The Mistakes That Very High Net Worth Investors Make in Real Estate

The upper 1% is different. I’ll say this to my wealthy clients and I am empathetic to their unique challenges. It takes work to protect and grow wealth. Tax planning is no fun. Relationships get complex. Returns are scant these days.

However, My clients are open to alternative investments like commercial real estate. They intuitively understand how money is made and lost in real estate. They are entrepreneurial and free of bureaucratic hegemony. I read an article by National Real Estate Investor talking about top mistakes these investors make when investing in commercial real estate. I agree with the author, as I’ve seen people make the same errors over and over. I talk about this in a podcast, Top 8 Mistakes High-net-worth Investors Make, Part 1. Starting today, and continuing next week, I’ll share my list of the most common mistakes I see high-net-worth investors make and share some stories from the field. Spoiler: I’ll explain why physicians in particular have a bad reputation as commercial real estate investors.

My Top 3 Mistakes Big Money Investors Make In Commercial Real Estate

1. They think they can do it themselves.

These are highly successful people, many of whom earned their money thanks to their skills and expertise in their field. But trouble comes when they think they can execute as a landlord, or handle all the details of a transition. They need to resist the urge to take it on themselves and realize the value of having a team assist with buying, selling, owning and operating a property.

2. Not doing adequate due diligence – on a deal or team you are working with.

These folks know how to do homework. But performing comprehensive due diligence on real estate is more complex than people understand. It’s common for investors to fall prey to a good sales pitch but not understand – or even pay attention to – the fundamentals. These investors need to take steps to make sure they are working with the best team and pursuing the right opportunities.

3. Forgetting portfolio diversification.

A laser-like focus might be needed to run your company, but it can hurt your efforts when working with a real estate portfolio.

In the podcast, I talk about my observations for when and how people make these mistakes and share suggestions for avoiding them, or fixing them after the fact. Next week, I’ll follow up with five more of the most common mistakes that big money tends to make in real estate.

Real estate transactions can be fraught with frustration and pitfalls.

Sometimes the hardest part turns out to be working with your broker, the person who is supposed to help you through the complexities. Veteran commercial real estate broker and client advisor John Culbertson discovered that brokers’ interests aren’t always aligned with those of their clients. He realized there was a better way to advocate for clients and get the deal done.


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