Personal Development

Calling All Real Estate Investors: Can You Answer These 12 Important Questions?

Expertise: Personal Development, Personal Finance, Mortgages & Creative Financing, Real Estate News & Commentary, Business Management, Real Estate Investing Basics, Flipping Houses
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The questions I ask folks who’re investing for the purpose of retiring well, change from person to person. Sure, there are all kinds of questions to which everyone should give sober consideration. Let’s look at several of ’em. Some won’t apply to all readers, some will. All require earnest thought. I’m not gonna give answers I often receive or make editorial comments to the questions. It’s a list that’s been singularly effective when eliciting investors’ actual thinking, and more often their comfort level. It’s also far from an all inclusive list.

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12 Questions That Every Investor Should be Asking Themselves

1.  Where are you now, financially?

  • Cash on hand including checking and savings.
  • Stock ‘n bond investments, in your name and in qualified retirement plans. (401k/IRA)
  • Current pre-tax household income?
  • What have you been able to save consistently, after taxes, on a monthly basis?
  • If you own a home and it has a loan, what are the PITI payments? What's the real life equity if you sold it today and had 8% costs?
  • Do you own any investment real estate? Current value/net equity? Own any notes? What are the particulars?
  • Do you currently own an annuity? What are the specifics?

2.  What are you REALLY lookin’ to achieve in retirement re: monthly income?

  • From what source(s) would that income be generated?

3.  What is your timeline? (How many years to retirement?)

  • Is the time you have to retirement sufficient to accomplish your goals?
  • If so, what are the specific facts giving you the confidence you can make it happen?

4.  Earlier you listed the sources you expect to generate retirement income. What led you to those investments?

5. Why did you choose those investments over others?

6.  Are there potential investments for which you’re comfortable/uncomfortable pursuing? If so, would you please elaborate?

7.  How much of your after tax family budget, if any, would you be comfortable in applying to your overall retirement Plan?

8.  If your timeline is short, a truly relative factor to be sure, are you aware that some investment vehicles won’t be your friends?

9.  Is your household income over $150,000?

  • Did you realize that much income bars you from applying any available depreciation (read: tax shelter) against your ordinary income?
  • Are you aware that doesn’t hafta be a huge negative for ya?

10. Are you and/or your spouse self-employed?

  • If so, does the company have employees other than you and/or your spouse?

11. Are you now contributing to an employer based 401k?

  • Do you have any 401k plans from previous employers?
  • Have you started an IRA? Is it ‘traditional’ or Roth?
  • How much per month are you contributing to any of these?
  • What is your expectation of these plans as it relates to retirement income?

12. Are you confident in the current plan’s ability to produce the income for which you’re planning?

Related: 5 Questions to Ask Yourself Before Investing in Real Estate

The Only Bad Question…

That list isn’t anywhere near complete. Also, as the discussion deepens and the scope widens the questions change. What’s pivotal to a 30-something investor, sometimes isn’t even on the menu of a 50-something investor. Duh, right? The takeaway from this is to ask yourself as many questions as possible, giving brutally honest answers. The question and answer exercise helps to establish a more clearly defined map.

One of the wrong turns made by investors is too many questions going unasked. It’s not that they didn’t wanna answer them, though that’s true in some instances. It’s that they don’t know the questions to ask, or haven’t realized how valuable to their future the answer can be. See for yourself by creating a list of questions to which you must have answers. You’ll notice quickly that your answers will many times lead to even more questions. That’s good!

I’ve learned the only bad question isn’t the one not answered.

It’s the one not asked.  

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.
    Mehran Kamari
    Replied over 6 years ago
    Wow, great thought-provoking article Jeff! It’s hard to know where you really are and set realistic goals to where you’re going, if you don’t know the answers to these questions. It’s obvious that you’ve helped many people plan their retirement, I can tell! Thanks
    Sharon Tzib
    Replied over 6 years ago
    Hey, Jeff! Another great article. I’d love to know the answer to #8. Thanks!
    Jeff Brown
    Replied over 6 years ago
    Hey Sharon — Thanks so much. If you’re 57 years old and planning to retire at 66, with $100,000 in your checking account, and an equal amount in your Roth IRA, is buying a 1-4 unit residential rental property the best way to go? The answer to that question is usually no, with a few exceptions. One thing for sure is this: Will you be able to pay off the loan on that rental property so the cash flow will be at its max? No? Why would you purposefully engineer a lower retirement income? You wouldn’t, right? On the other hand, even if you could, the same $100,000 would likely be able to produce higher monthly income in notes than real estate. Another reason notes might be a better answer at that age is that there’s a ‘built in’ profit, which will result in an increase in retirement income. Same with the notes the ROTH should be acquiring. Every time a note bought at a handsome discount pays off, the retiree gets a random raise. 🙂 The NOI for the rental, however, might go up, might not. Make sense?
    Sharon Tzib
    Replied over 6 years ago
    Yes, that makes sense, Jeff. The biggest obstacle I see is the barrier to entry to notes, since as far as I can tell (and please do correct me if I’m wrong – and I know you will wink, wink), you must be an accredited investor to purchase. Even the fictitious person in your example is not. So how does one get into notes if they don’t meet the minimum standards?
    Jeff Brown
    Replied over 6 years ago
    Sharon — Anybody who can find a note seller, can buy a note. The accredited investor factor comes in when the SEC is involved. My own note fund is under those regs. However, you can still buy notes in the fund, as an ‘outsider’. You need to register as a note buyer at the fund manger’s site. Dave Van Horn’s company, PPR is the fund manager. If you have any questions, feel free to email me and we’ll spend some time going over what’s doable, and how it’s done. It’s not all that hard, really. 🙂