That’s right. Helping your clients who want to invest in real estate can go beyond buying a home, a REIT or a vacation property to include some unusual and innovative strategies.
But never forget that real estate has its own set of rules.
“The market is extremely fickle,” cautions Michael Martin, principal and founder of Marius Wealth Management in New York. “Properties are illiquid and investors can't be emotionally attached."
Asset allocation, risk, tax liability, income needs and the ramifications of owning an illiquid asset all must be thoroughly vetted when discussing real estate investments with clients.
If a client is willing to take the plunge, here are some intriguing approaches wealth managers are currently employing.
In the winter, the client moves the vehicles to Vail, Colorado, home of the popular ski resort.
The client bought two Grand Design Solitude Fifth Wheel vehicles for $70,000 each. He is financing 80% of the purchase at 4% simple interest (a type of interest applied to automobile and short-term loans).
Upside: Denver is booming, and demand for accommodations is high.
After adding the $14,000 down payment to the annual financing costs per unit and dividing that number by the net annual income of approximately $37,000, the client achieved a return on his investment of about 48%, according to Martin.
Risks: The RVs are not appreciable assets, and if there is a market downturn, there is no guarantee of rental income. What’s more, the client’s business depends on Airbnb, which could mandate a reduction in rates. “His fate is in someone else’s hands,” Martin says.