One Size Doesn’t Fit All When Dealing With High Net Worth Investors

It doesn’t matter whether you’re flipping properties, wholesaling or locating rental real estate for investors, high net worth investor types don’t all fit in one bucket. This isn’t a discussion of commercial versus residential; instead a look at how high net worth investors differ in their investment objectives, tolerance for risk, and levels of experience.

Your constant competitor in this arena is investment in REITs, Real Estate Investment Trusts. Buying into REITS is passive investing that leaves all of the work to others. However, it also leaves all of the decisions to others, and you can use that in your pitch to get high net worth investors involved a little more actively in buying, selling, renting and managing properties.

Another marketing approach in dealing with high net worth investors is to clearly and factually present the differences between real estate and the stock market and other investments. Current cash flows, inflation protection and hard asset backing are all real estate investment characteristics that appeal to the investor with significant sums at risk in the stock or bond markets.

One source reports the percentage of total holdings by high net worth investors in real estate this way:

• 0% for those who know nothing about real estate investing.
• 25% to 50% held by people who are small multifamily or 1031 Exchange buyers.
• 70% for those who are experienced enough to manage their own properties.

That’s a wide spread of investment allocation, and experience and knowledge as well. The good news is that the “diversify” mantra all of these investors have heard for years can work for the real estate investor who is trying to flip or sell properties to this group. Show them how they can invest in real estate in different ways and property types and they’ll listen.

Better news for the wholesalers and fix-and-flip investors is that the highest net worth real estate investors are normally more experienced and they skip working with wealth management companies in favor of working directly with real estate investors. Never pitch “easy” to this group, instead pitch ROI and asset protection.