Question: I’m looking for a financial advisor who’s not looking to just sell me some annuities or equities. I have five properties; three are not producing as they should because they’re in a tough location, so I’m looking to see if liquidating them would provide a better retirement than being a landlord. I’m 66, not yet collecting Social Security, which will be fairly low as I took losses for several years as I renovated these properties and kept experiencing vacancies due to eviction. Two of the properties however are in the Boston area and are just condos but they would provide good basic income. One problem I have is being able to finance a place for myself to live once I liquidate the other properties. What should I do?
Answer: First up, it sounds like you need to find a financial advisor who has experience helping clients make decisions with their real estate — and who can also help you create a comprehensive financial plan for yourself. Real estate decisions can be difficult because they often involve timing, weighing the pros and cons of keeping and maintaining properties for income versus selling them, determining the amount of cash to have on hand for the uncertainties of real estate ownership, figuring out tax questions and other factors related to your planning needs. It is important to work with an advisor who understands these complexities.
Not only do you want a person with real estate and comprehensive financial planning experience, you may want an hourly or project-based advisor. The reason? Someone working under the assets-under-management (AUM) model might be more inclined to earn their fee based on how much money they’re managing for you.
Finding the Right Financial Adviser
When it comes to finding a financial adviser, it’s important to be cautious and make the right choice. To avoid any unwanted sales pitches and ensure you receive advice that is truly in your best interest, consider working with a fee-only adviser who is affiliated with a Registered Investment Advisor (RIA). An RIA has a fiduciary obligation to their clients, meaning they are legally bound to provide advice that is solely in the clients’ best interest. Unlike broker-dealers or insurance companies, RIAs are not able to sell annuities, stock options, or bonds.
Objective Advice and Scenario Planning
Regardless of the adviser you choose, it’s crucial to work with someone who can offer objective advice and help you prepare for various financial scenarios. By assessing the impact of your cash flow in both the short-term and long-term, a Certified Financial Planner (CFP) professional can provide valuable insights. Collaborating with your tax adviser, they can determine the effects of your decisions on your cash flow and taxes. Additionally, they should be capable of conducting an analysis on the properties to evaluate the return on equity (ROE). This analysis will guide decisions related to assets, income, and even Social Security.
Compatibility and Interviews
Finding an adviser whose values and mission align with your own is also important. To determine if a potential adviser is the right fit for you, consider interviewing multiple candidates. By doing so, you increase your chances of finding an adviser who can meet your specific needs.
To discover more about choosing the right adviser, check out our comprehensive guide which includes 15 questions you should ask any potential candidate.
When it comes to your financial future, choosing the right adviser is paramount. By opting for a fee-only adviser who operates under the umbrella of an RIA, you can ensure that your best interests are being prioritized. Additionally, working with an adviser who offers objective advice, scenario planning, and aligns with your values will greatly contribute to your financial success.