# How to build wealth **URL:** \ **Category:** In My Humble Opinion\ **Created:** [March 6, 2017, 6:28pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563 "2017-03-06T18:28:57Z")\ **Posts on this page:** 18\ **Page:** 4
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 9, 2017, 2:56pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/61 "2017-03-09T14:56:56Z")
> [@Ruken](#): > > \*\* With a lot of farmland in-between\*\* oh right. I forgot he was looking to rent out farmland. :rolleyes: ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [March 9, 2017, 3:05pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/62 "2017-03-09T15:05:28Z")
> [@Slash1972](#): > > oh right. I forgot he was looking to rent out farmland. :rolleyes: Meaning that not everything between here a there is in a high-price university town, which you already know if you looked at Zillow. Rolleyes indeed. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 9, 2017, 3:11pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/63 "2017-03-09T15:11:10Z")
> [@Ruken](#): > > Meaning that not everything between here a there is in a high-price university town, which you already know if you looked at Zillow. Rolleyes indeed. I’m sorry, but you’ve lost me. I don’t live in a “high-price university town” and there is absolutely nothing to be found for less than $150,000 that could easily be rented out. Could you maybe link to one or two places in Anacostia that could be rented out and also cost below $80K? ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [March 9, 2017, 3:42pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/64 "2017-03-09T15:42:13Z")
> [@Slash1972](#): > > I’m sorry, but you’ve lost me. I don’t live in a “high-price university town” and there is absolutely nothing to be found for less than $150,000 that could easily be rented out. Charlottesville is a high-priced university town. It is roughly at the border of the 2.5h radius. And everything closer is within that radius. And typically not as pricey as cville into you get near a city. > [@Slash1972](#): > > Could you maybe link to one or two places in Anacostia that could be rented out and also cost below $80K? Why do you feel that the listings you see in Zillow cannot be “easily rented out”? Look, you wrote: > [@Slash1972](#): > > Is this a typo? I live in the DC area (southern Maryland) and I can’t think of ANY area within 3 hours of DC that you could find a place for $60-80K. Without checking or apparently realizing how large that radius is. I could leave my office right now and be in Aberdeen, Gettysburg, Martinsburg, NAS Patuxent Rivet, etc. etc. all in about 90 minutes. 3 hours gets me to Trenton. ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [March 10, 2017, 2:24pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/65 "2017-03-10T14:24:45Z")
Appreciate all the input and advice! We’re still poring everything over and we won’t rush into anything. ---
**Author:** ![Slash1972](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/slash1972/32/6461_2.png) [@Slash1972](https://boards.straightdope.com/u/Slash1972)\ **Post date:** [March 10, 2017, 3:10pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/66 "2017-03-10T15:10:02Z")
> [@Ruken](#): > > Look, you wrote: Without checking or apparently realizing how large that radius is. I could leave my office right now and be in Aberdeen, Gettysburg, Martinsburg, NAS Patuxent Rivet, etc. etc. all in about 90 minutes. 3 hours gets me to Trenton. Yes, I realized my mistake and reduced it to 2 hours. However, I still maintain that you can’t find any rentable properties for under $80K in Gettysburg or NAS Patuxent River, or Aberdeen for that matter. If you think there are, please link to one. And I see you haven’t linked to any rentable Anacostia properties that can be had for under $80k. Edited to add: I admit there are some trailers for sale that are under $80k, so to be fair, I guess technically a place to rent out can be had in Gettysburg for under $80K. ---
**Author:** ![glowacks](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/glowacks/32/5548_2.png) [@glowacks](https://boards.straightdope.com/u/glowacks)\ **Post date:** [March 11, 2017, 6:11am UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/67 "2017-03-11T06:11:20Z")
I would advise to only become a landlord if you have the stomach for it. You need to be aware that putting a large chunk of your net worth into a single asset is a very risky move. If you diversify your real estate holdings, that’s that much more in paperwork you have to keep track of. There are definitely very successful people that are clients of my firm that I’ve worked on returns for that have a wide selection of rentals they manage, but they didn’t get to be successful by being landlords. The most successful landlord I’ve seen is one that retired from the real estate business - she clearly knew enough about real estate to know what kinds of properties were good to buy and rent. But there’s this guy who is the creative genius for a media company around here, and while he has tons of rentals, the rental LLCs owe his main business absolute heaps of money - sometimes on top of the bank mortgages. He’d probably have been better off sticking to stocks. It basically is a matter of appetite. Stock index funds are somewhat boring, and you can’t devote much extra time into improving your investing like you can with making improvements on your properties. If you really want to invest your money beyond what you’re allowed to put into retirement accounts, it certainly isn’t a bad idea, and is one that might pay off if you get lucky. I personally would rather spend my time I wanted to use to build my wealth to read financial reports of various companies looking to see which ones might be good to invest it. That it’s related to my field of work is a feature, not a coincidence. So unless you already work in residential real estate, I would advise you to not become a landlord, and instead try to set up a side business that involves something you’re good at. I don’t know what kind of job you have and whether it’s conducive to being an outside consultant, but the biggest asset you have is your brain. Look for ways to leverage the knowledge you have (combined with your capital) into more wealth creation, not just treat the capital as something separate from your marketable talents that allowed you to earn that capital. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [March 11, 2017, 1:56pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/68 "2017-03-11T13:56:21Z")
> [@Slash1972](#): > > Yes, I realized my mistake and reduced it to 2 hours. However, I still maintain that you can’t find any rentable properties for under $80K in Gettysburg or NAS Patuxent River, or Aberdeen for that matter. If you think there are, please link to one. That list establishes a radius. Establishing a radius doesn’t mean you are restricted to that outer radius and nothing closer. Those cities are examples of the perimeter so that you know how far to _stop_ looking. They are examples to show you how many square mile after square mile of bumfuck there are not all that far from DC. I shouldn’t need to explain that. You have now spent more time arguing about this than it would have taken you to validate your original or revised claim and find that they’re both wrong. That is amazing. Hagerstown, MD, less than 90 minutes away (so closer than my even more aggressive perimeter cities of Gettysburg and Martinsburg), has a few dozen properties under $80k. [Here](https://www.zillow.com/homes/for_sale/Hagerstown-MD/fsba,fsbo,new_lt/house,condo,apartment_duplex,mobile,townhouse_type/38842_rid/0-80000_price/0-309_mp/globalrelevanceex_sort/39.673964,-77.664071,39.59967,-77.781315_rect/12_zm/0_mmm/) is a citation to refute your original and revised (both uncited) claim. Let’s hope Zillow uses permanent URLs. If not, you can type “Hagerstwon MD” into Zillow yourself. I unchecked lots, foreclosures, and manufactured homes, and got 49 hits. You still haven’t defined “rentable”, which is a goalpost you added later, not one I ever addressed. So you’ll have to tell us why any of these don’t meet your hidden definition that you haven’t shared with us. [249 Summit Ave](https://www.zillow.com/homedetails/249-Summit-Ave-Hagerstown-MD-21740/87796598_zpid/) is a duplex for under $75k that claims to already have a tenant. > [@Slash1972](#): > > And I see you haven’t linked to any rentable Anacostia properties that can be had for under $80k. And I see you haven’t defined your moved goalpost. Note that I wrote “But there’s probably a reason it’s so low” because my assumption is that the property is in bad shape. [2400 Good Hope Rd SE #203](https://www.zillow.com/homedetails/2400-Good-Hope-Rd-SE-APT-203-Washington-DC-20020/522364_zpid) is a two-bed condo east of the Anacostia going for $79k. Downstairs, [#103](https://www.zillow.com/b/2400-Good-Hope-Rd-SE-Washington-DC/38.862462,-76.971272_ll/) is listed for rent at $1650/mo. Maybe it’s full of mold. Maybe the neighbors are loud at 2 AM. Maybe it’s not even a real listing. But for less time than it takes to type a response on the SDMB, the listing is right there on Zillow. > [@Slash1972](#): > > Edited to add: I admit there are some trailers for sale that are under $80k, so to be fair, I guess technically a place to rent out can be had in Gettysburg for under $80K. Already addressed. Establishing a perimeter does not restrict to that perimeter. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [March 11, 2017, 6:27pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/69 "2017-03-11T18:27:20Z")
