High-net-worth real estate investors encounter a multitude of mixed advice about real estate investment. Most of what is floating around have little — if any — basis in fact. While it is true that the same fundamental rules of investing apply to everyone, there are some mistakes to which high-net-worth individuals are more prone. We explore a few of the most common myths and misconceptions to help high-net-worth investors avoid these pitfalls.
What is a high-net-worth individual (HNWI)?
A high-net-worth individual (HNWI) has liquid assets between $1 and $5 million. Some very-high and ultra-high net worth individuals have liquid assets between $5 and $30 million and $30 million-plus, respectively. Liquid assets refer to cash on hand or an asset that easily — and quickly — is converted to cash. Some examples of liquid assets include bonds, stocks, and mutual funds. HNWIs prefer to work with financial advisors who can help preserve and grow their hard-earned wealth.
Investment myths and misconceptions
There are several myths and misconceptions about investing in real estate as a high-net-worth individual. Do not get caught up in half-truths when making decisions about your wealth. Here are some of the most common that our clients encounter.
1. You must take more risks
This misconception is patently false. While it is true that the higher the risk, the higher the reward, that does not mean investors with a higher net worth must be careless with their investments. Striking a balance between high-risk investments and overly conservative investments is the goal of most investors.
2. You must focus on multifamily real estate
This is one of those real estate investment myths and misconceptions that takes a basic truth about real estate investing and twists it. There is a higher price tag associated with multifamily real estate like apartment complexes, so it is understandable how this myth got started. High-net-worth individuals can certainly afford multifamily real estate, but they are not limited to it. Some have no interest in it and instead focus on commercial and industrial properties. Parking garages and warehouses are lucrative alternatives to the hum-drum expectation that high-net-worth real estate investors sink their considerable assets into residential units only. Your financial advisor can help determine which type of real estate makes the most sense for growing your investment portfolio.
3. You should invest close to home
High-net-worth individuals should seek opportunities in their own backyards as well as communities across the U.S. It may even make sense to sink some money into international real estate to further diversify your portfolio while gaining access to opportunities in emerging markets with growing economies. International real estate investing also is an efficient investment hedge.
Expert guidance for high-net-worth real estate investors
Do not fall victim to the myths and misconceptions that plague high-net-worth real estate investors. The Real Estate Investment Group (REIG) is backed by industry knowledge and a passion to help high-net-worth individuals identify real estate investments tailored to their venture capital goals. Contact us today to take advantage of our large global network.