Accountant says don't invest! Confused.......

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Accountant says don't invest! Confused.......

Thomas Morlan
Granger, IN · Member since 2014 · 2 posts · 5 votes

His exact words....'Don't F@#$*&G do it!!!!!!'.  

I am very confused now.  I have been researching/reading books, blogs, podcasts, anything I can find about real estate investing over the last month or so, trying to learn as much as I can and find the right property to begin my journey into the real estate world, and then he drops this bomb on me.  Talk about bubble bursting, sheezz.  

Allow me to introduce myself and my aspirations.  I am a 44 y/o full time optometrist (eye doctor) practicing and living in Northern Indiana.  My modest short term goal for 2015 was to purchase my first 2,3 or 4 unit multifamily home which produces positive cash flow and see where that takes me.  I have a very important and secure job and am very happy being in the healthcare field.  However, because it cost so much to go to optometry school (any medical school for that matter) I still find myself with a 6 figure student loan note, even after practicing for 15+ years! I tell everyone that having this student loan is similar to owning a second house/mortgage.  My actual mortgage costs $1350/mth and my student loan cost $1050/mth.  It's depressing and my hands feel tied because there is very little, in fact nothing, you can do with federal student loans as far as refinancing.  

Consequently, I do not have much in the way of cash to invest with.  This, by the way, is my accountants main reason for his adamant and very blunt and to-the-point advise.  I believe he subscribes to the (paraphrasing here) 'Dave Ramsey Book of Real Estate Investing', in other words, if you can't invest with 100% of your own cash, it's not advisable.  I tend to think it's a very safe, conservative, and maybe even old fashioned approach, but I don't have personal knowledge of clients who have lost hundreds of thousands of dollars either, as he does.  

When I mentioned all the hundreds of success stories I read about on BP.com and elsewhere, his reply was that for every hundred of success stories posted online.... there could be, and likely are, thousands of failures not posted.  The difference is that the failures are not going to post online (or anywhere for that matter) their failures like someone who will post their success and wants to tell the world.  I'll have to say.... has a point there!?!?

I don't want to give up on my real estate investment dreams, but I just don't know what to do.  Anyone with similar advise? How did you handle it?  Thanks

Tom

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
11y

@Thomas Morlan First. Dave Ramsey isn't an investor...he's a saver (pay down debt)...not the same thing.

Second, your accountant isn't an investor, he's also a saver (efficient use of limited funds)...not the same thing.

Third, those of us on BP (for the most part) are investors (eliminate the limits on existing funds)...and it sounds like you want to do the same thing.

My thoughts?  Watch/listen to Dave R. for entertainment purposes, listen to your accountant to save you money, and listen to other investors to learn how to invest.

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  • Jeremiah B.
    Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
    11y

    Listen to your CPA.

    I think that there are two very import things that new investors need to understand:

    1 - The decision is yours!  You're your own CEO.  You're the one who needs to own your decisions, because you're the one who will own your consequences.  So, when Bigger Pockets says "invest" - take it with a grain of salt.  When your CPA tells you to run like hell - hear that advice, but know that they don't get to make that call.   No one can tell you what to do.

    2 - Understand the advice!  The advice that everyone gives, myself included, is crap.  The value of the advice is in WHY they are giving that advice. A CPA saying "don't invest" is worthless.  But, a CPA who says "you don't have the cashflow to support the volatility of a rental property" is great advice.  When you ask a community like Bigger Pockets about investing, you will hear themes of encouragement and success stories.  It's probably because the real estate failures can no longer afford computers.  A financial planner's advice will have a different take.  As will a mortgage agent.  Or your attorney.  Or your family...  The logic behind each of these perspectives have value, and should be considered.

    My point is simply this:  You should understand and guidance of those you work with and trust, and you should take that guidance under serious consideration - but none of them or us should tell you to invest or not.  So, take a step back, look at your financial situation, your personality, your goals, etc. and then make an informed decision.

    Happy hunting.

    1Reply
  • Thomas Morlan
    OP
    Granger, IN · Member since 2014 · 2 posts · 5 votes
    11y

    Wow, first of all I want to say that I am amazed at the many responses I have received from this post!  I appreciate ALL the responses, critical or positive. 

