RE: Cash in a rental or in a bank?

[Debt-freeTICer]

Re: Cash in a rental or in a bank?

In October 2007, I invested 1.4 million cash into NNN lease commercial (Family Dollar and Dollar General properties) returning 8% with 10% increases every five years. Went in debt-free through a 1031 Exchange. Have been quite happy receiving my rents.

[don]

Re: Cash in a rental or in a bank?

In October 2007, I invested 1.4 million cash into NNN lease commercial (Family Dollar and Dollar General properties) returning 8% with 10% increases every five years. Went in debt-free through a 1031 Exchange. Have been quite happy receiving my rents.

Congrats, you seem to have hit what many hope to in CRE, as long as your tenants stay happy and put. Unfortunatley there are plenty of triple net CRE leases now sitting empty. Not so good.

[santafe2]

Re: Cash in a rental or in a bank?

The Federal Housing Finance Agency tracks many more cities in their All-Transactions House Price Indexes, including Santa Fe. The various indexes (Case-Shiller, FHFA HPI, etc) each have their quirks. The FHFA HPI pulls data from Fannie Mae and Freddie Mac conforming mortgages, so no jumbo loans... this skewed their data downward for expensive cities during the boom, but doesn't matter as much for markets where prices never went to the moon. The HPI also includes refinance appraisals, whereas Case-Shiller only includes actual purchases.


Forgot to note on the chart, their index is keyed to Q1 1995 = 100

Thank you for the pointer. The "not as negative as late 2010" understanding one gets from the graph is about what we see on the ground here. It's not awful but it's still not good. Real estate is a place where people still don't understand that a 100% gain and a 50% loss are the same thing. As we watch San Diego and LA real estate move up in a new bidding war, we understand that our future buyers are making money and in a year or two they will come here. Until then, we'll have to wait.

[Forrest]

Re: Cash in a rental or in a bank? My difficulty is having an apartment building that goes on sale in West Hollywood, CA on May 1st...an estate sale, alas...I would love to keep it, but can't. What do I do with the money? My share of the building is only a million or so, which buys next to nothing in So Cal, and I already have my primary residence, and will expand my business there, but other than expanding my long term gold holding, what do I do with the rest? Any ideas?...I definately need to know where to put a big chunk of it! And I only understand Real Estate, and Lending, (22 years experience) Soooo, other than hard money at 11-14% what can I do?

[RebbePete]

Re: Cash in a rental or in a bank?

My difficulty is having an apartment building that goes on sale in West Hollywood, CA on May 1st...an estate sale, alas...I would love to keep it, but can't. What do I do with the money? My share of the building is only a million or so, which buys next to nothing in So Cal, and I already have my primary residence, and will expand my business there, but other than expanding my long term gold holding, what do I do with the rest? Any ideas?...I definately need to know where to put a big chunk of it! And I only understand Real Estate, and Lending, (22 years experience) Soooo, other than hard money at 11-14% what can I do?

"I am more concerned with the return of my money than the return on my money" - Mark Twain.

Hard money at 11-14%? What?

[Debt-freeTICer]

Re: Cash in a rental or in a bank?

Have You considered a 1031 like-kind exchange so you pay zero income tax, State or Federal?

[santafe2]

Re: Cash in a rental or in a bank?

"I am more concerned with the return of my money than the return on my money" - Mark Twain.

Hard money at 11-14%? What?

Yes, my thoughts as well. When did millionaires turning over 10% per annum begin soliciting advice on a blog and whining about million dollar homes? Here's a sample of "next to nothing". https://www.google.com/search?q=home...w=1600&bih=754

[Forrest]

Re: Cash in a rental or in a bank?

Hard money loans are made to those who cannot get Bank financing...basically a low loan to value liar loan, with no lies, and the lender is the Bank.

It's only dangerous if you do not know what you are doing, which requires extensive knowledge of lending against real estate, and having good underwriting experience, as well as imagining and preparing for every possible thing to go wrong, which is a lot. However, at least the loan is secured by a property you know about, and generally visit before lending!

Rates begin at Prime plus 10% for perfect credit...I recall the 1980's, and making 21% loans, with a 21 point upfront premium. I grew up in the industry, so that helps, but in this bubbling real estate scam being run by the big investors on rental property, I doubt that I could trust an appraisal to hold true very long.

When the small investor buys rental properties from the big investors, and then finds the rental market rents crashing, we will soon have another real estate debacle, so I am looking for alternatives to hard money loans with equivalent income, and comparative safety, and in this market, I don't see one.

