Are you a real estate investor? Or thinking about getting started with real estate investing? A financial advisor who specializes in working with real estate investors can help you make smarter money moves whether you’re buying or selling a property, or interested in holistic financial planning for your real estate empire.

You’ll likely find dozens of financial advisors in your community well-suited to help you reach your money goals with a personalized plan. But it may be more difficult to find a real estate investment advisor who understands what it takes to be a successful property owner, landlord, and investor.

Fortunately, many financial advisors can work with you online, so you can meet online no matter where you (or they) live. This means you can choose to hire a financial advisor who lives hundreds of miles away if you decide their knowledge about real estate investing could help you achieve better outcomes. This can also be especially beneficial if you own or plan to buy investment properties far away from home where the financial advisor you hire lives in your target market.

Whether you’re a real estate agent who personally invests in real estate or you work in an unrelated industry but desire the potential benefits of real estate investing, hiring a real estate financial advisor can pay dividends down the road as your property holdings grow.

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Just getting started with real estate investing?

Whether you’re preparing to get started with real estate investing or recently started, learn more about the financial advisors who can help.

Looking to sell real estate? Questions about 1031 exchanges and advanced topics?

Are you an experienced real estate investor contemplating the sale of a property or involved in complex transactions? Consider a financial advisor with the knowledge and experience to help you navigate the process.

Q&A with Real Estate Financial Advisors

Get to Know Marcus Blanchard

We asked Provo, Utah-based financial advisor and real estate investing specialist Marcus Blanchard to answer questions useful for experienced real estate investors, especially those preparing to sell or exchange properties.

Q: For a real estate investor preparing to sell an investment property, what questions do you like to ask to understand their circumstances in order to help them maximize their gains and minimize taxes?

Any time you are selling an investment property there are three important questions to start with:

1. Why are you selling? This is the starting point because the answer will determine which path may be the best fit for you. Is it to fund another investment real estate opportunity? Are you in, or nearing, retirement? Do you want to diversify out of a single property that makes up a significant portion of your net worth? Or are you tired of the tenants, toilets, and trash that come along with owning real estate directly? Starting with your “why” will help you better craft a path forward.

2. What is the potential tax impact? We need to analyze the details of the deal: what amount in capital gains, depreciation recapture, and cost basis will there be? Knowing the damage beforehand will help guide you to the most appropriate strategy factoring in the other questions. 

3. Do you need income from the sales proceeds or investment? If you need income soon after the sale, it changes how we view your options. If you don’t need immediate income, it may present different investment opportunities. 

Q: A 1031 exchange is a transaction that permits capital gains taxes to be deferred by swapping one real estate investment property for another. But a 1031 exchange may fail if an investor who sold an investment property cannot find a qualifying replacement property within the prescribed timeframe. Based on your experience and knowledge, what options might investors consider, and how do you help your clients navigate this type of situation?

The sooner you can start evaluating your options, the better. Ideally, you have identified at least one backup in the first 45 days just in case your exchange fails, especially if you are reinvesting in a tough real estate market. Waiting until day 179 / 180 of your failing 1031 exchange leaves you with no room to maneuver. Some strategies I’ve seen used as alternatives to direct 1031 exchanges are:

• Delaware Statutory Trust – You exchange your property into a fund of existing managed properties to defer your taxes, diversify your holdings, and receive immediate income while keeping the step-up in basis for your heirs. This exchange must be done before you receive the funds directly and must be identified within the 45-day window after the sale.
• Opportunity Zone Fund – You can defer your capital gains tax from the sale until the end of 2026. One nice thing about Opportunity Zones is if you have already sold and received funds, you have up to 180 days AFTER the closing to reinvest your gains for deferral. The bonus is you can take your cost basis (money you put into the investment minus any depreciation) to do whatever you want with and any growth on your Opportunity Zone investment is 100% tax-free if you hold the investment longer than 10 years (learn more about Opportunity Zones here). 
• Deferred Sales Trust – Can be used to diversify out of real estate and create immediate income while deferring your capital gains through an installment sale (learn more about Deferred Sales Trusts here). This structure must be in place preferably before closing, but can sometimes be used with the Qualified Intermediary if your 1031 exchange is failing.

