AcesAndEights
AcesAndEights
Joined: Jan 5, 2012
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January 13th, 2015 at 4:46:17 PM permalink
Quote: AcesAndEights

Not to rain on your parade J, but a home is a terrible investment. Here is a great article summarizing various reasons why... Not that I think no one should own their home, but it's best not to think of it as an investment.

A rental property can be a good source of cash flow, but there are lot of problems with it, mostly maintenance and occupancy. When you take those two costs into account over the long term, a rental property is usually worse than investing in the stock market. If you do a lot of maintenance yourself, that's great, but at that point it's a job and you can't really compute the cash flow as investment returns. It's getting paid for putting your time into it.

Anyway, this is a sore spot for me as I have had some friends get their asses handed to them trying to generate passive cash flow with real estate. Great when it works, and everything's going smoothly! Not so much when it doesn't.


Here's one more article on Real Estate appreciation rates in the US, by Michael Bluejay who used to be the Wizard's webmaster.
"So drink gamble eat f***, because one day you will be dust." -ontariodealer
Face
Administrator
Face
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January 13th, 2015 at 4:50:19 PM permalink
Lead. It's the new gold.



The opinions of this moderator are for entertainment purposes only.
SlackJawYokel
SlackJawYokel
Joined: Jan 22, 2012
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January 13th, 2015 at 5:06:23 PM permalink
I believe in a balanced portfolio but something to think about adding is some peer to peer lending notes. There is a primary and secondary market for these micro loans that you make to people, though not all states allow access to the primary market. I currently use lending club and have had excellent results thus far. I have had a few defaults but overall my returns had been excellent.
odiousgambit
odiousgambit
Joined: Nov 9, 2009
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January 13th, 2015 at 5:54:55 PM permalink
Quote: AcesAndEights

Not to rain on your parade J, but a home is a terrible investment.



two thoughts:

*I absolutely 100% agree with that opinion

*I have to believe there are more self-made millionaires who did it with real estate, than any other vehicle

one thing for sure, I am not the guy for that. Know thyself.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
Asswhoopermcdaddy
Asswhoopermcdaddy
Joined: Nov 30, 2009
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January 13th, 2015 at 6:45:56 PM permalink
There are a couple main principles for investing.

1. Invest towards your risk tolerance relative to your age and financial needs. It doesn't make sense to be in all conservative positions when you're young or risky stock/commodity/hedge fund positions when you're old.

2. The main benefit of a 401k is tax deferred savings and dollar cost averaging. Buying into funds on a fixed schedule is much better than trying to time the markets.

3. Company matches are great, but I view a 401k as a way of forced savings, something Americans have a hard time of doing in our consumer obsessive economy. In Asian countries especially Japan, the majority of earnings are saved. It has the highest savings rate in the world.

4. Pick low cost funds unless you accept paying a premium for specialty funds(like sector specific or star managers).

5. Now to where to invest....the broad market is inflated in every asset class. A hit anywhere be it equity, bonds or commodities will hurt. I'm about 75% equity and 25% bonds. I rebalance whenever I see a good entry point in the market. I am more.conservative for my age group. In the equity space, I focus on dividends, small caps, and international. Bonds I look for intermediate duration. You'll notice that one or two categories are usually down when the others are up. I rebalance to keep my risk levels in sync
mcallister3200
mcallister3200
Joined: Dec 29, 2013
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January 13th, 2015 at 6:55:19 PM permalink
A major significant positives in real estate investment is tax shelter via depreciation or capital improvements, and you can often avoid capital tax gains on a sale using a 1031 exchange to purchase another property. Certainly it's more complicated with more risk/room for error than many investments if you don't really know what you're doing (easier said than done, I still hold my real estate license and worked in property management in my previous state of residence and I'm not so sure I'd be confident about being able to do it myself). I believe Kewlj has stated that his second property is in his neighborhood, so that helps.I wouldn't want to take a loan on an investment property, but if I had the excess cash laying around it would be tempting for the tax shelter.
mcallister3200
mcallister3200
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January 13th, 2015 at 6:56:51 PM permalink
Channeling real estate into a self directed ira/401k is also may be a better option than the way most people invest in real estate.
Johnzimbo
Johnzimbo
Joined: Sep 29, 2010
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January 13th, 2015 at 8:12:45 PM permalink
Three years ago I lost my job and converted my 401K into an IRA. At the same time I read Ric Edelman's "The Lies about Money" and have been adhering to the recommended portfolio for me in the book. The book has portfolios for various age and financial situation combinations, and I rebalance yearly. It has worked well for me and I don't fret the big drops in the market like I used to when I was definitely too aggressive.
RaleighCraps
RaleighCraps
Joined: Feb 20, 2010
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January 13th, 2015 at 9:12:15 PM permalink
Quote: Asswhoopermcdaddy

