Alternative real estate strategy

General Real Estate Investing
21

Hi Brian. Nice to meet you also. I have been around a while. I have made a lot of money for a lot of years. I have talked to money managers for years. I don’t just sit around and make this stuff up. I ask people questions all the time. That is basically what I do for a living. I ask questions for understanding and then make since out of what I am told. I find out what does not make since and find out why. If you ask any stock broker, money manager, asset manager etc. how many people they have made rich, they will say something like this “you have to have to bring some money into the game”.

As another side note, diversification is NOT buying 3 different retail stocks. How is that diversified?

I thought we were talking about making money diversification has nothing to do with making money. What diversification does is prevent you from losing money. You see money is like a ball game. You have offence and defense. Offence is how much money you make. Defense is how do you stop from giving some back. Equity professionals only tell you about defensive techniques. You make the money (at your job) and bring it to them and they stop you from losing it (funny thing is that they won’t even guarantee that you won’t loose the money) all they will do is asset allocate for you based on your risk tolerance. They call that diversification. They will tell you they have no idea what goes up (offence) and if they try to sell you a product (stock, mutual fund etc.) that is not on “the board” (recommended by their research department) they will get themselves fired. These products are selected to make the brokerage company money…not the investor.

If you are a stock broker or money manager I would like to ask you or anybody you have access to in the whole building. How many people have they made rich. I mean that the client brought in some money and you made them rich. Not dollar cost averaging (that is money the client brought) I mean money made from the investments.

22

Seriously, if you KNOW that a stock is going to go up, and you don’t have that much money in your account, why aren’t you buying options? You want to make some outsized gains? Options are the best way to go.

geez… if guys can’t make money trading stocks, options ARE NOT the way to go. 70% (and i might be low) expire worthless. Naked options are not a way for new investors to make money. Options do have their place, however, when protecting gains and trying to gain income on a position. Investing in options over a long period of time is a losing proposition.

23

I agree about brokers and brokerage houses pushing their own products, which is for their own benefit and not yours. The way that brokerages houses work are inherently against the benefit of individual investors. However, that does not mean NOBODY can get wealthy without capital in equities. I have. I started with almost no money. I know a lot of people that have also. Was it easy? No, but its done all the time.

Having said that, take what I say with a little grain of salt… I’m sitting here on this site for 6 hours a day and reading every REI book in sight! :biggrin

24

You never know that a stock is going up. You know that a sector is going up but all stocks from a sector are winners so you end of deversified in that sector. ( I will tell you that when a stock comes out of bankruptcy it is alwys up 10% to 15% just like Delta will be Thursday).

You ask why I don’t own Goldman etc. Because the price of stocks have nothing to do with anything you can figure out. If there is a reason for a stock to go up, the market is so efficient it gets taken into the price before you or I can buy it. The price comes down based on emotion which is something nobody can predict.

25

Bluemoon,

I’ll give you a little advice. I’ve been investing in real estate for about 22 years. I’ve made great money going it. But… there are times when investing in real estate is not a good idea. I have friends who told me I was NUTS not buying pre-construction condos with them in Florida. When people are CAMPING OUT at realtors sales offices at a site that hasn’t had a shovel put in the ground, just for the first 1000 units something is WRONG. I can tell you right now, EVERYONE of them NOW thinks the real estate market is rigged. Just like you think stocks are rigged.

You haven’t found a way to consistantly make money so you think it’s impossible. Here’s a tip. Know when NOT to buy stocks. Huh???
Google search David Dreman… He’s what’s called a contrarian investor. When no wants to buy U.S. car companies? He’s watching and waiting. When they don’t want pharma stocks, he buys because they pay a 5% dividen. Read his books. Ya know SOMEDAY you might have a big pile of money you made in real estate, writing off stocks is shortsighted. I’ve made some GREAT money buying good companies that get beat up for reasons that can be fixed. It really is not much different than buying real estate. Are you buying pristine homes in first class neighborhoods that don’t need a thing? No, your buying stuff that is beat up. The stock market can be the exact same thing.

