More free financial advice

[L8 APEX]

Let's see what you wise and some old men say about this topic. There is more than one way to skin a cat is the general theory here. What are good ways to invest money for the future. IRA, money markets? I don't want to simply save money for the sake of dumping it all at once and starting over again, that is old school. I want to reach the next level of financial planning and executing:rolleyes:

[Silver_2000]

Real Estate is a good investment - If you have that kind of cash and can put it down on a rental and make $$ on it you win 2X cause the property in the right areas should appreciate.




Let's see what you wise and some old men say about this topic. There is more than one way to skin a cat is the general theory here. Say you want to buy a new widget and the widget costs $50K. You have exactly $50K saved and can buy the widget out right. But old wise man say be patient young man. He say buy a business or property with $50K you have. Then finance aforementioned widget and let reutrns on investment pay for widget. Understand Kimosabe? Me neither:hammer: . What are good ways to put 20-30K to use these days and start getting a revenue or profit that can afford something else you want? I don't want to simply save money for the sake of dumoing it all at once and starting over again. I want to reach the next level of financial planning and executing:rolleyes:

[L8 APEX]

I have always been afraid of real estate with images of rental nightmares in my head:eek2: . With the hassles of eviction and the way people tear stuff up these days. I notice Jim sold his three rentals, I know Mark#4 still rents along with WesT. I am listening though.. A buddy of mine wants to start a eBay used car dealership. I don't like the odds of that either:rolleyes: .

[Silver_2000]

Well

In my case a 100k investment grew to 145k in 7 years

How else can you beat that rate ?

Doug

[L8 APEX]

You mean your house I guess? That doesn't pay you a monthly return to spend on toys.

[Cammin4V]

real estate. try and find a good deal on a house around a college campus and rent it out to students. its unreal what some people pay a month to live a couple of miles from campus, and the dumps they live in.

[whitelightning'02]

I've got a nice rent house for sale in Carrollton........

[Nuhklz]

I have always been afraid of real estate with images of rental nightmares in my head:eek2: . With the hassles of eviction and the way people tear stuff up these days. I notice Jim sold his three rentals, I know Mark#4 still rents along with WesT. I am listening though.. A buddy of mine wants to start a eBay used car dealership. I don't like the odds of that either:rolleyes: .

Investing in real estate does not have to be in the form of a house. There are mutual funds and other investment vehicles out there that rely heavily on the hotel and entertainment industry.

Think outside the box.

[WA 2 FST]

If you're trying to invest a small amount of your $$ with little down payment and then use the returns exclusively for play $$, then it gets pretty tough. Guys with $$ rolling out of their ears can do this, but this does not happen overnight with one investment. They are also turning over their investments (property, etc) constantly.

IMHO, investing is more of a long-term strategy, and short-term you may move capital around.

As far as rentals go... I could write a book, but that has already been done, and my copy-cat book would not make the millions of $$ these others have (most are shams IMHO, anyway). Zero-down is BS. Sure it _can_ be done, but that is few and far between. And don't look for the gov't to give you a loan/grant to start a real estate venture... b/c they explicitly state that they don't do that for "small businesses". Point is that there is no quick fix. That being said you don't have to pay cash for a rent house, either.

You let your tenant pay your mortgage and expenses with the rent they pay. Sure you will have to do some repair when people move. Sometimes very, very little. You do have advertising costs (but this is small). You do have maintenance costs (like on any home...A/C, water heater, roof, fence, etc). Even with good tenants you will replace the flooring (this is my biggest expense) every now and then if you have the property long enough.

But, for example, let's say you have a 15yr note and you put down $10k on a $100k home. This home should rent for ~$1000-1100mo. In a perfect world your rent will offset all the costs involved (all these costs are STILL tax deductible however, AND you get to depreciate the home over time...another tax deduction. In this case if you used "30yr straight-line" accounting methods, it would give you ~$3333 a year as an additional tax deduction). Say over 15 years, you're not lucky and you end up spending $15k out of your own pocket over and above the rent. This means you've spent $25k over 15 years. You also got tax deductions of at least $60k over the same time period. It would actually be more than that. I'm using $3333 x 15 + the $10k out-of-pocket you spent. Depending upon your tax bracket, this = $9000 - ~18+k in tax savings. So your NET loss over 15 years (just talking cash flow here!) is 15-16k... or possibly you broke even.

But in 15 years you have 1) a paid for property that is now putting $$ in your pocket ... this same property would realistically after taxes/ins./maintenance make you ~$6-7k/yr. 2) a paid for property that is worth at least the $100k you originally bought it for, but probably worth substantially more.

If we use the "Rule of 72" ($$$ doubles every 7 years) then you just spent a NET of $15k over 15 years and its now worth $100k ... probably much more. I'd say you did much better than double your $$ twice.

The caveat is that when you go to sell it, you will pay capital gains taxes. And no, its not JUST on the difference b/w the sold price and the original purchase price. Remember all that depreciation you were writing off? That lowers the "cost basis" of the property. So, on the books it would not be worth $100k as originally purchased, but maybe $50k. So if you sold it at 145k, you'd pay taxes on $90k. I believe the current rate is 20%. Still... you could have turned 10k into a NET profit (assuming 145k sales price, commissions included) of $127k. A potential way to get around this is to sell this property and buy another "like" one and put all the $$ into it. I have not done this yet, and hesitate to b/c the larger you get the more $$/sf it is to maintain, not to mention rent $$/sf goes down the larger home you have. I like small(er) and 4 white walls, no decorative stuff, no frills, no pools, no spas, no sprinkler systems... all of this stuff = more maintenance costs.

You could also refinance (cash-out) this property, and start over... your tenant is still paying your mortgage for you, but you now have $100+k in the bank. I haven't done this either, but am considering it.

If you need the property to make you some $$ each month from the get-go, then you can just get a 30yr note and try to pay it off early. The returns will still be there, just not as great or as fast. But you can take the same property size/cost, do 30yrs and put $3k in your pocket a year, and still get all the same tax write-offs you did with the above example.

Or, if you can pay cash... pay cash and get the $6-7k back every year, still get the tax write-offs for expenses/depreciation (you CANNOT write off bank interest on loans that are not for your personal-use home) and if the market spikes, sell it for a nice profit on your original investment.

But if you're willing to let the $$ sit for a bit, then real estate is a good investment. It's not very liquid, so if you need to move the $$ around often then don't buy property. If you still want in on the market somewhat, then do what Larry suggests.

BTW, I am NO expert. Not in the least. And I'm sure some math whiz will shoot holes in this. I've edited it several times b/c the math wasn't 100% correct. ;) I need to get to work.

[jim woods]

Terry or anyone else who wants to invest or make excellent return for there money/investment.
I have four rent house/homes for sale.The renters are in 3 of the homes so only have 1 right now that is perfect and ready to rent out and or buy ect.I am moving to Florida and selling all the homes in next 6 months at near investor prices.

Terry I want to give you some actual REAL numbers on what you can make if your are serious about investing in property.
The house is ready to buy then rent out/lease
The appraisal value of the home is 118k
I am will sell for 105K.If you come see the home and compare you will know this is a buy.
With closing cost and everything the house will cost you around 109k.
Put down 30k and you will be financing 79k
79,000 @5.75 for 15 years will be 656. a month.
This house and others in area will rent out around 1100-1200 a month.Check for yourself.
Do all the general non skill repairs on the house every year yourself.You can charge 75 a hour for your labor.this will drastically lower your income taxes on this house.Plus you get to duct for your income on this house any repairs you need to make for carpet,painting etc.
Now lets see what you have after 5 years of renting this house out.
I ran an mortgage schedule on this loan and in 5 years you will owe around 65k The house in 5 years will be worth a bare min of 130k-140k.That's assuming the absolute lowest appreciation in DFW home of 2% a year.
So by 2010 sell the house at 130k. Your 30k investment will turn to 60k-75k or more depending the housing appreciation. Plus the extra 500.00 per month income coming in a month from the rent.
Keep the house longer and make even more money.
The past 2 years have been the best time in history to invest in rental property because mortgage rate are at an all time low.
And if you don't want to mess around with lease/renting you could get a property management company to do this for you too.

Terry if you interested or anybody PM me and I show you the house etc..

[WA 2 FST]

I didn't realize my numbers weren't "real"? ;)

<---been doing this for 14 years, but what do I know.

The only flaw in your #s is that you're telling him he'll put away $500 a month on a $30k investment. You forgot taxes and insurance on that house which at 118k appraisal value in Collin County will be ~$3750+ per year (312+/mo).

$180 in profit per month max, assuming zero maintenance costs. However, as you and I both stated, repair/maintenance is all tax deductible.

I'm not saying its its a bad deal, Jim. It's not. :)

Jim, shoot me a PM with the addresses of the homes. I'd like to do some preliminary online research before I take any of your time. You can sell them with tenants in them. You don't have to wait til they are out or the lease has expired.

[jim woods]

Sorry Wes, I did not read/see your post before I made mine.Everything in your post was real and correct.
The other 3 house with renters in them , I am contemplating doing something I never done before. All three renters have terrible credit but have been renting from me for 5-8 years with little or no problems.I told all the renters that I am moving and will not be renewing their leases.I am going to sell the home.All of them wanted me to finance the homes to them.I just may do that since I will be able to charge them 12-18% interest and get Full market value of the home.So everything is on hold on those three homes until I figure out if I want to do that.But I do need to sell the one home with no renter in it.The address is 3217 wuthering circle, Grand Praire TX.The Dallas County Tax Office has it appraised at 110K if you check. The current market appraisal is 119k.I could give it to realtor and get around that.But I need to sell soon.105k .Or if a broker/realtor/investor has a buyer I can flip the title.

[WA 2 FST]

I've only tried owner-financing one time. Didn't work out. But you've got some good renters with excellent pay history on your side. Mine had been there ~4 years. Then the people got divorced, if I remember correctly and it went downhill fast. They didn't pay their taxes...guess who got to later on when it was time to foreclose? Hopefully you'll have good luck if you go that route. :)

Grand Prairie is too far for me. I manage my own stuff and drive time is a huge consideration for me. GP is a good location though!

GP might be perfect for Terry, however.

[Showtime]

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[Tex Arcana]

Terry, these men know what they are talking about. Listen to them. :tu:

If you're actually reading this, another part of the puzzle to consider that's not been mentioned: investing your money allows it to do work and to make money over a period of time. If you sink it into a widget, that money is gone, and what good is the widget is business closes up/you hit a bind, etc.? It's not worth what you paid for it the second you haul it out the door.

However, if you finance it for business, and put that money in either a money market fund or a true stock-market-type investment (with a GOOD HONEST finanical manager), then the money that investment makes pays for your widget, and you get to depreciate the widget and the interest paid (I think), meaning you end up making a bit more money in the long run off the money you invested.

The same applies for a real estate investment, except that its appreciation is based on the real estate market, and isn't as liquid as a MM investment (as Jim and Wes said).

If you're running a business, you should be using a competent accountant to do your books and taxes--aask him what would be best.

So, what's the widget, anyhow?? :d