Need Help Investing A Lot Of Liquid Cash

[firehawkocean]

Hello everyone,

I wanted to pick this forums brain as to what would be my best bet for maintaining, protecting and growing my wealth. I am open to any ideas! However, I anything but stupid. Therefore, please don't post any specific names & companies. I am 26 year old man, married, and have a 2 year old girl and I am expecting another one this year. I receive a misc. income from that is taxed federal and California as 1099 income.

I have no investments and have no stock in any company. I am currently in school for my Masters.

I live in California. I have the following assets:

1) One single family home PAID OFF - property value: $360,000.00

2) Liquid cash assets $400,000.00. nearly all is high yield savings accounts.

3) two automobiles PAID OFF. one valued at: $15,500.00 other valued at about $23,000.00

I am looking to buy a new property to live in and to rent the one I am in currently. should i use an entity to do this? which type?

I have zero debt.

[disneysteve]

Welcome. You certainly lay out a very unusual situation. At 26 years old, you have a net worth of over 3/4 of a million dollars and no debt. I'd certainly love to hear how you accomplished that.

I'm not entirely sure what you are asking us. Do you want advice as to where you should be investing? Or are you just looking for some type of information on buying another house?

[firehawkocean]

Welcome. You certainly lay out a very unusual situation. At 26 years old, you have a net worth of over 3/4 of a million dollars and no debt. I'd certainly love to hear how you accomplished that.

I'm not entirely sure what you are asking us. Do you want advice as to where you should be investing? Or are you just looking for some type of information on buying another house?

I guess I am asking for suggestions as to how I could start investing my assets and keeping them secure.

Thanks for any help and I know the situation is unusual but I am in a very unusual position.

[97guns]

im in california also and picked up 4 SFR's in los banos. they were all under 90K and im renting them out for 1K each, numbers are really good.

[dczech09]

Diversify. I would put some money into mutual funds. If you want to invest in some real estate and gain some cash flow from that, I am not exactly sure what I would recommend for an entity type. I know a lot of people here in Wisconsin utilze LLCs to run their real estate development operations for the tax benefits. I do not know how things would work in California, but I cannot imagine it is much different. I would consult a CPA.

[firehawkocean]

Diversify. I would put some money into mutual funds. If you want to invest in some real estate and gain some cash flow from that, I am not exactly sure what I would recommend for an entity type. I know a lot of people here in Wisconsin utilze LLCs to run their real estate development operations for the tax benefits. I do not know how things would work in California, but I cannot imagine it is much different. I would consult a CPA.

That seems like pretty good advice. Thanks! I will check with my CPA.

[MonkeyMama]

I was going to say, if you want GOOD and RELEVANT advice, I would consult with a tax advisor and/or a legal advisor. Particularly in regards to choosing an entity for your rentals. You will get decent general investment advice here. But once you start getting into legalities and tax strategies you really want someone who is an expert and knows your entire situation.

Talking to your CPA is a good start.

[baptiste.tyrell]

With those amounts involved, I would definitely hire a professional to help me invest wisely rather than risk trial and error.

[bjl584]

Talk to a professional about investing your money. Your CPA is a good start. Also, seek out a quality investment advisor.

[firehawkocean]

Talk to a professional about investing your money. Your CPA is a good start. Also, seek out a quality investment advisor.

Thanks for all your advice.

I believe that diversifying into buying some condos and investing in strong mutual funds would be worth it.

should i pay for an investment property outright? what about llc for the real estate to protect all my investments?

how should i find a good financial advisor. the last one i visited wanted me to dump 200,000 in annuities.

[97guns]

if you run the numbers you will see that getting a loan or leveraging your money will bring you the highest yield or ROI. my advice for buying real estate would be to


1) check out the rental market in the area via craigslist, if you look at detroit areas there are multiple pages of rentals listed daily, this is the type of market you dont want - too much competition.