I have absolutely no way of telling you what the next Apple computer is, But… It doesn’t take a rocket scientist to see Merck get their ass handed to them for Vioxx and figure Gee, baby boom generation just now entering their drug maintaince years ( diabetes, high blood pressure, cardiac) Did you REALLY think they were going out of business??? Come on use your head.

Don’t shut the door to this. There is tons of money out there. No when NOT to play the game. That’s the key.

Everyone reading anything on this forum should have a understanding of the stock market. If you make a ton of money in real estate there WILL come a day when even that burns you out. THERE is NOTHING better than buying a stock in a GREAT AMERICAN company that has been hung out to dry and watching it fight it’s way back. Forgeting the stock market could be a huge mistake. Money can muliply IF YOU LET IT. Learn everything you can. Just the fact that you think the stock market is rigged tells me you have not spent the time in the books. It’s EXACTLY the same game as real estate. You think paying $5000 for some idiots real estate boot camp is going to make you a millionaire. It’s NOT. You Will make yourself a millionaire by not giving up!

Last thing, I promise. I my life I’ve learned that following the crowd is THE quickest way to lose money ever invented. If you can think for yourself, do the opposite of the herd and 9 out of 10 times your going to make a pile of money. Look at these indiotic TV shows on flipping houses. THE first time I saw one I told my wife that’s it! We hit the top of the market! Sure enough. When everyones knows it, it’s too late, it’s not inside information it’s intuition. USE IT!

26

I tried to buy a few stocks on the way up that I heard everyone was getting into…and lost money when it dropped. I was buying near the top and had no idea, then it dropped. I agree with you on this one, following the crowd is a bad idea…

27

That is not true. It is not true that I have not found a way to consistently make money buying and selling stocks it is true that NOBODY has found a way to consistently make money buying and selling stocks. It can’t be done. I have done this it is true. Go to Merrill Lynch, Smith Barney or you pick the firm. Ask anybody or everybody there. Ask all the sales people even the best advisor or broker there “how many people they have made rich in stocks”. Don’t let them tell you about money the client put into the deal other than the seed money. The person that got rich off of the stock market does not exist.

I have more money than I can invest in real estate. I can’t do every deal so I do have stocks but it only keeps pace with inflation. When they tell you the stock market averages gaining 11% per year from 1929 until 2007, ask them what is the average yield that a client gets per year over that same period of time. It is 3%. Why is that? It is because the market is too efficient to leave enough crumbs on the table for you and me to make any money.

But the proof of the pudding is in the eating. Ask any broker how many people he has seen or even knows about that has gotten rich from stocks not counting the money that they added from their jobs. There are none.

28

Interesting article on automated trading: http://www.informationweek.com/showArticle.jhtml;jsessionid=LDMN5OJJKLYTEQSNDLPCKHSCJUNN2JVN?articleID=199200297&

Machines are now trading very slim ups and downs and making huge money, that’s where a lot of the money in the stock market is now made. We’re talking about competing by the milliseconds here…I know I can’t compete with that. Granted there are opportunities to make money as a private investor with a Scottrade account but these systems are surely taking a little more cake off the table.

29

Jeez, I had no idea that stocks were such a losing proposition - I’ll have to have a seance and tell my dead grandfather that he in fact did not invest well and consequently, he did not die quite wealthy. I’ll also have to tell him to never, ever invest in stocks in the afterlife 'cause no one can make any money doing so. Here or there. :wink: I think he might take a few spins in his grave when he hears this news…

I have read that a single, lump-sum investment of $10,000 in Southwest Airlines in 1975 w/ dividends reinvested is now worth some $1.2MM. (I don’t know if this is adjusted for inflation or not, but I think the point is clear, regardless.) On a similar high-flying note - one I’m kicking myself for not buying - is American Airlines (AMR). My then-girlfriend was a flight attendant for AA and begged me to buy in 2003 at around $1.50 s/s. I didn’t, thinking I’d get wiped out in an obviously forthcoming bankruptcy. AMR never filed and that stock has traded as high as $40+ s/s since then.

