10 things you should know about buying a second home | TRANSCRIPT

Speaker 1:
Information presented on this program is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented. Certified Advisory Corp is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded, or exempted from registration requirements.

Speaker 2:
Stay tuned for On the Money, Central Florida’s most listened to financial call and show. Brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by Certified Financial Planner professionals. Monday through Friday, their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners. If you have a financial question you want answered by real fiduciaries, the lines are wide open. Call (844) 580-WDBO. That’s (844) 580-WDBO and enjoy the show.

Josh McCarthy:
Good morning and welcome to On the Money right here on WDBO. My name’s Josh McCarthy, joined today by the people of Certified Financial Group, the people who are planning your financial future, making your tomorrow just a little bit better than your today. Joining us today, we have Aaron Bert and Joe Bert, a couple of certified financial planners with the Certified Financial Group. And you know by now that for more than 30 years the professionals at Certified Financial Group, they’ve been Answering your questions for you every single week right here on WDBOs On the Money. They’ve become Central Florida’s most listened to financial call-in program. And it’s the only call-in program where all of the hosts are certified financial planners. Joe, Aaron, how are you guys doing today?

Joe Bert:
Good morning, Josh. We are doing great. And thanks for the kind intro there. As you have said, Aaron and I are here to take the questions that might be on your mind regarding your personal finances. As folks out there are thinking about their retirement years, we tell our clients, we inform our clients, we work with our clients on it for a fee, getting them to and through their retirement years. That’s what we’re all about. Saturday morning here, we are for free. So if you have any questions regarding your personal finances, things you’re trying to figure out regarding your 401(k), and IRA, long-term healthcare pensions, all that stuff and more, that’s what Aaron and I and the 14 other certified financial planners at CFG do day in and day out.
But like I said, on Saturday morning, we are here for you absolutely free. This is not a one-hour infomercial. This is a live program unless you’re listening at seven o’clock on Saturday or Sunday morning, which is a recorded of this program. But at nine o’clock, we are live. So if you have any questions, the good news for you is the lines are absolutely wide open and we are here to take your calls

Josh McCarthy:
And those numbers are (844) 580-9326. Those magical phone numbers, (844) 580-WDBO. Or you can send in an open mic using that free WDBO app. We’ll play those back for you live on the air, and Aaron and Joe Bert with the Certified Financial team will answer accordingly. Today’s topic is 10 things you should know about buying that second home.

Aaron Bert:
So interestingly we get this question a lot. We meet with clients… Actually I had the question yesterday with a client that we had been working with for several years, came in to talk to us, and you always get the question is, “Should we buy a second home? Is it a good investment?” And the thought there a lot of times is not only for passive income or making some extra income on the side in addition to their employment, but also is it a second home that they can then turn around and use, or maybe move into at some point, or use as a second home for vacation purposes, so on and so forth. So that’s a question that we actually get a lot.
Yesterday was a little bit unique in the situation in that they just wanted to rent it out for a while. So they wanted to buy a house in Colorado and then they wanted to turn around and turn it into an Airbnb because Airbnb seems to be what everyone wants to do because it sounds like it’s an easy thing to do. You just put your house on this website, and then people come in, and they use it for a couple days, and then they send you a check, right? It sounds like a-

Joe Bert:
Sweet.

Aaron Bert:
… sweet deal, right? But the challenge that they always have is that there’s always other stuff that you have to consider. So right now when we’re looking, especially right now with buying any home is that homes are expensive-

Joe Bert:
And interest rates are high.

Aaron Bert:
… and interest rates are high. So if you’re buying a second home, especially for an investment property, just in any investment that you’re going to buy, really it’s going to be the price at which you purchase it is going to be the determining factor about whether or not it turns out to be a good investment. So if you’re buying that second home and it’s really high-priced, you’re going to have to get a lot of rent in order for it to give you a decent return to make it worth your while. So that’s one of the challenges right now is that home prices are so expensive. The other challenge, like Joe just said, is that interest rates are high. So if you’re going to try to use leverage in order to buy that home, meaning you’re going to borrow. Instead of just having a complete cash outlay, you’re going to be borrowing it typically at higher rates than what you’re getting then on your first or primary residence. So that’s the other challenge is that the interest rates are so high.
So these are things that you have to consider, right? The cost of the house is high, the cost to borrow is high, right? So then you have to make even more rent in order to make it a worthwhile purchase, which means you have to either be charging more or be renting it out more, which means that you can’t use it for personal use at all.
One thing we talk about a lot too is if you’re going to buy a second home, especially for personal use, is maybe you ought to test drive that area for a while, maybe go rent a house yourself in that area, go stay there for a week or maybe a month. So if you’re thinking about buying a house in the mountains of North Carolina, maybe go find a community you think you like or do some research, go stay there for a month and see if you like it-

