Posted by DavidV on October 23, 2003 at 23:21:20:
Hi there JT. 15% is probably high. I remember when i used to live in Orlando several years ago they had a news piece on past lottery winners. I don’t remember the exact numbers, but they looked at around 20 winners after a 2 or 3 year period and i think only one of them was still signifficantly better off. Most blew it all in about a year or so.
Question: If a $1 million windfall … - Posted by Robert Campbell
Posted by Robert Campbell on October 22, 2003 at 10:58:06:
Assume a great aunt passed away and left you a million dollars.
There was only one condition that Aunt Sadie put on your inheritance: you had to invest the money for 10 years before you could spend any of the principal (or the returns on principal) for personal items.
In other words, no cars, boats, big-screen TV, or vacations with your mistress.
Question: How would you invest that money?
Real estate, stocks, bonds, gold, tax liens, or … ?
For purposes of this discussion, an owner-occupied home is not considered an investment.
Robert Campbell
Legacy - Posted by Hank FL
Posted by Hank FL on October 24, 2003 at 10:48:06:
If one receives money that came from a family member, than there perhaps should be a conservative view as to how one treats that $.
Some capital is passed on generation to generation and the current “owner” is merely a caretaker.
But if one wins the lottery or Aunt Sodie took me aside before she died and told me to not be a wimp, then I’d start a company. I have a couple million $ ideas that would actually take some capital to get them off the ground. Not like this SFH REI stuff.
If I were to be more of a caretaker of the money instead of a risk taker, I’d break down the $ on a % basis the following way:
30% - Hard money lending anywhere in the U.S. that I’d be comfortable with.
35% stocks & bonds (no “pink sheet” stuff & no “junk”)
15% commodities: ala Jim Rogers
10% cash
10% Real Estate: including, but not limited to, a controversial TV/Radio campaign that would get much attention & deals.
Re: Question: If a $1 million windfall … - Posted by JT-IN
Posted by JT-IN on October 23, 2003 at 11:42:02:
Investing a Windfall?
Applying one of the first and foremost principles of investing? Preservation of Capital. I would do the following:
Invest $ 500K of the funds into a US Treasury instrument (Zero Coupon or 10 yr Treas.; tax planning not taken into account here). Purpose being that if the other $ 500K goes bad, you would still have nearly $ 800K in principle at the end of 10 yrs, upon maturity of the Bond.
Invest $ 100K into Vanguard 500 Index Fund, which mirrors the Standard & Poors 500 performance. Last 12 month return 18%+
Invest 400K in real estate, in the following manner:
In 10 years, with an extremely low risk approach, there should conservatively be 2.5 mil.
Now if it wasn’t a gift from Aunt Sadie, I would employ a much more agressive philosophy and investment style. I would be betting ont eh fact that her twin sister, Aunt Sarah, after seeing how fiscally responsible I have been, would drop another 1 mil on me, upon her dreadful departure…
Good exercise Robert?
JT-IN
Re: Question: If a $1 million windfall … - Posted by John V, FL
Posted by John V, FL on October 23, 2003 at 10:41:15:
One third swing trading the stock market with average hold from a couple of days to several months. One third undervalued REITS at bottom of the trading range that pay over 10% dividend. One third day trading significant gap downs at the open for quick profits by 10 am east coast time. Sometime within that 10 year period reallocate up to 50-75% to larger commercial and multifamily deals after the real estate bubble pops and I can buy properties dirt cheap like the first half of the 1990’s.
Reallocate my other funds now earmarked to invest. Instead use it for cars, boats, big-screen TV, or vacations with the mistress…lol
Re: Question: If a $1 million windfall … - Posted by ken in sc
Posted by ken in sc on October 23, 2003 at 08:07:18:
I would continue to do what I do now which is invest in houses, some for rehab, and some as leveraged rentals. It has worked so far. Anything else would require taking someone elses advise or giving them my money to invest. None of that for me! Later, given my new found wealth and knowing in 10 years that I can take profit, I might study other alternatives.
Ken
Re: Question: If a $1 million windfall … - Posted by Castro
Posted by Castro on October 22, 2003 at 23:42:55:
Study(NNN)grocery anchored shopping centers bought through the 1031 exchange. Call your attorney & get the name of an expert CCIM. If it’s a real windfall, study it thoroughly before you execute.
Success Always
Re: Question: If a $1 million windfall … - Posted by Jim (MD)
Posted by Jim (MD) on October 22, 2003 at 14:57:11:
I would stick with what I know and therefore invest in the following: stocks (which include REITS and other closed end finds), corporate bonds, tax free government bonds, mutual funds of all types, CDs, real estate, mortgages, and tax sale liens and certificates. All of these would be a buy and hold strategy.
If I needed a different job, I would buy a business. I consider real estate rehabs, real estate development, flipping, and other short term strategies to be a business, just as the IRS does. Of course they would all be possibilities, that is if I wanted to enter a business.
I would not invest in taxable government bonds, zero coupon bonds (where one is taxed each year on interest not received until the bond is sold or redemmed), annuities (not good for high income or high net worth people), or options and commodities (not my cup of tea). The asset allocation would vary depending on market conditions and opportunities I am able to find. If I did this for ten years, I would never, ever have to touch the principal, even if I got a new mistress. lol
If one is not familiar with their investments I suggest they seek outside counsel such as an attorney or family member experienced in such matters. If one wishes to dabble in stocks and or mutual funds, I recommend a stockbroker for assets allocated to that segment, not merely a financial planner.