Someone needs to tell people who invested in these two companies that they did not make any money…

David

30

The problem is that nobody invested $10,000 in Southwest airlines in 1975…Nobody did it. If anybody did, they would have been foolish and reckless. Because they had that personality type they would be broke by now. Go out take $10,000 of your money out of the bank and buy ICOC right now. It is trading at $6.00 and will be $70 someday. I am waiting.

Just like I said for the fourth time. Find me somebody just 1 person that got rich off the stock market. That person does not exist.

31

Whatever Blue, whatever…

32

Bluemoon,

Is that the planet your from???

First off, let me explain how the brokerage industry works. You go to school, or don’t, it doesn’t matter. Study for your Series 7, pass it, and THAT"S IT! Your qualified by law to pick stocks for people and sell securities.

You will never find ANYONE at that level who know’s people who turned $5000 into $5 million. Your right on that one.

And if you think that’s how it’s done, by calling your broker and letting him do the research and picking your stocks, no wonder you’ve never made more than 5%. It sounds to me like you CHASE stocks, that has NOTHING to do with INVESTING! By the way, have your realtor pick your properties for you too, that should return the same stellar rate your getting on Wall St…

I’ll give you one since you don’t know ANYONE who ever made money in the stock market consistantly.

A few years back a local man (Souhteastern New England) left $6 million dollars to a college he never attended. He was a fork lift operator for 40 years. He had a very simple investment strategy. Every overtime he worked went right into his investment account. He used a discount broker and told them flat out. “I do not want you sending me ANY of your recommendations” He bought great companies for 30 years that had been beat up and were out of favor on Wall Street. When he retired he had $19 million dollars in his account. All decisions made by him and VERY LITTLE trading.

I was lucky enough to meet this man in person. I asked him if he could give me some advice. I specifically told him I DID NOT want stock tips. He smiled and said " I eat here every morning at 7am, if you want to talk I’m here" Next day we sat down and he told me exactly what I’ve been trying to tell YOU in the last 3 posts. Everything he told me proved correct.

I’m actually posting this for ANYONE else reading here. You obviously know more than anyone about the scam our financial foundation is built on.

Oh and one other thing. If you had “more money than you could invest in real estate” You would be a member of a “PRIVATE BANK” and they will absolutley beat the rate of inflation for you. Here’s how it works…
You have, let’s say at least $500,000+++ in net worth, liquid. You are not going to stay at your local drive thru branch long. Why???
Because every bank in your state is going to be after that deposit. They get them by beating each other in the world of private banking.
When an account rises to that level it’s like another world. You’ll never get so many things for free in your life. Wanna see a MLB game??? No problem, we’ll send those tickets right out. And god forbid you mention taking that money somewhere else???

Your posts show absolutely no understanding of how markets actually create wealth.

33

I heard about this guy also. That means that out of the millions of people that invest in stocks there is only 1 that got rich. But he doesn’t count. He got rich based on dollar cost averaging not investing in the stock market.

34

For a second time, I have done it. Just because you don’t know anyone, doesn’t mean it is impossible. Again, you ARE NOT talking to the right people. Why is it that sucess in REI is considered entrepreneurial, but when everyone here talks about sucessful equity investment, you rely on someone else to do it for you??? Success in REI requires hard work and due diligence-- why wouldn’t equity investment be the same??? Have you ever pulled apart the financials of a company? Have you ever taken a course in financial statement analysis? Ever spend money on a seminar or class for investing? Ever read Graham & Dodd? Probably not. BUT, people here do those type of things all the time for REI. When they don’t do the same for REI, they are considered “doomed to fail” and idiots for not doing their due diligence. I make a lot of money in equities/bonds taking money from people who don’t due their due diligence. I love the people who get “tips” from friends and don’t know a darn thing… I will take their money 70% of the time. I am what you consider an “insider”… only because I have done my homework and know more than the most… I read several hours every day about equities/bonds and have done so for almost 20 years. You are what I consider a RE “insider”… you have done this, from what i have read of yours posts, sucessfully for many years… how did you get there? By not doing your due diligence? No. I’m sure you probably worked and studied your -ss off. Equities are no different.