So, I feel like buying a gold blanket, and pulling it over my head.

[Forrest]

Re: Cash in a rental or in a bank?

santafe2

• Re: Cash in a rental or in a bank?

Originally Posted by RebbePete "I am more concerned with the return of my money than the return on my money" - Mark Twain.

Hard money at 11-14%? What?



Yes, my thoughts as well. When did millionaires turning over 10% per annum begin soliciting advice on a blog and whining about million dollar homes? Here's a sample of "next to nothing". https://www.google.com/search?q=home...w=1600&bih=754

I'm not whining...I'm worried where to put my retirement money when there is no safe place to put it.

If the economy crashes before my probate closes, my inheritance goes up in smoke, eaten by a failed bank, and ensured only by the FDIC...presuming they'd be around after a crash.

As for the homeless...no one going to an investment forum is doing more for them than donating to their local mission, and my donation list is between me and YHVH!

As for being a millionaire...inheriting a million does not mean you keep the million, and certainly not in this market. Just putting the money in the bank is going to lose me 15% a year in real inflation, and negative interest rates...just check Williams' Shadow Stats.

[Forrest]

Re: Cash in a rental or in a bank?

santafe2

• Re: Cash in a rental or in a bank?

Originally Posted by RebbePete "I am more concerned with the return of my money than the return on my money" - Mark Twain.

Hard money at 11-14%? What?



Yes, my thoughts as well. When did millionaires turning over 10% per annum begin soliciting advice on a blog and whining about million dollar homes? Here's a sample of "next to nothing". https://www.google.com/search?q=home...w=1600&bih=754

Sante Fe, please realise that I don't have the million yet, I don't want a million dollar home...I have a nice little house in the country I can pay off...but soliciting general advice and counsel from other's at a forum one has belonged to for years didn't seem odd to me as to what to do with the remainder of the money. I had hoped for a little general conversation about what to do. I was looking for ideas, and a conversation, and being honest about what I am dealing with.

When you have little money (just my small gold holding) having the prospect of what is to me a lot of money to risk on investments I know nothing about is a scary business.

I am too old and physically disabled to bustle about earning a new fortune should I lose this one. I can invest in a business on my property, and I will, but that still leaves me with money to risk. Oddly, having money in a lump during a time of economic turmoil is a very difficult thing. The prospect of a little safety, added to the knowledge of how hard it will be to lose that little bit of safety is not a happy set of circumstances to be in.

To me, having this bequest is all I will ever have to finish out the last years of my life, however many they will be. Like others, I need income. After I pay off my house, presuming I receive a million dollars from my share of the sale of the apartments, the 900K will get me about $18,000 to $24,000 a year at the risk of losing all 900K in some array of investments. A registered investment account manager cannot tell me more than that...and I know that much already.

I still would like to know what you, and others would do, if they were going to receive a million dollars, and how they would go about it.

[cobben]

Re: Cash in a rental or in a bank?

I need income

Do you really? Think long and hard about that, imho, fallacy.

The only advice I dare offer - try to think like an insurance company that is going to structure an anuity for you, what would they do?
(assuming you have no dependents.)

But I always liked the depression era portfolio - one half in gold and one half in Treasuries, or the iTulip variant.

The problem for you with gold, is where to keep it. California is not a good place to keep anything in a bank safe deposit box. I don't have that problem in Sweden, at least not currently.

[santafe2]

Re: Cash in a rental or in a bank?

I still would like to know what you, and others would do, if they were going to receive a million dollars, and how they would go about it.

You can never ask what another person will do with money and get advice that will work for you. You have to practice ideas over time to find out what works for you. If you haven't done that over your life, don't start now. You, and I suppose, your siblings have sold off what was likely a great investment. I can't imagine doing that and not knowing what I wanted to invest in for a greater return. That said, if you are sixty and expect to live to 85, you have an extra $40k a year if you put your money under your mattress. Almost no one in the world will have that sort of retirement. You don't need to invest. Put it in a few banks and continue to live a simple life. BTW, you were whining.

[BadJuju]

Re: Cash in a rental or in a bank?

