Real Estate Investing Discussion with Landis Wiley, Financial Advisor
So, you have some stocks and bonds with a brokerage, a 401K with some mutual funds, and maybe even a Roth IRA. You know financial planning is important when it comes to asset allocation and making sure you are diversified in the stock market. How do you add real estate to the mix? Did you know that a financial advisor can also help with your real estate planning?
When you have stocks, bonds, and cash equivalents (such as money market instruments), you are looking at the three ways to invest with paper assets. When you diversify these three types of investments, you are diversified in paper assets. This helps of course, but you only truly diversify when you add real estate and commodities such as gold and silver to your portfolio.
A financial advisor is just another member of your team of experts to help you with investing. Your team could consist of an investor-friendly real estate agent, accountant, attorney, home inspector, insurance agent, banker, hard money lender, and property manager.
Enter Landis Wiley
In this interview, our co-founder and CEO Jeri Frank talks with Landis Wiley, a financial advisor in Iowa. At the early age of 10 years old, Landis was introduced to his dad’s stock broker. “I just really fell in love with the idea that there was a way to be immersed in problem solving every single day that fundamentally would make a difference in people’s lives,” said Landis. “I saw the impact that it had on my parents growing up, the things that they were able to do through his guidance, and he really introduced me to the business. I knew early on that eventually I was going to end up here, and here we are.”
The planning process is key. “Fundamentally, financial decisions boil down to a spreadsheet answer,” continues Landis. “A right decision, a wrong decision, and there’s a whole lot of gray area in between. Our job is really to help people understand what is optimal.”
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Landis’s Three Questions to Ask Your Financial Advisor
Here are three questions you can ask you financial advisor, whether you’re doing real estate or you’re just the average Joe out there.
1. What is your process for clients?
“What am I as a client going to go through with you as the advisor that’s going to help me understand where I’m at, where I’m going, and how to get there?” The process really is the key, and it should be the number one part.
2. What’s the team look like?
“Mr. or Mrs. Advisor, what’s your team?” Fundamentally, nobody knows everything. Understanding what that person has access to behind the scenes as far as network, expertise, so on and so forth, can be as important as the expertise that that individual person has themselves.
3. How do you get paid?
Is the advisor going to be compensated by selling you a product or is there a structure in place whereby maybe you pay them a fee hourly, flat fee, something of that nature, just simply for advice that then you can turn around and use to assist you in making decisions.
What am I as a client going to go through with you as the advisor that’s going to help me understand where I’m at, where I’m going, and how to get there? The process really is the key.
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As mentioned earlier, paper assets are only one major class of assets, along with real estate and commodities. “Over time, [diversification has] evolved to understand that stocks and bonds aren’t necessarily enough, because fundamentally, those two tend to move in lock step with one another in predictable ways, and that could be a danger,” said Landis. “Really the idea is, diversifying you away from things that move in lock step with the market.”
Real Estate Investment Trusts, better known as REITs, are one method of investing in real estate as an alternative to owning physical property. Although the physical assets give you that true diversification vs. the REIT and allow you to take depreciation, a REIT lets you trade real estate like a stock. “Real estate is very tricky for people who don’t understand what they are getting into,” said Landis. Using a REIT or an Exchange Traded Fund (ETF) associated with real estate can lower the risk and barrier to try.
“It really comes down you, I think, you don’t have to do this on your own,” said Landis. “I think too many people feel like ‘I’m going to do this and I’m going to figure it out for myself.’ They don’t have to. There’s a world of experts who have done it.”
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Landis agrees with a number of other experts we’ve talked to when it comes to the fundamentals. Learn, keep it simple, run the numbers, and start with the things you understand. “I guess the best advice I give to a new real estate investor is the same advice that I would give to a new investor in general, which is to keep it simple. Keep it to things that you understand, which part of that entails, make sure you really know what’s going on for you right now before you make this leap.”
We hope you enjoy this video interview with Landis Wiley. Check below for the full transcript!
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[00:04] Jeri: Hi. My name is Jeri Frank, and I’m co founder and CEO at AssetRover, and I’m here today with Landis Wiley who is a financial advisor. Welcome.
