Best high-return, low-risk investments? (junk bonds, mutual funds, cash, mortgage)
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Hi - I've been thinking of investment ideas for a while and just wanted to see what other ideas people had. I've been working hard and saving money for a while, and currently have a good amount of money that I'd like to invest (approx. $120k), instead of just having it make 1% in an online savings account. For the past month or so my main idea has been to buy a house and rent out the rooms. I live in CT (I'm from Long Island), you can get a decent multi-family house here near a college in a decent neighborhood for about $150k. Running some numbers, assuming rooms are rented out 80% of the time, I could make 8%-9% per year, calculating it as net profit (before taxes) over the total $ invested in the house. That assumes approx. $3000/year in repairs, and incorporates taxes and insurance into the expenses. This also assumes the house was bought with cash (no add'l mortgage expense), and for sake of simplicity does not incorporate closing costs. Besides that the % return looks decent, I also liked the tax breaks.
But currently I'm just not sure if it'll be worth the inevitable headaches. There are a couple bond funds (which are conservative and pretty safe) that have made approx 6%-7% per year historically. If I can count on that, it just seems possibly not worth all the hassle to manage a property and deal with showing the place, repairs, complaints, damage, etc. vs. clicking a button on a website and maybe checking the investment every few weeks. And it apparently is not possible or is extremely difficult since mutual funds can't do this, but it would seem that if you put in a lot of work toward learning the stock market or another area (commodities, forex, etc.) that you could consistently at least match the % returns you can make from owning property.
So basically I'm curious what people think about buying a rental property as an investment in general and about my thoughts here. Also I'm very interested in other investment ideas that could come at least somewhat close to 10%/year. I hate risk and am very conservative in terms of investing, so that's the type of investments I would plan to focus on.
high return and low risk are oxymoronic like jumbo shrimp, pretty ugly and happily married..... if you ever find such a thing keep it to yourself ,you wouldnt want to spread that around.... wall street will pay you millions for it.
even bond funds at this point are risky...either by the fact you have to go out 30 years to get 5-6% and risk inflation damage or they are high yield junk bonds with shorter terms...
right now thats a very very very high return and in the future it may also turn out to be at the high end as well.. if you were 100% stock in an index fund you would have seen 9.8% over the last decades on average.
low risk is around 2% these days... bond funds are at to low of an interest rate at this point to give you those returns. you missed that ride .... now we are at record lows already with rates at zero... not much gains left unless you go out 25-30 years to even see 5-6% and that is risky as hell at these levels
Hi - I've been thinking of investment ideas for a while and just wanted to see what other ideas people had. I've been working hard and saving money for a while, and currently have a good amount of money that I'd like to invest (approx. $120k), instead of just having it make 1% in an online savings account. For the past month or so my main idea has been to buy a house and rent out the rooms. I live in CT (I'm from Long Island), you can get a decent multi-family house here near a college in a decent neighborhood for about $150k. Running some numbers, assuming rooms are rented out 80% of the time, I could make 8%-9% per year, calculating it as net profit (before taxes) over the total $ invested in the house. That assumes approx. $3000/year in repairs, and incorporates taxes and insurance into the expenses. This also assumes the house was bought with cash (no add'l mortgage expense), and for sake of simplicity does not incorporate closing costs. Besides that the % return looks decent, I also liked the tax breaks.
But currently I'm just not sure if it'll be worth the inevitable headaches. Thanks, Dave
I would never purposely spend money to make myself a landlord. The only time I did it was out of necessity. The tax breaks, some of them anyway, may be going away. Plus tenants equal indegestion. You're better off taking great vacations with a loved one for 10 years as an investment over being a landlord any day.
Not everyone is cut out to be a landlord but for those who don't mind it's certainly a good investment. I have 3 close relatives who are landlords and are doing very well and are happy with their tenants. They enjoy knowing that the tenants are paying for a good chunk of their mortgage so it can be paid off earlier and eventually lead to a quicker retirement.
I think your plan is sound and the cap rate looks good, why not take a chance and see if you're cut out to being a landlord.
real estate can be a great investment.. its just not a passive investment . its an actual profession to do it right ...not something id want to do in retirement.
the other thing about real estate is its great until its not.... every landlord eventually has a tenant that has money issues crop up and you need lots of money to carry you through as well as major repairs and renovations as well as the ability to handle grief and aggrevation with tenants... .... i have been landlording for 25 years but like i said id never do it again, the returns when all are said and done are not anything i cant get elsewhere with the same amount of risk and alot less aggrevation and expenses .
100% into farmland, lease it out to a farmer/some crazy environmental conservation program. Forget about what you paid for it and collect your checks!
In Progressive Farmer magazine, they list land sales in the midwest US.
Seems a lot of prime farmland is listed as sold to........investors.
A yearly return of 4% on leasing it to farmers is about normal and the only expense is real estate taxes on that bare land.
The real return comes over time as they aren't making more prime farmland.
Stay away from the lower priced ,lower producing ground as the demand for leasing it isn't as strong.
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