December 2, 2020
J.M. Arbour’s President/CEO, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of December 2, 2020.
https://www.turnerpublishing.net/news/2020/11/29/cryptocurrencies-are-here-to-stay/
November 4, 2020
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of November 4th, 2020.
https://townline.org/the-money-minute-what-is-the-definition-of-retirement/
October 1, 2020
I purchased my first piece of real estate when I was twenty-two, fresh out of college. It was a single-family home that was in despair, quite possibly the most distressed property in the town; I say that literally. From top to bottom, the house needed a gut job. While removing walls and ceilings, I found that I wasn’t alone; a number of feral cats inhabited the property, and animal control had to set cages to remove them.
Over the course of five months, I assembled a team, and we tackled this house with all we had. When all was said and done, it was like a brand-new home, with a lot of time, money, energy, and thought sunk into it. It was a great experience, and I learned a lot as everything and anything you could possibly do to a home, was done.
It was not like you see on television where a person buys a property, does a major facelift, and makes out like a bandit in six weeks. I made about twenty-five thousand dollars on the flip, but once I calculated my hours in the project, I realized I made about a quarter of minimum wage. The experience and the knowledge, however, was worth a fortune.
Since selling this property, I have gone through almost another twenty units; from single-family homes, condos, office buildings, self-storage, to multi-family units, I’ve done a little bit of each, and like with other things in life, it has become better, easier, and more clear with time.
My occupation is not that of real estate investor; I am a private wealth manager and personal finance coach to thousands. My duty is to serve people and their best interests regarding their wealth; and my definition of wealth extends far beyond money. Health, family, friends, time, HAPPINESS, and yeah, sure, money … are all forms of wealth.
My duty is to coach people to see with vision, all the resources they have available to them, and to help them assemble those resources in a way that they come together to form a machine, one capable of deriving the results they desire in both physical and energetic forms.
Many financial advisers will “coach” you on stocks, bonds, mutual funds, index funds, ETF’s, REITs (Real Estate Investment Trusts), MLPs (Master Limited Partnerships), and others, what I call, standard offers. My question is, what about direct ownership in hard assets? How can this not be part of a successful portfolio?
There are said to be more millionaires and billionaires in the world who made their fortunes in real estate than compared to any other industry. There is a reason for this. Real estate works, and I say that with a double entendre. So why don’t more financial advisers coach their clients to buy and invest in real estate? I think if they found a way to monetize this activity and had the know-how, they would.
Real estate should own some real estate inside your investment portfolio, along with more of the traditional investments I listed above, as well as other alternatives (gold, silver, collectibles, digital currencies, and insurances). Getting clear on your niche, meaning what kind of real estate you want to own, is important.
You can invest in single-family homes, multi-units, condo associations, commercial office space, land, development, self-storage, etc. There is no answer in terms of which is best. Where do you live? What are the trends in real estate in that geographic region? What are the trends showing you? What is the hot commodity over the next five to ten years? What type of real estate do you naturally gravitate toward the most? Who do you know that can mentor you within a specific niche of the real estate world?
Don’t be fooled. People can make a lot of money or lose a lot of money when buying and selling real estate. I learned a long time ago in a real estate class that the money in real estate is made the day you purchase the property. In other words, if you do not “buy it right,” you stand to experience little gain, or even a possible loss. Mentorship, whether through people you know, books, articles, classes, or whatever you can get your hands on, is invaluable. Make sure you get schooled before you drop a dollar into your first venture.
Your team, over time, should grow to include real estate brokers, an attorney to do title work and closings, a CPA who understands the taxation details of the deals, banks or private lenders to provide capital (I’m a huge fan of using OPM… other people’s money), contractors to do the work, and sets of eyes and ears to help you find the deals.
Once you do have a plan and a solid team, begin to work your plan. I suggest starting slow with the aim being to learn and not to make a fortune on your first property. Real estate is about falling in love with the journey and the process, and not the quick bang for the buck; not every property works like that. The smartest and most experienced real estate minds I know are also the best practitioners of patience. They are in it for the long haul, for the residual stream of income, and not the quick buck.
One thing I can tell you as a financial adviser is that anyone can have a lot of money in the bank, but no matter how much money a person has, what he or she consistently needs is an income stream; one that funds their needs and wants, for the long haul. Real estate can do that almost like a personal annuity.
