What do traditional wealth planners have to say about rental properties?
What about the FIRE movement and retiring early?
Brian interviews former wealther planner and founder of Wealthtender.com Brian Thorp about how he personally invests, and his plans for passive income.
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Brian Davis: Hey, guys. Happy Tuesday, Brian Davis here from Spark Rental. Deni is taking this week off and I am super excited to be hosting Brian Thorpe, the founder of Wealth Tender. Brian, thank you so much for joining us today.
Brian Thorp: My pleasure, Brian. I appreciate it.
Brian Davis: Last week, Deni and I talked about how to invest in real estate through a self-directed IRA. This week we are diving into all things investing and how the official investment management world interacts with the FIRE community and the real estate investing community. So, let’s give you a quick background. Brian Thorp is a golf planner who founded Wealth Tender Dotcom, which connects you with the right financial professional for your unique needs. Because let’s face it, we all have unique financial needs, which means there’s no one size fits all financial planning professional for us. Brian let’s just let’s start at the very beginning with your early career, your background in wealth planning and how that set you up for the later stages in your career.
Brian Thorp: Sure, appreciate it. So, I went to University of Texas in Austin and actually minored in real estate. My first job out of college was working for a mortgage company in the late 90s. We were actually working with a lot of homeowners predominantly in the state of California that were underwater and spending a lot of time working to restructure their loans. That was certainly an interesting experience and a little gut wrenching at times and since then have always been interested in real estate, have owned various rental properties myself, still have a rental property in Austin, actually, and concurrent with a lot of the real estate investing on the side. Spent twenty-two years at Invesco, a Large Global Asset Management Company, where I was most recently the head of the key account team. We worked with wealth management firms, financial advisors around the country. And a couple of years ago I had an opportunity to pursue more of an entrepreneurial endeavor and launched Wealthtender.com, as you mentioned, which is a website focused on helping connect people to the right financial advisors or if they’re not ready to work with financial adviser or financial coaches, as well as educating people on personal finance blogs and podcasts that may be valuable resources for them as well.
Brian Davis: All right. Well, there’s so much that you said that I want to dive in deeper. So let me just start. Let’s start with your rental properties and your current property in Austin. Austin has done really well over the last year, real estate wise. I’m sure that has been nice for you. But tell us about your earlier real estate investments, some maybe some lessons that you came out of with those. I certainly got burned many times with real estate investments and learned some lessons the hard way. Tell us about your history as a real estate investor.
Brian Thorp: To sum it up, buy real estate in Austin and that’s the way to go. My first real estate property was actually a small condominium near in the university area, which was actually in the very late nineties. And the experience there worked out well because the economy in Austin had actually tanked and really wasn’t doing that well and had since come back. And so that ended up working out well. And then the most recent property that I purchased was in twenty ten, where the economic crisis had really dampened prices throughout the country, not as much in Austin as in other cities that suffered much worse, but it still provided a great entry point, which, as you mentioned, with the market truly on fire there now, it’s proven to be a really terrific investment. But I do think it brings up the point of real estate, location, location, location. Austin has been such a dynamic city. It’s such a great place to be, continues to grow. It’s exciting to see from an investment perspective the continued migration of people coming from California and elsewhere. And I think naturally purchasing real estate in a location like that, where you have growth, where you have a good tax environment, not no state income tax is really beneficial as well. A lot of things that have done well and in terms of real estate investments that maybe haven’t worked out as well, just fairly recently, we sold, fortunately, a condominium in Houston that in more ways than one, let’s say we were underwater on it. So one of my tips for your audience would be if the name of the condominium complex has the name of a natural body of water in it by you, that might not be necessarily simply the nice view that you should be looking for, but rather be wary that perhaps that you can someday and a major flood come into the building and then you get to deal with all those problems and maybe not get the return that you are looking for. So big lesson learned on that one.
Brian Davis: I am sorry to hear that. I’ve lost properties to many different disasters over the years, some tenant-caused some natural. I’ve never lost a property to flooding. I don’t think but knock-on wood, hopefully that is not in my future. You have a background in the traditional world of financial planning and investing. So, I’m curious to hear your thoughts on the FIRE movement (Financial Independence Retire Early) because it seems that the traditional finance world has a split reaction to the FIRE movement. It seems like some people are all about it and other people are very skeptical to the point of being scornful of it. So where do you come down on that?
