23 year old with 200K inheritance. Entrepreneurial ideas? Help

[Scanner]

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

[rj.phila]

ok, i've got the ultimate idea for you.

buy a multi-unit property, ideally a triplex. live in one unit, rent the other two, keep your job. you'll get experience "running a business", generate income IF you do it right(its not a no brainer), and keep your corporate job.

you've left out a few big things: A) what do you WANT to do with your life. B) own or rent.

[97guns]

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

im pretty sure i know what im talking about here, its the path i took to retirement 2 years ago at 39. i found myself with 250K in accumulated cash and decided to go into the landlord business. best move i ever made, im actually getting paid right now as i type.

[alphadore]

My suggestion is to put your money in a savings account and dont touch it for at least five years. You can also consider government bonds.

As per putting up your own business, I understand how great the idea sounds. I am an entrepreneur as well and there is nothing wrong with being entrepreneur. But, I believe there is still so much for you to learn before you can spend that 200k on a start up business. Making a start up work is a real pain. When you are your own boss, you actually work harder than working in a corporate. Entrepreneurship is 24/7. You think about your business at all times. You wake up with it and go to bed with it. When things are not looking bright, you are stressed like you have never been. There is also a flip side to it, when things are working out you are very happy and perhaps spare some extra time for your hobbies.

I am not an American, but there is an American politician that makes me laugh whenever I hear him speaking. He once talked about the "known unknowns" and "unknown unknowns" about invading Iraq. I believe there are many unknown unknowns for you. I suggest you just work for a couple of more years.

[alphadore]

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

Well, what happens when the price of the property falls dramatically? What guarantee do we have that U.S. is not going into another recession? There is no such thing as hitting the bottom. You never know where the bottom is. You finance a property then in two years, it is worth half the price you bought it for. You wont get the same rent from your tenants to cover your loan. I dont see this is the time for her to take risks. She can easily invest in a government bond that matures in 5 years and then decide what she wants to do with the capital. No rush.

[rj.phila]

Well, what happens when the price of the property falls dramatically? What guarantee do we have that U.S. is not going into another recession? There is no such thing as hitting the bottom. You never know where the bottom is. You finance a property then in two years, it is worth half the price you bought it for. You wont get the same rent from your tenants to cover your loan. I dont see this is the time for her to take risks. She can easily invest in a government bond that matures in 5 years and then decide what she wants to do with the capital. No rush.

just a heads up-rents and prop value function independent of one another. rent is more a function of general employment level than prop value.

[alphadore]

just a heads up-rents and prop value function independent of one another. rent is more a function of general employment level than prop value.

I dont agree. There is a very high corelation between them. If the property value goes down, the rent prices will go down. People will start considering buying houses rather than renting. This would be risky if you loaned to buy a house and relied on paying your loan from the rental income. General employment is a factor in this I agree but only one of the factors.

[rj.phila]

I dont agree. There is a very high corelation between them. If the property value goes down, the rent prices will go down. People will start considering buying houses rather than renting. This would be risky if you loaned to buy a house and relied on paying your loan from the rental income. General employment is a factor in this I agree but only one of the factors.

i own 4 properties. the valuations have popped all over the place in the last 3+ years. rents are all stable to up. dont fight the numbers my friend.

look at figure 1 or 3 here:

The Federal Reserve Bank of San Francisco: Economic Research, Educational Resources, Community Development, Consumer and Banking Information

or

U.S. apartment rents rise, supply tight | Reuters

or

average rents up 5% in Q3:

Third Quarter Apartment Rents Up 5 Percent Nationwide - Rent Jungle

[97guns]

Well, what happens when the price of the property falls dramatically? What guarantee do we have that U.S. is not going into another recession? There is no such thing as hitting the bottom. You never know where the bottom is. You finance a property then in two years, it is worth half the price you bought it for. You wont get the same rent from your tenants to cover your loan. I dont see this is the time for her to take risks. She can easily invest in a government bond that matures in 5 years and then decide what she wants to do with the capital. No rush.

no risk no reward, sure im at risk but my risk is very low compared to trying to open a business. i think the risk is pretty much taken out of real estate meaning it has or is close to hitting bottom. i was paying 75K for houses that were selling for 350K at the peak and ive realized a gain of 15-20K on each already, i hedged myself by buying at the bottom and am even more hedged now that some equity has built..scared money wont make money

[alphadore]

i own 4 properties. the valuations have popped all over the place in the last 3+ years. rents are all stable to up. dont fight the numbers my friend.

look at figure 1 or 3 here:

The Federal Reserve Bank of San Francisco: Economic Research, Educational Resources, Community Development, Consumer and Banking Information

or

U.S. apartment rents rise, supply tight | Reuters

or

average rents up 5% in Q3:

Third Quarter Apartment Rents Up 5 Percent Nationwide - Rent Jungle

Hi Rj. Looking at the past three year data to arrive a conclusion that there is no correlation between rent and house prices is wrong. Even in the first article you submitted does it clearly say that it is an indication of a bubble.