Joe Bert:
Do an Airbnb.

Aaron Bert:
… do an Airbnb. And it’s a good point because people, they get this idea in their head, “I want to go live in…” I don’t know, “Blue Ridge, Georgia.” And they go online, and it looks great, they’ve got a great festival, it’s a beautiful town, but you may hate it. I mean, you don’t know until you go and you stay there for a while. And you may not like driving up the mountain in order to get to your cabin, or you may not like the, I don’t know, whatever the restaurants that are in town or something. So go test drive it, go live there for a little bit before you make that big purchase at a high price with a high interest rate.

Joe Bert:
I think the other thing that you want to factor in there is what does it take to get there? You have to get on an airplane, and if so, is that going to be a hassle over time? Are you going to drive? Is it a six-hour drive, eight-hour drive, 10-hour drive? Are you prepared to do that on a regular basis? Those are all the things that need to be considered and you want to factor them in. And, of course, not only do you have the interest payments if you finance it, but then you’ve got other expenses

Aaron Bert:
All right. And that’s where we’re going to next.

Joe Bert:
That’s what I thought.

Aaron Bert:
So upkeep and maintenance add up, right? But a lot of times people think, “I buy a house. And what I got to pay, the utility bills, maybe the mortgage, I got to get a yard guy.” They don’t factor in the toilet’s going to break when you have somebody renting it, the roof might spring a leak, you may have a dishwasher that fails. All these little upkeep and maintenance kind of things really add up. And then so that’s eating into your profits, which is then eating into your rate of return.

Joe Bert:
Well, look at your own house.

Aaron Bert:
I know. A money pit.

Joe Bert:
Yes, a money pit.

Aaron Bert:
So now you have two money pits, right? And one of them is usually hundreds of miles away or thousands of miles away. And so then what you end up doing is you end up hiring a maintenance or a property management company who’s then taking 10% off the top in order to take care of those things for you. So that again, eating into your profits and eating into your overall rate of return.
The other thing people don’t understand, especially in Florida, so for people that are living up north who want to buy a vacation home in Florida because it sounds so great, is that our property taxes are really high. So you always have to take that into consideration is that additional expense of the property tax and insurance. So not only is your property tax is high, but your insurance is high. So, again, other expenses you have to factor in that are possibly eating into your rate of return.
You could also have state income taxes. And so state income taxes are going to depend on where you are living. So if you’re using it as a personal property, where are you spending the majority of your time? So for instance, if you’re a Florida resident, it’s one of the benefits of living here is we do not have state income taxes. But if for some reason you move to or you have a second home in a state that does have state income taxes and you stay there for more than half of the year, well now you’re a resident and you should be paying state income taxes in that state. So you have to be cognizant of that fact and keep that in mind for that second home purchase of how much time you’re actually spending there versus spending in your primary residence. Did you have something you-

Joe Bert:
No, you’re on a roll.

Aaron Bert:
Okay. I’ll just keep going then. And renting isn’t always easy. There’s a lot of competition out there, especially with Airbnb and all these other sites that are popping up that make properties easy to rent. So unless your property is well staged, looks good, reasonably priced, so the competition is really driving down the price of those rentals. If for some reason you decide that you want to rent this place out, so it’s not always easy to get top dollar for your place unless it’s really nice. And, of course, then you worry about people coming in, and renting it, and messing it up, and then you got to make it real nice again in order to rent it again. It’s kind of a nasty little circle there. So competition is driving down the price of people trying to rent out these places and it makes it harder, again, to get top dollar for that. So, again, eating into your overall rate of return.
And then I actually read about this the other day, and I think it was in the Wall Street Journal about the Masters exclusion-

Joe Bert:
Right.

