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Here's my story. I live in Los Angeles, and bought my first condo when I was 25 in late 2009. At that time there was an $8k tax credit you could get for first time home buyers. I wasn't making much at the time at $50k per year, but I had scrapped and saved enough for a down payment. Plus with the market crash and the tax credit, I was able to get a 1 bedroom. I lived there for 4 years, then rented it out for a year. I then sold it for a profit and used all my life savings to buy a small grocery store. I've been running this on top of my corporate job for the past 2.5 years. I'm now in the process of selling and haven't made any money from the store.

So with that said, I'll have $200k in the bank. I don't want to buy a condo again as I think prices are too high and there may be a market correction and recession coming. I have a little money invested in stocks, but I'm not a savvy and experienced trader or stock investor. I have a pretty good six figure corporate job and I'm 32 years old. I really want to get into real estate, but again, the prices are high. And even if prices decline, I doubt I could buy two properties - a condo for myself and a rental. LA real estate is just so highly priced. Even after the crash, the best I could see in LA was maybe 0.6%-0.7% monthly income/price ratio. I've read in the rental property thread that people in other areas of the country achieve up to 2.0% ratio. That's impossible in LA.

I'm looking for some ideas from people.

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Three pointer only for me.

DTASFAB (Oct. 13, 2016 @ 9:03a) |

Put it into an interest bearing bond fund, my current holding is SJNK and sit on it & collect interest until the market ... (more)

LeveragedSpeculator (Oct. 20, 2016 @ 6:28a) |

Junk bonds are usually highly correlated to equities, so good luck with your strategy.

stanolshefski (Oct. 20, 2016 @ 6:48a) |

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h&b. lots and lots of h&b.

rufflesinc said:   h&b. lots and lots of h&b.
  I'm sure you provided a facetious answer, but what is this?

t0pher said:   rufflesinc said:   h&b. lots and lots of h&b.
  I'm sure you provided a facetious answer, but what is this?


Prostitutes & drugs

Always a good idea when you can't think of anything else.

got it hookers & blow

Don't get greedy. Quite a few banks have 1% savings rates, I have one that pays 1.25%. Park it there until you find the property you want. Putting it into stocks might get you more, but it could just as well let you lose much of it if you don't know what you're doing.

H&B is a standard FW blowoff answer. Someone else will come in soon and say you should buy and resell Crown Vics.

Questions for you:

Where are you living now? Renting?
Have you started planning for your retirement?
How stable is your job?
Any chance of a relocation to lower cost area of the country?
Do you still have the grocery store? Do you sell Money orders or prepaid cards on credit? (PM me if so, might be able to save the business)

$200k is nice but nothing really amazing when you consider that you're always going to need somewhere to live here in LA.

Stubtify said:   H&B is a standard FW blowoff answer. Someone else will come in soon and say you should buy and resell Crown Vics.
 

  Well, H is illegal in most places except Nevada, and B is illegal everywhere. At least reselling CV's is still legal unless you resell more than your state allows you to sell without a license. 

"and B is illegal everywhere" - well, i do not remember anybody to get punished for this including one of our president.


Lazy portfolios - Bogleheads
Disclaimer
t0pher said:   Here's my story. I live in Los Angeles, and bought my first condo when I was 25 in late 2009. At that time there was an $8k tax credit you could get for first time home buyers. I wasn't making much at the time at $50k per year, but I had scrapped and saved enough for a down payment. Plus with the market crash and the tax credit, I was able to get a 1 bedroom. I lived there for 4 years, then rented it out for a year. I then sold it for a profit and used all my life savings to buy a small grocery store. I've been running this on top of my corporate job for the past 2.5 years. I'm now in the process of selling and haven't made any money from the store.

