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เนื้อหาจัดทำโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดเตรียมโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth หรือพันธมิตรแพลตฟอร์มพอดแคสต์โดยตรง หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่อธิบายไว้ที่นี่ https://th.player.fm/legal
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REAL ESTATE Investing Tips from a FINANCIAL Planner?

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เนื้อหาจัดทำโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดเตรียมโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth หรือพันธมิตรแพลตฟอร์มพอดแคสต์โดยตรง หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่อธิบายไว้ที่นี่ https://th.player.fm/legal

How do you find a trustworthy financial planner? And, if you're into real estate, how do you find one who understands real estate and can add value to your specific strategy? In this episode, our guest Kyle Mast, is just that. He's a certified financial planner and a real estate investor who understands that kind of investing strategy.

Kyle is the owner of Clarity Financial which is a fee-only, fiduciary firm with a focus on helping pre-retirees, real estate investors, and people pursuing early financial independence, but he's not taking new clients at this time. He loves helping people get their financial lives in order, however, and does that by doing interviews, like this one.

Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you!

TRANSCRIPT

[music]

Speaker: [00:00:00] You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource.

[music]

Kathy Fettke: How do you find a trustworthy financial planner? If you're really into real estate, how do you find a financial planner who understands your strategy and supports it and can help you with it? I'm Kathy Fettke and welcome to the Real Wealth Show. Our guest today is just that. Kyle Mast is a financial planner, and he's also a real estate investor. He's a CFP and the owner of Clarity Financial, but I just want to warn you, he is not taking new clients at this time, but he's happy to give us guidance here on the Real Wealth Show for free. Kyle, welcome to the Real Wealth Show.

Kyle Mast: Thanks for having me, Kathy.

Kathy: Do you agree that it's important for your financial planner to understand real estate if you are also investing in real estate?

Kyle: Well, that's a very loaded question. Yes, very easy question. If you're not interested in real estate at all, then you probably don't need a planner that knows very much about it, but if that's a big piece of your portfolio, especially if it's the majority of your portfolio, you need to make sure your financial planner, depending on what you mean by financial planner, does understand real estate just as much as maybe stocks and bonds or something that's maybe more typically thought of in that area.

Kathy: I am so glad you mentioned that because I thought a financial planner technically should be someone who looks at your entire financial plan that would include real estate, but generally, it doesn't at all. It's just mainly for stocks.

Kyle: It depends on who. When you go to look for a financial advisor or a financial planner, there's a couple of things that you maybe want to look for when you're looking to work with someone. Some people are very focused on investment management, getting a portfolio of investments that include stocks and bonds, maybe some alternatives in there that could include real estate.

Sadly, our industry, a lot of the training is really focused on stocks [00:02:00] and a portfolio and how to allocate it according to someone's age. Those things are all important, but it misses a broader picture of, if you own a primary residence, should you consider refinancing at some point? A lot of times the incentives, maybe, aren't aligned when you work with a financial advisor.

If you want to pay off your house, that's less money for a financial advisor to manage and make fees on. That doesn't mean that a good financial advisor or planner can't overlook that conflict of interest and give you good advice one way or the other, depending on your situation. Those are things you have to be aware of. If they're getting paid on a certain product or investment, that's a conflict of interest that dictates how they may offer you advice.

Kathy: Sure. Always follow the money, right? That's the problem is we don't know often how to follow the money. I was a mortgage broker for so long. Back when I started, you didn't really even have to disclose how much you were making. It was just backend commissions that would be made, sometimes 3% of a $1-million loan in California, $30,000 to push some paper, but the client really never even knew that we were making that much. Is it the same with financial planning? Is there secret fees behind the scenes?

Kyle: Yes, there's different. Maybe I'll try to use an illustration to give people an idea. When you're looking for a financial planner, I'm what's called a fee-only fiduciary. I'm a certified financial planner, but I'm also fee-only. That means I don't earn commission for selling an investment product, I earn fees from the clients, either if that's for managing something for them, whether it's a portfolio of investments or a lot of the times, it's an hourly fee for just advice or an annual retainer fee is actually what I do with a lot of my clients.

That type of model is maybe likened to if you were going to shop for a car and you went to Kathy's Fiduciary Car Advising, and you don't work for Toyota, you don't work for Honda, Ford, any of these [00:04:00] companies. Someone comes to you and pays you $300 and says, "I have a family of four, what's the best minivan I should buy?" That, you have no dog in the hunt.

You're making your fee for giving the advice, and you could send them to the Toyota Sienna. I'm talking about minivans. We just had twins, so these minivans are on my mind, but you'll send them wherever is best for that person. That's a fee-only advisor or a fee-only financial planner. If you think about, say, a Toyota dealership if you go into there and you say, "What's the best car that I should buy for my family?" they're not going to send you to the Honda Odyssey.

It makes sense. They work there, they know their cars really well. There's nothing wrong with that. It's just something that you need to keep in mind. In the financial world, there are advisors that may work for a larger company, I won't mention company names, but larger companies that have proprietary products or investments that a financial advisor may earn a little bit more or a commission or be incentivized in some other way, like with trips or things like that, to sell a product into a portfolio, and there's nothing wrong with that.

I know a lot of really good advisors and good planners that are in that model of the industry, but that's a conflict of interest that you just need to be aware of when you're going to work with someone. If you're looking for someone and you want complete objectivity and you want as little conflict of interest as possible, you want to look for someone that's fee-only and that is going to charge you an hourly rate or even an annual retainer.

A lot of times people don't want to pay for that. An hourly rate might be-- For a really good one, it's going to probably be closer to the $400 an hour range. That's probably the highest end. You might even get higher than that for one that does a retainer on someone who has a larger portfolio of real estate or investments. Depending on what you have going on, you could pay $10,000 a year and even more.

Then there's others if your situation is not as complicated, it might be worth just paying an hour of time of a financial planner. If you pay [00:06:00] $400 and they give you advice on some tax planning situation and a portfolio allocation that saves you $20,000 every year for the next 30 years, it's not a bad investment. [crosstalk] That's the model. If people are looking for something completely objective and if you currently have a financial advisor, that's something to maybe do a little bit of research and see what their model is.

A lot of people don't know how they pay their financial advisor. That's the first question to ask, how they get paid, and they should be able to answer it, no problem. They should get paid, and they should get paid well if they do a good job, but you as a customer or client deserve to know how that's happening.

Kathy: Which are the highest-paid commission investments, in other words, the ones that a financial planner might benefit the most from putting you into?

Kyle: That's a very good question. It changes over the years. Thankfully, there's more regulation than there used to be on some of this stuff, so that does [unintelligible 00:06:57] like you were talking about the mortgage industry, things have to be disclosed more. Some of the higher-commission products these days would be things like variable annuities, which is like an insurance investment product hybrid to really simplify it.

That doesn't mean it's a bad product. It means that there's a certain incentive there, and there are situations where that makes sense to have a product like that. Life insurance, some insurance sales, that's part of the industry that there really isn't a non-commissioned product out there. It's pretty much anytime you buy life insurance, there's going to be some sort of commission.