[00:13] Landis: Thanks.
[00:13] Jeri: How are you today?
[00:14] Landis: I’m doing great. How are you?
[00:15] Jeri: I’m good. I’m good. I’m glad we could get together today and do this interview. We wanted to start out by just laying some groundwork around you and your business, and then we’ll get into some other questions. To start out with, just tell us a little bit about your business and how long you’ve been in business for.
[00:33] Landis: Sure. I’m a financial advisor. My primary job is working with individuals and business owners, helping them figure out exactly what it is that they’re trying to do long term with their financial goals and really identify the most efficient way of getting there.
[00:48] Jeri: Right.
[00:49] Landis: It’s really that simple.
[00:50] Jeri: Right. It is all about the end game, right?
[00:51] Landis: Absolutely.
[00:53] Jeri: What actually brought you to this line of business?
[00:57] Landis: Sure. What brought me here … It’s kind of a sentimental story. I was introduced to my dad’s stock broker when I was 10 or 11 years old, and I just really fell in love with the idea that there was a way to be immersed in problem solving every single day that fundamentally would make a difference in people’s lives. I saw the impact that it had on my parents growing up, the things that they were able to do through his guidance, and he really introduced me to the business. I knew early on that eventually I was going to end up here, and here we are.
[01:31] Jeri: All right. Excellent. I know there are a lot of people out there who don’t have financial advisors, and I’m always surprised by the number of people that are like that. Can you help our viewers understand why you think the services of a financial advisor are essential?
[01:49] Landis: Sure. There’s a lot of statistics out there, and absolutely, the number of people who engage with financial advisors is lower than it should be. At the end of the day, fundamentally, our job is to help people that have a finite amount of assets, which is everybody. It doesn’t matter whether you have $10,000 or $10 million. You have a finite number of dollars, and you’re trying to achieve something. Really, our job is to help you figure out the most efficient way for you to get where you want to go with what you have.
[02:21] Jeri: Mm-hmm (affirmative). Taking off from that, have you run into people who have had this “Aha” moment after having sat down with you and having an initial consultation?
[02:30] Landis: Oh, absolutely. I would hope if I’m doing my job, that happens often. It’s always amazing to me. The people that I sit down with that … Particularly those who have done a great job saving over their entire lives and the day is coming when they’re thinking about retiring and walking away. The Number One fear everybody has is, “Do we have enough?
[02:54] Landis: “We’re afraid. We know we’ve done a great job. We know we have whatever it is that we’ve saved, but is it really going to be enough?” When I can sit down and walk them through the conversation and walk them through the plan and deliver the news that, “Yes. You have enough. In fact, you could have retired two or three years ago and be fine.” I’ve had people that break down in tears with that news, and that’s the part of the job that I love.
[03:23] Landis: On the flip side of that, the younger person, young family, young entrepreneur who’s trying to make a major move in a career, start a business, go out on their own or do something, and you sit down and you piece together the different aspects of what they have, what they’re doing, and where they want to go. All of a sudden in their mind, they see a pathway to get there, and you almost sense that relief that comes across and says, “I can do this. I’m going to be able to afford it. My family’s going to be okay, and hopefully, at the end of the day, we’re all going to be better that what we are today.”
[03:58] Jeri: Yeah. It really helps create a structure, a plan and a structure to get people to a solidified plan.
[04:06] Landis: Absolutely. Absolutely. Really, the planning process has to be the key to everything that a person does. It might be cold to say but fundamentally, financial decisions can boil down to a spreadsheet answer. A right decision, a wrong decision, and there’s a whole lot of gray area in between. Our job is really to help people understand, “What is optimal?” It’s up to the client then to decide whether they want to fully engage and go that direction or whether they want to modify it a little bit to something that’s more comfortable. Really, that plan has to be the core. It can help people identify what risk they can afford to take comfortably. It’ll also help them identify when they’re taking too much risk.
