Speaking of Investments

First off, a bit of info about myself, born poor,
parents were uneducated and had factory jobs. We
had a decent house, older vehicles but got by
fine. There was never any extra money and
certainly no money to invest with. Now,

I'm 35, self employed, financially stable, own 10
rental properties, (8 with mortgages) most
purchased in the last 5 years. I am always looking
to buy more real estate as I know it well, and I
have seen it work well for me. I would however
like to diversify my investments just in case Real
Estate takes a total dive. I don't see Real
Estate crashing as likely, but certainly possible
and want to protect myself from that.

I love the subject of money and business, but I
don't have any real life experience of crashes,
recessions, market shifts, etc. I don't even have
stories from my parents to go off of. I am looking
for the advice of someone say 50+ who has seen ups
and downs, recessions, booms and busts, and with
that in mind, I would like to ask:

If you were in my shoes (35 years old) and had
some money to invest where would you put it??

My goal is to find a place that is capable of
decent return, even if it needs to be monitored
regularly. I am very open minded and would love
to hear any serious ideas that you may have.

I"m only 32 but I keep some under my mattress. That"s the only way no one knows how much there is.

OK, first off, you don't see real estate crashing? Did you just get back from Mars? Were you living in the outback the last 5-6 years? Of course real estate can crash, like any investment. My best advise is to spread your investments around. At your age I had seen too many problems with rental property so I put any extra I had into my company 401k. There were many investment possibilities (bewildering in fact) so I used the investment models they offered. Has worked out pretty well so far, on track for a decent retirement in about 5-7 yrs. Good luck.

Rental property is a good investment. But if you want to spread some of your money around invest in goods and services people have to have even in a down economy. You might also consider rental property of a different kind or type. everyone has to have a place to live. I have always thought it was good to own property someone else is paying for.

real estate falls into different categories. While the housing value was going down in the last few years and a big part of the news farm land was going up in this part of the world.

I am admittedly pessimistic in my view of the future, but I would shelter as much of my net worth in things not denominated in US dollars as I could. I can't tell you what that is but the $$$ is and has been losing value for years. Look around, there certainly must be something available, perhaps Swiss Franks?

Real estate may crash, but that's when more people need a place to rent. When I started out in 1979 I got $125 for first house. Still own it, getting $600 out of it. Rental property is almost inflation proof reguardless what you can sell it for.

If you can get all your places paid for, you already know the secret to investing. My first place paid for my second place and so on. I went over 30 years before I used any rental money for personal reasons. It helped me retire at 55.

Don't put all your eggs in one basket. I worked for 31 years. I draw a pension.

Nothing wrong with being self-employed if you can also figure out how to draw a pension or provide income without working. At some point you won't be able do physical work.

I hire a lot of work done that I used to do. My old body likes it, but it pinches the wallet nerve a little.
George

You are doing the right thing by investing in income-producing property. Although it's quite possible for real estate prices to drop (ask anyone who bought Florida real estate in the past ten years), as long as your property can maintain a positive cash flow you should be able to ride it out.

One problem with real estate is it is not a liquid asset. That is, you can't quickly turn it into cash if you need to. In fact if it happens to be under water you can't convert it to cash at all. For that reason, I suggest you work on building up a cash reserve. If you don't have cash on hand (saving, checking, money market, CDs) to get you through three months of not working, you probably don't have enough. Sure, you're self employed so you can't get laid off, but you could be injured or otherwise unable to work.

Assuming you have a nice cash reserve, then I'd suggest you start putting money into a tax-deferred retirement saving account (IRA or SEP). As for the particular investments, that's your business, but over the long haul the stock market consistently outperforms other investments. And there is very little difference in the performance of the best actively managed stock funds and the performance of S&P 500 index funds.

Well I have land and rental property. I have seen the values go up and down. Here are some high points I have learned:

1) Do not buy any rental property expecting it to cash flow to make any loan payments. What I mean by this is, DO not have to have it rented to make the payments on it.

