Often, you will hear people say that you need to check with your “trusted advisor.” Now, that can mean your attorney, accountant, financial planner, or even a home inspector.
You might even hear people talk about some of the things they do before hiring someone. Maybe they sign engagement letters and NDAs (Non-Disclosure Agreements). I know I do today, and that’s something that I hadn’t done in the past.
Many of us are concerned with fees, but we should be more concerned with what we’re getting for those fees. Was the person you hired based on a referral, or did you find them in some other way? Did you set the right expectations at the outset, and do you have the right person for the right job?
For example, in the distressed mortgage business, we deal a lot with foreclosures, but it never ceases to amaze me how many attorneys don’t know that you can foreclose from a junior lien position. It also shocks me when an accountant or financial advisor advises their client against having a self-directed IRA account.
Although these strategies may not fit everyone, I’m convinced that oftentimes advisors give this advice because they are unfamiliar with them and don’t want to be perceived as ignorant. Instead of saying, “I don’t know, let me look into it,” they just tell their client it’s risky.
You Get What You Pay For
We all know why free advice is free, right? Although cost can be an indication of the quality of advice you’re getting, it isn’t always, and it’s definitely not the only thing to look at.
Once, when I was hiring a foreclosure attorney, I quickly realized his practice was a very small shop when the answering machine picked up, and I Googled his office to find that it was in a one-traffic-light town. Keep in mind, at the time I was trying to hire a foreclosure attorney for the whole state of New York. Obviously, this wasn’t my guy.
When I first hired one of my three accounting firms, I knew that I didn’t want an accountant who was too young, due to lack of experience. Still, I also didn’t want someone who was too old out of fear that he/she wouldn’t be keeping up with the latest laws and tax strategies, especially if he/she was approaching retirement.
What I really like to know, though, is not only if they are used to working with investors, but also if they are investors themselves in things like notes or real estate.
One of the reasons I hired our corporate accounting firm was because I knew they did a large, local mortgage servicer’s tax returns.
Who’s Driving the Process?
Sometimes, I think it has more to do with who’s driving the process. Many of us are reactive instead of proactive. In other words, we only seek out expert advice in times of need or duress, instead of putting the time in to educate ourselves on the space we’re operating in.
Knowledge is Power
When my partners and I first ventured into the note business, we looked to our advisors for information on how various processes worked, and we trusted them implicitly. Today, we do the complete opposite. We study the laws, regulations, and the foreclosure process in each state, and then we drive the attorneys. We tell them what the fee should be and what we expect of them based on what we know.
Also, in my experience, much legal counsel is better with legal advice than they seem to be with practical business advice. The same thing goes for accountants. Many are great at mechanically completing a tax return, but how many really interview you to dig deep into your overall situation and goals in order to help you plan future tax strategies? Many of them tend to operate in the present. I’m constantly asking my accountants questions about future strategy and tax implications.
Work Smarter and Harder
Like Gary Vaynerchuk (Entrepreneur) says, there’s no easy way. He doesn’t believe in the myth that truly successful people can work smarter, not harder. He believes that you should work smarter and harder, but just do it at something you’re passionate about.
So, if you really want to be a successful real estate investor, it may be time to up your game and become much more knowledgeable in the niche you’re playing in. Maybe it’s time to learn more about landlord-tenant laws in your area, how appraisers come up with values, or how to work with contractors, banks, real estate agents, and property managers.
Perhaps it’s always time to up our knowledge base, setting ourselves up to be more successful. If we’re continually improving, it will likely be much easier to recognize the type and quality of advice we’re really getting from our advisors.
So, BP folks, how do you know the advice you’re getting is sound?
Let’s chat in the comments section below!