Growing Your Wealth Through Real Estateby Mark Niederhelman

As an investment, the case for real estate remains a good one. Not only has the sector outperformed the S&P 500 over the past 40 years (an average annual return of 9.3% for the NCREIF Property Index versus an 8.7% return for the S&P 500), it’s done so with dramatically less volatility (7.8% compared to 16.4%), according to the S & P Dow Indices and NCREIF.

Real estate has a low correlation to stocks and bonds. Because it’s a lagging economic indicator — it rises and falls well after the rest of the economy — it moves differently than stocks or bonds. What’s more, real estate markets are unique. The factors that can sink home prices in one market can have no bearing on another, although that’s not always the case.

A Quar ter ly Publication Vol . 9 Issue 3 / July 2017the WealthWATCHSM the WealthWATCHSM 1

INSIDE THIS ISSUE

Growing Your Wealth page 1 Through Real Estate

Letter From The President page 2

Harvest For Hunger Update page 2

Economic Commentary page 3

Although the real estate market has plenty of opportunities for making gains, buying and owning real estate is a lot more complicated than investing in stocks, bonds and mutual funds.

Perhaps the biggest difference between a rental property and other investments is the amount of time and work required. If you invest in a rental property, there are many responsibilities that come along with being a landlord. You should also consider the amount of time required to deal with the investment. You may want to consider hiring a real estate property management company to handle the day-to-day operations of your real estate portfolio in exchange for a percentage of the rental revenue.

Because of the time involved in managing real estate, many investors prefer passive investment. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock.

REITs are unique because of their tax structure, which was designed to encourage smaller investors to invest in real estate projects they otherwise wouldn’t be able to afford. Corporations that have opted for REIT treatment pay no Federal income tax on their corporate earnings as long as they follow a few rules, including a requirement to distribute 90% or more of profits to shareholders as dividends.

One downside of investing in REITs is that, unlike common stocks, the dividends paid out on them are not “qualified dividends,” meaning the owner can’t take advantage of the low tax rates available for most dividends. Instead, dividends from real estate investment trusts are taxed at the investor’s personal rate.

Another excellent real estate strategy is the 1031 exchange. This tool allows an investor to sell a property, reinvest the proceeds in a new property, and defer all capital gain taxes. There was a time when 1031 cases needed to be simultaneous transfers of ownership, but under current law, a contract to exchange properties in the future can be used as well.

Family Limited Partnerships (commonly called FLPs) are frequently used to move wealth from one generation to another, and can be a useful structure for holding and transferring real estate within a family.

FLPs are typically holding companies, acting as an entity that holds the property contributed by the members. FLPs have several benefits. They allow family members with aligned interests to pool resources, thus lowering legal, accounting, and investing costs. They allow one family member, typically the General Partner (GP), to move assets to other family members (often children who are Limited Partners, or LPs),

Mark Niederhelman

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HARVEST FOR HUNGER UPDATE

Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors is not affiliated with Triad Advisors. This is for informational purposes only and should not be construed as tax or legal advice. Consult your tax or legal advisor in regard to your specific situation.

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by Jim Lineweaver, CFP®, President and FounderLE T TER FROM THE PRESIDENT

One of my favorite things about summers past, especially when the kids were young, was a tradition that my father-in-law started. At the beginning of each summer, he’d take pictures of the kids – on vacation, having fun, or just lounging around at home. At the end of the summer, he’d make a little book out of it and give it to Kathy and me. I still have all those books!

These are a few of my favorites of us as a family. I hope that you and your family have something fun planned this summer, and that you’ll take the time to make (and capture) a few memories of your own!

On a beautiful May Wednesday, the Lineweaver Financial Group staff had the opportunity to volunteer at the Cleveland Food Bank. We spent the morning sorting huge pallets of donated food, reviewing expiration dates, and repackaging it for the food bank’s distribution systems. We had a lot of fun working together, and all for a good cause! With client and staff donations combined, we also donated over 1500 pounds of food over the course of our entire Harvest for Hunger campaign, from September until the end of May. A big thanks to everyone who donated!

Look for Jim’s article “3 Steps Toward Financial Freedom” in the July-August issue of Boomer and Beyond Magazine, or head over to Lineweaver.net for the online version. If you have questions about your own path to financial freedom, please give us a call – we’re happy to help!

Following the strong start to the year, additional positive performance slowed in the second quarter as markets digested a tremendous amount of economic and geopolitical news. However, despite elevated levels of uncertainty throughout global financial markets, returns overall remain robust year-to-date. A few highlights from the second quarter:• U.S. Equity markets added to gains from earlier in the year at a slower

pace as compared to the first quarter. Economic data was mixed and overall GDP results fell short of expectations. Despite uncertainty, corporate earnings were stronger than anticipated which helped push equity markets to new highs.

