All Forum Posts by: Henry Clark

Enjoyed both the event and New Orleans

Congrats to BP team rolling with the Hurricane aftermath

Suggestion:

1. At luncheons, happy hour and mix area put standing signs in an area showing different REI types. Example: SFH. MFH. Finance. Trailer parks. Self storage. Commercial. Etc. Enjoyed meeting everyone, but a lot of effort finding similar investment discussions

2.  Along the same lines as above, set up some breakout rooms.  Have two or three investors lead an open forum conversation on the different categories

3.  Have specific breakout open forums for new investors. With take away action plans. 

Really enjoyed the event. Congratulations again on a great event. 

Talk with your tax acct

Another option depends on your personal preferences.  

Primary residence 2 of 5 years you can sell and not pay taxes.  Does not matter which 2 years

1.  Sell this rental property 1031 or move into it.   Make this property or the new one your primary res

2.  Rent your current house out or sell it tax free using the 2 year rule.  Depends on your personal preference.  You could rent it for two years.  Sell the house you moved to using the two year rule.  Then move back into your original house  

Again talk with your tax acct   Make sure no depr recapture on any of the scenarios  

@Trent M.

As your last sentence says, you would like to get your feet wet on Stocks. Recommend the following. Best way to learn Stocks/Bonds or REI. Pick a dollar number that if you lose it all, you will say "Ouch"; but it does not impact your life. My number at the time was $2,000. Then start trading it. Don't recommend you do Long term hold or day trading. This is not a financial comment, but if you will research and trade on Short term plays, you will learn more about the Stock market. You might hold a stock or Bond position for a week or 3 months. This will create more of a learning moment.

How did I do?  Over a 2 year period I was the greatest Stock trader in the world.  Made profit on all of my 19 trades.  LOST it all on my 20th.  I was wanting to learn about Stocks/Bonds just like you. 

Lessons learned:  A.  Almost everybody makes money on a market going up.,  B.  Your investment can go to zero.  Mine went to 1/2, then a week later went to zero., C.  The people running these big companies aren't as smart as I thought.  I can tell you these lessons, but like what does "hot" mean, its better you touch the fire; you will learn it better.  Which I did.  

I stayed in Stocks after that. Until the last 7 years, I got into REI and have been in it ever since. Moved out of my Stock positions and even 401k. Don't recommend you do it, unless you get to that decision point on your own. REI has the benefit of Leverage (no margin calls, as long as you lock in your Debt) and Tax Avoidance.

@Bogdan V.

Please explain to Trent the math behind a Margin Call.  Use 10%/20%/30%/50% market declines as an example.  Use a beginning $100,000 investment.  Take him through a normal 20 year Stock market cycle of ups and downs.  This will be very educational for him on how much "Stomach" he will need.  It truly is Champagne for Breakfast and homeless puking the next morning.  Most people who are playing margins have huge computers and are trading in and out every day for a $.15 per share play.

He is looking for a 10% return.  Explain to him your view on the Dow going from 34,000 up to 45,000 in the next three years for a compounding 10% return.  I didn't do the math above, but explain what that takes the P/E ratio to; and is it realistic, that future potential earnings growth will support that.

He also mentioned investing in the S&P, lets call it more Tech investments.  Where is Tech on an "Overall" growth curve?  Tech will always have a "Next Gen" product which is currently focused on Consumerism (TV's, phones, PC's, entertainment).  To me the next Tech Growth curve will be on the "Weaponization" of these technologies into the "Physical" world.  This has already occurred in farming.  Planters, fertilizer wagons, harvesters, grain carts, etc are already being GPS driven by Tech.  Auto plants have gone heavily to robotics.  These are all mass repetitive "Contained" environments.

Now the next great investment will be Auto over the road trucks, Nano Cancer treatments, Nano crop pesticide reduction, Solar electric surface paint generation, Water pumping technology from the Mississippi River to California/Arizona (reverse Dam management(actually don't recommend this, will cause excess salination of the Gulf)), Certified Individualized Student learning platforms, etc.  Localized and individual applications.  But this is a Long play, and being able to pick the winners/losers; developers/adapters and followers.  But making these plays is like looking for that Great MFH deal while everyone else is looking for it.

@Trent M.

You should do Stock investments, but like I say on my Self Storage posts; "Start small and Make Your Big Mistakes Early".

@Joe Villeneuve

Your totally correct.

But in this instance as you noted, @Trent M. has his properties fully paid off.  He plans to take it out 100%. The math you note, is not "his" situation or values.

My point to him is to stay invested in REI.

Sidenote,  I greatly appreciate all of your BP insights. 

@Trent M.

99% of all REI investors want to be where you are. Two deals under your belt. You have gotten past the Big One, jumping off the cliff and getting in.

Thus something is wrong. You have gotten past the hardest part of REI. Financial Independence doesn't seem to be a target for you. Plus your investments are fully paid off, as noted above, that doesn't fit with REI, which is about leverage.

