All Forum Posts by: Account Closed

There are online sites for landlords (such as BiggerPockets) and online sites for renters (Google "apartment ratings" and pretend you are a renter looking for a place to live). You can take the ratings and comments with a grain of salt, but if many people are saying the same thing about an apartment, there might be a grain of truth to it. The water cooler discussion has moved online.

Also, when rental markets soften, the move-in specials increase. I got a couple hundred dollars off my first full month of rent as a sign-up bonus. When the economy softens, tenant screening standards drop. Rather than let a rental property sit vacant, some landlords are willing to take a greater risk of having to evict someone. A long-time resident at where I'm now living told me when a previous owner (that went bankrupt) started accepting HUD tenants, "that's when the drugs came in" (I wasn't living here then to be able to confirm this assertion, but I have no reason to doubt it).

The same reaction happens in business ("street fighting" and "lifeboat ethics"). During the severe chip recession of the 1980s, for example, we had instructions from top management to accept all orders over variable cost. The idea was that direct material and labor would be covered and any gross profit would contribute something to cover the overhead. I didn't feel comfortable working in this survival-oriented environment (the bottom rung of Maslow's hierarchy of needs), but I had a hungry mortgage to feed every month.

Those times made me yearn for financial independence where I would more than cover my living expenses with investment income and not have to be concerned with the price of gasoline or the chip industry's "book to bill" ratio.

Except for small local banks and credit unions that keep skin in the game (portfolio loans), doesn't the bank want the loan to go through so they can flip it over to Wall Street for securitization?

Loan originators no longer must have ‘skin in the game’

https://www.brookings.edu/blog/up-front/2018/03/15/loan-originators-no-longer-must-have-skin-in-the-game/

When I refinanced my mortgage in the early 1990s, the industry was recovering from the appraisal inflation of the heady days leading up to the Savings and Loan Crisis of the 1980s. The appraiser explained appraised values had declined and I would be given a "quick sale" number (which was still 2X what I had paid for the house a decade earlier).

The same type of appraisal inflation occurred during the real estate bubble of the 2000s leading up to the Financial Crisis of 2008 (The appraisal bubble: In run up to real estate bust, lenders pushed appraisers to inflate values).

Ask your HR department if your company supports an in-service rollover of your 401K to an IRA (which can be a self-directed plan if that's what you want).

https://www.401krollover.com/what-is-in-service-401k-rollover-plan/

Once I reached a certain age (late 50s), my 401K plan allowed for an in-service rollover. I transferred my 401K balance each year to an IRA at a brokerage account where I had access to a wider set of investments. I did a custodian-to-custodian transfer because the IRS treats this type of transfer as a safe harbor.

I'll answer for myself. I'm a retired Silicon Valley cubicle dweller right out of the Dilbert comic strip.

I'm in the I (investor) quadrant now. I spent most of my life in the E (employee) quadrant. I spent a short period of time in the S (self-employment) quadrant and failed, but learned a lot from the experience. I've never been in the B (business owner) quadrant and knowing myself as I do, I don't believe I would do well in the B quadrant.

When I started investing in the stock market in the early 1990s, my financial advisor at a major brokerage firm advised me (correctly, in my opinion) to fund my retirement accounts (IRA and 401K) fully and invest an additional 10% of my salary in a taxable account. I was also a homeowner at the time (real estate) because the American Dream pushed my buttons. I bought the biggest house I could afford because that was the conventional wisdom then, not realizing there were other alternatives that would have let me achieve financial independence much sooner than I did ("live and learn").

I never ran a business as a kid (lemonade stand, deliver newspapers, whatever). I doubt I would be successful doing these kinds of activities. Some people just aren't cut out to start a business and expand it to the size where a manager runs the day-to-day operations so the owner can work ON the business rather than IN the business. Instead, people like myself can get a good education (thanks to Sputnik in the 1950s and my skill at math and science), exchange our time and skill for a steady paycheck, and take advantage of the incentives Congress established (tax-advantaged retirement accounts) to allow us to build wealth. People who do hands-on real estate also have benefits (1031 exchange, home capital gain exclusion). I'm told people worth more than $50 million can start their own foundations and hire the experts needed for sophisticated asset protection.

When I Google "Rich Dad" I come up with Richard Kimi, who didn't start out life wealthy. If this result is true, the Rich Dad started out poor and became rich as an entrepreneurial investor in hotels. He earned his wealth one hotel guest at a time.

People like to read the biographies of wealthy people because they allow us to live vicariously. For example, I enjoy the various biographies of Warren Buffett who started out life poor and became rich as an entrepreneurial investor (beginning as a child delivering one newspaper at a time). John Templeton started out life poor and became wealthy ("Investing the Templeton Way").

