Broker Estate Building

Little research has been done in the field of “How a Broker Can Build a Conservative and Diversified Real Estate Portfolio.” Perhaps the long-range objective for a real estate practitioner is to attain “financial security” through real estate ownership. Our minds have a difficult time grasping the concept of “financial security.” It is a term similar to “a million years from now,” or “some time in the future.” Our minds cannot understand indefinite, intangible terms relating to the future.

Thus, each broker must define “financial security” in terms he can grasp now, and objectively relate it to his own personal goals. Our minds can understand such concepts as creating a net estate: of a million dollars, or a monthly cash flow of $1,000 or $3,000.

The first step for a broker building a real estate portfolio is to establish a realistic goal, one that is well defined and on that our minds and thinking process can fully grasp now. A time table must be established to determine realistic time periods and a pattern in securing the goal.

By far the largest omission brokers commit in planning is not establishing a specific date for attaining their goal. Most set the goal date by saying, “I’ll do that in the future.” Again, our minds cannot understand indeterminate dates.

Are all of your activities geared toward you own total game plan, which will give you that goal in the time specified?

Let’s review the components in today’s broker portfolio which can be built into a balanced and diversified portfolio of the future. Following are those components desirable in a diversified real estate broker’s portfolio.

Portfolio Items Reason for Inclusion

Portfolio Items

Reason for Inclusion

A. Cash A. To maintain liquidity
B. Stocks & Bonds B. Liquidity, growth, & "instant
hypothecation for QUICK money.
C. Insurance (term) C. To cover mortgage liability
D. Insurance (whole life) D. To protect family

E. Real Estate

1. "Path of Progress" Land

2. Speculation Land (inexpensive)
3. Inventory
4. Depreciable Assets
5. "Income" Real Estate
6. Options

7. Joint Ventures

E. Your Business:

1. Rapid, short-term appreciation

2. Long-term appreciation
3. Dealership-oriented properties turning for quick
4. Improved properties offering depreciation &
tax shelter.
5. Acquired to create either monthly or annual cash
6. Control of real estate wealth of the future at
today’s prices.

7. Forms of multiple-group ownership opportunities.

F. Receivables

1. Income from Paper

2. Income from management contracts, etc.


1. Cash flow from notes, mortgages
2. Steady source of cash.

The list can be continually expanded. However, most brokers are “top-heavy” in only one category of investment. Being overstocked in one category is similar to the grocer who has forty shelves to display his goods, twenty of which are filled with cans of beets.

“Top-heavy” portfolios and grocers lack diversification.

Editor’s note: This article was originally published in 1972 in the SEC Real Estate News Observer. Cliff Weaver’s Broker Estate Building class was carried forward by Colby Sandlian and has been reinvented for the S.E.C. Education Foundation and will be taught by Phil Corso, S.E.C. Information is available on the Foundation web site:

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