Some financial advisors and I have to be careful, I hesitate to call them advisors sometimes if you're just, I would say, an insurance advisor, if someone is just an insurance salesman, they know a lot about insurance. [crosstalk] They know a lot about insurance. I refer clients to an insurance advisor or salesman to advise them on what insurance they should get and then bring it back to me so that I can look over it and make sure there was no incentive.

[00:08:00] Whole life insurance has a very high commission. It's a very high-commission product. There's a place for that. For most people, it does not fit. For higher-net-worth people, it can fit in certain areas.

Kathy: How high-net-worth, I'm curious?

Kyle: Oh, it depends.

Kathy: It depends, yes.

Kyle: I would say $5 million and above of net worth, you could probably make a pretty good case for it. Below that, you can make cases for it. I shouldn't even put a number out there, but that popped into my mind, but you could go--

Kathy: I'm just curious because we got calls all the time from people wanting us to promote it, and I didn't understand it enough, so I didn't want to do it. I just knew that there were huge commissions, and I didn't really understand the benefit, but I keep hearing how great it is, but I'm not sure if that's coming from the salespeople or from the client.

Kyle: Well, to go in a little more detail, in the real estate arena, your listeners, there's a little bit more benefit to a whole life insurance product if it's structured correctly. The reason for that is, if it's someone with higher net worth or higher income and higher income bracket, it allows you to access funds tax-free by taking loans on an insurance product. It's too much detail to go into on this podcast, but there is more of a case to be made there, but you do have to understand it. It is not easy to understand.

A lot of times, that that starts to get even higher-net-worth. You get to where you're really structuring a whole strategy around your-- There's an infinite banking concept out there that several people are proponents of. It's a very good thing for someone who has a very high net worth and they're building a team, they have a financial planner, a CPA, an insurance expert, an attorney.

It's this family office type setup where you're really building out something that is a generational thing, and your taxes [00:10:00] are just eating you alive, then you add this product in. For the average higher-net worth person from the $1 to $5-million range, I would say it's the minority that you'd need a product like that because you can get the insurance. If you're looking for life insurance, term insurance, which means you pay for it every year for a certain number of years, either it's 20 or 30 years, you get a $1-million policy.

For me, a $1-million policy, a guy in the 30s, it's $60 a month, and after 30 years it's done. I don't get any money back, but if I die, my family gets $1 million. You can invest that, put in real estate, whatever, just to take care of your family. It's not an investment product, it's not meant to be a cash management product. For the most part, that's going to be the best bang for the buck.

Those extra dollars that you would have paid for a whole life product or strategy can be used to pay down debt or to pay the mortgage on a rental property, invest in some other way. Dave Ramsey often pushes the "Buy term, invest the difference." That, as opposed to whole life, is not quite that simple, but for most people, that's probably a good fit.

Kathy: No, I just figured that it was circulating among regular folks and that probably the people benefiting the most were selling, but everybody's got to make a living, right?

Kyle: Oh, yes, definitely.

Kathy: I find it fascinating to meet someone like you because I was just talking to Rich thinking this is what we need, we need that person who can look at everything we're doing and let us know if we've got the right insurance, or maybe we're not diversified enough. We're definitely not diversified enough. We're barely in the stock market, we played a little bit when it tanked last year but not my expertise.

We just didn't want to put too much into it, I have a little bit in gold. I don't know if that's a good thing, but to have a service like that, where somebody is just being paid by the hour, it [00:12:00] sounds amazing. I know that I want to preface this with letting our audience know that you are retired. You are not taking-- I think you're retired or you're not taking new clients. Let's just get that clear. You're not promoting yourself. How does someone find someone like you who is taking clients?

Kyle: That's a good question. I'm not officially retired. I guess I could if I want. I enjoy my job a lot. I've really dialed it back. Like I said, we have twins that are here now, so family's really important to me. Financial independence is a big thing for me, too. To find somebody that is that hourly model, there's a couple of organizations out there. I'll throw those out there. That's actually probably a good place for listeners to head to.

One is the XY Planning Network, it's called. Because I'm a member of the organization, it's a professional organization that we do continuing education through. It's only fee-only certified financial planners. There's no commission product or financial plan as a part of that organization, and they have a website. You can search for someone by geography, you can search by for someone by expertise.

If you want someone who's real-estate-focused, it's a very good place to go for that. The other organization is NAPFA, N-A-P-F-A, the National Association of Personal Financial Advisors. That's also a fee-only certified financial planner, CFP-only organization. It's a similar place to go to find someone that works on that model. What you will find is you will find people like in any industry, people that have less experience, they might still be really good at their job.

There's people who have less experience than me that are way smarter than me and do a way better job than I do, for sure. What you'll find is that people that have 5 to 10 years of experience, it's going to be more like me. At least in this industry, there's such a demand for the fee-only financial planner [00:14:00] that has the 10 years of experience already that a lot of us are very busy or we've really dialed it back to not be taking on clients or take on people that we just really like.

It's less about growing the business anymore, as opposed to working with people that we can really provide value to. Those would be the good places to start. If you go to either one of those websites, they'll have a description of what that person looks like. I should say, your certified financial planner, not every financial advisor out there has that credential.

There's CPAs, you have these other professional designations out there, and that certified financial planner-- Let's see. When I took it, it was seven separate exams that you have to pass and then a 10-hour, two-day exam that you have to pass. You have to have three years of experience to hold the credential that you have to do under another CFP. Those requirements might've changed just slightly, currently, but that's what you're looking at.

Their work is in insurance, estate planning, investments. There's several other different courses that you have to go through, but that's the person that you're wanting to look for. You want someone that's looking at everything. Then, honestly, if you're talking to somebody like you started off right at the beginning, to find someone that if you're very real-estate-focused, you don't want someone that says, "Sell all your real estate and put it into Tesla."

Kathy: [laughs] That's right, yes.

Kyle: That just doesn't make sense. You also want a CFP. If you think of a CFP as the quarterback of a football team, there's a wide receiver that knows his job and is way better at it than the quarterback, but the quarterback knows about what he's supposed to be doing. He's doing something out of line. If I refer to an attorney for estate planning and I see something that's not quite right, I'm not an attorney and I can't give specific legal advice, but I can at least tell the client, "You need to get another opinion.

"This is incorrect." That's how a financial planner works. It's that broad [00:16:00] stroke over the entire situation. If you're more real-estate-focused, where I was going with that is the tax implications. A lot of financial advisors don't even look at if you're starting to draw income in retirement, you need to look where you're going to draw it from. Do you draw from a capital gains with a lower tax bracket?

Do you draw rental income? Do you pull? Do you get a home equity line of credit to do income for one year because your taxes are too high and then you pay it off next year? There's all these little pieces, and when do you take social security? They all balance each other out, whereas if you have someone who's just investments or someone that's just insurance, they can give really good advice in those areas, but they've got to meet together.

If you're getting a 10% return in one investment but your taxes are hitting you at 45% because you took it out of the wrong account or in the wrong strategy, you're really negating a lot of the value that's provided there. Does that answer the question?

Kathy: Yes, yes, it does. I'm wondering when we're going to get an AI that we can just put everything in and it spits out what we need to do, [laughs] then the government would get involved and not give you this test.