So with that said, I'll have $200k in the bank. I don't want to buy a condo again as I think prices are too high and there may be a market correction and recession coming. I have a little money invested in stocks, but I'm not a savvy and experienced trader or stock investor. I have a pretty good six figure corporate job and I'm 32 years old. I really want to get into real estate, but again, the prices are high. And even if prices decline, I doubt I could buy two properties - a condo for myself and a rental. LA real estate is just so highly priced. Even after the crash, the best I could see in LA was maybe 0.6%-0.7% monthly income/price ratio. I've read in the rental property thread that people in other areas of the country achieve up to 2.0% ratio. That's impossible in LA.

I'm looking for some ideas from people.

  
For the very reasons I highlighted above, you don't want to gamble your money. My advise would be https://www.bogleheads.org/wiki/Lazy_portfolios at Bank of America/Merril Lynch and benefit from http://info.bankofamerica.com/preferred-rewards/ or something similar at other brokers. Some even have special incentives to bring money into their accounts.

OP, what is your investment time-frame, i.e. when do you need a liquid money?

If it's at least one year I'd consider Real Estate Crowdfunding for at least part of your money; you'd still be in RE, but diversified, you'd earn a decent interest, and you'd still be relatively liquid

If interested - PM me, I can share some goodies

Stubtify said:   H&B is a standard FW blowoff answer. Someone else will come in soon and say you should buy and resell Crown Vics.

Questions for you:

Where are you living now? Renting? Yes renting
Have you started planning for your retirement? See below
How stable is your job? Definitely stable
Any chance of a relocation to lower cost area of the country? Very low chance I'd move
Do you still have the grocery store? Do you sell Money orders or prepaid cards on credit? (PM me if so, might be able to save the business) See below

$200k is nice but nothing really amazing when you consider that you're always going to need somewhere to live here in LA.

  
I'm not contributing to my 401k right now. I get that the safe and steady route that most people take is to put their $500 away every month into their 401k's and wait for 30-40 years and finally have access to that money and retire. While I'm not completely opposed to doing that, I just really want to break free from a daily job and have my own investments or business. All the rich people I know didn't slowly put money away into their retirement accounts and wait around. They all took risks and most of them started businesses. Again, I'm not saying there's anything wrong with that way of life, but a high amount of wealth is important to me.

Yes, I sell money orders, but not prepaid cards. Anyway it's a moot point, as I'm signing all the paperwork for an offer and opening escrow next week. I'm not sure how that would "save" the business. If you're thinking about the check cashing route, I already do that at my store and it's a good source of revenue. The business generates money, it's just way too much work for too little money.

FirstAllTheWay said:   
t0pher said:   Here's my story. I live in Los Angeles, and bought my first condo when I was 25 in late 2009. At that time there was an $8k tax credit you could get for first time home buyers. I wasn't making much at the time at $50k per year, but I had scrapped and saved enough for a down payment. Plus with the market crash and the tax credit, I was able to get a 1 bedroom. I lived there for 4 years, then rented it out for a year. I then sold it for a profit and used all my life savings to buy a small grocery store. I've been running this on top of my corporate job for the past 2.5 years. I'm now in the process of selling and haven't made any money from the store.

So with that said, I'll have $200k in the bank. I don't want to buy a condo again as I think prices are too high and there may be a market correction and recession coming. I have a little money invested in stocks, but I'm not a savvy and experienced trader or stock investor. I have a pretty good six figure corporate job and I'm 32 years old. I really want to get into real estate, but again, the prices are high. And even if prices decline, I doubt I could buy two properties - a condo for myself and a rental. LA real estate is just so highly priced. Even after the crash, the best I could see in LA was maybe 0.6%-0.7% monthly income/price ratio. I've read in the rental property thread that people in other areas of the country achieve up to 2.0% ratio. That's impossible in LA.

I'm looking for some ideas from people.

  
For the very reasons I highlighted above, you don't want to gamble your money. My advise would be https://www.bogleheads.org/wiki/Lazy_portfolios at Bank of America/Merril Lynch and benefit from http://info.bankofamerica.com/preferred-rewards/ or something similar at other brokers. Some even have special incentives to bring money into their accounts.

