My family & I are in the planning stages for a mini retirement. We would like to leave in June of 2018 and be gone for 14 months, live in 3 different country's for 4-5 months per. With 4 years of preparation I intend to have a team together to manage my rentals while we are away, when we return I plan to go full time in real estate, my current Business will be sold or closed prior to leaving. Our primary residence will be rented out furnished, I will sale my work vehicle and store her SUV.
I'm asking the professionals in each field for advice on what would be a higher yield passive investment I can start focusing on to enable us to enjoy a year+ abroad. Would you recommend; triple net rentals, Note investing, more rentals, car washes, mini storage, etc.? I currently specialize in Oil & Gas and Fix & hold SFH & 2-10 multi fam.
FYI, My wife and I plan on getting part time jobs & sending our children to local schools to be totally immersed in the culture.
A lot of the things you mentioned there are NOT passive. You are running businesses. So comparing triple net yield to running a business they are not going to be close to the same. The work and risk involved for the yield is very different.
Tell me what your pre-tax cash on cash annual goal is for investing and I can tell you if you are being realistic or not.
A sabbatical sounds like a great idea.
As Joel says, some of your ideas aren't passive. Triple net is, but usually it's a long term play. I'd look at notes or private lending.
Let me clarify, I was thinking on the side of investing as a partner in the carwash or mini storage, let the partner run the business, (email me a monthly statement).
Honestly Joel were not needing a substantial income for the time away. I'm looking for something that will be closest to passive without getting into stocks. We will live modestly & have the funds for the year liquid prior to leaving..
Thanks for the insight, I'm very interested in buying notes, just clueless @ this point where to start..
What happens Matt if the partner doesn't do as promised with the business?? How will you handle that??
Klaus has a situation with a business partner and a restaurant operator. I don't know how that has been going for him but I think well from last time we spoke.
Triple net is completely hands off. You just get the checks. One thing you haven't mentioned Matt is the money you are looking to invest. That determines options to an extent.
On the notes there are many investors on here good with them. Tons of different types of notes and they can be harder to get out of when selling.
Loc Roa has been buying business notes for years at a discount. You can look him up on here.
Yes, I have a restaurant about to reach a year in business. I'm the silent partner, but I've been pretty involved in strategy, marketing, and finance. It is going pretty well, but would not be if I were absent the whole time.
If you're preference is for the most passive/easiest route w/ higher yields you can try prosper.com or lendingclub.com (peer to peer lending sites.)
They are unsecured "consumer" loans yielding about 6-12 or 15%, depending on credit quality, for 3-5yr options I believe.. You can invest as little as $50 in each note to diversify, the interest is deposits into your checking account monthly, and they chase down and file collections to try to recover on any deadbeats if/when they occur. Not RE secured, and maybe not as good risk-adjusted yields as D/T investing, but much easier and passive to get started on today, IMHO, if you're too busy with your business.
If you have enough time and want to do the research, and maybe a little more time and effort during the process, go research and buy individual notes..
full disclosure: I have not invested on the P2P lending sites, but know several people who have, with different ranges of knowledge of credit risk, who are doing well in this environment.
These loans may be much more susceptible to downturns, so watch the maturity..
This is obviously hard to answer without a lot more information including a review your assets, incomes/debts, retirement plans, spending habits, etc. etc. With that said, I'll take a shot!
If you want something that is passive, and you already have a fair amount of RE holdings, and you do not need the cashflow, I would recommend investing in stocks or bonds. Here's why:
- Diversification. The single most under-appreciated component in most RE investor's portfolio.
- Extremely passive. Buy a fund, then don't touch or think about it for 14 months.
- Easy. Forming a new business or forming a triple-net lease takes some expertise. Investing in the S&P 500 just takes 5 minutes.
Generally speaking, you will get lower returns than in RE holdings, but it doesn't sound like returns are your key priority right now.
Why would you recommend bonds in such a low interest economy?
Originally posted by @Matt Laird:
Why would you recommend bonds in such a low interest economy?
Assuming you are in great shape financially (and it sounds like you are), I'm a believer in being increasingly defensive with your money. To say it another way, if I had the ability to take 14 months and travel the world, and still be on track for my retirement and long-term goals, I would ramp down the risk in my portfolio. That means I would personally stay away from additional rentals or anything that has returns that correlate with rentals (notes, large apt buildings, etc.).
I prefer securities (index funds) to bonds. But, if I were in a great shape financially and seeking low-risk and passive wealth protection - at the expense of growth, I would strongly consider some type of bond fund.
With all of that said, if you're an upper-middle-class, 30-something who has a long ways to go towards retirement and a net worth of under around 500K/passive income under around $40K, I would lean towards socks as you need the growth. If you're a 50's something with enough cashflow to cover your expenses and a net worth of >$1.5M in generally high-risk assets, I would absolutely recommend bonds as you need the protection. Granted, if me, you're a 30's something who hopes to retire in 17 years who is only generating around 20% of his passive-income goal, I need to be open to the risk of more real estate to meet my goals.
Jeremiah, what kind of total return do you expect from bonds over the next 10 years or so?
ps - If you're considering P2P, check out this website. It's a personal finance blogger who has been investing in P2P for a while. He's tracked his returns, time commitments, etc. for a few years.
@Jon Klaus Oh how I wish I knew what bonds will return over the next 10 years! There are lots of people more intelligent than I who could provide a far better answer.
If I had to guess, a federal-tax free bond fund (e.g. FLTMX) will return around 4%-6% over the next 10 years - beating inflation by around 2%. Though I expect rates to increase for all debt (including RE mortgages) by ~2% over the next 2 years, so I would avoid buying bonds directly, and rely on funds.
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