6 Tips on Getting Into Real Estate Investing

Going into real estate can be an exciting investment strategy, one that is both satisfying and lucrative. However, it’s not all rose petals and fairy dust. Every investment comes with risk but it’s how you manage and mitigate those risks that make the difference. If you are seriously considering diving into real estate investing here are a few things to take into account.

SIX (6) THINGS TO KNOW ABOUT REAL ESTATE BEFORE INVESTING

1. Establish Relationships

   It is not just a numbers game, it’s also a people game -Relationships are important. Everything is about relationships and real estate is no different. You have to find a reputable and trustworthy realtor who understands your goals, an honest contractor who won't take advantage of you, and tenants who are credit worthy and will pay on time.

2. Location

   Where you buy a property is just as important as what property you buy. Do your research to see what developments are happening in the area you are looking to purchase. An average house may yield higher returns in a more developed part of town than a really nice house in a poorly developed part.

3. Funding

   Evaluate the different ways of getting in. Wealthy people invest in real estate because it is a secure way to keep and grow their money. Three ways to fund your real estate property: Self Financing(using your own cash), securing a loan, or raising capital via equity investors.

4. Tax Advantages

   Owning real estate offers Tax shelters. Do your research to educate yourself on how to take advantage of these.

5. When To Purchase

   Real Estate has cycles. Purchase when markets are low. Acquiring properties in a low market can sometimes bring considerable appreciation values. Also consider purchasing in less desirable areas. They have a tendency to turn around over time and bring notable returns.

6. Be Flexible

   Things will not go as smooth as planned. It is inevitable that things will go awry at some point, whether it’s a bad tenant, bad property management, etc. Maintain a level of flexibility to help deal with any situation that arises.

Although the above six tips are geared mainly at owning rental property as a form of real estate investing, there are generally five different ways to invest in real estate which we will get into in the next post.

This was Part V of the Investing series: Click here for Part IV, Part III, Part II and Part I

Our investing series will continue in our next article and will dive into the different ways to invest in Real Estate. Sign up below to receive the Investing Series directly to your inbox:

This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.

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6 Questions To Ask Before Investing

“If you treat Investing like a casino, it’s going to treat you like a gambler”

— Anon

I had a sit down chat with a financial advisor/ wealth manager from a popular brokerage firm to answer some burning questions about investing. He has chosen to be anonymous in this blog post as we did not have enough time to get these questions and answers approved by his firm. However, he has guaranteed that all answers are truthful and based on general knowledge that anyone can google. He has also given me permission to give his contact information (via email) to my readers who are interested in learning more about investing.

Whether you’re a first-time investor or have been investing for many years, there are some basic questions you should always ask before you commit your hard earned money to an investment.

Q: What would you recommend as a starting point for a new investor?

A: For someone just starting out I would recommend they get an understanding of money and how it works. They have to determine their goals and their risk tolerance to market volatility. For example, certain types of bond funds can counterbalance market volatility so a starting point could be with bonds. Next, they have to choose an advisor that will put together a program designed to accomplish those goals .

Q:    What is a recommended portfolio diversification for a beginner i.e percentage of stocks, bonds, mutual funds, etc?

A: This is a nuanced question and depends on the person’s time horizon. For example, if you’re a 25 year old planning to use the money as a down payment on a house in 5 years you may be better suited with a larger portfolio of bonds. The short answer is, if they are investing for the long term they are going to see more growth in blue chips and mutual funds that pay rising dividends over time. See JP Morgan’s Guide to The Markets - Time, Diversification and the Volatility of Returns.

What this shows is the 1, 5, 10 and 20 year return going all the way back to 1950 of a pure stock portfolio, a pure bond portfolio and a 50/50 mix. There isn’t a 5 year period in that 70 year history where there was a loss of money with a 50/50 mix. The worst that happened in any 20 year period is that you quadrupled your money. So, the suggestion would be if they’re investing for the long term invest in companies that provide basic necessities for our way of life and go with a 50/50 mix.

Q: What factors determine how you will invest someone’s money and do things like age and risk tolerance play a role? 

A: There are many factors that play a role when it comes to someone investing. Things like:

• How involved the person wants to be with their investments, i.e hands on versus hands off approach

• Time horizon, not so much age. For example, if they are 70 years old but they are investing for their grandchildren’s legacy then age doesn’t matter.

• Risk Tolerance

• Tax considerations

  • IRA account versus Taxable brokerage account

  • Tax efficiency

  • Tax harvesting strategies

Q: How do you manage investment accounts for taxes?

A: Generally , there are 3 ways to invest money for taxes:

1. Taxable (pay as you go)

2. Tax deferred (Traditional IRA, Annuities)

3. Tax free (Roth IRA, Insurance products)

Q: What is your approach to financial planning?