  
Not bad, and I'd consider doing this. But I don't really adhere to the blanket statement that someone without experience is essentially gambling in the stock market. Every superstar trader had no experience at some point. Now, I'm not stupid and wouldn't throw all my money in it at once without knowing anything, but I still think of stock investing as a possibility as opposed to the lazy man's portfolio.

t0pher said:    
Not bad, and I'd consider doing this. But I don't really adhere to the blanket statement that someone without experience is essentially gambling in the stock market. Every superstar trader had no experience at some point. Now, I'm not stupid and wouldn't throw all my money in it at once without knowing anything, but I still think of stock investing as a possibility as opposed to the lazy man's portfolio.

  
Most people with experience are still gambling in the stock market. The "lazy portfolio" is designed to give you consistent returns over time with a diversified portfolio of investments. Why do this? Because most people can't beat the market, including you. Even easier than the lazy portfolio, put in a Vanguard Target Retirement Fund for the year you want to retire. It isn't sexy/fun/glamorous, but you will make more money than playing around in the stock market (which is gambling unless you have a lot more money and the time/financial analysis experience to make educated trades).
 

you've gone from "scrap[ping] and sav[ing] enough for a down payment" to 200k in the bank in roughly 7 years. stay the course and you should end up just fine.

t0pher said:   got it hookers & blow
  100 crown vics

Tresh said:   you've gone from "scrap[ping] and sav[ing] enough for a down payment" to 200k in the bank in roughly 7 years. stay the course and you should end up just fine.
  OP is going by anecdotal evidence on "taking risk" and "starting your own business" to end up with riches but that the result of confirmation bias.  Many others that followed that route ended up broke but you don't get to see their boat and big houses, because, well, they don't have it and you don't notice it.  You notice the hits, not the misses

​I'm not discouraging OP from taking calculated risk but it's not something that one can just push the right button and expect success.  Vanguard did a study and asked their high-net-worth clients what's one factor that most contributed to their success. 

Guess what the result turned out to be?  Their saving rate.   Yup, the boring, non-risk taking, plain old putting $ in the bank route works.

 

ZenNUTS said:   
Tresh said:   you've gone from "scrap[ping] and sav[ing] enough for a down payment" to 200k in the bank in roughly 7 years. stay the course and you should end up just fine.
  OP is going by anecdotal evidence on "taking risk" and "starting your own business" to end up with riches but that the result of confirmation bias.  Many others that followed that route ended up broke but you don't get to see their boat and big houses, because, well, they don't have it and you don't notice it.  You notice the hits, not the misses

​I'm not discouraging OP from taking calculated risk but it's not something that one can just push the right button and expect success.  Vanguard did a study and asked their high-net-worth clients what's one factor that most contributed to their success. 

Guess what the result turned out to be?  Their saving rate.   Yup, the boring, non-risk taking, plain old putting $ in the bank route works.

 


I agree with a lot of what you said, but I just want to mention one thing. I've personally seen extended family and friends lose multi-millions from their businesses and go from rich to poor. So I just have to disagree with the confirmation bias part of what you said. With high risk is the potential for high reward. I am not immune to risk, and I understand what it is. I sold my house and invested my entire life savings into a business without knowing what the result would be. And I get that because it didn't completely fail that it would contribute to my confirmation bias. I just still disagree with this one point.

Yes, I save a lot, and I think I'm on my way to the traditional work-for-40-years-and-retire route, but I believe there are different possibilities. I've seen the fruits of saving. However, from what I've seen, the millionaires that I have come in contact with did not follow this route. That's all I've noticed. Obviously due to my age, I don't know many 65+ year old people who've saved and saved and saved to retirement. But from my personal network of contacts, the richest people have started businesses.

I guess I'm bouncing ideas off of this forum just to shoot the shit. I feel like I gave the business my absolute best and I'm just not sure where to go. Here's my daily schedule on a hard day. I have easier days for sure, but 2.5 years of this and I think anyone would get fed up.

