High Return Investment Ideas/Alternatives to Landlording ?

[jacob]

@dragoncar - Higher.
Since the 1960s, equity ownership has exploded and become common. Since the 1980s stock ownership has become popularized through funds.

Since the 1980s, the US has run a deficit some of which has found its way into the stock market.
So my theory (I'm surprised the wiki page doesn't mention it) is that it's due to demographics and bigger fool theory coupled with unsustainable trade deficits.
I note that boomers (holders) are retiring and need to sell their appreciated FIFO stock but 20 yos (potential suckers) aren't buying because the market history they've seen looks pretty terrible. Also, they're demographically a smaller group.
Few people are talking about this. This is strange because the problem with Social Security of having 1 worker support 2 retirees eventually seems to be acknowledge. Well, what will it do to the market prices when you have two retirees who want to sell and only one worker with money to buy. Same thing ...

[jacob]

Another explanation is that I've often noted that people who haven't thought very deeply about these matters will defend their position by uttering the invocation "in the long run" pretty much as if they're going to live forever. For equity, "in the long run" = 60-70 years, which is 2-3 times as long as a typical investment horizon. There's a complete disconnect between the technical definition of a long run and then folksy understanding of the long run.
I suspect people don't realize/think about this because of the people who are currently retired, only a fraction of them has had substantial experience with a flat down market.
There's a LARGE group of voters who bought into the free market investing scheme to fund their retirement WITHOUT understanding investing. It's pretty terrible actually. The government essentially needs to prop up prices---which it has done. But it can not make them rise permanently if it isn't backed by fundamentals. Give the stock market another 10 years of being flat but artificially propped off and this equity premium will vanish.

[Chad]

It should be noted that the Fed is concerned about the Boomer issue too.
http://www.bloomberg.com/news/2011-08-2 ... -says.html

[jacob]

Ahh timely I didn't know Siegel was involved in this. So far I've only seen Browne worry about the demographic problem.
It's interesting to note that the solution proposed is to sell the US to China and India. Oh well, we're all globalized anyway, right ...

[Chad]

I thought the same thing about the solution...sell our companies to China and India?
I like Siegel's research, though I tend to be uncomfortable with the conclusions he draws from it. There always seems to be something slightly off.

[dragoncar]

Echo Boomers are entering their prime earning years soon. Perhaps children will simply buy their parent's stock

[Chad]

I'm not entirely sure who the echo boomers are, but anyone younger than the boomers would have to buy a hell of a lot of stock to offset the boomer demographic. Unfortunately, wages are stagnate at best.
Just once it would be nice to have a major positive financial trend.

[Dragline]

"Echo Boomers" are the children of the Boomers, typically known as the Millennial generation born between about 1982 and 2001. Yes, they are numerous. No, they don't have a lot of money to invest. They are generally saddled with lots of educational debt, are having difficulty getting jobs and a lot of them still live with their parents.
If anyone knows a surefire way to make a steady 15%+ through passive investing, let me know, but I think you are not likely to find one that does not involve a lot of risk. Certain leveraged REITs like NLY get you close, but could get hit hard if interest rates go up. I've been able to make a steady 9-10% the past few years via Lending Club, but only after a few years of zero return "learning". Still, I would not put too many eggs in any of these baskets. Only good as part of diversified income streams.

[JasonR]

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[chenda]

Thanks for all your replies
@ yes thats what I'm looking to do, will look into Ralph Borsodi looks interesting
@ JasonR thanks for the info - I think landlording is still something I want to do, and like you say using a manager does allow you to invest further afield, potentially allowing to buy better investments. Not sure what you mean by your last paragraph - I'm looking for higher returns so I can retire on a smaller amount of money.
Incidentally, if your looking to diversify income streams then I found this article on art. Basically purchasing artwork and renting it out to hotels, restaurants etc http://www.bbc.co.uk/news/business-14621053

[JasonR]

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[chenda]

@ JasonR - So your costs are proportionally higher on Property A than on Property B ? (Your loosing 70% of your monthly rental on A but only about 58% on B) Why is that ? I agree that take home income is more important than your nominal ROI.

[JasonR]

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[akratic]

cap rate = *net* operating income / property value
Property A = (300 * 12) / 30k = 12%
Property B = (1000 * 12) / 115k = 10.4%
cap rate is supposed to take annual costs (both fixed and variable) into account, thus net operating income.
I hope I didn't confuse things by trying to use cap rate without costs taken into account in a previous thread. I only did that because I didn't have costs for anyone's properties.

[JasonR]

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[Maus]

@chenda, @JasonR

WRT "hotel" art, I once cobbled up a business plan to mass produce found art collages and market them to mid-level hotels. I got the idea after spending a week in three different hotels on state business. It struck me that every room needed at least two pieces of art on the wall; and the stuff must come from somewhere. I confess that I had no aesthetic interest in the end product. No angel investor was willing to take a chance, so the idea was stillborn.

[Maus]

@JasonR

This exposition of cap rates remindes me of the Yield on Cost calculation for dividend growth investors. The market value of the underlying share isn't really of principle concern, it's the growing yield relative to the price paid for that share. That's why I am not too exercised by the recent market volatility WRT the majority of my dividend stocks. Their YoC is still more than adequate. The only thing that would upset me is a cut in dividend, such as swept the financials in 2008.

[JohnnyH]

Options selling can really help increase returns... Like Jacob said though, increase risk or work. And options sales certainly do require increased risk.
Ratios and spreads in addition to risk management does help limit risk.

[palmera]

Hello, this is my first post - but I'm a long time reader (since 2009/2010)! I'll introduce myself later. Moving on...
I've really thought long and heard about this. The only thing that I can think of that's actually sustainable is income-generating property (good ol' real estate).
I was having dinner with a family friend who's a successful lawyer (and he actually seems to really like it...weird... with a lot of different streams of incomes. He's very nervous about investing in the stock market, and while he still does it, he has orders to his brokers to sell at 12% gain (or another specific %age loss, I forget how much though).
He's pretty disgruntled right now that his portfolio is down BUT his real estate holdings are yielding %30 percent.
Let me tell you, that dinner was EXTREMELY educational!

[palmera]

Also, someone else mentioned it earlier, but in the accumulating stages, keeping an eye out for pay increases (through raises, promotions, job hopping) seems to be key.
Think about it, if you were to get a new job that increased your salary 20% - your investment in yourself (job applying, networking, training & education) just yielded you 20%!