It's what I do. Those kind of investments are out there, literally everywhere you care to look. The catch is the cost of entry, or perhaps I should say the size of the entry. There is no realistic opportunity to invest $10,000 in a passive, safe instrument and receive a 7% or better yield, but if you have a million $ or more, that kind of investment is quite commonplace. It's usually, but not always real estate related, it's long term in nature and generally not liquid in the first five years, but it is common. I have been doing it for twenty five years as a passive investor, as a lead investor, as a syndicator, as a fund manager. If you have a long term view and the equity in hand, you literally will never lose your investment and it will grow at an increasing rate over the years. In times like these where bank liquidity is non existent, cash is really King and the ability to multiply your cash is so much greater in times of financial uncertainty.
Dang, this is the most interesting and useful thing I've ever seen. (Now I can prove to my wife I'm not blindly wasting my time four hours every night)/ Can you give use more detail or at least a hint on where to look (e.g. google)?
Commercial real estate - assets that generate rental income from tenants - is the most common source of this kind of passive income. Properties are generally evaluated and graded according to their credit risk (the ability of the tenants to keep on paying rent). The properties with the least risky tenants will generate the lowest yield, but the bulk of commercial real estate has tenants that are mostly creditworthy but have signed shorter leases, or are not national publicly traded companies. The credit market penalizes them on a relative basis but the income in most cases is quite secure. This is the segment where, on a cash basis, 7% current yield are absolutely the norm. In an unleveraged situation (all cash, no debt) the cash invested will earn a return of around 7%. In year two however, based on inflation adjusted rent increases the yield will grow. Over a five year period the rent income can grow at least 15% or more depending on the CPI. If you are creditworthy enough to obtain some financing on fixed rate terms and at a lower cost than the initial yield, the return to the capital invested will be even greater. These kinds of investments are generally large value transactions - several millions to hundreds of millions - and they are bought by entities who raise the equity from qualified investors with large liquidity. These are not public instruments generally, but you can achieve a similar effect by investing in publicly traded REITS (Real Estate Investment Trusts). They pay a dividend generally and their share price will fluctuate based on the quality of their assets and earnings. The best investments are closely held with a limited number of players and trust in the general partner to buy the right stuff. These investments are truly passive. The investors generally have absolutely zero involvement or say in the management of the entity they have invested in. It is not for the faint of heart or the illiquid and you definitely have to have a long term view.
I would gladly pay you 7% but currently we have no more room for new investors. Well it's not really no room for investors we have just run out of RE to buy. We are currently testing the waters in a new market with our own money. If that area pans out I will send you a pm. You can see my posts on NSX Prime about what my company does. To give you an idea our latest purchase is an 8 unit that generates 3400 a month and we paid 157.5k for it. On the no risk investment we pay 10%. High risk investments can make as much a -50% to +50%. with the high risk investments there is a negative return for the first 12-24 months rarely do we have one a -50% but they do happen. After purchasing a property we make the thing "bullet Proof" take care of all issues correctly so we don't have to go back later and keep putting band-aids on problems. Most issues we know about before purchasing the property.
If you get a 7% car loan (in order to preserve the cash ... and for a run of the mill ferrari it's not worth it; we're talking about a small amount of cash wrt it's earning potential), you need to make back 7% after tax on your investment. What safe (low risk) instrument exists that can do that? I don't see REITs or commercial real estate (cash flow, not equity growth) as being low risk enough to justify the effort. Again, we're talking about a 2-300k car that will depreciate, and will lose value faster the more you use it. Preserving $1MM to finance an asset that is appreciating (your house), for which you get a tax break that decreases the effective interest rate, is a completely different matter. Anyway, not to slight anyone, because lots of folks here are smart and well-meaning, but anyone who gets their financial advice from a car forum is a moron.
I say dive in. If you can't really swing it you'll find out quick enough. If you've bought right then it should just wind up as an experience.
If we get a recession, and you lose your income, you'll lose the car, and all the money you've invested in the car will be gone. Up in smoke. Better either buy an older Ferrari, say a decent 355, for cash, or wait until you've got the dough to get exactly what you want. These cars aren't cheap to operate, and unless you made the right parental decision and they have enough dough to front you whatever you need, if there is a major repair due, you stand to lose all of your investment. Cash is king. Art
all kidding aside what does it cost approx. per year for repairs? My Gallardo had really no issues .. other then oil change..