2) You have 10 properties and only 2 paid for. You DO not need anything else to put money in right now. PAY THE darn mortgages OFF. ASAP!!!!!
What happens if the economy tanks and takes your self employment income down to rock bottom??? Than just to make it even more fun at the same time half your rentals go vacant???? Could you meet your payment and living costs???

3) You need at least six months of enough cash to pay ALL of your bills/payments, this has to be readily available. That means you can access it in less that 48 hours. A years worth is even better.

4) You did not say what type of properties you have. I am guessing rental homes or apartments. If this is the case do not think the real estate slump of the last 4-5 years can not go south again. It can very easily. Housing costs are still out of the reach of many people. This is getting worst not better. This economy is not rolling along. It is limping along. The total number of people in the work force that are unemployed is much larger than the government numbers tell. This effects people's ability to pay rent or buy homes.



So you need to shore up what you have started. The TV show/seminar guys that tell you to just keep buying more and more, that mortgages are just a tool are fools an they get taken out when ever there is a major market correction.

Remember that your lenders are all smiles now but if anything happens they will cut you loose so fast your head will spin!!! Non performing loans now are under much closer FDIC scrutiny. The banks do not want you around for long if your not making payments. It looks too bad to their auditors. So they will dump you faster than they may have in the past.

It sounds like you have been buying since the real estate market crashed a few years ago. Some areas have rebounded back. I just do not think that any of them are in real healthy shape. So prepare yourself for a down turn. If it does not happen then GREAT for you. If it does then your ready to pull through.

BE PREPARED for the worst and hope for the best.

I have a friend that is in the realestate bussiness,every thing was great,untill his wife became unhappy with him working long hours and she wanted a divorce.Take care of your home life first.
Never refinance {this I know}I started out with a 200. dollar payment and becaues of medical bills and other things I really didnt need Ive got a thousand dollar morgage,thank GOD ive only got a year left.
Dont never live above your means,and dont forget where you came from

jimmy

Jd Seller summed it up very well. Read # 2 several times. Pay down your loans and get them gone, then expand when you can.

You are smart to ask for advice. You have a great start but it can snowball away down the hill in a hurry with too much debt.

Real estate has been generally good to me over the past 35 years. While in the lumber business, moonlighting and for briefly full time, I've built several spec homes, remodeled houses and developed a small subdivision on a former Christmas tree farm on the edge of town.
My most successful investment I started was in 1989 and I just sold this business about a year ago. Was a small town self storage business of 74 units. Basic 30 x 100 post frame buildings, roll up doors, concrete floors with vapor barriers and security lights. No climate control. Had good monthly cash flow and, unlike rental houses, there was no heat, water heaters, furnaces, plumbing fixtures or utility liens, no section 8 headaches and it was "diversified in risks" - in other words if someone was late or didn't make a payment and I was almost fully rented out, plenty others WERE on time with their payment thus I didn't have to sweat making my mortgage and electric bill that month just because 1 or 2 people didn't didn't pay me on time. Just used an answering machine and returned peoples calls after I got off work. Met with them evenings and on weekends to do the contracts.

There is a company in Canada.
It has the symbol of COS. That stands for Canadian Oil Sands. Yep, the US of A buys most of the oil sweated out of the tar sands of Alberta. You will have to check price/past performance, dividends. I plan to buy some. I have to get a hold of my broker and convert the cash into this COS. I have not looked at it in several months.

Other than that.......Invest in yourself, pay off your debts.

Friend of mine told me many years ago that if you want to just make some money in real estate, buy run-down houses, fix them up, and flip them. If you want to make a living AND make money, buy apartments. I guess its worked for him- he has about 120 units, with a cash flow of about $30,000 a month, even after having sold a couple of buildings.

The key is rental value compared to purchase price- you can get decent apartment bldgs around here for about $30,000 per unit, vs. houses for 100,000 plus. Apts rent for $500, houses for $750 to 1,000- you do the math. Plus, houses require much more upkeep, because each house has 4 walls and a roof, and apts have one exterior wall, and only a roof for the top floor units.

Be interesting to see what farmland does with the falling corn prices. I think there are a lot of over-extended farmers out there, and they'll start shaking out after their annual loan renewal meeting with the banker.