    A special thanks for the book recommendations, Shawn!  As one reply put it....(and believe me, I am well aware) 'a month or so' is not a very long time to jump into this risky profession.  I am trying to do as much reading and research as I can before making any moves.  

    I am not going to get deep into my financial situation but thought I would address it since some of the post were questioning my habits and goals.  Suffice to say, I am married with 3 children and one with special needs with major medical bills. On top of that, in 2005 I over-paid for my practice (totally my mistake in retrospect, live and learn).  I have since sold that practice and made up some of that mistake, but as most of you may relate....life gets in the way when trying to do the right thing.

    Anyway, I am sooooo grateful that I found this site.  It is a tremendous asset for new aspiring real estate investors.  Believe me I have read EVERY reply to my original post and will consider all advise seriously.  Thank You

    Tom

    3Reply
  • Drew Wiard
    Rental Property Investor · Fort Wayne, IN · Member since 2014 · 251 posts · 129 votes
    11y

    Hey Thomas!  Welcome!  I am a Pharmacist from Fort Wayne who invests on the side, and I can COMPLETELY relate to where you're at both with student loans as well as being told I'm crazy.

    If you'd be at ask interested, I'd be happy to sit down and chat a bit about where we are both at what you'd like to accomplish.  Happy to help however I can!

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y
    Originally posted by @Thomas Morlan:

    His exact words....'Don't F@#$*&G do it!!!!!!'.  

    I am very confused now.  I have been researching/reading books, blogs, podcasts, anything I can find about real estate investing over the last month or so, trying to learn as much as I can and find the right property to begin my journey into the real estate world, and then he drops this bomb on me.  Talk about bubble bursting, sheezz.  

    Allow me to introduce myself and my aspirations.  I am a 44 y/o full time optometrist (eye doctor) practicing and living in Northern Indiana.  My modest short term goal for 2015 was to purchase my first 2,3 or 4 unit multifamily home which produces positive cash flow and see where that takes me.  I have a very important and secure job and am very happy being in the healthcare field.  However, because it cost so much to go to optometry school (any medical school for that matter) I still find myself with a 6 figure student loan note, even after practicing for 15+ years! I tell everyone that having this student loan is similar to owning a second house/mortgage.  My actual mortgage costs $1350/mth and my student loan cost $1050/mth.  It's depressing and my hands feel tied because there is very little, in fact nothing, you can do with federal student loans as far as refinancing.  

    Consequently, I do not have much in the way of cash to invest with.  This, by the way, is my accountants main reason for his adamant and very blunt and to-the-point advise.  I believe he subscribes to the (paraphrasing here) 'Dave Ramsey Book of Real Estate Investing', in other words, if you can't invest with 100% of your own cash, it's not advisable.  I tend to think it's a very safe, conservative, and maybe even old fashioned approach, but I don't have personal knowledge of clients who have lost hundreds of thousands of dollars either, as he does.  

    When I mentioned all the hundreds of success stories I read about on BP.com and elsewhere, his reply was that for every hundred of success stories posted online.... there could be, and likely are, thousands of failures not posted.  The difference is that the failures are not going to post online (or anywhere for that matter) their failures like someone who will post their success and wants to tell the world.  I'll have to say.... has a point there!?!?

    I don't want to give up on my real estate investment dreams, but I just don't know what to do.  Anyone with similar advise? How did you handle it?  Thanks

    Tom

    Tom, I imagine he has your best interests in mind, but understand, accountants are not investment advisors nor are they financial planners, unless they have additional training. Asking an accountant about any investment is not in their realm of expertise by training, they account for investments but do not and should not be giving investment advice.

    Your lack of funds may have much to do with his opinion. It does take cash on hand to hold properties, that, or the ability to obtain money to cover the unexpected.

    But, it also depends on what you buy, a new home may not have any issues other than vacancy for years.

    While there are all kinds of strategies to acquire an interest in RE to rent it, you're going to need more knowledge. Knowledge will give you the self confidence to enter RE without having to rely on the opinions of others. It takes time to learn, Rome was not built in a day, but it doesn't take a year either.

    It may be your accountant doesn't have a firm grip on RE accounting requirements, he may not want to mess with it, you might ask him some other time if he has RE investors as clients, if not, there is his reason most likely.

