Why Financial Advisors Won’t Talk To You About Real Estate
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Why Financial Advisors Won’t Talk To You About Real Estate


32 Comments

  • Donna E

    We have investment properties, and it was a good source of cash flow, but… two of our properties had roof failure, HVAC issues, and a number of other costly repairs, and one tenant moved out… eating up all the profits that were made, causing debt for the cost of repairs. My husband now thinks it was a big mistake getting into investment properties. Help, any advise?

  • Gerry Wilson

    Wow. They look after there interest first, THEN, the clients. Appreciate your honesty. If I ever need a financial advisor, that's the guy I'm going with. Kudos.

  • That's Rich

    Self-directed investment vehicles will never be recommended by financial advisors. For that reason, financial advisors are worthless to investors. Pre-packaged, professionally managed and/or government sanctioned savings programs are for lazy people who want to work their whole life and never achieve financial success or freedom. Managing your own capital, evaluating investments, reducing your costs and controlling your ROI yourself, are critical to success. Handing those tasks off to sales people with no experience with investing is monetary suicide. Whether you choose businesses, real estate, paper assets or a combination of those, you are far better off doing the work to educate yourself, gain experience and build a system. Generating upward of a 5% per month ROI, regardless of market conditions, is easy once you've learned the basic rules of being a self-directed investor. Then it's just a matter of compound, rinse and repeat every month.

  • Paul Trucker

    Wow. Clayton you are a very honest man!! But the problem is, what if everyone in going to be a real estate investor, who is going to rent then?? Can everyone in the country achieve financial freedom?

  • Joe Neri

    Great video! Question: Where are you getting your financial education/training?  The Answer 99% of the time… people are getting it from the financial institutions thats causing the problem in the first place. This is why most people are in trouble and their financial situation will never improve. "It ain't what you dont know that gets you in trouble.  It's what you know for sure that just ain't so." Mark Twain

  • HempWorx: With Dave

    Great interview!

    I'm new to REI, and I'm ready to take the plunge!

    Btw, and perhaps you've already done a video on this, would you be so kind as to do a video on the REI strategy of Wholesaling, how to get into it, defining what it is, how to write up a proper contract for the Seller and the Buyer, how to negotiate a fair sales price with the (Motivated) Seller, what to charge your (Cash Buyer, I've heard 10-50% of the "spread"), etc.

    Wholesaling is an investment strategy that I'd like to engage first as I start off my REI career, eventually branching out into Rental Properties, etc.

    Thx!

  • Hector Ortiz

    Amazing content. Stinks that we have been living in this Wall Street Matrix world regarding 401ks and financial services, and the lies that we have been promised by them. Love it Brother Clayton. Preach on!

  • LaserGuidedLoogie

    Good interview. Particularly the last question about using our IRA. This is something I have been considering recently, especially since I suspect there will be a sizable correction in the market anyway. Converting to a Roth IRA was something I didn't know about. Thanks again Clayton.

    -Ken
    http://www.LaserGuidedLoogie.com

  • Guy-Robert Porter

    You know, the more you work in this profession, the more you see. I agree with Brent. Most people mistake corporate "Advisors" for independent fiduciaries. But as an independent guy (only 1.6% of investment advisors are independent) and after doing this for over twenty years, I have to say I LOVE real estate investors.

    Every dime you put into real estate is a dime that I won't be managing the risk on or charging you to manage. WIN-WIN!

    If YOU as a client are called to do real estate, there are many ways I can help you and you'll be better off for having gotten the help.

    Here's the REAL reson that fiduciaries don't "encourage" clients to go into real estate….
    If you follow some internet guru who tells you to buy unit after unit and leverage yoruself 10-30X going into a simultaneous recession and secular rate hike cycle… too bad for you. The guru certainly isn't on the hook for your failure and he did get paid in advance.
    If a FIDUCIARY advised you that based on your goals and the welfare of your family, that you should leverage yourself that much…. he's on the hook also, in the sense that you could conceivably sue him for your failure.

    That's how much skin real advisors have in the game.

    See, financial advisors have a much depeer obligation if they act as fiduciaries. They can't just tell you all about the blue skies and forget the risk. That's why they won't encourage someone they meet for the first few times to try this.

    But if YOU, as a client already have the cojones (which no advisor or guru can supply) YOU are the one who's blazing a trail and YOU are the one who's Fixing, Flipping, Renting and Relaxing, then a wealth advisor can be an incredible ally.

    Jus' sayin.

  • Diane Valencia

    Brent and investors out there, have you read anything from Roccy Defrancesco, JD? Specifically, "BAD Advisors: How to Identify Them; How to Avoid Them". www.BadAdvisors.com. I am currently reading "Peace of Mind Planning, Losing Money is no Longer an Option". Read all his books. He hits the nail on the head. He educates advisors, cpa's, and attorneys. We all have so much to learn about this business. Thank you for your honesty and time.

  • steven joseph

    Yes. We had a liquidity event in late 1999. The money managers descended from around the country like vultures, winin' & dinin' us.

