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BlackCattle
Frequent Contributor

where to invest

I am a young guy still building up my land base. I feel land could correct in the next few years and dont want to lever up too much more at this time, what are some other investment strategies you guys use to make money?? Thought about commercial RE like a strip mall but taxes are crazy and not too familiar with laws and regulations in that sector and after all is said and done there doesnt seem like alot of bang for the buck...

I already own a few rental houses I bought in 2010 worth the money and the ROI is good if you can handle the tenant drama.. I am looking for new opportunities.. I really like real estate.. Ideally I would sell this stuff and buy more land at some point in the future when the ratios become more attractive... Thoughts???

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7 Replies
farmerguy89
Advisor

Re: where to invest

It'll one day be affordable again. Maybe do custom work/ rent til then?
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Kay/NC
Honored Advisor

Re: where to invest

Tenant drama...you have that right. We have found that letting a good rental agent run our rental houses does a couple of things: she does all the credit checks, showing, etc., which at leasst partially insulates us from some of that. Yes, she takes a percentage, but in our case, she also knows the local market there better, and thus commands enough morecthan we did to make it well worth it.

That has made us more money in a year than we would have taken in in two, and she has one more (the last one we refurbished and highest rental rate one) left to find the right tenant for, as of this week. We didn't go into residential rentals purposely, but have four that came to ysin various ways, with no really reasonable way to divest.

I think people will be needing rental property to live in way more than to open businesses in, at least for a while. The Fed is stii propping up this limping economy, which does not bode well for new commercial enterprises.

So many folks got ruined credit in the meltdown, and banks actually have to require some standards in order to float a house loan now. Prices of houses have yet to atart a real rebound in most areas, with few exceptions.

If, as you note, you can handle that this couple slipped away in the night, because they broke up and neither one can afford the property alone anymore ( our last failure of tenancy), or you aren't stretched so thinly that a new HVAC unit takes you into the red, you should be okay sticking with what you lready know.

If diversification is your goal, you might consider that abny or all of yourvproperties could eventually be flipped as sales, if you get tired ofbthe drama, and good times return to our fair land.

Most of our land base is in growing timber, which is standard for land that doesn't support crops in the Southeast. Another, longer-term type of crop. Takes no real effort from us, either.

You might want to ask yourself how much time - as well as money - you have available to commit to a different enterprise. That is a bigger problem than any other, to me.
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clayton58
Veteran Advisor

Re: where to invest

Pay off any and all debt.  I don't know of any investment that returns better now, with any degree of safety.  Also build up some working capital, then when the right oppurtunity comes, you can jump, while others are trying to line up financing.

Kay/NC
Honored Advisor

Re: where to invest

One other crucial point, that some fail to consider: You need cash in liquid form, to bridge gaps in earning. It is sad to see people " invest" every cent and not be able to make payments on important assets, due to an illness, economic reversal of fortunes, etc.

I have had to stay behind one of my VERY responsible kids for just this reason. You cannot pay down debt and stash in retirement accounts, and leave yourself with no ready, easily accessible savings. You can make every payment ahead of time, pay extra principle, and if you get hurt and miss too many scheduled payments further down the road, lose it all.

i would say to have a year's worth of your scheduled payments in savings...CDs aren't paying much, but you can get to them when you need them, without much penalty now.

For people without business debt, it has often been recommended that you have six months' worth of regular living expenses in cash. Since the economy took such a dive, that recommendation has been lengthened by some advisors to nine months, and a year wouldn't be outlandish.

Once you know you canl live without income for a while, and atill cover your assets, then you can look for more diversification in investments.
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BlackCattle
Frequent Contributor

Re: where to invest

I dont mind having some asset backed debt. Especially with historically low rate, and I can pay it back with cheaper dollars down the road.. I already rent a nice block of land and just not looking too grow much more in that area due to high cash rents and low margins. Too much competition for it now, some guys need to get skinned out... I will keep what I have and try to be ready for opportunities when they arise..
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farmerguy89
Advisor

Re: where to invest

Definitely the way too go. Your wait it out. Opportunity is not on every farm. But there are some out there.
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tree fmr
Advisor

Re: where to invest

I have a tenant who just missed a payment. Applied with the city program to assist with making the payments. How does this affect me? Have to agree on a 90 day eviction notice vice a 20 day. Since I go thru a rental management company they get the late fees. Yeah saves me on hassle but here I am with 0 rent for the month. First time this happened in 10 years so not bad. One house also set empty for 5 months, that hurt too!

Good luck in what you decide.

BTW, when the housing market dumped a co-worker asked about how I felt with losing all that money, my response "I get a rent check every month, so if that is losing money hope I lose a lot more!" Same thing I will say about farmland when it happens. Management and within your means is the key.
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