    I've not read other posts, just yours, this may have all been mentioned before, but when you ask any professional about something that is not their area of expertise, they may not be giving the best advice, but they may make it sound as if they are qualified. Vet those you seek advice from. Good luck!  :)

    2Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    I am pretty sure my accountant knows if I am in a position to invest in RE or not. Where and what may not be his exact expertise....but how much I can afford to invest annually is. 

    Like Bill G. says, your accountant may not have experience with RE investors.....or perhaps he has experience and has seen how his client's lose when they are not sufficiently capitalized. Based on his cursed worded response...it might be the ladder.

    0Reply
  • John Quebedeaux
    Real Estate Investor · San Diego, CA · Member since 2014 · 27 posts · 58 votes
    11y

    Never give up your dreams. The real estate market is an up and down market. We are in a down market and houses prices are staring to increase in 2015. Look at short sales!

    1Reply
  • Joe Fairless
    Investor · Cincinnati, OH · Member since 2013 · 2k+ posts · 1k+ votes
    11y

    @thomas 

    @Thomas Morlan if someone else has successfully done it then you can too. Just study how they did it and repeat the process to get similar results. 

    1Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y

    Thomas, have you taken action yet?

    You mentioned not having the option of refinancing school debt.  Makes me think you may be paying a higher interest rate.  Why not aggressively pay that debt down and effectively earn the rate of interest you've been paying?  When that note is paid off, put the monthly amount into real estate.  

    1Reply
  • Pat L.
    Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
    11y
    Originally posted by @Jon Klaus:

    Thomas, have you taken action yet?

    You mentioned not having the option of refinancing school debt.  Makes me think you may be paying a higher interest rate.  Why not aggressively pay that debt down and effectively earn the rate of interest you've been paying?  When that note is paid off, put the monthly amount into real estate.   

    Jon makes an excellent point, especially since most of your student debt interest may not be fully deductible.

    This article may be a good read for someone in your profession & student loan dilemma & earlier articles cover renegotiating student debt/loans.

    Over 30+ years we have been through as many accountants/CPA's as we have attorneys. Yet having finally found those we can trust, (we may question at length their objections), we heed their insight/advice. Your CPA probably has a deeper appreciation of your finances & vulnerability than anyone here & in some respects maybe you as well. 

    good luck

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    11y

    Accountants are very important members o your PowerTeam, but they are not investors...they are calculators...with a pulse.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    11y

    @Thomas Morlan 

    You can do it if you really want to do it. Buying a new personal residence with 3.5% down FHA, and renting your old residence is a pretty painless way to start. Some investors have got as far as serially moving every 2 years to a new personal residence, keeping the old one and renting it out. This is a way to get the lowest interest rates and the lowest down payments and a build an inventory of rental houses.

    Listen to my Bigger Pockets Podcast #82, I started with nothing and did 800+ deals.

    0Reply
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    11y

    @Joe Villeneuve about accountants not being investors - not true at all sir. You need a new accountant/CPA.

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y
    Originally posted by @Brandon Hall:

    @Joe Villeneuve about accountants not being investors - not true at all sir. You need a new accountant/CPA.

     Good point, in my other world, Managed IT Services, the best managed business I know is owned and managed by a husband/wife CPA duo. 

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    Your accountant may be smart but he's dead wrong on RE investing. Want to become wealthy in America? By that I mean 400-500k+ per year in free and clear passive income? Here are your options - 

    1. Be a trust fund baby. 

    2. Start your own company (and be really successful).

    3. Invest in real estate. 

    There are SO many ways to invest in RE without a lot of cash that is safe. Find an expert to guide you, as I have, and then get to work. I've done flips that made me 20k and I only put in under 10k of my own money. My first buy and hold makes me 16% per year, year in and out. Try to do that in the stock market.

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    My first flip here in San Antonio....I had under 10k to invest. Put that into a deal my partner advised me to do.....hard money on the rest. I paid out 1500 bucks in closing and two payments, and made almost 10k. That right there is a 6x return on my money that I actually paid out of pocket. 