[04:54] Jeri: That’s really important. When I was doing research about selecting a financial advisor, I noticed there were a number of articles out there warning against financial advisors who advise to buy real estate. I wondered if you had any kind of comments on that.
[05:10] Landis: Sure. Fundamentally, there’s a challenge when it comes to real estate in the world of advising. Number One challenge is, “What exactly are you advising the client to get into?” Real estate can be very tricky for people that don’t understand what it is that they’re getting into. Nowadays, you can go out and you can purchase individual properties and go about it that way. You can get into real estate through real estate investment trusts or REITs. You can get into it through mutual funds. You can get into it through ETFs.
[05:43] Landis: It’s really about making sure that whatever I’m discussing with the client is appropriate for their level of understanding of the real estate market. To some degree, that’s where you get that question of, “Is it right for financial advisors to bring up real estate as an investment choice for the client?” If I’m recommending that an individual go out and purchase property, and they don’t know the first thing about managing the property or all the different aspects that are going to go into it, that really doesn’t make sense.
[06:13] Landis: If it’s somebody who would benefit from having that diversification of the asset in their portfolio, and we can find a way of doing it through a managed mutual fund, a real estate investment trust, and ETF or something that fits them, certainly that’s a much more acceptable line of conversation.
[06:31] Jeri: Right. Right. It is all about diversification in the end?
[06:38] Landis: Absolutely.
[06:39] Jeri: Let’s talk more about diversification because I personally know that early on in my investing career, I did make this mistake, but I thought I was very diversified. I was diversified because I had a 401(k) and an IRA, and I had stocks, and I had bonds, and I had a savings account and money market. I was diversified. Then I realized I was diversified in the stock market. I’m sure I’m not the only one that has made that mistake. Can you help us … Describe more about what other forms of diversification there are and how you handle that?
[07:25] Landis: Obviously, diversification, the most common way that people define that is through diversification of asset classes. You hit on a couple of them in there. It used to be diversification was, you didn’t have all your stock in General Electric. You also owned some Ford Motor Company. That was the original diversification is breaking out, and “Don’t put all your eggs in one basket,” so to speak.
[07:46] Landis: Then we moved into the idea of diversification being, “Own some stock and some bonds,” And the proportions of that should be based on all sorts of things including your age, your time horizon, your risk tolerance and so on and so forth. Over time, that’s evolved to understand that, “Stocks and bonds aren’t necessarily enough,” because fundamentally, those two tend to move in lock step with one another in predictable ways, and that could be a danger.
[08:14] Landis: Over time, asset allocation diversification has evolved to include real estate as a portion of a portfolio. Now you hear the term, “Alternatives” that are brought up. The idea of owning real assets. The idea of owning potentially some commodity or things of that nature, but really the idea is, diversifying you away from things that move in lock step with the market.
[08:37] Landis: That’s just pure asset allocation diversification. The piece that I find most clients have never had a conversation about is on the flip side, which is tax diversification. The treatment of the different asset classes that you’re buying based on the types of accounts that they may be in. Is it going to be taxed as income when you take the money out? Is it not going to be taxed when you take the money out? Is there going to be capital gains tax or dividend exposure? That can almost be as important or more important than just the decision on the asset diversification on the front end. It’s a very complex subject of when you talk about diversification. Where are you looking? Are we just talking while you’re saving up, or are we talking about the bigger picture when we start to take the money out on the back end?
[09:26] Jeri: In summary, there are two types of diversification. Asset diversification and tax diversification.
[09:33] Landis: Yes. Correct.
[09:36] Jeri: All right. Good point. The next question I have is, what words of advice would you have for someone who is investing in real estate?
[09:44] Landis: I guess the best advice I give to a new real estate investor is the same advice that I would give to a new investor in general, which is, “Keep it simple. Keep it to things that you understand, which part of that entails, make sure you really know what’s going on for you right now before you make this leap.” Then it goes back to some of the planning that should be done, in advance of that. Fundamentally, don’t get in over your head. Start out with things that you understand. Talk to people who have done it before. Get your questions answered. If you don’t know the questions to ask, find somebody who’s done it and say, “What do I need to know?”