> [@iiandyiiii](#): > > Are there any worthwhile alternatives to real estate and mutual funds? Bonds. Hear me out but take it with a huge grain of salt. The notion of diversification has come up a lot in this thread. Your assets are in your own home and index funds. Your current strategy can leave you vulnerable to losses if there is a big downturn. What are the chances of a big downturn? Well, to me the stock market seems to be near a peak. We’ve had a bull run going back, what, 8 or 9 years? Past is not future, but with all the political and social unrest around the world, it doesn’t seem so unlikely to me that we will see a pullback in the next few years, possibly a big one. Diversifying into bonds will get you as asset with a lousy yield in the short run, but if your bond assets become significant ahead of a downturn, they will hold their value. Then you can wait until there is blood in the streets, liquidate and mop up. This amounts to a low-risk way to short the market (stock or real estate) long-term. But, if your assets are growing into “significant” territory, why not have a safe-and-secure section of your diversified portfolio? ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [March 13, 2017, 12:45am UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/70 "2017-03-13T00:45:48Z")
Our real estate agent got back to us with a list of over 50 properties under $100K, many clustered around places like Fredericksburg, Culpepper, and the Shenandoah region, but a few as close as Leesburg VA (which had a single small condo at about $90K). So it looks like we’ll at least have some options relatively nearby if we want to go with a small investment property. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [March 13, 2017, 1:37pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/71 "2017-03-13T13:37:20Z")
> [@Try2B\_Comprehensive](#): > > Diversifying into bonds will get you as asset with a lousy yield in the short run, but if your bond assets become significant ahead of a downturn, they will hold their value. Then you can wait until there is blood in the streets, liquidate and mop up. > > This amounts to a low-risk way to short the market (stock or real estate) long-term. But, if your assets are growing into “significant” territory, why not have a safe-and-secure section of your diversified portfolio? Shorting the market is not the same thing as “safe-and-secure”. In the case of bonds specifically, if interest yields rise - as they are currently projected to do - then the value of your bond portfolio will decrease. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [March 13, 2017, 6:53pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/72 "2017-03-13T18:53:10Z")
Maybe you would not mind doing elaborating on that. Say I buy $50k worth of Treasury bonds with a 2% yield. A year later, the Fed raises rates, new Treasuries now yield 2.5%. I still make 2% on the ones I bought, right? How have I lost money, beyond opportunity cost? Then, if the market crashes such that an S&P 500 index fund drops in value by 20%, the bonds still pay 2%, no? And could be liquidated to fund the purchase of suddenly cheap assets, right? Am I missing something? ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [March 13, 2017, 7:11pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/73 "2017-03-13T19:11:17Z")
You still get the 2%, but the dollar value of your holdings will decrease. So if you try to liquidate, i.e. sell the portfolio, you get less for your holdings. The reason is because as yields go up, the value of an investment paying a fixed dollar amount decreases. Because it now takes less capital to get that level of payment. That’s why you’ll see/hear the business news reporting on the yield of government bonds, e.g. the 10 year treasury rates. That doesn’t imply that there were new treasury sales that day at those rates. It’s that sales of pre-issued bonds are constantly going on, and each of these carries an implied yield, based on the value of the bonds. ---
**Author:** ![Oredigger77](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/oredigger77/32/3181_2.png) [@Oredigger77](https://boards.straightdope.com/u/Oredigger77)\ **Post date:** [March 13, 2017, 7:14pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/74 "2017-03-13T19:14:42Z")
> [@Try2B\_Comprehensive](#): > > Maybe you would not mind doing elaborating on that. I’ll take a stab and be corrected later. There are two values for a bond, the face value and the par value. If you bought a $50,000 bond at 2% it’s face value would be 50K but it’s par value would be more or less then that depending on the bond’s interest rate compared to the overall market. With the expectation of rising interest rates the par value of the bond is typically less than its face value so you may have both 60K in for 50K out of pocket. That way your 50K is earning 2.4% actual interest. This can work in the other direction as well where you can buy a bond for more than face value and earn less than the face value interest. You are correct that you will be getting the same 3K in interest no matter what but what you paid for that money will change over time and if you want to liquidate to take advantage of blood in the streets how much you can sell the bond for will change over time so it’s not straight forward. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [March 13, 2017, 7:43pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/75 "2017-03-13T19:43:24Z")