    0Reply
  • Nathaniel S.
    buford , GA · Member since 2014 · 10 posts · 1 vote
    11y

    you can refinance your student loans. I refinanced at a fixed 3.5% for 5 years and I know the 10 year rate is 4.5 % fixed. Variable rates in the low 2s.  If you good drb student loan refinancing you will see what I am talking about. Take about a month to process all paperwork and pay off the federal loans. My loan payment went from 961 for 10 years to 1233 for 5 years couldn't be happier . Wish it was gone tho 

    1Reply
  • Bryce JamisonPro Member
    Rental Property Investor · Mebane, NC · Member since 2015 · 494 posts · 439 votes
    11y

    I'm currently reading think and grow rich by Napoleon Hill. It was one of the books highly recommended on here, and it's free online. Check it out.

    By the time you get through the first chapter you'll have your answer.

    Welcome to BP!

    0Reply
  • Daniel Mohnkern
    Investor · Titusville, PA · Member since 2015 · 298 posts · 150 votes
    11y

    I only accept advice about a topic from people who are in the position in which I want to be.  I refuse to take advice about money from poor people and I will not take real estate advice from non-investors. You will become a replica of those to whom you listen and with whom you spend your time.

    3Reply
  • Dale Stevens
    Investor · Downers Grove, IL · Member since 2015 · 353 posts · 213 votes
    11y

    @Thomas Morlan - Accountant.. is he working each day? Is he able to say what he does today will support him in his retirement? While he is right, that there are probably thousands if not tens of thousands of failures, it is because people didn't get educated initially. But he can not argue with the fact that the vast majority of wealth is derived from Real Estate.

    With that being said, he is an accountant. Do you ask your Cable installer for their advice on which car to buy?  Do you ask your Dentist which shampoo to use for your hair? I think you see the insanity of that.  Believe in yourself! Educate yourself, and then go out and prove him wrong. And when you do. HIRE A NEW ACCOUNTANT!

    3Reply
  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
    11y

    Fire your accountant and hire a new one.  The worst thing you can do is have someone on your team that doesn't want you to be doing what you're doing.  Don't bother even trying to convince him.  Grab another accountant (preferably one with experience in real estate) and begin your dream!

    0Reply
  • Adam Johnson
    Rental Property Investor · Holley, NY · Member since 2011 · 507 posts · 347 votes
    11y

    Couple more good books - The Millionaire Mind and The Millionaire Next Door.

    It has already been said, control your personal finances.  Spend less than you make.  That will free up cash as well as options.  You can pay down the student loans.  You can also use it for investments.  Either way, cash is king.  If you are overspending, you will be owned, you won't own.

    I am going to add another vote for finding a new accountant.  But I will also add that accountants count beans by trade, but that doesn't necessarily make them good bean growers.

    We used to work with an accountant for quite a number of years.  As we grew in one direction, he grew in another direction.  Eventually, it got to the point where his advice was against or not in line with what we were trying to do.  It was a gut-wrenching decision, but also a very wise one, to start interviewing candidates to take over his duties.  We asked for referrals from colleagues that were largely embedded in real estate investing which, at the time, was a direction we were headed in a big way.  We found our current accountant as a result and couldn't be happier.  She has a lot of real estate investor clients and KNOWS our business inside and out.

    With that said, we also use her guidance appropriately.  We determine ourselves whether a deal is a good deal or not.  We also determine whether or not we should be buying or waiting.  However, we do consult with her when analyzing certain deals or to run numbers by her to confirm our hunches.

    For example - we recently looked at a commercial deal where the seller would only sell the corporation that owned the real estate, but would not sell the real estate out of the corporation.  This was new to us, and we spent a fair amount of time with her going over how it might work, why the seller only wanted this structure, etc.  In this situation, her advice leaned us away from the deal.  Taking her feedback into consideration, we ultimately decided that it wouldn't work because implications of such a deal structure pushed it away from our targets.

    Would I ever ask her if I should go after any particular deal? No.  Would I ever ask her if I should act or wait to invest? No.  Would I ask her how a particular deal works or ask for her opinion of a deal based on information in a tax return that I don't fully understand?  Absolutely.

    Having a "team" of a good accountant, attorney (ies), etc. is critical to your success.  Having the right people on that team is even more important.  They need to know your business to give good advice.  At the end of the day, though, they give you informed opinions in order to help you to decide.

    Either way, keep learning and keep asking.  I am not here to say to invest or not to invest.  That is your decision to make.  I do and I have made a lot of progress as a result.