A: I approach it as a process and it should be the same no matter who the individual works with

• Get a feel for who they are, what they want to accomplish and why

• Determine where they are coming from, their psychology about money, their values and their belief system around money and investing.

• Ask them to quantify this as much as possible, in terms of their goals for the account, their psychology about risk

• Tax needs

• Risk tolerance

• Are goals realistic

• Am I a good fit for them and vice versa

Based on the above , I will then go through the courses of action and next steps. I will be transparent about:

• The cost structure of each option

• The degree of involvement each party needs to have for each option

• Fees for services

• I will then set up a periodic review for each account, i.e monthly, quarterly or annually.

Q:  What are some important questions a client should ask their financial advisor before investing?

A: This is probably one of the most important questions.

1. How is the plan in the client’s best interest

2. Explain cost structure

3. Discuss any potential tax considerations

4. The various risks associated with the investment. Every investment has risks. There’s no such thing as a risk free investment

5. Describe in full the process of beginning this journey

If the advisor is unable to answer any of the above to the client’s satisfaction, they should exercise caution before proceeding.

If you would like to learn more about Investing or begin your own Investing journey with this advisor, feel free send me an email below and I will forward his info: CONTACT ME

This is Part IV of The Investing Series. Click here for Part III, Part II, and Part I.

Our investing series will continue in our next article on the topic of Real Estate Investing. Sign up below to receive the Investing Series directly to your inbox:

This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.

This article may contain affiliate links.

How To Start Investing in The Stock Market

Many people know the importance of investing but never actually do it!

I must admit, there was a time when the topic of investing was very confusing and overwhelming for me. The learning curve with all the different financial terms and what they meant were steep. It took several talks with my financial advisor, my husband breaking things down in detail and me listening to some great podcasts to finally get a good understanding of it.

Like most people, my first experience with investing was through a retirement account that I have with Edward Jones. Once I read upon the subject of investing (the most helpful being JL Collins’ The Simple Path To Wealth), listened to podcasts on the topic and consulted with the experts, I graduated from being a rookie and started investing with Vanguard in their VTSAX (Admiral Shares). You can see some of my recommended books on investing here and learn more about Vanguard’s VTSAX here.

Investing requires a mindset shift, and you should look to start by investing in a retirement plan, followed perhaps by investing in the stock market. But how do you even get started investing in the stock market? I will give an overview of how to get started and for the sake of this article let’s get some definitions down:

Investing: Putting money into a vehicle with the goal of receiving a return down the line (growth). In most cases, you plan for little involvement on your part once you’ve invested the money.

Stocks - A stock is part ownership of a company. They are also called shares or equities and the more you own the bigger your ownership stake in the company is.

Bonds - A bond is when you loan money to a company or the government who in turn pay you back in full with interest.

Mutual Funds - A mutual fund is a pool or compilation of funds from a group of investors set up for the purpose of buying security like stocks, bonds, etc.

Index Funds - An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500).

Exchange Traded Funds (ETFs) - These are similar to index funds however, they can actively be traded throughout the day at the current market price (you'll pay commission fees as a result) unlike mutual funds and index funds that are traded at the end of the day, and at the market's closing price.

Brokerage Firm - A brokerage firm is a financial institution that manages or facilitates the buying and selling of securities (different kinds of investments e.g. stocks, bonds, etc) between buyers and sellers. They typically charge commission fees on trades and can provide you with up-to-date research, market analysis and pricing information on various securities. Examples of brokerage firms in the US include Vanguard, Fidelity, Charles Schwab, etc.

How To Start investing

Investing can change your financial future for the better. You don’t need a lot of money to start investing. In some cases, you only need a few dollars to get started. Of course, you might have a goal of increasing your investments long-term. But don’t let limited resources stop you from building your long-term wealth.

1. Try a Robo-Advisor

   A robo-advisor is the term often used to refer to digital platforms for investing and is essentially a virtual financial advisor. With the use of algorithms and technologies, it eliminates the need for a human financial advisor and is a more hands-off approach. Rabo-Advisors are marketed to millennial as a digital solution for the often intimidating process of investing. You’re asked some questions online and based on your answers it provides automated financial management services and tailor your investment recommendations based on your goals.

   The benefit of using a robo-advisor is that the fees are typically much lower, even though you are getting customized portfolio recommendations. Most robo-advisory firms offer low minimum investment requirements and take care of portfolio rebalancing automatically.

   If you are interested in trying a robo-advisor, some popular ones are Acorns, Robinhood or Betterment.

