With estate planning, sometimes they need an update. We need to understand when the plan was last updated, and does it take into account ownership of real estate? You have to know just to ask the question.

Another challenge is operational efficiency. How is this real estate that's going to be purchased going to be operated? Is there a lot of day-to-day or is it something where they can be fairly passive? Institutional investors are set up for this, but high-net-worth investors might not necessarily be. It helps these folks to have someone involved on their team that deals with things like insurance, accounting, legal—everything needs to be set up in an efficient way. An entrepreneur may be involved in a different business and doesn't realize the operational issues that go into a complicated real estate investment.

Privacy is huge; a lot of times people don't want their transactions reported. This is also for personal security: some folks are from foreign countries where there's a risk of kidnapping, so generally they want to form into these ownership entities where identities are not disclosed. Some use professional asset managers for this reason. Privacy needs to be protected with the team, and it's not unusual for family offices to ask whole team to sign non-disclosure agreements. We often don't use the family name on a document. In these cases, there are limitations on liability—not slip-and-fall liability, but if you're going to use an entity, you're doing it because you have extremely deep pockets in the background. We need to make sure we honor corporate formalities to prevent the piercing of the corporate veil, so this is providing the appropriate entity shield for liability.

GlobeSt.com: What are the advantages of being a high-net-worth investor versus a larger investor?

Burchett: They can be agile and nimble and can move quickly because they're not going through finance or investment committees. They can also be very patient—entitling land takes time, but they're not reporting to Wall Street. As such, they can take advantage of opportunities that might not be available to other investors.

GlobeSt.com: Which areas of real estate investing work best for high-net-worth individuals?

Burchett: I don't think there's a limit or certain type of focus, but they do best financially in the types of categories where they're able to be patient and agile: value-add situations, for example. They may need to pass over niche areas that are the “asset class du jour,”—they're best for the antithesis of that. Everyone likes to say they go after value-add, but can go after anything niche, unique or the next new thing. Investments that involve a passive level of involvement tend to work best. There's a sort of a balance. It also depends what kind of investment they're able to commit to with their time and expertise.

Entitlement plays are another area that works well—a property that requires patience and a long-term process or perhaps a community-planning process. Someone who has a vision and wants to develop something that could take time, and generally institutional-type investors don't go for this. It's often a family ranch property, and they don't want to sell to a big developer—they want to venture with the developer, hang in there and get the ultimate ROI. This also may take a lot of capital. The entitlement process may involve litigation and challenges.

GlobeSt.com: What else should our readers know about this investor cohort?

Burchett: It's for people that are seasoned professionals in real estate and have a lot of expertise. This is a unique group of individuals that can benefit from working with people of a high level of expertise. There's a lot of growth potential in this area right now; a lot of wealth has been created since and during the Great Recession. It's something for real estate professionals who think they're aging out or are ready for their next move. Many are thinking about working with high-net-worth individuals for their expertise and experience. It's a wonderful opportunity for folks who find themselves in that place, but it takes someone with maturity, discretion, the ability to communicate well and be willing to be nimble themselves. It's a fun challenge. You can't be a bull in a china shop in this business; you need to be willing to connect with people at more personal level.

More than 300 of the industry's leading national investors, REITs, banks, private equity firms, asset management firms and other institutions will join us as we explore the market conditions behind the trends at this year's RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in New York City. Learn more.

SAN DIEGO—There's a lot to be gained from working with high-net-worth investors, from their wealth of knowledge and expertise to their deep pockets and willingness to be patient, Withers Bergman partner Marjorie Burchett tells GlobeSt.com. Burchett, who recently joined Withers Bergman to focus on the Southern California market, including resort projects and mixed-use hotel/residential projects, was previously a partner at McKenna Long & Aldridge and Luce, Forward, Hamilton & Scripps. Her clients include high-net worth individuals, corporate property investors and developers and private-equity investors. We spoke with her exclusively about the challenges and advantages of being a high-net-worth investor and which areas of real estate investment work best for this cohort.

