What is the Real Estate Financial Planner? Interview

Are you interested in learning more about what the Real Estate Financial Planner™ software is and how it came to be? Then check out this interview! Not much to see in the video… as I did not really show anything important on the screen share. There is also a raw transcript of it below.

Transcript of Video

Real Estate Financial Planner

Jassen: Hey James, how you doing?

James: I am doing amazing. Thank you for having me on.

Jassen: Awesome. Awesome. Um, you know I really appreciate you taking the time to join me. This is Jassen Bowman, by the way, for those listening and appreciate you taking the time to join me for, for a conversation that, that, uh, I felt was necessary. Uh, we did a, a kind of a, a, a test run through yesterday of, of doing some, a Webinar for explaining some of the Scenarios and that are that you’re building, in the Real Estate Financial Planner™ and I felt that there were a few, uh, kind of background things that we should probably, cover in a conversation, record that and make that available for folks. And so that’s what we’re doing here. And so I want to jump right into this first and foremost by asking you a what will probably be a very obvious question to anybody that visits the website, looks at the tool, looks at any of the other classes we’re going to be doing. And the inevitable question is, what is this thing? What does it, and what, what is its reason for existing on planet earth? Like, so what is this?

James: Yeah, that’s. So what I basically heard you say is a yesterday for our Webinar, we, uh, we dropped you into calculus three and you were really only in college Algebra one or something like that. We kind kinda slammed you with all this jargon and dialogue and assumed you knew a ton of information about the calculator and I get so excited about the calculator and kind of like what it does and like all the different things you can do that sometimes I don’t step back and give people the big picture of, of what’s going on. So I’m glad we’re doing this call.

Jassen: You’ve also been embroiled in this. I mean, you’ve been working on this thing for almost two years I think.

James: I think it’s more than that actually. And um, I was so tempted to look up like when we started with the original calculator. I’m going to get up from my desk and pull that up right now because we, um, when we started doing this, I’ll kind of give you the backstory.

James: So May 21st, 2015, that’s going to be an important date here in a second. So, so basically here’s the, here’s how it worked. Um, I’m a real estate broker here in northern Colorado and um, I was helping clients. I work almost exclusively with real estate investors. I would say, oh boy. Ninety percent of my clients are real estate investors. I would also say that like, you know, 90 percent of all my transactions are on the buy side. I only do a, I think this year we’ll end up doing about 40 some transactions last year, did about 40 transactions and about four of them are sell our listings, people selling Properties, the other 36 or so are people buying Property. So I’m really heavy on the buy side, really heavy, um working with real estate investors and about whatever that is now, three years ago, three and a half years ago, um, I was at lunch with two of my best friends and we were, uh, kind of just, you know, having lunch, talking about things.

James: And one of my best friends was saying, hey, you know, this is my, this is my proposed real estate investing strategy. I’m thinking about buying a house, moving in, living there for a year or so, you know whatever the lender requires. And then buying another owner occupant Property and then converting the previous one to a rental. And because I’m doing an owner occupant, I could put five percent down. I can get a little bit better interest rate on my Property. And um, you know, I can kind of repeat this cycle and I can acquire a very large portfolio of rental Properties with a relatively small amount of down payment. And if you think about this, Jassen, if you are going to go buy Properties with 20 percent down as investments, you can buy four times as many. If you only have to put five percent down instead of 20 percent down when you’re going to buy these Properties, so a single 20 percent down payment can be leveraged into four investments four Properties that you’re going to go by and the interest rates better, which helps you improve your cash flow.

James: The, you know, the downside is you do need to move into the Properties and live there for a year in order to be in compliance and not commit loan fraud, but it’s a relatively small price to pay in order to be able to acquire this portfolio of rental Properties. And so,

Jassen: This is an important point you have if you’re going to follow this strategy which you referred to as the Nomad strategy, you must live in the Property for 12 months because that is what is written into the mortgage contract that you’re signing when you take out the loan.

James: That’s right. Yep. It’s otherwise it’s called occupancy fraud. It’s a type of loan fraud. And uh, the penalties are pretty severe. I’m like, I think, uh, one of my, one of my client’s old tenants actually went to prison for loan fraud.

Jassen: Right.

James: So this is not like a joke. This is like serious stuff. So as long as you’re complying with the Rules, it’s totally fine. And tell your lender, what you’re doing, tell your real estate agent what you’re doing and do that. So again, getting back to my story though, so he tells me that this is the model that he wants to do and uh, I, I started going over in my head what the numbers look like for doing that. And I’m like, those numbers are going to be pretty amazing. Now I want to be totally clear. He is not the first guy to come up with this idea. In fact, I’ve had clients who had bought Properties that they were living in. They moved into another Property. They kept the old Property and they converted it to a rental. But this is the first time where it actually clicked for me to do this as like an investing strategy where we were actually formula formulaically going to do this and repeat it and consistently do it.

James: I’d had a bunch of clients do this before and in fact that the joke I make is that, you know, from the time of the caveman, you know the caveman guy would go take over the cave. He lived there. He’d say, Oh, this is great. I’ll tell you what’s, you know, you go rent this one from me, I’m going to go take this other cave up on the hill. And they kind of like serially went cave to cave, almost like nomads, you know, they nomadically moved from cave to cave in on their woolly mammoth, you know, what their little money sack hanging there and bear skins and their mammoth skin, stuff like that. So, I mean, this is not new stuff, right?

Jassen: Right.

James: But one of the things we did is, and the reason I know the date is, he told me about this model. We have a pretty good discussion about it over lunch. And I ran home all excited because I’m a spreadsheet guy. So I ran home and pulled up my spreadsheet and I started building basically what we eventually called the first Nomad Calculator. Um, you know, it’s just the Nomad model, the investing strategy of moving house to house and kind of buying Properties instead of just building one really good spreadsheet. And by the way, we have like one of the most amazing spreadsheets for analyzing individual Property available. It’s completely free you can go to the, you know, learn to be rich.com and it’s one of the downloads on there. Maybe we’ll add it to the Real Estate Financial Planner™ website. But we teach a ton of classes on how to use the spreadsheet, how to analyze deals. And it’s a really amazing tool for doing analysis on a single Property. But what we didn’t really have is the ability to see how buying multiple Properties kind of cascading these spreadsheets on top of each other.

James: Works out on a kind of entire portfolio basis. And so I ran home that day and it was May 21st 2015 is when we actually built this spreadsheet because I had an email where I went home and I spent the whole afternoon building this spreadsheet. And then I emailed to him later that day and I said, hey, here’s your model, here’s what it looks like. It looks pretty phenomenal. Um, and so you know let’s dig into this a little bit more. Let’s call up some lenders. Let’s get some details on how we can make this a strategy and make sure that it can work. And you know, over the last, you know, three and a half years, we’ve probably taught, oh boy, at this point, well over 100 classes, you know, two hour plus content classes on all the different nuances of doing this strategy. And I’ve had, you know, a dozen plus clients kind of doing this strategy where they’re, they’re on the path of buying repeated Properties and we have, you know, people that are on their third and fourth Property. I mean you are on, what number is this for you doing the nomad strategy?

Jassen: This is the, this is my fourth Nomad Property.

James: Yeah. So like you as an example, have bought Properties and kind of done the Nomad strategy. So this spreadsheet that we made at first was, you know, at the time it was like cutting edge, it was like, oh my gosh, look at this, you buy a Property every single year and if you get this in cash flow and then here’s what the debt pay down looks like, and here’s what some appreciation assumptions look like. It was pretty amazing to be able to see how this thing plays out if we do this. And I think at the time we were talking about doing it for 10 Properties, like no, maybe I can convince my girlfriend and I to kind of do this for 10 years. We acquire 10 rental Properties and I should be pretty good with 10 rental Properties.

