Rental Property Investor · Chicago, IL · Member since 2018 · 34 posts · 5 votes
I am new to BiggerPockets. I’ve been doing property management, building fixing and holding for near 40 years - the last 20 years independently. My wife and I are retirement age now. She wants the security now of a financial advisor. I am ready to expand. We have 4 buildings now and I am wanting to grow that for retirement income to at least 4 buildings more. Is a financial advisor recommended? What kind? Does it matter? Thanks for your input.
Financial Advisor · Virginia Beach, VA · Member since 2017 · 502 posts · 508 votes
7y
@Clarence Watkins you will likely get a variety of answers to that question about whether or not it is important for the advisor you hire to be a real estate investor. I'm in the camp that says knowledge is important, but experience is optional. By way of analogy, if I need an oncologist, I wouldn't narrow my candidates to the ones who have had cancer. A thorough knowledge of it will suffice.
Here are the things I think are more important than real estate experience:
A fee-only fiduciary. Make them put it in writing and sign it. "Fee-only fiduciary". If you don't know why that's important, Google it.
For REI's I would avoid an advisor who charges based on assets under management (AUM). You can be a fee-only fiduciary advisor and charge AUM, but for the advisor with a client holding real estate it creates a conflict of interest. The advisor can bill you on your securities portfolio, but not on your real estate portfolio. This creates an economic incentive to the advisor for you to liquidate your real estate and buy securities (stocks, bonds, mutual funds). Can they still give good advice despite that conflict of interest? Yes, absolutely yes. But if they advise you to sell the real estate to buy securities, do you trust them? It might be the right advice, but you'll always wonder. The easiest way to deal with a conflict of interest is to eliminate it altogether. Find someone who charges a flat fee and no AUM.
Credentials are fine, but in all honesty have limited utility. Five years ago I answered questions on the CFP exam about the yield-to-call on callable convertible securities, and passed. Don't ask me anything about convertible securities today. I haven't thought about them since!
You'll learn more by interviewing advisors. Don't just read a couple of websites and Linked-In profiles and pick the best one. Interview them like you're hiring an employee (because you are!) Interview 5 or more. Ask them hard questions like "How are you compensated." Listen to the questions they ask you. Are they asking about your goals or are they asking about your money?
I read recently that 65% of Americans don't trust financial advisors. Most days I think the other 35% are just naive and gullible. There are a few good ones, but if your starting position when dealing with one is suspicion and distrust - well, that's probably just your good sense talking.
Rental Property Investor · Minneapolis · Member since 2019 · 257 posts · 244 votes
7y
I would say you need to get aligned with your wife on goals and objectives. Buying more properties with leverage has some risk.... if you buy all cash and are good property manager then that is conservative approach...she might not see it that way though. Some people hear rental property and see all risk and some see security, depends on mindset. Financial advisers might be able to get aligned on goals...but most wont understand real estate and will recommend u liquidate and invest with them in stocks and bonds. I would highly recommend fee only advisor and find one with real estate experience, easier said than done...I’m looking for the same .
I’ve been doing property management, building fixing and holding for near 40 years - the last 20 years independently.
What was your wife doing during that time? Is she ready to manage those properties if you do the statistically likely thing and check out first? If not, is she aware of the tax implications of liquidating those properties when she inherits your shares in them?
Nothing wrong with sticking with what you know as far as real estate investing. Might just need a solid estate plan to ensure she is taken care of if she is not as comfortable with real estate.
Rental Property Investor · Chicago, IL · Member since 2018 · 34 posts · 5 votes
7y
@Paul Allen. Thanks Paul. My wife is and has been in college administration. She’s ready to stop working. She wants no part in continuing in real estate if I were to pass, but I want to hire out the property management when I’m unable to do it. You are right that she probably primarily wants future security with minimal risk or responsibilities. Thanks for your input.
