Charting the Course

Believe it or not, the S&P 500 has returned an average of 10.2% over the past 100 years. That’s something for investors to keep in mind as they scratch their heads at today’s equities roller coaster, wondering if it wouldn’t have been better to just put their money in a coffee can and bury it out back.

While it’s never a good idea to convert investments to cash and stow it in some dark place, there is plenty of debate about safety in times of market volatility. Let’s face it, most investors could do without the market swings like the ones we’ve watch this year.

Take Oct. 13, for example. The Dow Jones Industrial Average fell early in the trading day by more than 500 points after the release of a Consumer Price Index report. But later in the day, the Dow took an inexplicable turn to finish with a gain of more than 800 points. The next day, the market changed its mind again, and the Dow fell by more than 400 points.

That’s the kind of stress a lot of investors would rather avoid, which is why many turn to real estate as a stable alternative to harbor money until the storms subside. But the fact is, real estate is no haven.

The term, mark to market refers to the current value of an asset, and in equities, mark to market is constantly changing as hundreds of thousands of asset trades happen every day. While that can be a benefit, it’s also a burden to some investors who find themselves bouncing between euphoria and misery on a continual basis.

Real estate may seem more attractive because there’s an illusion of stability. But in reality, real estate is affected by interest rate hikes and many of the same economic forces that impact stocks. The difference is real estate doesn’t react to them as efficiently as the equities market.

In the last U.S. recession, the S&P 500 declined more than 36% in 2008, then rebounded by more than 25% in 2009. Real estate also reacted to the recession, but that market’s behavior was quite different. Look what happened in Florida. Real estate began to decline in 2008 and continued to fall until the market hit bottom in 2011 and 2012, declining 30% to 50% or more.

Because of the lengthy nature of transactions, real estate is not only slow to decline, it’s also slow to recover. But there’s nothing wrong with real estate as an investment. Along with stocks and bonds, real estate can create enormous value. It’s just not the best protection from turbulent markets.

The economy can be fluid, and occasional market turmoil is inherent. That’s why investors establish long-term investment plans they can stick with, regardless of the climate.

There is risk in investing, but history tells us that cloudy skies don’t last forever, so there’s no point in seeking shelter when we have investment plans to help us ride out storms. So, in times of turmoil, resist the urge to run for cover. Instead, hold on to your plan and stay focused on your long-term journey. There may be some ups and downs, but your plan will take you to the financial future you’ve been dreaming of.

In just a few weeks, Full Sail Capital will be moving its offices from north Oklahoma City to the Midtown District, an area full of optimism, growth, and excitement for the future.

After nearly four years of helping clients manage assets, investments, and wealth in Oklahoma, our firm shares that enthusiasm. Oklahoma City is growing, evolving, and prospering on a foundation of blue-collar values attracting thousands from across the country to pull up roots and move here.

We are strong believers in the Oklahoma standard because most of Full Sail Capital’s management and staff were raised here, educated here, and started their careers here. So, we are committed to our state, and we’re excited about planting our flag even deeper into Oklahoma soil.

And we are not alone. The talent pool in Oklahoma is getting broader and deeper in almost every field as we have watched our state transition from the “brain drain” of the ’80s and ’90s to rapid population growth over the last decade.

Did you know Oklahoma City has grown by more than 100,000 new residents since 2010? That represents nearly half of the state’s overall population growth during that period. According to Census 2020, OKC is now the sixth fastest-growing city among the nation’s 25 most populated cities. Incredible.

And rest assured, the financial industry has taken note. The quality of our financial professionals is as good as any in the country, so rather than hire strangers in New York, Chicago, Dallas, or some other financial center, Oklahomans are finding high-caliber tax attorneys, certified public accountants, registered investment advisors, real estate brokers, investment banks, venture capital firms and other financial professionals in OKC.

With a little homework and some conversations with trusted friends and colleagues, people are finding the local fiduciaries, seasoned attorneys, and tax pros they need to manage and protect their assets. Hiring locally brings numerous advantages. The most notable of these is a real relationship that grows through face-to-face interactions, which beats phone calls or Zoom meetings every time. Trust is best maintained when you can look someone in the eyes, and incentives remain aligned when your adviser may see you at church, the grocery store, or a Thunder game.

Physical presence is assurance, and it demonstrates commitment, not only to our clients, but also to our community. It’s an exciting time to be in OKC, and we can’t wait to be part of that excitement in our new offices at 10th and Broadway in Midtown. The renaissance is continuing in Oklahoma City, and we think people and relationships are at the heart of it all.

There are many things in life that we dismiss, not even realizing how much we value them until they are taken away. For a lot of us, the experience of living through a pandemic has demonstrated just how much some of those little things mean to us in our daily lives.

Millions have been working from home for months as companies have transitioned away from traditional office settings, prompting wide speculation about the future of office space, office buildings and downtowns across America.

Amid the continuing debate over worker productivity, flexible work hours and reduced overhead costs, many of us are realizing the link between offices and the cultures that bring companies to life.

Over the past year, we have missed more than our share of face-to-face meetings and the collegiality that comes with them. We have gone without lunches with clients and co-workers, and there have been no after-work Thunder games downtown. Office Christmas parties became a thing of the past, and forget about the birthday cakes, appreciation days, and donuts by the coffee pot.