James: You know, a nice portfolio of that. And it seems like a reasonable approach to do.

Jassen: Right.

James: The tricky part is we kind of did this, this crazy spreadsheet and it had some limitations. Like the first one we did it basically assumed all of the Properties were exactly the same. So we said, okay, this is a $300,000 Property, $250,000 Property and we’re buying basically the same exact Property over and over again. We did take into account that Property values tend to go up over time and that rents tend to go up over time. So you’re buying slightly more expensive Properties as you go down from house number two to three, to four to five and on. But it was, it was very simplistic in a lot of ways. It didn’t give you a lot of variation to do stuff. Um, and, and, and kind of like to kind of give you the longer version of the story from the spreadsheet.

James: We actually ended up building web based software to model this whole thing because with the spreadsheet we couldn’t do the types of graphs and Charts that I wanted to use, when I was teaching the classes. So we ended up building our first custom, what I, what I call the Nomad Calculator. And I called that one now, you know, Nomad Calculator 1, where we kind of did software and made these Charts to be able to kind of cascade these rental Properties and analyze things and we built this software to be able to teach classes and have the slides for PowerPoints and everything else. And then we built, you know. We wrote a couple books based on this stuff. Basically we said, hey, rather than me talking out the story and showing you how each Chart builds on each other and what’s happening to show you what the Chart is, I said, why don’t I just write this out longhand?

James: And so I took the Charts and I wrote narrative between the Charts telling the story of you buying your first Property, here’s what all the mechanics look like and the cash flow and the rents and how much money you’re making from appreciation and debt pay down and all that other stuff. And here’s what happens when you by your second and third and fourth and 10th and and doing really complicated models. And we wrote, I don’t know, probably three or four different books using the original Nomad Calculator software. So that was Nomad Calculator 1. The spreadsheet was not even part of it. Nomad Calculator 1 was kind of like step two in the process. It was web based software where we did this and the Nomad Calculator as of right now, and it may come down, but as of right now it’s actually still online. People can go log in, but just like the spreadsheet, it, it had the assumption that you’re buying the same Property every year. Now, Jassen, you’re on Property number four right now, right?

Jassen: Right.

James: Are All four of your Properties identical?

Jassen: Not even remotely similar.

James: Yeah. And the other assumption. Yeah. And the other assumption we made is that you’re going to be doing this every 12 months to the day. So when you bought your Properties, did you wait exactly 12 months and then you bought your Property on the very next day?

Jassen: No, I went 15, 16 months between number one and number two. And then 14 months between number two and number three. And then um, between number three and number four was only six months.

James: Yeah. And you did some special stuff. That’s why you were not required to do the year. But here’s, here’s the challenge that we had and why the calculator was so limited and we knew we needed to build something else is that first of all, people are not buying the same house. Like the client that did this, they bought a duplex first and they’re not going to buy 10 duplexes. It’s hard to do loans for that. So they ended up doing a duplex for the first one and then single family homes for additional ones. So the Properties are definitely different. The time period between when you’re buying them, even if you really, really want to hit that 12 months to the day, it’s like near impossible to do that because sometimes you make offers on Properties, you don’t get them accepted. Closings take, you know, 30 days plus or minus.

James: So it’s hard to time this thing perfectly anyway.

Jassen: Right.

James: And people tend to take time off, you know, they end up doing two or three or four, and then they say, well, I need a break, you know, my spouse, by the way, it’s never the person. It’s always the spouse that’s like I’m not willing to move again. Right. It’s like know the guy comes to the class or the girl comes to the class and it’s always, oh my, my wife or my husband won’t move another time. I’ve already moved three times or four times. I need a break, you know, so they’re always blaming someone else, but you can’t just count on doing these exactly 12 months to the day. And so I knew pretty early on, even when I was building the first calculator, I was like, yeah, I mean I’m making some, some radical assumptions about things, you know, exactly.

James: Twelve months, exactly the same Property. All the appreciation rates are the same. All the rents are the same, but they’re going up in value you know. So I’ve made some really strict constricting type of assumptions about stuff and I knew I was going to need to change that. So I started building the Nomad Calculator 2 shortly after I built Nomad Calculator 1, it’s just with working a full time real estate brokerage business and you know, I had a kid in college and another kid just out of college or just out of high school, um, and so family stuff going on and we had some medical and health issues in our family. So there’s just life going on. And so it took a little while for me to get around to it. But I finally started programming what I called the Nomad Calculator 2 because it was the second version of this calculator with a lot more complexity.

James: And when I do, when I started building that one, I started building it in such a way that you enter in all your assumptions on a single web page and it would do all the calculations in real time. So you basically hit submit on the form. It does like millions of calculations and math and just displays like, you know, 50, 50 different Charts on the screen and everything else. And what I’ve, what I realized very soon after I started building it that way, is that I was going to crash my server.

Jassen: Yes

James: And you know, this is a known problem for me, right? I tend to take on these projects that are bigger than what technology can really handle. Um, and so

Jassen: I’ve seen you do this before.

James: Yeah, this is not new new territory for me. I tend to develop these, um, you know, as hobbies. I’m like, I do software kind of on the side for fun. Um, so I started building this thing and I realized very quickly, yeah, this is going to be a problem. Um, you know, I’m not even halfway through all the features I want to build and I’m already starting to crash my server. So what I, what I ended up doing is scrapping Nomad Calculator 2, and then moved on to Nomad Calculator 3 even before Nomad Calculator 2 was even released. Um, I, I basically abandoned it midstream, like I need to redo the code base entirely. And so Nomad Calculator 3, which was the precursor for what the Real Estate Financial Planner™ is really Real Estate Financial Planner™ is like Nomad Calculator 4. But we changed the name because the Nomad Calculator was all about doing the Nomad model, buying a house, living there for a year, converting it to a rental and repeating the process 10 times or whatever number of times you wanted to do it.

James: And what happened was when we went to Nomad Calculator 3 and we implemented all these technical changes on how we do the calculations and what it can do and how we model stuff, it became more than just Nomad. It became, you know, being able to do financial planning, financial advising type stuff for stocks and bonds and real estate combined into one in one software package. And if you’ll, if you’ll give me the kind of latitude I’d like to sort of explain to you how I think about this stuff and if it’ll help you, I think understand what the software is about and why it’s there. So,

Jassen: well and by the way also because of the fact that this is the, I think it’s important to mention that the complexity of the tool as it exists now, and we’ve had this conversation before about whether this was going to be a consumer tool or a professional tool, the sheer complexity of using it kind of defaults to being for professional, uh, use and, and so, you know, used by accountants, tax professionals, financial advisors, real estate agents, etcetera, uh, you know, for use with their clients. So, so I would like to hear your perspective as you explain the Real Estate Financial Planner™ as it exists now about why it’s useful to a finance or accounting professional in helping their clients. I think that’s an important perspective to cover.

James: Remind me to come back to that because it relates to what I’m going to tell you, but I almost needed to tell you this kind of pre-story first before I kind of touch on that. But you’re right that the calculator is the financial planner, Real Estate Financial Planner™ software as it exists now in my mind is software. It’s like a programming language you use to program your specific investing strategy and then the software runs and produces the output or the results of how your strategy performed overtime. So the analogy is it’s not something you just fill out a web page with a couple numbers from. I want to buy five houses that are about $300,000 each. Run. Show me the results. It’s refreshingly complicated.

Jassen: Refreshingly complicated.