For a comprehensive study conducted by Federal reserve covering the data from 1970 to 2004, please refer to the following document; http://www.federalreserve.gov/pubs/f.../200450pap.pdf

Hope it helps.

[alphadore]

no risk no reward, sure im at risk but my risk is very low compared to trying to open a business. i think the risk is pretty much taken out of real estate meaning it has or is close to hitting bottom. i was paying 75K for houses that were selling for 350K at the peak and ive realized a gain of 15-20K on each already, i hedged myself by buying at the bottom and am even more hedged now that some equity has built..scared money wont make money

congratulations... buying a house may seem less risky than investing in equities. But buying a zero coupon T-bond is even less risky than investing in real estate. T-bond is a capital guarantee fixed income vehicle. Once it matures, then she can decide what she wants to do with that money. Maybe she will have a brilliant business idea by then. But now she doesnt have an experience nor an idea to proceed with. Why rush? Take your time, safeguard your investment in a government bond against inflation and make the right decision when time comes.

[rj.phila]

alphadore: good article, some good stuff there. some clarifications:

1-i wasnt trying to say they had NOTHING to do with one another, merely that drawing a direct causal line from value to rents just isnt accurate, IMO. when i said "rent is more a function of general employment level than prop value", i was saying there is a more direct causal relationship btw employment/rent than prop value/rent. how many landlords slashed their rent in 2008-9 by 40%, when the underlying prop value was slashed by 40%? none that i know of. all i can say is that every landlord i have talked to about this, including myself, sets rents according to what the market can sustain, NOT what the value of the prop is. and what the market can sustain is, without a doubt, a function of the buyers' ability to pay, which is a function of.....employment levels.

2-i'll quote the 1st two lines of your linked article to illustrate what im trying to say:

"Nominal house prices in the United States have risen by about 70 percent since
1994. Over the same period, the indexes for tenants' and owners' equivalent
rent in the consumer price index have increased less than half as much".

that illustrates the point i'm trying to make: when prop values go up, down or sideways, rents dont necessarily follow.

however, on the OTHER hand, rental income is, IME, a much better indicator of valuation than anything else. that is also supported by this quote in your article:

"The results lend empirical support to the view that
the rent-price ratio is an indicator of valuation in the housing market."

or, to just dumb the whole thing down, you could replace all my posts with this:

rent is a much more likely indicator of value, than value will be of rent.

[alphadore]

Good morning RJ. I guess we understand each other better now. Thanks for further clarification. By the way, I hope Irene wont cause much damage to you guys. I am far far away from there.

[97guns]

congratulations... buying a house may seem less risky than investing in equities. But buying a zero coupon is even less risky than investing in real estate. T-bond is a capital guarantee fixed income vehicle. Once it matures, then she can decide what she wants to do with that money. Maybe she will have a brilliant business idea by then. But now she doesnt have an experience nor an idea to proceed with. Why rush? Take your time, safeguard your investment in a government bond against inflation and make the right decision when time comes.

HA, if your holding treasury bonds your getting ponzied, how could you tell her to invest in a company (our gov't) that is bleeding money like theres no tomorrow, with a balance sheet thats 16 trillion dollars in the red. would you invest in such a company on wall street?

[rj.phila]

Good morning RJ. I guess we understand each other better now. Thanks for further clarification. By the way, I hope Irene wont cause much damage to you guys. I am far far away from there.

thanks much. crossing fingers, we'll see here in a bit!!! 7pm on sat, and i can still blather on the internet, that's a civilization win, no?

97guns-it may eventually be one, but technically, it's only a ponzi scheme when interest payments are foregone. we're not there yet. so the sky MAY fall, but until it does, it hasnt and isnt. billions of dollars in global wealth flocked to treasuries AFTER the s&p downgrade.