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A Financial Adviser on Real Estate

A Financial Adviser on Real Estate

Sarasota Herald-Tribune

An investment adviser and financial planner in Sarasota for 30 years, Rick Helbing of Suncoast Advisory Group still has a soft spot in his heart for Wisconsin, where he was born and raised. He roots for the University of Wisconsin Badgers in sports and owns a share of the Green Bay Packers football team.

Helbing’s particular niche is medical and dental professionals and small business owners, who often have real estate in their investment portfolio.

From 2009 to 2011, “Medical Economics” magazine named Helbing one of the 150 top financial advisers in the country for physicians. He sees himself as the quarterback, the big-picture strategist, and recommends his clients seek counsel from their tax advisers, CPAs and/or tax attorneys on specific issues. Correspondent Chris Angermann talked to him about the real estate aspects of his business.

Q: What is your biggest challenge regarding real estate with your clients?

A: They make emotional decisions. They’ll go on a ski vacation to Vail, Colo., come back and say, “We like it so much, and we’re going to buy a condo. We can rent it out, make a bunch of money, sell it down the road and hit the rainbow pot of gold.”

I never want to destroy their dream, but since I’m their financial adviser, I go through the cash flow analysis, call a couple of Realtors out there, and see if I can get hold of the developer. I discover that Vail is so overbuilt that the chance of renting out their condo in the summer is zero.

In the winter, since they want to use it for two weeks themselves, the average rental time is a month or two at most. They’ll have to have a management company, which takes 20 percent of the rent. And suddenly it’s not such a good deal. I’m Dr. Doom, sometimes, but I don’t want them to make a financial decision they’ll regret and end up costing them a lot of money.

Q: What about commercial property?

A: In the old days, when I learned the real estate business, it was “location, location, location.” But when it comes to investment, you look at what you want to use the property for, what you are trying to do with it. A doctor or dentist may want to buy a commercial building, have his practice in it and lease the rest out. It’s a good idea, but you still have to do your due diligence.

You have to check out the condition of the property. You have to take an inspector with you — someone who really knows what to look for. Does it need a new air-conditioning system? Are the foundations solid? One of my clients was looking at an apartment complex. It was 100 percent occupied and the financials looked fine, but something didn’t seem right. I asked her to get me the plans on the place and when it was built. It was pretty old, and the owner hadn’t put a roof on in 17 years. When she had it checked out by a general contractor and structural engineer, she found out the building was in pretty bad shape and passed on the deal.

Q: How do tax issues play into real estate investments?

A: In the old days, one reason to buy real estate was for tax-shelter purposes. That doesn’t really make sense today, because a lot of the laws are changed.

Let’s say I’m a doctor and I buy a commercial or residential property. I have to be careful. If I have a loss, I may not be able to write it off right away because of my income level. That loss is suspended until I sell the house. Until then, I have this loss I can’t use, and I’m stuck with it.

People who are in the real estate investment business can write all of it off, but I’m working with clients who don’t do it full time.

Q: But isn’t real estate considered a good investment now that the market is coming back?

A: That has not been my experience. Basically, we’re just getting out of the bottom of the market.

I have several clients who started out in Sarasota with the majority of their portfolio in real estate. They have divested quite a bit, sold off when times were good, and replaced it with investments in the stock market or other places.

Most of my clients are not investing in residential real estate. They’ll look at commercial or a franchise, but they’re not going to buy five homes and rent them out.