Have a Clear Understanding of your Overall Financial Goals, Risk Tolerance, Income Requirements, and Tax Implications Before Making any Real Estate Decision

As an investor you can have extensive information on a particular property and market but still make a wealth draining decision if you have not carefully considered all possible real estate alternatives within the context of your unique tax and financial situation.

Successful commercial real estate investors understand that building and protecting commercial real estate wealth requires expert advice on the following issues:

• Buy, sell, hold, 1031 exchange, refinance or redevelop a property
• Financing structure and impact on operations and holding period
• Amount of financing leverage for the investment to maximize cash flow and tax benefits for a particular investor without adding undue risk
• Before and after tax impact on cash flows for all alternatives
• Ownership structure (LLP, LLC, Partnership, Individually, Living Trust, etc) benefits and limitations
• Decision making when properties have multiple owners with different goals and objectives
• Partnership buy-outs
• Redevelopment and repositioning of property
• Property management operations
• Building facilities maintenance and capital improvements
• Estate planning and wealth transfer planning

Balance Real Estate Holdings by Geography and Property Type to Protect Against Market Downturns

A balanced real estate portfolio can provide for wealth accumulation while managing the risks of downturns in individual property types and markets. It’s the same concept as having a balanced portfolio of stocks and bonds that is appropriate for your personal financial situation.  For instance, when most people retire their investment portfolio is often re-weighted to include less individual stocks and a higher percentage of fixed income investments and annuities. 

Real estate portfolios should be balanced in much the same way that is, changing to reflect the requirements of the investor for their stage in life.  Real estate, like all investments has a certain level of inherent risk.  However it would be rash to simply sell the real estate, pay all of the built up taxes and using whatever is left over to buy bonds and treasury bills.  Instead, adjust your real estate holdings to match your requirements when you enter a new phase of life.

Standby for the continuation on Thursday.
Read Part 2

***
Alex Zylberglait provides commercial real estate investment advisory as well as research, estate planning, asset allocation, valuation, financing, special assets services, transaction advisory and commercial property acquisition and disposition services.