With all due respect to those who say you can make money easily, there are hundreds of others who have lost their shirt. You can invest with relative safety , i.e. municipal and state bonds earning around 3% tax free. Corporate bonds work for some, For example Citi bank recenlty offered a 8+ interest return. However, once you leave this relatively safe area, you are "risking money". Timing is crucial. If you have indefinite time, most real estate will appreciate in time. If you need the money, you risk bad timing. Rental income must be "managed" by you or someone. Tennant turnover and many other issues keep you busy. Becoming part of big REIT is not a gaurantee as we saw with large mortgage groups as well. Personally, buying raw land works for me. I buy it and wait for someone someone to want it more than I do, and make money. No hurry so no worry. Nothing to maintain except taxes. A recent craze are RV spaces. Increasing numbers of people don't want a condo in Aspen but the $1million plus hauler with toys. They set up semi permanent campsites and meet and party with their friends. Comerical real estate is often a good way to make money. Find a seller with a building he has had trouble leasing, but it for a price significantly below replacement value. Given your purchase price you rent below market, fill it up and sell it. Don't confuse investments with toys, i.e. Ferrari's (which are for fun not income). It is also noteworthy that there are fewer wealthy people than poor people, yet we usually only hear from those who have or are making money, and seldom from the many more who have or are not. When we make money we know everything, just ask us. Check in a bit later and you might be deafened by the silence. Best
With all due respect, I understand what you are saying but you list a number of caveats and what you are doing is not without risk. Here in Colorado, I have seen commercial real estate get crushed and I seem to remember Donald Trump was technically bankrupt for being overextended in commercial real estate when the NYC market weakened. Most anything can be expected to return 7% over a long enough term. Besides, I have a sneaking suspicion the original poster does not have $1M laying around to invest and forget about for years. I do thank you for your input however. I try to listen to everyone. Using one's head and working hard almost always leads to good success. For the record, I am watching our local market carefully and plan to make some unkind offers when it looks like the bottom or just past the bottom. Dave
Someone asked where you can make money and I gave a very generic reply regarding real estate investment. You may have noticed that I did not offer to invest on behalf of anyone, or manage their money or even to refer them to an investment. Investing, like toilet habits, is highly personal and very specific to each individual. What constitutes acceptable risk for me relative to my balance sheet may be unacceptable for you. The point that I made is that there are literally endless opportunities to earn greater than 7% per annum in relatively low risk investments if you have the cash, the desire, the patience and the risk tolerance. And Donald Trump is really bad example. The NY Times ran a story about him last year after the Forbes list was published, laying out his real net worth excluding the "goodwill" he claims for his name. Their story essentially said he was probably worth less than $250 million, not a bad number, but in present day terms less than what he inherited from his father. The reality is that anyone asking how to find a 7% yield probably is in no position to invest in that type of instrument anyway, because if he had the liquidity the investments would have most likely found him first. Regarding your local market, Those unkind offers are already being made by seasoned professionals. My Denver office is presenting several offers a week. Finding the bottom of a market is really like trying to catch a falling knife. You'd be better off investing on the merits of the investment regarding price and yield and taking a long term view rather than trying to time a purchase at the perfect point to make an extra 10%, which over reasonable long term hold periods amounts to very little additional gain. Regarding hard work - if that was a precursor to success coal miners and lettuce pickers would be the wealthiest people. A market economy prizes intelligence, boldness and willingness to act where others hesitate. Hard work, I'm afraid is just hard work. All this for a Ferrari! What a thing the Commendatore created!
.....will think watching a baseball game is more important then working... or that making it to their friends birthday party is more important then getting work for tomorrow set up. Lets face it you are right, there are tons of people who fail for every one who succeeds but the one who succeeds puts in more effort and makes more sacrifices. It just irritates me when I see people fail and they want to blame everyone around them when in fact it is their own fault for not putting in the required effort to succeed. I have seen a lot of people fail and the reason more often then not is laziness or poor priority management.
The US dollar is just fine, especially if you are buying US assets with it. It's also just fine if you are an exporter of anything as you have a price advantage against other countries. If you are US tourist traveling abroad things are pricier, but I believe that a majority of Americans have never left the USA for any reason so they don't care. The misconception that a dollar weakness relative to other currencies is a bad thing is founded in National pride more than any covert weakness. Euro economies like Germany France and Italy are being devastated by the strong Euro. Their exports are too expensive to be profitable yet they have to keep factories running to preserve jobs which is not always possible and the unemployment rates in western European countries are in double digits, leading to all sorts of social and political issues.
What about the school teacher who buys a Kia Sonota and finances it? Are you going to tell them they have no business buying a Kia Sonota because they can't afford to pay cash for it? Whether the car is an exotic or not is irrelevant. There's lots of variables that decide if you can actually afford the car. Income, debt, assets, lifestyle, etc will decide. But saying "If you can't pay cash, you can't afford it" is not true. I don't know anyone at all that paid cash for their house. Does that mean they can't afford it? Not at all. What you say may be good financial advice, but it's not true.
I'd say that it's very relevant. Transportation is a neccesarry expense for some, and as others have pointed out, a Ferrari is not an everyday driver. As such, I would group a Ferrari in with "luxury expenses". Nobody needs a Ferrari, so to stick one's neck out financially for one is not a wise move. A place to live is also a neccesity, and a house is much more likely to appreciate in value than a car. There's nothing stupid about financing a house.
When you finance a house, it's leverage. When you finance an exotic car, it's bad judgement. When you ask if you should finance an exotic car, it's a disaster in the making.
We aren't talking about the car you need as your daily driver, or your house, or putting a really nice table saw on your Sears credit card until you get a bonus at work... the issue here is do you buy that $100K+ "toy" to play with when you aren't really sure if you can afford it and/or if the cash flow wave you are riding will allow it without tapping into outside equity from a bank, etc. Ray
Hey, you may disagree with the advice given, but it is far from "stupid." It is a long way from 'stupid' in all capital letters with three exclamation marks after it. The advice of buying a luxury sports car with cash is a reasonable and logical statement. First, most interest on home loans is deductable, and as a general rule, home values increase over time. If one can deduct the interest on an appreciating asset, then, the home--over time becomes a wonderful investment. For 95% of Americans, the home is the single best investment they will make over their lifetime. Second, I understand that a lot of people stretch the envelope by deducting interest on leased vehicles, especially on sports cars, but only in the most unusual circumstances will this pass IRS scrutiny. One can get away with a Mercedes or BMW on a lease, which is run through a company. However, a Ferrari that is used as a business vehicle and on which the interest is deducted is a big indicator of an audit from the IRS. And, if you are audited, you are likely to lose on this one. When someone asks for advice, I don't load a gun with a bullet, spin the barrel and hand it to them and say, "Good luck. Maybe the gun will fire and maybe it wont."