In addition to the creation of residual income, real estate can also experience the beauty of capital appreciation. Real estate was once said to double in value every ten years. In some areas, in some time periods, that’s been true. In others, it’s been terribly inaccurate, for the better and/or the worse. There have been ten-year periods over which a property hasn’t moved in value, and depending on the type of property and the time period, there have been times where properties have doubled seemingly overnight. Therefore, I say, give more time and attention to trends and the magnitude and direction of those trends than you do to prices alone. The same advice goes for stocks and other traditional type investments: trends over price.
One of the largest benefits of investing in real estate comes in the form of the people you meet. Many successful people swim in the arena of real estate investing. If you start to swim in this arena, you too, will start to meet more people accomplishing some of the things you may want to accomplish. It’s that simple. So, who are you hanging around that is currently doing what you are considering doing? Speak with these people and see if you can grab just one or two golden nuggets of wisdom from them. This can serve to drastically shorten the learning curve.
If you want to invest in real estate but are unsure or unwilling to take on all that is required, there are many options available other than direct investment or ownership. There are many companies and funds available that will take your money, invest it in real estate deals, and then share the profits with you. Many companies are looking for capital, and the good news is, it doesn’t need to be a lot of money for you to begin. For some, this might be the best and most efficient way to invest.
Whether you decide to go it alone or use a fund that invests your money, you need a plan. It needs to make sense, and you need to find comfort with it. It’s a plan that will require time and patience. Again, real estate is best played as a long game.
Consider how you will get involved, if at all. If you have questions and would like a consultation about ideas, please call my office.
I wish you all the best and hope this article sparks a few good thoughts for you.
Cheers,
Jac
Jac Arbour CFP®, ChFC®
Jac Arbour is the President of J.M. Arbour Wealth Management.
He can be reached at 207-248-6767.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
August 27, 2020
J.M. Arbour’s President/CEO, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of August 27th, 2020.
https://www.turnerpublishing.net/news/2020/08/27/as-goes-maine-away-goes-hunger
August 5, 2020
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of August 5th, 2020.
https://townline.org/the-money-minute-the-power-of-a-smile-and-a-wave/
July 22, 2020
401(k) plans were authorized by the Revenue Act of 1978 and took effect in 1980. Since then, we have seen a major decline in the number of employers offering pensions, making defined contribution plans more important for retirement income. Just how important? According to the Social Security Administration, in about fifteen years from now, the average retiree will be responsible for creating around 66 percent of their own income. 401(k) plans and other defined contribution plans will be a major component of that percentage.
Some people argue that the benefits of a 401(k) plan are not as strong as they once were. A writer for Bloomberg stated that 401(k) plans no longer make sense for savers. Why would someone say this? This misleading comment is based on the idea that 401(k)s are only a tax shelter and that their advantageous characteristics depend on only four specific factors, all tax based.
The four factors were stated to be:
i.) the marginal federal income rate was 43% in 1980 and is now 12%
ii.) the capital gains rate was 28% and is now 0%, but only for some people and only for a portion of the capital gain
iii.) the likely retirement bracket was 15% in 1980 and is 12% today and,
iv.) interest rates were around 15% in 1980, compared to almost 0% today.
Let’s think for a moment.
401(k) plans are not just about taxes. They are about saving, investing, outpacing inflation, and oftentimes, targeting better rates of return than inflation. They are also about getting an employer match, utilizing the power of tax deferral, having a loan source in times of hardships, creating retirement income, and more. There are quite a few reasons to use defined contribution plans, other than just for tax benefits. However, let’s go ahead and discuss taxes for a moment.
After 2008/2009, we saw the Fed print around four trillion dollars, and we saw the International Monetary Fund issue SDR’s (Special Drawing Rights) at a rate of eight and a half times more than it had in the previous forty years combined. (As a side note: for those unfamiliar with SDRs, when this happens, it is important to take note of just how deeply impacted the money supply truly is for different countries. It is typically not a sign of things going well). We haven’t seen much for inflation in decades. We saw the US dollar come off the gold standard in 1971, which begs the question, what is money truly worth? We have seen suppressed interest rates for over a decade. Now, due to the pandemic we are experiencing, we saw the issuance of $2.2 trillion stimulus package, and we were hearing of the need for more stimulus money before that one hit the streets. Large corporations have taken on, relatively speaking, large amounts of debt due to the favorable interest rate environment, but then asked for help from the government when they didn’t have the cash to support themselves during the pandemic. Some of these companies and many others hold a large amount of debt. If I were to guess, the next crisis will be the debt crisis—think student loans as well.