Offices are where people work together and celebrate together. How can we know each other, appreciate each other and sacrifice for one another without being able to high-five each other after a win?

Sure, there are going to be some innovations in the use of office space after what we experienced last year. More workers may be sharing offices while they work from home part time, and rigid work schedules may become a thing of the past. If it isn’t already, mobile technology platforms will be the standard for executives and professionals because of the pandemic.

We can all be grateful that technology enabled us to step away from our offices and distance ourselves as COVID-19 was raging across the country last spring, but we can’t trade technology for organizational culture. Without offices, the impromptu conversations in the hallway don’t happen, training opportunities diminish, personal connections wither, communication suffers and company loyalty fades.

The office environment is an essential source of social connection, motivation and creativity. Maybe we overlooked that last year as we rushed to deploy our laptops and cloud-based data banks, but the little things we gave up in 2020 turned out to be big things we need to get back in 2021.

A couple of years ago my grandmother had to move out of her home due to advancing medical needs, and our family faced the task of selling it to help cover rising health care costs.

She had been living in the place since 1970, and as we walked through it, we found the house hadn’t really changed much over the past 45 years. It was out of code, there were structural problems, and certain aspects of the house no longer functioned. It was clear that we had our work cut out for us before we could put the property on the market.

We were facing the same issue that thousands of families across the country face every year. The home health industry has burgeoned, allowing more older people to stay in their homes longer, and in some cases, they may never move out.

As people age in their homes, maintenance and upkeep are often overlooked to a point that many of the houses are not in condition to pass home inspections when it’s time to sell. We’ve all seen the billboards and television ads from companies offering to buy houses in quick, easy transactions, regardless of the property’s state of disrepair.

My family certainly didn’t sell to these types of companies, and we rarely suggest our clients sell to them either. People who do can leave thousands of dollars on the table. With a few simple steps and strategies, families can sell their properties for what they’re worth and walk away with the value they need to cover retirement and health care costs that can grow late in life.

The process starts with hiring a private home inspector. For between $125 and $250, a home inspector can identify structural, mechanical, plumbing, electrical, roofing and other problems that could stand in the way of a sale.

Once the fundamental problems are out of the way, it’s time to hire a real estate agent who can typically provide advice on cosmetic improvements. That might include paint, flooring and potential updates in the kitchen, bathrooms or other parts of the house that can increase a property’s value and improve its marketability.

All these repairs and improvements can be costly. But don’t invest so much that the ultimate cost per square foot of your house exceeds the market price range of surrounding homes.

Scott Cravens is chief operating officer and a founding principal at Full Sail Capital in Oklahoma City.

Watch your mail, because this is the season when county assessors send property valuation notices to homeowners and commercial property owners across the state.

Before you roll your eyes and turn the page, read on, because February is the time of year when normal, everyday people can save hundreds, thousands or even tens of thousands of dollars in property taxes. All they have to do is pay attention and be their own advocates.

I never let a February pass without giving my property valuation notices a close look. It’s not unusual for me to pay the assessor’s office a visit to discuss my own properties or advocate for my clients when I think valuations are either unfair or inaccurate.

Here’s how property taxes are figured. Assessors establish the Market Value of a property, then it adjusts the Taxable Market Value of the property in accordance with limits imposed by state law. Once the Taxable Market Value is solidified, it multiplies that Value by the Assessment Ratio. Next, it subtracts any Exemptions, such as the Homestead Exemption. Finally, it multiplies this adjusted amount by a Millage Rate, which is not set by the Assessor and varies depending on the county and school district. This is a bit complicated, so to simplify, the higher the property’s assessed value, the higher the tax assessment.

The county assessor’s job is to generate funds for county government and public schools. Assessor’s offices across the state are tasked with establishing market valuations for thousands, and in some counties, tens of thousands of properties. The sheer volume of this work creates a lot of opportunity for inaccuracies, faulty data or property specific considerations that these diligent assessors cannot possibly know. That’s why assessors distribute notices each year. They want to hear from you.

To many property owners, those notices are just another piece of mail to put in a stack, but for those paying attention, they are opportunities to reduce their tax burdens. If they find the assessor’s market value estimates are too high, they get to work.

Property appraisals are not always accurate. That’s why you can and should ask for the comparable properties and other information that an assessor used when estimating your property’s market value.

Few properties are truly the same in a given area, especially in neighborhoods with homes built at different times. Look at each property and determine if they truly compare to yours. The internet makes this research easy. Just key in the address and all kinds of information pops up.

Has the comparable property been remodeled recently? Does it have expensive amenities that your property does not have? Are the structures similar in age? Also, what’s the condition of your property? Are there foundation issues that could devalue your property? What’s the condition of the electrical system and the plumbing? Does your property need a new roof?

Those questions can help you determine if the assessor’s comparisons are fair and accurate. Assessors aren’t your advocates. They use a much broader brush that usually works in the county’s favor. So, the question is, are you going to do the leg work, ask the questions and be your own advocate? The county hopes you don’t.

Scott Cravens is chief operating officer and a founding principal at Full Sail Capital in Oklahoma City.