If you had $100,000 in free cash flow every year how would you invest?

[Tictac]

That's all any any assh0le with money ever wants to hear.

What I will hear if you want to manage my financial investments is that you prove you beat the Vanguard S&P 500 Index Fund, including expenses (i.e. your cut) over a ten year period. No "Yes'm Boss Man" involved.

For if you can't, you don't get to waste my time or my money.

 

[guru1000]

BB, it's your claim, nor ours. Whether or not your trades are small and liquid (and illiquid and thus not attainable by institutional trading) doesn't change the fact that you professed 100k to a mil in 3-5 years. The onus is on you. I find it incredibly hard to think that in the past 10-15 years, you could not get your hands on $5,000 and trade yourself into a mil.

Just admit you went a bit overboard, and we will leave it there.

 

[guru1000]

The math:

$100,000 x .03=

$3000 per day; $21,000.00 per week; $1,000,092.00 per year

If you're making gains like the above, I suggest reaching out to the large wirehouses. They'll front you the money you need to advertise your formula.

You must be making a fortune.

There are less than 260 trading days a year (with holidays), but, nonetheless, remember the 3% daily returns are compounding, so if at month 8, his portfolio reached 400,000, his daily 3% return would be $12,000!

Of course his percentage returns will diminish as his portfolio grows due to illiquidity of the market, and there will be days where he loses. I don't discount that BB may have had some success back in his trading days, but here he went a little overboard.

 

[Bible_Belt]

I find it incredibly hard to think that in the past 10-15 years, you could not get your hands on $5,000 and trade yourself into a mil.

Just admit you went a bit overboard, and we will leave it there.

While I'm making claims that no one understands, let me add one more that you definitely won't understand: I really don't give a sh!t about money. If I did, I'd take the bar exam and be an ambulance-chasing low life lawyer scum bag. I've had money before, enough to know that it doesn't make me happy. Beyond basic needs, I have little use for it. The idea of slaving my life away to make small numbers on paper turn into large numbers on paper is my own idea of hell.

Trading was never about money to me. It was a fun, challenging, competitive game I played every day with a bunch of my friends. I always thought of it as an art, and not a science. It's not that different from at least the mental component of martial arts. It was the only job that never bored me. Every day is different when you follow a market.

 

[guru1000]

Inspiring example guru! I'm actually providing business advise to a client looking to raise around $50,000 in VC funding. Perhaps I should think about investing or have some of my compensation paid I'm shares. I'll be doing the business plan and financial projections so will have a good understanding of the company. What kind of metrics do you use to determine a "good" investment.

Don’t create such rigid rules within your business stratagem that you miss opportunities disguised as distressed dogs.

I try not to fall into the trap of metrics, although I'm guilty of this as well, as many opportunities that I have capitalized on were disguised as ostensible dogs. Most of the companies I contract with are conditional contracts based on a certain hardship (sales tax in my example above) being overcome or a specific quota for marketing/advertising performance being met (as per my recommendation in how to augment revenue) before I invest.

If you look at the example I cited, IF I could not settle the tax debt successfully, the deal would be null and void. My risk was minimal. I may have to navigate through 50 or so companies before I find one where I can potentially find/create a condition where there is an encumbrance that could be mitigated/eliminated--and I use this encumbrance to negotiate cheaply. The key in my example: I was equipped to think of the potentiality based on my comprehensive understanding of the financial and legal aspects surrounding the matter. Herein is why due diligence of both the financial and legal aspects are required.

I network often and have a rolodex of 50 or so investors with liquidity ranges between 250k-5 mil. I ask the investors what type of investments they seek, and if an offer presents itself which meets their criteria and that I am not personally interested in, I present the offer to the investor(s), and take a consulting fee/stock from the company.

Caution for outsourcing investments: In America, there are 4(a)(2) and 504/506 private placement registration exemptions which require stringent disclosure requirements to be met with investors with whom you have a pre-existing relationship. Violation of these laws in some cases could become criminal, so I advise if you elect to take this investor route with some of your deals, that you have a comprehensive understanding of the federal and local laws governing these types of investments. Seek competent legal counsel and try to get him/her on board in stock or paid by proceeds of the funding distributions.

As to the deal you are currently working on, feel free to post it in this thread, keeping anonymity of name and numbers (just keep the percentages identical), and I can give you some input.

 

[guru1000]

BB, if I remember correctly, weren't you encumbered by an educational loan that you couldn't pay that prevented you from getting licensed as an attorney. Now, you don't need money? LOL.

I like you BB, but come on ...

 

[BeTheChange]

My thoughts:

Rule of 100: 100 minus age=percentage invested in red money;
Real estate= high risk. Potential for big gains and big losses; 0%liquidity.

If it were me:
$100,000:
30% in 401(k) (I'm 45 and very conservative)
6 months' salary in checking account
Remainder in fixed indexed annuity with inflation rider

I refuse to gamble (i.e. invest) in real estate

I don't mind the loss of liquidity at the moment but I see your point.

 

[synergy1]

I don't mind the loss of liquidity at the moment but I see your point.

Well I'll go you one better (just something to think about, and I mean this respectfully):

If you need money ASAP, lose your job, are involved in a car accident, etc., you WILL mind not having access to your money.

Also, if your tenants lose their job....

If your tenants damage the place...steal...etc.

You get my point...just saying that in my opinion, real estate is riskier than the stock market. At least I can move stocks and bonds to a safe place.

You are 26, though...you at least have lots of time on your side to recover...

Everyone I work with think that real estate is their golden ticket and speak endlessly about how their houses are virtually assured to go up in value. What they leave out of the equation are closing costs, repairs, interest, and other factors. Ironically enough all of them have sold nearly break even, and in some cases, at a significant loss.

What I tell everyone is that all forms of equity carry with them a unique set of risks. A house as an investment is no less risky than stock market shares ( albiet around here far less volatile). If you are willing to put in the time and effort to get good at R/E, go for it. People ask me why I am "wasting" money renting and tell them that my time is better spent investing either in index funds and equity. Its what I put my time into.

 

[Bible_Belt]

BB, if I remember correctly, weren't you encumbered by an educational loan that you couldn't pay that prevented you from getting licensed as an attorney. Now, you don't need money? LOL.

I like you BB, but come on ...

I wouldn't pay back that money even if I did have it. The government can fvck off as far as I am concerned. The bar association, speaking of people who can fvck off, only requires that I make six months of payments before I am considered ethical enough to be lawyer scum, so it's not like it's impossible.

 

[Tictac]

While I'm making claims that no one understands

It's not us. What you're saying doesn't make any sense. It explains why you busted out quite handily.

That's all any any assh0le with money ever wants to hear.

With 'customer appreciation' values like these, best you stay in the back office, even if you start your own company.

 

[guru1000]

I wouldn't pay back that money even if I did have it. The government can fvck off as far as I am concerned. The bar association, speaking of people who can fvck off, only requires that I make six months of payments before I am considered ethical enough to be lawyer scum, so it's not like it's impossible.

BB, then why did you attend law school? Further, why do you sound resentful/angry? Austerity is not so enlightening, huh

 

[EyeBRollin]

Everyone I work with think that real estate is their golden ticket and speak endlessly about how their houses are virtually assured to go up in value. What they leave out of the equation are closing costs, repairs, interest, and other factors. Ironically enough all of them have sold nearly break even, and in some cases, at a significant loss.

What I tell everyone is that all forms of equity carry with them a unique set of risks. A house as an investment is no less risky than stock market shares ( albiet around here far less volatile). If you are willing to put in the time and effort to get good at R/E, go for it. People ask me why I am "wasting" money renting and tell them that my time is better spent investing either in index funds and equity. Its what I put my time into.

Real estate is more lucrative than the stock market, save the rare instances you hit the jackpot with the right small-cap stock (i.e. buying Tesla a couple years ago).

Example:

$100,000

Stocks - $100,000 ----> $108,000, given the hypothetical return of 8%
+$8,000

Real Estate - $100,000 ----> $500,000 property, ----> $515,000, assuming hypothetical return of 3%
+$15,000

Furthermore, I can dump that $100,000 into income producing real estate that pays me a hell of a lot more monthly cash flow than dividends, and can be reinvested into owning more of that $500,000 asset.

Real estate also has tangible value in that you can live in it. You always need a primary residence. That expense is doesn't go away.

 

[EyeBRollin]

What I will hear if you want to manage my financial investments is that you prove you beat the Vanguard S&P 500 Index Fund, including expenses (i.e. your cut) over a ten year period. No "Yes'm Boss Man" involved.

For if you can't, you don't get to waste my time or my money.

Agreed 100%.

 

[Bible_Belt]

BB, then why did you attend law school? Further, why do you sound resentful/angry? Austerity is not so enlightening, huh

I studied martial arts for years. And yet I have no desire to get into fights. It's the same thing. I do enjoy kicking lawyers' asses from behind the scenes, on occasion. They are all fat, lazy, pathetic fvcks.

I paid cash for that law degree, by the way. I bought it because I was bored with my money. My defaulted loans are from undergrad.

 

[BeExcellent]

With 100K free cash flow I would do the following:

Pay down existing mortgage debt on income producing properties. 100K would satisfy 5 or 6 mortgages, rendering those properties free & clear & creating additional cash flow on the bottom line, which in turn would accelerate pay down on remaining properties.