[laughter]

Kyle: That's right. Yes. The problem is people don't fit into a box good enough for AI. If we were all robots, then I think they could create an AI for it. [crosstalk] I have a client that he's losing his job, but they saved really well for retirement, and he's going to be retiring next month, but his situation is way different. He's able to do that because his living expenses were really low.

I have another client that's a very similar situation and that it's going to be tough for them because their strategy could be the same if their lifestyle was different. You really have to have someone that really wants to look at your whole situation and make recommendations specific to you and your family, the goals that you have. Do you have kids, do you do not have kids? Are you going to get-

Kathy: Do you have goals?

Kyle: -inheritance at some point? Do you have goals?

Kathy: Right. We've got to start there.

Kyle: Yes. I shouldn't assume that. Yes.

Kathy: A lot of people haven't sat down or you have to keep revisiting them [00:18:00] because life changes. That's something that you would want to do, ideally, with a coach or an advisor. I'm curious why a financial planner would choose one over the other. It seems like you would make more money, and maybe it's the same thing, but in a situation where it's assets under management or commissions or both versus just a flat fee.

Kyle: I'll be very transparent in how I operate my business. I do a lot of assets under management, and I also do one-time fee-only hourly stuff and then retainer, where you charge a certain amount a year and the client has access to you. Initially, to get into the industry, it's a lot easier to do commissioned products. You can sell a product. It's like you said, everyone needs to make a living.

I want to make sure that we're not-- Sometimes I tend to talk down on that type of the industry, and I really need to be careful not to because these are good people that are trying to make a living and really believe in the product that they're selling, they're just not looking at the whole picture sometimes. Usually, early on in a career, that type of commission product makes more sense because if you're doing assets under management, if you're selling a $100,000 product and you make a 5% commission on it, you make $5,000 just like that.

If you're going to manage assets for clients, you're advising them on real estate and investments and it's $100,000 worth but you're going to charge 1%, which is maybe an industry standard, that's $1,000 a year for five years that you have to wait to get that $5,000 if you would've just sold them a product. That's the temptation, it's a delayed gratification type of business.

The first two years that I started my firm, I bought a few little clients from an old firm and started my firm. I made $13,000 the first year, $19,000, the next year, super-small, but I was building the [00:20:00] model of retainer clients only, long-term. That's why an advisor might choose one or the other. Apart from the objectivity, I chose this model because I want to make sure that my conflicts of interest are as clean as possible for clients and that they know that when they're coming to me, too.

Kathy: [crosstalk] Yes, I'm sure. It makes sense. It's the same for me at RealWealth. I could be selling $5-million homes in Malibu, but that's just not where my heart's at. I want to help the average person build a portfolio of $100,000 homes that pay us barely anything.

Kyle: Yes. Thank you for doing that. Thank you for not [unintelligible 00:20:37] and doing the real wealth instead. I appreciate that. For everyone listening, I have a couple of homes that I'm going through in Florida through RealWealth. I was telling Kathy before we got on that I wish I would have found them earlier because I tried to do my own vetting ahead of time in the market and that it's working out, but it was a lot of work, and it has been nice to work with a team.

Kathy: That means so much. I was so surprised when you said that in our pre-interview, I had no idea. I should've known, but thank you for saying that. Tell me, if you don't mind, what was difficult about trying to do it yourself because you live in Oregon, and you were trying to buy in Ohio. What did you learn in that process of doing it yourself?

Kyle: It's just hard to know where to start. I just booked a ticket to Dayton, Ohio, and met with five agents and three property managers, and a couple of local lenders in the area. You come away thinking it's just a whirlwind because you haven't actually worked with these people. You've interviewed them. Do they interview really well? They don't do a really good job. I've gone through one property management company there, I'm on the second one, and they're doing okay, it's not amazing.

It was very tough. I tried to diversify out of Oregon, so that was the reason that I went there, and I'm looking at Florida and some other markets, too. [00:22:00] I'd rather spend my time analyzing deals or getting the financial stuff that I'm really good at, rather than the boots on the ground, vetting property managers and builders, which I love that you guys do that. It's really nice.

Kathy: You don't have to do that. I Love what you said in, again, the pre-interview, just like, "What an interesting model to have crowd-based real estate?" Was that what you said?

Kyle: Yes.

Kathy: That, I had never really thought about it that way, but that's what it is because these teams that we refer people to, if we get poor reviews from our members, well, they're not going to be on our list anymore. It forces them to be great and to take care of our members. I really appreciate that perspective. They work so hard at doing that. I sometimes very rarely because I need to be in a really good mood and feel really strong, but sometimes I'll do a Google search on myself.

Recently, I saw something on Reddit that was about us, and someone was like, "Oh, I met them, I'm not impressed." I'm like, "Oh my gosh, I wonder why, what did I do?" They also said, "What do you need them for, anyway? Just go do it yourself." I still wanted to respond and say, "Yes, do it yourself and also know that there's this group of people who have a great track record, that's the benefit."

Anyway, it's hard to understand that until you've done it. There's a lot of do-it-yourselfers. Do-it-yourselfers are just that. They're good at that. There's people like you and me that would rather not, rather have to pay someone else to do it. Just like I'd rather pay you to look at my portfolio and help me, it's the same kind of idea.

Kyle: Yes, that's a really good point. That's not just in real estate, that's a decision we always have to make, whether we do something ourself or whether it makes sense for us to hire it out, pay someone else to do it. [00:24:00] If it's the lifestyle that you want, that you love going into a home and Chip and Joanna Gaines'ing it to death, really renovating the place, burst strategy, bringing in tenants, if that's what you enjoy doing, don't use ReealWealth.

Why would you do that? Because that's what you enjoy. I enjoy financial planning, I enjoy time with my family, I enjoy investing a lot, but that's at a high level. I don't enjoy getting down into the weeds, at least not anymore. When I first started, I was helping to renovate our duplexes and things like that. You move past that, and I didn't enjoy it. That was to learn what I needed to know.

Some people enjoy it. That's in anything. If you're going to fix your own car if you really like fixing your own car, go for it. I don't like that, so I would have somebody else do it. I'm putting solar panels at our house. I'm really enjoying it.

Kathy: By yourself? Wow.

Kyle: I'm not going to hire someone else to do it. I'm doing it myself, yes.

Kathy: Oh my gosh.

Kyle: It's one of the best, I'm having a blast doing it, which I wouldn't have told you that I'd be up for doing something like that, but that's what people have to decide. That reviewer on Reddit, that's great for them. Don't hire them if you can save money or you think you can do a better job, but if you have hundreds or thousands of investors that are vetting these providers, it might be hard to do a better job than that.

Kathy: Yes, agreed. Oh, so, so good. I know we're just about out of time. I'm just going to look at my list of questions to see what I might have missed. Let's talk about this. This is a question that comes up a lot. Is there an age limit to investing in real estate because I know that that's been a thing for financial planners saying, "Oh, by the time you're 60, you really need to be in conservative investments," maybe even younger?

I'm not sure. We have a lot of people that come to us later in life because they are maybe liquidating a property that they had in California that can sell for a million dollars and they can get into five brand new rentals [00:26:00] in Florida or something like that. Maybe they're 65. We've had people in their 70s and 80s even doing that and increasing their cash flow. What are your thoughts on that?