Harvesting capital losses in your brokerage accounts (or crypto) can also help reduce the capital gains from selling a property. If you have a large amount of capital losses that haven’t been used from years prior, these will also help reduce your capital gain in the year of sale.

Q: What are common financial planning challenges you encounter among real estate investors and how do you help your clients overcome them?

Marcus: The most common financial challenge I find with real estate investors is simply organizing their financial life. Between new real estate deals, family, travel, another side job, etc., the overall financial picture can be challenging for investors to keep track of. Not keeping track of your net worth, income, and investments at a high level can lead to years of missed opportunities, increased costs, and potentially overpaying in taxes. 

I help my real estate investors make sure their net worth is moving in the right direction and that nothing slips through the cracks. For example, a real estate agent I work with was maxing out retirement contributions and was in a high tax bracket. However, you only get credit if it shows up on your tax return; he wasn’t getting credit for his retirement contributions on his tax return and thus wasn’t locking in his tax savings.

We were able to work with the CPA and get the return amended to get over $40,000 back in taxes. None of this would have been caught if the tax return wasn’t being reviewed for accuracy and opportunities. 

Get to Know Marcus:

View the profile page for Marcus on Wealthtender or visit his website to learn more.

Another challenge I see is real estate investors who are typically over age 50 and want to simplify their holdings but are concerned about capital gains taxes. Maybe they are tired of the tenants, toilets, and trash or can’t find a property that makes sense to 1031 exchange into. With real estate values being so high, this also presents a unique challenge of finding properties that pay net annual income greater than 2%-4% of the total value. This is an extraordinarily low amount of income relative to property value, historically speaking. Of course, this depends on the area you’re in. Here in Utah, the cap rates can be extremely low.

Simply selling the appreciated properties in an outright sale isn’t very enticing either due to the significant capital gains and depreciation tax that would be generated. So I help my clients who want to cash in on their real estate values, draw a higher income, and NOT get killed in taxes by deferring their capital gains along the way.

I wrote an article detailing what that process looks like on my website, which can be found here: How Can I Sell My Business or Real Estate & Not Get Killed In Taxes?

Q: For the thousands of real estate agents who also invest in real estate, what special financial planning recommendations do you suggest they consider given both their income and net worth can be directly impacted by local market conditions?

Marcus: One challenge real estate agents have is how irregular their income can be at times. Putting your dollars to good use and building an adequate “Safety Bucket” is critical when an agent’s local market hits a cool-down period in real estate transactions.

This also applies to any investment properties one might own. Are there adequate reserves to cover surprise expenses or tenant turnover? Having adequate reserves also provides the opportunity to strike when a great deal presents itself. 

Q: For real estate investors who are unsure whether or not they should hire a financial advisor, what guidance can you provide to help them make a more informed and educated decision?

Marcus: I wrote an article detailing this exact question, which can be found here: 10 Questions You Should Ask Your Financial Advisor

There are a lot of advisors out there, some with specialties and most without. Due to the unique and tax-efficient nature of real estate, you should search for an advisor who specializes in working with real estate investors or agents.

Many financial advisors also don’t understand why anyone would invest in anything besides the stock market. Be sure to find an advisor that realizes wealth can be built in several different ways. The same goes for finding a tax preparer. Find a tax preparer that works with many real estate investors so they know exactly what to look for to find problems and opportunities with your taxes. 

Q: What expenses can a real estate investor deduct to reduce their capital gains taxes when selling a property?

Make sure you have accounted for all property improvements that you put money into. I see sellers go through years of records with their tax preparer to make sure things aren’t missed such as:

• New appliances
• Replacing the roof
• Remodeling 

Keeping up on these items as they arise will help you (and your tax preparer) have a much smoother time determining what your actual cost basis is when selling your property. 
Also, any costs from closing (staging, title fees, commissions, etc.) can also be used to reduce the capital gain on your property. 

Q: Are there online resources or communities you suggest to real estate investors who are interested in becoming more educated on their unique financial planning needs?

Marcus: Bigger Pockets can be a great resource if you’re looking for general education or do-it-yourself resources. If you’re looking for assistance with education along the way, search out advisors here on Wealthtender, XYPN, NAPFA, or Fee Only Network that specializes in working with real estate investors. 

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