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Should you Invest in this Hot Investment?

Summary

Julie heard about a real estate investment idea on the radio and was curious: Should I invest in this advertisement?

We break down the topic into two parts: 

  1. Should you invest in Real Estate?
  2. How do you evaluate an investment opportunity that you are considering?


    Bottom Line Up Front:

    1. Yes, I believe that Real Estate has a place in a well-diversified investment portfolio.
    2. Pause, research, and understand how a potential investment fits into your strategy and goals.

    Photo by Stephen Leonardi on Unsplash

    Transcript

    [00:00:00] Mike: welcome to financial planning for entrepreneurs and tech professionals. I'm your host, Mike Morton certified financial planner, chartered financial counselor. And today on the podcast. We welcome back our great friend, Julie, to the show.  

    [00:00:17] Julie: Hey, Mike, do all those letters even fit on your business?

    [00:00:21] Mike: I Not to bring it up where you were talking about spark type something I recently found out about, and I am a Maven, which means I love to learn. And yes, I'm now just getting more And more letters the end of my name because I love to go out there and learn more and more things.

    No,  

    [00:00:37] Julie: part of that is you don't even know what they stand for  

    [00:00:40] Mike: I don't. Yeah,  

    [00:00:41] Julie: try and rally off  

    [00:00:42] Mike: that's right. I don't know.  

    [00:00:43] Julie: accomplishments.  

    [00:00:45] Mike: I don't even know what any of these things stand for. Yeah. That's fantastic. That's great.  

    [00:00:49] Julie: but you've  

    [00:00:49] Mike: All but I've learned but I've learned a lot.

    to help my clients and to help the listeners out there today. So we are having Julie back for a variety of reasons. One, because she's lovely and we love having her here on the show, but also he had brought up a really good question.

    We were out for a run. And she brought up a really good question about something she heard on the radio and how does this fit into investment strategies and portfolios? Julie, why don't you.

    walk us through the situation? What happened? And then we'll.  

    [00:01:20] Julie: All right. So I've got my radio tuned to am. Yes. I still listen to the radio and yes, I am still has stations and I'm listening to the the WBZ. It's a. Every 10 minutes and they give traffic and news. And anyway, an advertisement had come up a number of times and it was the NRI and it's the national real estate investment association.

    And they say tired of market volatility. Real estate is booming right now. You should be investing in real estate, invest with NRI, and we give you 21 to 25% returns and it goes on and I'm thinking, that sounds awesome. First of all, secondly, clearly it's too good to be true. So I'm going to ask my good friend and financial planner slash whatever all those little letters are.

    What's the.

    [00:02:10] Mike: Yeah, that's great. So you hear an advertisement on the.

    radio. So there's a couple of things that I want to highlight there and we're going to dive into one is real estate. So it was real estate, a good investment in your portfolio. So we'll talk about that. And the other thing of course, is this might Not just apply to real estate.

    You could hear an advertisement about any type of investment vehicle or strategy, and it might be on the radio, might be a print. It might be a friend of yours saying, Hey, you should really check out, this new NFT or crypto asset or real estate or investing in wine or, whatever it is.

    And how should you. Think about that. So

    [00:02:46] Julie: Not to go off on a tangent, but I do invest in wine and it is spectacular.

    [00:02:52] Mike: Wait, do you invest in wine or just drink the wine?  

    [00:02:55] Julie: No. It's angel. It's a naked wines. It's an angel investing type. We had to be on a wait list to get onto it. And then you pay in and then you get the investor prices off of the different vendors. And it's spectacular. I highly recommend investing in wine  

    [00:03:13] Mike: let's dive into that. I've got another tip about investing in wine new technology. Allows you to invest in wine and they store it and you can watch your mark portfolio of lines go up and down. So it's pretty fascinating that the point is there's a million things to invest in these days, art, wine startup companies on all kinds of stuff which is exciting, which is exciting.

    So let's go back to the real estate. I love, they said, get , 20 to 24% returns. Is that every year is that guaranteed?  

    [00:03:42] Julie: And that was my question. And the reason I thought it would be a good thing is because you hear, in our area in particular, real estate is booming. Houses are going at astronomical rates and it's not like the 2008 pre 2008 scare. Not that, that was a scare that was crash. But where banks were over lending, people are paying cash.

    For these pieces of property that are hundreds of thousands of dollars over asking. So it's a legitimate question. Maybe they are making 20%, 21% returns.

    [00:04:12] Mike: absolutely. Absolutely. And last year definitely could be right. Look at the, just the public stock market was up by 20% last year. Okay. I'm only chuckling because of course we know when you sit back and think about it, wait, I can't get 20% you returned to year in and year out.

