LGBT Real Estate Investing

The beginner’s guide to gay & lesbian real estate investing

Written by Tom Yeung, CFA | CDFA Investment Advisor & Fund Manager, Jurnex Financial Advisors

Some may ask how LGBT real estate investing is any different from regular real estate investing.  After all, does sexual orientation actually matter when it comes to buying real estate?  But trust me there’s a difference.

As an LGBT investor myself, I’ve seen the various issues that gay and lesbian people face when investing in real estate.  And it’s only by acknowledging and understanding these issues, that we can start overcoming these hidden pitfalls.

LGBT people are more likely to get denied mortgages

Even though gay marriage is now legal in all 50 states, LGBT people still face discrimination. And it’s not just subliminal biases. A study by Iowa State University finds that same-sex partners are 73% more likely to be denied a mortgage. And for those who are approved, interest rates are 0.2 percent higher on average, adding tens of thousands of dollars to repayments over the lifetime the loan.

LGBT legal ownership issues

LGBT people also face legal issues that straight people often don’t.  For instance, domestic partnerships can create some significant legal tangles.  Without the right documentation, a domestic partner might find themselves losing ownership of a home if his or her partner passes.  While it’s possible to overcome these with good LGBT investment advice, these are all things that you need to think about before investing in real estate.

So if you’re a gay or lesbian investor, read on to see my five top tips for LGBT real estate investing.  And if you want to learn more, be sure to check out my beginner’s guide to real estate investing too.

What makes LGBT real estate investing different?

First, let’s discuss the differences that LGBT people face in real estate investing.

1. We’re more likely to face discrimination. Over 57% of LGBT people report facing discrimination at work, according to surveys. Even as recent as 2019, 22 active bills are seeking to restrict healthcare, adoption, anti-discrimination, and anti-trans rights of LGBT people.  Discrimination also makes mortgages harder for LGBT people to get.

2. We tend to congregate in cities. While many LGBT people choose to remain in their hometowns, the majority of LGBT people relocate to larger cities in search of work and acceptance. Because real estate investing’s relatively local, LGBT investors generally are buying in higher demand areas.

3. We’re more likely to be unmarried. When it comes to owning property, asset titling can become a critical issue. Who owns the asset, and what happens to it if you or your partner were to pass away?

4. Lesbians also face gender discrimination. Lesbian individuals and couples face even more significant challenges since women are also less likely to qualify for mortgages. That’s one key reason why only 30% of real estate investors are women.  You can also read my article about women’s real estate investing for more information.

Is real estate a good investment for LGBT people?

The short answer?  YES!

You can make money in real estate investing. In fact, it’s one of the best investments you can make thanks to generous tax breaks and first-time homeowner deals.

The trick is finding mortgage lenders, tenants, and communities who will ACCEPT you and your investment. Anything less, and you risk paying a higher mortgage rate, or cleaning up after tenants who fail to respect your property.

As always, I suggest you talk to an investment pro before making a final decision on a real estate investment. That’s because the couple hundred dollars you’ll spend on a 2-3 hour professional consultation will be well worth the $100,000’s you’re spending on the real estate investment.  But to get you started, here are my five tops for LGBT real estate investing.

Five tips for LGBT real estate investing

1. Keep things in your name if it’s your money

Only 10% of LGBT individuals are married, according to a recent Pew Research study.  And if you’re unmarried, I highly suggest you keep the property in your name if you’re the one putting equity into it.

There are three reasons for this:

I: Gift taxes. Unless you want to trigger massive gift taxes when you go to sell the property, you should keep assets in your name if you’re the one contributing the equity.

II: Clarity of ownership. If you and your spouse don’t share assets, there is NO reason for you to share liabilities either. Having a shared mortgage can spell financial disaster for the lower-earning partner if something happens to the other partner.

III: Possibility of separation.  In certain places, LGBT couples are almost twice as likely to separate as straight couples.  So if you are the one contributing to a property, keeping it in your name will keep ownership clear in case anything were to happen to your relationship.

2. If jointly owned, have a written agreement

If you and your partner DO decide to own real estate together, there are several ownership structures you can consider.

A. Joint tenancy with right of survivorship.  All tenants have an equal right to the account’s assets in the event of the partner’s death. In other words, if your partner passes away, the asset is transferred directly to you as the surviving spouse.

