I'm getting ready to sell my landscaping business after 22 years. My accountant strongly advises putting the proceeds into a diversified mutual fund portfolio. My best friend, who made money in rentals, insists real estate is the only way to go. I'm torn. Has anyone dealt with conflicting advice like this? What did you actually do?
Investing
My accountant wants me in mutual funds, my buddy wants me in real estate
Following. I'm in a similar spot but but my conflict is between my brother and a fee-only advisor.
Your accountant is probably thinking about liquidity and taxes. Real estate is illiquid and management-heavy. That said, your buddy might know your local market better than any fund manager.
Real estate isn't passive. I learned that the hard way after selling my plumbing company. Tenants, repairs, property taxes. It ate my weekends for years.
How much are we talking? If it's enough to buy a few doors outright, real estate can work. If it's a smaller amount, mutual funds give you instant diversification for almost no effort.
Also worth noting: your accountant may have a conflict if they earn fees on AUM. Did you ask them directly about that?
That's a fair point. My advisor charges a flat fee, which is why I trusted him more than the bank guy pushing loaded funds.
I sold my HVAC company in 2019 and split the proceeds 60/40 between index funds and a couple of rental duplexes. The rentals have outperformed so far, but only because I self-manage and got lucky with good tenants. I wouldn't recommend it to someone who doesn't want a second job.
Why not both? Put the bulk in a simple three-fund portfolio and carve out a small slice for a rental if you really want one. That way neither advisor gets to say I told you you so.
NorthFork, that's basically what I ended up doing. It's not exciting, but it lets me sleep.
One more thing: capital gains. If you sell the business, the tax hit can be significant. Your accountant Should be modeling that before recommending any allocation. Real estate has depreciation benefits, but you need a CPA who understands both sides.
Second that. My CPA saved me more in the first year than my buddy's real estate advice ever did.
Whatever you do, don't let the sale proceeds sit in cash while you decide. Inflation will quietly eat at it. Pick a reasonable default like a money market or short-term Treasury ladder and then take your time.