[10:21] Landis: The areas where I’ve seen people get into trouble in any kind of investment … It’s not just real estate investing … Is when they get into investments that fundamentally, they just didn’t get. Their comment back to me always is, “I guess I didn’t really understand what it was that I was buying.”
[10:37] Jeri: Really, when it comes down to it, it is just “Understand.” Understand what you’re doing. Understand what you’re getting into. Don’t just jump.
[10:47] Landis: Right. Yep.
[10:47] Jeri: Think about it. Plan for it.
[10:50] Landis: Yep. Talk to people who know. Make sure that you have your team. Everybody has their expertise, and the more that you can rely on those people and glean knowledge off of them and glean experience off of them, you’ll be able to assemble something that fundamentally should be successful for you because you’ve eliminated all of the potential downfalls.
[11:09] Jeri: Right. Do you often try to connect people, once you know that they have an interest in a particular area? Do you ever try to connect people so that they have a go-to person?
[11:19] Landis: Absolutely. Obviously, I know what I know, but I also know what I don’t know. I understand enough about real estate investing to have a knowledgeable conversation with a client, but at the end of the day, it’s not what I do day in and day out. Certainly, in that arena, my goal is going to be to connect them with other clients or with other connections in the area who do live and breathe that world that I do think would be beneficial to them based on what their goals are.
[11:50] Landis: That may be very different for somebody who’s looking to get into residential real estate and management of that side versus somebody who’s looking to get into strip mall ownership. It’s always about trying to help them get connected with people that have similar goals, have done similar things and can hopefully shorten the learning curve for them.
[12:11] Landis: If you go back to your question about the value, why would you have a financial advisor if you’re looking to do this? One of the things that we very much pride ourselves on here is we can almost serve as a consultant of type that if you’re looking to get into something … You might have an accountant. You might have an attorney. You might have an insurance agent or what have you, but maybe for what you’re trying to do, they don’t have the expertise that you need.
[12:41] Landis: In that case, we can serve as a sounding board to get you connected with an attorney who has experience in the real estate market, a CPA who has experience in dealing with real estate investors, commercial real estate investors, residential real estate investors and be almost like a quarterback, if you will. That one-stop shop that when you have a question, you can call Landis and, “Hey, Landis, this is what I’m thinking about doing,” and I can then connect you to the person that would be best suited then to help. I think there’s some of that in what we do.
[13:21] Jeri: Yeah.
[13:23] Landis: Beyond just, obviously, our role.
[13:25] Jeri: Right. Right. It’s like I have my team around me, but you have your team around you, and your team is an extension of my team.
[13:33] Landis: Absolutely.
[13:34] Jeri: Yeah.
[13:34] Landis: The biggest inhibitor for people whether it’s real estate investors or regular investors is, “Where do I begin?” Because there really is so much information, and there are so many people, and a lot of it conflicts. Google’s a great thing, but Google has almost put too much information it people’s fingertips, and it’s paralysis by analysis.
[13:55] Jeri: Yep.
[13:56] Landis: At some point, it’s, “Who do I talk to that can help me cut through the clutter and really get connected in with what I need to know, so I can start to make decisions and move in the direction that I want to move?”
[14:10] Jeri: Yep. I think that’s a really good point.
[14:13] Jeri: Many of the materials out there, when you read them, indicate your team that you surround yourself is composed of the traditional folks. You have your CPA. You have your attorney. You have an accountant. Missing from that is the financial advisor. Why do you think that is?
[14:32] Landis: That’s something, certainly, that we notice oftentimes, and I think one of the major challenges associated with that is just the term “Financial advisor.” What does it mean? If you go hire a CPA, the role’s very defined. Their job is to help you with your taxes every year and to minimize the tax liability that you face each year. An attorney, their job is to draft the documents surrounding your real estate investment or to help you with titling or what have you.
[15:01] Landis: A financial advisor is a term that is very broadly used and really, there’s two categories of financial advisors. There’s those who, when you come in and sit down, their primary focus is if you have money, put you in a certain type of account, invest a certain way, purchase a certain product, do something of that nature. As a real estate investor, most likely your dollars are going towards real estate. That’s why you’re doing what you’re doing, so that may not necessarily be a model that works for you.