    Best of luck!

    0Reply
  • Paula Derie
    Port Charlotte, FL · Member since 2015 · 3 posts · 0 votes
    11y

    You will  never get rich working for a living. You also need to invest for the long term.  If you are ready then do it! I have an excellent CPA, btw, and today just sent him an email with a question. But they don't think  like an investor does. Few people do.

    0Reply
  • Michael Win
    Austin, TX · Member since 2015 · 61 posts · 21 votes
    11y
    Originally posted by @Account Closed:

    Your accountant may be smart but he's dead wrong on RE investing. Want to become wealthy in America? By that I mean 400-500k+ per year in free and clear passive income? Here are your options - 

    1. Be a trust fund baby. 

    2. Start your own company (and be really successful).

    3. Invest in real estate. 

    There are SO many ways to invest in RE without a lot of cash that is safe. Find an expert to guide you, as I have, and then get to work. I've done flips that made me 20k and I only put in under 10k of my own money. My first buy and hold makes me 16% per year, year in and out. Try to do that in the stock market.

     I never understood/grasps this when I was younger (read late 20's) and wish I did.  I make in the 1% of Income and paid off all of my med school loans in 1 yr.  The only debt I ever carried after that was home loans.  I always put money in the stock market thinking that eventually I would get to the point where I can live off the dividends.  Well....... this hasn't worked out very well given the crash.

    Fast forward to now (read early 40's) and Last year I decided that I would go into real estate.  I just closed on 6 duplexes and now have 13 rentals.  They are all financed so eventhough I will not make a great deal of money yearly, I should still be able to pull in 30-40K a year in FCF.  No bad, not great, and definitely not able to retire.

    But it is a start.  And If I can raise rent by $200/door in 3-5 yrs, my FCF would jump to 60-70K.  Better, still not great, still not able to retire.

    Now, if I can use that cash flow and in 5 yrs, pick up another 5 duplexes.  I could potentially have FCF of 100K with 23 rentals.  Better, good, but still not definitely not able to retire (Read I want to spend as much I do now and I live off much more than 100k/yr).

    But now in 10 yrs, and I pick up 10 duplexes my FCF would be 150K.  So in my early 50's I will consider retiring without every touching my retirement accounts, cash accounts.  I would just live off the rentals.

    I always thought that once I get a certain $$ in retirement, I would retire but this would mean I have to reach into my retirement accounts.  Its so much better to not touch my retirement and just live off the rentals.  I essentially will have a paying job forever while doing no work.  

    0Reply
  • Kyle Scholnick
    Boca Raton, FL · Member since 2015 · 135 posts · 132 votes
    11y

    Real Estate is a proven way to wealth. The key is doing it right. Take what your accountant says with a grain of salt. Its all about the numbers. If the numbers work, you will be successful. Be conservative, plan for 10-15% vacancy, 15% maintenance, 15% capex, etc...use bigger numbers like that so you have a good margin of safety. If the property still looks good on numbers, don't make silly mistakes like investing in a poor price to rent ratio (like investing in DC on a 400k house that rents only 2k per month vs an Atlanta house that costs 100k that rents for 2k per month), make sure you have tools and knowledge on how to screen tenants so you don't get crappy ones that will cost you a fortune down the road.

    Again, plan for a big margin of safety for the maintenance...consider age/cost of HVAC, roof, siding, electric, flooring, plumbing, etc.

    This is where experience comes in...one month doesn't sound like you may have all the knowledge you need to make a successful choice and know how to find profitable rentals...but maybe you do! I have read 20 books in one month and learned a tremendous amount about certain things in one month so maybe you are all set, I'm just saying to drop the ego and really eval if you are ready and know all the things you have to do...as long as you plan correctly, no reason why you can't be successful.

    And regarding your accountant, I will leave you with this quote:

    "Don't let others who say it is impossible stand in the way of those of us who are doing it"

    Good luck!

    0Reply
  • Vincent Crane
    Realtor · Atlanta, GA · Member since 2015 · 693 posts · 357 votes
    11y

    Once you have 6 units that each cashflow $200 a month and it completely covers your student loan payment, you can send him a note and say, see? Just make sure you know how to analyze a deal and make sure it cashflows

    0Reply
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