4am Wake up
4:30 Arrive in downtown LA at the wholesalers to purchase produce and other products for the store
6:00 Arrive at my store with inventory and unload with help of one worker
6:30 Get changed into my business attire and head to work
7:30 Start my corporate job in Beverly Hills
5:00 Get off, and drive straight to my business. Change into t-shirt and jeans.
6:00 - 9:00pm Work the cash register, clean up shop, and help close up for the night
10:00 Get home, shower, and pass out from exhaustion
4am next morning repeat

You've missed one essential point. You should be risking other people's money when starting a business. Sure, it limits your upside, but it prevents you from being wiped out by a failure also.

There's no easy answer right now. As you noticed, due to 8+ years of super low rates, everyone has been chasing yield and asset prices are seriously inflated.

Sounds like you don't really have time to start a new business, so in your situation, I'd probably start dollar cost averaging it into index funds. I.E. buy 50k every 6 months. That way if market tanks in a month you still have cash left to buy it cheaper.

Is the generic

'What can you do with if you had $XXX' the new Tree question? It's asked at least once a month.

H&B in the back seat of a Crown Vic.

t0pher said:   
I'm looking for some ideas from people.


This is Fatwallet finance, where the standard answer is to save and invest, slow and steady, in a tax savvy fashion, for a comfortable retirement, in the style of www.bogleheads.org.

The main recurring topic of secondary income that is discussed at FWF is the ins-and-outs of land lording. If you want to pursue that for secondary income, you will find much smart people to advise you here.

​Other than that, you sound like an entrepreneur looking for his next opportunity. Here's a wild suggestion in that vain -- ever thought of starting a mortuary? Very high profit margins.

megatard said:   Here's a wild suggestion in that vain -- ever thought of starting a mortuary? Very high profit margins.
 

  Completely recession proof!

Just wondering how did you make sure that employees weren't stealing from you, giving away produce or cash from register, when you weren't there?

At least put enough into your 401k to get a match. It's a 100% return on your investment risk free.

What would I do?

1) Buy a place to live with 20% down at historically low mortgage rates.
2) Max out retirement accounts for 2016 & 2017 from payroll and use remainder of 200k for living expenses.
3) Sell grocery business asap.
4) Learn about investing. Start with "The Millionaire Next Door." You have more time on your hands now that you are not working a register for $0/hr.
5) Start a family. I find that most people will be parents for most of their lives. Your parent self will have different priorities than your pre-parent self.

t0pher said:   there may be a market correction and recession coming
Maybe, maybe not. If your 200k had been invested in the S&P500 for the past 5 years you would now have $350,000 and enjoyed many lazy mornings & evenings.

If you don't own a home and are able to borrow enough to buy one then it's a no brainer. Government subsidized mortgage rates resulting in rates as low as 2.5% (in China where it's not subsidized and people put at least 50% down it's 6%) and tax benefits make real estate the best investment by far. If you already own a home I would still say to buy a rental if possible. People's low savings rate and poor credit make for an army of renters driving rents up. Locally a 400K house rents for about $2300/month. This is already better than the historic return of the SP500 with the historic appreciation rate also beating the SP500's dividends.
If you must by stocks unless you are among the top 1% of day traders (you would know if you are) just buy the SP500 index. From the age of 15 I used to watch CNBC sometimes from morning until night. Then I realized how biased the channel is in favor of stocks. They are more exciting and generate more money for their advertisers.

First learn what happened with the Beverly Hillbillies.  Next identify and then purchase prospective land in a low tax state.  Yeah, I fully realize how nutty that sounds.  But you know, that is exactly what I did years ago . . . by accident.  And OMG did it ever work out great!

Most people are unaware America remains one of VERY few countries where average citizens are allowed by law to benefit from ownership of prospective land.   So two words for the OP:  "Geology" and "shale".   

I don't know why you're not saving for retirement now. Your line of thinking with respect to that is just silly.

You're wanting to be a business owner sounds like a lot of guys your age. Youcre envisioning a money machine where you just sit back and the money comes in. That's usually not possible in any real volume. You've worked hard for your grocery store, but that's the level of work *any* successful startup needs.