    I would quadruple my money and just, a handful of years, which would be absolutely amazing.  

    [00:04:33] Julie: that'd be Jeff Bezos.

    [00:04:34] Mike: And of course there are investments. Yeah, absolutely. You strike home runs now and then it's oh, that was great. So I'm not saying that stuff's not out there, but when you're hearing an advertisement, of course, you're like, man, that's so true.

    But let's get real estate. Does real estate belong in an investment portfolio Or how to think about real estate and investing in real estate. Julie, I know you and I both own our home, right?

    [00:04:58] Julie: Or at least most of it.

    [00:04:59] Mike: At least. Yeah. At least some of it that's. I was going to say that we own some percent of our home  

    [00:05:04] Julie: Yes.

    [00:05:06] Mike: had the mortgage still paying off the mortgage, but of course we own a part of our home.

    And so there's an investment in real estate now. Some people say it's not investment. I have to live somewhere. And so you don't view it as an investment and perfectly valid, not arguing that point. No don't think of it as an investment that you're going to reap the benefits of in, next five years or in retirement or whatever it is.

    But sometimes you can, maybe you've got a big family in a big home and you're like, yeah, I know I'm going to downsize in 10, 20 years and get some of that cash and use it in other ways. Perfectly valid. Maybe you have a vacation home. Okay. Same idea. Oh, I want to use it with a family for a while, but I know that's like my college investment, my parents did that and had a vacation home.

    We used it for 20 years and then I went to college. So no longer had that vacation home.  

    [00:05:56] Julie: Yup.

    [00:05:57] Mike: But that's, idiosyncra. In other words, you own one home in one area. Now the good news is, you know, that area very well. So hopefully you've made a wise investment. The bad news is you're having to continually to add to that investment.

    You have to upkeep your home, cause you're living there and things like that. So my point is you have, you already have some real estate in your portfolio. Does real estate fit into a portfolio of assets and investments? I believe. Okay. So there's a number of ways to add that to your portfolio investments.

    It depends on how many investments you have if you're just starting off and you're young and you're getting started with your future, you want to use some money in the long-term future. That's what I call investing. We're going to put that money aside and spend it somewhere in the future.

    And depending on when that future is, if it's next year, you're putting that in a savings account. If it's 20 years from now. Yeah. You can probably invest that in the public stock market. So real estate belongs in there. If you have enough assets to continue to diversify into real estate, because it is a great long-term asset.

    We have historical data from hundreds of years of real estate. And guess what, Julie, they're not making any more.  

    [00:07:12] Julie: But people are building houses every day

    [00:07:14] Mike: Yeah, but in terms of land, it's true. Wait a minute. What are you talking about. Oh, that's just the same. It's just the same. They're not making any more of it. Land.  

    [00:07:27] Julie: Got it. Oh yeah. Yeah. True. Oh I don't know that a Spanish island where the lava's flowing. I just got a whole lot more real estate there.

    [00:07:36] Mike: all right, nevermind fine. But, real estate, there's a number of ways of getting involved in it. It may already be in your portfolio. so if you're in a target date fund of low cost index fond across, the stock market. You might already own some real estate as part of that, the way I do it often with my clients is REITs real estate investment trusts.

    And they are public. Trust , they are low cost sort of index funds, or there are available as index funds. So you're investing in commercial, residential, across the whole us or across the whole globe, very low costs. So you're just diversified. I'm not sure. Suggesting, oh, we should invest in, malls in this area or downtown real estate of this type.

    There are those available. So now you're getting into more niche products. And if you have some insight or you believe that, Hey, yeah, I think this, shopping malls in middle America are going to do great or commercial space and downtown has been really racked recently. And I think it's going to come roaring back.

    I'd like to invest in that you can look into. Real estate investment trust REITs within your portfolio, your 401k, or your IRAs or your brokerage account or whatever it is now, of course, there's other ones like the one you heard on the radio, there's a million different ways of getting in and out of real estate.

    Okay. Tons of different stuff. There's farmland. I was hearing about recently you can invest in farmland in different ways. So just do your research, know what you're invested in, but the point is. Is real estate, a good investment. I believe it is. Cause it's real, it's tangible and people are always going to need it and use it.

    [00:09:02] Julie: But, so when you say do your research, what am I looking for? The advertisement on the radio said, just call this 800 number. And of course, if I call that 800 number, they're going to give me lots of spectacular information. That's going to make me say, sign me up and  

    [00:09:17] Mike: sign me  

    [00:09:17] Julie: whatever amount of money.