JDSeller has the right info. Pay off the mortgages on the 8 that have them. Debt is the elephant in the room that no one wants to talk about. Get the debt off your back then invest in anything else you want.
If you think about stocks read ALL of Jim Cramer's books first. Follow his philosophy and good luck.

Remember no matter what you do there is no such thing as a sure thing. Risk and reward always go together.

own 10
rental properties, (8 with mortgages)
Your looking for a place to invest :shock: :shock: :shock:
And you have 8 out standing loans :roll: :roll:
You can hang on a lot better when you OWN free and clear what you have.. :?

Over 50 and BTDT

oops..Sorry I see JDseller already covered it.........
Im, gone....

Excellent advise from JD !! My best advise is don't trust anyone else to invest YOUR money. You obviously are smart enough to do it yourself. No one cares about your money like you do. Don't even look at mutual funds or any of the other so called investments that require a "financial idiot" who are usually living at or above $80,000 yr. It's as simple as buy low and sell high and stay out of "actual debt". Not to be mistaken for "temporary debt" which is when you borrow $30,000 to buy a piece of property or equipment etc that you know you can turn in 6 mos for $50,000. You are not missing anything as the days of giving a financial idiot $50,000 and getting 10%-12% every month/year are long gone and as long as the Fed can print money will never come back.

Read some books by John Bogle, founder of Vanguard Group. And become a "Boglehead" google it! I'm 78 and been invested with them for 25 plus years.

JD, I agree with most of your points, but I have to disagree with you on the point of paying off mortgages. Consider this:

Return on investment: He doesn't say what the interest rates are on his mortgages, but around 6 percent seems likely for rental property. Which means when he pays down a mortgage, he's locking in a six percent rate of return. Maybe less if he's in a high enough tax bracket, since he's losing the interest deduction, so let's say five percent. That's better than bank interest, but not that great for what is in effect a 20+ year CD.

Risk: What if he pays down the mortgage on a house that's under water, then it ends up going into foreclosure? He loses every nickel that he paid against the principal. If you have a house with a 50,000 mortgage that's worth 10,000, does it really matter whether the bank forecloses against a $45K principal versus a $50K principal?

Liquidity: This is my main issue. You and I agree he should build up a significant cash reserve. Any money he pays against mortgage principal isn't going into his reserve. You can ride out pretty much any crisis if you have enough cash on hand. In fact, a financial crisis can turn into a major opportunity IF you have enough cash.

Now a disclaimer: This is a case where I don't necessarily follow my own advise. My wife and I try to pay down our mortgages, and we do own three houses free and clear. We have one house that's deeply under water, yet we've paid down the balance significantly. I can rationalize this by saying the interest rate on that house is the highest of our mortgages, but realistically we should have walked away from the place years ago. Instead we have an 850 credit score and a money pit we'll never unload.

(quoted from post at 21:45:18 01/01/14) First off, a bit of info about myself, born poor,
parents were uneducated and had factory jobs. We
had a decent house, older vehicles but got by
fine. There was never any extra money and
certainly no money to invest with. Now,

I'm 35, self employed, financially stable, own 10
rental properties, (8 with mortgages) most
purchased in the last 5 years. I am always looking
to buy more real estate as I know it well, and I
have seen it work well for me. I would however
like to diversify my investments just in case Real
Estate takes a total dive. I don't see Real
Estate crashing as likely, but certainly possible
and want to protect myself from that.

I love the subject of money and business, but I
don't have any real life experience of crashes,
recessions, market shifts, etc. I don't even have
stories from my parents to go off of. I am looking
for the advice of someone say 50+ who has seen ups
and downs, recessions, booms and busts, and with
that in mind, I would like to ask:

If you were in my shoes (35 years old) and had
some money to invest where would you put it??

My goal is to find a place that is capable of
decent return, even if it needs to be monitored
regularly. I am very open minded and would love
to hear any serious ideas that you may have.

Click to expand...

If I could just figure out how to invest in the government being stupid...
And I am totally non partisan about that.