Okay, well maybe not $1 Million, but how can I use the money I have to make more money?
I had been saving the money to make a downpayment on a house. But after perusing Robert Kiyosaki’s Rich Dad, Poor Dad, one of his ideas struck me. A house is a liability! Why should I spend most of my money in order to go into debt? Having equity in a home would be nice, but at this point it seems to make more sense to use my money to generate some extra income first.
I haven’t actually read the book yet, but it doesn’t seem to have any real ideas in it. The problem with all books of this type is they’re all positive thinking rah rah rah and no actually ideas.
So how do I do it? I have a full time job and make a decent salary. Putting my savings in stocks or mutual funds isn’t going to get me a significantly higher return, especially with the market being the way it is.
Maybe I’m just bereft of imagination, but the only real profitable thing I can think of is to start an internet porn site. I’ve got a few ideas that would make mine stand out. I’ll need some help though. Anyone interested?
Don’t buy a house until you can afford to make at least 15% of the price as a down payment. That’s just my personal opinion, but the bigger the down payment, the better. A house is an excellent investment; renting has its advantages, but you don’t get anything long-term for the money you pay.
An excellent investment vehicle for 20 grand is a no-load index fund. Over ten years, you can easily see returns of 10 to 15 percent, or more. And it’s very, very low-risk, since you get automatic diversification.
I’ve always heard this, dunno how true it is. Use your downpayment on a house, but get a bigger one than you need. Rent out the rooms you don’t use and use the rent towards the mortgage and such.
Buy a four-plex (One building, 4 separate living units)
Live in one, rent out the other three - two units’ rent pays the mortgage, the 3dr unit’s rent pays the maintenance. You live free, and end up with the whole property free and clear.
What money you would have spent on housing can now be invested.
Net: for the hassle of tennants for X years, you come up with a building AND a portfolio - both of which provide income.
Slightly off topic, but there is an awful lot of evidence to suggest that Kiyosaki is a fraud and doesnt know what hes talking about. You should know about that before you base any decisions on advice he gives.
Thanks, Zcrysis. I read your link and it confirmed what I suspected about Kiyosaki. Namely, that he’s a con artist with no real ideas.
It never ceases to amaze me that otherwise intelligent people (like my father, who recommended the book to me) continue to fall for this nonsense. Especially considering that some of Kiyosaki’s lessons contradict things that my father obviously believes (Kiyosaki says don’t bother going to college, while my father is a Ph.D.)
Extraneous’ 4-plex idea sounds good. I might have to start with a duplex, though, unless I want to move someplace cheaper than LA. Either that or stick with the porn idea.
I read that link too and concluded that the author has a serious burr up his butt and way too much time on his hands. I didn’t see many strategies being challenged, but there was a bunch of argument over semantic points and a truly bizzare section trying unsucessfully to discredit someone’s military record.
I don’t know who Kiyosaki is and I haven’t read the book, but that screed convinces me of nothing but that the author is obsessive nitwit.
I agree with Extraneous. If I had ‘extra’ cash, I’d buy a rental property. I’m of the opinion that you’d want to use the smallest downpayment possible…if some bank wants to let you use their money, I say go for it, especially with rates as low as they are now.
Real estate may not appreciate as quickly as stocks/bonds, but with stocks and bonds your returns are only your $20,000 investment. If you use $20,000 down to buy a $400,000 rental property, your returns are on the $400,000. Granted, you have to pay interest, but the interest is tax deductable, it should be covered by the rental income.
I also read Rich Dad / Poor Dad, and you’re right. It’s one decent concept repeated about 50 times, with a lot of ‘you can do it!’-type stuff inbetween. Add to that the possibility that he’s a fraud, and I’d say either read the first chapter only, or don’t waste your time reading it at all.
Any way to make 20k into 1M would involve risking all of the 20k. Penny stocks, Vegas, Pork futures. The general assumption in that situation would be that you are going to lose your 20k.
On the other hand, a buddy of mine did some risky property investments on duplexes that were ‘on the cusp’ between good neighborhoods/bad neighborhoods in the gamble that the good neighborhood was going to spread. He lived upstairs, remodeled and improved it himself, then when he was done, moved downstairs. Then bought another. Then two more. Then he sold them all and bought an apartment building. This was over the course of about 15 years. He now owns 3 apartment buildings, and a wonderful house in the suburbs. He worked as a host in a resturaunt the whole time. The evening shift allowed him the freedom to do work and upkeep in the buildings, and he had health insurance through that job. He’s now part owner of the resturaunt too. He’s probably a millionaire on paper.
Anybody who says buying a house isn’t a good investment is insane. My house has doubled in value in 5 years (about a 200k swing). There’s nothing short of coke dealing that makes that kind of money.
