Purpose-Based Real Estate Investing – Live Happy. Invest-Wisely.

Fabricio Riggioni - FEB 28, 2019
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Purpose-Based Real Estate Investing – Live Happy. Invest-Wisely.  A purpose-based real estate portfolio will allow you to measure your success with more than just the standard industry’s financial ratios, such as Cap (capitalization) Rate, Net Operating Income or Cash on Cash Returns. Instead, you will be able to measure a specific investment decision against the purposes that you have already defined as the backbone of your decision-making process. These purposes will vary depending on your age, risk tolerance, current financial situation, and most importantly, how clear you are about your life purposes and what it takes to accomplish them.

This process is also kind of fun. It allows you to dream and create at the same time. Furthermore, your life purposes don’t need to be a huge list on a sheet of paper. They can simply be in a short paragraph on how you envision the rest of your life, and the steps needed to achieve that lifestyle.

This process is also kind of fun.
It allows you to dream
and create at the same time.

The key is to assimilate this information into a short paragraph and acknowledge that your investment decisions will follow the steps outlined for yourself, rather than only looking at the Net Income line in your excel spreadsheet. You will now play in another league when it comes down to purpose-based investing.

This is the three-step process I use when working with investor clients and managing their real estate portfolios with a purpose-based investing approach

1. What’s your purpose and what have you done to accomplish it?

Answers to this question will flow like a huge river on a steep mountain, both for lifestyle and financial purposes. Once you know how you want to spend your time, efforts and money, you might realize that most of the decisions you have made so far have not been the right ones. I see many clients who have accumulated tons of financial wealth, but have done a poor job serving their lifestyle purpose. It’s a huge eye-opener.

In this step, we also analyze your current portfolio and lay out the plan for changing it. We take into consideration the current financial situation, liquidity and type of assets that we’ll need to seek or keep in our portfolio to obtain the life we want for ourselves.

2. Plan execution: Patience, patience and more patience

If you’re new to purpose-based investing, one of the hardest things to do is pass on deals that you know look good on the spreadsheet but don’t serve your overall plan. There will always be good opportunities in the market, whether economic times are good or bad, as long as you stick to the plan laid out in Step 1. Just be ready to jump on the deal that will benefit your lifestyle and the ones around you. Have your team of expert lawyers, architects and real estate professionals ready to go and make it happen.

3. Ongoing revision: Life changes every day, so make your portfolio flexible.

The lifestyle purposes you have now are very different from the ones you had 10 years ago. So why should your real estate portfolio not change accordingly? Try to do a deep analysis every six months. Take into consideration the purpose-based investment process, along with the traditional financial analysis required to make your portfolio successful.

Always remember, LIVE HAPPY. INVEST WISELY! Please contact NATIVU if you want to learn more about “purpose-based investment”.