James: Yeah it is because it’s not just entering a couple fields on a web page. It is, hey, I really want to be able to control all these knobs and levers and adjust things and houses are different and my assumptions about what the market is doing, what the stock market with the bond market is doing, what the real estate market is on a house by basis or be able to run like Monte Carlo Scenarios where you have, you know, varying market conditions where you have, you know, 10 percent decline days in the market and how does that impact your entire portfolio.

James: But I’m getting ahead of myself. So, so here is the interesting point. Jassen have you ever like sat down with a financial planner or financial advisor to have them give you an overview of where you stand for planning for retirement or anything?

Jassen: Yep.

Okay. So if you, for those of you that have done this, you know, you, you know what I’m talking about, for those of you haven’t done it, typically what a financial advisor will do is they’ll come in and they’ll say, you know, tell me about the assets you have and what’s your savings rate and how much you make and you know, what’s your target for retirement, what other big life events you have coming up. And they’ll plug in all their numbers. So they’ll put together a financial plan for you. And a lot of financial advisors, financial planners and CPAs, they will charge a fee for this service.

James: Some of them will actually not charge you a fee. They want to do this to acquire your business and then they want to manage your assets or they want to offer you additional services. But a lot of them, I’d say even most of them are charging a separate fee for you to go develop a financial plan and they’re going to go and they’re going to plug in all your numbers, all your stock holdings all your bond holdings. And in most cases what they ended up doing is they run this Monte Carlo simulation and the Monte Carlo simulation… Monte Carlo is a fancy way of saying run this, run this kind of plan multiple times with different market conditions and see what the range of outcomes has been. So if the market only does three percent a year, what does that look like? If it does, you know, 12 percent a year, what does that look like?

James: It does eight percent a year, what does that look like? What does it look like? If it’s up really good for the first few years and then it does really poorly for the last, but it runs this like 100 or a thousand or 5,000 times or 10,000 times. And so then it could show you your range of results for your investments. If you go and you talk to a financial advisor or financial planner and you go over these things, one thing that you will notice is that they all do a great job of dealing with insurance and stocks and bonds on your portfolio, but most of them, in fact, I have not actually found one. I’m sure they’re out there, but I have not found one yet that actually does a good job doing this with real estate. They will list your real estate on your asset column and they list, your mortgages and your liability column to show that, oh, by the way, here’s your stocks.

James: Really pretty graphs your range of values for how probable it is for you to hit your retirement numbers and here’s where you start withdrawing money and here’s your social security and it. Here’s your life insurance. Here’s your. Here’s some annuities you have and all this other stuff. They’ll have this really complicated, amazing plan that works great for this, and then sort of like as a side note with an asterisk on the side. They’ll say, oh, by the way, and you have these two rental Properties to generate $100 a month in cash flow and you have these two mortgages and that, you know, basically your net worth increase when you subtract your value of the Properties from the, from the mortgages you have is another $200, or $500,000, whatever it is. Right? And so it’s, it’s sort of this like, and by the way, you have real estate for, for most of the financial planners I’ve seen, I’ve not seen one that actually does a good job modeling and it occurs to me because I’m a real estate guy.

James: I mean I’m a real estate broker licensed here in Colorado that the real estate stuff is the stuff that’s complicated. The stocks are complicated in their own way, but not that much. There’s not that many different levers you pull when you do stock market investing. I mean you could do really, you can make it complicated, but real estate, even in some of its most basic forms, you own a rental Property. There’s lots of variables and things that can happen. You know different appreciation rates, different rent appreciation rates, different depreciation, you know the tax benefits of owning it. I mean there’s all sorts of things that you could do. How do you handle financing? Do you refi cash out, refi and releverage? Do you pay things off more aggressively? There’s all sorts of things you can do that impact how the asset performs over time and so the more I thought about this, the more I realized there’s a gap in the marketplace. You know from a traditional financial planner that is gonna go and take all your assets and they’re going to run a plan for you to being able to plan this stuff with real estate involved. Stocks and bonds and real estate all living together under one kind of model and presentation. That’s really what’s been missing and the ability to test different strategies and different investing Scenarios to do that. I think that’s where the gap has been in the marketplace up to now.

Jassen: Well that begs a super obvious question and that is if the. If all the financial planners, financial advisors with an o or with an e, you know, if all the PFSs, all the CFPs out there are making their plans based on stocks and bonds and the primary thing they’re helping you with more than anything else is determining a proper asset allocation for you to, to hit your, your net worth Goal. Um, and, and most of them are honestly putting you in some sort of index fund of some nature. That’s what most of them do.

James: I don’t know if that’s, I don’t know if I would classify that true because I think there’s a good number that do that, but then there’s also a good number that they do some more sophisticated asset allocation modeling. So I don’t want to group everyone into that, but do continue because I, I don’t, I don’t want to make assumptions.

Jassen: Okay. Fair enough. But I mean if, if, if, if that’s what all of them are doing.

James: Yeah.

Jassen: Then the conventional wisdom seems to be that you should be building your retirement nest egg out of stocks and bonds. Um, why are you so special? Why should somebody listen to James when he says, no, you also need to include real estate as part of your overall asset allocation. Why? Why is this an asset class that you should pay attention to? Um, and kind of a corollary to that is, well, I could just invest in riots on, on the public markets. So why real estate? Why directly owned real estate? Why, why, why should anybody care about that and why do this versus a real estate investment trust?

James: Yeah. Those are really good questions and I’m super reluctant to kind of dig into them. Because I almost feel I’ve been set up to answer the question and because, you know, my belief is that real estate returns are higher, but you know, but that is a, it is a subjective belief about things. I think you could make some arguments based on data to show that real estate returns, especially leveraged real estate returns where you’re getting a mortgage on the Property, um, significantly outperform the real estate market. However, I’d rather not try to convince somebody to do real estate if they’re not already inclined to do that. So I’m not here, I’m not here to try to tell you, if you’re not doing real estate, you’re dumb.

James: Uh, I’m not try to tell you, you really should do real estate because I can totally see. I know people that real estate is not a good choice for them. They don’t have the personality for it. They don’t have the risk tolerance for it. They don’t, they don’t have the desire to like deal with some calls, you know, sometimes even talking to my wife, we’re, we’ll, you know, we’ll discuss some things and she’s like, you know, the nice thing about stocks. You never get a call saying, hey, you need a new roof or you need a new furnace or whatever it is. You make your investment. And sometimes the investments down a lot, but you’re not getting a call from the Property manager saying, oh, by the way, can you please write me a check for $6,000 because I need a new roof on the Property and it’s not covered by the hail claim or whatever it is.

James: You know. So you don’t have those types of things. And you could totally plan around this and when you really run the numbers, I think you will see that in most cases, real estate can significantly outperform stocks. However, I’m not here to kind of persuade someone that you definitely should do it. Um, I think for the people that are inclined to do it, this tool provides you a way to model things that you’ve never seen before. Um, you know, the ability to say I own three rental Properties or 10 rental Properties, rental Properties, and I want to see, should I pay them all off? What does that look like? Uh, should I not pay them off? Should I re-leverage? Should I take cash out and buy new Properties? You know, and I believe this is going to happen in the marketplace. So what does that look like if this happens?

James: Running, running Scenarios like that in our Real Estate Financial Planner™, it’s amazing. It does stuff that you just, you’ve never seen before, you, you’ll never see anywhere else. It’s just awesome for doing that. But as far as me convincing you, you should definitely do real estate. I don’t know if, if that’s what I really should be doing. Um, so I apologize I didn’t give a,

Jassen: No it’s a good answer. It’s an honest answer is what it is.

James: Yeah.

