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Link Posted: 9/11/2014 11:26:49 PM EDT
[#1]
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With the current conditions in the stock market all my gains are sliding back again. I just hope I can end this year up at least 4%.
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are you retiring this year?  

ar-jedi

Link Posted: 9/11/2014 11:39:36 PM EDT
[#2]
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Depends on what you are leveraging.  Buying real estate or building a business with leverage is entirely different than buying stocks on margin.

You can poo poo this concept all you want, but you would have a hard time driving by any business park and finding a company in there of any size that wasn't built with leverage.  It's the entire reason that banks ever came into existence in the first place.  They weren't conceived as savings institutions but as sources of capital to enable growth.  

My company has used debt to finance our growth since our inception and you'd be hard pressed to find others that didn't do the same.  If you are putting all of your own money at risk when growing a business, you'd be thought a fool.

Despite your edits of "quickly" and "at great risk" that is not what this is about.  Using leverage to grow a business isn't about getting rich quick at great risk by default.  That depends entirely on how much leverage you are using.  There are "reasonable" levels of debt for a business to carry to the point that in some cases not only is too much considered unhealthy, but also too little.

The point of my post is that OP should look at his situation and determine if it makes sense to have all that capital tied up in a single asset just to make 14.5%.  First, I bet his numbers are naively optimistic and second, that's a lot of exposure to take just for whatever that real number actually turns out to be.


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I'm 32.5 and I only have 30K between my 401K and Roth IRA. However instead of putting more money into these I invested in two rental houses which which already have a NET profit and will return about 14.5% per year once they are paid off. One has 27 years left and the other will be paid off in about 14 years.


Just some food for thought, but your rental properties will generate higher % returns if you keep them leveraged.

Example:

$100k home (Paid Off)
$14.5k in rents net of expenses (your 14.5%)
14.5% return on $100k

$100k home (80% at 5% interest)
$10.5k in rents net of expenses and interest
52.% return on $20k

Using the example above where you have $100k to invest.  You could have 1 property at $100k earning 14.5% or you could have 5 properties at $20k down each earning 52.5%.

I am a firm believer that the only point of rental properties is your ability to buy them with leverage.  I'm not saying this makes sense all the time, for every person, and under every market condition, but you should at least go through the thought exercise and decide for yourself.  

It's worth noting that damn near every person that ever got rich (quickly) did so with some form of leverage either directly or indirectly (at great financial risk).  I bet I could shoot down most counterexamples that people would come up with to disprove that statement as the use of leverage is often buried deep down in the details.  Try me.

Leveraging investments is great until it is doubling or tripling your losses.  


Depends on what you are leveraging.  Buying real estate or building a business with leverage is entirely different than buying stocks on margin.

You can poo poo this concept all you want, but you would have a hard time driving by any business park and finding a company in there of any size that wasn't built with leverage.  It's the entire reason that banks ever came into existence in the first place.  They weren't conceived as savings institutions but as sources of capital to enable growth.  

My company has used debt to finance our growth since our inception and you'd be hard pressed to find others that didn't do the same.  If you are putting all of your own money at risk when growing a business, you'd be thought a fool.

Despite your edits of "quickly" and "at great risk" that is not what this is about.  Using leverage to grow a business isn't about getting rich quick at great risk by default.  That depends entirely on how much leverage you are using.  There are "reasonable" levels of debt for a business to carry to the point that in some cases not only is too much considered unhealthy, but also too little.

The point of my post is that OP should look at his situation and determine if it makes sense to have all that capital tied up in a single asset just to make 14.5%.  First, I bet his numbers are naively optimistic and second, that's a lot of exposure to take just for whatever that real number actually turns out to be.




Can you suggest any additional reading on rental principles?  Is it even possible to leverage rental property at 20/80?  I have a significant amount of savings ~90k, and have been thinking that rentals might be a decent place to tie up a little liquidity.
Link Posted: 9/11/2014 11:44:11 PM EDT
[#3]
25.  The wife was way ahead of me and I got a substantial raise.  I put it all in for a few years, maxed + very nice corporate matching and highest risk investments.    











I should have invested in .coms, however, that left many of my coworkers pushing a shopping cart full of aluminum cans.







Chess or checkers, wine or beer, or something like that............




I blew my stock options on Harleys and pussy.  The rest of it I wasted.

 
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