Hi folks,
This week we’re selling a small investment property (original plan was to have my elderly folks move in but they backed out). Anyway, after paying off loans and realtors and such we’ll have about $40K or $50K left over. I’ll eventually use it for some toys but in the meantime I’d like to put it somewhere safe for maybe six months to a year. I could stick in the savings or get a CD and I wouldn’t lose too much to inflation but I was wondering if anyone had any other recommendations (e.g., tax free something or other). Thanks in advance!
Roger
“I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity.” ~ Dwight D. Eisenhower
“There is nothing I can imagine more dangerous than a decisive idiot…” ~ Dwight D. Eisenhower
“He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch” ~ old Turkish proverb
Replies
Ya might want to ask G80104 about some stockmarket tips. heh heh
Rez,
Sorry I slept in late today, Sure would love to help Roger,but I all ready got a boatload of enemies, any stock tips would just add to the list!
How about using the money for a 10% downpayment on a Porsche Carrera GT?
At least it will keep a smile on his face!
Hey G, what about gold?
This analyst at BMO, one of the big five banks here in the great white north, is predicting a devaluation of 30% in the USD. Just think about what gold would do.
my heaviest two investments now are energy and health
for the energy - I am going strong on Price New Era, up abnout 20% this year so far and designed to do best in an inflationary environement. It5 has pecious metals and other natural resources and commodities also, and is spread globally. I tried to post this lasty night and my poweer went off while wr5iting about energy - Sheesh! What a paradox
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
If you send it to me, I will keep it safe for you.
I'm beginning to think this post was a mistake. I think I'm about to get an incredible amount of abuse... ;-)
Actually I've had a revelation since I first posted! I'm going to send the money to Cat Stevens and join a cult!"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Roar!
Nah, just wait awhile. This is the Saturday afternoon crowd.
Clearly you must be a troll because you posted this in the wrong section.
Other than that you need to determine what the purpose of this money is for before you can decide where to put it.
1. Additional for long term retirement.
2. Keep immediate lquid for any oppurtunity that comes along.
3. Keep for 3-5 years until ready for another investment project or serious remodeling of house.
4. Save as 3, but 5-10 year span.
5. Keep as working capital/cushion for self-employement that you talked about a while ago.
Or you looking for immediate income or long term growth?
Thanks, Bill,
It falls under your number 2:
2. Keep immediate lquid for any oppurtunity that comes along.
I'm all set on retirement investments so I was just looking for something in the 6 to 12 month range. "I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
For something that liquid about your main option would be a money market fund.
If you are going to actively looking or want to be available for whatever comes along CD's don't work as the short with draw penalties are too high.
If you know that it is going to be at least 6 months then you could go with 6 month CD's and then renew them for 3 month terms after that or maybe 1 month terms.
Another option would be non-load, short term bond funds.
Right now most stocks and mutual funds are lethargic, bouncing between small gains and losses. It would be just as easy to loose some as to gain in the short time frame you have.
Probably a credit union savings account, CD, or money market account are your best choices. You won't get rich, but this year you would be doing fine to keep what you have.
I would not worry about taxes. You won't make enough off of it for taxes to matter much.
You are putting money away for retirement, aren't you? If you have not made your full contribution to your retirement account(s) yet, put the maximum allowed in there. Also for your spouse, if applicable.
Roger, are you aware that you can trade investment property, tax free, for "like kind" investment property? It's called a 1031 exchange (section 1031 of the irs code).
Interestingly, you'd probably be surprised what "like kind" property can be.
Are you anticipating purchasing any heavy equipment for your business? Maybe you'd like to use that extra cash to set up a leasing company....using tax free dollars?!
Theres way too much info out there, way over my head.
Did you know that you can hold investment property in your taxfree Roth Ira?
Good point on the 1031. He really needs to consider the benefits from such (deferral of the capital gains - much like an IRA). But he has a time period in which he must identify the follow-up property, 60 days, isn't it?
