Financial Planning for Real Estate Professionals and Investors

Has building your own personal RE investment portfolio slipped onto the backburner because of:

--Lack of time?

--Needing to build up more liquidity for the large commitments?

--Apprehension of personally guaranteeing a large commercial mortgage?

--Conflicts of interest issues with your day job?

--Hesitancy of partnering with friends and family to pull off the deals?

A challenge of investing in commercial real estate is that doing it by yourself takes a lot of time both in obtaining an investment and then managing it.  And even for individuals with high incomes, it can be difficult to accumulate enough capital to adequately diversify a property portfolio.  Throw in having to personally guarantee the mortgage, and the idea loses its luster.

And for RE industry professionals, financial planning for retirement or a work-optional lifestyle can be more complex because of the income fluctuations, possible 1099 status, and industry cyclicality.

Today’s New Reality:  These obstacles can be overcome.

You must be willing to pursue investment opportunities outside of your 401k, financial planning tax-minimization strategies, customized portfolios built to complement your real estate investments, and a planning process focused on putting the pieces of this puzzle together.

You need a process that combines your unique real estate knowledge with financial planning tools and strategies that can complement it.

With this approach you can pursue:

Building a personal, passive income stream through a diversified collection of commercial real estate investments. 

Not relying on just a 401k and personal mutual funds to create your retirement income.

Building a personal investment program that:

Generates cash that is redeployed into other opportunities or used for personal income.

Consists of custom investment portfolios that exclude real estate and other interest rate sensitive investments (e.g., yield-focused energy partnerships, and reducing bond interest rate risk via zero-duration bond funds) in order to account for the other real estate investments.

Utilizes non-recourse leverage to pursue higher returns.²

Obtains asymmetric/upside-only leverage on investments tracking stock indices.³

Obtains loss cushions on investments tracking stock indices.

Contains investment vehicles with the potential for tax-free growth and distributions.

We Help Real Estate Industry Professionals pursue these retirement planning objectives and a work-optional lifestyle or full recreational retirement through our Relationship Service Performance R.S.P. Process™.

>WHAT REAL ESTATE PROFESSIONALS AND INVESTORS IS THIS FOR:

This is designed for real estate industry professionals and investors with investment portfolios over $1 million that want to pursue an income replacement strategy to allow for retirement, early retirement, or career choice freedom by building a portfolio focused on passive cash flow and tax reduction.

>HOW WE DO IT:

At Ryan Poage & Co., we have created a proprietary investing and financial planning program that focuses on building a custom portfolio that complements clients’ real estate portfolios by reducing duplicate exposure and interest-rate sensitive investments, and utilizes other investment vehicles that can allow for increased upside and/or lowered downside and potential tax benefits – none of which are found in the typical 401k plan.

>WHAT MAKES US DIFFERENT:

We are wealth advisors for a small group of successful individuals, who among other things aspire to a work-optional lifestyle.  Over the past 20-plus years we’ve developed and refined a process to put the pieces of that puzzle together and we call it the Relationship Service Performance Process™.  It was created specifically to help our clients slow life down, restore liberation and order, and ensure they are enjoying the fruits of their work ethic and sense of purpose.  We pursue this by trying to help them obtain passive income in retirement, trying to reduce their taxes, striving for improved returns in an environment filled with high stock market volatility and low interest rates, and providing frequent, meaningful communication on an ongoing basis to implement and adjust their financial plan.

In addition to being a Certified Financial Planner™ Practitioner, having double majored in Finance and Real Estate in college, having over 20 years of industry experience, and being a business owner since before the Great Recession, Ryan is a private investor in real estate developments containing 593 luxury apartments, approximately 100,000 square feet of office space, and 68,000 square feet of retail space.

^1.Vanguard “How America Saves” 2020 report

^2.Non-recourse leverage refers to loans structured into an investment that do not have to be personally guaranteed by the investor.  Leverage can increase returns or, during difficult economic times, increase the risk of loss and liquidity.  If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, then the amount available for distributions to investors may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, investors could lose the property securing the loan that is in default, thus reducing or eliminating the value of their investment.