Aaron Bert:
… for renting out properties. And basically it’s called the Masters exclusion because in Augusta, Georgia, they have this little tournament called the Masters that occurs every year. And the people that live there, or if you live anywhere really where there’s a big sporting event or some sort of event that draws people, were renting out their properties for a week or two weeks, and people could come and basically rent out their properties or use their properties to stay there for the Masters Tournament. And so the people would leave and the people would come in and rent it out. And so the rule is that if you rent out your property, I think it’s 14 days or less-

Joe Bert:
Right.

Aaron Bert:
… you are able to not recognize any of that income for income tax purposes.

Joe Bert:
That’s right.

Aaron Bert:
Typically, tax-free income that you’re able to receive. It’s called The Masters Rule.

Joe Bert:
No, it doesn’t have to be in Augusta, Georgia. It could be anywhere.

Aaron Bert:
Right. It could be anywhere.

Joe Bert:
Right.

Aaron Bert:
One place where it might make a lot of sense is if you live near a big college town-

Joe Bert:
Right.

Aaron Bert:
… where they have parents’ weekend or whatever people come in-

Joe Bert:
Right.

Aaron Bert:
… you could rent your house out as long as it’s less than 14 days and doesn’t even have to be consecutive. You can rent your house out for a 14-day period, collect the income, and not really recognize it as-

Joe Bert:
And I guarantee you there are folks in Gainesville that do that.

Aaron Bert:
Yeah, Gainesville and other big college town where there’s big festivals or concerts or all that kind of stuff.

Joe Bert:
Right.

Aaron Bert:
But, again, that’s called The Masters Rule. So something to consider if you do have that second home. Also, if you’re buying a second home and you’re planning on renting it out, how you-

Joe Bert:
Let’s stop you there.

Aaron Bert:
Do you want to go back?

Joe Bert:
Yeah, I’m going to go back to that because some people might misunderstand that. If you rent it out for more than 14 days, you’ve just blown the deal.

Aaron Bert:
Yeah, you can’t rent it out more than 14 days at all.

Joe Bert:
It’s not that you get 14 days free and then you get everything else. On top of that-

Aaron Bert:
Right.

Joe Bert:
… you have to pay tax on. No, if it’s 14 days, that’s it. End of story if you want the tax-free income.

Aaron Bert:
Right.

Joe Bert:
Right.

Aaron Bert:
Exactly. So if you live in a real popular, I’m thinking about the college towns that don’t have a lot of hotels or not enough maybe for parents’ weekend or for the college football weekends or whatever, people can rent their house out basically for all the home games.

Joe Bert:
Right.

Aaron Bert:
But those weekends-

Joe Bert:
And it doesn’t have to be 14 consecutive days.

Aaron Bert:
Right.

Joe Bert:
Right. Seven weekends for two days a weekend.

Aaron Bert:
Right. And charge probably top dollar because you can’t get into a hotel and all that income then comes in tax-free.

Joe Bert:
Right.

Aaron Bert:
So something to consider there. But then, of course, you have to have insurance or maybe put your home in an LLC, if the second home in an LLC in order to protect it. So an LLC stands for limited liability corporation, and it’s a way of protecting your personal assets outside of the LLC in case something were to happen to the property owned within that LLC. So how you structure that home, or how you protect that home, or who the owner of that home is, is an important thing to consider. Also insuring the home to make sure you have enough liability insurance and possibly buying an umbrella policy for excess liability insurance too in case people are renting the place and something happens to them while they’re on the property, whether they trip and fall, or who knows.

Joe Bert:
Right.

Aaron Bert:
So that’s why you buy insurance and make sure that you protect yourself accordingly. And the last but not least is it may sound great, but inheriting a property is not always the best thing to happen. A lot of people don’t necessarily want to inherit it. So something to consider with your beneficiaries if you’re buying that second home. They may not want to inherit it and it could be nasty surprise for them of how to unwind that in the end. So those are my 10 tips for buying that second home.

Joe Bert:
And I’ve got one more that we’ll catch after the break.