Too bad he plans on spending the principal on toys eventually. By rolling this over into another property, perhaps one that offered a regular income, he could buy his toys from that income stream and still have the principal.
The beauty of the 1031 becomes 1) the (as mentioned) similar characteristics as an IRA, the non-tax-penalized income (perhaps even part being free from taxes) stream, the carrying debt can be self-extingusihing, and eventually when part of a family limited partnership, can be passed on at a discount - avoiding estate taxes.
On the other hand, some feel as soon as this election is over, the stock market offers some attractive opportunities. Although under current valuation parameters, it doesn't look like it.
Financial planners agree that one does not make long term investments with money needed within one year.
Stonefever....there are specific regualtions regarding the 1031....identifying prospective properties, closing in specific times, language, etc. None of the specifics are too complicated...but the IRS will disallow if any are missed. Any competent real estate atty will be able to facilitate the process. If you're bold, you could write it all up yourself and count on the title company to properly facilitate the deal. A google search will give a ton of info on this process.
You did mention one particular key aspect of the 1031.....estate planning!
The 1031 allows you to DEFER taxes....which allows your investment to grow taxfree. We all know how significant this can be. But....by holding properties in certain trusts....the taxes can be avoided upon death! The heirs simply take over the property and start off with a new basis!
This is one of the most powerful wealth transfer "tricks" of the wealthy...yet it is available to everyone....the problem is that all the "little" guys out there....like us, don't take the time to learn about this stuff. Then, when we do learn it...we treat it like it's a scam...something to be avoided!
I have investment property...and it's up for sale right now....you can be sure I'm going to include the 1031 technical language necessary to defer my taxable gain. The best thing about this is that it doesn't cost me anything. If I fail to identify a replacement property, and fail to buy something else....I simply pay the taxes, the same as if I never intended to 1031 it!
blueIf you want to read a fancy personal signature... go read someone else's post.
If you haven't done one of these before, you will need the services of a Qualified Intermediary firm.
Your real estate pro can refer you to one, or you can shop for a QI on the web.
Bob, most any title company will now do 1031's. The bigger ones..like Chicago Title finally wised up and jumped onto the bandwagon.
It sounds like you have invested some time learning or doing some of this stuff.
Are you aware that you can hold real property in Ira's?
blueIf you want to read a fancy personal signature... go read someone else's post.
Didn't know that. At my age, IRAs don't look so good.
But do you know about Qualified Personal Residence Trusts? QPRTs? Pronounce them Q-perts.
Another great asset protection gambit. But it only benefits those to whom the residence is placed in trust.
Thanks, Blue,
I hadn't thought about rolling it over for "like kind" property. I'd be interested in that (buying another place that needs work, fixing it up, and keeping it as an investment property) but my wife wants me to finish the addition I started on our house 5 years ago before I do anything else. I estimate about 6 months to finish our addition. I guess I should consult our accountant!"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Interestingly, you'd probably be surprised what "like kind" property can be.
Are you anticipating purchasing any heavy equipment for your business?
Like kind property is Real estate for Real estate (not heavy equip).You get out of life what you put into it......minus taxes.
Marv
The safest investment - Government Bills and Bonds. Pay better that CDs. Can be sold if you need to cash out before maturity. Can be purchased without commission at http://www.treasurydirect.gov .You get out of life what you put into it......minus taxes.
Marv
BUY TOOLS!
If you can't spend it all on yourself, I'm sure that there a few willing volunteers here who would help.
( let's see- a Powermatic 66 table saw, a panel saw, oh yeah, and a nice building to put 'em all in)
In no time you'll have your problem solved!
( its no wonder why my wife doesn't let me near the check book)
Shep,
I do plan to buy a few new tools. My vintage 1960's Rockwell tablesaw has been a workhorse but it's on its last leg..."I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Invest in oil--I hear from a good source that gasoline will be at $5/gal in a few years! ;-)
This same question had been asked about 6 months ago. You can learn a lot from this thread.
http://forums.taunton.com/tp-breaktime/messages?msg=38241.1
Jon Blakemore
Roger...I might also advise tax liens.
