Let's talk about investing

[Umfriend]

Define "break even or get positive cash flow" please. I assume there is a mortgage on it? Fixed rate until maturity? You can get more in rent (after maint and service expenses) than your annuity payments? Any tax angles to such an investment? How much time would you spend on managing this.

No, I don't at least. I just have most in a savings account but, having enough at my disposal to last me a little while should the need arise, direct most of my new savings towards equity.

[xortam]

We're really at a peak right now for Real Estate. Interest rates are rising which puts pressure on buyers and the peak buying season is always just prior to summer vacation as that's the best time for families to relocate. I know of people considering selling their homes to take advantage of this peak and renting until the market cools off a bit. This can work for you if you also write off part of your residence as a business expense. I've considered investing in my retirement property (have so for decades) but I don't want to manage multiple properties and/or deal with a rental property. I've also got this moral hang-up about owning multiple properties when housing is in such demand but that's perhaps an unrealistic attitude. You can also invest your money in REITs (Real Estate Investment Trusts) and take advantage of the Real Estate boom without having actual ownership of the property. REITs have done quite well in the last five years and are positioned to do well going forward.

Treasury notes are also a good investment right now for conservative investing. They are considered a benchmark that others try to beat yet they've been outperforming most other instruments. Treasury notes are good for pension plans or for my wife's very conservative investments. I'll be moving a large chunk of her savings account into Treasuries very soon.

[Umfriend]

xortam has some good points. BTW, because of the rising interest rates, I asked about whether yours (Helevitia) was fixed until maturity (them divine 30-year fixed rate mortgages). REITs may be a good alternative BTW. Aside from diversifying risk, having all property-management dealt with it (AFAIK) immunises you from interest rate movements to a considerable extent (i.e., AFAIK, when rates go up, proprty values go down (ussually) and so would yours, right away. With REITs, the same thing happens, but it is others who suffer the first hit, so you're safe for a while). I think I remember a report from Fitch sdaying that REITs did require quite a bit of due diligence though.

Not sure about the T-Notes thing though, but that may be due to local circumstances. Over here, currently, a bank savings account offers better yields compared to short-term govvies (say, T-Bills). Given the level of interest rates, I'm still reluctant to buy longer-term government paper (like T-Notes and T-Bonds especially). It really depends on your financial situation (income, age, carreer prospects, net worth, planned retirement age, retirement-wealth-level requirements).

I do short-term bank deposits (savings account) and equity only. But over here, there is hardly anything like a REIT available. And I stay clear from commercial real-estate (again, over here).

[Helevitia]

Define "break even or get positive cash flow" please. I assume there is a mortgage on it? Fixed rate until maturity?

Meaning that my mortgage is $1600/month and I could rent this place out for approx. $1600. It will rent for more when the economy picks up a tad more. And yes, 5.375% for 30 years. It doesn't get much better than that.

You can get more in rent (after maint and service expenses) than your annuity payments?

Well, I am only 33 so my annuity payments from say my retirement fund is so far off that it doesn't even fit in the picture right now.

Any tax angles to such an investment? How much time would you spend on managing this.

Yes, there are tax advantages. There are too many to talk about in a few sentences. It just depends on if you are a passive or active property owner. Or you can become a "real estate professional". Or, you can get your real estate license and go that route. Each offers different tax advantages. BTW, every single item that you fix or repair or replace is tax deductible. The only thing that isn't is the dirt the hosue sits on. You can even write off a plane trip to go see the property that you may buy.

I would spend zero time managing the property for the first 5-7 years. I would hire a property management company at about 10% of the rent. After that I would hope to have a few more properties and become a "real estate professional" which has major tax advantages.

My goal is to hold on to the house for 20-30 years while someone else pays the mortgage (rent). Since houses go up an everage of 5-7% over the last 50 years and even higher in California, my house will be worth a small fortune by then.

Example: I bought my house in Jan/2000 for $240,000. 5 Years later it is worth $500,00! It has doubled in 5 years! That is amazing.

No, I don't at least. I just have most in a savings account but, having enough at my disposal to last me a little while should the need arise, direct most of my new savings towards equity.

Equity? In what?