Well, on review, I’m not talking about cash money, but then again, I’m going to be able to buy a house outright Somewhere Else with the proceeds from the sale of my current house, which we plan to do when we “drop out” of the big city scene.
A house also gives you some leverage. For example, when you pay off your Rental Haus/Love Shack, you can get a loan with your Love Shack as collateral and then, if you continue with the roommate thing, your Love Shack is making you money while your New House is too.
Step 1: Forget you ever asked a bunch of yahoos on the internet about how to invest money (especially Doper yahoos–what were you thinking?). You’ll get lots of different opinions that are mostly based on the different people’s individual circumstances and aptitude and have nothing to do with your circumstances or aptitude. As an added bonus, the opinion givers will invariably start arguing with one another about each other’s opinions and will entirely forget that you exist.
Step 2: Read at least five general purpose books (i.e., ones that assume the reader knows absolutely nothing and try to introduce the reader to absolutely everything), and then read more about specific types of investments (e.g., bonds, different types of stocks, other equity stuff [REITs, MLPs], options, futures, boring stuff [money market accounts, CDs]), investment strategies in each of the different areas (e.g., for futures: scalping, hedging, swing trading, position trading, etc.), and anything else you got interested in while reading the general purpose books.
Investing for Dummies is a really good place to start; I recommend it to beginners because it doesn’t have an agenda or anything else to sell. You’ve gotta watch out for this when you read any other book, but after you’ve read a couple things like this will be easy to spot.
Step 3: Do whatever you determined for yourself is the right thing to do based on your research and analysis in Step 2. This might be simply putting all of the money into a CD and forgetting about if for a few years and it might be trading currencies at home in your spare time (and not getting much sleep, but that’s the life of a currencies trader). How fast you want that $20,000 to turn into $1 million and how you will feel and live if you lose the entire $20,000 will be big determiners of the investment method(s) you choose.
I reviewed commercial real estate loans for years and saw many millionaires made from investing in rental real estate, buying the first one and then leveraging future purchases from the equity. Rentals are valued on the income they generate, unlike a house. Also, the losses are allowed against ordinary income (earnings, interest, dividends, etc.). Due to depreciation expense most rentals are “losses”. (some limits) I have a friend who owns rentals and they can be a big pain in the behind, but if you do some research and find a part of the country where it looks like homes are appreciating (and rents going up), and you could get in at the bottom, you could make some money. Just tonight there was a program segment about the problem in Montreal. No rentals for middle-income people. It’s happening here in Southern Maine. Fewer and fewer affordable rentals around Portland. Home prices have skyrocketed over the past few years. I live in a rural area in northeast Maine but even here prices are starting to go up; 6 years ago the most expensive house in town was 36,000. People always have to have a place to live. And unlike the stock market, the risk is much lower.
I got out of the market because I was tired of waiting for the next shoe to drop. All it would take is one more attack in the country and people starting to believe our government can’t protect us and the market will plunge. I’m older and I’ve seen the economy with it’s up and downs, but we are in a new era and I just don’t know if all the old advice applies anymore. Good thing the recovery doesn’t depend on me!
That’s a bunch of BS! I bought may house about 1.5 years ago with only a 3% down payment. With the rise in property value, I refiananced this year with about 22% equity in the home.
Don’t blow your wad on buying a home when you can do it for the minimum and keep more of your money! Then turn around and invest. You’ll make a lot more for the same amount of money spent and still have a nice home to live in!
That is poor advice. You benefited from increasing property values and low interest rates - situations that could change at any time (especially property values). Say after you made your 3% down payment, the housing market started to tank and home prices dropped by 10% (not out of the realm of possibility). Now your equity is gone, and are paying just to get even. Add on top of that some “unfortunate circumstances” that can happen to anyone and you have got a major problem.
A larger downpayment insulates you from some of these problems. Note: it does not make you immune, just more resistant. It depends on the risk tolerance level of the individual, and to say that because a 3% payment worked for someone does not make investing in a house prudently and conservatively (i.e 15-25% downpayment) “BS”.
So tossing all of your money into buying a house is a sound investment?? Say you throw 15-20% in as you suggest and the terrible senario of the property dropping in value. Now you’re out 5-7 times as much money as you would have been with a 3% down payment. Plus you’ve got a lot less money in your savings for emergencies!
As for paying to get even, you always can put more money into paying for your house (as long as there’s no pre-payment penalty.) As for getting money out of the house if needed, you have to take out a 2nd mortgage or home equity line of credit. Not nearly as easy as moving the money out of savings.
What exactly makes putting 15-20% down on a house prudent or conservative?? To me it’s more prudent to keep that money for yourself and build up your savings further.
