Giving your portfolio an inspection and a tune-up

I just got home from a special meeting with my financial advisors.  They’re two brothers I met at a business function some time back and they are personal trainers for my financial well-being.  During today’s meeting, we began the first phase of a three part review of my financial health – protection.  In this phase, we took an hour and walked through all of my “protective” assets – insurance of all types, government plans, wills & trusts, etc.  Although they have seen worse, my situation had a lot of room for improvement.  Essentially, the key areas I had lacking were disability insurance, life insurance and possession of a will (to determine who gets all of my Futurama and Samurai Jack DVDs, among other things, should really bad luck come my way).  These brothers congratulated me on how well I’ve managed my investment accounts and chastised me on how poorly I have been managing my insurance.  Because I am an independent contractor now, disability and life insurance are my own responsibility.  I never took the time to consider the cost/benefit analysis of having disability or life insurance, but after going through some financial scenarios, I have become to understand the benefit of protecting myself at this level before focusing on the higher level strategy of my investment accounts.  With the guidance of my advisors, I was able to take steps in the right direction to protect everything that I’ve been working hard to achieve.

This experience today got me reflecting on some of my recent work.  As I talk with prospects and work with my clients, I find a similar situation often pops up with their real estate strategy.  They invariably have a strategy to find space to meet their size needs (i.e. number of employees or offices), but frequently have not taken the time or had the experience to step back and look at the bigger picture.  What is their long-term growth need?  Will their lease terms accommodate this growth?  Have they seriously considered external market trends that may impact their planning and timing in the market?  Can your space meet changes in your business model or work structure or is productivity being hampered?  What about protections in case the building faces unexpected operating expenses or real estate tax bump-ups, causing their effective rent to go up by 10-15% in one year?  As you can imagine, there are a lot of what-ifs that could happen and, like my financial advisors showed me, it’s safer in the long run to protect yourself with a little insurance.  I’m curious to hear about times when brokers or tenants have faced similar challenges to the questions posed here – how did you address them?  Were you able to resolve the issues to your satisfaction or were you backed into a corner?

For all of the space users, all of you business owners and executives out there, take some time to review your real estate portfolio.  Sit down with your lease(s) or have a tenant representative prepare a summary for you.  Take some time to evaluate the past growth of your firm and understand how your space is being utilized by your employees and clients.  As Sun Tzu said in the oft-quoted The Art Of War, “know yourself and you will win half the battles.”  When it comes to your business and its long-term well-being, by taking a little time to understand where you are, you will be better prepared to make the best decisions for the future.

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