A New Approach for Real Estate Diversification

“Like-kind” exchanges may permit clients to defer capital gains taxes.

The forecast for real estate is highly uncertain in the COVID-19 era, with many experts expecting dramatic change in commercial, residential and industrial markets. However, this much is clear: the portfolios of many older Americans contain a respectable amount of investment real estate, and it’s something advisors need to consider as they help clients pivot their holdings toward an appropriate asset mix for retirement.

American households held $6.4 trillion in investment real estate, exclusive of the value of their primary home in 2016, according to analysis of Federal Reserve data by Realized Holdings, a company that manages investment property wealth. And Realized found that approximately 10.2 families with net worth ranging from $1 million to $15 million had more than 20% of their assets accumulated in investment properties.

This is an area where many financial advisors are outside their comfort zone, according to David Weiland, CEO of Realized. “It’s a giant pool of wealth that has gone unnoticed by most advisors and real estate professionals, generally because they don’t understand real estate at the granular level, and real estate professionals don’t understand wealth management.”

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