REAL Exclusive Magazine

Real Estate Investing For Baby Boomers

By Jeff Riddell

Last article, we discussed middle age real estate investing. Next is the 50-65 bracket—I’ll call them the baby boomers. In my opinion, this is the time to become more conservative in your real estate investing; and more diversified in your real estate holdings regardless of whether you are a beginner or long term investor. If you started your real estate investing career earlier while you were in the 20-35 bracket—or even in the 35-50 bracket—by now you have probably accumulated a pretty nice portfolio of real estate holdings such as houses, small multifamily and maybe even some industrial properties, office properties, strip center or free standing retail buildings. You should also have benefited handsomely from appreciation and mortgage amortization by this time, especially if 15 year mortgages were your choice.

Often the road to diversification is through refinancing and redeploying the tax free refinance proceeds into other real estate. Also, since these are peak earnings years for most people, you may now be able to add more to your real estate portfolio than ever before—especially if the kids are out of school and off your payroll. However, to avoid too many eggs in one basket, people in this age bracket may also decide to sell some real estate assets and diversify. A 1031 exchange may be the answer to make sure that their real estate piggy bank is not reduced by payment of capital gains taxes and recapture of depreciation.
 
What about the people who are in their 50s or early 60s whose only real estate investment is their home? If you are in the 50-65 age bracket, a diversified investment portfolio is important; most advisors agree that diversified investment portfolios should include real estate. For people in this age bracket whose portfolio consists of stocks, bonds, mutual funds, CDs and other non-real estate assets, it may be time to add some real estate. If you’re too busy with your regular job—or at an age where you are not inclined to work at your real estate investments—take a look at real estate investment trust (REIT), limited partnership (LP), limited liability company (LLC) and tenant-in-common (TIC) real estate investments. For a moment, let’s take a closer look at REITs and TICs.

Regarding REITs, there are publicly traded REITs and non-publicly traded REITs—sometimes called private REITs. There are actually two kinds of private REITs: Those that file with the SEC but are not listed on a stock exchange; and truly private REITs which do not report to SEC at all, but I will refer to both collectively as private REITs in this article. Since publicly traded REITs are listed on a stock exchange, your stock broker can introduce you to them. For private REITs, you will need the help of a securities registered representative who specializes in direct private placement securities (DPPs)—and who knows which sponsors have private REITs available. Although past performance is no guarantee of future results, REIT returns have been impressive recently.

Regarding TICs, they (tenant-in-common ownership of real estate) are nothing new. TIC (tenant-in-common) just means that a single property has more than one owner. Any group can co-own real estate as tenants-in-common, even what I call traditional properties like a strip shopping center, office building or apartment project. Such co-ownership, however, does not avoid the headaches of property management unless the co-owners can afford professional management.  Sponsored (syndicated) tenant-in-common (TIC) properties, on the other hand, may be a way of participating in real estate without management headaches. Although some TICs are treated as pure real estate and are sold through real estate brokers, most are marketed as securities through securities broker-dealers and their registered representatives. Therefore, like private REITs, you need to be in touch with a securities registered representative who specializes in DPPs to purchase most TICs.
 
Next article, we’ll talk about seniors.

Jefferson F. Riddell is a Florida Board Certified Real Estate attorney with thirty-five years of experience assisting people with a variety of residential and commercial real estate matters. U.S. 1031 Exchange Services, Inc is a 1031 exchange qualified intermediary (QI) and a member of the Federation of Exchange Accommodators (FEA). As President of U.S. 1031 Exchange services Jeff has been facilitating 1031 exchanges for more than twenty years. Jeff has been awarded the Certified Exchange Specialist (CES) certification. Jeff may be reached at 941-366-1300 or via email at jeff@us1031.com. www.us1031.com