I think rental properties are a good thing. They hit investing from two different sides. One one side they increase your cash flow and they invest in your assets. I will use my current house as an example.
I was lucky enough to buy within the last 2 years, so I have pretty much bought at the bottom of the market (Just luck). I can rent my house for about 500 a month over what my mortgage is a month. So after paying a management company I can still pocket a few hundred extra a month. While that is not much, think of it as a added bonus of a long term plan. From here I have 2 choices as time goes on, I can A. let my current mortgage get paid down over the years and have an asset (the house) while still having a source of income (rent). So basically by the time that I am in my 60's I could have the mortgage fully paid off with rent money coming in every month. But it will all be income by then because I will not have a mortgage. While yes I will have to invest money in the property over the years to update, fix, and repair things, it will not be anything compared to the revenue that it is generating .
The other option is to rent it out and as the house appreciates and the mortgage gets paid down, I could refinance or take out a second mortgage. Now this is the good part, because I can now take that money to invest in a new property, thus increasing my cash flow while still carrying debt.
The key is to not have debt on a depreciating asset unless you really need it...
Is Ramsey the one that pushes the "never buy a new car and everyone should own an old beater"? I listened to some money dude a few months ago that was preaching that and laughed cause it's totally me. I just downsized from having 4 rides in the driveway at one point. Here come late spring I'm hoping to have my 2 current ones finally built, done and 100% happy with them in all ways except one... The MPG options will be like 18, or 18 depending which one I want to drive! I'm sure by early next summer I'll be back to 3 cars in the driveway all paid in full like I said but the 3rd car will probably be an under $3000 honda civic getting 30mpg again! LOL
I keep telling myself 2014 is the year I'm going to HEAVILY invest. I've got a few projects I want to knock out in 2013 and want the cash on hand for just in case crap instead. After that I'll probably dump 75% of my savings into investing of some sort. I got time to try to figure out what's what... Maybe I'll go buy a roach invested 4 plex and rent it out for twice the payments to some pimps and hos!
I've never had a credit card and built my rating through small bank loans. I am paying for school out of my own pocket with no loans. I've had a mutual fund that I've been putting $300 a month into since that time. What sucks is watching your money go from $35000 in 2005 to $10k in 09.
My wife on the other hand has $90k in student loans. $8k in credit cards. Her car is paid for but when they start wanting $800 a month for her loan it's going to sick if she isn't working.
I tried the slum lord thing and it wasn't for me. Mostly because I bought a crappy property that I could only rent to crappy people. I have been thinking about buying either a duplex or condos and give that a try. I've got a buddy whose mortgage on a condo is $500 a month and is renting it for $900.
the key with investing for the most part is to just put money in every month and dont look at it. If you keep on putting in while the market is low, then you will get crazy return on that money and it should offset the losses on the other money. It makes me laugh when people see the market drop and they stop investing. That is the best time to invest. But the key is to diversify your money, you do not want it all in one place. If you have your money spread out, it is less likely to take a hit from a single occurrence. For example right now we have I bonds, roth IRA (Spread out), mutual funds (spread out), 401k(Spread out), TSP (tax deferred for government employees), and my wife's 50% retirement here in 5.5 years.
I know that we will never be rich, and it would be nice, but we look at things realistically. Once of my key points has been to try to retire without having any dependency on Social Security, because we do not believe that it will be there when we go to retire.
The main thing to do is to not go overboard. You do not want to not enjoy your life because you are saving... only to die young.
What sucks is watching your money go from $35000 in 2005 to $10k in 09.
Yeah, that right there is a bit of why I have to wonder am I possibly ahead having just not invested really till just the last couple years into a 401K program? Chances are probably not, in the long term you're probably still better off then me I would guess.
And I'm somewhat kidding about the slumlord, I've been pretty lucky with the tenants in my place. They fell behind at one point but got caught back up over a few months and have been good since. Other then the small farm at the house I can't complain and even that's not too bad. I'm kinda jealous I didn't have a goat powered lawn mower when I lived there honestly...
for a 401k put in at least what the company will match too, otherwise you are just loosing free money. Most places will do 50% up to 6% of your income. From what I have noticed in the past, that 6% shows up as a trivial amount on your actual pay check. That is the quickest way to get a 3% raise from your boss.
Already on that, we're 50% matched to the first 4% which is what I'm putting in and I'm thinking about bumping it up to like 10% in...
Actually it's funny talking about company perks. Rather then investing in the typical fashion in 2014 I'm half ways tempted to build a '65 mustang to flip. My employee pricing for parts is so cheap that it's staggering. Like I physically hold a part in my hand at my purchase price and most of the time feel the steel to make the part has to have more value then what I paid type of cheap! I'd do a full restoration and drive it till it sells for profit. I'm talking a very nice show quality car for probably less then $15K which would easily sell for more then that. An employee just recently put $18K into it and sold for $42K in less then 3 months on the market... Said he had 8 months into the build and I doubt he was working at a pace like I typically do knowing him. LOL I doubt he had a weekend with 25 hours in the garage like what I just came off for instance...
I keep on watching gas monkey garage and wondering when he is going to turn a real profit.
Yesterday in my tourist stuff we went to the Shelby museum. I though it was crazy that they had the original Shelby and Carroll turned down an offer for $23 million for it back in the 80's. The guy said that they have estimated that it would go for over $50 million at auction right now. Its it just crazy what some collectors will pay for stuff.