Jassen: And you know I will say, I will evangelize if you won’t, you know, I, I am convinced by the data that I’ve seen that real estate is the best performing asset class over the past couple hundred years

Jassen: in this country, above and beyond even the stock market. I have seen the data that convinces me of that. Uh, so I’m, I’m happy with that, but even with that, I have decided that I’m going to maintain a 50/50 real estate to securities, um, uh, uh, asset allocation in my own portfolio. Um, but what I love about Real Estate Financial Planner™, uh, it is that it allows me to be able to see the range of consequences or the range of expected, um,

James: Expected value. Yeah.

Jassen: The expected value of my overall portfolio. And I can directly compare a Scenario of, okay, I’m going to go a 70/30 stocks bonds and that’s all I’m going to do. Versus, I’m going to put half my investments into a rental Properties and half into the 70/30 portfolio and so to do that and, and I can see based on back testing data and whatever assumptions that I want to make because I’m going to make different assumptions about the returns in the stock and bond markets than you are. And I can see which of those two Scenarios plays out better. I can change any of the variables so that I can kind of play with it and see what the impact is.

James: Yeah,

Jassen: That’s what I like about it.

James: This reminds me, so you’re in the tax field and you did tax returns for awhile, um, you know, before you started kind of teaching some of the stuff you teach now, but what it reminds me of is one time you did taxes for us and you also told me a story about this. So I’ll just tell you the story part of it. You told me one of the things you used to do is you’d go and model like what-if Scenarios, right inside the tax software. You’d say, if I do this, how does that impact my overall tax picture versus doing it this way, and then you’d go and run tax fake like fake tax returns with your own numbers saying if I had done this, what is my tax return? It looks this way and what would I do if I did my taxes this way? Which one works out better for me in the long run, and the short run.

Jassen: Very, very common in the tax world.

James: Yeah. And so like I’m not from the tax world, but this is what that software allows you to do. It allows you to say, you know, if I decide, hey, right now I’m on of trek trajectory where I’ve got 80 percent in stocks and 20 percent in bonds. I plan on switching to a more conservative bond portfolio as I get older. Pretty common thing for people to do. You know what happens if I switch this over in five years where I go from you know 80/20 to now 70/30, 60/40 to 50/50. And I and I just kind of go along this path and compare that to saying what if I just took a little bit of the money and I bought a single rental Property or two rental Properties or 10 rental Properties or what if I bought one every year, one every other year, one now and one 14 months from now or one now and one when junior graduates college, or you know.

James: How can I go and model these things and see what the impact is to my entire investing planning portfolio with assumptions. Like for example, one of the things Jassen, you were concerned about when we talked about this, this is probably a month ago or so you said, hey, you know, one of the things I’m really concerned about is, is the stock market going to see a major correction and what does that look like for me if I have all my money in stocks or bonds or real estate, what happens if real estate prices decline by 10 percent? Stock prices decline by 10 percent, bond prices decline by 10 percent. What does that look like for my portfolio? How big of an impact is that for me and what happens if it happens randomly, like it happens more than once over the next 30 or 40 years, you know what, while I’m living and while I’m working for a little while longer and then retiring, how does that impact stuff?

Jassen: We’ve had two 10 percent market corrections in 2018 already.

James: Yeah.

Jassen: Two of them.

James: So this is the thing, right? If you want to see what the impact of that is, the regular financial planners, financial advisor guys, they could totally model that for you on your stocks and bonds stuff. They do a great job with it. They can do Monte Carlo simulations and say, if you have these corrections, this is what it looks like. Or based on actual historical data. If we go run all that, and by the way, historical data does not mean it’s going to happen in the future. It just means if you had started back then, this is what it looks like, but they’re really, really good at modeling that. What they lack is the ability to model that and real estate at the same time. You know, how does this impact your rental Properties and what, how does it impact something if you’re planning on buying 10 rental Properties over the next 10 years, if you have market corrections somewhere in there, year one, two, three, four, five, six, seven, eight, nine, 10. What happens to the different ways that that impacts you because you’re buying things cheaper, but the stuff that you already own is also discounted too. So what’s better? I mean how does it really impact things? So what happens if rents drop? What happens if you can’t sell Properties so you can’t refinance? Does it even matter? Well, a lot of this depends on what your plan is and how you plan on doing that and the software allows you to model it.

Jassen: So I’ll kind of go back a little bit to what I asked a little bit ago, but in a, in a, in a more selfish manner, you know, for, for the CPAs, enrolled agents, tax attorneys, and other financial professionals that work with me, um on other things. How can they use this to serve their clients and also as a marketing tool?

James: Yeah. Those are great questions. And I will say what’s great about it is, and you correct me if I’m wrong, because you know the tax world much better than I do. I mean I know the real estate stuff pretty well, but the, like the tax side of it, but I know when I go hire my CPA to do my taxes, they charge me extra for every rental Property.

Jassen: Correct.

James: So it, it seems to me that if you have clients that have more rental Properties that you can charge more for tax return preparation and you could actually increase the average basically profit per person you’re working with. You basically have a more profitable tax clientele.

Jassen: Yep.

James: Um, and so you could use this tool because there’s really no one out there offering the ability to kind of do planning analysis. And by that I think you can charge for the planning analysis this like regular financial planners do.

James: They charge people, you know, a thousand, 1500, $2,000, sometimes even more. If it’s a pretty complicated case for you to sit down and say, so you know, here are your assets right now. This is what it looks like. This is likely when you’ll be able to retire based on these assumptions, how do you think these assumptions are? Do you think they’re reasonable? Should we adjust them? Let’s rerun it and see how it performs for you. So I think you can get additional fees by doing this type of planning for people, but then it also helps you attract a more profitable, a higher per kind of like tax return type of clients. Um, and, and the other thing about it, and maybe this is kind of just like me thinking about it from my perspective, but as a real estate broker, if you offer this type of service to, uh, to real estate agents, you kind of focus on marketing and networking with real estate agents and explain to them what you can do for their clients.

James: They are like multipliers for potential clients because there’s no other CPAs, accountants that I’m aware of that are going in there and do any type of planning for real estate investments. It’s like a missing piece. And so you go start networking with, you know, 10, 20, 30, 50, 100 real estate agents out there that each have a handful of real estate investor clients. I think you get to attract a whole bunch of new, a tax returns with clients that own real estate so your tax returns are going to be higher. And then you can offer these kinds of consulting services, financial planning services on top of that. So I think you get like a double whammy there where you can attract new clients and also increase the average transaction size for the clients you already have.

Jassen: Absolutely. And just for those accountants that are listening, it’s not just the tax preparation, um, even if you do kind of a, uh, only a modicum of tax planning or financial planning on behalf of your, your tax clients, this is a whole new profit source. It is a, a, like James said, a service that your competitors are completely unable to offer. Um, because it’s so a unique, um, and you know, you and I pulled some data recently showing that one in 14 Americans, um, puts a rental Property on their tax return anyway,

James: Which I was really surprised to see.

Jassen: That it was so high?

James: Yeah that, that many people have rental Properties.

Jassen: Yeah. 10 million people. It’s, it’s, it’s a lot. So it increases the, the additional up sell services for your clients as well. Now, James, you did mention real estate agents, CPAs can network with real estate agents. What about real estate agents themselves and using this kind of the way you do, uh, as a client services tool for your real estate brokerage?

James: Yeah, I’ll go into that second. Did you say that CPAs cannot work with real estate agents?

Jassen: No, I said they can.

