I have previously gone out on a limb to say that it’s very difficult (actually, I said impossible) to pay to get good commercial / investing advice.
Unlike a doctor, accountant, or attorney who can only give themselves so much self-help [AJC: unless the doctor’s a hypochondriac; the accountant’s an embezzler; or, the attorney’s a criminal] …
… any “investment / business advisor” really worth listening to is probably making too much money for themselves to waste their time advising you on how to make money.
On the other hand, on rare occasions, you can find such high-quality advice:
– You can find a mentor; somebody who’s been there / done that and is willing to counsel you one-on-one
– You can buy stock in a company owned by such a person e.g. Berkshire Hathaway; by investing in BH (for example) you are ‘paying’ Warren Buffett to look after your wealth as a by-product of looking after his own.
WARNING: if you ever receive a bill from either of these types of people … run for the hills! They are not whom they seem 😉
But, there is a time when you DO need to seek – and, pay for – financial advice; to illustrate, here is an e-mail that I recently received:
Heh Adrian, do you think you can help and ole lady, who has been swindled more time that you can count, now unemployed (forced retirement), drowning in debt with but 1.1 million in property assets and 80K in bank that I am using to live off but it will only last 11 months with what I am paying out? I am 66 my husband (also retired) is 68.
It was our two financial advisors that got us into some of this trouble. We Lost our retirement investment through their recommendations. Even our other real estate investment (2 raw land and 1 condo) are now worth less than the remaining mortgages.
[My last] $80k is not just spending money; it is also supporting those mortgages, which I can’t sell due to the market.
You see, the time to pay for GOOD financial advice is when you think you might be in financial trouble (even if it was BAD financial advice that got you there, in the first place).
That’s why I don’t like to seek advice about WHERE to put my money.
But, this reader DEFINITELY needs to seek urgent professional financial advice!
She should get a recommendation from a friend to a fee-based advisor and/or accountant and just ask them to help her make some immediate decisions about her current structure: e.g. should she (can she) walk away from her mortgages? How much can she budget for the next 12 months in living expenses, and so on?
Then she’ll need to start learning (reading this blog is a good start) how to make real money, all over again …
What would you do in her situation?
Here’s what I’d do:
1.)Steel myself to accept the fact that I may have to start all over again and really rough it out. Accept that there is a chance that I might never get back my former affluence.
2.)Then sit down with pen and paper and put down my barest needs.
3.)Next I’d work out what those basic needs would cost.I’d then go over the list and see how to trim the expenses on those basic needs.Next I’d consider alternative ways of funding those needs.
4.)Ignoring the mortgage payments or considering various payment options I’d work out how long my savings would support my needs.
5.)Check if I can get my loans waived off or rescheduled.Find out how much it might cost to move the courts.See how I can afford it.
6.)Tell family and friends about the problems I’m having.Seek support.
7.)Sign up for the state sponsored benefits available to senior citizens etc.
8.)Make a list of all the assets I still possess.Especially ones I might have overlooked such as insurance policies.See how long they can support me/what sort of stake they will provide me to start again.
9.)I would consider employment or self employment including starting a small business using skills I had developed earlier in life.Check if this will help stretch my savings a bit.
10.)I would considering retiring/living for part of the year in a country with lower living expenses; maybe even consider working in such a place
@ keerthikasingaravel – Great list! I notice that you didn’t include seeing a professional (e.g. accountant or financial advisor)?
What would I do in her situation?
Well after reading this, I see she has some Raw Land. This should be looked at for ways to bring in extra income.
Would this land sell at a higher Price if it was not Raw Land. Can she afford to put a building on it. Or Better yet, maybe even rent it to a company who needs a good location.
That could help bring in Money and improve the resale price , as well as desirability of the property.
Look into ways to reduce the debt payments,to enable her to live longer on what she has available.
See about some sort of work for herself(even if Part time).
She says she cannot sell any of this property?
perhaps she can sell even a portion to raise some extra cash for the time being as she works on a longer term plan.
Adrian I would want to see a good lawyer familiar with the workings of the American equivalent of our Banking Ombudsman , Debt Recovery Tribunals and higher courts.That’s what I meant to say in :5.)Check if I can get my loans waived off or rescheduled.Find out how much it might cost to move the courts.See HOW I can afford it.
