Real estate may be great but I’m talking about putting some money aside each month on top of my 401k(w/ company match). I can’t buy real estate with $100 a month. Pretty much, how do you get into real estate?
It is unlikely that you will be able to get lucky and invest in the next microsoft or Intel so don’t even try. Instead the best way to beat the average investor is to buy indexed funds such as that of the S&P 500 and keep your expnces at a minimum. If you buy and sell stocks on a regular basis it is more liekly that you will simply increase your trading expences rather than increasing the return on your investment. Vanguard for example has an S&P index fund with an expense ratio below a half of a percent which really adds up over thirty years. The key is to max out your IRA contributions and minimize your expnces i.e. pay off your house as soon as possible hire don’t buy a new car every five years etc. Save as much as possible and invest it in a a diverse portfolio and you’ll do better in the end than if you spen all your time trying to beat the market.
I can’e beleive how many people are still buying into the “max out your 401(k)”, “Max out your IRA”, and “buy and hold” theories. While there is some validity to these concepts, they are mostly just salespitches. Remember, anyone who makes money from your investment will have an agenda. Stockbrokers are salesmen. Bottom line. Many tell you to “buy and hold for the long term” because they get paid by the number of dollars in their “book”. (Not all get paid per transaction). The real money in the market is in trading, not investing for the “long term”. But, you must educate yourself and work at it dilligently. Most people who saying trading frequently is “risky” simply don’t know how to trade and are unwilling to learn. People are duped into thinking that the market “always goes up in the long run” by figures taken out of context. Your broker will recite the last numbers he saw on MSNBC about how the Dow is up 400,000% since 1943. While the market may be up since then, this is a very misleading statement. The reason being that the stocks that make up the Dow are not the same stocks as when the index was started. (Only one is the same, and they originally started with twenty stocks, now there are thirty). When a stock on these indexes starts to tank they will remove and put in a new stock that is newer and bigger at the time. So ask yourself, how can I use these indexes to gauge the market? (They are useful in gauging the market from one year to another, but not decade to decade). 19 of the original 20 on the Dow are no longer in existence. Think about that. Real estate is the huge overlooked factor in investing success. Although it’s not as easy as some would suggest. Bottom line is don’t just leave your money with someone, close your eyes, and expect a very good result. By the way, for all the “buy and hold” proponents who will begin to spout out their numbers and wisdom I say this: keep taking your 10-15% per year, while the traders take 10-15% per month. Your broker won’t tell you this because 1)they usually don’t know how (remember they’re salesmen, not traders) and 2)because you wouldn’t need them if you learn to trade. I know this isn’t the easy, pretty, or nicely wrapped answer that most people want. It’s just the truth.
Do you own the place you are in? Do you have roommates? You should at least own the place you live in. If you don’t, buy a place with a buddy that is half way competent at fixing bathrooms or kitchens or has a knack for landscaping, then share the equity. Maybe your credit is good enough and your buddy has the down payment. Just save that 100 a month and look for extra ways to stash so that the very moment you are ready to stop renting you buy a place. Renting is the single easiest way to make sure you are never wealthy. It would be better to save that hundred for the next five years and buy a tiny little place than to max out the 401k. Remember your entire piece of property goes up in value not just what you put down on it. And it is not uncommon to double the value of the property in just a few years. Double 100,000 g’s and you only put down 6,000. Someone had eluded to reading Rich Dad Poor Dad, that would be a good idea. Also read the millionaire next door. Both of these books explain that most millionaires in this country did it by owning property and K.I.S.S. The fact is that real estate goes up no matter what over time and most people never do it because they don’t have the balls. But that is really just a matter of understanding what happens. Research REAL ESTATE my friend.
I don’t post much on the OT forum, but this one got me. D_END has it right. Period. Where else can you use other people’s money to pay for YOUR equity and YOUR investment? Where else, 30 years from now, can you have both income AND appreciating equity? If you haven’t currently read 10 real estate books, start there. Think about this:
Buy 1 house per year for 30 years. At the end of 30 years, assuming a 30 year note, you will be receiving monthly income probably equal to at LEAST twice the original amount of the note (due to rising rates of rent and expected cost of living) from your FIRST house. Each year after that, you will receive FREE and CLEAR another house income. Assuming a current $1000 rent rate, count on at least $2000 30 years from now. So, after 35 years, you have 5 houses free and clear, and you are making $10K+ per month. Heck, by that time you could start paying off a house almost each month! At the end of 40 years from now, I’ll bet you would own 20-25 out of the 30 and have less than 3 years left to pay off the last one you bought only 10 years before. You’d be making over $60K per MONTH and OWN 30 houses, the first few of which would probably have almost TRIPLED in value. I’m almost 30 now and kicking myself for not starting when I was 20.
If I could give financial advice to a kid going to college it would be this: Buy a duplex, no matter what the cost. Rent out the other rooms on YOUR side and rent out the other side. I promise you’ll be living for free (actually, you’ll be making money), and you’ll be building equity. Because you will be living in one side, you can literally get into a duplex for 3% down, which you can borrow from your parents. Why parents don’t do this for their children when they head to college is completely beyond me. Each month, save the money you are making and put it into a fund to buy the next one. At the end of your college career, hire a management company to handle it if you move. All you do is collect the check.
Then, start buying 1 per year… Once you own about 5, you’ll get to the point where you don’t even have to put your own money down. Banks will just throw money at you when you bring them your next deal.
Go to the bookstore and start reading…
I agree with D_MAN. I purchased a condo through HUD four years ago. I put 5K down and the sale price was 80K. It is now appraised at 150K. I would love to buy another property but am going through divorce and that has set back my plans. Fuckin bitch!! I still have the house and kids but now she is in an apartment.
Real estate values may go up, but of course, it’s all about location. I live in the city, and city properties are affordable but go up in value very slowly. Suburbs are very different though.
As for the renting theory, you may be making $1200 a year in your example, but that gets wiped the first time you need roof repairs or the furnace goes. Renting can be good cash flow, but it can be a major pain in the ass.
There is no way to argue this topic. Michelle. Most smart multiple property owners rent out their properties at just below the mortgage price so they can right off anything else. Also roof repairs of landscaping or whatever are all tax deductable. As for the city. One and two bedroom condos appreciate the fastest in big cities and it is not that hard to find a new building for your first purchase to minimize your up keep expenses. But let’s just say you have a place and some frat boys are renting the place and they do all kinds of evil things to the place. BUT, they lived there for four years. The property has gone up and they have paid down your mortage. If it went up 20 g and you need 5 g to fix it and you have a 1 g deposit from them. Explain to me how you lose. Over four years they will have paid quite a bit of you place off. You could always sell and put that in your pocket. But that is what pussies do. You gotta hold on to that property. The only reason to ever sell anything is only to roll it into another TAX defferred, more expensive property. But even that is not necessary because banks will be throwing money at you by then.
Hey, michelle! =)
What you said is absolutely true. Yet, I would gladly pay $1000 out of my pocket every single year for $10,000 worth of equity. The greatest thing is that it is an extremely small percentage of properties that this will happen to. Most of the time, the insurance company is going to pay for whatever happened, anyway! =)
So, D_end, how often have you followed your own advice and how much are you making???
I was hit in the head by a giant Anvil while walking my dog a year ago and watched my buddy make 80 grand on a 100,000 dollar place last year now he has three. And they have inched up a little more in the last few months. I just lost my renter status a few months ago and stress about my mortage now instead of rent. But it doesn’t hurt when I write the check anymore, it feels good. I don’t know if I will be lucky enough to get a good enough surge to buy another place soon but mean while I will just pay this one down.