The genius of the Cashflow game is it's use of neuro-linguistic programming (which some have discredited as junk science), which is the same technique Tony Robbins uses with his firewalking shtick. The first time I played Cashflow, the four of us playing the game got out of the rat race by going in together on a hotel deal. I was elated because it seemed to suggest the numbers behind passive income generation really work. If something helps you conquer your fears of money or hot coals, it's useful.

RDPD might be a way to go, but it's not the only way to go. RDPD might get people's attention (which is good), but going in on a hotel deal with three other strangers could also be a disaster. Building wealth by buying gold and going heavily into "good debt" might also work, but in the wrong market, it could be a disaster. RDPD is misleading because it doesn't warn about these potential downsides.

This matter was discussed on BiggerPockets 10 years ago as the Financial Crisis of 2008 was unfolding:

Can a Bank call the loan?

https://www.biggerpockets.com/forums/50/topics/20032-can-a-bank-call-the-loan-

My takeaway is that when a bank is under stress and needs to raise capital quickly, it will do whatever it has to do to remain solvent ("desperate measures for desperate times"). Performing loans with a "due anytime at the discretion of the bank" clause are fair game.

It makes sense from the banker's point of view. You need to raise money quickly because there is no long term when you can't survive the short term. Are you going to sell your junk to raise cash? Or your gems? Responsible borrowers are punished in this scenario.

I do a Mental Rehearsal before starting a project.

What do I do if X should happen? What do I do if Y should happen? Then if X or Y happens, I've thought through the matter ahead of time rather than trying to figure it out as the crisis unfolds. I involve other members of my team to get their input and make sure we're all on the same page.

As far as a depression coming, it might occur or it might not. Clairvoyancy is a skill I don't have. What I can do is ask myself how I would survive hard times. I also realize if the times become too hard, I'm going under no matter what.

I find it OK to think through bizarre scenarios. My friends were amused when I wondered how I would deal with the loss of my Internet connection (which could be serious when doing online investing). A week later, a service technician at Amazon Web Services threw the wrong switch by mistake and half the Internet went down for a few hours (AWS says changes were made to prevent this from happening again). Because I had thought through the possibility, I was not affected.

One of the wealth building books I read a long time ago had as its first chapter: What is Your Relationship with Money? I felt cheated at the time because I wanted to have a lot of money and I expected the book to tell me how to get it.

The book was right. In my case, I grew up in a poor area of the country (declared to be an economic disaster zone by the Johnson Administration in the 1960s [today, it's part of the Rust Belt]). I knew money was hard to come by based on my life experience and wanted to be conservative to preserve what I had. I also desired to have a lot more money and had a tendency to be aggressive short of buying lottery tickets, which I knew were not a reliable means of getting rich. I had to balance those two competing forces in my mind while paying down my debts and learning how to deal with likely disruptions to my W-2 day job. Silicon Valley, for example, depends on the fortunes of a single sector of the economy. The chip recession of the 1980s was its worst up to that point in its history (subsequent chip recessions have been worse, but not much worse).

The strategies and methods I developed became my money habits that define who I am today. When I attended the Get Rich Quick real estate seminars of the 1990s and 2000s, for example, I decided to take the slower scenic route to my goal of financial freedom rather than the faster, more-direct route that involved the use of high leverage. "Good Debt" works when tenants pay the rent, but good debt becomes bad debt when that rental income stream dries up for any reason.

Some people thrive on going through the rags-to-riches-to-rags-to-riches cycle multiple times ["nothing ventured, nothing gained"], but for me, I believe the slow-and-steady-wins-the-race approach of the tortoise over that of the hare. People need to discover and do what works for them.

Here is another data point to consider -- the yield curve.

https://www.nytimes.com/2018/06/25/business/what-is-yield-curve-recession-prediction.html

If the yield curve is predicting a recession, the economy will slow and some tenants might not be able to pay their rent. But what matters are the tenants in the properties you own. If they continue to pay their rent even in a recession, the state of the larger economy doesn't really matter to your financial well being.

I don't have an answer for you because what you are asking about is a very personal matter, but you might want to check out resources on career planning.

https://www.thebalancecareers.com/career-planning-4161894

My strategic planning professor in business school had an appendix in his textbook that covered personal life planning. Just as a strategic plan for a business is supposed to maximize long-term shareholder value, a career plan for an individual is supposed to maximize lifelong personal satisfaction. Other than that different end goal, my professor's take was that the same strategic planning procedure applies to both situations.