Brian Thorp: It aligns with different mentalities. The different people have and perhaps be a little stereotypical in this assessment. But for somebody who naturally wants to work in a very stable environment and have that stability of a corporate job for the next 40 years, they may not be as inclined to participate in the FIRE movement as somebody who has more of an entrepreneurial spirit that wants to be more of a self-starter and perhaps on their own and take some additional risks. Although I wouldn’t suggest that to participate in the fire movement, you necessarily need to take risks. I think you can still have a corporate job and be interested in just more of the stability that offers but have a frugal mindset so that you’re putting enough money into your savings and investments and living more within your means so that you may be able to retire sooner and achieve that level of financial independence and that many people are looking for. But I think generally what we see is amongst the fire community, a lot of people that do have that entrepreneurial drive, they’re looking for different ways to find passive income and other ways to be their own boss and not necessarily have to spend the next 20 or 30 or 40 years working for a larger employer, even if they’re not truly financially independent, still have to perhaps find ways to generate income, but have that independence and the spirit of control and the ability to work for yourself as opposed to somebody else.
Brian Davis: In my household, my wife has a salary job with excellent benefits and it’s quite stable and reliable, and that frees me up to do more of the entrepreneurial thing. And it’s a great combination. We have her income and benefits as a foundation, and then that frees me up to pursue some potentially higher reward entrepreneurial ventures, but also some high-risk entrepreneurial ventures. But out there in the FIRE community, I’ve interviewed a lot of people who, were either very entrepreneurial and had a dozen side hustles going on and other people who had a nine-to-five job with strong salaries, strong benefits, or even just a mid-level salary, but good benefits. And they just squirreled away most of it or a good chunk of it and were able to retire young. I truly believe that FIRE can be available to anybody, but it does take a little creativity on your part and you’re not going to be driving the same car that your friends are necessarily driving or living in the same high-end neighborhood where your friends are living. So, there are some sacrifices involved. Speaking of retiring early, the premise of that is that you have to have passive income. You have to have income coming from your investments. So, tell us about some of your passive income strategies. As someone who has been in this industry for a while and has a background in traditional finance, real estate investing, you’re familiar with the FIRE movement. What are some of your go-to strategies for passive income?
Brian Thorp: Yeah, it’s interesting. I think we have a lot in common beyond just our first name, our wives. Both are working for that stable employer that bring in the benefits and give us the freedom to do what we’re doing. And for me, as you mentioned, with the entrepreneurial experience at Wealthtender.com, that in itself, I’m really optimistic. We’re seeing some really great momentum. And it’s been terrific to build relationships with a number of personal-finance blog owners, podcast owners and more recently, financial advisors, financial coaches and ultimately working to connect them with consumers. And as we build this platform, I’m optimistic that it will turn into a real business that will afford me the opportunity to enjoy life with less money stress, which is actually our slogan on the website, while providing a lot of great benefits for the providers that are on our platform and the consumers that are leveraging it. I think there’s something to be said for diversifying, whether it’s your portfolio of investments or as you and I are doing, we have diversified income streams. We have that stability of our wives, which is terrific, and God bless them, as well as the entrepreneurial efforts that we have to try and complement that and perhaps someday even replace that income that they’re bringing in. And separate from that, the real estate property in Austin is certainly a great way to generate some more traditional passive income, if you will, and separate from that, maybe not paying dividends in the true sense of the word dividend today. But I am a big fan of investing in the markets and whether it is investing in stocks or actually do a fair amount of angel investing as well. I think there are some really interesting opportunities that are out there. I love working with entrepreneurs that have that passion and drive to really grow a business from nothing. And it’s been a lot of fun to participate in that area as well, which could pay dividends down the road.
Brian Davis: That’s interesting. You said that you do some angel investing. Is that something that is open and available to the average American investor, or do you need to be an accredited investor to do that? How does that work for someone who’s not familiar with angel investing?
Brian Thorp: Yeah, great question. Historically, you had to be an accredited investor, and it was also much more difficult to identify where you could make an investment even if you were an accredited investor. And then the check that you would need to write in order to invest in generally any type of a startup was going to be twenty-five thousand or perhaps more. And there’s still certainly the opportunity to do that. I’m an active member of the Houston Angel Network, which is a terrific group that has more of a traditional focus. But there are some terrific platforms that are out there today which allow you, even as a non-accredited investor, through some of the Jobs Act and recent legislation over the last 10 plus years, that allows pretty much anybody to participate and do so at a much smaller investment, amounts that could even be a thousand dollars, maybe even less. But the opportunity to really participate and investing through startups or some of these platforms like Seed Invest, I believe it’s seed invest.com Where you can invest in companies that might be businesses in your local area where you’re able to participate in the revenue, that they are generating and that actually might be a little bit more like an income stream because many of those are actually providing a percentage of the revenue as an income stream as opposed to a percentage of equity. So, there are some interesting models that are out there.
