"HW \"Skip\" Weldon" <skip5700[at]yahoo.com> wrote in message news:<4v58ov8nn7ic9h3v4rndlmkg87f4e0d8vg[at]4ax.com> ...
- quote -

The only counterexample I can come up with is people I met who have
always bought and rented out apartments.

Such people tend to:

- live extremely frugally personally
- be good at home repair (nothing like builders to bleed you dry)
- be very intelligent, in the sense that they are able to minimise on
professional fees by reading extensively and asking the right
questions
- be very focused and tenacious, for example checking 6 or 8
references for each prospective tenant
- show extreme discipline in market timing. If a property does not
make their required return (typically 8% pa or more on net rental
yield) they *do not* buy it. Regardless of whether all their friends
are jumping into rental property.

Typically they have a full time job, begin by renting out properties
as a part time business using the equity from their own home as
collateral. The ability to use borrowed money means they can expand
their balance sheet much faster than, say, a stock investor. The
deductibility of interest against income keeps the taxes down.

Typically after 10-15 years they have a portfolio of 10-20 properties
which provides them with enough income after expenses to continue to
live (frugally) without working. They then become their own property
management company.

But timing is everything in this game. In many markets I cannot
believe this is a good time to be plunging into residential real
estate.

Rich Carreiro wrote:

- quote -

Right, "I am a better investor because I am a businessman, and a better
businessman because I am an investor," he said. He happens to be extraordinary in
both areas. On the other hand I think any wealth-generating vessel can be thought
of as an investment.

- quote -

If you couldn't beat him, you could've joined him and done as well -- anyone who
has held BRKA for the last three decades would have had the same returns,
percentage-wise, as Buffett. Warren has certainly made some folks rich, if the
followers at his annual shareholders' meetings are any indication. Theoretically,
an ordinarily wealthy person, maybe one of his original partnership investors, who
had put $250,000 or so in it in 1965 would be a billionaire today, just by going
along with the ride. Of course, the fact that an average person would likely have
lacked the foresight is another issue, but outstanding investments are certainly
not limited to Berkshire Hathaway. Even well-known bluechips like GE and MSFT have
increased their values ten folds over the last ten years, even after the recent
bear market.

Sure, maybe the world will sink into a global depression or war, wiping out
wealths everywhere. It could happen, or it might not. And because economics come
in cycles, if the U.S. will never repeat such returns in the near future (despite
the past year in which many have had sizable returns), some other emerging regions
probably will. I also agree that most investments are mediocre by default, but I
also believe that many if not most investors do not necessarily have a clue about
the underlying businesses, ending up buying high and selling low. I know of
investors who are millionaires many, many times over because of wise decisions on
the markets over the decades. It really depends on whether one is a truly
sophisticated investor, I think; most are not.

On Sun, 12 Oct 2003 20:14:35 CST, Rich Carreiro
<rlcarr[at]animato.arlington.ma.us> wrote:


- quote -

Buffet has reportedly said (I've never seen the exact quote) that most
investors would be best served by buying a 500 Index fund and just
holding. Rather telling statement by the man that many wealth seekers
<grin> attempt to emulate.

-HW "Skip" Weldon
Columbia, SC

Shawn <no[at]spam.com> writes:

- quote -

True, but he's not an "investor" in the way the word is generally
used. He's not just deciding which stocks to buy and then deciding
when or if to sell them. He's instead taking controlling (or
near-controlling) interests in businesses. That's a hugely
different thing than being an "investor". Even if a zillion
fund managers were as good as Buffet, they wouldn't have returns
like him because they're not allowed to do the sorts of things
buffet does.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

BreadWithSpam[at]fractious.net wrote:

- quote -

So who has been paying Mr. Buffett for management services since the 70's?
Maybe the value of BRK stock, which alone attributes to 99% of Warren's
wealth, has grown a couple thousand times since 1965 because the frugal
geezer has been drinking his favorite diet coke for a living?

- quote -

1967: Buffett is worth about $10 million.
1970: Buffett Partnerships are dissolved.
2003: Buffett is worth about $30 billion.