I will tell you what I would do, forrest. I would buy a small plot of land outside or at least on the fringe of a strong communal center, like Seattle. Then I would build a stone or brick home that is as small as you possibly need. For me, I would opt for about 200-300 sq ft. From there, I would work on making it as self-sufficient as possible at least as far as power generation goes. I would buy years worth of food staples and store them. After that, I would invest about 20-30% in gold, 5% in silver, and then diversify from there. Keep some cash, but not much. Have some overseas investments, but keep 'em at 10% or so. Consider dipping into the stock market with about 10% when it finally pops and put it in places you feel will do relatively well. As you are older and probably retired, my method of diversification probably wouldn't appeal as much to you. Still, there are options available that you could turn hobbies into mini-businesses. Making alcohol, woodworking, whatever. Just something you might do anyway and that could turn into a profit for yourself.

I guess the key to me is to ensure you are as capable as possible of supplying your own needs without it being a burden. And from there, it is about diversifying yourself as much as possible. Nothing is ever a sure thing.

[astonas]

Re: Cash in a rental or in a bank?

I will tell you what I would do, forrest. I would buy a small plot of land outside or at least on the fringe of a strong communal center, like Seattle. Then I would build a stone or brick home that is as small as you possibly need. For me, I would opt for about 200-300 sq ft. From there, I would work on making it as self-sufficient as possible at least as far as power generation goes. I would buy years worth of food staples and store them. After that, I would invest about 20-30% in gold, 5% in silver, and then diversify from there. Keep some cash, but not much. Have some overseas investments, but keep 'em at 10% or so. Consider dipping into the stock market with about 10% when it finally pops and put it in places you feel will do relatively well. As you are older and probably retired, my method of diversification probably wouldn't appeal as much to you. Still, there are options available that you could turn hobbies into mini-businesses. Making alcohol, woodworking, whatever. Just something you might do anyway and that could turn into a profit for yourself.


I guess the key to me is to ensure you are as capable as possible of supplying your own needs without it being a burden. And from there, it is about diversifying yourself as much as possible. Nothing is ever a sure thing.

I agree generally with BadJuju that self-sufficiency is a very desirable thing, but as one gets older, I suspect that proximity to family and friends is a greater source of stability than being able, for example, to grow one's own food, which requires health and vigor. I would be less inclined to pick up and move far away if you have good relations with your existing community, and your neighborhood is safe and stable. By all means, if you enjoy gardening, or keeping chickens, etc., do so to the extent you can, and modest investments in infrastructure to make this more viable could wind up covering themselves. I wouldn't, however, disrupt a social network by moving in order to do so.

Solar panels, improved home insulation, and other ways of reducing your month-to-month expenses could all be very sound "investments" depending on where you live. I would look for as many of those opportunities as I could find that had a favorable ROI. It is more common to talk about the income side of a retirement budget, but that's often not where the greatest opportunities are found.

Once my expenses were as low as I could cost-effectively make them, I 'd look for ways to pay the expenses remaining using passive income, not a hobby/business, which is likely to disappoint exactly when one needs money most (eg. medical event).

Gold, and perhaps silver, make up a portion of a portfolio today, but I would argue that the volatility alone make these somewhat troubling to have as a majority of one's holdings as one approaches retirement. So certainly keep a portion (15-45%, depending on risk tolerance) but look for other ways to invest as well.

I'm probably not in line with a lot of iTulip in recommending a world portfolio, rather than one heavily overweighting the US, but I see PCO hitting very hard here compared to other places, and I see the European situation as being far more benign than most others here do. For this reason, I would divide the equity portion of my portfolio almost equally between US, developed international, and emerging markets. This weighting is very aggressive, but depending on the vehicle you choose, you could take advantage of export-oriented emerging markets with high quantities of natural resources that could do well in a global inflationary environment. I would emphasize northern European nations in the developed international category, which I believe investors (especially Anglo-Saxon ones) are excessively scared of at the moment.

Bonds hold a similar story. Yes, they don't look promising anywhere, but it is hard to stay entirely away from fixed-income as you approach retirement. I would say the key here is to choose bonds that are least likely to spike in rate (and thus drop in value), and simultaneously offer an acceptable currency story. Since I think a lot of the angst over Europe comes from invalid projections of Anglo-Saxon values onto European nations, I would argue that northern European nations at this time offer bonds that are the least ugly, and even have some potential currency-exchange upside. Split between these and TIPS, if you want to hold US as well. TIPS may not keep up with inflation, exactly, but they may do less badly than others, and at least there's no currency-exchange risk. Stay short-term for now.

I'm not an investment advisor, but that's the general approach I would take in your shoes, for what it's worth.

[BadJuju]

Re: Cash in a rental or in a bank?

I am not really advocating growing your own food. It really wouldn't be worth it. That is why I like passive stuff, like solar, that can offset the costs and troubles of on-grid power. Stuff that works for you instead of you working for it.