[15:29] Landis: On the other hand, the other model of financial advisor says, “Planning comes first. Planning is the core,” and for some clients, planning is the only interaction from a business standpoint or from a service standpoint that we may do.” It may be sitting down and just working through, “Where are you at? What do you think you’re trying to do? What are all the pieces of it?” And, “How does this really fit with what you’re trying to accomplish?” And helping provide some guidance as to what should be the parameters that you look at that aren’t going to put you and your family at excessive risk or put you in the best position for reward?
[16:07] Landis: There’s two very distinct models to financial advisors. Really, the key is making sure that when you do sit down and engage with one that the model they operate under is going to benefit you as a real estate investor. My bias certainly would be towards the planning, and specific for real estate people, whether you’re new into it or whether you’ve been doing it for years, that’s a piece that frequently is missing, like I said, but really should be and could be a core component with the right person.
[16:39] Jeri: Right. All right. Thank you. As you’re evaluating financial advisors to bring into your team, what kind of questions should you ask?
[16:47] Landis: Sure. I would say there’s really three questions that any person should ask a financial advisor, whether you’re doing real estate or whether you’re just the average Joe out there. Number One would be, “What’s your process for clients? What am I as a client going to go through with you as the advisor that’s going to help me understand where I’m at, where I’m going, and how to get there?” The process really is the key, and it should be the number one part.
[17:19] Landis: Number Two is “What’s the team look like?” “Mr. or Mrs. Advisor, what’s your team?” Fundamentally, nobody knows everything. Understanding what that person has access to behind the scenes as far as network, expertise, so on and so forth, can be as important as the expertise that that individual person has themselves.
[17:41] Landis: Number Three is the question that oftentimes gets asked with Number One. “How do you get paid?” Is the advisor going to be compensated by selling you a product or is there a structure in place whereby maybe you pay them a fee hourly, flat fee, something of that nature, just simply for advice that then you can turn around and use to assist you in making decisions. Those really are the three … What I’d say are the three core components or three core questions that a person should ask.
[18:13] Jeri: Process, team, pay structure.
[18:16] Landis: Yes.
[18:17] Jeri: Okay. Excellent. Any final thoughts that you have about the Cedar Rapids, Iowa corridor and investing in real estate?
[18:27] Landis: As somebody who grew up in this area … I was raised on a farm just north of Palo. I’ve seen Cedar Rapids, and really the whole corridor area grow and evolve … 2008 was a tremendous challenge for this community, but it really presented almost a blank canvas for us to start over in a lot of ways, and it’s really exciting as a young person to see the growth, to see the energy, to see the development. To see new buildings coming in and new entertainment.
[18:54] Landis: Certainly, as a person looking to invest in real estate, you live and die by blood flow in the community, by excitement in the community. You need people coming in and looking to invest and expand their businesses and do things or purchase homes or what have you. Really, for a real estate investor, it’s a great time to be in this area. There’s so much growth. There’s so much excitement, and I’m really optimistic about the future of … Not just Cedar Rapids, but the whole corridor.
[19:27] Jeri: I have to say as a new start up and being here through the flood, there is so much opportunity right now. Everywhere you look … It’s a very supportive start up community around here, both in Cedar Rapids and Iowa City.
[19:46] Landis: Absolutely. Cedar Rapids and the Midwest in general has always had a reputation for hard work ethic, very welcoming. We’re always willing to lend a hand to our neighbor. The one thing that maybe was missing around here was just the excitement and the cohesiveness and the opportunity for people that wanted to start. 2008 has presented that catalyst to grow those opportunities and really, it’s just working on the backs of everything that’s right here. Hard work, willingness to help a neighbor, and now we just have the opportunity that’s being presented where those people can connect and grow together.
[20:18] Jeri: Yep. Thank you so much.
[20:19] Landis: Thank you.
[20:20] Jeri: Have a good day.