Estate Planning for Real Estate Investors

A true MAREI case study of a package deal that MAREI CoFounder Kim Tucker and her husband purchased. The actions of the investor and heirs before the final purchase is the case study in estate planning for real estate investors — what not to do, and the two dates that can keep it from becoming your story.

Years ago, Don and I did a deal I still think about. The numbers here aren’t exact — close enough for government work, as my dad used to say — but they’re close, and the lesson is exact.

There was a couple. Both investors. They’d built a real portfolio the hard way, one house at a time, and they had a young daughter. Everything they were building, they were building for her — a better life, a head start, a legacy worth leaving. Hold onto that part, because most of you reading this are doing the exact same thing.

Then life did what life does. They divorced and divided the estate. And not long after, he died unexpectedly. He was murdered. I’m not telling you that for shock. I’m telling you because it’s the whole point: he didn’t get five years of warning. He didn’t get any.

Here’s what makes this a case study and not just a sad story. This man did almost everything right as an investor. He bought, He held, He built, but He did one thing wrong — and it’s the same thing I’d bet money most of you are doing right now. I’ll get to it. First, watch what happened to the $2.1 million.

The estate went to an attorney — not a manager

When he passed, his estate went to an attorney to settle. Not a property manager. An attorney who happened to hold a real estate license but knew nothing about rentals, tenants, or urban-core property. By all accounts a good man, doing exactly what he was hired to do: settle the estate, and save the estate money doing it.

Step one: he got everything appraised. The houses being actively marketed — good shape, paying tenants — plus the personal home in Waldo came in at $2.1 million. A real legacy for a little girl.

Step two: he carved out the houses nobody could buy — tied up in city litigation over asbestos cleanup. Fair enough.

Step three is where it started to slide. He put the remaining twenty-five or so houses on the market as one package. All or nothing. Couldn’t be broken up. $2.1 million. If you were in the business back then, you probably saw it float around. He marketed it off-market for two years. The price crept down. Slowly.

Step four: he managed the tenants. Except he didn’t — that was never his skill. By the time I looked, two years in, all but about four houses sat empty. And an empty house in the urban core is a countdown clock.

You know what came next. The copper thieves. Thousands in damage for twenty dollars of copper. Cabinets gone. Whole AC units gone. Anything they could carry.

By the time Don and I made our offer — the nice Waldo house included — we bought the package for right around $300,000.

$2.1 million to $300,000. To save on a property manager and a sales commission, the estate lost roughly $1.8 million. And here’s the quiet part: over two years of billing, I’d wager most of what was left went to the very attorney who was trying to save money.

But the attorney isn't the lesson

He did his job. The lesson is the investor. And it fits in one sentence:

He thought he had all the time in the world.

Five years. Ten. Plenty of runway to get around to the boring paperwork someday. So there was no plan. Nobody named to manage. Nobody named to sell. No reserves to keep the lights on. Nothing on paper. And when “someday” turned out to be a Tuesday, everything he built for his daughter went to strangers who couldn’t tell a rent roll from a grocery list.

Estate planning for real estate investors isn't the boring part

If the bus got you tomorrow, could someone pick up your business and run it — or wind it down — without blowing it up?

Not your net worth. Your instructions. Who legally steps in. Who manages the properties and the notes. Who keeps the bills paid while it all gets sorted out. Where is any of this written down? Whether the people you’d count on even know they’re on the list.

Because your portfolio is almost certainly bigger than his was. At today’s numbers, a lot of you are sitting on what could be a $7–8 million estate. Right now. And an elderly spouse, or a young spouse who’s never done what you do, or — worst case — a twelve-year-old, is not going to protect it. Not without a plan you built while you still could.

And if you think you’re already covered — good. Then answer this: Did you fund it? Did you legally turn it on, or is it a binder on a shelf? Did you transfer those LLC’s into your estate, did your attorney event tell you how – Bet 95% of you, and Me Included don’t have this part right.

Did the people you named move away, or pass away? Our Executor on our first estate plan, got dementia and several years later passed away, and THEN we redid the estate.

When is the last time you actually looked at your plan.

Two dates. Put them both on your calendar.

Tuesday, September 8 — MAREI Live, 5:30–8:30 PM. This is the one to be in the room for. An estate-planning attorney and a CPA walk you through the checklist in person: what you need in place legally, and what you need in place to keep the business breathing if you step away. You’ll leave knowing the questions you don’t yet have answers to — and that’s exactly where a real plan starts.

FREE for MAREI members and first-time guests. Not a member yet? [Join here] — or pay the $35 guest fee at the door. [Register Here as a Member, Guest or For a Guest Pass]

Saturday, September 12 — MAREI Workshop, 8:00 AM–2:00 PM Central, on Zoom — wherever you are in the country. This is where you build the other half: getting what you’ve actually built down on paper, in a form your attorney and CPA can turn into real protection. Can’t make it to Kansas City? Doesn’t matter. This one comes to you.

Early-bird pricing: $47 for MAREI members, $97 for non-members. [Register Here]

One meeting shows you what’s missing and gets you in front of some great legal and financial advisors. The workshop helps you fix it. Do both — and if distance is the only thing standing between you and a plan, let September 12 settle that.

Estate planning for real estate investors is the one piece of the business you build for everyone but yourself — and it only works if you build it while you still can. Wherever you are in this — just starting out or thirty years in — show up.

Because the plan you never wrote is the plan the copper thieves are counting on. We had this comment from Kristina Hartman who is a Title Escrow Agent “All of this!! It breaks my heart when heirs come to us for help disposing of real estate. If only the owner had filed a “transfer on death” instrument, or had a succession plan for their LLC they could have save thousands of dollars and hundreds of man hours spent resolving the situation. . . No plan is also a plan unfortunately, one that involves leaving your heirs the headaches.”