James: Okay. That’s what I was wondering for a second there. I thought you said they can’t do it. This seems like a perfect fit and I don’t know the, I don’t know the accountant CPA business that well, but it seems to be really seasonal to me it seems like all your work happens between, you know, January and April 15th or something. It seems like that’s like the primary thing, and this is a, this could totally be an off season activity where you’re, you know, sitting down with real estate investors and helping them plan or are sitting down with real estate agents and helping them understand how to do this. So it’s a,

Jassen: I’m glad you mentioned that because I mean it’s, it’s a, you know, financial planning in general, um, and this unique angle on it in particular, you know, as a way to give you like a USP, a unique selling proposition to help you gain clients, you know, much like tax resolution is not seasonal and that’s the primarily primary thing I teach is the tax resolution stuff. This is another service that is not seasonal and I’m not going to go off on my normal rant about how artificial intelligence is going to kill 90 percent of the tax preparation industry anyway. And so you need to be shifting towards working with people with more complex tax returns, a higher dollar value services. This is one of those, a higher dollar services.

James: Yeah, I agree with that. So, to get back to your, your question, you basically asked me about real estate agents and as a real estate broker here in northern Colorado. I can actually speak with confidence on this because this is my business model. My business model is working almost exclusively with real estate investors. Um, and, you know, to kind of give you a gauge. I come from a relatively small city. The population of my city is probably 150,000 people or so. Um, I, I think I told you at the beginning of the call I do about 40 transactions a year. So, um, I haven’t looked at stats in the last year or so, but last time I looked at stats that made us a number three real estate agent working with buyers in northern Colorado. I’m just looking at the stats in our MLS. I don’t get obsessed with the stats or anything, but if you’re kind of getting a gauge of like, does that make you super productive?

James: Is 40 transactions a lot. Is it small? It’s pretty good. It’s like a really healthy business. You know, our average transaction size is about $10,000 or so per closed sale and so we do $400,000 a year. I’m kind of like in that ballpark for the real estate transaction. Sometimes a little bit higher, sometimes a little bit lower. So it’s somewhere in that ballpark. So from a real estate agent perspective, this is amazing and if you have a business already, it’s, it’s great you can add this on if you don’t have a business already, I will tell you we have niched down. And the reason why I’m like 90 percent investor is because I don’t stress out about all the latest gimmicks, you know, the Facebook advertising and trying to go after listings and know all the new home buyer stuff. I just focus in on one niche and I serve that niche like amazingly well.

James: And we just narrowed down the focus and work with that. And this. The calculator is an example of us focusing down on that niche because we created a tool to be able to analyze and share the stories and the and explain to people why they may want to buy one Property a year or one every other year, whatever it is, and you get more repeat clients from doing this. The CPAs and the accountants, you guys have tax returns every year. It’s like the government mandates. Guess what? You’re filing a tax return this year. So if you’ve got a client, you’re basically getting paid every April.

Jassen: It’s built in recurring revenue.

James: Yeah, it’s like built in recurring revenue, real estate agents, real estate brokers. We don’t usually have that. Right. You know, a client, uh, typically, you know, the normal real estate agent, a client goes and they buy a house.

James: And I think the national average, if you look at the NAR stats, if I, if I’m not mistaken, it’s like 10 years, so every 10 years the client will then sell the old house and buy a new house. And so really you’ve got two transactions per decade or one every five years. It’s another way of looking at that on average.

Jassen: Right.

James: Okay. So a client is worth, let’s say a client, and I hate to put numbers on clients that I’m not like looking at people with these big targets, but if you look at it a on a dollar per client basis, a client that brings in $10,000 every time they buy or sell a house, that’s basically $20,000 over a 10 year period. And if my math is right, I think that’s hard to do math on calls. I think that’s $2,000 a year, is that right?

Jassen: Correct.

James: So a client is worth. If they stay on my Rolodex and I stay in touch with it and I do a really good job over the next decade, there’ll be worth about $2,000 a year for me. Now if I stay in touch and they end up buying or selling a house and buying a house with me at the end of 10 years. Investors, very different animals. So you remember me telling you about my friend, the client that was doing the sequential buying a house every year, doing this Nomad model, well, what does that client worth to you? If they’re buying a house every year? I told you the average commission in my marketplace is about $10,000. What is that worth? That’s like a 10,000. Yeah, that’s like a $10,000 per year client. And, and I will tell you when you, when you finally step back and you realize, wow, this is $100,000 dollar client to me, if I really take care of them and I treat them super good over the next decade, you can end up doing a lot of really good like wow type of things and taking care of people and doing the right thing all the time when you know that a client is $100,000 client or for you over the next decade.

James: Um, and, and you know, the other thing about it is when you have clients that are acquiring these big portfolios of rental Property and they tend to become pretty affluent, you end up having like really wealthy friends and you can do really fun things. Like we travel with these clients know I’ll go on trips. We went to Mexico with, with one of my friends and you know, these, they become

James: really close friends just like you, Jassen. I mean, you know, we joke all the time, you know, you’re wealthy right now, right? Like uh, like news to you. But it’s, it’s true. And so we, you and I were talking recently about going on a cruise together.

Jassen: Right.

James: You don’t do that with like poor clients, but you know, you have, you have disposable income. I have disposable income, you know, we like each other’s company. We like to talk to each other about a bunch of things. So now we’re talking about doing a cruise together and it’s fun. I mean it’s like things you could do. Now I’m not saying you need to go and become best friends with all your clients. So there’s some clients that you wouldn’t want to become best friends with, but you do have, you do have opportunities to become really good friends with the clients you pick to become friends with. That end up being a pretty affluent type clients that, you know, it’s good to hang out with people that had money like you do. So,

Jassen: I want to back up really quick to something that listeners may not have picked up on. Um, and, and this is important for financial planners to hear, for CPAs, enrolled agents, real estate brokers all to pay attention to. You are niched way, way down in a way that allows you to operate your business in a manner that is very contrary to the typical real estate brokerage.

James: Yeah, that’s probably true.

Jassen: You are not out there chasing listings as, as a matter of fact. Can I talk about the conversation that you had on speaker phone the other day?

James: Yeah, you’re welcome to do it. Just don’t mention any names, but yeah,

Jassen: Yeah, yeah, of course, of course. So this is an, this is a great story for any real estate agent or I’d even dare say as any CPA, etcetera to hear. Okay. So um James was over at my new house, my fourth Nomad Property, and um, we were going to go to dinner, but he had to return a call to somebody that had called him to inquire about listing a house and that is so far outside of James’s normal thing that he does in his brokerage that he has. He is able to basically talk away those people, uh, because this individual had already met with one real estate agent and they wanted James to come out and kind of compete for his business. Well, James doesn’t have to do that. And so James had a very, very good, uh, kind of, uh, uh, talk off because this isn’t what James normally does. This prospect was not the best fit for him. And James actually said, I am probably not the best fit for listing your house. Um, if, if you’ve gotten, you know, a, a good, you know, value that you’re, you want to list the house with this, with this person you’ve already met, just go ahead and, and I’d suggest doing that. Most real estate agents can’t do that.

James: Yeah, I think you’re describing it in a way that I would not describe it in. You’re not describing it wrong. I just, I would describe it differently and the way I describe it is this guy wanted me to basically compete for the business of listening a Property and I know a lot of real estate agents do that. They want to come out, they want to give their listing presentation and do that. For me, I just don’t do it that way. We we basically provide this massive amount of value in doing the kind of plans and discussing things with people and offering them tools and classes and stuff like that. Focused on real estate investors and when somebody who is a client of mine wants to list the Property, they hire me.