GlobeSt.com: What are the challenges high-net-worth investors face in real estate investment today?

Burchett: One of the key challenges high-net-worth investors face is their tax issues, combined with the estate-planning component. There's either a complete awareness of these issues or a complete blindness to them. Our job as lawyers is to get them to the right specialists to help them with these issues. There are two financial issues that have to be taken into account.

With the tax issue, here's an example. We were working on a financing transaction and suggested the other side have local counsel; we realized the way they were holding the property was a complete mistake from a tax standpoint. We restructured the transaction to their advantage, but it took someone who could spot those issues that are important on both sides of the transaction.

With estate planning, sometimes they need an update. We need to understand when the plan was last updated, and does it take into account ownership of real estate? You have to know just to ask the question.

Another challenge is operational efficiency. How is this real estate that's going to be purchased going to be operated? Is there a lot of day-to-day or is it something where they can be fairly passive? Institutional investors are set up for this, but high-net-worth investors might not necessarily be. It helps these folks to have someone involved on their team that deals with things like insurance, accounting, legal—everything needs to be set up in an efficient way. An entrepreneur may be involved in a different business and doesn't realize the operational issues that go into a complicated real estate investment.

Privacy is huge; a lot of times people don't want their transactions reported. This is also for personal security: some folks are from foreign countries where there's a risk of kidnapping, so generally they want to form into these ownership entities where identities are not disclosed. Some use professional asset managers for this reason. Privacy needs to be protected with the team, and it's not unusual for family offices to ask whole team to sign non-disclosure agreements. We often don't use the family name on a document. In these cases, there are limitations on liability—not slip-and-fall liability, but if you're going to use an entity, you're doing it because you have extremely deep pockets in the background. We need to make sure we honor corporate formalities to prevent the piercing of the corporate veil, so this is providing the appropriate entity shield for liability.

GlobeSt.com: What are the advantages of being a high-net-worth investor versus a larger investor?

Burchett: They can be agile and nimble and can move quickly because they're not going through finance or investment committees. They can also be very patient—entitling land takes time, but they're not reporting to Wall Street. As such, they can take advantage of opportunities that might not be available to other investors.

GlobeSt.com: Which areas of real estate investing work best for high-net-worth individuals?

Burchett: I don't think there's a limit or certain type of focus, but they do best financially in the types of categories where they're able to be patient and agile: value-add situations, for example. They may need to pass over niche areas that are the “asset class du jour,”—they're best for the antithesis of that. Everyone likes to say they go after value-add, but can go after anything niche, unique or the next new thing. Investments that involve a passive level of involvement tend to work best. There's a sort of a balance. It also depends what kind of investment they're able to commit to with their time and expertise.

Entitlement plays are another area that works well—a property that requires patience and a long-term process or perhaps a community-planning process. Someone who has a vision and wants to develop something that could take time, and generally institutional-type investors don't go for this. It's often a family ranch property, and they don't want to sell to a big developer—they want to venture with the developer, hang in there and get the ultimate ROI. This also may take a lot of capital. The entitlement process may involve litigation and challenges.

GlobeSt.com: What else should our readers know about this investor cohort?

Burchett: It's for people that are seasoned professionals in real estate and have a lot of expertise. This is a unique group of individuals that can benefit from working with people of a high level of expertise. There's a lot of growth potential in this area right now; a lot of wealth has been created since and during the Great Recession. It's something for real estate professionals who think they're aging out or are ready for their next move. Many are thinking about working with high-net-worth individuals for their expertise and experience. It's a wonderful opportunity for folks who find themselves in that place, but it takes someone with maturity, discretion, the ability to communicate well and be willing to be nimble themselves. It's a fun challenge. You can't be a bull in a china shop in this business; you need to be willing to connect with people at more personal level.

More than 300 of the industry's leading national investors, REITs, banks, private equity firms, asset management firms and other institutions will join us as we explore the market conditions behind the trends at this year's RealShare National Investment & Finance, scheduled for Oct. 5 and 6 at the Roosevelt Hotel in New York City. Learn more.