5 Ways a Real Estate Advisor Can Add Value to Your Project
When you need help buying or selling a piece of real estate, you turn to your real estate agent, right?
But if you’re a business owner, how do you know buying or selling, or even leasing some space is the right decision for your business?
And if you're an investor, have you thought through the tax consequences, how to structure your portfolio correctly, or how to leverage existing assets and capital allocation strategies to grow your holdings?
It’s an interesting thought experiment, but it rarely ever happens – many of these decisions are made by default. Because not making a decision, or failing to examine all possible scenarios, is a decision by its very nature.
Real estate advisors bring an extensive background in real estate but offer expertise far beyond just buying or selling property.
Did you know that in some cases, through minimal capital investment, simply rezoning land can increase the value of a property by 3-5x?
Through strategic property planning, insights into management and ownership strategies, and guidance into the real estate development process, a real estate consultant can maximize the value of your investments and transform your business – whether you’re a business owner, investor, or real estate developer.
This article highlights 5 ways a real estate advisor can bring value to your project.
1. Challenge Assumptions
Everyone has their implicit biases – we’re shaped by our genetics, experiences and upbringing, and environments. And that unique formula of influence informs how we look at the world and guides our decision-making.
Have you ever started a new job and, after a couple of weeks, began to question why they’re doing things a certain way? And what’s the typical response – “because that’s the way we’ve always done it.”
Previous successes have a habit of lulling us into complacency. And as organizations age or we spend more time in an industry, it's common to become stuck in your ways.
Even the most seasoned investors need a sounding board. Problem-solving is a team sport, and a real estate advisor can help challenge your assumptions regardless of experience level.
Every investor has a different set of objectives. Every small business has a unique value proposition and set of operations. And every deal requires a unique approach to ensure that it aligns with your long-term strategy.
But because you've done something a certain way, how do you know that your underlying assumptions are correct?
A real estate consultant can help you wade through those implicit biases and challenge some of your traditional assumptions to create the optimal real estate strategy for your objectives.
2. Real Estate Strategy
I don’t mean strategy in the vapid or cliché way it’s often thrown around today. I mean strategy in the nitty-gritty, nuts and bolts, long-term vision kind of way.
In the military, we often distinguished between tactics and strategy – think flanking the enemy and taking the hill versus driving the enemy from the province to “win the hearts and minds.”
In layman's terms, strategy is the long-term vision, while tactics are the individual steps and actions required to achieve the strategy.
Most real estate agents understand the tactics required to complete a transaction – the proper paperwork and individual steps needed to close a deal.
But what’s often not discussed is how the deal fits into an investor's overall portfolio strategy. Or how a particular transaction impacts a business's balance sheet, ability to hire and retain talent, or bottom line.
Success in real estate lies at the intersection of several traditional disciplines – finance, operations, management, leadership, interpersonal skills, modeling, and analytical expertise – and they all impact strategy.
Taking the hill is essential – just as completing the transaction is essential.
But in the context of real estate, the strategy should guide your decision-making process. And a real estate advisor can help you synthesize all the factors that influence strategy, including the macro and microeconomic trends that might impact the value of the real estate as well.
3. Risk Mitigation
More so than other assets, real estate uniquely conveys several types of risk that owners and investors need to contend with.
Real estate is a localized asset – its value is influenced by local demographics and the local economy, the school and university system, job market, and even taxes and local government policies.
But what investors often fail to consider is the influence that market risk has on real estate values.
Systematic risk or undiversifiable market risk are influences that every investor must contend with.
Markets go through cycles; real estate is subject to the same economic booms and busts as other industries. Macroeconomic factors and greater market forces can significantly impact the value of even a hyper-localized piece of real estate.
A real estate advisor understands these trends and how they impact real estate. They can help craft an approach to mitigate market risks – maybe it’s through owning different asset classes in different markets or maintaining a healthy reserve account to weather economic downturns.
And what about other types of risk, like management and property, and environmental hazards?
Real estate can be subject to economic obsolescence through the influence of external factors like crime and nearby development. In addition, deferred maintenance and property deterioration can lead to functional obsolescence.
And on the management side, tenants that pay their rent are great, but there is a very real risk they don’t. Protection against damage and establishing legal safeguards are necessary mitigation measures to be explored.
A real estate consultant’s understanding of real estate risk factors positions them to help investors and businesses make smarter decisions.
4. Decision Making
Should you rehab your old office investment property or sell it as is and upgrade to a new asset?
Opportunity costs impact every decision we make in real estate. Decisions made or not made can result in dollars lost today or may affect the value of your real estate in the future.
The primary role of a real estate consultant is to help maximize the value of a client’s investments.
Think about it this way.
Let’s say you already own property – maybe it's underperforming, you've dealt with vacancies, difficult tenants, and you’re struggling to raise rents to where they should be.
But how do you know where market rents should be? Maybe it makes sense to update the amenities to help attract and retain tenants. Does the required capital outlay payback upon asset disposition over a several-year hold period?
There’s no one-size-fits-all solution to any property situation. But there are important decisions that need to be made throughout the journey that a real estate advisor can help you navigate.
If you’re a business owner, you’ve likely faced a decision between leasing vs. buying a commercial property. Did you conduct a lease vs. buy analysis, or even consider developing? And if you were to develop, would you know where to begin?
We’re all faced with more decisions than we have time to deal with; competing priorities fray at our limited attention span. Real estate advisors can help you weigh your day-to-day business considerations against your long-term decision-making.
5. Better Aligned Financial Incentives
The current real estate service provider model doesn’t correctly serve clients.
Think about it.
Real estate brokers only get paid when a transaction happens – so they’ll try to talk you into buying or selling a property, or maybe leasing some space, even if it might not be the solution for you or your business.
A lender only gets paid when they help you arrange financing through a service they offer. So, they’ll likely never discuss creative financing solutions like lease-to-own, sale-leaseback, real estate syndication, or build-to-suit to meet your strategic needs.
Attorney’s and CPA’s fight to increase billable hours and rarely stray outside their distinct niche to offer practical, creative solutions.
So, most real estate transaction service providers end up hard selling you on their specific services because that's how they get paid. And it begs the question, what incentive do they have to help you think creatively if it doesn’t lead to a paycheck?
Conversely, a real estate consultant has much more flexibility regarding fee structures. Instead of being transactionally oriented, they can be strategy and long-term goal-focused.
This enhances the positive outcomes associated with your real estate decisions and assets.
And you won’t feel like you’re being pressured into a decision that might not make sense for your unique situation.
But, How Do You Know If a Real Estate Advisor Is Right For You?
Have you ever felt like maybe you’ve left money on the table? Or you wanted to pursue real estate development but didn’t know where to start? Or your business is growing, and you need more space, but you aren’t sure what strategy to pursue or how it impacts your business?
There could be hundreds of different scenarios that describe questions you’ve had in the past or questions you’re wrestling with today.
Ultimately, the role of a real estate advisor is to help stakeholders make better-informed decisions and maximize returns and project outcomes.
Even if you're not sure there's a benefit, it might be worth a conversation.
At Marsh & Partners, we love chatting with business owners, real estate investors, and developers about their challenges, goals, and aspirations.
Even a quick 15-minute chat could be the difference between wealth and expense.
Book some time on our calendar or reach out directly to begin the conversation today.