Depending which state you are in..you could earn as much as 2% per month (Iowa). These investments are extremely safe....unless you buy a tax lien that is more that the property is worth. Onthe other hand, you could get stuck with a 100k property if the homeowner doesn't pay you back your 2k plus interest!
Woohoo!
They might not fit your time frame though.
blue
just yelled into the other room ... wife yelled back ...
either a CD or money market ....
but money markets are low right now.
she worked for a financial planner.
I said ... "invest" for 6 to 12 months ... liquid there after.
Jeff
The Berkshire A mentioned by Mike Smith in the previous thread would be my choice if I was in that position, as long as I didn't need that truck.
Heck, buy 'em both.
The Berkshire A
what's the minimum buy in?
Jeff
$2... $200..... $2000... don't matter. i can buy any dollar amountof any stock for no commission..
annual fee of $120.. all the trades i wantMike Smith Rhode Island : Design / Build / Repair / Restore
Ar closing today it was up $1,600 over todays opening at $86,000 per share.
52 week high was $95,700 and a low was $75,500.
Class B is 1/30 of class A shares. Also has 1/200th of thevoting rights.
Yeow! Many more responses than I expected! Plus, TxTroll is in here, which I didn't expect. I thought he was just in BT for Kerry-bashing.
I was hoping that I could get maybe .5% above CD rate. That extra would keep me in beer for a month!
"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Be careful of what you wish for.
blueIf you want to read a fancy personal signature... go read someone else's post.
Thanks, Jeff. We have some other money in mutual funds. I want to keep it liquid. When we bought the house we expected my parents to move into it but they didn't. I fixed it up over last winter and we rented it as a vacation rental this past summer. It did well but we weren't quite breaking even on the cash flow. The increase in equity we're seeing out here (Cape Cod) is running about 20% per year and is expected to stay strong as the baby boomers buy vacation/retirement homes.
Anyway, I view it a bonus money for the work I put into the place. I'm thinking about maybe a new 25' Parker Sport Cabin with twin Yamahas in my future. This money won't be enough for that but it's be a pretty good down payment... ;-)"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Roger,
Do you need a new company truck and can you use any write off's?
The IRS will still allow you to deduct the entire amount paid for a heavy truck; suburban and up, three quarter tons also, I think.
Just works if you use it 100% for business. don't we all?
Anyway, "check details with your tax guy", just a thought.
ok .. I got it.
a week or so ago the wife found a "hotel/motel investment" websight.
Not sure where ... but it had a list of vacation properties from around the world that were for sale.
There is currently a fully furnished hotel/conference center for sale ...
in downtown Bagdad!
Seriously.
Listed "as is"!
For sale outright ... or lease to the foreign held parties. The lone american investor wanted out.
Me ... my first thought ... there's a goldmine just waiting for the war to end.
think of the tourism opportunties! Keep a stack of "where they found saddam" maps at the front desk.
I forget the price ... but it was cheap!
Jeff
roger .. i was thinking about this today.. i'm going to look into some REIT funds and REIT portfolios..
Mike Smith Rhode Island : Design / Build / Repair / Restore
Good.
I'm beginning to lighten up on REIT's in my clients portfolio's. Now I'll have someone to sell them to!
We've made lot's of money in them over the past 4 years. Some now are too pricey and face future rent renewal pressures, thus threatening their dividends. I'm not expecting them to crash, but last spring's call to attention caused many to fall 15 to 20% in a week.
REIT's are complicated beasts. In order to make good decisions about them, you need good research into the individual ones. Note that REIT research is different than other stock research. These guys can go in and actually kick the tires of the investmetns and watch how they're managed. Due to the tax issues involved, their disclosure is a bit more dependable. The usual stock research involves much blue smoke and mirrors that can be interpreted many ways. I find that when I have issues or questions, a direct call to the analyst clears things up quick. I'm amazed at how much these guys have on these type of companies as opposed to a tech or healthcare stock.