Kyle: I would say, definitely, no age limit. Real estate, just like a lot of other investments, you can dial up the risk or dial down the risk just as pretty easily within that asset class. It's real estate and this depends on how you look at risk, too. Maybe you put 75% down on a property and you only take a 25% loan because you just want to have this little tiny mortgage payment that is not a big deal.

You're 70 and if something happens where there's a tenant out for a few months and you have some cash reserves that you can pay that, it's not a big deal, or you can just pay it with your social security check to cover that mortgage, or you pay all cash for the property, to reduce the risk. Now, I will say you have to be careful when thinking about risk. What I've seen, especially in this market, is if you pay all cash for a property, I would say there's actually some more risk there than you might realize.

I think you've talked about this on this show with other guests before, too, but the fact that you can get a 30-year mortgage for 2.9% right now or as an investor, 3.5%, maybe on a single-family home, and you can take that $150,000 that you would have put to pay cash for it and keep that in reserves or maybe get another one like you said, if you sell a property in California and you get a few nice loans on a few other properties, that cash flow, you're paying down the mortgage, getting depreciation, I would argue that having all of your cash locked up in that property, there is a different kind of risk to that that you do need to be careful of.

You might not want to do that with all your properties. Even if you're 70, even if you're 80, it's okay to have a mortgage. If you have a big chunk in the bank of reserves that you can pay that mortgage off for 20 more years and you're 80, I think you're going to be okay. [00:28:00] [unintelligible 00:28:00] Yes, it is.

Kathy: It's all about reserves, right? It's good property management and reserves. Even in our own single-family rental fund that we have, I was really nervous about getting leverage on that because you got to make those payments. When you're talking about a $5-million loan, it's different than a $100,000 one. You got to be able to make those payments. We just did what you said.

We kept plenty in reserves, but we also had some of the portfolio in cash so that if anything happened, we could just sell that one property and we got the cash or invest it in short-term lending or something like that. I do agree that regardless of age, you could be 30 and it's a huge risk for you if you don't have the reserves but you bought a property and it's vacant for a couple of months and then there's repairs that are needed, which there always are, don't think that there won't be, and you don't have that money. It doesn't matter how old you are. It's a horrible situation.

Kyle: Yes. Definitely, the reserves will make or break a real estate portfolio. That's a big deal. We're at a weird time now where inflation is outpacing these loans that you can get on properties. That's not always a typical scenario where you can get a loan with a lower interest rate than what the actual inflation numbers are coming out with. If you want to look at what inflation might really be, you're probably doing even better, but if you can get a loan for 3% and inflation's at 5% right now, the bank is paying you to have that loan. It becomes an asset to you in the long run.

Kathy: I'm glad you, again, brought that up because so many financial planners and just conservative investors believe you should pay off your primary residence when, in fact, that's where you can get your cheapest money. If you refi your primary and get that 2% loan or whatever and re-invest that, of course, you need to know how to reinvest that properly, that could be a really good use of money. Do you see any issues with cash-out refinancing your primary?

Kyle: It really depends [00:30:00] on someone's situation. I don't. Personally or for a client that's very responsible with money, has good savings, has good reserves, there, I don't think there's anything wrong with that. It is the cheapest money that you can get, it's incredibly cheap. We're the only country in the world that has these 30-year loans that you can get at these low interest rates.

It might not always be the case. The other thing that I should say is that it's not always that way. You look at different decades, it doesn't always make sense. What I'm advising clients to do now, 10 years from now, it might change, depending on if interest rates are a lot higher, if they need to refinance for some other reason, or say they are buying a house and interest rates start at 8%.

Now, it might make sense to pay that loan down faster because you're getting a guaranteed 8% return on paying that debt off and say inflation is about the same. It's not a blanket statement for all times, but where would we sit now, with these just historically low-rate loans that are available with inflation outpacing it, is very unique. If you have the reserves, it's actually a very good hedge against inflation, which reduces your risk because if you have too much cash not working enough for you, inflation's going to eat away at the value of it.

If you could put a loan on a property that cash flows very well, this is not speculation, these are investments that cashflow, then it helps hedge against inflation, which is a very big risk to retirees especially if you have fixed income, [crosstalk] yes, you can really be hurt if the cost of food doubles in the next five years and your retirement income does not.

Kathy: The cost of everything doubles or triples, it's accelerating. Finally, is there a point where one might be not diversified enough and just own too much real estate?

Kyle: Yes. Real estate, it depends on the person, whether you can say you have too much real estate or not enough real estate. I would say if someone's very heavy-real-estate-focused, you understand the industry, that's what you want to be invested in, I would say it's more about making sure you're diversified within markets because if you are too heavy in one market, that can really hurt you.

I would also say that there's benefit to the liquidity of other types of investments. If you're investing in a 401(k) or Roth IRA, a traditional IRA, even precious metals like gold and silver, there's different benefits to those. It is good to have some of those other vehicles, especially like Roth accounts that you pay the tax now and you never pay tax again. I think that's an account that's going to go away, eventually.

If you can take advantage of those accounts, max those out, I would definitely recommend doing that. If you're really getting into real estate investing and buying more properties, it's not too much trouble to max out your Roth IRAs, too. I've seen where clients that future investment liquidity from those accounts affords them the ability to buy a property and pull it out tax-free, whereas if you pull it out of a 401(k) or a pre-tax account or sell an investment, you might have to pay tax on it without 1031 exchange, but a Roth IRA account if you've got $100,000 thousand in there, you can pull it out, and it doesn't mess with your taxes at all.

Kathy: Fascinating. I'm sure if we could take live questions, we would get a lot of them, but we've already taken so much of your time. Thank you, Kyle, so much for being here on the Real Wealth Show. It's been really enlightening.

Kyle: It's an honor, Kathy. Thanks for having me, I appreciate it.

Kathy: Thank you for joining me here on the Real Wealth Show. You can go to realwealthshow.com to get access to webinars. There's over 500 that go much, much deeper into the mechanics of real estate investing, including interviews with CPAs, who can really help you structure things and save you a ton of money. We have property managers, who will teach you what to look for in property management.

They teach those courses and those webinars. We have mortgage brokers, who will show you what to really look for and alone, especially when it comes to investment property.

Then we have teams across the country that are over 57,000 members that RealWealth have been working with and can give us great feedback on how they're doing, and they're on our list because they're doing great, and they can help you acquire investment property with property management in place in really hot growing markets like Florida and Texas and North Carolina, and then, of course, great cashflow markets like Ohio.

Again, you can go to realwealthshow.com. It's free to join, and you'll get access to all of those in-depth webinars. Thanks so much for joining me here on the Real Wealth Show, and we'll see you next time. Bye-bye.

Speaker: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com.