Brian Davis: I assume that this is a high risk, high reward investing. I mean, what have your experiences been and what kind of returns have you seen? What kind of risk have you seen just personally with some of your own angel investments?
Brian Thorp: Yeah, for sure. And that’s what’s kind of fun. I mean, you do need to be thoughtful as to the level of risk. And so not putting all of those eggs in that one proverbial basket, but the opportunity and the payoff can potentially be quite significant down the road. As I mentioned, with Seed Invest, I think many of the deals that you would see there in your local community, admittedly, I have not done any of those that are participating in the revenue from restaurants that might be starting up. And there you’re truly eating your own cooking where you have the opportunity to invest, get some type of a payback and feel truly invested. And I think that’s a great way for people to start, because you can really start to understand the business clearly inside and out, the economics. And then for some of these more traditional angel investments, they absolutely are incredibly high risk. There are opportunities in some instances to invest once the revenues are a little bit more stable. But at that point, you’re likely not necessarily doing so much of an early-stage investment with a really significant payoff, but rather just taking the opportunity to make hopefully still a good return as that company matures. But it’s already reached that point where it’s more of a stable business. Personally, I like to go from a stock market perspective, be a little bit more conservative, but then from a startup perspective, really swing for the fences, but doing so thoughtfully, finding founders that are truly passionate, that have the experience and in many instances trying to invest in areas that I know serve as an example.
Brian Thorp: I serve as an adviser to a company called Unes, which is an app that helps families save money for their children’s college or other savings schools that you might have out there. And for me, having the experience in the financial services space gave me additional comfort with my ability to both invest and serve as an advisor in an organization like that. So just as you might do in the stock market, trying to find things that you’re familiar with, investing in what you know, that would definitely be my one tip. If you are going down the path of angel investing is to use it as an opportunity to become that much more astute and areas that you do take advantage of that experience, knowledge that you have to invest in things where you maybe have a little bit of an advantage versus somebody that doesn’t have that knowledge of that particular area where that startup is trying to focus and really grow. Plus, that offers the opportunity to potentially play a role and add value potentially as an adviser, where you can actually chip in and share some of that knowledge, where you not only have the payback potential from the investment itself, but the opportunity to contribute to the success of the organization, which is great, too.
Brian Davis: Well, that’s a great answer. On several levels. I love that you said, “leverage your own expertise and experience and invest in areas that you know well because that can give you that competitive advantage”. And I really like what you said about how you isolate risk in your portfolio. Right. You have a more traditional conservative equity portfolio. I do the same thing. Most of my stock investments are index funds and not trying to get fancy with it. It’s just really foundational. And then I with a little bit of fun money, I go out and invest in some cryptocurrency or pick stocks or some of that stuff. But it’s with a very small percentage of my portfolio. It’s kind of shooting for the stars kind of stuff that you can feel comfortable with when you have a solid foundation among fundamentals in your investing in your investments. Tell us a little bit more about Wealth Tender and why you created it, your mission and why we should all be using it.
Brian Thorp: Now, I appreciate it. You know, the one of the things that I identified was there are a lot of great websites that are out there that are focused on personal finance, education. And what we were really trying to do is bring it all back to the human side of money and investing. So, in a world where a lot of people have said, we’ll just throw it all in a Robo adviser, I think there’s a place for Robo-advisors. But money is such an emotional topic. And for many people, you know, when we’ve had a long bull market, putting everything in a Robo-adviser may work well. But when we get into more of a rocky scenario or you have complex investment needs or estate planning needs, there’s just so much more value that a financial advisor can provide that a Robo-Advisor naturally can’t. And money is such an emotional topic, I think that will never be replaced by technology. So. Big believer in technology. Think it’s a great tool and many financial advisers are heavily relying upon all sorts of technology, but ultimately the real value that I believe financial advisors can provide these days is more of that emotional aspect and really helping people understand the behavioral issues and helping people invest smarter, which may have less to do increasingly going forward with where you’re actually investing, because they’ve already used technology and identified really smart and thoughtful portfolios, but really thinking about how best to position yourself for success just based upon all of the different assets that you bring to the table, the ways that you can diversify your income streams even and as well as your equity across a number of different platforms and opportunities.