Rental Property Investor · Chicago, IL · Member since 2018 · 34 posts · 5 votes
7y
@Paul Allen, The tax implications of liquidation our real estate is something I need to know more about too. Thanks for the thought. So, a financial advisor for sure, but how important is it that the financial advisor is also a real estate investor so that they are sensitive too that investment strategy?
Financial Advisor · Virginia Beach, VA · Member since 2017 · 502 posts · 508 votes
7y
@Clarence Watkins you will likely get a variety of answers to that question about whether or not it is important for the advisor you hire to be a real estate investor. I'm in the camp that says knowledge is important, but experience is optional. By way of analogy, if I need an oncologist, I wouldn't narrow my candidates to the ones who have had cancer. A thorough knowledge of it will suffice.
Here are the things I think are more important than real estate experience:
A fee-only fiduciary. Make them put it in writing and sign it. "Fee-only fiduciary". If you don't know why that's important, Google it.
For REI's I would avoid an advisor who charges based on assets under management (AUM). You can be a fee-only fiduciary advisor and charge AUM, but for the advisor with a client holding real estate it creates a conflict of interest. The advisor can bill you on your securities portfolio, but not on your real estate portfolio. This creates an economic incentive to the advisor for you to liquidate your real estate and buy securities (stocks, bonds, mutual funds). Can they still give good advice despite that conflict of interest? Yes, absolutely yes. But if they advise you to sell the real estate to buy securities, do you trust them? It might be the right advice, but you'll always wonder. The easiest way to deal with a conflict of interest is to eliminate it altogether. Find someone who charges a flat fee and no AUM.
Credentials are fine, but in all honesty have limited utility. Five years ago I answered questions on the CFP exam about the yield-to-call on callable convertible securities, and passed. Don't ask me anything about convertible securities today. I haven't thought about them since!
You'll learn more by interviewing advisors. Don't just read a couple of websites and Linked-In profiles and pick the best one. Interview them like you're hiring an employee (because you are!) Interview 5 or more. Ask them hard questions like "How are you compensated." Listen to the questions they ask you. Are they asking about your goals or are they asking about your money?
I read recently that 65% of Americans don't trust financial advisors. Most days I think the other 35% are just naive and gullible. There are a few good ones, but if your starting position when dealing with one is suspicion and distrust - well, that's probably just your good sense talking.
Rental Property Investor · Chicago, IL · Member since 2018 · 34 posts · 5 votes
7y
@Paul Allen I’m glad to have engaged you. You are welcome, but thank you for taking the time to answer my questions and concerns -Excellent information.
I am new to BiggerPockets. I’ve been doing property management, building fixing and holding for near 40 years - the last 20 years independently. My wife and I are retirement age now. She wants the security now of a financial advisor. I am ready to expand. We have 4 buildings now and I am wanting to grow that for retirement income to at least 4 buildings more. Is a financial advisor recommended? What kind? Does it matter? Thanks for your input.
If you do choose to move forward I would say the #1 piece of advice I would give is to find a financial advisor with with personal experience in the type of deals you are working on. Finding any professional who also deal personally in the investments you do will give you access to niche strategies that they would have access to. Best of luck to you moving forward!
Financial Advisor · Blaine, MN · Member since 2014 · 477 posts · 387 votes
7y
All of the information you've gotten it's really good. Another thing to consider is what kind of an engagement are you looking for? Some of our clients that are more DIY just want a one time plan for an hourly fee. Some want help with a few specific issues. Some want an ongoing planning relationship with regular check-in meetings. Find an advisor that is not just competent with the complexities of your situation, but also comfortable with the type of engagement you prefer.
Another thing to consider is location. How important is it to have someone local? Would you rather deal with a generalist that is local or an expert in your situation that isn't in your area.
Rental Property Investor · Chicago, IL · Member since 2018 · 34 posts · 5 votes
7y
@Scott Jensen Hi Scott. Your what type of engagement question is very helpful and worth considering. Also, whether or not the financial advisor needs to be local is another good question. I’ll think about these and get back to you. Thanks a lot.