In fact this is what I am doing.

Once debt is serviced and the portfolio fully optimized I will look at private lending vehicles as well as the occasional flip project or new development project.

What @guru1000 does is intriguing to me as well. I solve problems in creative ways and if I see an out of the box solution will tackle things that others are afraid of, and for example things along the lines of leveraged buyouts, even on a small scale fascinate me endlessly. In time I expect to cut my teeth on some small deals, and then parlay that experience into bigger deals. So I'm all ears for that sort of thing.

 

[BeTheChange]

Well I'll go you one better (just something to think about, and I mean this respectfully):

If you need money ASAP, lose your job, are involved in a car accident, etc., you WILL mind not having access to your money.

Also, if your tenants lose their job....

If your tenants damage the place...steal...etc.

You get my point...just saying that in my opinion, real estate is riskier than the stock market. At least I can move stocks and bonds to a safe place.

You are 26, though...you at least have lots of time on your side to recover...

I agree that there are always unforseen risks, which is why it's important to have an emergency fund. Outside of my real estate investments I have around 6 months worth of "disaster scenario" cash.

 

[synergy1]

Real estate is more lucrative than the stock market, save the rare instances you hit the jackpot with the right small-cap stock (i.e. buying Tesla a couple years ago).

Example:

$100,000

Stocks - $100,000 ----> $108,000, given the hypothetical return of 8%
+$8,000

Real Estate - $100,000 ----> $500,000 property, ----> $515,000, assuming hypothetical return of 3%
+$15,000

Furthermore, I can dump that $100,000 into income producing real estate that pays me a hell of a lot more monthly cash flow than dividends, and can be reinvested into owning more of that $500,000 asset.

Real estate also has tangible value in that you can live in it. You always need a primary residence. That expense is doesn't go away.

You aren't comparing apples to oranges. You are simply highlighting the advantages of leverage in a case where the underlying equity goes up. One can do the same in the equity markets, futures markets, and others. In addition, you forgot to mention that the downsides captured using leverage are, obviously, significantly larger.

Let me ask you this question, why does a stock not have tangible value? Does it not also produce something - namely earnings? Much as real estate has intrinsic value from the location, land etc, companies also have intrinsic value such as staying power, earnings, IP etc. As a stock owner, I am a part owner of a business. Sure, I don't have the same seniority in certain cases such as a re-org, but typically a bank has a lien on a house in the certain events as well including default.

By in large, the stock market as an aggregate has superior returns than the housing market on a compounded basis. Both carry risk, both carry with them the requisite research to value equity by whatever standards one deems appropriate. I know people who have lost and made money in housing, and i know people who have lost and made money in stocks. The question isn't weather the housing market is wrong or the stock market is right - its more appropriate to say that Real estate is right for some, and the stock market is right for others. But its silly to make grandiose claims that one is better than the other by using contrived examples like the one above..

edit: My first post implicitly seemed to condone real estate. That was not my intention. If someone likes doing business in this space, it can be great. One of my former co workers started purchasing properties years ago and have since retired with quite a lucrative business from his 100+ properties. I talked to his brother, and it was just as much work as starting a business, and required a lot of time to have significant cash flow ( roughly 5-10 years). The key was time. He put in the time. Anything worth while requires this element.

 

[yuppaz]

You all ever / known anyone who strictly traded covered calls in a bull market? I've known guys who have done very well trading like this. Every once in a while their stock will **** the bed but since they own the shares it's not so scary. How is that for a consistent strategy for returns?

 

[Bible_Belt]

My issue with the covered call crowd is that they are trying to avoid having to learn valuation and pricing models for options. I don't blame them for not wanting to have to do so - you gotta be Rainman to understand that sh!t. Black Scholes is like a kindergarten primer, and almost no one really understands it. I don't want to learn it, either, but that's why I would never trade options. I always try to encourage people to not get into options until you are already making money in stocks. It's like trying to ride a motorcycle before you can ride a bicycle.

 

[yuppaz]

I hear that you need to understand exactly how options are priced etc. I used to trade directional options (did really well during 2008 crash long puts on all bankers, home builders, country fried etc.) Though and it wasn'the a serious issue. I just new the direction in my estimation and bought leaps. But when there is a bull market and you are a directional bearish options trader you can get your ass handed to you. It seems like I should have another strategy for this perma bull like market that our government protects no matter what and doesn't let correct. I was thinking to just sell a couple dollar out of the money puts what a stock hits some support on technicals. Plan to always have enough stock to cover if I get drilled and the stock drops sharply. Anyone trade like this, any advise?