Brian Davis: That’s a great answer, and I love that you said that investment advisers are not necessarily there to pick stocks for you or to set your portfolio for you because, you know, an algorithm actually can do that just as well as a human being. But the algorithm is not going to talk to you off the ledge when the market drops 10 percent in a day, and everyone starts panicking and starts thinking about selling off their stocks. A human adviser hopefully will talk to you off the ledge from panic selling or making these bad financial decisions. I do appreciate that as much of a fan of Robo-Advisor’s as I am. There are limitations to what they can do, and human advisers bring that emotional component to the table. They also can have a more nuanced conversation with you about your finances as a whole. And they can have the holistic conversation with you and to your point, include estate planning and some and maybe tax planning and some of these other components of it, as opposed to just picking the funds. I mean, any of us can invest in an index fund, right?
Brian Thorp: Yeah, I think you hit the nail on the head. I mean, investing Robo-Advisor can do that. Well, but again, as you talk a lot at SparkRental, the opportunity for real estate, it’s probably rare if any Robo-Advisor that really understands how to incorporate real estate into a broader portfolio or asset allocation. And then beyond that, on the website, we’ve got a lot of great personal finance blogs, podcasts, as well as financial coaches. So, we really want to be able to help people no matter their income or stage of life, and ultimately graduate to where they’re working with a financial advisor but be able to serve people no matter where they are.
Brian Davis: Well, I want to be sensitive to your time here, but before we wrap things up, I want to hear your best lessons or tips for people out there who are pursuing financial independence who maybe want to retire early. What if you could tell them three things, three core lessons that will save them all kinds of heartache down the road? What would those three lessons be?
Brian Thorp: Ok, let’s say for one, it’s you can always look in the mirror and rely upon yourself for a lot of great ideas. But I highly recommend taking advantage of people that have perhaps walked in your shoes already. And if you go to, Wealthtender.com/FIRE, we have a guide to financial independence, retire early FIRE blogs. And one of the things I would suggest is that the vast majority of those blogs are written by people who have walked in your shoes and they’re now sharing their experiences. So, you may find one that doesn’t resonate as much as another, but you can generally find with so many great blogs that are out there, somebody that really resonates, subscribe, and ultimately become that much more passionate as you become part of a community that shares your common interests. And then two I think, again, as we talk about investing in what you know, I think that holds true for more than just investing. I think in general, being really mindful as to where your strengths are and reinvesting in those where it makes sense. So, as it pertains to investing, we talk about investing in things, you know, but throughout life, I think any of these different areas that are going to play into financial independence down the road, find those where you have that expertise and knowledge and you’re good at doing it yourself, but otherwise find areas where you can really lean on others. And don’t be afraid to ask a lot of questions, listen and learn. I think that would be the others to just really listen and learn. And then finally, I think I may have lost it.
Brian Davis: To recap what you said so far, you said go out there and don’t reinvent the wheel or get advice and help from people who have been there before because that can save you a lot of work and a lot of mistakes. You also said invest in your area of expertise because you do have a competitive advantage there.
Brian Thorp: The third I would offer if I got my theory in there, is patience and being proactive. So already, just if you’re listening to this or if you are subscribed to a blog or you’re just being proactive in terms of your financial independence mindset, that in itself is going to pay dividends down the road. Because if you’re not proactive about this fire movement and really focused on what it takes to achieve financial independence, then it’s really going to be difficult to get there. And related to that is just being proactive and patient as well and recognizing that a lot of this takes time. And you may if you have a lot of credit card debt that’s out there, need to focus on that walk before you can run. But patience is another certainly attribute that I think will pay dividends down the road for somebody that’s pursuing FIRE.
Brian Davis: Excellent advice, even people pursuing the FIRE movement, you’re not going to retire overnight, you’re not going to reach financial independence overnight, it does take patience. We’re talking about being able to retire in five or 10 years as opposed to 40 years. But five or 10 years is still a significant amount of time. And it still takes patience, and it takes discipline in automating those savings and investments each month. And you’re doing all the right things every single month, month, and month out. So that’s great advice. Well, Brian Thorp, thank you so much for joining us today. This was a lot of fun, and we hope to have you back on the show soon. Appreciate it. Thanks so much, Brian. Have a good one. All right, guys, we will see you next Tuesday at two p.m. Eastern. Shoot us over your topic request, because this is about you, guys. It’s not about us. And quick announcement. We will be hosting a webinar next Thursday, June 24th, with Mark Podolsky The Land Geek about how to invest in raw land. So, Brian, thank you again. And we will see you guys next week.