hewinsfinancial.com/blog ... They fail to enlist help in creating a plan for ... The standard information provided in th
FINANCIAL PLANNING FOR REAL ESTATE OWNERS The life of a real estate owner is a long and crowded road. Required activities, such as maintaining and upgrading facilities and finding and dealing with tenants, are time-consuming, but necessary to keep everything running smoothly.
TODAY’S OWNERS NEED TO CONSIDER THEIR OWN TOMORROWS Owners typically have well-defined goals and big dreams for their real estate investments, but they’re often inundated with an endless list of tasks and limited time to accomplish them all. In many cases, this prompts owners to put off personal financial goal-setting until later in life, when “things settle down” or until a potential transaction presents itself. Lack of time often causes owners to fall prey to two outcomes: •
They fail to enlist help in creating a plan for their own financial future. It’s risky for owners to make decisions on their own without sufficient information or analysis, and can potentially lead to outcomes they’ll regret further down the road.
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Sometimes, they don’t take action at all, which can cause them to miss out on real estate or investment opportunities they wouldn’t dream of passing up.
Here are 10 ways you can overcome these challenges: 1. MANAGE CASH AND DEBT LEVELS: For a “younger” real estate enterprise, managing cash flow and debt levels is of utmost importance. External demands on your financing situation can be endless, so it is critical to keep a close eye on property and operational expenses and conserve dollars wherever you can.
2. PAY YOURSELF: By the time you’ve covered property taxes, mortgage payments and maintenance expenses, it may seem impossible to set aside funds for yourself. But failing to do so can leave you with very little in the way of retirement or savings for future goals. 3. ESTABLISH PERSONAL GOALS: As a real estate owner, you should make an effort to plan for your personal goals in the same way you put together multi-year plans for your current and future property investments. Starting a conversation with family members or advisors is a great start; there are also several tools and apps that can help you articulate your goals once you have a better idea of what you want. Additionally, determining what is “reasonably possible” given your financial circumstances is a critical step. 4. PLAN FOR RETIREMENT: Take some time to determine how much money it will take to fund your retirement or second-career dreams. Tracking or paying close attention to personal expenses, as opposed to real estate expenses, can be accomplished with the help of online tools or a good old-fashioned spreadsheet. 5. LEVERAGE REAL ESTATE FOR CASH FLOW: Of course, many property owners’ plans include the future sale of some holdings to fund their own retirement spending needs, along with retaining the cash flow from some existing properties. However, a future payoff from a sale or expected rental cash flows may not match those hopes. Therefore, you may want to plan for the tiered selling of properties over time, as opportunities arise. You should also set up regular automated payments to your savings to accumulate enough money to fund recreation and relaxation
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during retirement. To some extent, it’s okay if this saving takes place in spurts; however, you should at least try to set aside a certain amount each year. 6. DIVERSIFY YOUR ASSETS: As you save and invest some money for your future, ensure that it is properly diversified and compatible with the amount of risk you are willing to bear. Don’t fall prey to “market timing”; determine an investment policy and execute it in a disciplined way, so you can spend most of your time and efforts on managing your real estate. 7. DEVELOP A RISK MANAGEMENT STRATEGY: Some real estate owners underestimate the importance of protecting their families against the unexpected. Life insurance and buy-sell agreements can help safeguard your survivors in the event of your death. You might also consider disability insurance, which can provide coverage if you’re physically unable to work. 8. START THE SUCCESSION PLANNING PROCESS: It’s important to keep the issue of succession planning in mind. Getting the most out of your real estate investments later on, in the way that makes most sense to you, can help guide your personal wealth management decisions once you’ve left your enterprise.
10. CHOOSE A FINANCIAL ADVISOR OR A FINANCIAL PLANNER: Most real estate owners would benefit from the guidance and assistance of an appropriate advisor. First, it’s important to ask yourself the following questions: •
Is he or she an expert in wealth management, as it relates to real estate owners?
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Does this person have a fiduciary responsibility to put their clients first with no compensatory conflicts of interest?
Financial advisors are not created equal; some aren’t held to the fiduciary standard of care. Registered investment advisors (RIAs) comply with the standards listed above and are regulated by the Securities and Exchange Commission (SEC) or their state. For more information, consult the Financial Planning Association (FPA)’s website at www.FPAnet.org. With some luck and a lot of hard work, you can overcome challenges within your real estate enterprise and take steps toward future growth. But don’t forget to get on track — and stay on track — toward achieving your personal financial goals.
9. CREATE AN ESTATE PLAN: Regardless of age, owners should meet with a qualified attorney and estate planning specialist to discuss and ensure that their goals and wishes are properly reflected in their estate planning documents (including plans for real estate assets). Younger owners don’t always feel that estate planning is necessary, but failing to create a plan could put their assets and their families at risk. At a minimum, you should have an updated will that contains instructions on how your personal assets should be distributed to prevent conflict or confusion among family members down the road.
AUTHOR
www.WipfliHewins.com
Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current ADV Part 2A, copies of which are available upon request or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
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FINANCIAL PLANNING FOR REAL ESTATE OWNERS