My clients also did very well in a few of the large REITS in the last few years. We got out beginning of this year. Now IS an excellent time to get out. If you want a comparison as to how these perform with rising interest rates, go back and check out their performance in the 1987-89 time frame... got pretty ugly. BTW, they generally trade in relationship to the 10 year treasury rate...usually indicated as a spread. don't mean to insult you if you are knowlegeable in all this, just want to agree!!
Yeah. Going thru a few pullbacks makes you appreciate the signs leading to the adjustments. Sometimes they get us a bit too cautious and we run too soon, thus leaving something on the table. But its going to happen sooner or later. April's 25% pullback in one week didn't seem to phase many did it? Apparently a bigger one will be necessary...
Note MSW. Weak price because of a several million sq ft lease (MSFT) coming due in about a year. The price being paid on today's lease certainly won't be the same on the renewal - IF it is renewed! Some estimate it may be released for half today's rate.
Where else is this issue going to show up next? By the time it's announced, the darn price has fallen 30%! Really worth it to squeeze every last penny out of an investment?
Have you noticed that part of the process to create a market for POS investments is to tell your buddies and whomever else how great this investment you just made is?
Reits aren't any "safer" that any common stock.
blueWarning! Be cautious when taking any framing advice from me. Although I have a lifetime of framing experience, all of it is considered bottom of the barrel by Gabe. I am not to be counted amongst the worst of the worst. If you want real framing information...don't listen to me..just ask Gabe!
"Reits aren't any "safer" that any common stock."
Not meaning to be a smart a$$, but your statement needs a lot of clarification.
First, "safer." Securities such as stocks and such (including REITs) have their safeness" or "risk" interpreted by professionals differently than most folks. To them, risk is defined by the degree of change of value over a period of time. Then this value (really a form of standard deviation, but expressed as it's "Beta") is compared to a suitable benchmark.
Everything changes in value. In some cases such changes are not preceivable, but they're there. T-Bills have the lowest beta among asset classes. But when discussing stocks and risk, the pros have to break up stocks into different types before they can compare.
Second, these different types can be measured by many different characteristics since they're all different, yet the same in ways.
But for the purpose of your argument, let's classify the stocks of question by credit rating. AAA rated stocks could be argued to be "safer" than REITs. But junk rated securities would pale compared to the relative safeness of a REIT. Which has the highest beta? Only on generalizations can one bet.
It's difficult to compare a REIT to a common stock (even though a REIT IS a common stock). They trade on different issues. They are different asset classes. When measuring their betas, different benchmarks are used.
One shouldn't compare the two, one should have both choices available.
See, stocks, bonds, REITs, and other investments are simply different types of tools used to accomplish a task. Most people do best when collecting the better offerings of each type. The task is trying to figure out which is a "better" offering...
But I agree with you. REITs can be quite risky. Especially when they're priced at such high levels as they are. Getting a 4% dividend from a REIT is nowhere near enough of a return for the amount of risk assumed. And this is where I'm seeing the better REITs trade nowadays. The ones paying more also have their baggage needing to be considered...
And I'm finding less risk and better potential returns in other stocks.
It really depends why you are investing in REITs
As a portfolio diversifier, I agree with your assessment
As an instrument of income, I disagree.
I hold approximatley 26 REITs that I have held since 1998. I live on the dividends. Frankly, I don't care what the price is doing, although this is the market's measure of this asset class's risk.
However, I DO care about the REITs ability to continue and grow its dividend...and this is my measure of risk. I do this by tracking TRENDS in free cash flow as a ratio to the dividend (the AFFO payout ratio), as well as watching the horizon for qualitative factors that may effect the REIT's future (individually or as an asset class). All else is background noise.
I have spoken and written on this topic extensively, and know many professional asset managers, with all kinds of experience and credentials. I am becomming convinced that I'm the only person on the planet who does it this way...whcih is fine with me :-)
BruceM
Mike,
I did a google on REITs and it sounds pretty interesting. I may look into that. Thanks for the tip!"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Plywood, rebar, cement, any damn thing I need is doubling every 6 months.