James: They’re not interviewing me to hire me. They say, hey listen, we want you to come list your Property and at that point I start doing work. We say, okay, great. Now we’ll go. We’ll go look at comps. Will pull some comparable data. We’ll do the analysis. We’ll go out with you and look at a bunch of different Properties, but we’re, we don’t do that in preparation of meeting with somebody and we don’t do that. Especially when they tell me that they’re going to go have another agent do it and then we’re going to come through and pitch and they’re going to make a decision. I’m like, if you want to go and interview agents, that’s totally fine. You’re welcome to do that. It’s not a good fit for me, but if you decide you do want to hire us, let me know and you know, we’ll do this.

James: We know we do an amazing job. The clients that we work with, we have like amazing, like retention as far as repeat business. So you know, I’m not like trying to convince someone. It’s sort of like the discussion we had earlier where you asked me, you know, convince someone that they should buy real estate here that I just want to buy real estate. I’m here to serve you. But I mean I’m not going to go and try to convince someone, Oh, you know, you should really buy real estate. Here’s like the most amazing thing about it, here’s why you should buy it. 20 reasons and let me deal with your 94 objections. That’s just not me. I’d rather plant more seeds and harvest than try to like fight to make sure that I am getting some, some business by competing with other people. I don’t know, maybe that’s wrong of me, but that’s how I do it.

Jassen: I, I agree with being in a position to not a have to compete with other agents for the business is a great place to be.

James: Yeah.

Jassen: And by the way, you’ve mentioned the classes several times and you’ve kind of skirted around it. We haven’t actually mentioned where the, uh, NCREIG and a what that’s all about. Briefly talk about NCREIG.

James: Yeah, so we, we teach real estate investor classes. So we uh, the or Fort Collins Board of Realtors, um, you know, we basically get the room once a week, we rent the room once a week and it doesn’t cost anything it’s part of your membership dues. But we basically say Wednesday night, um, any investors come to the meeting, you know, we’ll teach a class on, you know, 50 different topics, you know, we’ll have a class on, excuse me, how to screen tenants or how to use the spreadsheet to analyze a deal or a, what it looks like when you buy one extra rental Property versus not buying the rental Property.

James: You know, we’ll go pull some slides for this thing. We’ll give a little talk and have people with questions and people that are interested in real estate investing, come and they, they see that we’re knowledgeable, they get to talk to other clients in the room. So other clients are really selling me. Now I’m not really doing it. And if the client wants to then meet with me and talk about doing investing and then we’ll grab lunch and, and see if it’s a good fit. And if they think it’s a good fit, great, we’ll, we’ll talk about doing it, but it’s not, it’s not salesmanship as much as it is a informational tools. And then we record the classes so that if a clients comes in, you know, if I get a new client a month after we taught how to screen tenants, I can go say, hey go watch the two hour video on how to screen tenants and then if you want to get together and grab lunch and I’ll answer any questions where you know it wasn’t covered in the video, I’m happy to do that.

James: But then I’m not on the phone explaining know how to screen tenants or what I look at when I go analyze a Property or how I analyze Property with the spreadsheet. It’s, it’s saving me time, it’s leveraging my time to do that. And you get a library and you attract new clients. And you do that. And I think that’s, by the way, I think that is appropriate for both real estate agents and CPAs and accountants and financial planners. Because I think this is a tool for planners too, who want to say you’re right, there is a gap about being able to add in the real estate component. Let me do that.

Jassen: Absolutely. And, and you know, I, I think you’re being a bit modest in how successful the Northern Colorado Real estate Investor Group (NCREIG) is. I mean, you, you run probably the best real estate investor association in the state. Um, and a lot you’ve got a lot of high praise for the quality of education that you provide and you do it all at absolutely zero cost. You don’t charge a dime for any of the classes. You don’t ask people to chip in a, for, for running the meetup group or, or anything like that. You do it as a, um, it’s really, correct me if I’m wrong, but I think it’s really, your only a marketing campaign for your entire brokerage.

James: It is, and I appreciate the compliment. You’re right. I probably do downplay it a bit. I think we have just over a thousand members in the, in the meetup, you know, in a city of 150,000, which is pretty impressive. Um, but yeah, and this is the only thing we do at this point and I use it as a, any real estate agents on the call and I’m sure there’s an equivalent in the accounting and financial planning world. Um, you know, they, they in real estate agent kind of like marketing education, how they teach you how to go generate business. There’s idea of staying in touch with your sphere of influence and uh, you know, staying in front of them and touching them, you know, 33 times or whatever number you believe, depending on who you’re following. And so the classes allow us to stay in touch with our sphere of influence, um, by saying, hey, we have a new class coming up.

James: We’d love to see you. Uh, you know, it’s going to be free. Come on Wednesday night, 6:00. We’d love to hang out with you and teach you this class and if you miss it. We’re going to send you out the recording anyway, so now it allows me to send basically two emails a week that are valuable. They’re not going to opt out of them because it’s not, you know, here’s how to. And I apologize for stepping on people’s toes, but you know, here’s a recipe on how to cook chicken. Um, or uh, you know, here’s how to turn your clocks back. Um, you know, it’s not like generic content you’d buy from a newsletter provider or you know, something really cheesy. This is like really valuable stuff that people want to receive and they look at it and they’re like, oh yeah, I do want to come to that class or I want to watch that video, or yeah, I need to buy another rental Property this year and I need to plan for college for Joey, let me go buy another rental Property that deal with that or, or whatever it is. And so we do classes and stay in touch with people as our primary method of staying in touch with your sphere and generating business that way.

Jassen: Yeah, I and, and it, it really is valuable stuff. I mean, you cover material often better, and I won’t name, I won’t name any companies, but there are like these, you know, get rich in real estate coaching companies out there that charge 30, $40,000, um, for the type of educational material that you provide for free. Um, and, and you, you obviously get business out of that. That’s why you do it. So you are getting paid and in the end,

James: I am getting paid. Yeah.

Jassen: But, but it’s, it’s, it’s, you’ve got a wealth of material on JamesOrr.com, RealEstateFinancialPlanner.com. There’s the Nomad podcast that people can get on, on Stitcher and iTunes and whatever. Right? There’s like a wealth of information that you produce.

James: Yeah. And, and the kind of comment on the, you, the guru guys that charge $30,000 a year and you’d know if you see their books in the bookstore and you see,

Jassen: Yeah, I’m not gonna name names, but we all know who they are.

James: Yeah. and so you know, those guys, we actually market against them. And so whenever someone’s sort of asked me about those, we tell them, hey listen, you know, our model is um, instead of giving them $30,000 to kind of teach you how to invest in real estate, get rich in real estate. I’m save your $30,000, come to our class, use the $30,000 as down payments to actually buy Property. You know, we’ll teach you everything you need to know. In fact, people have told me repeatedly, you know, I really wish I’d found you before I dropped $30,000 on so and so, um, you know, I could’ve used that for down payments or something like that.

James: I mean, that you don’t know how many testimonials I have, where people have said that to me. So we get it. And so we’d rather have you take that money and buy a rental Property or two or buy at least an owner occupant Property or two and be able to do that. I mean, in our marketplace, $30,000 would get you two Nomad Properties which could make the difference of whether you retire early or not in our marketplace versus taking the $30,000 in investing in, get rich quick, you know, information where they, you know, they, they get you in there for three weekends and they try to teach you about wholesaling or something like that, which you know, we don’t do that. We go into depth on very niche topics and give you the detail of how to from someone who’s doing it so. And you get to network with other people that are doing it as well.

Jassen: Yeah. And you have a lot of really amazing classes. I’m sure. I’m sure everybody at NCREIG has like their favorite. You know, I’ve, I’ve definitely got my short list. Like one of my favorite classes is the class on how to manage your Property manager. Yes. I love that one.

James: Right.

