How Do You Serve A Client Who Just Won The $731.1M Powerball Lottery?
On Thursday, a lottery ticket sold in a convenience store in Lonaconing, Maryland, became the fourth-highest jackpot in Powerball history. Odds are, the winner’s going to need an agent.
How do you serve a client who just won the Powerball lottery?
On Thursday, a lottery ticket sold in a convenience store in Lonaconing, Maryland, became the fourth-highest jackpot in Powerball history.
The winning amount, $731.1 million — or $546.8 million if paid in a lump payment before taxes — is large enough to completely transform a life. And although the winner has not been identified, people who rake in large lottery sums typically turn toward real estate as their first investment — and to real estate agents for advice on how to spend their loot.
Rick Knudsen, who won the $180 million Mega Millions jackpot in 2014, used it to buy a home in Southern California’s Yucaipa Ridge and expand it into an 800-acre ranch. He also bought houses for his five kids but later sold the ranch after finding it to be too much upkeep and not the right fit given the incompatibility of its high elevation and his son’s heart condition.
“Those who lived a more moderate lifestyle often say ‘I don’t really need this much money, maybe I can buy a house for my mother,’” Meghan Barry, president of the Seattle-based broker network Who’s Who In Luxury Real Estate, told Inman. “You often see celebrities and sports stars come into a lot of money and then crash and burn with their finances but I think real estate’s always a good way to go.”
If the client’s goal is to propel themselves into the kind of ultra-luxury lifestyle that had previously seemed like the stuff of dreams, large windfalls can cloud judgment and convince winners they have more money than they do (federal taxes on Powerball winnings could bring that number down to just over $340 million.) Barry advises immediately enlisting a financial planner in order to see how much you have after all the taxes and unexpected expenses are paid. Even with amounts much smaller than the Powerball jackpot, agents who receive an excited call from a client who unexpectedly came into a lot of money should remind them to figure out their finances with a professional before committing to a major purchase.
Once finances are figured out, it’s usually a good idea to diversify — a large main home, a vacation property in a place you love to visit and an investment apartment in an expensive city would be sound investments, according to Barry. In celebrity-laden cities like Los Angeles, there are numerous listings over the $100 million mark (including a spec mansion that stretches across five acres in Bel Air that developer Nile Niami is offering for $350 million) but those may not be the best choice even if affordable to a newfound millionaire.
“You can easily buy a ranch for multiple hundreds of millions of dollars… but that usually encompasses a whole lot of land and a whole lot of responsibility that comes with it,” Barry said. “If you’re looking for a home, ease of access and this sort of luxury lifestyle, I think looking at multiple properties is definitely the way to go.”
Agents lucky enough to score such a client will need to figure out what it is they want. Aaron Kirman, a Compass executive who deals in high-end Los Angeles properties, told Inman that Powerball money would present the winner with a lot of options — a good agent will know of the upwards-of-$100-million listings that regularly appear in the city but also find alternatives that could turn out to be better investments. (In Los Angeles, the property taxes on a $100 million property would add up to around $720,000 a year alone.)
“You could buy a trophy property for $300-$350 million, you could buy five homes at $100 million or you could buy a lot of homes in the $30, $40 and $50 [million range],” he said. “It depends on what somebody is looking to do but certainly spending that kind of money is certainly not very hard given that we have so many amazing properties in the city.”
Another key element for agents to consider is whether the client is looking for a residence for themselves or investment opportunities to make sure the winnings stretch as far as they possibly can.
If the goal is investment, agents could raise the option of a property in a city like New York or San Francisco. Because the pandemic has pushed many homeowners of those cities and into less crowded suburbs, prices on luxury apartments have dropped. And because a 30 percent drop on a $2.5-million apartment is still unattainable for most, those who can afford one now will likely see the value grow significantly with time.
Often, however, a client who came into money may not be interested in the kind of high-flying lifestyle such a windfall can buy. They may be more interested in a ranch, a larger home in their own city or the ability to take care of family members for life. In such cases, good agents will stay well-informed of different properties and be able to do the research necessary to find the best option for their client.
“What’s really great about real estate is that it’s never simply an investment and it’s never simply a way to park your money and see it grow,” Barry said. “It’s something that you can enjoy.”