Everyone commiserated with one HBGer’s lament that some development offices don’t include primary residence – or even any real estate – in their capacity ratings.
And I’ve heard people say on multiple occasions, “Our prospective major donor is never going to give us their house (or sell their house and give us the money), therefore we shouldn’t include it in our ratings.”
Which is true. The donor is probably never going to give your nonprofit the deed to the house they’re currently living in. (<stage whisper>: I won’t mention “planned gift” at this point, okay?)
THE THING IS…
They are also never going to give you their salary (unless they’re Chris Long), sell their yacht, their plane share, or their horses to make a donation, either. They won’t liquidate their art collection, grandma’s diamonds, or that vintage Chanel worn to last week’s benefit. The privately-held company they own will remain unsold. Likewise the stock options that don’t convert for another 5 years.
If the argument is that they’re not going to sell their house, then we should disqualify those other assets, too, right? Because they are never going to give them to you, either.
You can’t pick and choose.
If you randomly take one non-liquid asset off the table, you should take all of them. And you’d never do that, right? It would be illogical.
Figuring out someone’s gift capacity is hard enough to begin with. Purposefully handicapping yourself makes absolutely no sense to me.
Real estate certainly isn’t the be-all-end-all, but like all of those other assets I mentioned, if nothing else, it’s an indicator of wealth. But I think there’s much more to real estate – even primary real estate – that should be considered.
To start with, it’s solid information. We’re already operating in a realm where anything concrete is in short enough supply. So why ignore a valuable, real, solid, asset?
Real estate is a green flag. When I’m trying to find new prospects in a sea of regular donors I may skip over someone who lives in a $850,000 home in San Francisco, but I’m definitely not going to ignore a donor who has a $850,000 condo in Aspen. I’m now going to search to find a separate primary residence.
Real estate is a red flag. I was once asked to research someone who had approached an organization out of the blue offering to make a multi-million-dollar gift. What I discovered – by just looking into the prospect’s primary residence – was the first red flag that probably saved the nonprofit from months of wasted time – or worse.
100% of the world’s high net worth individuals (HNWI) own real estate. And for the more privacy-aware among them, real estate is sometimes the only hard asset we can find for them. Knowing what kind of real estate they own gives you clues into the type of personality they are, how they may want to be cultivated, and what philanthropic investments may interest them. For example:
The billionaire who owns a 20-bedroom party house on Miami Beach is very different from the billionaire living in a three-bedroom ranch in Omaha. Their real estate choices can give you clues to their lifestyle and engagement preferences. One may be a better prospect for naming opportunities with big splashy events. The other may prefer funding boots-on-the-ground clinics for vaccine delivery and student scholarships.
We can use real estate for estimates. According to the Capgemini World Wealth Report, real estate accounted for 17% on average of a HNWI’s total assets globally last year. (In the US, it’s 11% of total assets; in Europe it’s 18%). So if all you can find is someone’s real estate holdings, you can still come up with a decent guesstimate of their total assets using that one ratio if they’re in the HNW classification.
Real estate is critical to planned giving. There, I’ve said it, and this is really important.
Let’s say you work at a small college and you’ve got childless husband-and-wife alumni couple with a ski resort condo, a vacation home at Los Sueños in Costa Rica and a primary residence in Boston’s Back Bay. They’re consistent donors and lifelong volunteers to the college. There’s no question that the planned giving officer needs to know about them.
And in this case, it’s not only the real estate that’s interesting, but also what it tells us about these special people. Here is an active, outdoorsy couple who possibly enjoy golf, tennis and skiing. A pair that enjoys regular seasonal travel, but whose lifestyle may require extra cultivation time because they are probably not in town very often. What decisions do you need to make about how to engage them?
Look at all the information that just knowing about real estate gives us!
ONE LAST THING
In case you’re wondering, here at HBG we do include primary residence in our total visible wealth calculations on profiles.
We believe it’s a real asset. I think you should, too.