Josh McCarthy:
Stay tuned for that final Joe Bert tip about buying your second home. If you want to hop on the air, the number to call is (844) 580-9326, (844) 580-WDBO, or send in your question about predicting, maybe you can predict your financial future, but if you want to plan it responsibly, that’s who we have in studio today, Joe Bert, Aaron Bert with the Certified Financial Group. You are listening to On the Money where we’re planning tomorrow-

Joe Bert:
Today.

Aaron Bert:
Today.

Josh McCarthy:
… with the Certified Financial Group. Welcome back to On the Money right here on WDBO 107.3 FM, AM 580. Always streaming live. Take WDBO on the go with you using that WDBO app. Anywhere you got some of that juicy internet, you can push the play button down at the bottom of the app and listen to your favorite show just like On the Money. You can get some financial advice if you’re in Hawaii and you want to just plan accordingly. That’s what we offer here. If you want to hop on the air, we got Joe Bert and Aaron Bert, a couple of certified financial planners with the Certified Financial Group. The number to call is (844) 580-9326, (844) 580-WDBO. And we’re talking the first segment about 10 things you should know about buying that second home. And Joe, I believe, had one more thing he wanted to let you know in this segment.

Joe Bert:
One of the other things you want to be, and this has just come up recently, I saw an article not too long ago about folks owning property in the villages. They buy the home, they’re living up north, they want to buy the home, and they want to lease it out. And what they do is they do Airbnb. Well, some of these communities are clamping down on your ability to rent out your homes to Airbnb simply because of the problems they can create. The parties that come in or the people that are renting for a period of time, they have no respect necessarily for the property, or for the neighbors. So some communities are putting in restrictions now that you can’t rent your house for short-term rentals.
In fact, I have a condo on the beach and you have that restriction in the covenants there when you sign up. You have to recognize that it’s not designed to be a motel. And so if you’re going to do that, you want to be careful that you don’t live in a community maybe that can restrict it. Maybe they don’t have it now, but if it becomes really very popular, the neighbors can change the covenants and restrict having your Airbnb. And if you’re looking out for your income, that can change overnight.
And the reason that a lot of this is going on in the villages is that people are finding that it’s cheaper to book a place for a period of time in the villages and go to Disney and all the resorts as opposed to paying the hotel rates down in the Disney area. And in the villages you’ve got golf courses, you’ve got swimming pools, and all kind of entertainment. And so it’s become a pseudo place retirement or a resort area for people coming to the Disney World area. So these are the things to consider.
And Aaron led into this that he had a client or we had a client that came in and got in some specifics. And I think what I want to emphasize to our listeners is this is what we do as certified financial planners. We manage billions of dollars of money for clients around the country. But as certified financial planners, we have a checklist of 100 things that a certified financial planner can and will do for you, and managing money is just one of them.
And Aaron just demonstrated how when we get into the nitty-gritty of a client’s personal situation, we’ll run the numbers and see if it makes sense. And sometimes it makes great sense and allows you to do what you do. But what you don’t want to do is go into this emotionally because it is in fact a financial decision at the end of the day. And if the financial decision doesn’t work, it appears good initially on paper perhaps, but it’s [inaudible 00:17:46] to blow up your retirement plans. So certified financial planners, this is what we’re trained to do. We do the in-depth analysis and all kinds of things like leasing a car, buying that second home, college education, all those things that we’re skilled in as certified financial planners, not just money managers. So I hear the bumper music again. Josh, take it away.

Josh McCarthy:
Here I take it away as we go into break. This is the Certified Financial Group bringing you On the Money. If you want to hop on the air, talk about maybe some tips on buying your second home, talk about tips at all in planning your financial future, or if you want to know a little bit more about Score My Funds or when you can see more of the team face-to-face, they got plenty of workshops coming up to assist you in planning your retirement, planning your tomorrow.

Joe Bert:
Today.

Josh McCarthy:
The number to call is (844) 580-9326,(844) 580-WDBO. Send in your open mic on that free WDBO app. Pick the brains of these financial experts. You’re ready, Joe? You are now listening to On the Money where we are planning tomorrow-

Joe Bert:
Today.

Aaron Bert:
Today.