It seems clear that the man who has beat S&P by double digits for decades is
no ordinary hedge fund manager.

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> writes:
- quote -

Not really. Yes, his investments have done fabulously.

But he got wealthy not from his original investments growth, rather,
from getting paid to _manage_ those investments of his and those of
other people.

His compensation for managing the partnership which ultimately
evolved into Berkshire Hathaway was similar to the compensation
that hedge fund managers get - fees plus a percentage of the
upside.

- quote -

started with eight investors putting in a total of $105,000 and
Buffett investing $100. The fee structure of the partnership was
typically no fee until a 6% return. Buffett got 1/4 and
investors got 3/4 of the annual returns above 6%. Buffett
reinvested all his fees back into the partnership.

Look at that page indicated above and note not just the returns
of the partnership, but how much money that means that Buffett
himself got back as fees. It's _huge_. His investors made
a heap of money. He, himself, made that heap-raised to some
positive exponent.

That all said, my original point remains - running a business
is risky. Real estate rental business is a business.
Running a real estate rental business is very risky and
a lot of work.

Lots of folks get rich starting and running businesses.
And lots lose their shirts.

And that goes for rental real estate just the same as,
say, starting a restaurant.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

"HW "Skip" Weldon" <skip5700[at]yahoo.com> wrote in message
news:4v58ov8nn7ic9h3v4rndlmkg87f4e0d8vg[at]4ax.com...
- quote -

I never met him, but didn't Warren Buffet become wealthy by investing?

To address remarks earlier in this thread, specifically real estate
investing, in my area lenders typically want 35% down on rental property,
not just 20%. Also, they want cash for several months rent in case of
delinquencies or vacancies. The $500,000 might not purchase the full 2.5M in
real estate, and I would question whether that would be a sound plan
nyway - no diversification.

Elizabeth Richardson

On Wed, 8 Oct 2003 07:08:03 CST, zhendsch[at]yahoo.com (zak) wrote:

- quote -

To go in a different direction, I have never met anyone who became
wealthy solely by investing.

Met a lot, though, who became successful in their career, so much so
that they saved regularly over a long time. The point is that the
career was the key, not investments.

Ditto for entrepreneurs who built a business and sold it - met some of
them too. Also knew a few who married money or inherited it. And
I've heard of those who stole it. <grin
But nobody who invested their way to wealth.

(I know it's fun to believe investment stories. But every time I
checked, success stories were based on one point in time during the
investment cycle. If you check again later - during another part of
the cycle - you'll understand.)

-HW "Skip" Weldon
Columbia, SC

speednxsticket[at]earthlink.net (Speednxs) wrote in message news:<eb91af01.0310071221.eff1359[at]posting.google.com> ...
- quote -

I wouldn't use 10 years as a guide for what the long term appreciation
will be. I would argue (as you did in your post) that the recent
run-up in housing values means that buying now likely means buying
high.

- quote -

I thought the point was rental real estate is a small business and
small business owners can get rich, therefore investing in rental real
estate can be a path to great wealth.

However, it does seem risky to me for the original poster to take his
entire retirement nest egg and use it as collateral for 2.5 million in
residential real estate, especially if he has no previous real estate
experience.

BreadWithSpam[at]fractious.net wrote in message news:<yobd6d9xi5y.fsf[at]panix3.panix.com> ...
- quote -

27%. So according to your math housing prices should have gone up 37%
- 47%. How much percentage has your house (or a typical one nearby)
gone up since 1993? Personally I think the CPI is a total crock.

- quote -

business owners almost never have this happen. How many hours a week
do you work at your small-business?

Best of Luck to both of you,
Speednxs

speednxsticket[at]earthlink.net (Speednxs) writes:

- quote -

Just before anyone buys into this kind of thing, note that
long-term appreciation of real estate at 8% is NOT ordinary.

Long-run real estate gains have been more like 1 to 2% above
inflation.

For most folks, it looks like more because it's a hugely
leveraged investment and whether it's a mortgage or rent,
folks count on monthly payments for a place to live so
that after 20 years, they suddenly have huge equity in their
homes.