2) run the numbers, i cant stress this enough. take into consideration all your monthly expenses and what the property will bring monthly. price insurance and know what the property tax will be. run numbers for markets that doesnt even interest you just so you know where your areas numbers are.

3) try to keep the investments semi-locally, not a long distance affair - they dont work. you will get nickled and dimed no matter what manager you go with if they know you are not within range of them.

condos are fine but be aware of the monthly property maintanance/association fee that they can raise whenever they feel fit. maybee look into a duplex or triplex instead. again just my opinions but from a fellow real estate investor.

[scfr]

how should i find a good financial advisor. the last one i visited wanted me to dump 200,000 in annuities.

You ran like hell, right? (I hope.)

Keeping your money in high yield savings accounts is not a bad idea for the time being, until you figure out what you want to do. Just make sure you are not exceeding the FDIC insurance limits.

You don't mention how knowledgeable you are about personal finance and investing. If it is a new subject for you, I recommend that you spend some time reading up on it right away. There are lots of good basic books out there (I like the Wall Street Journal books as basic primers), and magazines as well (Smart Money, Money, Consumer Reports Money Adviser, etc). If this is an area where you feel you lack knowledge, I recommend educating yourself before you talk to an adviser.

Re choosing a good financial adviser: I have heard good things about the Garrett Planning Network, but have not used them so cannot speak from personal experience. They would be one to check out.

Regarding your education, you're paying cash rather than taking out student loans?

You're in a very nice position, and you have the opportunity to build a very financially secure future for yourself and your children. Good luck.

[MonkeyMama]

That seems like pretty good advice. Thanks! I will check with my CPA.

I would start with your CPA, yes. Ask for recommendations for a financial advisor. Ask them their opinion about starting a LLC (there are both tax and legal reasons to consider type of entity - so may need a referral to an attorney).

Financial advisors - not sure is quite as necessary. IT could be nice and helpful, but there are so few really helpful financial advisors out there with YOUR best interest in mind. Wasn't really what I had in mind with my last post.

re: LLC - you need LEGAL and TAX advice specific to your situation. Paid for, if you want GOOD advice.

[disneysteve]

how should i find a good financial advisor. the last one i visited wanted me to dump 200,000 in annuities.

He wasn't an adviser. He was a salesman. Two very different things. What you want is a fee-only certified financial planner. There is a website for finding those but I don't know what it is. I'm sure Google could help you find it.

Avoid dealing with anyone who earns money based on what investments he/she gets you to invest in. What you want is non-biased advice (as much as that is possible to obtain). If you are paying someone a flat fee or an hourly rate to review your situation and give advice, that is the way to go. You want to minimize the conflict of interest that comes from asking a salesperson what you should buy. They will almost always preferentially recommend investments that they earn more for selling.

[snafu]

1st, have you had any experience as a landlord? This is not a simple role, you need to be able to chose the right tenant,negotiate effectively with difficult people, maintain the property, do basic repairs on plumbing & electric, be prepared to respond to problems beyond traditional business hours and have a long list of tradesmen you trust. I hope you can tell I am speaking from experience!

Investing in the traditional sense requires elements of risk. With interest rates so low, you are losing buying power to inflation. With interest rates more likely than not to s-l-o-w-l-y increase, bonds will fall significantly. With turmoil in various parts of the world Equities caan drop on loss of consumer confidence. Government decisions to act/not act can decimate a portfolio in a couple of months as you have recently seen. Doing nothing is even worse. Finally, no one cares about your money as much as you do.

As a 26 y/o student in a Master Program with liquid assets of $400.K you need to learn about the basics of investment and become familiar with asset allocation PDQ. Financial planners are fine when the economy is on an upward trajectory. I don't know anyone who was told to sell out and bite the bullet on tax consequences when the 2008 -2009 c*** hit the fan. The GWB administration decisions vibrated around the world.

If you were my son, I would recommend asset allocation in Exchange Traded Funds suitable for your age and your assessment of the risk level you can manage...and still sleep at night.