Help clients avoid rash real estate purchases

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I blame it on the hot tub.

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 the Jacuzzi in the back yard 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: We weren't 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, “How to talk to clients about investing in real estate,” says he was particularly intrigued by one client’s tactic: “Buying an RV to rent out to Airbnb customers — who would have thought?”

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

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.

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

“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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Real estate Client communications Client retention