Diversifying Portfolios with Real Estate

If you sold or bought a home in 2020, you know that the real estate market was, well, crazy. Low inventory, the pandemic, and low mortgage rates created huge demand and a seller’s market. Today’s market looks a bit different: Buyers are gaining leverage in the West (Phoenix, AZ, Colorado Springs and Denver, CO, Dallas, TX and Las Vegas, NV) while sellers are gaining ground in the East (Fayetteville, NC, Harrisburg and York, PA, Syracuse, NY and Hartford, CT). Of local note: Salisbury, Maryland is number 11 on the list of sellers’ markets. Current prices remain above pre-pandemic levels (though lower than in February 2022), inventory is up but below normal levels, and the average 30-year fixed mortgage rate is over 6.5%. What’s the Big Deal About Real Estate? From long experience, we know that the best way to grow wealth and minimize risk is to create and hold a diverse portfolio. For business owners, diversity consists of three types of investments 1) financial, (e.g., stocks, bonds, CDs retirement accounts, annuities, etc.), 2) business, and 3) real estate (not including one’s personal residence). For non-business owners, we design a combination of financial and real estate investments to best meet each person’s goals. Connecting Your Goals to Real Estate The answers to the real-estate-related What, Where and When questions depend on your unique goals, but here are a few observations from the team at Obsidian. What type of Real Estate? There are numerous types of income-generating real estate investments. The best one for you depends on whether you are looking for cash flow or capital appreciation; what type of tax benefits you need or want, and if you want to use or rent the property. Where to Buy Real Estate? We’ve already mentioned several cities where buyers are gaining leverage, but there are other cities, namely college and military towns, in which real estate demand and prices don’t swing as broadly. In addition to stability, there can be other benefits. For example, we recently helped a couple purchase a condo in the town in which their son attends college. After their son lives in the property for two years, he will qualify for in-state tuition. Note: Domicile requirements vary so it’s critical to confirm terms prior to investing. When to buy Real Estate? Many analysts expect that 1) the housing market will move into a seller market territory by this summer; and 2) by November sales will decline by 16.3% year-over-year, inventory will increase by 16.5% and the median sale price will reach $374,000 (essentially the same as November 2022). Just as we believe that there is no one “best” investment portfolio, we also believe that there is no one “best time” to purchase real estate. “Best” always relates to the alignment with your goals. Who can help? We know that picking the “ideal” property and timing both its purchase and sale can be intimidating. Every day we help individuals assess their real estate options to find the ones that best meet their long-term goals and diversify their wealth.

Lifestyle

A-choo!

Sound familiar? It does to those of us who live with allergies to grasses, trees and weeds. According to the Centers for Disease Control, that’s 25.7% of adults and 18.9% of children. For several years, scientists have noted that the allergy season is starting earlier (10 to 40 days) and lasting longer (5 to 15 days) due to changes in temperature and precipitation. The American Academy of Allergy Asthma and Immunology provides a guide to a variety of treatments, including over-the-counter medications (e.g., antihistamines, decongestants and eye drops), and prescription medications (e.g., nasal steroid sprays). We can also make environmental changes (e.g., planning when to be outside, nasal irrigation and HEPA filters) to help minimize symptoms. If you are interested in accurate pollen and mold counts in your area, check out this cool tool from the National Allergy Bureau. There you can sign up to receive email notices when levels change or qualify as “high” or above.

How we Help

The Kids Are Gonna Be Alright

We’re consulting with a lot of children lately. We call these young adults “children” only because we’ve worked with their parents for years. For example, we’re helping the daughter of one client with her 401(k) plan and budgeting for her life in New York City. We’re working with another client’s children to integrate their Roth IRAs into more comprehensive financial plans. Since the children of our clients tend to be involved, in some fashion, in their parent’s estate planning, we’re helping them understand how trusts work and setting them up for success in the future. We often facilitate meetings with parents and their children to explain some of the financial choices parents have made and how these choices affect their children. These meetings open lines of communication between generations concerning a rarely talked-about topic and give children the opportunity to ask questions, especially about estate administration. Family meetings also motivate parents to organize various elements of their estate, so their children aren’t left with the always time-consuming and typically confusing task of closing an estate. If you believe a meeting would help your family, let’s talk about your financial disclosure comfort level and an agenda that is appropriate to the age and financial sophistication of your children.

Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Securities are offered through Triad Advisors, member FINRA/SIPC. Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors