Alternative Investment Ideas?

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cycloneworld

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Mar 20, 2006
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I'm trying to learn as much about real estate for investing purposes, too - include me on that private message! lol

Is it worth it (in your opinions) to get a real estate license to save on acq/disp costs? How many deals/year would you think you'd need to have to make that worth it?
Initially, no its not worth it. Especially in acquisition mode as it doesn't cost you a thing to buy a prop. Possible down the line if you like it and are growing. Not relying on a realtor to setup showings is probably the biggest advantage.
 

SCarolinaCy

Well-Known Member
Jun 20, 2011
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Greenville, SC
A majority of our long term assets 401k, IRA, HSA are tied to the stock market. I would like to diversify my assets, a little curious if anyone has any alternative investment ideas or experience (positive or negative)?

I have dipped my toe into Peer-to-Peer lending, no complaints so far. Some negatives are that assets are not liquid. Returns are decent early on but will trail off over time as a loan's principle declines. Although not directly tied to the market, if the economy is really bad, people could stop paying their lenders.
I bought some Lending Club 3 years ago. I placed them in my IRA to simplify taxes. My notes are just now expiring. My main goal was to educate myself on the concept.
 

SCNCY

Well-Known Member
Sep 11, 2009
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You're a couple years behind on the smaller unit properties. A lot of investors competing for those smaller multi-unit properties(2, 4, 8 unit) and it's driving up sale prices which is making your cash-on-cash return in the low single digits. I agree with your second paragraph, but sellers are fully aware there is line of buyers and don't need to negotiate.

We turned our focus that last couple years on 40+ unit properties because there is far less competition, #'s still need to make sense to sell and cash-on-cash returns are still solid (11-14%). Our area of focus is from Philly to Des Moines.
Yeah, I’m starting to realize this. The house I purchased in 2016 and lived in it while I rehabbed it to update it. I then moved in to my, at the time girlfriends condo and rented out my house with the idea to expand. I just don’t have the money saved up for a future investment. I’m thinking of selling my house when the current lease is up as I think I could end up with 50k cash when all is said and done.

If I sell the home, I think my plan would be to use that money to buy and flip houses until I have enough money saved for a multi family property; but still enough to flip houses. Then just keep repeating that. I think I would target multi family properties that would need updating in 5-10 years of purchase. I’m also in the KC market too. My target is really the cash flow that comes from rentals.
 

cycloneworld

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Mar 20, 2006
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Regarding the duplexes, investors will make an offer on a property without actually looking at it in order to tie it up. During their inspection period, they will then actually look at the property and negotiate the purchase price then. It’s just a strategy to get the unit off the market as quickly as possible so the decision to actually buy can be made later.
This can happen, yes. But if you get a reputation for doing this and not closing deals - it will eventually catch up to you. And agents won't give you a "first look" because they know you play games. This may work on private sales but still isn't a great strategy overall.
 

Clonedogg

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Sep 4, 2009
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CR, IA
At one time I wanted to own rental units and slowly have that be my main job or source of income. Now that I am a little older, I'm less convinced that's what I want to do.

REITs are interesting but I will have to study up on it or ask my Financial Planner if he is familiar. REIT.com seems like a good place to start learning.
 

2forISU

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Oct 8, 2008
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Agree on storage units but not strip malls as they relate to mall tenants selling stuff that can be bought and delivered online.
Our portfolio is smaller with strip malls but they are at 100% capacity and no issues on collections. It also depends who your tenants are but fast food places, beer/liquor stores and phone places have done well in these times. I'm sure states that closed down might see something different.
 

Clonedogg

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Sep 4, 2009
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CR, IA
A few questions:
How close are you to retirement? 20-25yrs
Are you willing to learn something new? Maybe depends if it interest me
Are you willing to feel growing pains (losses) to learn this new investment? Maybe depends if it interest me, if your questions are leading to Real Estate, please see post 45.

Real Estate is fine and dandy, but if you aren't serious about learning it, spending that kinda of cash, or taking care of the property then stay away.

I hear people say "I wanna diversify" all the time because they heard someone say that somewhere. People say that because any investment could lose money, so I don't want to risk everything on one play. Financial Advisors say it because eventually they want you to invest in a high risk asset that they will make a ton of cash on.

If 401k and IRA are working for you, why switch?
Its not about switching my 401k,IRA,HSA. I wont be deviating from that plan. I have been blessed enough to have additional funds. I am thinking about what to do with that. Dumping it into a brokerage account? Ya that's an option just seeing what else is out there before all my assets are in the market.
 

clone4life82

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Dec 17, 2008
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You're a couple years behind on the smaller unit properties. A lot of investors competing for those smaller multi-unit properties(2, 4, 8 unit) and it's driving up sale prices which is making your cash-on-cash return in the low single digits. I agree with your second paragraph, but sellers are fully aware there is line of buyers and don't need to negotiate.

We turned our focus that last couple years on 40+ unit properties because there is far less competition, #'s still need to make sense to sell and cash-on-cash returns are still solid (11-14%). Our area of focus is from Philly to Des Moines.
so what’s the best way for someone to break into the real estate market and purchase their first 2,4,8 unit property and not lose themselves in the process if you don’t mind me asking? Especially if buyers know that now?
 

2forISU

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Oct 8, 2008
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so what’s the best way for someone to break into the real estate market and purchase their first 2,4,8 unit property and not lose themselves in the process if you don’t mind me asking? Especially if buyers know that now?
There is numerous ways to break in to the market:
-Off market deals, cold calling owners, or find landlords that are wanting to get out of the business(retire or tired of being in the business).
-Find real estate investment groups in your area and join their monthly meeting. They usually have investors that are looking sell off market deals. Anything on the MLS is going to have hefty price tag.
-Find realtors that have well connect in the multifamily market. Email them and ask them to put you on the email distribution list for any pocket or off market deals.
-Reach out to property mgmt firms and ask if they have any clients that are looking to sell

Single family homes aren't sexy but you can build a nice portfolio and have good cash flow. Plus, they allow you to test your interest before jumping in to a multifamily property.

Feel free to DM and would be happy to speak further.
 
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SCarolinaCy

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Jun 20, 2011
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My wife invested in a handful of rental properties which included 4 small houses and one condo unit before I met her. She made the investments right out of college and would absolutely agree with the above issues. She bought her properties at the height of the oil boom in OK in the early 1980's. When the oil economy collapsed, the value of homes / condos also collapsed and did not recover for years. My wife was able to collect enough rent to cover the amounts owed to bank. But any excess cash flow went into repairs or covering loan payments on properties that were vacant. Tax benefits on the rental properties were reasonable, however. My wife ultimately sold the properties. I doubt she got back what she originally paid for some of the properties. But she received enough to cover the outstanding owed on the loans against the properties. She would have been better off to invest in stocks. Stocks were very undervalued in the early 1980's.

Given what I learned from my wife, this does not feel like the right time to directly invest in real estate. It would be better wait until after the real estate market fell to more reasonable valuations. I am not sure if the tax benefits are as beneficial at the current time. Our investments in RE are limited to REITs. They can be a great investment if you get in on the right (low) valuation.
Magic, You and I must have been real estate partners, when I lived in Tulsa. Couldn't raise rents fast enuf in 1980. In March 1982, after the collapse, I was lucky to get out with my shirt. Learned a lot about real estate, and myself.
 

BCClone

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Sep 4, 2011
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so what’s the best way for someone to break into the real estate market and purchase their first 2,4,8 unit property and not lose themselves in the process if you don’t mind me asking? Especially if buyers know that now?

My advice would be to find a single or a duplex level deal to start with if you plan to do much of the work yourself. An 8 could be a large chunk to bite off right away, if you are fully employed.

I just did an inspection for a house that is going into a rental. It is in a smaller town, mechanical devices are solid, roof and siding is in above average condition and only needs a little interior work. You can get these things for 30k-40k in towns of 2,000-4,000 people and rents are 450-500 area and typically don't have a whole lot of down time. To start, situation like that may be of interest and get you in without much out of your pocket.
 

Tailg8er

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Feb 25, 2011
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My advice would be to find a single or a duplex level deal to start with if you plan to do much of the work yourself. An 8 could be a large chunk to bite off right away, if you are fully employed.

I just did an inspection for a house that is going into a rental. It is in a smaller town, mechanical devices are solid, roof and siding is in above average condition and only needs a little interior work. You can get these things for 30k-40k in towns of 2,000-4,000 people and rents are 450-500 area and typically don't have a whole lot of down time. To start, situation like that may be of interest and get you in without much out of your pocket.
That's kind of where I am thinking of starting. I haven't seen anything for sale near those amounts, though, looking at some of the smaller towns within an hour or so of DSM (though I admit I haven't looked too hard quite yet). Barely seem to find livable places for less than $100k in most places.
 

beentherebefore

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Nov 24, 2007
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Often alternative investments make for tough tax situations, give HUGE commissions to whoever sells the product, often puts a great deal of your money in illiquid situations, and can sometimes be closer to a scam than an investment a person can count on. Sometimes, though, they can do quite well; but investors can often be gouged as much as someone who buys an annuity.

If you can stand the risk and don't mind the illiquidity, some of these investments can be quite lucrative. But they also were some of the most "shady" a few years ago. Often 50-100k is the minimum investment (but some REITs can function just like a mutual fund and then not require a large minimum), and so alternatives are often only available and wise for high net worth investors.

Be careful.
 

JeanValette

Active Member
Feb 15, 2016
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Minnesota
One thing that I thought was always kind of a cool idea was to have a black walnut planting (like 1-2 acres) where you harvest the nuts then eventually sell the timber.

Well, it was cool, then you learn about all the annoying stuff like waiting 40 years until you see a windfall, routine maintenance/fertilization, and trying to get rid of the nuts.
 

BCClone

Well-Known Member
SuperFanatic
Sep 4, 2011
30,168
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North Iowa
One thing that I thought was always kind of a cool idea was to have a black walnut planting (like 1-2 acres) where you harvest the nuts then eventually sell the timber.

Well, it was cool, then you learn about all the annoying stuff like waiting 40 years until you see a windfall, routine maintenance/fertilization, and trying to get rid of the nuts.

My old shop teacher in HS (back in the late 80s) convinced his inlaws to plant a walnut grove since walnut was so expensive then. Have went by it and it was nice. Biggest problem now is I don't really know very many people that like that dark of a wood for their house or furniture.
 

JeanValette

Active Member
Feb 15, 2016
130
192
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Minnesota
My old shop teacher in HS (back in the late 80s) convinced his inlaws to plant a walnut grove since walnut was so expensive then. Have went by it and it was nice. Biggest problem now is I don't really know very many people that like that dark of a wood for their house or furniture.
Well, at least if everything falls through you have a nice walnut patch for people/wildlife to enjoy for decades.
 

nocsious3

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Aug 23, 2013
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First off, Cash is trash. Let's not confuse purchasing power vs. true capital appreciation via investment. Your purchasing power is going to evaporate if you hold US dollars or companies with low growth primarily exposed to the US. US stocks might go up, but most won't really increase your purchasing power in my opinion over the next 10 years.

The number of bonds with real negative yields is gigantic now, so you can't go there for investment or preservation. Growth will be the name of the game to outpace inflation, and not much in the US fits that mold. FANG stocks are bid up so big precisely because there isn't any other place to hide domestically. There will be tremendous growth in emerging markets, but fund selection will be important. Most of the emerging market funds are market weighted and therefore overly exposed to a few countries. I'd avoid those funds and try to pick a few individual country focused funds. For some that might include China, but that's a bit of a black box and geopolitical risk is high. I like things like India and Brazil and I'm avoiding Japan and most of Europe.

With US debt monetization rapidly ongoing, and the Federal Reserve purchasing something like 60% of treasuries since the crisis, precious metals should hedge that risk and preserve purchasing power. Gold confiscation or more likely just taxing the holding of precious metals is a risk though. Some commodities should do well, but many are hard to own directly and trading futures isn't for most. I'm not as bullish on oil, gas, and coal. The move to renewable energy is real and rapidly increasing worldwide. I would be cautious of owning natural resource extraction companies that operate in localities that have a tendency to nationalize these assets. Copper should do well, but again pick your miners wisely as many operate in localities that will nationalize resources given enough national debt pressures.

I don't like rental real estate in the US currently, but that may change in a few years after weaker hands need to unload rentals. If i had to pick a market it would be in the Midwest. Traditionally, median home prices have tracked inflation for 100 years. We had the housing bubble that really was the first time things got really above rate of inflation and that didn't go well. We briefly got back to the trend line around 2012, but things inflated back up again, probably because of artificially low interest rates as set by the Fed. You can still find deals occasionally, but I'm having a hard time finding much. Look for houses you can easily add an extra bedroom and maybe an extra bathroom and you really can't do that unless you're willing to do the hard work and walk properties, and get a team in place to rehab properties. Then you have to be willing do endure all the things about being a landlord that suck.

Lastly, monetary history isn't really talked about or really taught much, but world reserve currencies never last forever and for that matter no fiat currency has either. Our dollar is back by the full faith and Credit of the US government. Who is willing to lend Uncle Sam $1000 right now for 10 years at 0.60% interest? I'm not. There is a non-zero risk that we will have a currency collapse and for that reason I do think people should have some precious metals and other asset classes besides domestic dollars and companies. Some argue bitcoin too, but that's a whole other debate. I think bitcoin is likely to fill the role gold once did and get confiscated/made illegal. I do think physical cash will largely if not outright disappear over the next 20 years, if not sooner. Many countries have already removed large denominations from circulation. The largest bill in China is worth about $15. The Euro removed their 500 denominated note from circulation. Fully digital, government mandated, currencies are coming.
 
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nocsious3

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Aug 23, 2013
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My advice would be to find a single or a duplex level deal to start with if you plan to do much of the work yourself. An 8 could be a large chunk to bite off right away, if you are fully employed.

I just did an inspection for a house that is going into a rental. It is in a smaller town, mechanical devices are solid, roof and siding is in above average condition and only needs a little interior work. You can get these things for 30k-40k in towns of 2,000-4,000 people and rents are 450-500 area and typically don't have a whole lot of down time. To start, situation like that may be of interest and get you in without much out of your pocket.
This^
I think Midwest towns about 45 minutes from the larger cities are about the only thing with some regular value right now. It's close enough to town that people are increasingly willing to look that far out and cost of living is pretty low. I'm talking outside cities like KC, Omaha, Des Moines, etc. These homes are typically pretty old so finding them in decent shape is the hard part, but you'll find 2-3 bedroom houses with up to 1500sq ft selling under well under 100k with decent regularity. Finding a management company is another issue though, assuming you're not going to do it yourself.