold to rebalance, does the vacation home go first since it’s not “productive?”
So what happens?
There is inertia to liquidate physical real estate assets and move capital to a stock and bond portfolio that financial advisors can easily understand and rebalance to remain compliant. Often tied to this is an assumption that commensurate real estate exposure can be achieved by investing in REITs.
Wise financial advisors, wealth managers, accountants, and other professionals recognize that clients often generate wealth investing in real estate whose internal rates of return often exceed those of equities, especially when taking tax advantages into consideration. They also tend to be client-centric, empathetic to the connection many investors and families form when evaluating, purchasing, improving, tenanting, and operating or using real property.
This is where I step in as your real estate wealth strategist.
I partner with investors, family leaders, trustees, and wise professionals who seek to champion the family real estate legacy, prudently pursuing financial and familial objectives while appropriately managing risk. I assess and develop real estate strategies that align with the family wealth and succession plan formed by its financial and legal advisors. Once affirmed by family stakeholders, I follow through with implementation, crisply executing strategic initiatives
I am here to help you build your real estate legacy.