Jassen: Uh, and, and you just don’t hear about detailed topics like that in other places. So I’m not trying to sell everybody on NCREIG because we’re really here to talk about the financial planner, but there’s a wealth of other information that is attached to what James is doing that, that is out there. We’ve only got like five or 10 minutes left, but I want to change topic a little bit. Uh, you just mentioned, uh, you know, running Scenarios to determine the difference between early retirement or not.

James: Hold your thought for a second because I want to make, I want to point something out about what you just did because there is a marketing lesson for all the accountants and tax professionals and financial planners and real estate agents and even real estate investors on the line in that you can’t stop talking about the good value you’re getting from NCREIG. And so the accountants and tax professionals, financial planners, real estate agents, all those guys need to realize that that’s what they want to have happen in their marketplace for themselves. And one of the ways to do that is to use tools like the financial planner in order to create classes. Um, so that they can go and replicate what we have. I mean, you’re welcome to steal what we have. Don’t like go steal verbatim what I have, but you’re welcome to say, Hey, I actually did start an investor class in my marketplace and kind of do it. So yeah, I just wanted to point out that there’s a marketing lesson than you not being able to stop talking about inquiry for other people.

Jassen: Absolutely. Well, and I talked about Nomad all the time, like you don’t talk about Nomad because I’m doing it myself and because I like, what you’re doing and I want to promote what you’re doing. You know, I can’t shut up about Nomad because I think it’s such a no-brainer investing strategy. Um, you know, that I can’t shut up about it. Like I’m sure some of my, my, my accounting and tax professional clients, they get tired of hearing about it, but

James: they should find their own Nomads so they can do those tax returns.

Jassen: I agree. I agree. And that’s why Real Estate Financial Planner™ is a good tool for helping you. Uh, and again I’m biased, but helping the tax professionals grow this niched more lucrative little angle of their, their practice. Uh, but you want to shift gears and talk about FIRE, um, because one of the things that you realized, this is a fairly recent realization within the past, like month or two, I think that the Real Estate Financial Planner™ tool is a valuable tool for people that want to reach financial independence, retire early, and for the advisors, accountants and other people that are helping people on this quote unquote FIRE path. Can you talk about how the Real Estate Financial Planner™ tool can help with FIRE planning?

James: Yeah. So FIRE for those that don’t know is financial independence, retire early. It’s an acronym and it is a growing community. A lot of younger folks are. They have a very different philosophy than I had growing up where you go to work and you work until you’re 65 or whatever it is. There’s a lot of younger folks now that they are like, I want to go and sacrifice a little bit now. Keep my expenses really low, save a very large percentage of my income and/or leverage my investments, you know, do really big leverage investment moves and not work until I’m 65, you know, I want to enjoy life. I want to you know work until I’m 30 or 35 or 40 and then I want to be done and be able to retire. And so there’s a growing movement, a community, there’s a lot of heated debates, um, you know, Suze Orman just kind of like got involved in these big discussions about, you know, FIRE guys, you shouldn’t do that and stuff.

James: So there’s this like growing movement toward that and the calculator allows you to model stuff that you can’t model with traditional financial planner software if someone’s going to do stocks and bonds only or stocks only. Yeah. The regular financial planner tools, you know, especially some of the financial technology companies that are coming out there because a lot of these guys are younger millennial sort of people that are into technology and they’re comfortable using tools. Like, yeah, we won’t insert names and stuff in there, but you know, the ones where you automate your own investing, um, that’s, that’s there for people that are only doing stocks, but there’s a very large group of these people that are also doing real estate and I think that they are lacking guidance. They’re lacking some tools for modeling. We’re just not seeing it out there. And so I think that going after this community and getting you know clients that are, that are wanting to do this, I think it’s a good group to go after and the software really targets and helps those folks by being able to model stocks and bonds and real estate and seeing what risks are out there for them if they’re going to have a very long period where they’re going to have to live off their assets.

James: And how does that all impact stuff?

Jassen: Right. I mean, we were talking yesterday about, you know, the, like the Trinity study for example, which is the study that, that gave us, the, uh, the so called four percent safe withdrawal rate, which is now heavily in question, but the, the study was based on a retirement horizon of 30 years.

James: Yep. And what’s interesting about that study in particular is having $0 at the end of the 30 year period was acceptable outcome for it.

Jassen: Right. So the day you die, you have nothing left that, that was the whole philosophy of the study.

James: So if you retire at 30 and you and you, it’s okay for you to be out of money at 60, that’s a problem.


James: And that’s why the safe withdrawal rate in that study in particular is in question because if you have a much longer time horizon, if you’re retiring a 30 or 35 or 40 and you expect to live to 90, you need to have a much longer window for you to be able to support that. And that’s why the four percent Rule, um, it’s probably a little bit too aggressive for a lot of folks.

Jassen: Yeah. And, and one of the features that you recently added to the Real Estate Financial Planner™ that I really like, um, uh, there, there are, are two or three other tools out there that are commonly used by the FIRE community in order to run these simulations of whether their portfolio and their asset allocation decisions are going to result in a successful, um, you know, my money lasting until the day I croak kind of Scenario. You’ve taken a different approach with it in terms of, of how you model reaching that FIRE Goal. Can you talk about that real quick?

James: I think what you’re getting at is like what percentage you are toward achieving your safe withdrawal rate and your cash returns from real estate. And so we do model it that way, but the software, it’s not quite there yet, but this feature that we’re adding very soon is the ability to also actually trigger a retirement event in the software. Yeah, I guess you can do it now, but I’m going to make it easier to. We’ll do it, but at an event that actually triggers the retirement and then it will show you how you perform for the retirement part of your kind of like lifespan as well, so it does both. It allows you to say what percentage you are to being able to retire, but then it will allow you to go and model two if you say, Hey, I’m retiring next year, what is my portfolio look like once I do that? Um, and so there’ll be some easier tools for doing that. You can do it now, but it’s a little bit harder to set up.

Jassen: I guess what I was getting at is some of these other tools that are out there, they, they show you the probability of, of, of success based on a certain inputs. What you’ve done is you’ve built in a tool that said that effectively more or less tells you when you can retire based on a comparison of Scenarios.

James: Oh yeah, that’s true. Yeah. I don’t know if you want to mention this. Do you want to talk about us perhaps putting together kind of a tool, a book that people can use in order to educate people in their local markets and kind of what that’s going to cover?

Jassen: Yeah, that’s a really good, good idea. We’re, uh, we’re, we’ve actually been discussing two books, but the first one that we’re putting together a will be a book that, um, other financial services professionals, uh, can, uh, is licensed. Is that the right word? Is that

James: I don’t know if we’re doing licensing or they can kind of just use as marketing tools or co-brand, or whatever. I’m not sure how we’re going to structure it yet, but.

Jassen: Okay. So however we do end up structuring, it there will be this book, um, that, um, we’re not trying to. I don’t think we’re trying to debunk like the Trinity study or, or anything like that. What, what we’re trying to do is create a book that you as a service professional can use as a marketing tool. Showing people the range of possible outcomes based on different retirement planning Scenarios. All stock, 60/40 stock bond, with or without real estate and and how that plays out.

James: Yeah, and you think of it like a case study book, right? There’s 12 different ways that you can go into retirement. You can say, I’m going to rent and I’m going to invest 100 percent of my investments in stocks. How does that perform? When can you retire? If you do that model and let’s say you can say, okay, I’m going to rant, but I’m going to do 60, 40 stocks and bonds and how long did it take you to hit retirement numbers with that and once let’s say instead of doing 60, 40 stocks bonds, I’m going to actually buy as many rental Properties as I possibly can. What does that look like? And so you’re going to have 12 different case studies and they’re going to compare each other there. You say, you know, this one takes this long and the other one takes this long and we’ll have lots of Charts and data and and kind of like storytelling of how these kind of play out and you’ll be able to use these as tools to hand out into your community because I use books in my community all the time and it’s super effective and so you’ll be able to go and hand out these books as kind of like a, a marketing tool that says, hey, listen, I speak your language, I understand what you’re trying to do.