Owning and operating the business of rental real estate is
very much owning and running a business. It's not passive,
it's not even vaguely low-risk, and it's not a hobby.

That all said, lots of small-business owners get quite
wealthy - in a whole variety of small businesses.

See, for example, the Millionaire Next Door, for some
perspective on building wealth as a business owner versus
as an employee.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

AlexGowes[at]yahoo.com (Alex Gowes) wrote in message news:<1f1d9db2.0310051637.1a7dea6[at]posting.google.com> ...
- quote -

market you will have about a $1,500,000 in 10 years. Take away
$150,000 for 15% capital gains tax and you have $1,350,000. To get a
$100,000 a year return you need about a 7.5% return.

Or you could buy Rental Real Estate. Let's say you buy Single Family
3 bedroom/2 bath Residences for appreciation. You need 20% down and
need to find an area that will appreciate an average of 8% a year AND
will break even cash flow. This is possible, but not easy. Do you
feel lucky? Well, do ya' punk? I just love saying that. My Rentals
appreciated about 20% a year for the last two years and no taxable
events occurred. Just a fluke. With all those Schedule E deductions
I didn't pay any State or Federal taxes either. My bumper sticker:
American by Birth, Unemployed Biker by Choice. What can I say? Since
the big crash is coming, buy when the prices are low and sell when the
prices are high. Don't tell anyone this closely guarded secret

Your buy $2.5 million in Rental Real Estate with your $500,000 down
payment. You wait 10 years and it is worth $5.4 million (8%
appreciation). You've got about $330,000 of your mortgages paid off.
You have about $3.7 million in equity. You could probably buy bonds
at this point and be done with it. Rentals are a significant amount
of work (don't underestimate this), but they should be throwing off
increasingly positive cash flow over the years. You can also deduct
up to $25,000 of employee income against phantom depreciation
allowances. There are upsides and downsides. In reality, I'd buy 1
rental a year and see how it goes. You may not have $100,000 of
positive cash flow at this point. You sell one or two of your SFR's
and buy 4-plexes to 8-plexes. With a 1031 exchange, no taxable event
occurs. These don't appreciate much as your money is tied up in
bricks and boards, but they throw off a lot of income and
depreciation. If you live in your rentals for 2 years, your can use
the $250,000/$500,000 home owner's capital gains exemption. With a
mix of SFR and small apartments you have some growth and some income
and get your $100,000 a year.
It was a dream/a dream I had on my mind/when I woke up/not a penny
could I find – Muddy Waters

Or you could email back that Nigerian Finance Minister and make some
real money

Happy Dreams!
Speednxs

lexGowes[at]yahoo.com (Alex Gowes), you asked:

<< <i> I have about $500,000 cash to invest. I want to retire in 10 years (at
age 55) and have a passive income of at least $100,000 per year at
that time. I don't need to touch the principal until then. Is this
complete fantasy or an achievable goal? What is the most likely
investment strategy to get me to my goal? Real estate? Stocks?
Something else?</i> >
It might be possible, but it's NOT going to be easy . . . . if it can happen at
all. Here are just some quick thoughts:

Just one the quick, I would suggest you'll need to get to at least $1,500,000
in that 10 years. And to get there you're going to need to get a HIGH rate of
return over this period (maybe on the order of 12% each year). You might look
at reducing that rate of return to 9% if you contribute an additional $20,000
each year. In either case, your "investment strategy" has got to be for
"growth." And investing for "growth" comes with quite a bit of risk. My
crystal ball is no better and no worse than yours or anyone else's, and there's
many ways to "invest" to get there. So choose your poison well (preferably
one you enjoy being involved with - stocks? Real Estate? Your own Business?).
If you're not prepared to take a lot risk, then I would suggest that this goal
is indeed in the realm of fantasy.

I have about $500,000 cash to invest. I want to retire in 10 years (at
age 55) and have a passive income of at least $100,000 per year at
that time. I don't need to touch the principal until then. Is this
complete fantasy or an achievable goal? What is the most likely
investment strategy to get me to my goal? Real estate? Stocks?
Something else?