All Forum Posts by: Tyler Mullen

@Filipp Laptev

An advisor for REI, do you mean an agent/broker? I like my agent and am very satisfied with her, she keeps tabs on the market and provides more than simple transaction facilitation. REI isn't set up for the FA comp model, they're so different, I can't fathom how it would work.

I do my own FA as much of my background are in related areas and I'm interested to do it.  Many find their time is better spent elsewhere.  Luckily there's a custom answer out there for just about everyone.

This is a broad topic and the answer is different for everyone.  I have used a variety of advisors over the years, been an advisor myself and self managed, here are some thoughts...

Some Pros:

Having someone you expect to be more qualified than yourself paying more attention to your investments than you might want to.

If you work with a fiduciary they should put your interest ahead of their own with a written commitment.

They keep you organized for tax time.

They will generally have a set template of investments based on how you answer the questionnaire, interpret that as a plus or a minus.  Independent advisors are generally thought to have an advantage because they can recommend anything, they are not locked into "the family"... also if they are CFP will/should be able to give a more holistic template of advice beyond specifically what's in your account with them, so gold, insurance needs, retirement/estate planning, business continuity and/or real estate for example.

They tend to be very risk adverse even if you want the riskiest investments most will still be putting you in funds/etfs. The more aggressive you want to be the more you're going to want to pilot solo, unless you have significant assets and/or find a specialized advisor that will do individual stocks, options, futures or whatever else you're looking for. I put this in the pro category because for most people less risk is more appropriate. Although the riches people are not diversified at all, Bezos, Balmer, Gates, Buffet; but for every one of those there's a million people that bought a lot of something and it went to zero. Most people will do better giving themselves something to fall back on, that's what diversification is meant to do. Same with REI, it's foolhardy to put all your cash into a single property, keep no reserves and just pray the flip goes well or go bankrupt. That's not "investing".

Some Cons:

They charge advisory fees.  Even 1% or less can seem small but over time this can be a significant drag on a portfolio when you consider you pay it even if your account goes down.  (Referring here to standard advisors, not hedge funds and private funds that differ in fee profile.)  These fees are in addition to the management fees within a fund/etf.

Limited set of investment choices.  These choices might have higher management fees than others "not in house".

Possibly slower to react to events in the world or markets than you might be.  Remember after 9/11 people were on TV advising "not to sell out their accounts", many sold everything and went all cash once the markets opened days later.  That's a good or a bad thing entirely depending on you, the point is if you're not looking/managing it all the time, then you're accepting someone else might make a different decision than you.  What if you want to sell everything and you can't get your advisor on the phone?

It's one more place your PIA is floating around waiting to get hacked, not compared to investing solo online, but compared to other things like REI, metals. If you're really worried about it you could do this through an entity so at least if the entity data is stolen it's not your PI that is gone. Although at this point most peoples PIA is stolen, generally the more recently it's stolen the more it's traded/sold/used for fraud, so it's still good to limit PIA from being stolen repeatedly.

They're going to recommend a defined set of investments/allocations based on your questionnaire and where their back office black box says we are in the economic cycle, rate cycle. Again, if you want to be able to be more hands off because you time is much more valuable computer programming or syndicating massive REI deals, there you go.

You have to vet properly to begin with & monitor constantly.  When you consider a specific person you should ask around about their reputation.  You should look them up on FINRA and be okay with the report there.  You can look up public records to see if they have convictions/judgements against them.

You also have to actually verify they hold your account through a proper third party custodian, there are only a few companies that do this, their info is widely available.  This is what Bernie Madoff didn't do, he told people his accounts were with a custodian (one which I won't name here) and quite literally no client, no regulator ever verified this.  So he created his own statements and the numbers were made up, the "trades" were entirely fiction.

Watch out for people looking for victims, when it sounds too good to be true, just avoid it.  For example, in a heart breaking story, I got to deal with the aftermath for an elderly couple victimized by this guy:

https://www.seattletimes.com/s...

Should you or shouldn't you?

The answer is different for everyone so all I can do is share opinion and you have to consider it with all the other info you gather.  I do my own now but that's also because I'm interested in it and I compete against myself.  Other people look at it like a CPA, attorney or dentist, I too hire out for all three, so shoulder shrug I guess... 

Keep in mind it's not a forever "decision" nor does it have to be an "all in" decision.  You can choose to hire help for a limited time and then "take over after takeoff".  You can split the portfolio and then compete to see if you can beat the advisor using your own account.  There are also so called "robo-advisors" you might consider, one of which I use.  I'm happy to share specifics of anything I mentioned in DM if you'd like to reach out.

Whatever path you choose, keep your head on a swivel!  I wish you well as you gather info and I hope your research leads you to your best choice.