Just pick one and buy a truck load.
Or stick it in your pocket and wait for the right moment. It'll come & a pocket full of cash is all it takes to make it happen.
Joe H
First, I would pay off any credit card or other high interest debt.
Second, since you want it to be liquid, check out an ING Direct Savings Account. I've had one for years. Right now they are paying 2.20%. There's no fees, no minimum investment amount required and you can withdraw any amount at any time. I have mine linked to my checking account and it's very easy to switch the money from one account to another.
If you're not comfortable about doing financial stuff on the web, they also have very good phone support. You can actually talk to a live person instead of phone mail.
roger... my biggest regret in investments is NOT hanging on to a spec house i had..
after owning it , and renting it out for a couple years, we were still barely upside down on the rental income VS. expenses..
it wasn't one year later that the market turned enough so that would have been positive... and the Cape we sold for $75K then would now bring $350 K..
with your location on Cape Cod... i would think seriously about holding it....
you can always take some equity out by refinancing...
not as liquid... but liquidity isn't everything..
can you comfortably service the debt ?
Mike Smith Rhode Island : Design / Build / Repair / Restore
Mike...I was thinking the same thing....20% isn't anything to sneeze at.
Also, the fact that there is a 20% appreciation offers another great suggestion. Sell the property on a lease option....at the appreciated price. The target market is people with damaged credit that need a year or two in a rent to own situation to repair their credit.
For instance...if that property has a FMV (fair market value) of 100k today, and it's appreciating 20 %, then it would make sense that you could ask for 120 k today on a one year lease option. You would need at least 3% down, and sell it on a one year lease at 120k, with the 9% financing built into the lease payments. This provide an income stream of 9% secured by a mortgage. The 3% is tax free funny money (its taxable if the option is executed or expires).
You could add an option year, for similar terms, but set the new sale price at 140k...which reflects two years growth at 20% (it's approximate...round figures only here for the example). That increase the income stream in the second year.
The lease option has several tax advantages. It gives you depreciation, and shifts the taxes, insusance and maintenance onto the buyers. Additionally, it allows the investor to hold it past the one year requirement that is required to categorize it as a capital asset, which means it's taxed at the lower capital gains rates!
Most banks will gladly give an equity loan on property like this.
This arrangement takes the hassles out of leasing and income properties. I'm also involved in a summer reort rental propety and it's now on the market precisely because I don't like the time investment of managing it...even though it's minimal. I do have it offered on a lease option too.
blueIf you want to read a fancy personal signature... go read someone else's post.
Mike, that was my argument with my wife; I wanted to keep it for a few years but she doesn't like having any debt. The mortgage on it is 5% and the property values have been going up at 20% so it would be a great investment. They aren't making any more land out here on the Cape! But it's a moot point because we're closing tomorrow. And I'd have a tough time selling the idea of rolling it over into another investment property (even tho I'd do all of the work)! She wants me to spend time finishing the addition on our house that I started 5 years ago - women!"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Is this a fully insured bank account?
My ears are quivering but my "too good to be true" instinct is squeezing my butt cheeks
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I've cut and pasted the following info from the ING Direct web site:
"Earn 2.20% Annual Percentage Yield on an FDIC-insured savings account with no fees, required minimums or service charges… no matter how much you have on deposit."
I'm not sure I know how to post a link, but here's the website:
http://home.ingdirect.com
All of my other investments are in Vanguard mutual funds. I heard about ING Direct on the "Vanguard Diehards" website. A number of people there were also looking for a safe place to park funds for a short time and ING was highly recommended.
They do not have a "brick and mortar" location, so they can afford to pay a little more.
I also have my home equity line of credit through them. They approved it very quickly and sent a representative to my house to finalize the paperwork. Very convenient.
I've been happy with them. But, of course, you should check it out for yourself.
Thanks, I can run from 50K cash to -10K credit depending on time of month and cash flow. That tip could be worth four hundred a year to me. Haven't wanted to mess with something that might be too slow moving money to loacl account
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I use ING as well and have been pleased with the service.
