We purchased an office building on Riverside Drive, looking to move to a more convenient and central location in our growing area. We also wanted to be on one level since many of our clients don’t do stairs as well as they used to.
The building was built in the late 90’s by a federal government agency and is in surprisingly good shape, but also lacks in some key areas. The property required compliance with current fire codes, updating equipment and systems for modern energy efficiency, and moving several walls to accommodate a new 100 seat conference room. Additionally, in the 90’s, digital communication did not exist. Today, we need modern media rooms where I can visit face to face with clients a thousand miles away.
Given the size of the project, there was some talk as to whether a full tear down and rebuild might be more cost effective. Ultimately, we decided a remodel would allow us to retain those parts of the building that were solid and still useful, while replacing or adding those features that our business would require going forward.
It’s definitely been an interesting project and, like most remodels, the design has changed a few times along the way. With remodels, there is always the potential for surprise with each wall you knock down. We decided these challenges were worth the cost savings over building new, including significant savings in fees and permits.
The other day while inspecting the property I thought about how similar this project was to what investors often face, especially if they decide to move their accounts to a new advisor. The new advisor usually makes the case that the portfolio needs some changes, sometimes significant ones. The decision has to be made, do you tear the whole portfolio down and start over? Or do you essentially plan to do a remodel? In each unique situation, proper time should be spent analyzing the options before you carelessly swing that wrecking ball against your portfolio.
For non-qualified accounts, unpleasant taxes could be incurred by a massive sell-off of assets, which cost must be weighed against the long term benefits of any change. Financial transactions often involve fees that should be calculated and taken into consideration. Sometimes, as with real estate, a full rebuild from scratch is the best option. Other times, there may be several positions in the existing account that could fit in well with the new plan, so you may decide to keep them. In this way, like any remodel, some existing structure may continue to offer the portfolio value.
If my completed building satisfies our company needs and does so at a reasonable cost, the remodel will have been the right decision. The same criteria is useful in deciding whether an investment portfolio needs a complete rebuild, or if a less dramatic remodel makes more sense. Regardless of which option you personally choose, think it through carefully. Once that wrecking ball strikes, it is difficult to turn back.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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