[00:35:11] [END OF AUDIO]

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เนื้อหาจัดทำโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth เนื้อหาพอดแคสต์ทั้งหมด รวมถึงตอน กราฟิก และคำอธิบายพอดแคสต์ได้รับการอัปโหลดและจัดเตรียมโดย Rich and Kathy Fettke and Kathy Fettke / RealWealth หรือพันธมิตรแพลตฟอร์มพอดแคสต์โดยตรง หากคุณเชื่อว่ามีบุคคลอื่นใช้งานที่มีลิขสิทธิ์ของคุณโดยไม่ได้รับอนุญาต คุณสามารถปฏิบัติตามขั้นตอนที่อธิบายไว้ที่นี่ https://th.player.fm/legal

How do you find a trustworthy financial planner? And, if you're into real estate, how do you find one who understands real estate and can add value to your specific strategy? In this episode, our guest Kyle Mast, is just that. He's a certified financial planner and a real estate investor who understands that kind of investing strategy.

Kyle is the owner of Clarity Financial which is a fee-only, fiduciary firm with a focus on helping pre-retirees, real estate investors, and people pursuing early financial independence, but he's not taking new clients at this time. He loves helping people get their financial lives in order, however, and does that by doing interviews, like this one.

Join RealWealth today at realwealthshow.com to find out how to build wealth with new and renovated single-family rentals. Membership is free, and will give you access to the Investor Portal where you can view sample property pro formas and connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

And please remember to subscribe to our podcast and leave a review if you like what you hear! Thank you!

TRANSCRIPT

[music]

Speaker: [00:00:00] You're listening to the Real Wealth Show with Kathy Fettke, the real estate investors resource.

[music]

Kathy Fettke: How do you find a trustworthy financial planner? If you're really into real estate, how do you find a financial planner who understands your strategy and supports it and can help you with it? I'm Kathy Fettke and welcome to the Real Wealth Show. Our guest today is just that. Kyle Mast is a financial planner, and he's also a real estate investor. He's a CFP and the owner of Clarity Financial, but I just want to warn you, he is not taking new clients at this time, but he's happy to give us guidance here on the Real Wealth Show for free. Kyle, welcome to the Real Wealth Show.

Kyle Mast: Thanks for having me, Kathy.

Kathy: Do you agree that it's important for your financial planner to understand real estate if you are also investing in real estate?

Kyle: Well, that's a very loaded question. Yes, very easy question. If you're not interested in real estate at all, then you probably don't need a planner that knows very much about it, but if that's a big piece of your portfolio, especially if it's the majority of your portfolio, you need to make sure your financial planner, depending on what you mean by financial planner, does understand real estate just as much as maybe stocks and bonds or something that's maybe more typically thought of in that area.

Kathy: I am so glad you mentioned that because I thought a financial planner technically should be someone who looks at your entire financial plan that would include real estate, but generally, it doesn't at all. It's just mainly for stocks.

Kyle: It depends on who. When you go to look for a financial advisor or a financial planner, there's a couple of things that you maybe want to look for when you're looking to work with someone. Some people are very focused on investment management, getting a portfolio of investments that include stocks and bonds, maybe some alternatives in there that could include real estate.

Sadly, our industry, a lot of the training is really focused on stocks [00:02:00] and a portfolio and how to allocate it according to someone's age. Those things are all important, but it misses a broader picture of, if you own a primary residence, should you consider refinancing at some point? A lot of times the incentives, maybe, aren't aligned when you work with a financial advisor.

If you want to pay off your house, that's less money for a financial advisor to manage and make fees on. That doesn't mean that a good financial advisor or planner can't overlook that conflict of interest and give you good advice one way or the other, depending on your situation. Those are things you have to be aware of. If they're getting paid on a certain product or investment, that's a conflict of interest that dictates how they may offer you advice.

Kathy: Sure. Always follow the money, right? That's the problem is we don't know often how to follow the money. I was a mortgage broker for so long. Back when I started, you didn't really even have to disclose how much you were making. It was just backend commissions that would be made, sometimes 3% of a $1-million loan in California, $30,000 to push some paper, but the client really never even knew that we were making that much. Is it the same with financial planning? Is there secret fees behind the scenes?

Kyle: Yes, there's different. Maybe I'll try to use an illustration to give people an idea. When you're looking for a financial planner, I'm what's called a fee-only fiduciary. I'm a certified financial planner, but I'm also fee-only. That means I don't earn commission for selling an investment product, I earn fees from the clients, either if that's for managing something for them, whether it's a portfolio of investments or a lot of the times, it's an hourly fee for just advice or an annual retainer fee is actually what I do with a lot of my clients.

That type of model is maybe likened to if you were going to shop for a car and you went to Kathy's Fiduciary Car Advising, and you don't work for Toyota, you don't work for Honda, Ford, any of these [00:04:00] companies. Someone comes to you and pays you $300 and says, "I have a family of four, what's the best minivan I should buy?" That, you have no dog in the hunt.

You're making your fee for giving the advice, and you could send them to the Toyota Sienna. I'm talking about minivans. We just had twins, so these minivans are on my mind, but you'll send them wherever is best for that person. That's a fee-only advisor or a fee-only financial planner. If you think about, say, a Toyota dealership if you go into there and you say, "What's the best car that I should buy for my family?" they're not going to send you to the Honda Odyssey.

It makes sense. They work there, they know their cars really well. There's nothing wrong with that. It's just something that you need to keep in mind. In the financial world, there are advisors that may work for a larger company, I won't mention company names, but larger companies that have proprietary products or investments that a financial advisor may earn a little bit more or a commission or be incentivized in some other way, like with trips or things like that, to sell a product into a portfolio, and there's nothing wrong with that.

I know a lot of really good advisors and good planners that are in that model of the industry, but that's a conflict of interest that you just need to be aware of when you're going to work with someone. If you're looking for someone and you want complete objectivity and you want as little conflict of interest as possible, you want to look for someone that's fee-only and that is going to charge you an hourly rate or even an annual retainer.

A lot of times people don't want to pay for that. An hourly rate might be-- For a really good one, it's going to probably be closer to the $400 an hour range. That's probably the highest end. You might even get higher than that for one that does a retainer on someone who has a larger portfolio of real estate or investments. Depending on what you have going on, you could pay $10,000 a year and even more.

Then there's others if your situation is not as complicated, it might be worth just paying an hour of time of a financial planner. If you pay [00:06:00] $400 and they give you advice on some tax planning situation and a portfolio allocation that saves you $20,000 every year for the next 30 years, it's not a bad investment. [crosstalk] That's the model. If people are looking for something completely objective and if you currently have a financial advisor, that's something to maybe do a little bit of research and see what their model is.

A lot of people don't know how they pay their financial advisor. That's the first question to ask, how they get paid, and they should be able to answer it, no problem. They should get paid, and they should get paid well if they do a good job, but you as a customer or client deserve to know how that's happening.

Kathy: Which are the highest-paid commission investments, in other words, the ones that a financial planner might benefit the most from putting you into?

Kyle: That's a very good question. It changes over the years. Thankfully, there's more regulation than there used to be on some of this stuff, so that does [unintelligible 00:06:57] like you were talking about the mortgage industry, things have to be disclosed more. Some of the higher-commission products these days would be things like variable annuities, which is like an insurance investment product hybrid to really simplify it.

