I have close extended family relationships that are such a blessing. Not everyone gets along with their relatives, so I count myself very fortunate. And as I get older, I really have a desire to make sure we take the time to nurture those extended family bonds.
I would love to spend more time with my extended family and it seems like there should be a way to make this a reality but the logistics of seeing family is getting trickier and all of that travel costs money. But what if there were a way to visit family and offset some of those travel costs?
As we have explored AIRBNB with our clients and even ourselves, I am wondering about starting a real estate investment trust, or REIT with some of my family members. This idea was born out of the fact that my wife and her family are spread across multiple states. And by multiple, I mean a lot – Mississippi, Montana, Colorado, Wisconsin, Michigan, and Minnesota. Then throw in my family in Nebraska, Arizona, California, and Wyoming and you get the idea. We are all over the place.
If you’ve been following our work at Uncommon Wealth Partners for any length of time, you know I’m about to offer an Uncommon solution to this problem. My question to you and to myself is: Is our family ready for a real estate investment trust (REIT?)
Our work with clients is often about designing your business around your life and creating the cash flow to support both. I think a REIT might just fit the bill in this case and allow the extended family some time to be together in the process.
So what is a REIT? A REIT is a portion of the tax code that allows for the formation of a company that owns, operates or finances income-producing real estate. By leasing space and collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends. REITs must pay out at least 90 percent of their taxable income to shareholders (family members in this case) and most pay out 100 percent.
Here’s how that might play out, at least in my situation. Each family could collectively purchase homes in each family’s neighborhood and use them as AIRBNB properties. We could co-invest in a fund that we use to secure the down payments. We all have good jobs, we all work hard and we all want to spend more time together. It seems like an idea that just might work.
Business with family is tricky though, no doubt about that. But, pooling our resources and chipping in would allow us to travel more to see the other family members and check in on our investments.
And to be clear, you might not even take the step of establishing an official REIT. I’m suggesting that it would not be difficult for a like-minded family, no matter how geographically spread out, to put together a portfolio of properties that they own, manage and benefit from together.
We spoke at length with Brett Appleton about just this on an episode of the Uncommon Life Project podcast, so check that out if you are interested in seeing how it is playing out in one family. Brett and his father-in-law are doing something similar. There are lots of ways to do this. It’s just a matter of finding a fit with your goals, the lifestyle you and your extended family want, and putting a real estate portfolio together that makes sense for all of you.
So how about it? Is your family ready for a REIT?