Here are 3 ways that annual reviews of your real estate investment can take you from a “just enough” to a “very comfortable” retirement.
When was the last time you had an expert review your real estate investments? Better yet, have you ever had an expert review your real estate investments?
If not, there’s a good chance you are either missing out on more profitable properties, owning the wrong type of property for your financial profile, paying more than you need to in financing costs, or all three!
Keep reading to learn more about the three reasons why you should be reviewing your real estate investments with a professional each and every year.
1. Are you leaving money on the table?
Most real estate investors in expensive markets like Bay Area, New York, and Los Angeles don’t realize they are statistically underperforming compared to other – less expensive – markets; at least from an investment income standpoint.
By exchanging their investments for properties in less expensive markets – such as Portland, Sacramento, or Austin – via a 1031 exchange, real estate investors can typically increase their rental income by 35%, 50%, or even 100% without having to pay tax!
Thanks to the time value of money and the power of compound interest, this additional income can make a seven-figure difference in lifetime net worth if invested properly.
Case in point, one of our clients who exchanged a single family home in San Francisco for a multi-unit property in Portland increased their annual rental income from $43k to $101k. This excess income invested in the equity market with a 6% average annual return will add $1,333,000 to their net worth over the next 15 years.
2. Do you own the right type of real estate investment vehicle?
There are three main types of real estate investments: FIRST- is direct ownership of an investment property (single family house, multi-unit rental property, etc.).SECOND- is triple net lease commercial property with a national tenant (Starbucks, Dollar General, Burger King), and THIRD- is through a professionally-managed fund such as a REIT (real estate investment trust) or DST (Delaware Statutory Trust).
All three of these have very different features, benefits, pros, and cons. The right one for you depends on your unique financial situation, goals, objectives, wants, and needs.
A finance professional with expertise in real estate investments can make sure that your investments are optimally aligned with your personal financial plan to ensure you don’t lose out on rental income, capital appreciation, or overpay in taxes.
3. Are you paying more than you need to?
Borrowing costs have more than doubled over the past few years, and many real estate investors are unknowingly paying much more than they need to.
Getting the most favorable borrowing rates and terms requires inside information, experience, and connections within the real estate industry, all things an experienced real estate financial professional can offer.
It’s important to meet at least once a year with a real estate professional to stay up to date on financing opportunities in the industry and make sure you’re not paying more than you need to.
If you feel like advising on client real estate investments is beyond your area of expertise, you’re not alone. Many advisors have good intentions but don’t have the tools or experience needed to analyze and identify the best opportunities for their clients. SIFF is a real estate investment advisory and consulting firm (NOT a real estate broker) that works with investors and their advisors to bridge the gap between financial planning and real estate investing.
Unlike real estate brokers and agents whose main goal is transactional in nature, SIFF brings objective, third-party guidance to those looking to leverage their real estate investments to create a shorter path to retirement. To ensure the best possible pricing and service, SIFF also coordinates and oversees all of its clients’ real estate transactions.
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