    So you know, how do I vet. That type of organization. If I were interested in doing that, because to be honest, I just did was say, Hey Mike, do I want to do this?  

    [00:09:29] Mike: want to do this,  

    [00:09:29] Julie: And, but if somebody were more interested in doing it on their own, what would they like.

    [00:09:34] Mike: Let's get into this second topic because I think or piece of this, because it doesn't just apply to real estate. Your question is like, how would I researched this and that's the other thing I want to talk about is how do you evaluate these investment ideas somewhat?

    Like I said, a friend brings some something up, you read it in the paper. You're like, Ooh, that is a good idea, and so what should you do? How should you react to that? And my first comment is do some research. How do you go about doing research one, look at what is out there in terms of availability.

    Oh, okay. There's this product I heard on the radio. So you check that out. You go to that website, you're going to read fantastic info. So you go to other sites, right? Or are there other products like.

    this, does this. Oh, it turns out, yeah, there's this is like a whole category of products.

    And so now I know, oh, there's different ones I could evaluate are there for me personally, and my clients I'm usually going with the low cost massively diversified in terms of asset classes, that's the way. Tend to go with any of these. So you can look into that, oh, real estate. That sounds pretty interesting.

     Is there a product that's low cost, massively diversified? Do I have to be in a niche product? If you're interested in ESG, Sri investing, sustainable investing, maybe there are products that match that. So in other words, do research spend some time, go, just go on Google and start poking around first.

    [00:10:53] Julie: So would these products come up on a better business bureau, sir?

    [00:10:56] Mike: They're going to come up in a lot of different areas. Julie, I would first start broad like category. If it's something you don't know that much about say crypto assets, geez. I've been reading about this for a while, in the paper. Find some other research that paper's website, New York times, wall street journal, whatever, read more articles, more in-depth stuff.

    Find some people that follow crypto and write about. Read some of their stuff. So in other words, get a diversified viewpoint of the asset class, the investment that you're interested in, this sounds like a cool space. I want to get involved, learn about it, learn the expenses, what are the opportunities and things like that. and the next thing. Okay. Now that I know a little bit more about this space and come up with some conclusions I think real estate is good because they're not building any more of it, people always want it. And I looked at a hundred years of history.

    It's always gone up. And so yeah this looks pretty good. So how could, how does that fit into your investment strategy? How does it fit into your portfolio? So crypto or wine or real estate or public, stock market. How do these fit into a portfolio of investments in your strategy?

    And then this takes a little bit more work, understanding yourself, your goals and what your expectations are for any of these different investments. Like you said, oh, am I going to really get 20% a year? Is this an investment that is very volatile? That goes up and down a lot. How to think about that?

    Is this an investment that has a good chance of doubling, but a good chance of going to. Is it that kind of investment or is it one that you're getting a steady stream of income from? And so how do all those bits and pieces fit in so that you are reaching your goals?  

    [00:12:33] Julie: Okay.

    [00:12:33] Mike: Yeah. And then finally, the good thing about doing that, right? Again, you heard an ad on the radio or a friend said. The good thing is that you're taking time to pause and put some space between, oh my God, you had this sounds amazing. I definitely want to do this, put some space between that thought and how it fits into your life.

    And so by doing research and pausing and evaluating and making sure you have a good strategy, it's always great in anything in life to just pause and make sure it really makes sense.  

    [00:13:05] Julie: you're right across the board. It makes sense to do that. So my biggest takeaway, I'm probably not going to call that 800 number.

    [00:13:14] Mike: Always be wary of things that are actually advertised. Just know what you're getting into. Yeah. I love the question though. You brought it. up yesterday And you're like, oh, I just started this thing, what do you think? That's perfect. Yeah. Let's have a discussion, it's exactly what to do.

    Pause and think about it and see what makes sense. And then what we came up to Julia, was you already own real estate in your report. Hey, cool. We're covered.  

    [00:13:34] Julie: I love it. And I learned something new twice.

    [00:13:37] Mike: I wanted to do twice.

    All right. Super cool. So Thanks so much for the question, Julie, and thanks for being here today.

    [00:13:44] Julie: Thanks so much for having me. Bye.  

    Thanks for joining us on financial planning for entrepreneurs. If you like, what you heard, please subscribe to and rate the podcast on Apple iTunes, Google play Spotify, or wherever you get your podcasts. You can connect with me on linkedin or mortonfinancialadvice.com. I'd love to get your feedback. If you have a comment or question, please email me at financialplanningpod@gmail.com. Until next time thanks for tuning in.