• International equity markets were positive during the quarter and outperformed their domestic counterparts. Economic data in Europe continues to come in better than expected, and could be signaling a period of sustained growth. Emerging Market equities posted some of the strongest gains of all in countries such as China, India, and Brazil, which continue to accelerate. Emerging Market stocks are the best performing asset class year-to-date.

• After a steep increase in interest rates to end 2016 and after only the third increase in short-term rates by the Fed since the Financial Crisis, interest rates were generally stable to declining during the second quarter. Declining rates helped prices of Core U.S. Bonds which more than doubled their return from the first quarter. Investors continued to embrace risk in fixed income markets as High Yield Bonds, International Bonds, and Emerging Market Bonds outperformed Core U.S. Fixed Income.

• The only negative returns for the quarter came from commodities, mostly as oil prices suffered volatility and ended the quarter below where they began. Energy prices continue to be buffeted by macro-economic developments and particularly by rhetoric from OPEC about continuing production cuts currently in place. In contrast to falling commodity prices overall, Global Real Estate had a strong quarter and, similar to fixed income and equities, International Real Estate handily outperformed U.S. Real Estate.

An important Lesson from the second quarter:• Typically, when the economy is strong, stocks tend to do well, pushing

prices higher while interest rates are also rising and pushing bond prices lower (bond prices and yields move inversely to one another). However, throughout the second quarter, both equity prices and bond prices moved higher; a result rarely seen. There has been much speculation about what is causing this unique dynamic. The reality is, it is nearly impossible to pinpoint causes of financial market performance over short periods of time. It’s like predicting the weather. It’s impossible to know what the weather will be like 2 Tuesdays from now, however, what we do know is that it will be colder in January than it is in July. This is why we take a strategic approach to investing and avoid trying to time markets. We set a strategic target asset allocation plan for portfolios and adjust that plan at least annually to take advantage of valuation opportunities in markets as they ebb and flow over time. This latest episode in the market is just another illustration of the fact that markets can produce irrational results over short periods.

Tune in to WKYC Channel 3 at 11:30am every other Sunday to see a member of our team on the Golden Opportunities show with Laurie Steiner, where we discuss current financial topics in an easy to understand format.

Upcoming shows and topics:

GOLDEN OPPORTUNITIES SHOW

ECONOMIC COMMENTARY3

3 Tips For A Healthy Summer

It’s finally summer! Something we wait for all year in Cleveland. And, while you should definitely take some time to have fun, recharge, and spend time with family and friends, here are three health tips that will help you have a healthy summer!

1. Eat More Berries An easy way to improve your diet this summer, is to have a cup of mixed fresh berries every day. They’re full of antioxidants, which may help prevent damage to tissues and reduce the risks of age-related illnesses. They’re also high in fiber, which helps keep cholesterol low and may even help prevent some cancers.

2. Drink alcohol – for your heart! Ok this one comes with a caveat. No one needs to be encouraged to have a drink during the hot summer months, but don’t overdo it. Research shows that drinking alcohol in moderation – defined as about two drinks a day – can help protect against heart disease.

3. Plant a garden Gardening is a great way to reduce stress. It helps you focus, beautifies your house or yard, and helps you to get out for some fresh air. Just remember, if you’ll be out in the sun for more than a few minutes, it’s best to wear suntan lotion of at least SPF 30.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

HEALTHWATCH

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while still retaining control over the assets. Because the LPs have no rights of control, they cannot liquidate their partnership interest. The timing and amounts of distributions is up to the GP(s). That means a distribution cannot be made to one partner (GP or LP) unless all partners receive their pro rata portion of any disbursements.

Sunday, July 2, 2017What Do President Trump’s Policies Mean for You?

Sunday, July 16, 2017Roth Conversions Can Be a Smart Retirement Strategy – Here’s Why!

Sunday, July 30, 2017Three Ways to Take Care of a Charity, and Yourself!

Sunday, August 20, 2017Growing Your Wealth Through Real Estate

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Geoff is the newest member of the management team, having joined in November of 2016. As Marketing Manager he oversees all traditional, event, and digital marketing programs. For example, he writes most of the content for this newsletter!

Geoff has spent the last 15 years leading marketing, communications, and advertising campaigns for some of Cleveland’s best known organizations. He earned

The German word “kummerspeck” means excess weight gained from emotional overeating. When translated literally, it means “grief bacon.”

his undergraduate degree from the University of Dayton, and his MBA from Baldwin Wallace University.

Geoff lives with his wife Kara and their two dogs in North Olmsted. In his free time Geoff enjoys reading, walking with the dogs, and working out.

If you would like to receive our newsletter through email, please email Annika at Annika@lineweaver.net

EMPLOYEE SPOTLIGHTGeof f Powers, Marketing Manager

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