    We thought we'd picked the most sincere one, but in our ignorance we followed his advice to not buy gold, not pay cash for our personal residence, and he never even mentioned buy & hold real estate or flipping or anything like that. He lost gobs of money for us (for a fee!) throughout the lost decade of the 2000s. Thankfully we put our remaining cash into our primary residence, which we now realize could be working much harder for us in buy & hold. I will cry myself to sleep for the foreseeable future now that I've run the numbers on how much money we would have earned and preserved had we known about buy & hold back in 2000. Where were you in 2000 Clayton!! LOL. DON'T GIVE YOUR MONEY TO SMITH BARNEY GOLDMAN SACHS MORGAN STANLEY MERRILL LYNCH etc … <crying emoticon>

  • Lady Owl

    Wow now it makes a lot of sense as to why the guy from bleep didn't want me to do real estate. Thanks Clayton for this interview. Thank you Brent for being transparent as well

  • Evan Sweetin

    So, okay let me get this straight. I was trying to calculate how I’d achieve $500,000/year in real estate income, which would mean I’d need around $41.6k/month to get there. Which would mean I’d need about 83 units generating $500 in positive cash flow per month. I’m not sure if that’s correct (I think it is), but when it’s broken down, it feels SO achievable. (I say that now, as I don’t own a single property yet, but it makes these goals/dreams not seem so daunting when you really look at it).

  • Donald Trump

    Well, it is certainly against their interest but there are more pressing reasons than that in my opinion. For one, a financial advisors realm of expertise is in the financial instruments he is familiar with and works with on a day to day basis. There is a chance that the financial advisor has little experience in the realm of real estate and his or her advice, if it turns out to be wrong, can constitute malpractice. You don't even want him or her giving you advise on real estate in the first place.

  • cindymastin

    I'm anxious and hopeful that you will do a video explaining how you actually pay your personal monthly expenses with cash flow when it seems that you are not actually using that rental income but putting it back into the business (mortgage, expenses, etc.). Am I wrong in thinking that you are using that additional return to pay down the mortgage (heloc, etc)?

  • Dominique Henderson

    I’ll add that some FAs charge flat fees for planning and investment mgmt so although what Brent mentions as the more common forms of compensation, there are financial advisors that don’t have these conflicts of interest regarding compensation.😉

  • Jo Hans

    The reality is that 99.999% of people should not be recommended to buy real estate and potentially become a property manager in a retirement plan. Most "high level professionals" that advisors target have no idea what a skrewdriver is and would be eaten alive by contractors taking advantage of them in the bidding process. If they go with a property manager, they charge higher fees for a single family and are becoming difficult to get. You would need to buy a property with a very large gross return built into it which is difficult to do near all time high housing prices. Those lower prices homes have risen much faster than it should, suggesting dumb money is being piled into the market. (much much harder to find great deals than it was even than last year) Maybe I'm just a finance nerd with a few properties, but today's overall newbie real estate investors education has dropped substantially and I'm genuinely concerned about it. Investors are piling in wholesaling and owners are increasingly trying to sell their properties on a 15% interest only contract with a final balloon payment of an already over priced property.

  • Brian Salinas

    This is why there is the movement toward making the fiduciary agreement a requirement for all planners/advisors. Personally, I just became a financial planner and I am working on my CFP certification, but only doing fee-based planning so that I can have that fiduciary agreement signed and only make moves in the best interest of the client. This way I do not make any commissions on products or investments I recommend. All advisors should be working this way to remove that incentive for advisors to only recommend certain investments/products.

    Good planners and advisor should be real estate investors and be involved in the real estate investment community so that when opportunities present themselves the advisor can introduce the clients to the investors so that they too can become real estate investors and give guidance on how to invest. Not all clients are going to want to be property managers, but they don't have to be. A client or a group of clients can come together to become private lenders.

    This takes the right kind of advisor/planner, the kind that I am trying to become. Currently, I own 1 rental property but am still new to the real estate investment community. I don't know how to charge for being that middle man between current clients and real estate investors since it is an investment avenue. I am toying with the idea of charging a separate fee for "real estate investment services" because there is quite a bit a knowledge to gain and teach before a client makes a decision on what way to put their money to work. for example: charging a flat $300 for a separate meeting that is limited to 4 hours, and in those 4 hours we talk about each type of way they can invest their money into real estate with the pros and cons of each path. then after deciding on a path, we move forward to invest or find an experienced investment partner. The goal would be to educate them, and move forward with an investment, we would take as much time as needed to find that right investment or partner, no more upcharges past that $300 fee, regardless of how long it takes to find that investment.

  • bryce e

    Former financial advisor: We have strict guidelines about what we can recommend and talk about. Real estate was an alternative, but through REITS. We could have been fined and held liable for recommending someone buy a rental.

  • bryce e

    This is why it’s important to go to an advisor you TRUST COMPLETELY, or is a FEE BASED advisor who does not receive commissions.

    Most people think $1,500/year for advice?! No way! Well, they have no incentive to push certain investments. They will do right by you, and the value of that is worth much more than the fee they charge. I’m a former advisor, I left because of the conflict of interest.

  • Billy Smith

    well done agree with all your points ,have streams of income is a great plan .Blend of Index funds based on age /risk tolerance ,with passive income with growth in real estate is a winner in a good market I stay in "A" type SFH .

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