The Risks- my financial advisor

[Deyano M.]

So folks...

Just wanted to see everyone's opinions on this. About 2 years ago my wife and I hired a financial advisor. He has been fantastic- we have some great retirement investments and are 200% better saving for the future now than before.

Only issue- he has been dead-set against any real estate investing. He feels that it is just too risky and continues to come up with "what ifs". His stance is that until we have a substantial "cushion" in the bank, we shouldn't even attempt it. For him, his cushion is around $40K. His attitude is very conservative in nature, so I'm not sure if it is just him or what.

Needless to say, I am pretty much going against his advice and aim aiming at a property purchase in the spring of 2007. I have done the logistical planning and some financial scenarios and it seems like a win/win here.

The project would last 8 weeks. If it went longer we can handle the carrying costs (which we also have estimated and can handle easily). It's a team of my wife, myself, and my Mother and our collective cash flow is substantial enough to carry the house no matter what- indefinitely it we had to. We have all agreed to rent it if it didn't sell in 6 months time- So...

I just don't understand why my advisor is so alarmed by this proposal...
I have read about plenty of people building up their funds- one project at a time until eventually they are an all cash buyer and it makes sense. Sure - it is risky, but isn't life risky in general? haaa

Any thoughts???

Thanks!

[Frank Adams]

Some points regarding your post;

WHY are you hiring a "financial advisor"? You should be educating yourself about your investments, savings and SPENDING.

WHAT are the QUALIFICATIONS of this "financial advisor"? Anyone, with or without qualifications can call themselves a financial advisor, it's a favorite term of "bucket shop" phone callers. Is (s)he a CERTIFIED FINANCIAL PLANNER? Only CFPs can use that term.

REI is not for everyone, there are lots of horror stories on this and every other site, IF you chose to read them. Many or most of those are caused by people who suffered from what I call "gottadoadealitis"! That is they looked so long and hard for a deal that they finally settled for a marginal profitable deal. The problem was that their analysis assumed everything would go as planned. In REI as in life things don't always go as planned.

I've been doing REI for almost 30 years, there were times when the % of my net worth in REI exceed 60%, but I generally tried to keep it around 40%, which I think is a good balance. However, I always fully funded my IRAs, 401ks, SEPs etc and I always had a sufficient cash reserve. IMO your cash reserve should be about 6 months LIVING expenses.

That doesn't mean it includes your needed cash for rehabs and holding costs. It means if you both lost your job tomorrow you could take a "go to he**" attitude, and not have to panic about ANYTHING for six months. Is $40K is the right number for that?

Start educating yourself today about all matters financial, especially the spending and saving side of it. It's not how much you earn, it's how much STICKS.

all cash