Josh McCarthy:
… with the Certified Financial Group.

Speaker 2:
Welcome back to On the Money, Central Florida’s most listened to financial call-in show. Brought to you by Certified Financial Group in Altamonte Springs. It’s the only show hosted exclusively by Certified Financial Planner professionals. Monday through Friday, their CFPs provide financial planning and investment advice for a fee. But on Saturdays, the advice is absolutely free and has been for more than 30 years for their WDBO listeners. If you have a financial question you want answered by real fiduciaries, the lines are wide open. Call (844) 580-WDBO. That’s (844) 580-WDBO and enjoy the rest of the show.

Josh McCarthy:
Welcome back to On the Money right here on WDBO. My name’s Josh McCarthy with a big microphone on it that says WDBO because I get lost sometimes. We are sitting in studio today with Joe Bert and Aaron Bert, a couple of certified financial planners with the Certified Financial Group. This is your chance to hop on the air, pick the brains of these financial experts. The number to call is (844) 580-9326, (844) 580-WDBO. Or you can leave your open mic inside that WDBO app. Push the open mic button, give me your best 15 seconds. We’ll chop it up and play it back for you on the air as if it was called-in all to begin with. Again, (844) 580-WDBO if you want to pick the brains of Joe Bert and Aaron Bert, or if you want to go there and say hello, shake the hands with the certified financial planners at the fancy offices of the Certified Financial Group. There are plenty of opportunities for that too guys.

Joe Bert:
We’ve got some workshops coming up. Aaron, why don’t you tell them about it?

Aaron Bert:
So we host workshops in our office, usually a couple a month, and they cover a broad range of topics, anywhere from tax planning to social security. We do a long-term care one, we do cybersecurity one. And the point of those workshops is not to sell anything, but really just provide some general educational information and introduce people to our offices and to our planners here within our offices. And so it’s a low risk opportunity for people to come in, meet with us, no obligation, spend an hour, learn a topic, have some snacks, meet the planners, again, learn something and go home with some information that’s valuable to you. And then at some point later on in your life, if you determine you want to use us for any sort of help in your financial life, then maybe you’ll think of us because you have some familiarity with us and our firm.
So that’s kind of the idea of the workshops, why we do them. Again, leave your checkbook at home. It’s not some steak dinner where we’re trying to sell you an annuity or some other product. We’re not pushing anything except for knowledge that we’re sharing with the community.
All the workshops can be found on our website financialgroup.com. If you click at, I believe it’s workshops at the top of the page. The next one we have coming up is November 4th, hosted by Matt Murphy. That is a Saturday, and it runs from 10:30 to noon, and it’s called How Tax Planning Changes Through the Four Stages of Retirement. Again, November 4th, hosted by Matt Murphy, CFP and AIF, accredited investment fiduciary.

Joe Bert:
Let me take over here.

Aaron Bert:
Good. What’s next?

Joe Bert:
Well, you need to cough.

Aaron Bert:
I’m good. I got it.

Joe Bert:
All right. Go ahead.

Aaron Bert:
The next one after that is actually hosted by Charles Curry. This is an evening one, it’s November 15th, runs from 6:30 to 8:00 PM in the evening, social security planning, basic rules and claiming strategy. So, again, if you’re interested in coming in in evening, maybe after work, feel free to come by the offices, and 3:0 to eight o’clock on the 15th of November. And actually we’re scheduling all the way out into February. So January, we have on 10 January cybersecurity: 10 threats facing every person in business. That one also is hosted by Charles Curry. And February, we have on February 7th, long-term care planning Strategies, again hosted by Charles Curry. Those are evening ones. So during the workweek 6:30 to 8:00 PM.
If you’re interested in any of those or want more information, it’s on our website. Again, financialgroup.com, click on workshops, and you can find information. And that’s also where you would go to register RSVP for these workshops because they do fill up. And then if for some reason we get overbooked, we’ll put you on a waiting list and let you know if we have any cancellations.

Joe Bert:
To talk a little bit more about the one coming up on November the 4th. That’s November 4th-

Aaron Bert:
Tax planning.