   • Micro-Investing

     • There’s an app for that! Just like robo-advisors, micro-investing apps offer a variety of tools and ways in which you can be investing. Micro-investing apps are marketed towards millennials and young, rookie investors and was built around the idea of helping people get into investing with as little as a few dollars. Some popular micro-investing apps include:

       • Acorns - It is simple and is perfect for the true beginner looking to get help building a well-diversified portfolio. You can choose from among five portfolios, all of which are invested in ETFs from well-known investment management companies like Vanguard. It costs as little as $1 per month for accounts under $1 million, or free for college students.

       • Robinhood - Typically attractive to those looking to do individual stock picking and even dabble in cryptocurrency and options trading. Trading is commission free, but there are fees charged by SEC and FINRA.

       • Stash - Great for beginners who want to be a bit more hands on about picking investments or has specific preferences on the types of companies they invest in. They offer access to more than one hundred investments, including ETFs and individual stocks. It costs $1 per month with no commission on accounts under $5000 for Stash Invest and $2 per month for Stash Retire.

2. Seek out a Brokerage Account

   There are many investment services available on the market today. Each offers different services and charges different fees. In some situations, you may want to buy and sell stocks on a regular basis. These transactions can add up quickly at some brokerage firms. In other situations, you might choose an index fund with fees built-in. Either way, you'll want to find a brokerage account that minimizes fees for your investment strategy.

• Decide What Kind of Account You Want To Open

  • The type of account you open will depend on the reason you’re investing in the first place. Most times when one is investing they are doing so for a medium-long term goal.

• Decide Which Brokerage Should You Use

  • You have many options when it comes to picking a brokerage firm. Consider a hands on versus a hands off approach (depending on how comfortable you currently are with investing).

  • Consider the minimums for opening an account. Many, but not all brokerage firms will have a minimum initial investment in order to open an account or invest in certain funds. These minimums vary, and therefore can have a huge impact on which institution you pick. For example, my very first investment was in Vanguards VTSAX with a minimum required investment of $10,000. If you are not in a position to invest that amount at the moment you have several options:

    • You can opt to choose a different brokerage firm

    • Search and see if another comparable fund at the same brokerage has a lower initial investment requirement

    • Invest at a different brokerage and transfer your funds after you’ve met the investment minimum at the brokerage you want

    • Keep saving until you hit the minimum

    • See if the exchange-traded fund (ETF) version is cheaper than the mutual fund version, sometimes it is.

  • Determine what the brokerage firm’s fees will be.

  • Determine whether you want to go with a Full Service Brokerage Firm versus Discount Brokerage Firms. The main difference is the the full service firm will have an advisor helping you build and manage your portfolio, but you will pay higher fees. You take a more DIY approach when going with a discount brokerage firm and therefore will save more in fees. Plus, Discount brokerage firms may have minimum initial investments, often between $1000 to $3000. Some popular discount brokerages include Vanguard, Fidelity, Charles Schwab, TD Ameritrade, Ally Invest, etc.

• Pick Your Investments

  • When picking your investments consider your goals, risk tolerance, time horizon and whether you want it to be actively or passively managed. Keep in mind that you will pay more in fees for an actively managed account. You will also need to diversify as you build your portfolio so as to not put all your eggs in one basket. For example, investing in mutual, index, or ETFs gives you exposure to a variety of sectors and companies, and is a good first step.

Investing can be a confusing topic but it doesn’t have to be once you understand a few basics. You can start with a robo-advisor or a micro-investing app to get your feet wet and level up to a brokerage firm when you feel you are more comfortable.

This is Part III of The Investing Series. Click here for Part II and Part I

Our investing series will continue in our next article and will feature an Interview with a Wealth Management expert from a popular Brokerage Firm. Sign up below to receive the Investing Series directly to your inbox:

This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.

This article may contain affiliate links.

Setting Up Your First Investment Account

If you have a retirement account such as a 401K, 403B, Roth or Traditional IRA, Congratulations! You’re already an investor. A lot of people don’t consider their retirement savings as investing. Saving for retirement is important and should (arguably) be your first investing priority because:

• It helps lower your tax liability either today or in retirement (depending on the type of account)

• You’re possibly getting free money from an employer (if there is a match program)

• It can easily be automated, so building your nest egg becomes habitual

• It can help you achieve financial independence and be able to walk away from the need to earn a paycheck

If you’re not yet saving for retirement, I urge you to start today. It is extremely beneficial to start saving for retirement early so that you can take advantage of compound interest.

Employer 401K

If your employer offers a 401K plan then you’re in luck and won’t have to do this yourself. However, do make sure you are saving up to the point where you get the employer match. An employer match is when an employer puts money in your retirement plan, matching your contribution up to a certain percentage. For example, your employer might have a contingency that they will match you 100 percent up to 4%. If you earn say, $40,000 - in order to get the full 4% match, you will have to contribute at least 4% of your salary into the 401K. That is, about $66 per biweekly paycheck (or $133 per month) and so does your employer. You would have saved roughly $1600 per year in your 401K and receive an additional $1600 from your employer making it a total of $3200 (half of this was free money).