Re: Question: If a $1 million windfall … - Posted by Anne_ND
Posted by Anne_ND on October 22, 2003 at 12:56:56:
I’d use a small portion (less than $50K) of the money as a down payment on a mobile home park, with another $30K set aside for repairs/maintenance
I’d use $87K to finish a rehab project that is going to cash flow extremely well
I’d use $200K to buy 10 properties in need to rehab and another $200K to finish them and rent them out
I’d use $50K to buy a commercial property for a small business I’ve started (not related to real estate) and $30K for the business
I’d use $100K for Lonnie deals
I’d use $100K to pay cash for a discounted price on a 12-plex
the remaining $153K I’d use for venture capital investments
this was a good mental exercise, thanks!
Anne
Forget… - Posted by David Krulac
Posted by David Krulac on October 22, 2003 at 12:33:58:
stocks, gold and most bonds.
The only bonds that I’d consider would be triple tax free municipals paying about 5-6% currently but no Federal, state or local tax is due if purchsed in state.
But tax free bonds would only be the choice if I didn’t want to have to do anything.
For me Real Estate is the only choice mostly single family houses, mostly rentals, some flipping, foreclosures, tax sales, and land developement. In other words everything that I’m doing now, no change to the process, just more of the same.
David Krulac
Central Pennsylvania
Re: Question: If a $1 million windfall … - Posted by Kristine-CA
Posted by Kristine-CA on October 22, 2003 at 11:40:53:
I’d continue to do what I do now (buying and re-selling) but I’d have the added benefit of having enough cash to rehab or hold for a while if I needed to. Would come in especially handy for commercial props which I would like to hold to get the best price (instead of flip as I currently do). Some of the cash I’d put into a 10+ unit that would run positive (because I’d gotten such a great deal). I’d also buy tax lien certs in other states.
I don’t think I’d have all the capital working at full speed. Some of it would need to sit in something relatively stable and produce interest…but what would that be? Maybe I would have all the capital working all of the time…
The one good thing about working without any cash these past two years is that I always have to look at a deal from the perspective of how much is it worth today–since I need to sell it to fund my purchase. I wonder if I wouldn’t get a little confused if I had cash to buy outright–if I wouldn’t play little appreciation and added value games in my head. Gambling, that is. Right now, I don’t gamble because I need the deals to close for income.
Well, I’m ready for the lesson now. Feel free to set up my trust account at Santa Barbara Bank & Trust.
Sincerely, Kristine
Re: Question: If a $1 million windfall … - Posted by CL2
Posted by CL2 on October 22, 2003 at 11:20:25:
A well balanced portfolio in real estate and stocks may be a good idea.
Re: Question: If a $1 million windfall … - Posted by jasonrei
Posted by jasonrei on October 22, 2003 at 11:15:04:
If it could be an active investment I’d do what I do now- rehabs and buy small multis to keep here and there.
If it had to be somewhat passive, I’d buy RE notes.
I’d also consider making hard money loans.
Some good choices, especially … - Posted by Robert Campbell
Posted by Robert Campbell on October 23, 2003 at 13:57:55:
Hi JT-IN
I especially liked your decision to put 50% into bonds (zero’s) that mature in 10 years … and I like your reason for doing that even better: preservation of capital.
I’m like you … when you get rich (especially from a windfall), don’t do something stupid where you could possibly get poor.
Smart choice.
Robert Campbell
Wow! - Posted by Robert Campbell
Posted by Robert Campbell on October 23, 2003 at 14:03:58:
What should I expect any different kind of asset allocation from someone with your investment trading skills?
If your present rate of return continues for 10 years - and I wouldn’t bet against it - you, my dear friend, are going to be the subject of my next book.
Keep it up, John V, for the next 10 years (and even longer!) and I give you 15% royalty for the exclusive rights to your story. Then maybe you can take two vacations each year with your mistress. (g)
Best wishes,
Robert Campbell
Re: Question: If a $1 million windfall … - Posted by Kristine-CA
Posted by Kristine-CA on October 23, 2003 at 12:51:20:
Ken in SC: I think you have a good point here. Investing in what you know or what you are willing to learn is key. Even real estate is not a good investment for people who lay down the cash and refuse to learn about it. Or don’t even take the time to set some goals and make a cursory business plan. I certainly see a lot of that where I am.
Maybe I’m just dreaming but if I’ve been able to repeatedly create cash from deals with very little cash of my own, wouldn’t I be able to turn 1M into several times that much in ten years. It seems that having cash would get me into better deals and give me more time. Time to hold or improve properties–something that I don’t often have with the way I currently do deals. And that the profits would improve greatly.
Well, I like dreaming. Hope all is well with you and yours in SC. Sincerely, Kristine
Interesting, and boy oh boy do you love … - Posted by Robert Campbell
Posted by Robert Campbell on October 23, 2003 at 14:12:07:
real estate.
Anne, I’m curious why didn’t you take some of the money - let’s say $500,000 or so - and put it in a savings account or 5-year Notes?
Now you would have your downside covered if real estate should blow up. Stranger things have happened you know … just look at Japan for the past 10 years.
Robert Campbell
Re: Question: If a $1 million windfall … - Posted by RichV(FL)
Posted by RichV(FL) on October 22, 2003 at 15:16:41:
Anne,
I liked your idea of a free and clear 12 plex at a discounted price (of course).
I think i would pick up a few free and clear properties myself. With that kind of cash you can be creative with the rest.
I might do some hard money lending also. Hmmm…something to think about…
Great Success,
RichV(FL)
Re: Question: If a $1 million windfall … - Posted by Robert Campbell
Posted by Robert Campbell on October 22, 2003 at 11:33:20:
What percentage of the $1 million would you allocate each asset class you mentioned?
Explain your reason(s) for your allocations.
Yes you can actively manage the money NT - Posted by Robert Campbell
Posted by Robert Campbell on October 22, 2003 at 11:28:40:
NT