Joe Bert:
Yeah, through the four stages of retirement. This is a lot of information here that how the tax planning is critical, how it impacts your social security, how it impacts your pension, your IRA, your required minimum distributions, the charitable contributions, qualified charitable distributions, all those things that you should be considering in your retirement years and how they all interreact. So this is a great one. If you’re at or near retirement, and you’re looking at taxes, and want to minimize your taxes because remember every tax dollar you pay is a tax dollar you can’t spend, this would be great for you. So once again, as Aaron said, go to our website financialgroup.com. That’s financialgroup.com. And I see we’ve got a text question floating in there. Josh, so take it away.

Josh McCarthy:
That’s right. If you want to hop on the air, phones are open for you. (844) 580-9326, (844) 580-WDBO. Text question comes to us and they ask, “My dad’s advisor is recommending preferred stocks for income in his portfolio. Good idea or nay?”

Joe Bert:
Maybe.

Aaron Bert:
It depends. People don’t necessarily like it when you say that because you’re not telling them exactly what’s going on. But without having more information and more analysis and more details, it’s really difficult to say whether or not that that is a good idea. Preferred stocks, it’s a traded stock that is higher up on the food chain in the capital structure of a corporation and they normally pay dividends, which is why they’re asking whether or not that’s a good thing for income. And so preferred stocks, like bonds, basically pay a set dividend every month. But the underlying issue with preferred stocks is that, like bonds, the fluctuation of that stock can occur. And if you need to get into the capital or the principle of that stock, you may end up having to sell it at a price that’s lower than what you purchased it for. So there’s always concerns there about whether or not that would be a good strategy for you.
We don’t buy individual stocks within our company. That’s not something that we necessarily believe in because then you have to go in and dig into the financials of the company, know about what’s going on with labor, and what’s going on with the financials and their cashflow and their revenue, and all this different stuff. So buying individual stocks is always kind of a high risk, high reward type of proposition because of the risk that you have in buying any one individual security. So we always believe that diversification is important. Maybe owning a preferred stock mutual fund or ETF where you’re getting broad diversification may be appropriate. But without knowing more about their particular situation, it’s hard to say whether that’s the right thing for this person or not.

Joe Bert:
Often people look at dividend paying stocks, they say, “Well, that’s a high dividend.” And the reason it’s a high dividend is because the share price is so low, and the reason the share price is so low is perhaps there’s negative things going on within the company.

Aaron Bert:
Right.

Joe Bert:
So you got to be careful of that. People just looking at dividends, why is the dividend so high relationship to the price of the shares is because the shares are down at the moment, or maybe down permanently, are going away entirely. So you need to be careful. Just don’t look at the dividend but look at the underlying stock because as a stock owner, actually you’re taking the risk-

Aaron Bert:
Right.

Joe Bert:
… as opposed to a lender. When you’re owning bonds, you’re a lender to the company, you have more priority on distribution or on liquidation than a stockholder. So as Aaron said, in the pecking order, the lowest on the totem pole is the common stockholder, then your preferred stockholder, then your bond holders.

Aaron Bert:
Right.

Joe Bert:
And, of course, the IRS always is first, and then your creditors are always right after that. So there is a pecking order in terms of who gets the money if something is to happen to the company. Not to say that the preferred stock shouldn’t be looked at, but as he said, we are not stock pickers. Our strength is finding the very best money managers that pick the very best stocks. And that’s the strength that we have. And we use a system through the Center for Fiduciary Studies, which brings me to something that we may want to talk about, which is Score My Funds, which we’ve been offering to our listeners now for a couple of years, and every week we have a few folks that take advantage of it. And this is an opportunity for you to have the investments that you own in your portfolio, whether it’s your IRA, your 401(k), your individual brokerage account, whether it’s a mutual fund, or an ETF. It’s not individual stocks, it’s a mutual fund or an ETF.
We will then run that through our system, scored on 11 distinct criteria, everything from expenses to manager tenure, to a beta, alpha, and it looks at 11 distinct criteria to measure the quality of the fund scored on a scale from zero through 100, with zero being the best, 100 being the worst. And we’ll send you that report absolutely free. And then if you’d like to follow up with that, we’d be glad to do it for you. So if you want more information about that, go to scoremyfunds.com. That’s scoremyfunds.com, put in the information and we’ll shoot you the report within 48 hours. So that’s my story there.