The one caveat is to test the waters first to see just how liquid your funds will be. Sometimes I can't transfer my funds for a week or so. Just make sure you don't try to withdraw money today for a bill that's due tomorrow.
Jon Blakemore
That was my concern. I've heaard the same about other internet banks. With my local, I know the girl I call and the money moves as we talk on the phone.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Thanks, Cynthia. That looks like a winner!"I hate war as only a soldier who has lived it can, only as one who has seen its brutality, its futility, its stupidity." ~ Dwight D. Eisenhower
"There is nothing I can imagine more dangerous than a decisive idiot..." ~ Dwight D. Eisenhower
"He who thinks himself a stag but is in fact an a$$ will learn the nature of his mistake when he goes to leap the ditch" ~ old Turkish proverb
Roger, I'm no pro at investing or real estate but I dabble a bit in both. I've never done a 1031 exchange but I know several folks who have. There are "middlemen" that can help you out in this regard. So you don't have to sell your house (or whatever property) and then go out and find something to "trade" for. I believe they can put it into some sort of account and then you can find a property you want and then release the funds from the 1031 to purchase the new property. Don't hold me to that but I believe it works that way.
Anyway the point is that there are brokers or middlemen out there that can help you with this process. It will save you boatloads on taxes.
This is the kind of thing the really wealthy people do. #1 they refinance their properties (typically commerical) every ~5 years so they can use the money and continually write off mortgage expenses against their business. # 2 when a property is tapped out of write-offs, or they're just tired of it, they do a 1031 exchange and never have to pay property taxes on the property(ies).
- Rob
The 1031 exchange is so common today that most reputable title companies will act as a facillitator for a couple of hundred dollars.
Theres specific language that has to be written into the purchase agreement.
What kind of investing have you done Stokeoluck?
blueWarning! Be cautious when taking any framing advice from me. Although I have a lifetime of framing experience, all of it is considered bottom of the barrel by Gabe. I am not to be counted amongst the worst of the worst. If you want real framing information...don't listen to me..just ask Gabe!
As for real estate we own a few rental properties. Mostly for the tax write offs and one is to help a relative out. As for stocks, etc. I used to be an active "penny" stock trader back in the late 90's, when - as I like to say - a monkey could make money doing it. Today I'm pretty traditional with IRA's, 401k's, and a little bit of play money in some stocks like McDonald's (I figured why fight the fat craze...why not join it?), Pfizer, Whole Foods Market, etc. Mostly though we're investing in our new house. Our area is pretty stable (big university town) so we feel it will be a good long term bet.
- Rob
Rentals eh? So your a buy and hold kinda guy... which is one key to long term wealth. The one area that I don't like in real estate is landlording. Have you had any trouble? Do you use any unique programs?
blue
Warning! Be cautious when taking any framing advice from me. Although I have a lifetime of framing experience, all of it is considered bottom of the barrel by Gabe. I am not to be counted amongst the worst of the worst. If you want real framing information...don't listen to me..just ask Gabe!
Do I have any trouble??? Well, last night I received a certified letter from a tenant telling me they're pissed at the other tenants so they're breaking the lease and moving out. I used to get pretty worked up about stuff like this. Now however I do two things: 1) try to rent to "good" people, I don't rent to the first person that can fog a mirror and 2) I resign myself to the fact that most renters will stay a year - tops.
Now I sleep well at night...even after receiving this certified letter. :-)
I've considered commercial property but I feel it's tied too tightly to the economy. Not to mention it's big bucks. Not to mention when they sit vacant they sit vacant for a LOOOONNNNNGGGGGGG time.
- Rob
You gotta get to Mr Landlord at mrlandlord.com
He's got the greatest stuff for landlords. Hes got programs for everything...and every program is $ for you.
Commercial real estate does sound a lot more appealing. I like the sounds of triple net leases. You do have to have staying power though. One builder I've framed a house or two for tells me he has one building that gives him a 20k net cash flow per month on a triple net lease.
blueWarning! Be cautious when taking any framing advice from me. Although I have a lifetime of framing experience, all of it is considered bottom of the barrel by Gabe. I am not to be counted amongst the worst of the worst. If you want real framing information...don't listen to me..just ask Gabe!
