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Location: Visitation between Wal-Mart & Home Depot
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Quote:
Originally Posted by Pocketplayer
Thanks for chiming in...
I think what I was trying to say is, yes, I want to first buy a home. However, property in TN is aprox 1/3 the cost of that in Los Angeles (San Fernando Valley). Because of this, I want to buy low (house for about $120K) and then invest the rest of the money.
Here's what I have looked into;
1) A CD for one year at the highest interest rate I can find.
2) Buy another house or rental property (2-4 units)
3) Another investment in the stock market (feel this is too high risk however)
4) Seeking some way to live off the interest or use interest as a large income supplement, i.e., annual CD rate of return.
My asking, "What would you do?" was seeking ways to invest that might yield a medium risk return.
Interest on $350K is not going to be living money, especially when the fed has lowered interest rates to Z-E-R-O so that the banks can pass the savings on to you. The way to live off of that money is to leave it alone for 30 years.
This is easier said than done, but probably the best thing to do with that money is to put it into an interest bearing account and pretend you never saw it. Do not change your lifestyle, do not dip into it, do not start feeling rich. Ignore it unless you are making it bigger.
Before you buy a rental property I'd suggest spending a few MONTHS hanging out on some REI web sites and getting advice from EXPERIENCED RE investors.
Way too many people think RE is a great investment because they own a house that is "breaking even" or has a positive cash flow of "a couple of hundred $ per month" THEY ARE ON THEIR WAY TO BANKRUPTCY.
A couple of hundred $ of cash flow a month is a LOSER. Rents need to be about TWICE what your mortgage payment is to make money. Most "investors" overlook things like:
Allowance for vacancies, even "normal" turnover costs you one month's rent.
Allowance for damages, even collecting a "security deposit" of TWICE of the normal rent can't cover full repainting, replacing carpet etc.
Major repairs-how much is a new furnace? A/C? Roof?
RE investing is NOT amateur hour, but many wannabes treat it as such, they lose money for a few years and then get out of it. Unless they are bailed out by extraordinary inflation, WHICH WE ARE NOT LIABLE TO SEE FOR ANOTHER TWENTY YEARS.
Spread the money among several CDs for a year while you educate yourself. Then diversify among 4 or 5 "classes" of stock mutual funds.
your best investment is marrying me. i disagree with golfgod's opinion. with your inheritance money, i believe you can find a rental property to pay for CASH. so NO mortgage/loan/interest to pay. instant cash flow monthly! or if you decide to marry me. we can start a home care nursing business. i come from business oriented family. in fact, almost all my family members run a home care nursing business so i will have a lot of advice from them.
I have to agree with golfgod's advice, you have a learning curve to go through before you take any serious steps. Go slow, educate yourself - luck to you.
Before you buy a rental property I'd suggest spending a few MONTHS hanging out on some REI web sites and getting advice from EXPERIENCED RE investors.
Way too many people think RE is a great investment because they own a house that is "breaking even" or has a positive cash flow of "a couple of hundred $ per month" THEY ARE ON THEIR WAY TO BANKRUPTCY.
A couple of hundred $ of cash flow a month is a LOSER. Rents need to be about TWICE what your mortgage payment is to make money. Most "investors" overlook things like:
Allowance for vacancies, even "normal" turnover costs you one month's rent.
Allowance for damages, even collecting a "security deposit" of TWICE of the normal rent can't cover full repainting, replacing carpet etc.
Major repairs-how much is a new furnace? A/C? Roof?
RE investing is NOT amateur hour, but many wannabes treat it as such, they lose money for a few years and then get out of it. Unless they are bailed out by extraordinary inflation, WHICH WE ARE NOT LIABLE TO SEE FOR ANOTHER TWENTY YEARS.
Spread the money among several CDs for a year while you educate yourself. Then diversify among 4 or 5 "classes" of stock mutual funds.
Good luck.
golfgod
Golfgod, I have a question for you. (BTW, the OP hasn't been back to this thread in almost a year, so I might as well hijack it.)
We're some of the ding-dongs you talked about who are thinking of investing in rental property. I understand completely what you said about making a profit on a rental, but here's my question. If, after taking into consideration repairs, vacancies and all other expenses you're still breaking even (i.e., the rent(s) cover all the expenses) are you still not making money in the long-term because you're using other peoples' money to pay a for a property which you can then sell?
The assumption is that "long run" the property appreciates in value. That is far from a lock.
Right. But let's say you buy a duplex for $160,000, paying 20%, or $32,000 down. You finance it for 30 years so the payment is relatively low. What you collect in rent covers all of your expenses. At the end of 30 years, even if the property has not appreciated at all, you still see a profit of $128,000.
You're still making money, right?
Is the reason such an investment is frowned upon that if you invested $32g in the stock market for 30 years you'd have a much greater return? Given the events of the six months makes you wonder...
Edited to add: My math skills aren't great, but I calculate that at about a 4.8% return. Not great I guess, but not likely to evaporate if all goes to hell in a handbasket, either.
Depends on what you mean by "rent covers all your expenses"... The reason the IRS lets you deduct depreciation costs from income of rentals units is not JUST because real estate investors lobby for it, it is that rentals wear out. You have to have sufficient reserves to repair / replace A LOT of the stuff in rentals. Appliances, fixtures, flooring, windows, doors. It adds up. Sickeningly you can't really raise rents all the time to cover these things either. Almost without exception a rental becomes something that you as a landlord feel less and less good about renting out -- it fatigues you. "Let somebody else deal with the kind of people that will want to rent this place" drove me to sell my multi-family and I know that feeling effects other landlords. I have seen this happen even with larger "corporate style" rental complexes. They get sold from firm to firm becuase the cash flow no longer makes sense AND the firm gets tired of being in a certain segment of the market. Sure the big firms can and do make efforts to move the units "upscale" and sometimes that can work, but you need a whole different level of financing to refurbish the units, rethink marketing/management/pricing. If the over economy moves in the wrong direction then you are behind the eight ball. Right now there are any number of REITs with residential rentals that are in BAD shape...
A purely financial type investment portfolio is just a lot nicer thing to have at a certain point in your life.
Don't get me wrong. I have made money from rental properties, and part of me wishes that I held on to some until the tippity top of their peak value, but it is not an easy money path that some people woudl have you believe...
Of course the alternatives have to be good too. As you point out if you were looking around for any short of stocks or bonds or mutual funds RIGHT NOW the outlook on many is terrible. You have to "risk" things and it comed down to how much upside vs downside does any investment have. With an inexpensive enough piece of property, especially one where some sweat can quickly imporve the rental or sale potential you could argue that you have more control over the vagaries of the financial markets. I still that is true in some places, but without getting out and seeing the competition (renters always do that you have to as well) you could be in world of hurt really fast...
Good Luck!
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