B. Tenants in common. Ownership gets divided among two or more parties, but there is NO right of survivorship. Your assets will get passed to whoever you name in your will.

C. Tenants in common with unequal ownership. For couples who contribute unequal amounts to a real estate investment, they may also wish to hold unequal amounts of equity. For example, if one spouse gives 2/3 of the down payment, while the other spouse gives 1/3, the first spouse might own 2/3 share of the property to start, rather than just 50-50

D. Married couple.  You can transfer property tax-free between married couples. But ownership of the underlying property will depend on your state’s laws. In community-property states, courts generally grant 50% ownership of the property to each spouse. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. The other 41 are equitable-distribution states that seek to divide things fairly (but not necessarily 50-50).

Regardless of which path you take, you must get it in writing. That’s where a lawyer or an investment pro can help. Because even if nothing happens to your relationship, having a written agreement before you invest will make life far more straightforward when you go to sell the property.

3. Stay local

There’s an unusually large temptation in LGBT real estate investing to buy property in popular gay-friendly vacation spots. You’ve heard the names. Fire Island, Northampton, Fort Lauderdale, Provincetown. The list goes on. And plenty of people have made a lot of money investing in those places.

But hear me out: if you’re going to start investing in vacation real estate, pick one close to home.

It’s certainly possible to buy property across the country, but it’s also far more difficult to manage.  Even if you hire a professional property manager, you’ll often find yourself having to visit the property to assess any damage.  You’ll also find that professional management for a single property will tend to eat into profits.

Instead, I suggest you invest closer to home, within driving distance of the property. So if you live in Washington DC, consider investing in Rehoboth Beach, DE instead of Palm Springs, CA. And vice versa if you live in Los Angeles.

4. Watch out for discrimination.

Discrimination can happen any time to LGBT people.  Here are the top-four places to watch for in real estate investing.

A. Mortgage. As mentioned in the introduction of this article, gay and lesbian couples often pay higher mortgage rates than straight couples. To make sure you’re not getting a bad deal, make sure you’re shopping around for the best prices. I suggest you contact at least THREE mortgage brokers before making a final decision. It’s extra work up front, but it’ll pay off in the long run since you could save tens of thousands of dollars on your mortgage.

B. Real estate agent. Finding the right real estate agent can be critical to your success as a real estate investor. That’s because a great agent will know where to find exclusive deals. Don’t end up with an agent that won’t give you priority on good deals.  Similar to mortgage brokers, I recommend you interview at least THREE real estate agents before choosing one.

C. Home sellers. Studies show that people are more willing to negotiate with people of similar backgrounds.  Even though you probably won’t face any issues, you need to be aware that people who perceive you as different may be less willing to negotiate on price.

D. Tenants. Just like home sellers, you might find tenants with inherent biases. You don’t want to violate the federal Fair Housing Act, but you have the right to say “no” if you believe the tenant isn’t a good fit.

5. Find an investment pro

Buying an investment property is a substantial financial commitment. You’re putting hundreds of thousands of dollars towards a single investment. And as an LGBT real estate investor, there are so many other moving parts to consider.

Fortunately, you don’t have to do this alone. The great news is that help is available. And all it takes is a phone call.

Whether you’re an investing novice or expert, it’s worthwhile to reach out to an LGBT-friendly investment pro. That’s because the right advisor can help you review your investment and make sure you’re getting a good deal. They can also point you towards special mortgages and deals that you otherwise might miss. For instance, most first-time homebuyers will qualify for FHA loans that reduce down payments to just 0.0-3.5% for anyone with a credit score of 500.

Where to find more resources

So there you have it. My five essential investment tips for LGBT real estate investing. And if you’re looking for even more investment tips, you’ve come to the right place.

That’s because I’ve helped invest client money for over a decade in the same old-fashioned way. And that’s to seek out great companies in great industries that can you can buy at a discount to their fair value.  Sounds too simple to be true? Give me a call today, and I’ll show you that it’s still possible after all these years.

About Jurnex

We are an independent registered investment advisor and asset manager.  We have the securities backing of Charles Schwab, yet we retain our operational independence from any third party. This means you can have the confidence your money is safe with one of America’s best brokerages and still receive knowledge and advice from an independent firm focused on YOU.

Want to learn more?