Why Real Estate is Overlooked by Most Financial Advisors

April 10, 2019
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When you mention real estate investment to many financial advisors, you may just get a look of concern or confusion. It’s not that they don’t believe it is another way to build wealth. It’s that they may not fully understand how to do it.

Traditional Investments vs. Real Estate

You see, most financial advisors are trained in a more traditional product sales capacity. Those products are stocks, bonds, mutual funds and insurance, and this will be their comfort zone and they are likely working on an investment sales commission structure. They may deal in real estate investment trusts (REITs), though that may be as far into real estate investing as they are comfortable going. A more well-rounded financial advisor will be able to look at your specific situation and help you explore any number of investment strategies that can help you achieve financial independence. This should include real estate.

Though no investment is 100% predictable, traditional forms of investment have been considered easier to understand and analyze. Real estate investments (depending on the type and investment structure) may have more complexity and could require more effort and due diligence. However, we know that most investors don’t spend countless hours reading their favorite stocks Annual Report or Proxy. When you get down to it, real estate can be fairly simple to understand, yet it’s not taught in any of the required financial planning or advisory coursework. There is no “real estate game” in high school like there is “the stock market game.” Real estate investing is about creating durable cash flow through renting out your property with long-term appreciation potential.

Even though real estate investment takes more effort and understanding, it should not be overlooked. There are many exceptional tax advantages with real estate that aren’t found with other traditional investments. The wealth-building opportunities are surely there when you invest wisely.

If real estate is already part of your investment portfolio or it’s something you are considering, you will definitely want to find a financial advisor who can help you with it. In the video below, I explain six traits you should look for in a financial advisor when it comes to real estate investment.

Let’s review and summarize the key points:

#1: Real Experience with Real Estate

First, you want to find a financial advisor who has real experience with real estate, whether it’s practical experience as a real estate investor or proven expertise in advising others in achieving financial freedom through real estate investment. Ask questions and see if they have the answers you need.

#2: Knows Your Goals Needs and Skill Sets

A good financial advisor will take the time to understand your lifestyle, your goals, your interests, your skill sets, your financial needs, your time constraints and what you may or may not be good at when it comes to your wealth management.

#3: Develop Your Real Estate Investment Strategy

There are many different ways to successfully invest in real estate. There are real estate investment trusts (REITs), limited partnerships, crowdfunded real estate, real estate developments, renovations and sales (house flipping), vacation rentals, and long-term income property management amongst others. If owning rentals, do you want single-family homes or multi-family complexes? Do you want to be an active (hands-on) or passive (hands-off) investor? Ultimately, your financial advisor should help you figure out your niche and what will be best suited for your lifestyle and desired portfolio. In addition, a knowledgeable financial advisor will be able to guide you in tax planning when it comes to getting the most out of your real estate investments.

#4: Objective 3rd Party to Analyze Investments

Your financial advisor should also act as an objective third party when it comes to analyzing real estate investments. Just as they would (or at least should) for other traditional investments, you want someone with a financial mind to be able to analyze your current and future real estate investment portfolio and help you make the right decisions moving forward.

#5: Identify Opportunities in Your Portfolio

In line with #4, a good financial advisor will be able to help you identify opportunities (and missed opportunities) in your real estate portfolio. If it’s time to dump an underperforming property, they can let you know. If there is a new opportunity out there worth pursuing (such as new purchases or refinancing a current property), they can keep you pointed in the right direction.

#6: Help You Develop the Right Real Estate Team

Last but not least, your financial advisor should be able to guide you in developing the right real estate team to manage all your real estate investments. This is very important because you want to have the right people on your side and the right people in place to handle all your needs. This includes real estate agents, attorneys, inspectors, contractors, property managers, title reps and insurance experts—especially if you are planning to be an active real estate investor. If you are looking to be more passive, then you may need help in finding the right investment group to join.

If you want real estate investment to be a part of your financial plan and an integral part of your strategy to build wealth and achieve financial independence, don’t settle for any old financial advisor. Illumination Wealth is here to offer you complete financial planning support and guidance in all forms of investment.

To learn more about Illumination Wealth, visit our website or contact us today for a preliminary financial consultation to see if our financial advisement services are right for you.