The only thing I would add is that the value of a bond is not completely in accord with the interest rates, since there’s also the value of the principal as well. Basically, it’s the value of the interest payments plus the principal (discounted at current rates). For this reason long term bonds are much more sensitive to changes in interest rate than short term ones. Because the percentage of the value that’s based on the interest payments versus the principal is much higher, plus the impact of discounting on the principal is itself much greater. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [March 13, 2017, 9:04pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/76 "2017-03-13T21:04:33Z")
> [@iiandyiiii](#): > > Our real estate agent got back to us with a list of over 50 properties under $100K, many clustered around places like Fredericksburg, Culpepper, and the Shenandoah region, but a few as close as Leesburg VA (which had a single small condo at about $90K). So it looks like we’ll at least have some options relatively nearby if we want to go with a small investment property. Leesburg is hopping; I’m surprised there’s anything left that low. It’s even close enough for miserable commutes to the District. How much appetite do you have for fixing up on your own? That was always a barrier for me. My home-repair skills are underdeveloped. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [March 14, 2017, 6:04pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/77 "2017-03-14T18:04:18Z")
> [@bump](#): > > But to do it right, you have to account for your own time in some fashion. Maybe not in the relentless way that a self-employed business owner should look at his profits and effort spent vs. just having a normal job, but your non-working leisure time is valuable now, and becomes drastically more scarce for several years once you have children. Totally true. As the father of an 11-month-old, I’m _distinctly_ aware of how scarce and valuable my leisure time is. Ultimately, you have to want to do the part-time job of a landlord for “being a landlord” to make sense in most situations. If you _don’t_ want the part-time job of being a landlord, then don’t buy an investment property, buy shares in a company that buys investment properties. Your time is valuable, but if you’re reasonably handy, it’s not hard to come out ahead of hiring someone to do all the work. A good check on this: Do you do your own handyman work around your house, or do you hire professionals for everything? For example, I saved about $600 recently installing a water softener (at my own house) over hiring someone to do it. It took me somewhere around 5 hours. $100+ an hour, tax free, is a pretty good value for my time. And I like working with my hands, so it’s enjoyable labor for me, not drudgery. ---
**Author:** ![Fotheringay-Phipps](https://avatars.discourse-cdn.com/v4/letter/f/d9b06d/32.png) [@Fotheringay-Phipps](https://boards.straightdope.com/u/Fotheringay-Phipps)\ **Post date:** [March 14, 2017, 6:55pm UTC](https://boards.straightdope.com/t/how-to-build-wealth/781563/78 "2017-03-14T18:55:58Z")
> [@iamthewalrus\_3](#): > > Your time is valuable, but if you’re reasonably handy, it’s not hard to come out ahead of hiring someone to do all the work. A good check on this: Do you do your own handyman work around your house, or do you hire professionals for everything? > > For example, I saved about $600 recently installing a water softener (at my own house) over hiring someone to do it. It took me somewhere around 5 hours. $100+ an hour, tax free, is a pretty good value for my time. And I like working with my hands, so it’s enjoyable labor for me, not drudgery. I myself do that sort of thing around my house but rarely at my investment property, although it’s only about 2 miles away. Mainly because I need to find a mutually convenient time to work at it, and plus if I find I need another tool I have to drive home rather than just popping into the garage. I also have more time to research whether this is something I want to fix myself and how to go about doing it, if it’s not something I’ve done before. I’m more likely to do things at the rentals myself when they’re between tenants and need a bit of minor sprucing up (replacing light fixtures and outlets, fixing shelves etc.) when it’s not as pressing a need and there’s no tenant’s schedule to work around. [Previous page](https://boards.straightdope.com/t/how-to-build-wealth/781563.md?page=3)