Tyler Mullen, CFE

Try a smaller bank that has a commercial lending unit. When I last did this they looked at the personal finances and tax returns for LLC members owning more than 20%. They required a personal guarantee also because the LLC was less than 2 years old and didn't have sufficient income yet.

Since you're nearby, contact me if you'd like specifics.

Eastside FIRE Club Personal Finance & Investing, sponsored by Speakeasy Capital, is hosting a meetup focusing on Real Estate Investing and its contribution to FIRE.  We will discuss:

• Common hurdles to getting that first rental onto your balance sheet and producing returns.

• Pitfalls to avoid and advantages to look for in order to save yourself cash & grief!

• What other avenues within REI are people using besides straight rental ownership?

• Share with the group... what you are working on now and what, or who, are you looking for next.

DM for further details or any questions, I look forward to meeting everyone!

DISCUSSION QUESTIONS:

1. If you received $1,000/mo in UBI, how would your family use this money to better your lives?

I would just make more investments, buy gold, short US govt bonds, invest abroad.

2. What market are you in? How do you think $1,000/mo in UBI would affect your local housing market?

Western Washington - It would dump even more gas on the inflation fire.  Demand far out paces supply especially when one considers where people would prefer to live vs where they settle on living.  Most people can't afford to live near their job so they have to spend 45-150 minutes each way to commute.  The bigger issues are zoning, building restrictions and people refusing to downsize and move.  There are thousands of single people and couples living in 3 - 6 bedroom houses all over Seattle who also don't pay full property taxes.  This forces those looking for properties to where they're for sale, mostly many miles from the jobs.

3. Would you automatically increase the rent on your investment properties because your tenants are now receiving an extra $1,000/mo?

I would increase rents along with the market, not specifically because of this.  This would cause massive inflation.

The time and $ cost for using an LLC is worth it to me to keep my personal name and SSN in fewer places. I'm highly vigilant trying to prevent identity theft, this is one of the spokes in that wheel.

Tyler Mullen, CFE

In considering renting vs. buying take the following into account:

"Whether you buy or you rent, a mortgage is being paid."

Because of the availability of credit and the fact that most properties have a mortgage, property itself, including renting it, is priced as though a mortgage is on the property, even when there is no mortgage. Look at the marketplace for buying or renting... say A and B are essentially identical neighboring properties but B has a 80% LTV mortgage on it so its costs are say 70% higher than A. What we see for rent charged is that A and B will charge very similar rates. If one owned A would they charge substantially less in rent just because their costs were less? No, people usually seek to charge "Market Rate". One might choose to undercut their competition slightly, but only enough to lure enough renters to 100% occupancy, even a 5% undercut would likely achieve that.

In other words, you should have good reasons not to buy, reasons that outweigh the fact that if you rent you're not really saving much money and you're buying the property for someone else.

1.  An "issue"... No, an event, yes.

2.  No.  The community changes over time.  People don't have an absolute right to live in a community without respect to the costs of the decision to exercise that right.  If the costs increase beyond ones willingness to pay, I'm intentionally not saying "ability to pay", then they should move.  If we start granting people rights to a neighborhood where they don't bear the cost of that decision then that infringes on the liberty and private property rights of someone else.

3 & 4.  I understand that people are priced out of many things including housing because of many factors, some they control, others they don't.  It's a complex global economy where people can easily fall behind if they don't gain a skill or learn a valuable trade and especially if they make poor decisions.  However, everyone needs to be responsible for themselves first and then help others as they see fit, no one should be expecting handouts.

5.  There are many things that would ease price increases, some of those are not supported politically in certain cities.  IMO more building is a fine alternative.  I never understood why we would prevent people from building more condos and apartments if that's what they wanted to do.  Don't you want your city to grow?  How else is it supposed to work if there's say 40% of Seattle + Suburbs that is over the age of 60 and in the same area there's demand for 100,000 new computer/tech jobs?  My 96 yo grand mother isn't going to learn to code, yet something's gotta give.

Other things like the FIRE movement and digital economy are marginally reducing demand in cities because people are moving far from their company offices and working from home, starting new businesses or retiring early or taking new jobs in rural cities where the cost of living is much lower.

Has anyone ever done a deal which included a proper and complete residential fuel oil tank decommissioning having been performed by the seller personally (not a hired contractor), using cat litter, then never having the decommissioning certified/filed/inspected with the proper local authorities?  I checked with the correct authority, they have no record of a tank or a decommissioning.

If the seller told you that's how "it was decommissioned"... and the garage smelled like fuel oil, how would you respond?

Thank you all for your time!

Keep it simple. Buy a SFR or small multi near you, something that needs little to no repairs. Get a management agency then focus on generating your next purchase down payment.