In reality if you wanted to make a successful business start you would probably have to quit your job, lose all medical and other benefits and live like a peasant for years.

You could consider buying a duplex or triplex in the LA area you live in. Rent two units and live in the third. Let two other people pay the majority of your housing costs and move your monthly rent payment towards a long term 30 yr loan.

You have a great paying job. The business you own is the business of you. Don't do something stupid and throw that away chasing a dream of becoming an overnight millionaire.

t0pher said:   That's impossible in LA.

I'm looking for some ideas from people.

  Move.

two chicks, at the same time.

When you've sold the grocery store, buy a liquor store.

t0pher said:   What Would You Do With $200k In The Bank?
  
Ask where the rest of my money went

Look at buying REITs if you like real estate. You get pro management plus regular income and none of the headaches.

t0pher said:   
Stubtify said:   H&B is a standard FW blowoff answer. Someone else will come in soon and say you should buy and resell Crown Vics.

Questions for you:

Where are you living now? Renting? Yes renting
Have you started planning for your retirement? See below
How stable is your job? Definitely stable
Any chance of a relocation to lower cost area of the country? Very low chance I'd move
Do you still have the grocery store? Do you sell Money orders or prepaid cards on credit? (PM me if so, might be able to save the business) See below

$200k is nice but nothing really amazing when you consider that you're always going to need somewhere to live here in LA.

  
I'm not contributing to my 401k right now. I get that the safe and steady route that most people take is to put their $500 away every month into their 401k's and wait for 30-40 years and finally have access to that money and retire. While I'm not completely opposed to doing that, I just really want to break free from a daily job and have my own investments or business. All the rich people I know didn't slowly put money away into their retirement accounts and wait around. They all took risks and most of them started businesses. Again, I'm not saying there's anything wrong with that way of life, but a high amount of wealth is important to me.

Yes, I sell money orders, but not prepaid cards. Anyway it's a moot point, as I'm signing all the paperwork for an offer and opening escrow next week. I'm not sure how that would "save" the business. If you're thinking about the check cashing route, I already do that at my store and it's a good source of revenue. The business generates money, it's just way too much work for too little money.

  
Here's the other thing about confirmation bias - those that took the risks and had flashy, high-noise experiences that resulted in wins are not just generally the ones you hear about - these mini-Trumps of the world are also often living over-leveraged house-of-cards lifestyles.  

I'm a little older than you and have been taking the safe and steady and boring route with maxed-out or near-maxed 401Ks for my wife and I.  My net worth is multitudes of yours and I expect to retire very comfortably very early.  Outside of this anonymous post, almost nobody knows the extent of my success because it's nobody's business and there's no upside (and significant downsides) to disclosing this information to anyone in my personal life.  Do some research outside of "this is what I see" and you'll discover that the vast majority of high-wealth individuals kept a cool, calm savings strategy and risk mitigation on top of a well paying and stable job.  Trust that this strategy is the most statistically beneficial even if you've 'personally seen' friends that hit it big playing roulette.
 

CowbellMaster said:   
Do some research outside of "this is what I see" and you'll discover that the vast majority of high-wealth individuals kept a cool, calm savings strategy and risk mitigation on top of a well paying and stable job.  

  That's simply not mathematically possible, unless by "high-wealth" you simply mean seven figures in their 60s

Maybe you interpret "well paying and stable job" a bit differently, too, ruffles? Cowbell's description sounds similar to mine, and I hit 7 figures of wealth at about age 45. That could probably turn into 8 figures by my 60s, but I think I'll opt to retire long before then. It's probably not a category of wealth that would attract a lot of attention, but it was pretty simple and seems to have been low-risk.

It's not exclusively 401k & IRA savings for us, maybe Cowbell has implied that.

Skipping 45 Messages...
LeveragedSpeculator said:   Put it into an interest bearing bond fund, my current holding is SJNK and sit on it & collect interest until the market correction hits.
  Junk bonds are usually highly correlated to equities, so good luck with your strategy.



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