Have you had good luck with that MRLANDLORD.com site?
Looks interesting.
In about twenty years of owing rental property (a mobile home park, multiple single family dwellings, duplexes) I've only had to evict one tenant and just last week took my first tenant to small claims court.
I've got a judgement and they have agreed to make payments. The dispute was over some damage done by a person 'helping' them move out.
I held the tenant responsible because they refused to identify the party who did the damage. They thought they could just deny it and nothing would happen.
I have some residential properties that are located in areas zoned business but have never converted them into commercial.
I'm wondering if most people here have found "background checks" to actually be valuable?
"I will never surrender or retreat. " Col. Wm. B. Travis, The Alamo, Feb. 1835
IC, the only landloring I've done is high end weekly resort renting. Were getting 2500 per week for our place, which means we're working with a much higher clientele. We haven't had any use for background checks because all of our clients are known referrals.
I'm familiar (somewhat) with Mr Landlord because he spoke at one of out local Real Estate Investment Association meetings. If I was landlording, I would use a lot of his "programs". He has programs for everything: biweekly rental collection, tenant refferal, early rental pay, etc. His programs are designed to put a positive spin on services that put more money in his pocket.
Anything stopping you from converting those commercial properties?
blueWarning! Be cautious when taking any framing advice from me. Although I have a lifetime of framing experience, all of it is considered bottom of the barrel by Gabe. I am not to be counted amongst the worst of the worst. If you want real framing information...don't listen to me..just ask Gabe!
I have used renter checks and it weeds out the deadbeats, but the last renter had a a great credit history and doesn't know the meaning of cleaning day.
"I cut this piece four times and it's still too short."
>>Anything stopping you from converting those commercial properties?<<
Just inertia. They're doing alright as is and I haven't decided what the highest and best use would be if not residential.
I try to go on the rule of 1.5% of value per month as gross rent. ($100,000 property should bring in at least $1,500 rent per month).
Found that if you try to stay close to that rule you do pretty good.
"I will never surrender or retreat. " Col. Wm. B. Travis, The Alamo, Feb. 1835
I'm curious what market you are in where you are applying your 1.5 percent monthly rule? Also, is this rule extended to newly purchased property or is this property that has been held for along time? I'm located in Boston, MA and I see alot of people chasing extremely low returns on multi-family investments, ie. $500,000 two-family homes grossing approximately .5% and the lower priced properties doing about 1% monthly gross. Unless you are counting on a short term equity boost(ie. a neighborhood on an obvious upswing) you are often better served in other investment areas at those prices. These numbers are based off of retail pricing by the way not wholesale, hunting down distressed properties is a separate entity and I don't believe in the idea of "free" sweat equity.
-Ray
My properties are scattered throughout Texas.
The 1.5% is from an old rule of thumb which I was introduced to by an old investor years ago.
It is difficult to find property which will fit with that rule but when you do you will make money. If you break down the expenses and cash flow on almost any property you will find that it works out pretty much that you will need about 1.5% per month in gross rents to make it profitable.
It can be flexible depending on your interpretation of the local market.
"I will never surrender or retreat. " Col. Wm. B. Travis, The Alamo, Feb. 1835
We do a basic call your previous landlord and friends background check. We also do a check of court records for previous evictions and finally on the person selected for the property we do a credit check.
I really don't care if they have good credit but I do care if they have been evicted in the past which sometimes shows up on the credit report if it was in another county. And I want them to be able to get the utilities turned on in there name, another thing the credit report will tell you.
Using this system we have had 4 evictions in 20 years, half a dozen or so we wish we didn't rent to. Its been a good side business with great tax benefits but not for those who struggle to deal with people issues.
My wife is a great people person so she handles the day to day. You only see me if somethings broken or you haven't paid as I am better at turning on the intimidation charm if needed. DanT