Are You Having These Three Conversations About Real Estate With Your Advisory Clients?

Posted Dec 13, 2023


Financial advisors rarely discuss the potential benefits of investing in real estate with their clients. The reason is twofold: outside of investing in publicly traded real estate investment trusts, real estate isn’t usually taught as part of the finance curriculum for registered investment advisors or certified financial planners; and financial professionals don’t have a compensation structure in place for clients who want to move money into commercial or residential real estate. 

However, advisors who want to provide holistic and long-term wealth management and financial planning services to their clients may want to consider including real estate in their asset management strategies. Doing so also may help create a unique value proposition that helps differentiate you from others in the field. 

Financial advisers should use these three questions as a foundation when beginning conversations about the different types of investment properties their clients currently hold and how those properties affect their plans for the future.  

Where Do You See Real Estate as Part of Your Overall Wealth Management Plan? 

The nucleus of this conversation likely stems from your clients’ age – those closer to retirement will probably have a much different view of their real property holdings than younger clients. 

This is largely a fact-finding conversation to determine how your clients’ real estate assets are supplementing or supporting their other sources of income, as well as the importance your clients place on those assets’ ability to create additional wealth over the long term. Be sure to discuss the potential benefits of real estate as an investment strategy, regardless of age. These benefits may include: 

  • The potential for long-term asset appreciation, especially in expanding markets 
  • Recurring income in the form of monthly rental or lease payments 
  • Tax deductions 
  • Reduced volatility and increased portfolio diversification 

Your goal is to help your clients gain a clear understanding of the role real estate can play in their overall wealth creation and management strategies. 

How Much Income Do You Derive From Your Real Estate Investments? 

If real estate is part of the equation, then financial advisors should help their clients understand the net income being generated from their real estate holdings. 

Your clients may not know how to conduct a proper analysis of each property in their portfolio, especially since rental income and property expenses are prone to fluctuations that make it difficult to simply extrapolate one month’s income across a 12-month timeframe. They also may not understand the role that property and rental income taxes play in the equation. 

Conducting a detailed analysis of your clients’ real estate holdings can help determine their strategy for their properties moving forward. 

Hold, Sell or Swap? 

After determining the role real estate plays in your clients’ financial plans and figuring out each asset’s net income, the final conversation around real estate should focus on whether it’s in your clients’ best interest to hold, sell, or maybe even swap properties through a 1031 exchange. 

While some clients may enjoy direct property management or hold sentimental ties to their real estate holdings, other clients may not want to deal with the effort and responsibility that comes with direct property management. When given options, such as selling their current investment properties and rolling the sale proceeds over into a Delaware Statutory Trust-supported 1031 exchange, they may opt for passive real estate investments. The professionally managed properties held within DSTs provide investors with the potential for recurring income and wealth preservation since any capital gains taxes realized from the sale of their original assets are deferred. Their capital remains 1031 eligible upon exit of the DST investment as well. 

Putting it all Together 

Some financial advisors don’t discuss the role real estate plays in their clients' wealth management strategies. The three-fold conversation outlined above can be beneficial in several ways, though. You can provide a unique value service to clients that can help your practice stand apart from others, as well as lay out additional options for your clients to consider when it comes to their real property holdings. 


This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.     

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. 

There is no guarantee that the investment objectives of any program will be achieved.  

No public market currently exists, and one may never exist. DST programs are speculative and suitable only for Accredited Investors who do not anticipate a need for liquidity or can afford to lose their entire investment. 

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