3 Tips To Get Better Intelligence Before Making Financial Decisions
HOW GOOD IS YOUR INVESTMENT ADVICE?
3 Tips To Get Better Intelligence Before Making Financial Decisions
Have you ever received bad advice regarding an investment?
Maybe it was a stock tip that turned out to be a bust.
It might have been a friend or family member telling you NOT to invest in something that turned out to do exceptionally well. Such as telling you to stay away from real estate. Then you watched it quadruple in value over the years.
My attorney friend Jeff Watson likes to say, “If knowledge is the new currency, then Wisdom = Wealth.” © You can subscribe to Jeff’s newsletter here. https://www.watsoninvested.com/
We want to make wise investment choices.
We don’t have supernatural powers that tell us which investments will produce outstanding returns over the next 5, 10, or 20 years. But we do have the ability to gather enough information so that we can make educated investment decisions.
Where should we go for this knowledge? Here are three suggestions.
First, let’s rule out where we should not go.
TIP 1. Never take financial advice from someone who is making less than 3 times what you want to be making.
I heard this one at a real estate investor meeting. Let’s think about it.
Would you take stock advice from someone just out of school who has limited investment experience? Or would you seek someone who can make a living off of their investments?
Sometimes the people giving advice mean well, but they don’t have the experience to make a fair assessment. Maybe they did own a rental property at one time, but had an unprofessional property manager that did not screen tenants effectively. So they became very negative about investing in real estate. Do you think you could get better advice from someone who has owned at least ten rental properties?
We learn best from people who have already paved the road before us. We don’t need to do everything just like they did. But we should listen to what they have to say and give it serious consideration.
It is our responsibility to learn how to make our money work harder for us than we work for our money. Therefore, we need to seek out people who have already done this.
TIP 2. Beware of the internet.
The internet can be very useful. Just ask Siri or ChatGBT a question and you can get quick answers. We can learn a lot about market trends, for example. Most of the answers are substantially correct. But not always. There are limitations.
Sometimes the information is biased. Artificial intelligence is only as good as the source. And we don’t always know the limitations of what information is used to generate the output.
Facebook user groups can provide good information and feedback on ideas. Some responses can be based on a lifetime of experience, others with limited knowledge.
I like the concept of “Trust, but verify.”
Take, for example, when we need to seek legal answers. The internet can help us gain an understanding, but there are times we should seek competent legal counsel. Such as dealing with probate situations. What happens when a seller is supposed to inherit a property? You can find the general process on the internet, but there are specifics that an attorney will know to ask about.
You can also download an LLC operating agreement from the internet, but it should be verified with legal counsel that it is appropriate not only in your state, but for your particular situation.
TIP 3. Get to know specialists
We need to know who to go to for the best advice. When starting out in real estate investing we are told that we need to build a team. We may need contractors to provide rehabbing services. Then there are realtors, attorneys, accountants, and others.
Real estate investor groups tend to have vendors that provide a variety of services. Some provide materials and installations that are needed for rehabs. Others specialize in trust services or closings. It is best to get to know these people before you need them.
Seminars and conferences also provide a rich environment where you can meet other people who specialize. Some of them may have investing goals and objectives similar to yours. Others may have already done what you are planning to do. They might even well exceed the requirement of Tip 1.
Masterminds tend to be smaller groups and can have a variety of backgrounds. The people in masterminds frequently have a business area they specialize in, such as landlording, short-term rentals, private or hard money lending, multi-family, self-storage, and the list goes on. The mastermind may have a limited focus, or more broad. It can provide great value with the variety of the members’ experiences.
One of the ways we get to know specialists is through our monthly multi-family meetup on Zoom. During the hour we usually have a guest speaker who has a specialty. In the past we have had experienced lenders, brokers, and an apartment investing coach. This helps us get to know the specialists while they help us understand what we need to know about their area of expertise.
This month we have Colleen Pacheco, an experienced insurance broker. She will help us understand what is going on in Florida and nationwide and how we should plan for our insurance needs going forward. The changing insurance environment is sure to impact all real estate investors, not just those interested in commercial properties.
Is there another topic you would like to hear about with regards to multi-family?
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Mike is a retired aerospace engineer with a passion for real estate investing and teaching financial literacy. He lives with his wife in Daytona Beach, Florida.