Most professional athletes make a great living with their professional salaries and contracts, which may qualify them as “accredited investors.” Financial planning, therefore, is a necessity for professional athletes to ensure they are covered in case their career is cut short or simply to secure their future post retirement. Among other options, real estate investments are a preferred choice for pro-athletes in the US and other parts of the world. Let’s take a closer look at the various aspects of real estate investment management and options that financial planners recommend for pro-athletes who qualify as accredited investors.
What Does Accredited Investor mean?
The Securities and Exchange Commission’s (SEC) recognizes the primary function of the accredited investor status, as to identify individuals who can sustain the risk of investing in unregistered securities. Unregistered securities, unlike those registered with the SEC, do not require companies such as hedge funds or venture capital funds, to disclose prescribed information to accredited investors. Such investments, therefore, involve more risks and careful valuation before investing.
How Do Athletes Qualify as Accredited Investors?
According to finance planners, pro-athletes may qualify as accredited investors if they have:
- Incomes exceeding $200,000, or $300,000 (together with a spouse) in the 2 years prior to making the investment, and expect to have similar earnings during the current year.
- Net worth over $1 million, either individually or together with a spouse (this does not include the value of the individual’s primary residence or any vehicles).
What Risks Do Investors Face with Real Estate Investments?
Professional athletes qualifying as accredited investors must be cognisant of the following risks:
- Management risks (including property and assets)
- Debt risks (including over leverage and debt maturity risks)
- Cap Rate risks (capitalization rate of the property)
- Physical asset risk
- Entitlement risk (for new property developments)
- Market volatility risks
What Can Investors Do to Protect Themselves?
Professional athletes qualifying as accredited investors need to hire an investment planner in order to address and mitigate the risks involved with investing. Financial planners can help evaluate real estate investing opportunities to create diverse asset-based portfolios, and target properties with existing cash flows. Once the appreciation potential of the property is met, investors should look for an exit strategy.
The career span of most professional athletes is approximately 5 years, during which they earn premium salaries, get lucrative endorsement deals, and lucrative contracts. It is imperative for them to invest their wealth wisely to ensure a consistent income after their career is over. If you too are looking for direct investment opportunities in real estate, look no further than FIG Tree Capital Ventures. To learn more, fill out our contact form or call us at (866) 300-2170.