How important is spousal knowledge of real estate investing?
Seasoned real estate agents sometimes witness adventurous souls surprising their spouses with million-dollar properties, in exotic locations. While some react to the unexpected investment shedding tears of joy, some are appalled. Agent Gary DePersia of the Corcoran Group believes that taking the spouse to a surprise visit before closing the deal is a win-win situation. Halstead Property agent Rena Goldstein, on the other hand, believes that making a million-dollar mistake is rough. “A necklace is a lot easier,” she adds(1).
The word ‘infidelity’ in a relationship is parochially attributed to a physical or an emotional affair. Lately however, experts are delving deeper into ‘financial infidelity’, defined as the act of secretively engaging in financial dealings, unbeknownst to one’s spouse. Financial infidelity, despite being a long-standing phenomenon, has remained obscure – to the extent that there was a glaring lack of quantitative data on the subject. Multimedia financial services company, The Motley Fool, took notice of this glaring omission and the comprehensive survey that ensued was quite telling. A whopping 71% of the respondents admitted to committing financial infidelity at least once(2).
While financial infidelity can be anything from a crippling alcohol problem to an incessant need for new cosmetics, it becomes momentous when real estate investments are involved. It’s easy to see why. Real estate investments tend to be capital-intensive and aligned with long-term objectives. In this context, the spousal-knowledge imperative warrants further exploration, on the basis of its merits, demerits and significance within the contemporary social and legislative framework. Needless to say, the stalwarts of the real estate industry are divided in opinion.
The case in favour.
As stated earlier, buying real estate is a colossal investment. If both the parties involved make a collaborative, predetermined real estate investment, the financial burden can be shouldered equally, just as both parties also split the loss, in the event of a market downturn. Besides, sharing common goals is central to a relationship, and a joint investment aligns with long-term relationship objectives. Financial transparency in relationships allays any fears of rifts and arguments in the future.
Prabhakar Rao, Managing Director of Gemini Property Developers, believes that spousal knowledge of real estate investments has overt benefits, adding value to the institution of marriage and at the same time, making the investment substantially more future-proof. According to Prabhakar Rao, both the parties can lay their real estate requirements on the table, consolidate them and make a more lucrative investment than they would have, on their own. Legally speaking, there are plenty of provisions to safeguard the interests of both parties, in the event of a separation down the road.
What has changed?
When the capital requirement is high, finding common ground can be a tall order, especially if both the parties harbour a mutually dissimilar financial approach. Disparity in the amount contributed towards a joint real estate investment can result in ownership disputes. In a marriage, emotions can take precedence over business acumen and the resulting investment could spell disaster. Habitual investors and industry insiders, with substantial expertise and a commendable track-record, may not like intrusion into their business decisions – spousal or otherwise.
According to Prabhakar Rao, the information age has disrupted traditional real estate practices, presenting unprecedented schemes that have found takers from all walks of life. Plentiful market options and individual lifestyle choices means that spousal knowledge of investment can sometimes take a backseat. Prabhakar Rao believes that access to premarital inheritance money, divergent credit scores and existing beneficiaries from a previous marriage are a few factors that could be discouraging of spousal engagement in real estate investments – especially in light of the grim reality of soaring divorce rates.
Investments benefit demonstrably, from inclusive decision making.
The emergence of real estate, as a major talking point in the financial infidelity discussion, is in part owed to the advent of a more gender-neutral social norm. With the exception of some scattered communities, inheritance, ownership and investment were male bastions, for much of human history. However, evidence is now emerging that couples making more collaborative investments are not only in fairer and more equitable relationships, their decision making might actually be benefiting as well. A recent Fidelity Investments study(3) revealed that although a mere 29% of women see themselves as investors, they tend – on the whole – to buy and hold, generating better long term returns. Men, in contrast, tend to trade 45% more often. As any fund manager will tell you, an approach that fuses both these tendencies appropriately, is the ideal basis for an astute and optimal investment strategy.
Fortunately, the participation of women, in driving financial decisions in general and real estate investments in particular, is rising consistently. By and large, women are well-acquainted with the subtleties of the industry and often make impactful real estate investments, cutting across geographical divides. The MENA region is no exception. Despite decades of hindrance and disinclination towards women’s empowerment and inclusion, women in the region have risen through the ranks and are now leading the charge as decision makers. In this regard, Dubai’s contribution to this transformation is particularly creditable. As per Dubai Land Development’s (DLD) estimations, women investors accounted for 30% of the total real estate investments in Dubai, in the first quarter of 2018(4).
The power of consensus.
So how important is spousal knowledge of real estate investing? Well, there are no wrong answers, only right decisions.
Prabhakar Rao is of the opinion that an intelligent investor can certainly have a definite and well-informed conception of their spouse’s real estate inclinations, but an investment made on the basis of mutual introspection and assessment, by both parties, is the far more desirable path to such a crucial and emotive investment.