Money

Super-Rich Real Estate Lessons

A few months ago, I read an article about the aggressive (but legal) tax reduction strategies of Mr Ronald Lauder (Estée Lauder’s son).

It made me realize how the tax code is used quite differently by the top 5% than for the remaining 95% of the population. Bottom line: these super-rich not only have cash but also access to the many loopholes and advantages hidden in the tax code. How about, “if you can’t beat them, learn from them” line of thinking then?

Four real estate lessons we can learn from this top 5%:

1) Be willing to pay for professional advice:

It truly is amazing how many buyers, sellers and homeowners I talk to who said to have received their ‘real estate advice or knowledge’ from their neighbours, parents, in-laws. This is without even bringing up those who heard something on the news the night before or read some headline in the paper.

There’s no doubt in my mind that Mr Lauder has a small army of accountants and attorneys in service, helping him with his tax issues. So, why shouldn’t we hesitate to get some solid professional advice on real estate, bonds or tax law when very important financial matters are about to be decided on our end?

2) Take full advantage of the tax code:

We all dread doing our taxes. Most of us probably wait till the last week before the deadline to have a closer look. It’s complicated and ‘no fun’ with all its exceptions. Mr Lauder has reportedly deferred hundreds of millions of Rand in taxes by using the loopholes in donating art to his own (charity) foundations, hereby deducting millions of property taxes in his real estate portfolios.

How about we make an effort or ask for tax advice next time next time we have a property write-off question? Or property tax credits? Or green tax credits for installing certain environment-friendly products? I’m sure we’ll be surprised by the number of deductions available to us that we were not aware of.

3) Use the government programs:

When the major banks worldwide started to get into serious trouble these past few years, their executives were throwing their hands up in the air, crying foul or innocence or whatever. It resulted in the banks getting billions of Rands in government bailouts. Yet, many individuals who were hit by the economic crisis that ensued, with a lot less to lose, relatively speaking, were struggling with bond repayments on their homes. Why not research which (government/bank) programs are available to you as a homeowner in such a situation?

4) Be careful of emotions clouding your decisions:

The majority of people (which happens again to be that 95%) can’t emotionally remove themselves from their homes despite fighting a losing financial battle, where all the data are contradicting otherwise. On the other hand, the 5% will realize what’s going on and remove themselves from the situation, by for example divesting in a house or lowering the sale price of their home, if it makes business sense. Easier said than done, I agree, but if you see how these 5% people are almost making money through the housing debacle, they must be onto some truth there.

A short-term sacrifice for a long-term financial good

 

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