At this point I’m not very certain what an accountant,your equivalent of our CAs or financial advisers could do for her that she cannot do for herself with the help of family and friends.Advice doesn’t come cheap and at the point she needs to save money and pay only for the most usable advice.What she needs is to safeguard her capital and deploy it only in the safest of avenues,preferably inflation adjusted.Her goal should be to draw down her capital as little as possible and live off what ever money she can generate now.Her first effort should be to adjust her finances and lifestyle to her new situation and secondly save her investments in real estate.
BTW if this person still needs help I would be glad to hold her hand while she drew up her own financial plan.We could work online.
Also might it be possible for her to rent out a part of her house now/take in a paying guest?
keerthikasingaravel,that is a very good thought. As Adrian once pointed out, you need to find ways to increase income levels ,so you can have the cash on hand for other investments. This was the idea behind finding ways to use this Raw Land she has on hand. Rent it, or build on it then rent it. Sell a small Part of it. Take on Part or full time work. All these will help her current situation while working her plan for the future.
All this while paring off any unneeded current expenses.
@ keerthikasingaravel – Yep, I agree with you and Steve: she should try to extract as much income as she can from the real-estate and increase her income in other (legal/moral/ethical) ways.
I think a professional will help her do the calculations … probably in one meeting. She needs a technical answer to a technical question: “given this asset/income list, what can I spend each year?”
Good technicians (financial or otherwise) provide excellent value when answering technical questions, unless she can convince a friendly blogger/mentor to work with her for free 😉
I want to thank you and all you reads for their input. Now let me tell you “the rest of the story” just so you don’t think I am a total ditz. And maybe a lesson for others. Most these issues started 6 years ago when I met a man who for all intensive purpose seem very successful (certificates and plaques on the wall) even to members of the local community. He moved (which he got for free due to new developer building new high communities)and refurbished house I had some saving I wanted leverage for retirement. Canada’s oil business was booming and there was housing shortage in the oil services parts of the province. I had the opportunity to buy serviced town lots for $10K each, I bought 10, plus another property that could be subdivided into 7 lots and so we partnered up in a separate incorporated company. He was the technical/construction/sales guy, I was the money (land) person. We could put the houses on the land and refurbish for a total of $65K and resell them at going rates of 160-180K which gave us approx $2.8m gross profit. Sounded like a no brainer to me. What I didn’t know as I was working full time and mostly out of town was that he selling the properties, not finishing the work and pocketing the money. Every thing was legal from the company side, but then people stared suing and my lawyer told me to get out because as a director of the company and the only one with assess they could come after me. So with legal and accounting advice I resigned from the company taking $100K loss things went from bad to worse. The economy collapsed, the oil business tanked and along with it the housing market. What I managed to salvage was one oversized lot with a shack on it I had not turned over to the company.
I won’t belabor the point with the rest of the sad story,but you get the point. I did my homework and put together a good business arrangement, but nothing can protect you from a crook.
opps for got to tell you what I am doing that some of your reads also suggested. I am listing the condo in online free real estate site as “rent to own”. I am also listing the raw land (4 acres with lake access), putting a house on it would take more upfront cash than I have I certainly can not front an other mortgage nor could I qualify. I am also listing the one remaining town property as a for sale by owner on the same sites. We have cut our expenses and do need to maintain our retirement house as long as we can in this still depressed market. If it comes down to it long enough for the market to improve we can sell it and then have money to move somewhere we can just live off out Canada pensions. I have talked to two accountants and they believe it to be a sound decision. My financial advisors say they are still hopeful they can recover ‘some’ of my rrsp investments ($90K)lost in other land deals. Real Estate and I just don’t seem to work well together.
I want to thank all of your readers for offering advice, it was very helpful. Oh and as for working, since I have had a stroke, now high blood pressure and cholesterol and new heart issues,that doesn’t seem likely, but I have started a few websites to see if I can do some consulting in the oil and gas sector and do some affiliate marketing in other areas, as a way to make a little money. Both long shots but worth a shot.
Ruthanne Koyama says:***I won’t belabor the point with the rest of the sad story,but you get the point. I did my homework and put together a good business arrangement, but nothing can protect you from a crook.****Ruthanne,you are right to a point. I think the wording of that partnership should have had some sort of clause in it that said ,your partner cannot make sales of any sort ,without both parties agreement and signature. This might have been more effective in saving you . However, now its time to asses what you have, how you can create additional income, and than salvage this entire thing.
Good Luck, sounds like you have a pretty solid plan going right now. The Online thing,seems like it could be quite helpful.