Traverse City Business News | Boats, wine and VRBO: what the rich invest in (and maybe you can too)
Boats, wine and VRBO: what the rich invest in (and maybe you can too)
You have money in the bank and you want to invest it. What to do?
Dan Stiebel of Coldwell Banker Commercial says the allure of owning a physical asset such as property cannot be ignored.
“It’s a little more work than buying a stock with a dividend,” he said. “It’s not for everyone.”
He said the most attractive property is a single-tenant, net-leasehold property where the tenant has a long-term lease and all upgrades and maintenance are their responsibility. He points to franchise operations as the most visible entities of this type.
“The owner receives a dividend like a stock,” he said.
For those considering investing in commercial real estate, Stiebel said securing good tenants and having a good property manager are key to providing a stable income.
Investing in residential real estate is also a consideration. Estate agent Matt Geib of Century 21 Northland said there has been a significant increase in the number of people buying homes to rent.
“There has been an increase in demand for short-term rentals…related to the pandemic,” he said. “After the first year of COVID, there was a demand for people to have their own space rather than a hotel.”
He said the appeal of waterfront properties in the area has exploded.
“Investors are fighting against each other,” he said. “They don’t look at historical data (in terms of value).”
When most people hear the word investing, they probably think of the stock market. Jim Mellinger, chief financial officer at Edward Jones, said expensive stocks don’t make sense for those investing a limited amount, but they might for someone with money.
“Wealthier people like to own individual stocks (as opposed to things like mutual funds),” he said.
Mellinger cites online juggernaut Amazon as a “perfect” example.
“At $3,189 a share, the haves might say, ‘Give me 100 shares,'” he said.
Mellinger says that in the years he’s been in the business, he’s seen the number of wealthy people soar.
“I’ve been doing this for 30 years – the numbers are bigger,” he said. “There are more rich people today than 20 years ago.”
When it comes to the wealthy, Mellinger adds that there are certain areas they may need to pay more attention to than the average person.
“The richest have tax problems,” he said. “It makes more sense (for them) to buy municipal bonds. It is non-taxable income.
Echoing Stiebel and Geib, Mellinger says he also tells his clients that investing in real estate is something to consider.
“VRBO homes are popular now,” he said. “It’s a phenomenon across the country.
What about jewelry, gold and precious metals as investments? James C. Smith, owner of the eponymous jewelry store in Traverse City, says “absolutely,” but not for the reason you might think.
“Anyone who tells you jewelry is a good investment is trying to sell you jewelry,” he said.
He said another jeweler once told him that jewelry was “an investment of the heart and not of finances. I am of this mindset.
This extends to precious metals.
“I get calls about gold. (People say) ‘Gold is exploding. It’s at an all-time high,'” he said, mocking the ubiquitous TV ads.
“You have to take into account that you have to sell this tangible product,” he said, adding that when he receives these calls he has an answer ready.
“I say, ‘Buy it on the exchange,'” he said.
What about the hottest new investment, cryptocurrency? Mellinger said he saw a divide between those interested in it in terms of age rather than wealth. Young people know it better and are more interested in potentially investing in cryptocurrency than older people.
For customers inquiring about it, Mellinger said they’re on their own.
“This is the most recent thing I get questions about. We all think crypto is coming,” he said. “I can’t even get into this.”
What about high-end personal watercraft? Locally, the waters are more about pleasure than financial return.
“I would say first and foremost, boats and/or yachts, unlike homes, are a depreciating asset,” said Jeff Kern of HarborView Yachts.
And as a depreciating asset, boat owners should develop a plan to navigate ownership by maintaining their property and making sure they’re doing their best to retain their value, he says.
Another difference he noted is the cost of actually using them.
“Wealthy people aren’t usually as concerned about the costs associated with maintenance, fuel, or other expenses that a typical family would budget for,” Kern said.
So, are there other areas the wealthy are investing in that might have local application? Turns out there is: The Grand Traverse region is well known for its wines. Is wine a good investment?
Very probably. In a recent article, Financial Bautis said wine has outperformed the S&P for the past 30 years. It has generally piqued the interest of those with privilege and access, such as wine experts or the ultra-rich. But as the wine has become more popular, more people have seen its appeal, and that includes locals.
“I would say that’s true,” Blue Goat assistant manager Coty Mendenhall said.
She says she sees people buying high-end wines there.
“A lot of high-income and wealthier people in Traverse City are looking for a special bottle, maybe to drink right away or add to their collection,” she said. “Some vintages are best enjoyed about 10 years after bottling.”
Marie-Chantal Dalese, CEO of Château Chantal, said she sees this market as limited to very high-priced, exclusive and allocated wines.
“We definitely don’t play in that world,” she said. “I guess like any limited good, people will find a way to make money out of it. It looks like fun, but not as much fun as drinking it.
Art is another area seen as an alternative investment option for the wealthy, but for some it’s more about love than love of money.
“I would say the people I sell art to don’t buy art as an investment, but because it resonates with them, or it’s a particular artist they collect,” Shanny said. Brooke, owner of the Higher Art Gallery in Traverse City.
Instead, she said that in her experience, even wealthy collectors she has relationships with don’t buy art because they think its value will increase over time, but plan to pass it on. their art as a legacy to their loved ones after they are gone.
Another area of alternative investment is travel? Tom Rockne, director of Tom Rockne Travel, would say that such an expense is a good idea and indeed an investment. He said people are intrigued by destinations they see in movies or on the news, “and think, ‘I want to go there.'”
“They want to do something meaningful and see it as an investment,” Rockne said.
While traveling means seeing new and different places and cultures, he believes it’s more than just exposing himself to new adventures. (After all, you can see distant places on TV or online.)
But experiencing it in person goes further.
“It opens up (the traveler), opens up the family,” Rockne said. “You become a more informed person.
“It’s an investment in yourself, in your family.”