At the height of your athletic career, you will be swimming in money and adoration. However, the good times won’t last. Most professional basketball players retire in their mid-thirties, meaning that you will have to stretch the money you are making now to last for the next 50 years. Either that or get another job. The future can seem daunting but it doesn’t have to be. One of the best ways to ensure that the money you make while playing for the NBA will support you and your family for years to come is to invest it in real estate.
People will always need someplace live and work. Certainly, the US housing market has hit a rough patch over the past several years but one of the best things about real estate investments is that property values will always recover if you wait long enough. The reason the British Royal Monarchy and the Vatican are so fabulously wealthy is because they own a great deal of land that can be sold, rented, or developed.
Perhaps a better example would be former NBA star, Luol Deng. Over the course of 11 years, Deng made $100 million playing for the Miami Heat and even more in endorsements and bonuses. The now-retired 30-year-old has given a great deal of thought about what to do with all of that money.
“Throughout my career, I’ve been trying to find something that I really love doing, besides the fact that I just want to make my money work for me,” said Deng. “And I looked at real estate as something you could really get into if you understand it and if you have capital.”
Along with property development, Deng spends his time with other former NBA stars educating current players about the benefits of real estate investments. The National Basketball Players Association (NBPA) hosts regular symposiums on investment strategies for retiring players. In 2008, Fortune magazine revealed a shocking report that showed 60% of all NBA players go bankrupt within five years of leaving the sport. Since then, the NBPA has worked tirelessly to help its players succeed in life after professional basketball by encouraging them to finish degrees, training them in broadcast media, and helping players to land internships.
Investing in commercial real estate is not as simple as buying a house and selling it again. There are a lot of technical and legal aspects to the business as well, such as cap rates, due diligence, and structuring appropriate joint ventures. Without proper instruction in the art of real estate investments, people tend to make foolish mistakes that cost them money.
Deng first came up with the idea of teaching his fellow players about the real estate business after making his own investments with his business manager David Gross. Together, they put Deng’s money to work in a London residential project and into a program to develop property in South Sudan, where Deng is originally from. In discussing his post-NBA activities with some friends, he discovered that they too were interested in real estate.
“It’s straightforward, it makes sense and they feel like there’s no hocus-pocus, no voodoo where one day it’s going to disappear like some of the financial instruments that they are pitched,” said Gross.
The symposium is designed to teach players how to tell the difference between a good deal and a bad one. More importantly, it is a way to get young players to start considering what their life will be like once they retire. Typically, players only start to think about life after basketball towards the end of their careers. Lack of preparation can lead to a worrisome gap between retirement and finding a new job.
Deng hopes the NBPA real estate symposiums can help prepare players for the future. Brian Roberts, a guard for the Charlotte Hornets, is 29-years-old and still has several years of game left in him. Nonetheless, he and his wife, Jenna, attended the conference because Roberts considers real estate a potentially lucrative investment for his earnings.
“These guys come out of the NBA and they have these bank accounts, but not necessarily a direction they want to go in,” explained Jenna. “Real estate is a good way to harness the drive from the NBA.”
It is not a ‘sure-fire’ way of wealth management nor is it a get rich quick scheme. Rather, real estate investment is a teachable skill that can be used to increase the wealth of an NBA player in an exciting way.