That doesn't mean it's a bad product. It means that there's a certain incentive there, and there are situations where that makes sense to have a product like that. Life insurance, some insurance sales, that's part of the industry that there really isn't a non-commissioned product out there. It's pretty much anytime you buy life insurance, there's going to be some sort of commission.

Some financial advisors and I have to be careful, I hesitate to call them advisors sometimes if you're just, I would say, an insurance advisor, if someone is just an insurance salesman, they know a lot about insurance. [crosstalk] They know a lot about insurance. I refer clients to an insurance advisor or salesman to advise them on what insurance they should get and then bring it back to me so that I can look over it and make sure there was no incentive.

[00:08:00] Whole life insurance has a very high commission. It's a very high-commission product. There's a place for that. For most people, it does not fit. For higher-net-worth people, it can fit in certain areas.

Kathy: How high-net-worth, I'm curious?

Kyle: Oh, it depends.

Kathy: It depends, yes.

Kyle: I would say $5 million and above of net worth, you could probably make a pretty good case for it. Below that, you can make cases for it. I shouldn't even put a number out there, but that popped into my mind, but you could go--

Kathy: I'm just curious because we got calls all the time from people wanting us to promote it, and I didn't understand it enough, so I didn't want to do it. I just knew that there were huge commissions, and I didn't really understand the benefit, but I keep hearing how great it is, but I'm not sure if that's coming from the salespeople or from the client.

Kyle: Well, to go in a little more detail, in the real estate arena, your listeners, there's a little bit more benefit to a whole life insurance product if it's structured correctly. The reason for that is, if it's someone with higher net worth or higher income and higher income bracket, it allows you to access funds tax-free by taking loans on an insurance product. It's too much detail to go into on this podcast, but there is more of a case to be made there, but you do have to understand it. It is not easy to understand.

A lot of times, that that starts to get even higher-net-worth. You get to where you're really structuring a whole strategy around your-- There's an infinite banking concept out there that several people are proponents of. It's a very good thing for someone who has a very high net worth and they're building a team, they have a financial planner, a CPA, an insurance expert, an attorney.

It's this family office type setup where you're really building out something that is a generational thing, and your taxes [00:10:00] are just eating you alive, then you add this product in. For the average higher-net worth person from the $1 to $5-million range, I would say it's the minority that you'd need a product like that because you can get the insurance. If you're looking for life insurance, term insurance, which means you pay for it every year for a certain number of years, either it's 20 or 30 years, you get a $1-million policy.

For me, a $1-million policy, a guy in the 30s, it's $60 a month, and after 30 years it's done. I don't get any money back, but if I die, my family gets $1 million. You can invest that, put in real estate, whatever, just to take care of your family. It's not an investment product, it's not meant to be a cash management product. For the most part, that's going to be the best bang for the buck.

Those extra dollars that you would have paid for a whole life product or strategy can be used to pay down debt or to pay the mortgage on a rental property, invest in some other way. Dave Ramsey often pushes the "Buy term, invest the difference." That, as opposed to whole life, is not quite that simple, but for most people, that's probably a good fit.

Kathy: No, I just figured that it was circulating among regular folks and that probably the people benefiting the most were selling, but everybody's got to make a living, right?

Kyle: Oh, yes, definitely.

Kathy: I find it fascinating to meet someone like you because I was just talking to Rich thinking this is what we need, we need that person who can look at everything we're doing and let us know if we've got the right insurance, or maybe we're not diversified enough. We're definitely not diversified enough. We're barely in the stock market, we played a little bit when it tanked last year but not my expertise.

We just didn't want to put too much into it, I have a little bit in gold. I don't know if that's a good thing, but to have a service like that, where somebody is just being paid by the hour, it [00:12:00] sounds amazing. I know that I want to preface this with letting our audience know that you are retired. You are not taking-- I think you're retired or you're not taking new clients. Let's just get that clear. You're not promoting yourself. How does someone find someone like you who is taking clients?

Kyle: That's a good question. I'm not officially retired. I guess I could if I want. I enjoy my job a lot. I've really dialed it back. Like I said, we have twins that are here now, so family's really important to me. Financial independence is a big thing for me, too. To find somebody that is that hourly model, there's a couple of organizations out there. I'll throw those out there. That's actually probably a good place for listeners to head to.

One is the XY Planning Network, it's called. Because I'm a member of the organization, it's a professional organization that we do continuing education through. It's only fee-only certified financial planners. There's no commission product or financial plan as a part of that organization, and they have a website. You can search for someone by geography, you can search by for someone by expertise.

If you want someone who's real-estate-focused, it's a very good place to go for that. The other organization is NAPFA, N-A-P-F-A, the National Association of Personal Financial Advisors. That's also a fee-only certified financial planner, CFP-only organization. It's a similar place to go to find someone that works on that model. What you will find is you will find people like in any industry, people that have less experience, they might still be really good at their job.

There's people who have less experience than me that are way smarter than me and do a way better job than I do, for sure. What you'll find is that people that have 5 to 10 years of experience, it's going to be more like me. At least in this industry, there's such a demand for the fee-only financial planner [00:14:00] that has the 10 years of experience already that a lot of us are very busy or we've really dialed it back to not be taking on clients or take on people that we just really like.

It's less about growing the business anymore, as opposed to working with people that we can really provide value to. Those would be the good places to start. If you go to either one of those websites, they'll have a description of what that person looks like. I should say, your certified financial planner, not every financial advisor out there has that credential.

There's CPAs, you have these other professional designations out there, and that certified financial planner-- Let's see. When I took it, it was seven separate exams that you have to pass and then a 10-hour, two-day exam that you have to pass. You have to have three years of experience to hold the credential that you have to do under another CFP. Those requirements might've changed just slightly, currently, but that's what you're looking at.

Their work is in insurance, estate planning, investments. There's several other different courses that you have to go through, but that's the person that you're wanting to look for. You want someone that's looking at everything. Then, honestly, if you're talking to somebody like you started off right at the beginning, to find someone that if you're very real-estate-focused, you don't want someone that says, "Sell all your real estate and put it into Tesla."

Kathy: [laughs] That's right, yes.

Kyle: That just doesn't make sense. You also want a CFP. If you think of a CFP as the quarterback of a football team, there's a wide receiver that knows his job and is way better at it than the quarterback, but the quarterback knows about what he's supposed to be doing. He's doing something out of line. If I refer to an attorney for estate planning and I see something that's not quite right, I'm not an attorney and I can't give specific legal advice, but I can at least tell the client, "You need to get another opinion.

"This is incorrect." That's how a financial planner works. It's that broad [00:16:00] stroke over the entire situation. If you're more real-estate-focused, where I was going with that is the tax implications. A lot of financial advisors don't even look at if you're starting to draw income in retirement, you need to look where you're going to draw it from. Do you draw from a capital gains with a lower tax bracket?

Do you draw rental income? Do you pull? Do you get a home equity line of credit to do income for one year because your taxes are too high and then you pay it off next year? There's all these little pieces, and when do you take social security? They all balance each other out, whereas if you have someone who's just investments or someone that's just insurance, they can give really good advice in those areas, but they've got to meet together.

If you're getting a 10% return in one investment but your taxes are hitting you at 45% because you took it out of the wrong account or in the wrong strategy, you're really negating a lot of the value that's provided there. Does that answer the question?

