Many investors choose to add real estate to their investments. This is often done in an effort to diversify their portfolios and to make money in the long term. However, not everyone is familiar with the complexities of the real estate market and how demanding it can be. This is why wealth managers are so important to property investors. They can help clients to find the right opportunities by creating a personalized plan that matches their financial situation and goals. This planning reduces the risks involved in real estate investment.
Why wealth managers need to understand their client’s goals
One of the first things a wealth manager will do is discuss with the client what their goals are, how much they have available to invest and the lifestyle they hope to have. All of this will help to create a plan that is tailored to the client.
For instance, if a client is seeking a steady income, their plan might include investing in either residential rental properties or commercial real estate with reliable tenants. However, a client who can withstand higher risk investments and prefers a higher return might benefit more from buying properties to renovate and sell at a profit.
Experienced wealth managers, such as Chuck Roberts of Stifel, Nicolaus & Company, work with a wide range of clients, who may invest solely in property or alongside other investments. Their advice will be impartial, based on their clients’ needs and goals.
How wealth managers identify suitable investment opportunities
Real estate is an industry with the potential for investors to earn big or small, in the short-term, long- term or both. The options include residential or commercial properties and funding the purchase yourself or using crowdfunding. A wealth manager can help you find opportunities you might not have considered, decide whether obtaining a license would help you build your professional reputation, and choose where to obtain funding, depending on your goals.
Wealth managers also carry out in-depth market analysis to help you determine the potential of various real estate investments. This includes looking at how your investment may perform in the future based on economic indicators, current and future property values, the market rent you might expect and the potential for growth. This depends on factors such as location, market demand, employment figures, consumer spending and any possible risks.
Before recommending an investment, a wealth manager will scrutinize legal documents, evaluate the condition of the property and its potential for profit, then talk you through the possible risks and rewards to help you make an informed decision. They will often have access to exclusive opportunities for investing in real estate which aren’t public knowledge. This includes pre-market listings and off-market deals. These can be the opportunities that offer clients unique advantages and potentially higher returns. So, if you’re concerned about the cost of working with a wealth manager, the collaboration is often a worthwhile investment.
Integrating real estate into comprehensive wealth management
Including real estate in a complete wealth management plan means looking at the bigger picture. Wealth managers help their clients achieve this by looking at their assets, liabilities, income, expenses and future financial goals. This integration helps ensure the client’s real estate and other investments complement each other and improves their overall financial strategy.
While there are always risks, real estate is a good way to diversify your portfolio. With the right guidance from an experienced wealth manager, an investor can help meet the demand of those looking to buy or rent residential or commercial property. In short, people will always need homes to live in and properties to run their businesses from. However, during economic downturns, an investor needs to think about how they will appeal to buyers or renters who are on a tighter budget.
There are also tax implications and opportunities for optimization within real estate investment. Wealth managers work with tax advisors and can help clients invest in the most tax efficient ways by using strategies like depreciation, 1031 exchanges and opportunity zone investments to reduce tax liabilities and increase after-tax returns.
A complete wealth management strategy
With so many moving parts involved in buying, selling and renting, cash flow management is an important part of investing. A wealth manager helps their clients to become financially stable by making sure money is coming in as well as going out. They can also communicate with estate planning professionals to help clients refine their strategies for transferring real estate assets to heirs using the most tax-efficient methods.
Wealth managers play an important part in helping clients understand the real estate market, find the most suitable investment opportunities for them and integrate real estate into a complete wealth management strategy. They help clients reach their investment goals, carry out in-depth market analysis and create personalized solutions that help improve the financial security of the investor.