Stockbrokers as i said before are SALESMEN! Nothing more, nothing less. Do realtors make you rich if you listened solely to their advice? NO. You’d probably be broke very quickly. It IS possible… I have done it, I continue to do it and I know lots of people doing it.

Another side note… one equity investment, whether it went up 1000% or down 1000%, does not make a good case for sucessful OR unsuccesful equity investing… its tantamount to going to vegas and rolling the dice.

One more side note… short term trading of equities is also tantamount to rolling the dice… You WILL lose if you do so over time… thats NOT investing

35

I am sorry Brian I have not been clear. We are getting off subject with seminars and stockbrokers. I only have 1 question find me a person that got rich in the stock market. Not as a broker, and not from dollar cost averaging and compounding? I contend that that person does not exist. I want you to show me a person that got rich in the stock market using techniques that would not get him in basically the same position if he used a different vehicle like CDs or money markets.

36

Blue-
There are stories all over the place of people like that. Read any magazine like Kiplinger’s when they have their retirement issue, or a book like The Millionaire Next Door. They are out there. Also, the market beats 70% of the professional managers out there. I would bet that that number is higher for the retail investors as well. Is it 100% that retail investors get their asses handed to them? Absolutely not. My advice for you is to put most of your money in an index fund, and start relearning. I spent two years investing and trading on paper before I opened my brokerage account to avoid making my first(and most likely biggest) mistakes with a lot of money. Guess what? It worked. Take a small portion of your money and figure out what system works for you. I would look at maybe a dividend focused approach or maybe something from the mechanical investing school of investing.

PeterM-
You might want to check out St. Joes. I know there is a regional airport being built near one of their major area(I want to say St. Petersberg). With your time frame, I think you could ride out the FL RE cycle and make some good money over time. Obviously, due you’re own research and make sure it works for your portfolio.

37

Sure… one person? Me. How did i do it? Initially with a decent amount of credit. I have had double digit returns for the past 15 years… CD’s or money markets ain’t getting you that. I used borrowed money-- same as no money down in REI.

38

NJREstudent, I suppose this is in bad taste, but could you give us a ballpark of the net worth you gained in the stock market?

100 million?
50-100 million?
10-50 million?
<10 million?

I agree completely with bluemoon, people can make 10, 20 or even 30% return on their money, but you’re not going to turn $10,000 into a million within a year. Besides if making money in the stock market was so predictable, then there wouldn’t be any risk and thus it should have much up-side potential.

39

Frankly, it’s none of your business. Yes, you can make 10%, 20% or 30% on yours or borrowed money in equities… keep in mind that the statement earlier was that you can become very wealthy in RE using none of your money. You borrow it. You can make similar returns in equities/bonds with borrowed money as well (albeit without the tax benefits). No one said stocks were riskless… and by the same token, if someone said using highly leveraged money to buy RE is not risky, they don’t understand risk. I’ll submit that if done correctly, REI has mitigated risks… BUT (and thats one big BUT), less of a risk profile with much more leveraged money equals more risk-- your smaller risk is amplified.

40

Bluemoon: Alexander Elder, PHD. There are many others, but you only asked for one.

 Investing is investing is investing.  A rose by any other name would still make you a ton of money if you took the time to learn to read financial statements, and follow economic trends.  Many people realized the potential rise of technology in the late 1990's and made money in the NASDAQ.  Reuters has Provestor plus, which is my preference, but virtually all online brokerage firms will give you some form of data for the task of fundamental and technical analysis.  What are the companies sales doing?  What are Profits?  Are they investing in research and development?  ect.

 Of course you need to bring seed money to the table, you need to do that with most business ventures.