Kathy: Yes, yes, it does. I'm wondering when we're going to get an AI that we can just put everything in and it spits out what we need to do, [laughs] then the government would get involved and not give you this test.

[laughter]

Kyle: That's right. Yes. The problem is people don't fit into a box good enough for AI. If we were all robots, then I think they could create an AI for it. [crosstalk] I have a client that he's losing his job, but they saved really well for retirement, and he's going to be retiring next month, but his situation is way different. He's able to do that because his living expenses were really low.

I have another client that's a very similar situation and that it's going to be tough for them because their strategy could be the same if their lifestyle was different. You really have to have someone that really wants to look at your whole situation and make recommendations specific to you and your family, the goals that you have. Do you have kids, do you do not have kids? Are you going to get-

Kathy: Do you have goals?

Kyle: -inheritance at some point? Do you have goals?

Kathy: Right. We've got to start there.

Kyle: Yes. I shouldn't assume that. Yes.

Kathy: A lot of people haven't sat down or you have to keep revisiting them [00:18:00] because life changes. That's something that you would want to do, ideally, with a coach or an advisor. I'm curious why a financial planner would choose one over the other. It seems like you would make more money, and maybe it's the same thing, but in a situation where it's assets under management or commissions or both versus just a flat fee.

Kyle: I'll be very transparent in how I operate my business. I do a lot of assets under management, and I also do one-time fee-only hourly stuff and then retainer, where you charge a certain amount a year and the client has access to you. Initially, to get into the industry, it's a lot easier to do commissioned products. You can sell a product. It's like you said, everyone needs to make a living.

I want to make sure that we're not-- Sometimes I tend to talk down on that type of the industry, and I really need to be careful not to because these are good people that are trying to make a living and really believe in the product that they're selling, they're just not looking at the whole picture sometimes. Usually, early on in a career, that type of commission product makes more sense because if you're doing assets under management, if you're selling a $100,000 product and you make a 5% commission on it, you make $5,000 just like that.

If you're going to manage assets for clients, you're advising them on real estate and investments and it's $100,000 worth but you're going to charge 1%, which is maybe an industry standard, that's $1,000 a year for five years that you have to wait to get that $5,000 if you would've just sold them a product. That's the temptation, it's a delayed gratification type of business.

The first two years that I started my firm, I bought a few little clients from an old firm and started my firm. I made $13,000 the first year, $19,000, the next year, super-small, but I was building the [00:20:00] model of retainer clients only, long-term. That's why an advisor might choose one or the other. Apart from the objectivity, I chose this model because I want to make sure that my conflicts of interest are as clean as possible for clients and that they know that when they're coming to me, too.

Kathy: [crosstalk] Yes, I'm sure. It makes sense. It's the same for me at RealWealth. I could be selling $5-million homes in Malibu, but that's just not where my heart's at. I want to help the average person build a portfolio of $100,000 homes that pay us barely anything.

Kyle: Yes. Thank you for doing that. Thank you for not [unintelligible 00:20:37] and doing the real wealth instead. I appreciate that. For everyone listening, I have a couple of homes that I'm going through in Florida through RealWealth. I was telling Kathy before we got on that I wish I would have found them earlier because I tried to do my own vetting ahead of time in the market and that it's working out, but it was a lot of work, and it has been nice to work with a team.

Kathy: That means so much. I was so surprised when you said that in our pre-interview, I had no idea. I should've known, but thank you for saying that. Tell me, if you don't mind, what was difficult about trying to do it yourself because you live in Oregon, and you were trying to buy in Ohio. What did you learn in that process of doing it yourself?

Kyle: It's just hard to know where to start. I just booked a ticket to Dayton, Ohio, and met with five agents and three property managers, and a couple of local lenders in the area. You come away thinking it's just a whirlwind because you haven't actually worked with these people. You've interviewed them. Do they interview really well? They don't do a really good job. I've gone through one property management company there, I'm on the second one, and they're doing okay, it's not amazing.

It was very tough. I tried to diversify out of Oregon, so that was the reason that I went there, and I'm looking at Florida and some other markets, too. [00:22:00] I'd rather spend my time analyzing deals or getting the financial stuff that I'm really good at, rather than the boots on the ground, vetting property managers and builders, which I love that you guys do that. It's really nice.

Kathy: You don't have to do that. I Love what you said in, again, the pre-interview, just like, "What an interesting model to have crowd-based real estate?" Was that what you said?

Kyle: Yes.

Kathy: That, I had never really thought about it that way, but that's what it is because these teams that we refer people to, if we get poor reviews from our members, well, they're not going to be on our list anymore. It forces them to be great and to take care of our members. I really appreciate that perspective. They work so hard at doing that. I sometimes very rarely because I need to be in a really good mood and feel really strong, but sometimes I'll do a Google search on myself.

Recently, I saw something on Reddit that was about us, and someone was like, "Oh, I met them, I'm not impressed." I'm like, "Oh my gosh, I wonder why, what did I do?" They also said, "What do you need them for, anyway? Just go do it yourself." I still wanted to respond and say, "Yes, do it yourself and also know that there's this group of people who have a great track record, that's the benefit."

Anyway, it's hard to understand that until you've done it. There's a lot of do-it-yourselfers. Do-it-yourselfers are just that. They're good at that. There's people like you and me that would rather not, rather have to pay someone else to do it. Just like I'd rather pay you to look at my portfolio and help me, it's the same kind of idea.

Kyle: Yes, that's a really good point. That's not just in real estate, that's a decision we always have to make, whether we do something ourself or whether it makes sense for us to hire it out, pay someone else to do it. [00:24:00] If it's the lifestyle that you want, that you love going into a home and Chip and Joanna Gaines'ing it to death, really renovating the place, burst strategy, bringing in tenants, if that's what you enjoy doing, don't use ReealWealth.

Why would you do that? Because that's what you enjoy. I enjoy financial planning, I enjoy time with my family, I enjoy investing a lot, but that's at a high level. I don't enjoy getting down into the weeds, at least not anymore. When I first started, I was helping to renovate our duplexes and things like that. You move past that, and I didn't enjoy it. That was to learn what I needed to know.

Some people enjoy it. That's in anything. If you're going to fix your own car if you really like fixing your own car, go for it. I don't like that, so I would have somebody else do it. I'm putting solar panels at our house. I'm really enjoying it.

Kathy: By yourself? Wow.

Kyle: I'm not going to hire someone else to do it. I'm doing it myself, yes.

Kathy: Oh my gosh.

Kyle: It's one of the best, I'm having a blast doing it, which I wouldn't have told you that I'd be up for doing something like that, but that's what people have to decide. That reviewer on Reddit, that's great for them. Don't hire them if you can save money or you think you can do a better job, but if you have hundreds or thousands of investors that are vetting these providers, it might be hard to do a better job than that.

Kathy: Yes, agreed. Oh, so, so good. I know we're just about out of time. I'm just going to look at my list of questions to see what I might have missed. Let's talk about this. This is a question that comes up a lot. Is there an age limit to investing in real estate because I know that that's been a thing for financial planners saying, "Oh, by the time you're 60, you really need to be in conservative investments," maybe even younger?