[Helevitia]

We're really at a peak right now for Real Estate. Interest rates are rising which puts pressure on buyers and the peak buying season is always just prior to summer vacation as that's the best time for families to relocate. I know of people considering selling their homes to take advantage of this peak and renting until the market cools off a bit.

IMHO housing in California will not drop more than 30% when it does cool off.

You can also invest your money in REITs (Real Estate Investment Trusts) and take advantage of the Real Estate boom without having actual ownership of the property. REITs have done quite well in the last five years and are positioned to do well going forward.

This is an excellent idea and a great place to put your money. Along with what is called a "Total Stock Market Index Fund". Basically, the REIts and TSMIF rides the market, so if it goes upo, you make money, if it goes down, you lose money. And since the Stock Market averages 11%/year since it started, you are almost guaranteed to make that much without doing anything but putting your money into it.

[Helevitia]

BTW, how come it seems like nobody is jumping on these credit card schemes? I mean, at the very least, the last one I posted gives you free money! What am I missing? Also, do you buy gas? food? Prescriptions? Then why not apply for the 5% cashback card and collect your money? Please explain to me why you wouldn't do it, really! Only downsides are discpline. If you can't stop yourself from using the card, then this deal is not for you.

[xortam]

IMHO housing in California will not drop more than 30% when it does cool off. ...

It's not about housing prices going down as that's a rare occurrence. It's about ROI and expected growth rates. In other words ... you may do better with your money invested in other markets and instruments when the housing boom cools off. Money flows quite rapidly to find the highest growth curves and many like to spot those trends and get in there early.

AFA CC schemes ... I haven't spent much time considering your proposals. We always pay off our monthly CC statements so we're quite disciplined in that regard (and we have the funds to allow this). We use two cash-back CCs already for most CC purchases but there may be some other better cards available. I've got bigger fish to fry.

[Umfriend]

Equity? In what?

I meant stocks aka shares aka equity. So far only Dutch companies, mid to small cap value stock (although one turned out to be a growth stock, which was nice).

[Helevitia]

I wanted to give an update to my "stoozing"

I applied for 6 credit cards over the last few weeks and got them all.

1 card let me borrow 15,000. Another let me borrow 10,000. A third card would not let me borrow the money by writing a check to myself so I balance transferred the money ($5000) to the first card and then borrowed the money again from the first card

A 4th card I signed up for gave me $150 just to sign up and use it once. The 5th card gave me free 5000 points just for signing up of which I cashed out for a $50 Home Depot Card. And the last card gives me 5% cashback on all gas, groceries and prescription purchases. There is a $300 cap on the 5% but you can continue to collect 1% after that.

I have officially borrowed $30,000.00 between Citi and Chase. I have paid zero out of pocket money to do this. I get to borrow $25,000.00 fort 12 months and $5000.00 for 15 months. I have to pay back 2% of the outstanding balance per month which comes out to $600 and then continues to decline as the months go by. I use the borrowed money to make the monthly payments.

So after everything is said and done, I should make about $1500 over the next 12 months from doing this. The hardest part is managing the money, but Quicken helps tremendously there.

[Kurt]

transfer costs? do you have negative interest on money movement from your bank account?

[Helevitia]

transfer costs? do you have negative interest on money movement from your bank account?

Not sure I understand what "negative interest" means? There is/was no fees associated with any transfers from any accounts or credit cards.

[KvHagedorn]

If they called it something cooler than "stoozing" I might do it.

Sounds like something criminal being done by a sleazy guy smoking a cigar.

[Helevitia]

If they called it something cooler than "stoozing" I might do it.

Sounds like something criminal being done by a sleazy guy smoking a cigar.

The name "stoozing" was thought up after a guy with the online name "stooze" was credited for orginally thinking of this idea back in 2001. Whether or not he actually thought of it or did it first is debatable.

[Helevitia]

Update:

I have now applied for 12 credit cards. The last two were denied so I have to stop for a while

I have recieved approx. $400 from cashback (this is non taxable btw) and about $600 from stoozing. Interest rates have gone up to 4% from 3% when I first started this. I also go thte free $150 from one credit card and a free $50 gift card to a store of my choice on another card offer. So I'm positive about $1200 for playing their game. Not bad for 7 months. I probably spend one hour a month making sure everything runs smooth.

My credit score went from 745 to 679 and is now back up to 690. I'm hoping to clear $2000 by the time this is all over.