James: Here’s the tool that shows you 12 different models. If you ever want to come in and do a consultation with me or you know, I can kind of help you on your tax return if you’re doing this sort of thing. I specialize in helping people that are doing these plans. Come talk to me. I will do this for you. That’s the idea in my mind.

Jassen: And, and I want to point out two things. One, there are 12 Scenarios that we’re covering in the book. There are actually, uh, how many, how many total Scenarios did you, did you calculate out it was like more than grains of sand in all the beaches on the planet or something.

James: It was something crazy like that. There’s, yeah, there’s like billions and billions of iterations.

Jassen: Yeah. So the, the 12 that are going in the book are a 12 Scenarios that, that James and I have have selected based on, I want to say I guess common advice or common Scenarios that you see talked about on blogs and Facebook groups and forums within the FIRE movement. Um, that’s why I’ve selected these 12,

James: I think FIRE and also just the general real estate investing communities. Some of them are rental Property type ones as well, so.

Jassen: Right, right. So for example, one of them is, I call it the Arnold Schwarzenegger plan because this is what he did back when you moved to the United States. Um, he was couch surfing on other living for free in other people’s houses and money that he was getting from is like really early acting gigs and a modeling or whatever. He was buying rental Properties in southern California even before he, he bought his own place to live. So we’re gonna. That’s one of the ones that we’re going to cover for example. But the other thing I want to point out is that, um, maybe we mentioned this, I can’t remember if you mentioned or not, but when you’re using the book, and I always tell my CPAs enrolled agents, other tax professionals, they got to have a book. A book is one of the most important elements of your overall marketing planning.

James: The book is the new business card.

Jassen: Agreed. Absolutely agreed. But one of the things that you can use this for, like James was saying, is to just give it out within the community, establish your expertise and people can actually come to you to run their Scenarios because you will have access to the software. I don’t think we’ve explicitly mentioned that.

James: I don’t know if we’ve explicitly worked out all the details, but yeah, you’re right, they will have access to the software because they’re professionals that will need access to the software. So.

Jassen: Absolutely, and correct me if I’m wrong, but people could sign up for a, it’s got some limitations, but you can sign up for a free account if I.

James: Yeah, everyone can register for a free account and I think what you and I have been talking about kind of coupled with the book is to give people that are professionals, uh, advanced tools that the free accounts will not be able to do. Um, so that there’s, there’s an incentive for them to come and work with the accountant or financial planner or a real estate agent decides to use the, what kind of tools to do some additional marketing. So

Jassen: yeah, I think things like the Monte Carlo simulations and things like that that are, that are really important, those won’t be available in. And again, I don’t know what you’re calling it, but the, the public consumer free version, um, those won’t be available.

James: That’s my understanding too, and this is still, we’re still really early on. I’m kind of working through some stuff in this, but yeah, that is my thought process as of right now is the free accounts to basically be able to come in and do some relatively simple testing, you know, a couple of different bank Account or stock market Accounts, um, a couple of Properties, um, and a couple of Rules, but uh, any type of really advanced modeling of stuff and running, you know, really crazy what’ifs, are going to be for the kind of more Premium type stuff.

Jassen: Excellent. Well James, I really appreciate you taking the time to do this. I felt that was important that we have a conversation about what the heck this thing is, uh, and, and how it can be used and why there’s a, you know, for the professionals in particular, why there’s a market for the service that they can provide by using the tool. Um, is there anything else in that light that you can think of? We didn’t really cover?

James: No, I think it’s just that gap, right? That, you know, there’s whatever, there is tens of thousands of financial planners out there. If I had to guess that are all offering financial planning services where they’ll do stocks and bonds and model your portfolio, but I’ve yet to meet one that does real estate like that.

Jassen: Um, well there’s 80,000 certified financial planners, CFPs, 80,000 of them in the United States. And uh, I, I read on a, a thread on a forum the other day, somebody that is studying for the CFP exam, they’re taking a, um, it’s 200 hours of training that they have to go through. They’re almost done and less than one hour, less than an hour was about real estate.

James: Yeah. See, that’s crazy. And you know, even on the real estate agent side, because we have to take continuing education, you know, the kind of the equivalent of your CPE stuff for accountants and CPAs. We do that for real estate agents and there’s not a lot of CPE for real estate investments. Um, you know, there’s, there’s a few courses here and there, but there’s not a ton. And so I think it’s like, it’s this just glaring gap or open space in the marketplace and the, I think it’s ripe for someone coming and filling in. There’s, there’s like over half a million people a subscribed to the subreddit for the financial independence, retire early movement. Um, so this is like a very large group of people that are not being served well. And they’re people with money, uh, you know, and they need help so.

Jassen: Well. And I also look at, you know, there’s one of, again, I’m not gonna name names, but there’s one of the, one of the largest, um, you know, traveling road show, uh, come to the dinner seminar and then we’ll sell you a ticket to the weekend and then we’ll send you a ticket to the week long thing. And then the up-sell to the $30,000 coaching, you know, that kind of kind of slimy get rich quick in real estate things there. There’s a company out there doing over $250, million dollars a year in revenue selling this, get rich in real estate stuff. There’s, there’s a huge, huge interest in it.

James: Yeah, that’s a deep well. I mean all going all the way back to the seventies and early eighties, you know, the Robert Allen Book, uh, the creating wealth and how to buy Properties with nothing down and stuff like that. Yeah. Carlton Sheets and I’m sure there are guys like beforehand, right. But I think this has been going on for a long time and I don’t see it ending anytime soon. I think there’s, this is a opportunity to legitimize it and kind of come in and do legitimate financial planning and advising from a professional CPA, you know, kind of like modeling perspective where you have real world advice and real world opinions to give, um, to help people do it instead of the slimy, you know, go make offers with nothing down all day long sort of stuff.

Jassen: Absolutely. Well James, thanks again for taking the time to do this. I really appreciate it.

James: You are very, very welcome. And, you know, we should probably do another one a little bit later on where we kind of go into some more advanced topics that we can kind of model with this calculator as well. So

Jassen: absolutely. And I have the feeling that, you know, six months down the road or something and we’ll probably end up rerecording this because we’ll have better insight after interacting with users and whatnot. Well, actually before we close out, what would be, what would be like if anybody listening to this is interested, be they real estate agent, financial advisor, CPA, a, they run a real estate investing association, whatever their role in this world is a, what would be your recommended next step for them to take?

James: I would just tell them to go create a free account and just start watching some of the like how to content, you know, how we’re modeling things and they can usually copy of a copy of that particular Scenario into their own planner account and be able to modify things and tweak things. So I would just tell them to go create a free account in the system and then look out for blog posts and videos and content of that way. Is that what you think is best?

Jassen: Absolutely. I love it. Yeah.

James: Yeah. So that’s great. And the place to go for that, it’s just Real Estate Financial Planner™.com. So that’s the domain name. We ended up putting the Real Estate Financial Planner™ software on and it’s web based. You just log in and you’re able to kind of modify things real time and realize we’re constantly working on improving this, you know, we’re relatively new in the system with, with creating this and getting it all online and providing help files. And Holly’s working hard on just getting a whole bunch of like, um, you know, help web pages up on how to do certain things. So if you need help with something, just go out and reach out to us and we’ll try to make sure we get the help you need up.

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