How will this be rectified? How will it be paid for? A simple answer would be taxes; we have seen it happen before. The current 12% marginal tax bracket is surely favorable, and once it increases, I am not confident I will see it that low again within the next twenty-five years.
Let me ask you a few questions:
Do you think taxes will be higher or lower in the future?
Would you rather pay taxes at 12% or what they will likely be in ten years from now?
If your answer is 12%, you’re probably right.
If you are currently saving in a 401(k) or other defined contribution plan, I suggest you check with your tax professional and determine what your tax bracket is at this time. If it is low, say 12%, you may want to consider making your 401(k) contributions to the Roth portion of the plan. This will allow you to pay taxes now at a potentially lower rate than in the future, have your money grow tax-deferred, and enjoy tax-free withdrawals in retirement when taxes will possibly be higher (depending on when you retire).
Again, the tax bracket in 1980 was 15%. I would not be surprised if it is higher than this in the near future. Interest rates were also around 15% in 1980. Could this happen again? I think it could, easily. The marginal rate was 43% in 1980, which in my opinion is not a far cry from what is possible in the next ten to fifteen years.
The July 21, 2020, Bloomberg article, 401(k) Plans No Longer Make Much Sense for Savers, specifically states, “In 2020, there is no tax advantage remaining to the 401(k).” I could not disagree more. If any of what I previously mentioned happens, or even remotely happens, the tax advantages will remain strong, especially if the Roth component of the plan is utilized now, while we are still in a relatively favorable tax environment. If interest rates change (go-up) and tax brackets do the same, the benefits will still be strong, but the pre-tax contributions will become more favorable once again. In this situation, the person with the Roth money will be patting him or herself on the back.
The bottom line is that you need to play the game; sometimes that requires you to pull the right people onto your team who know how to read the cards and move the pieces.
I have learned that money is currency, like energy, and it doesn’t just disappear, but rather changes forms and hands. There is always an opportunity, but where that opportunity lies is a constantly moving target. When you look for deterrents, that is what you will find; when you ask, “where has opportunity shifted to at this time?” then you begin to look for it and then find it.
I suggest you recognize that opportunity always exists, and it is the job of you and those on your team to find it, even throughout the forever-changing economic and tax landscapes.
All for now,
Jac
Jac M. Arbour CFP®, ChFC®
Jac Arbour is the President of J.M. Arbour Wealth Management and can be reached at 207-248-6767.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
J.M. Arbour’s President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of June 29th, 2020
https://www.turnerpublishing.net/news/2020/06/29/e-must-run-george-lrr-ll-gng-kc-tct-bru-skw-how-your-retirement-account-can-feed-hungry-kids-in-maine-and-provide-scholarships-to-trade-school-students-no-pic-linda/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of June 6, 2020
https://www.turnerpublishing.net/news/2020/06/06/nine-considerations-for-your-401k-rollover/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of May 2nd, 2020
https://www.turnerpublishing.net/news/2020/05/02/a-dose-of-positivity-goes-a-long-way/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of April 7th, 2020
https://www.turnerpublishing.net/news/2020/04/07/health-wealth-and-your-best-self/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of March 6th, 2020
https://www.turnerpublishing.net/news/2020/03/06/ever-felt-financially-naked/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of February 7th, 2020
https://www.turnerpublishing.net/news/2020/02/07/own-a-retirement-account-get-a-load-of-this/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of December 25, 2019
https://www.turnerpublishing.net/news/2019/12/25/pensions-do-i-take-the-lump-sum-or-monthly-payments/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of November 2, 2019
https://www.turnerpublishing.net/news/2019/11/02/enjoy-every-age/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of September 23rd, 2019
https://www.turnerpublishing.net/news/2019/09/23/e-must-run-ll-gng-kc-lrr-bru-tct-skw-attention-retirees-how-much-are-you-paying-for-investment-advice/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of September 4th, 2019
http://www.townline.org/the-money-minute-attention-retirees-will-you-outlive-your-money/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of August 5th, 2019
https://www.turnerpublishing.net/news/2019/08/05/e-must-run-george-web-and-kc-lrr-bru-tct-skw-boom-must-run-lions-tigers-bulls-oh/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of July 15th, 2019
https://www.turnerpublishing.net/news/2019/07/15/the-new-american-dream/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of May 21st, 2019
https://www.turnerpublishing.net/news/2019/05/21/the-vibration-of-gratitude/
J.M. Arbour's President, Jac Arbour writes a column for a few local newspapers. Here is the article for the week of April 3rd, 2019
http://townline.org/the-money-minute-do-you-work-9-5-for-free/