Aaron Bert:
And real quick, Josh, since we have a break here. I just wanted to mention, if you have a call that you don’t want to talk about on the air, we do have Rodney Ownby, CFP and CPA, who has taken calls off the air. So if you’re interested in giving Rodney a call and asking him a question off the air, you can reach him at our office number, which is 407-869-9800. Again, 407-869-9800. If he doesn’t answer, leave him a message. That means he’s on the phone, he’ll give you a call right back. Again, Rodney Ownby, CFP, CPA, is taking calls off the air if you are interested.

Joe Bert:
Yep. I see we got another text floating in there. Josh, take it away.

Josh McCarthy:
You got it. Next question states, “I have 15% of my money in physical gold,” maybe this person is a pirate on the weekends. Well, they have 15% of their money in physical gold. Would you recommend more or less percentage wise?

Joe Bert:
Certainly not more.

Aaron Bert:
Again, it depends.

Joe Bert:
Well, yeah.

Aaron Bert:
It’s funny, we get this question, especially in times like this, right? Where there seems to be uncertainty, there seems to be some angst out there in the world. People are shooting at each other in different parts of the world, the government is spending more than what they’re bringing in, and people gravitate towards gold. And the reason they gravitate towards gold is because for some reason, they like gold, and they want it to be in their safe, and they know that they have it, and it’s there for them for… I don’t know what they’re ever going to do with it, because if you think about it, if things got really bad, and for some reason you needed to start selling off your gold, who’s going to give you food in exchange for gold? I don’t understand. I mean, I guess it just gives people some sense of security, but at the end of the day, you’re going to have to trade it or sell it for something in order to make that gold have some more value, right? Am I wrong?

Joe Bert:
No, you’re right. And, of course, it all depends on how you buy it. And why do people gravitate toward it? Well, the commercials on television. If you watch some of-

Aaron Bert:
Well, really good commercials.

Joe Bert:
They are good commercials, “The world is coming to an end.” What gets me, it says, “Gold is an all time high. Now’s the time to buy.”

Aaron Bert:
Right. That’s never the time to buy anything is when it’s at an all time high.

Joe Bert:
Right. And there is a place for those kinds of assets in some portfolios. But don’t bet the ranch on it. And certainly if you have 15%, I certainly would not do more.

Aaron Bert:
Especially if you have physical gold-

Joe Bert:
Yes.

Aaron Bert:
… because then the challenge you have with it is then you got to store it and you got to protect it.

Joe Bert:
Right.

Aaron Bert:
And if someone knows you have a lot of physical gold, then you become a target. So there’s a lot of challenges in owning gold. The other challenge I have with gold is that… Wait, I just lost it. What was I going to say?

Joe Bert:
I have no idea.

Aaron Bert:
It doesn’t pay you anything.

Joe Bert:
Well, there’s no income.

Aaron Bert:
No dividend, no income. So you have this thing that doesn’t pay you anything and your hope is at some point is that somebody’s going to give you more for it than what you paid for it.

Joe Bert:
Well, it’s like any tangible asset, whether it’s real estate, silver, or stamps, or coins, or whatever it might be. You bought something and you hope it appreciates. And gold over time has appreciated, but it is not the end-all be-all. And if the world comes to end, I say, what’s the difference?

Aaron Bert:
Well, I think you’re probably better off buying guns and ammunition.

Joe Bert:
I agree.

Aaron Bert:
Anyway. Put that in your safe.

Joe Bert:
Yeah.

Aaron Bert:
Anyway. All right.

Joe Bert:
All right. Josh, I see we’re up against the break here, buddy. Take it away.

Josh McCarthy:
Thank you so much. Thank you for joining that Pirates of the Caribbean ride. That was fun for all of us. If you want to hop on this show, we got one segment left. The number to call is (844) 580-9326, (844) 580-WDBO. Or like Aaron said just a few minutes ago, we do have that off-air number because we get some callers being like, “I want to know what to do. I trust these guys at Certified Financial Group. But you know what? I don’t want to give out my whole information live on the air.” So that’s why that off-air number exists, Rodney Ownby standing by at the office. The number is 407-869-9800. You are listening to On the Money where we’re planning tomorrow-

Joe Bert:
Today.