The great thing about a 401K is that the money you save is automatically deposited into the plan before it’s taxed, so less of your income will be taxed now. Plus, the 401(k) allows your savings to grow tax-free until you withdraw the money at retirement. This feature means your money will compound at a faster rate. Only when you withdraw money will you pay taxes. Read more about the types Retirement Accounts here.

If you don’t have a retirement plan with your employer or are self employed, a retirement account is very easy to set up.

Here’s how to to Set up Your Own Retirement Account

1. Decide How Much You Want to Save

   If you’re following the 50/30/20 rule, then you should already have in mind to put 20% of your income towards saving and investing. So, you may decide to put between 10-15% of this allocation towards investing to yield a respectable nest egg. Consider the example of a 30 year old taking home a $50,000 salary. If he/she gets a 3% salary bump on average each year, and her investments earn an average annual return of 7% during her working life, then saving 15% of her income would yield $1.7 million by the time she reaches age 65. That is the power of starting early and of compound interest.

2. Decide What Types of Investments You Want

   If you’re not eligible for a retirement fund at work that gets you matching funds, you can sign up for a Roth IRA or Traditional IRA. A Roth IRA is funded with money out of your paycheck that has already been taxed (post tax dollars), but when you withdraw the money in retirement, it will be tax-free. While a Roth IRA won’t save you money on taxes this year, it’s a fantastic way to avoid paying taxes on your future investment earnings. A Traditional IRA on the other hand utilizes pre-tax dollars. This gives you the ability to lower your taxable liability today but you will be required to pay taxes on it in retirement.

   If you’re self employed or the owner of a small business you have the option of setting up a SEP IRA, Solo 401k or SIMPLE IRA. You can get more information about those types of Retirement Accounts here.

   The type of Investment will depend on your time horizon (how long you have to invest). For example, a younger person will have a longer time to invest. It is advisable that when starting out you stick to an all-in-one fund also known as a target date-fund. Target-date funds are a convenient way to save for retirement because it removes the overwhelming investment choices to put into your retirement account. In this fund, you select a year closest to when you feel you will retire. For example, If you are 30 years old and you want retire at age 65 then it will be Target Date Fund 2055. The fund’s managers will then automatically invest you in a primarily aggressive portfolio now and then rebalance it to be a more conservative portfolio by time you plan to retire.

3. Choose Where to Open Your Account

   There are plenty of options when it comes to opening a retirement account. Brokerage firms, banks, and other financial institutions offer a myriad of options to hold investments (i.e stocks, mutual funds, bonds and cash, earmarked for retirement). Where you choose to open an account will depend on the type of investor you are, hands-on or hands-off. If you have a little experience with investing and would like to buy and sell, an online broker may be the most beneficial. Consider building a portfolio out of low-cost index funds and ETFs. This approach makes it easier to ensure adequate diversification in your portfolio (which lowers your investing risks) and helps minimize the fees you’ll pay. Look for a broker that has low or no account fees and small commissions; offers a wide selection of no-transaction-fee mutual funds and commission-free exchange-traded funds; and provides solid customer support and educational resources, especially if you’re a new investor. Some great options are Vanguard,Fidelity, ETrade, Charles Schwab, Edward Jones, and TDAmeritrade to name a few.

   A hands-off approach is an automated way to manage your investments using a robo-advisor. A robo-advisor will choose low-cost funds and rebalance your portfolio, keeping it in line with your investing preferences and timeline for a fraction of the cost of hiring a human financial advisor. This option is usually better for those who agonize over investment decisions. Look for one with a low management fee, generally 0.40% or less, and services that meet your needs.

   If you decide to use a robo-advisor for your IRA, you don’t actually need to choose your investments. Your robo-advisor will ask you for your goals and preferences and select investments that match up with them, and even adjust those investments over time. Some great robe-advisors are Robinhood, Betterment, Ally Invest, and Acorns to name a few.

4. Fund Your Account and Get Started

   After you’ve figured out how much you want to invest, the type of account you want to invest in and where, all that’s left to do is fund your account and get started. Put your money in and automate it so that a set amount comes out of your bank account each month. That’s it, you’re done.

If you’re starting out as an investor there’s no better way to start than with a retirement account. Choose a broker or financial institution, fund your account, select a few investments (stocks, mutual funds, ETFs), automate it, and put your money to work. Your future self will thank you!

This is Part II of The Investing Series. Click here for Part I.

Over the next couple weeks I will be breaking down the topic of Investing and providing ways in which you can start investing right away. Sign up below to receive the Investing Series directly to your inbox:

This article is for educational and informational purposes only. Contact a financial advisor before making any financial decision.

This article may contain affiliate links.