I'm not sure. We have a lot of people that come to us later in life because they are maybe liquidating a property that they had in California that can sell for a million dollars and they can get into five brand new rentals [00:26:00] in Florida or something like that. Maybe they're 65. We've had people in their 70s and 80s even doing that and increasing their cash flow. What are your thoughts on that?

Kyle: I would say, definitely, no age limit. Real estate, just like a lot of other investments, you can dial up the risk or dial down the risk just as pretty easily within that asset class. It's real estate and this depends on how you look at risk, too. Maybe you put 75% down on a property and you only take a 25% loan because you just want to have this little tiny mortgage payment that is not a big deal.

You're 70 and if something happens where there's a tenant out for a few months and you have some cash reserves that you can pay that, it's not a big deal, or you can just pay it with your social security check to cover that mortgage, or you pay all cash for the property, to reduce the risk. Now, I will say you have to be careful when thinking about risk. What I've seen, especially in this market, is if you pay all cash for a property, I would say there's actually some more risk there than you might realize.

I think you've talked about this on this show with other guests before, too, but the fact that you can get a 30-year mortgage for 2.9% right now or as an investor, 3.5%, maybe on a single-family home, and you can take that $150,000 that you would have put to pay cash for it and keep that in reserves or maybe get another one like you said, if you sell a property in California and you get a few nice loans on a few other properties, that cash flow, you're paying down the mortgage, getting depreciation, I would argue that having all of your cash locked up in that property, there is a different kind of risk to that that you do need to be careful of.

You might not want to do that with all your properties. Even if you're 70, even if you're 80, it's okay to have a mortgage. If you have a big chunk in the bank of reserves that you can pay that mortgage off for 20 more years and you're 80, I think you're going to be okay. [00:28:00] [unintelligible 00:28:00] Yes, it is.

Kathy: It's all about reserves, right? It's good property management and reserves. Even in our own single-family rental fund that we have, I was really nervous about getting leverage on that because you got to make those payments. When you're talking about a $5-million loan, it's different than a $100,000 one. You got to be able to make those payments. We just did what you said.

We kept plenty in reserves, but we also had some of the portfolio in cash so that if anything happened, we could just sell that one property and we got the cash or invest it in short-term lending or something like that. I do agree that regardless of age, you could be 30 and it's a huge risk for you if you don't have the reserves but you bought a property and it's vacant for a couple of months and then there's repairs that are needed, which there always are, don't think that there won't be, and you don't have that money. It doesn't matter how old you are. It's a horrible situation.

Kyle: Yes. Definitely, the reserves will make or break a real estate portfolio. That's a big deal. We're at a weird time now where inflation is outpacing these loans that you can get on properties. That's not always a typical scenario where you can get a loan with a lower interest rate than what the actual inflation numbers are coming out with. If you want to look at what inflation might really be, you're probably doing even better, but if you can get a loan for 3% and inflation's at 5% right now, the bank is paying you to have that loan. It becomes an asset to you in the long run.

Kathy: I'm glad you, again, brought that up because so many financial planners and just conservative investors believe you should pay off your primary residence when, in fact, that's where you can get your cheapest money. If you refi your primary and get that 2% loan or whatever and re-invest that, of course, you need to know how to reinvest that properly, that could be a really good use of money. Do you see any issues with cash-out refinancing your primary?

Kyle: It really depends [00:30:00] on someone's situation. I don't. Personally or for a client that's very responsible with money, has good savings, has good reserves, there, I don't think there's anything wrong with that. It is the cheapest money that you can get, it's incredibly cheap. We're the only country in the world that has these 30-year loans that you can get at these low interest rates.

It might not always be the case. The other thing that I should say is that it's not always that way. You look at different decades, it doesn't always make sense. What I'm advising clients to do now, 10 years from now, it might change, depending on if interest rates are a lot higher, if they need to refinance for some other reason, or say they are buying a house and interest rates start at 8%.

Now, it might make sense to pay that loan down faster because you're getting a guaranteed 8% return on paying that debt off and say inflation is about the same. It's not a blanket statement for all times, but where would we sit now, with these just historically low-rate loans that are available with inflation outpacing it, is very unique. If you have the reserves, it's actually a very good hedge against inflation, which reduces your risk because if you have too much cash not working enough for you, inflation's going to eat away at the value of it.

If you could put a loan on a property that cash flows very well, this is not speculation, these are investments that cashflow, then it helps hedge against inflation, which is a very big risk to retirees especially if you have fixed income, [crosstalk] yes, you can really be hurt if the cost of food doubles in the next five years and your retirement income does not.

Kathy: The cost of everything doubles or triples, it's accelerating. Finally, is there a point where one might be not diversified enough and just own too much real estate?

Kyle: Yes. Real estate, it depends on the person, whether you can say you have too much real estate or not enough real estate. I would say if someone's very heavy-real-estate-focused, you understand the industry, that's what you want to be invested in, I would say it's more about making sure you're diversified within markets because if you are too heavy in one market, that can really hurt you.

I would also say that there's benefit to the liquidity of other types of investments. If you're investing in a 401(k) or Roth IRA, a traditional IRA, even precious metals like gold and silver, there's different benefits to those. It is good to have some of those other vehicles, especially like Roth accounts that you pay the tax now and you never pay tax again. I think that's an account that's going to go away, eventually.

If you can take advantage of those accounts, max those out, I would definitely recommend doing that. If you're really getting into real estate investing and buying more properties, it's not too much trouble to max out your Roth IRAs, too. I've seen where clients that future investment liquidity from those accounts affords them the ability to buy a property and pull it out tax-free, whereas if you pull it out of a 401(k) or a pre-tax account or sell an investment, you might have to pay tax on it without 1031 exchange, but a Roth IRA account if you've got $100,000 thousand in there, you can pull it out, and it doesn't mess with your taxes at all.

Kathy: Fascinating. I'm sure if we could take live questions, we would get a lot of them, but we've already taken so much of your time. Thank you, Kyle, so much for being here on the Real Wealth Show. It's been really enlightening.

Kyle: It's an honor, Kathy. Thanks for having me, I appreciate it.

Kathy: Thank you for joining me here on the Real Wealth Show. You can go to realwealthshow.com to get access to webinars. There's over 500 that go much, much deeper into the mechanics of real estate investing, including interviews with CPAs, who can really help you structure things and save you a ton of money. We have property managers, who will teach you what to look for in property management.

They teach those courses and those webinars. We have mortgage brokers, who will show you what to really look for and alone, especially when it comes to investment property.

Then we have teams across the country that are over 57,000 members that RealWealth have been working with and can give us great feedback on how they're doing, and they're on our list because they're doing great, and they can help you acquire investment property with property management in place in really hot growing markets like Florida and Texas and North Carolina, and then, of course, great cashflow markets like Ohio.

Again, you can go to realwealthshow.com. It's free to join, and you'll get access to all of those in-depth webinars. Thanks so much for joining me here on the Real Wealth Show, and we'll see you next time. Bye-bye.

Speaker: The views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to realwealthshow.com.

[00:35:11] [END OF AUDIO]

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