Aaron Bert:
Today.

Josh McCarthy:
… with the Certified Financial Group. Welcome back to On the Money right here on WDBO 107.3 FM, AM 580. Your chance to hop on the air with a couple of certified financial planners with the Certified Financial Group. Gary has given us a call from St. Cloud. Go ahead, Gary, you’re on the air.

Gary:
Hi. How are you doing?

Joe Bert:
Good.

Gary:
I’ve got a few rentals that I’m kind of tired of doing getting up in age. Can I convert them to maybe a real estate fund or anything that would avoid capital gains other than 1031s?

Joe Bert:
No.

Aaron Bert:
Other than 1031-

Joe Bert:
Other than 1031s. Well, here’s another option that you may want to consider. Some people really like this to avoid the capital gains is turn it into what’s called a charitable trust. Here’s what you do. You put those real estate assets into the trust [inaudible 00:33:50] for market value, avoid all the taxes. You then have the proceeds for those sales in the trust, and then the charity that you select will provide you or your survivor and/or your survivor an income for a certain period of time, whether it’s your lifetime, 10 years certain, whatever it is. So that is the way to avoid the taxes and to generate income for your lifetime. And that’s an option. And the 1031 is what you said, there’s no way other than that to avoid the capital gains taxes. And remember on those rental properties, I’m sure you’ve talked to your tax preparer that you’ve got to recapture some depreciation on that. So look at what the actual tax consequences are, the sales. Have you looked at that, Gary?

Gary:
Yeah. So what about the real estate funds? Are they doing well to invest in?

Joe Bert:
Well, every fund is unique, and there are some good ones and there are some not so good ones. I think real estate should be a part of a portfolio. It shouldn’t be the entire portfolio. And we use it in our portfolios as part of the diversification process. But owning real estate through a fund gives you that opportunity to hold or invest in tangible assets. But your real estate funds have different components. You can have residential, you can have commercial. There are some that invest in cell towers and all kinds of different real estate investments. So there is a place for it. I can’t tell you if it’s appropriate for you, but we do recommend it as part of a diversified portfolio. Yes.

Gary:
Thank you very much for all your work. Appreciate it.

Joe Bert:
You’re welcome, Gary. Appreciate the call.

Aaron Bert:
And actually this is a great point that Gary brings up because the topic this week was buying a second home or buying rental properties. And then sometimes people accumulate many rental properties.

Joe Bert:
I’ve seen it.

Aaron Bert:
… using it as a source of income that they want in retirement.

Joe Bert:
Yep.

Aaron Bert:
And people are trying to unwind these now because of the elevated home values, because they’re not getting as much rent as maybe the value of the home is worth, or it’s just harder and harder to rent them, or maybe there’s capital improvements that are needed. And so now they’re trying to unwind them and they’re stuck with the tax consequences of owning these properties over all this time and the depreciation that you have to recapture. And just another consideration for those people that want to buy a second, third, fourth, fifth, sixth, seventh home or whatever, and then turn around and try to rent it out because at some point, you have to unwind it, and whether you unwind it or your beneficiaries unwind it, which is even more of a challenge if it’s across multiple states. It’s just something you got to consider when making that decision.

Joe Bert:
Well, it’s active management. You’re in fact running a business. So you need to be savvy in that as in any business. I’ve seen people make a lot of money in it, and I’ve seen people lose a lot of money. So you got to be careful. A lot of considerations. And I see we’re up against the break. Once again, Rodney Ownby is taking calls off the air. You can reach him at 407-869-9800. That’s 407-869-9800. If the line is busy, he promises to call you back.

Josh McCarthy:
Thank you so much, Aaron Bert with the Certified Financial Group, Joe Bert with the Certified Financial Group, and the voiceless, Rodney Ownby, this Saturday with the Certified Financial Group answering the questions as they have for a long time here on WDBO. You have just listened to On the Money where we are planning tomorrow-

Joe Bert:
Today.

Aaron Bert:
Today.

Josh McCarthy:
… with the Certified Financial Group.

 

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