...
5. Now to where to invest....the broad market is inflated in every asset class. A hit anywhere be it equity, bonds or commodities will hurt. I'm about 75% equity and 25% bonds. I rebalance whenever I see a good entry point in the market. I am more.conservative for my age group. In the equity space, I focus on dividends, small caps, and international. Bonds I look for intermediate duration. You'll notice that one or two categories are usually down when the others are up. I rebalance to keep my risk levels in sync



I am mid 50s, and just forced out from the only company I worked for, for 33 years. My analysis says I have enough to last 34 years if I make 3% each year. It won't be an extravagant retirement with lots of travel, but I can pay all my expenses and have a little bit of fun each month (won't be any more $2K buy-ins at craps though, unless I score some nice day trade wins).

One of the biggest things to kill a retirement is to lose money in the first couple of years of retirement. So an asset mix is really out of the question for me right now, because a year with a 10% loss would be quite devastating. On the positive side, I do not have any plans of drawing on my retirement funds for a few years, so I am not faced with the double hit of a market loss and a draw down, all at the same time.

I wonder if Axel offers a 401K program..............
Always borrow money from a pessimist; They don't expect to get paid back ! Be yourself and speak your thoughts. Those who matter won't mind, and those that mind, don't matter!
kewlj
kewlj
Joined: Apr 17, 2012
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January 13th, 2015 at 10:56:07 PM permalink
Quote: AcesAndEights

Not to rain on your parade J, but a home is a terrible investment. Not that I think no one should own their home, but it's best not to think of it as an investment.

A rental property can be a good source of cash flow, but there are lot of problems with it, mostly maintenance and occupancy. When you take those two costs into account over the long term, a rental property is usually worse than investing in the stock market.



Quote: mcallister3200

I believe Kewlj has stated that his second property is in his neighborhood, so that helps.I wouldn't want to take a loan on an investment property, but if I had the excess cash laying around it would be tempting for the tax shelter.



I think for an AP (especially a card counter AP), the home/investment scenario is a little different. As a professional card counter, my bankroll is EVERYTHING. A successful AP, Kim Lee (on BJ21) used to tell me that an AP's entire net worth is his bankroll, including real estate and investments. I had a problem with that at the time. I wanted to separate things out into nice little packages, rent money (wasn't a home owner), living expenses, bankroll, maybe savings.

But now as a homeowner, I have come around to that way of thinking. I put 50% down on my home that I live in. That money came from my blackjack winnings and as such, it will always sort of be part of my bankroll, even if I separate things out as I do. I now look at it as I have a playing bankroll, which is high five figure that I have readily available for play (would like to get that back over 100k). But if I were to lose that which is highly unlikely, at the tiny RoR that I play, I would HAVE to dip into my total BR which includes home equity. So my home IS part of my bankroll and as such, I need to protect that investment dearly. I don't need to have it increase in value the way you would want a traditional investment to, but I can't have it decline (long-term).

Now, my second property was just a bad decision on my part. Maybe 'bad' isn't the right word, because I think and hope it may turn out ok, but it is a decision I regret. It's a decision I didn't think through entirely and that's not the way an AP operates. I just saw this nearby property selling significantly under current value and grabbed it up (cash purchase also from what I now consider my total BR funds).

My plan was to turn around and put it right back on the market at a closer to market selling price. Problem with that is potential buyers can see that even though property is listed at or close to value, that is very recently sold for far less. The questions they immediately have are what is wrong with it that it sold so far below value and what now makes it worth more? I quickly realized the prospects of turning around and selling it right away at a higher price were not good. Second option was to rent it out for a year or two, generating some income, and then sell it for a profit, which I should be able to do baring another major drop in the Vegas market. (values have been creeping upwards).

Luckily, I found a renter on another site that I participate on that some members that I know vouched for. He is an AP (for a living) so I worried about his finances, I know that's the kettle calling black...lol. He has been very reliable tenant and actually wants to purchase the property, so hopefully he will be in a position to do so at some point in the not too distant future and this rash and potential bad decision will have a happy ending. :)

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