You might be a Med student who is just starting their Internship, and wants to dedicate themselves to their career. Could be a MLB player who just got called up. Who knows. Not going to try to convince you to stay in REI.

So lets do Stocks.  You want a 10% return.  Although you said the S&P500, lets use the Dow since more people have a historical sense of it.

34,000 Today.

37,400  10% year from now

41,140  10% 2 years from now

45,254  10% 3 years from now

You got to love compounding on a spreadsheet.  This assumes you don't take any out and don't pay taxes "yet".

But lets go back to the S&P500 and lets reference it since you mentioned investing in it. Currently the P/E for the S&P500 is say 37. That means the Price is $37 versus an earnings of $1 before tax. Used dollars as a reference point. Lets tax affect it, whereas for REI, I would try not to pay taxes (1031, Die, Refi- cash out). Tax affected P/E ratio is 37/.75= 49, we will call it 50 to make the following math easy.

Lets compare it against REI. For magnitude several options for REI investments.

$50,000 investment and annual return of $1,000  Appreciation and cash flow

$100,000 investment and annual return of $2,000

$200,000 investment and annual return of $4,000

$300,000 investment and annual return of $6,000.

Summary:

If you expect the Dow to reach 45,000 from 34,000 then you should invest in the Stock Market.  Please note the S&P 500 has been three times higher than it is right.  Make sure you understand what caused that home run.

If your rental properties, both Appreciation and Cash flow are making less than $6,000 on a $300,000 investment, then you should divest into the stock market, disregarding the tax implications.

Realize you want a less Passive investment and a lot of the BP team could point you to solutions on your current investments.  But that doesn't seem to be your objective.  

If it was me and I wanted to get out of REI, I would go totally to cash immediately. Do you have the strength to "Sit" on it for about 3 years? Then pick up the pieces after a financial downturn.

Options:

1. The economy was already hot. Now throw $3 Trillion of gas on it with Transportation, Covid, Shipping and Labor issues, we will go into hyper inflation. Great time to buy long term bonds at 18% interest. My worst financial decision ever was not dropping out of college and doing $2,000 per year IRA's at 18% fixed. Problem, your sitting on Cash, which will devalue.

2.  Go to silver when it hits $14 again and then sell at $25, 1 year later.  Not Gold.  This play only occurs about every 10 years, thus you need a job so you don't get bored.

3.  Invest in ?????, but that takes a totally different skill set than any of the above options.

@Jason Cooper

Post your contract and ask for any suggestions

Join Indiana SS assoc. Get their standard contract and compare

Talk with your local police.  They should tell you to treat as abandoned

Take a lot of pictures

Take pictures of your signage and post.  Ask for suggestions

No Trespassing. Customers only

Unit considered abandoned if contract not received in 30 days. 

5 MPH

Slow

Review all of your procedures.  What is your legal process for auctions in Indiana?

Lien and lockout dates

Fees, etc

Insurance coverage. Real versus personal property

Customer insurance offering 

Etc  Etc

@Amy Silva

Ask a Financial planner, banker or estate attorney for cpa recommendations

Ask the cpa about primary residence and 2 out of 5 years residency. Can discuss 1031 but don’t think you need it

The real issue will be the financing on your purchasing or assuming the loan.  Them staying on the title.  Do they have enough collateral for their new purchase.  Avoiding Gift tax if they transfer loan to you. 

@al 

Loopnet Maryland Lease has 500 listings.  Some show and don't show rate per sf.  The rest just find similar properties and call.

@Al Cavitt

@Colin Williams

One horse will be $3,000 per year.  Need at least three acres or more if your soil is rocky.  Otherwise they will be in a mud pit.  You will need to clean the stalls and barn out weekly.  My brother just got divorced.  He doesn’t do horses but did all of the work for 20 years.  That was one of the issues.

We have always had horses but they had plenty of pasture. This is black soil   Your probably in rock  

I have done truck farming vegetables on two acres and did peppers on 6 acres for two years. It’s a lot of work. Paid my first two years of college. Make sure you have a plan otherwise your trading $50 per hour work for $8 per hour.  It’s fun but not with the dollar per hour trade off

I would go for non crop items   Very labor intensive.  

Check out raising duck eggs for your chefs and bakers.  Can keep for up to two weeks easily.  Do khaki, runners or production Perkins  

Raise ducks or geese for the fall market or take orders for Chinese ethnic groups   Organic and free range    .   East coast your in that market   Do homer or Peking ducks or Chinese/white african geese for ethnic groups   Want the knob.

This way you have winters off.   Can ramp up easily.  Very little work once set up  Find a butcher and locker.  Or do it yourself if you sell in state.  Try to find land near a marsh that you won’t bother neighbors   This is very noisy and smelly.  

@Ross Y.

You either need to clarify what your CPA told you or you need to switch CPAs.   This is a pretty straight forward discussion with the info you noted.