Boats, Wine and VRBOs: What the wealthy invest in (and maybe you can too)

You’ve got money in the bank and you want to invest it. What to do?

Dan Stiebel of Coldwell Banker Commercial says the appeal of owning a physical asset such as property can’t be discounted.

“It’s a little more work than buying a stock with a dividend,” he said. “It’s not for everybody.”

He said the most attractive property is a single tenant net-leased property where the tenant has a long-term lease and all improvements and maintenance are their responsibility. He points to franchise operations as the most visible such entities.

“The owner gets a dividend like a stock,” he said.

For those looking at investing in commercial real estate property, Stiebel said securing good tenants and having a good property manager are keys to providing steady income.

Investing in residential real estate is also a consideration. Realtor Matt Geib with Century 21 Northland said there has been a significant uptick in people buying homes to rent out.

“There was a surge in demand for short-term rentals … tying into 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 the area’s lakefront properties has exploded.

“Investors are fighting one another,” he said. “They are not looking at historical data (in terms of value).”

Mellinger

When most people hear the word investing, they likely think of the stock market. Jim Mellinger, a financial manager with Edward Jones, said expensive stocks don’t make sense for those investing a limited amount, but they might for someone of high net worth.

“The wealthier like to own individual stocks (as opposed to things like mutual funds),” he said.

Mellinger points to the online juggernaut Amazon as a “perfect” example.

“At $3,189 a share, the well-heeled might say, ‘Give me 100 shares,’” he said.

Mellinger says in the years he’s been in the business, he is seeing the numbers of wealthy people climb.

“I’ve been doing this 30 years – the numbers are bigger,” he said. “There are more wealthy people now than 20 years ago.”

Regarding the wealthy, Mellinger adds that there are certain areas they may need to pay more attention to than the average person.

“The wealthier have tax issues,” he said. “It makes more sense (for them) to buy municipal bonds. It’s tax-free income.”

Echoing Stiebel and Geib, Mellinger says he also tells his clients that investing in real estate is something to look into.

“VRBO homes are popular now,” he said. “It’s a phenomenon all over 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,” just not for the reason you may think.

“Anybody that tells you that jewelry is a good investment is trying to sell you jewelry,” he said.

He said another jeweler once told him jewelry is “an investment of the heart and not of finances. I’m of that mindset.”

That extends to precious metals.

“I get calls on gold. (People say) ‘Gold is going through the roof. It’s at an all-time high,’” he said, mocking the ubiquitous TV commercials.

“You have to take into account you have to sell that tangible product,” he said, adding that when he gets those calls, he has a ready response.

“I say, ‘Buy it on the stock market,’” he said.

What about the hottest new investment, cryptocurrency? Mellinger said he sees a divide in those looking into that in terms of age rather than wealth. Younger people are more conversant with it and more interested in potentially investing in cryptocurrencty than older people are.

For clients that inquire about it, Mellinger said they’re on their own.

“That’s the newest thing I get questions about. We all think crypto is coming,” he said. “I can’t even dabble in that.”

What about high-end watercraft? Locally, the waters are more about enjoyment rather than financial return.

“I would suggest that 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 formulate a plan to navigate ownership by maintaining their property and making sure they do their best to hold their value, he says.

Another difference he noted is the cost for actually using them.

“Individuals with wealth typically are not as concerned about costs associated with maintenance, fuel or other fees a typical family would need to budget for,” Kern said.

So, are there any other areas the rich invest in that could have some application locally? Turns out there is: The Grand Traverse region is well-known for its wines. Does wine make for a good investment?

Quite possibly. In a recent article, Bautis Financial said wine has outperformed the S&P for the past 30 years. It has typically attracted interest from those with privilege and access, like wine experts or the ultra-wealthy. But as wine has become more popular, more people have seen its appeal, and that includes the local population.

“I would say that’s true,” said Coty Mendenhall, assistant manager at the Blue Goat.

She says she sees people purchase high-end wines there.

“A lot of higher-income and wealthier people in Traverse City are looking for a special bottle, maybe to drink right away, or to add to their collection,” she said. “Certain vintages are best enjoyed 10 years or so after they’re bottled.”

Marie-Chantal Dalese, CEO at Chateau Chantal, said she sees that market as limited to very high-priced, exclusive and allocated wines.

“We certainly don’t play in this world,” she said. “I suppose as with any limited good, people will find a way to make money from it. Sounds 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 rather than love of money.

“I would say that the people who I sell art to do not buy art as an investment, but because it resonates with them, or it’s a particular artist that they collect,” said Shanny Brooke, owner of Higher Art Gallery in Traverse City.

Instead, she said it’s her experience that even wealthy collectors she has relationships with aren’t buying art because they think its value will increase with time, but that they plan on passing their art as heirlooms to loved ones after they are gone.

One other alternative investment area is – travel? Tom Rockne, principal at Tom Rockne Travel, would argue that such an expenditure is a good idea and is 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 travel means seeing new and different places and cultures, he believes it is more than just exposing yourself to new adventures. (After all, you can see far-off places on TV or online.)

But experiencing it in person goes deeper.

“It opens (the traveler) up, opens up the family,” Rockne said. “You become a more informed person.

“It’s an investment in yourself, in your family.”

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