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Knowing Exactly Where You Are Now Is Often THE Difference Maker

Jeff Brown
3 min read

My job at the front end of the relationship with a client is to understand, inside and out, their financial picture as it is. It’s surprising how many times I’ve had conversations with folks, only to have them let out a little bitty factoid that changes most of what I woulda told ’em to do. What may seem humdrum to you today, might make a very happy difference a decade or two down the road. I never know when that elusive little factoid will show up, but in so many of my initial conversations with clients, they pop up without warning.

Here are some recent examples.

  • Reserves? We have give or take $500,000 in the stock market — most, if not all of which will not carry with it much if any capital gains taxes.
  • Do we own anything else? Oh yeah, almost forgot. There’s the two free and clear homes Uncle Doug left me last December. They’re worth about $100,000 apiece.
  • And this year’s favorite so far — Anything I’ve left out? My new job starts next month, and I”ll be makin’ just under $100,000 more than I am now.

Over a period of 15-30 years, any one of those ‘factoids’ will make a huge positive impact on what those folks would’ve been able to do otherwise. In one case, the first example, they’ll be able to increase their retirement income by something like $5-7,000 — wait for it — a month. Most likely a conservative figure.

Most people with whom I talk, maybe 2/3, underestimate what’s possible for them, given their circumstances. I mention it only to illustrate the importance of talking with someone who has the answers to questions you don’t know to ask. It’s not uncommon for real estate investors to learn that an option they thought was completely unavailable was actually on their menu.

It goes both ways.

Nearly half the time it’s my job to tell investors to just keep doin’ what they’ve been doin’. Don’t rock the boat. Stand pat for now, and we’ll talk in a year or two. It’s been my experience people often think everyone else doin’ so much better than they are, when the truth is, they’re smokin’ most of their peers when it comes to investing for their retirement.

Maybe my favorite conversation of this type came several years ago — a soft spoken 74 year old woman, whose husband had passed away two years earlier. Her only surviving family, three nephews, had been urging her to sell her entire real estate investment portfolio. Why? She had all the money she’d ever need, and they wanted what they could get — and sooner rather than later. They knew they were in the will, and wanted it now.

After very carefully analyzing her portfolio I asked her the most important question: Is that what ya wanna do? I won’t repeat her reply. Suffice to say, the opinion she held of her nephews wasn’t in the neighborhood of flattering. She’d included them in her will, to keep some peace with her two younger brothers, though most of her estate wasn’t headed their way.

Her husband had done wonderfully well in building their portfolio, while ensuring she’d always have more than enough after tax income to live out her days. The fact was, even though she paid for herself and a couple lifelong girlfriends to go on rather pricey cruises each year, she still was unable to spend all the after tax income generated from her properties.

Not even close.

Selling her properties only made financial sense for her nephews, (pause) and me. She laughed like a schoolgirl at that observation. It was best for her to simply enjoy herself and not think about it a second longer.

She was happy to hear a seasoned pro tell her how well her husband had done for her, both in income, tax shelter, and structure. She thanked me for my time, chuckling as she added, “I think they’ll hafta wait ’till I’m gone.”

Knowing your whole story is mission critical for the serious real estate investor. This is especially true of those who’re either just beginning, or started not long ago. Mistakes made now, especially mistakes of omission, will have dramatic ramifications when it comes time to retire. The old saying, “Ya can’t unring a bell” has a sorta companion saying that follows — “Ya can’t ring a bell today that only coulda been rung 10-20 years ago.”

BawldGuy Axiom: Assume there are answers to questions for which you don’t know to ask that will come back to haunt you in years to come. So often it’s not the mistakes we make that do the most damage, but the opportunities or strategies we might’ve grabbed, but never knew existed — forever gone.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.