^3.Asymmetric/upside-only leverage refers to a risk/return payoff of investments tracking stock indices where there is a multiple applied to the appreciation of an underlying index, usually up to a specified maximum cap, but not a corresponding multiple applied to any potential losses of the underlying index if held for the duration of the investment time period. Investments with these types of features do not provide for any dividend income that would normally be associated with the underlying index or investment and have costs and other negative features that should to be considered.

Ryan Poage & Co. (RPC) is a state registered Registered Investment Advisor. Registration does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability. The contents of this report have been compiled from original and published sources believed to be reliable, but are not guaranteed as to accuracy or completeness. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Content should not be construed as personalized investment advice or as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned.

IMPORTANT NOTICE: Past performance is no guarantee of future results. Different types of investments and strategies involve varying degrees of risk, and there can be no assurance that any specific investment or investment strategy (including the investments and investment strategies recommended by the advisor) will be suitable or profitable for current or prospective clients. Your actual results may vary. Investing carries an inherent element of risk. Potential for substantial loss in principal exists. There are no assurances that a portfolio or strategy will match or outperform any particular benchmark. All investment strategies have the potential for profit or loss.

This is neither an offer to sell nor a solicitation of an offer to buy any security, which can be made only by an offering memorandum or prospectus, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so. An offering is made only by means of the applicable offering memorandum or prospectus in order to understand fully all of the implications and risks of the offering of securities to which it relates. A copy of the applicable offering memorandum or prospectus must be made available to you in connection with any offering. The views expressed herein are subject to change based upon economic, real estate and other market conditions. These views should not be relied upon for investment advice. Any forward-looking statements are based on information currently available to us and are subject to a number of known and unknown risks, uncertainties and factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Investments in real estate assets are subject to varying degrees of risk and are illiquid. Many factors may adversely affect the financial condition, operating results and value of real estate assets. These factors include, but are not limited to:  changes in national, regional and local economic conditions, such as inflation and interest rate fluctuations; local property supply and demand conditions; ability to collect rent from tenants; vacancies or ability to lease on favorable terms; increases in operating costs, including insurance premiums, utilities and real estate taxes; federal, state or local laws and regulations; changing market demographics; changes in availability and costs of financing; and acts of nature, such as hurricanes, earthquakes, tornadoes or floods.

Leverage can increase returns or, during difficult economic times, increase the risk of loss and liquidity.  If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on a property, then the amount available for distributions to investors may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, investors could lose the property securing the loan that is in default, thus reducing or eliminating the value of their investment.

The distributions and income paid from real estate investments are uncertain and not guaranteed. The timing and amount of distributions is determined by the managers and of any specific investment. Distributions can typically be paid from sources other than cash flow from operations, including but not limited to, the proceeds of the investment offering, borrowings, or the sale of properties or other investments. Distributions paid from sources other than cash flow from operations may not be sustainable.

Diversification does not assure a profit or protect against loss in a declining market. An investment in a non-listed real estate investment is not a direct investment in commercial real estate. There are significant differences between commercial real estate and non-listed real estate investments. Non-listed real estate investments may exhibit volatility even though its securities are not listed on a national securities exchange.

Do not construe the contents and discussion herein as legal, tax or accounting advice. The information contained herein is believed to be accurate, however, no such warranties, representations, or guarantees are provided to that effect, either expressly or implicitly. Further, the information contained herein is intended only to provide a high level overview and not an exhaustive explanation of the rules, regulations, exceptions, etc. generally applicable to a like-kind exchange pursuant to Internal Revenue Code Section 1031. The discussions and examples contained herein are based on law presently in effect and certain proposed Treasury Regulations. Nonetheless, readers should be aware that new administrative, legislative or judicial action could significantly change the information contained herein. Transactions involving Internal Revenue Code Section 1031 are highly complex, and it is strongly recommended that investors seek competent, independent tax and legal counsel prior to initiating, and while performing, such a tax deferred exchange.

RPC cannot provide advice regarding specific tax consequences. Taxpayers considering an IRC §1031 tax deferred exchange should seek the counsel of their accountant and attorney to obtain professional and legal advice.