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Howard Huge

Best way to grow $25,000

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Just wanted to pick some HAIF brains.

What do you think is the best way to take $25,000 as seed money and make more money with it.

Stocks, bonds, mutual funds, buying land, buying property with a loan, franchise, start a small business, invest in a business with other people, I'd like to hear everyones take on this please.

Thanks in advance.

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Depends on your level of risk acceptance.

Lets say high.

But for more input, id like to hear suggestions for all risk levels.

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I hear just putting it in the banks of Cypress is a terrific investment :lol:

 

I'm horrible at personal investments, I'd rather go the easy route and just toss the money at some CDs, cause they're easy to manage. current rates make me cringe when they come due though.

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80% stocks 20% mutual funds. Buy stocks with a low price:earnings ratio with good potential for growth, stable positive earnings every quarter for the last couple years, and at least some dividend.

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Sell meth, it's fairly high risk but big profits.

Indexes are a nice thing to look into. I think buying specific stocks is something you need to spend a lot of time doing rather than casually investing.

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I'm a fan of stocks/bonds and tend to stay in the High-Medium risk categories. Here's what I like that has served me well so far...

 

High Risk (but not dangerous): Mortgage REIT's that pay high dividends. They were battered down when the market crashed, some pay 11% quarterly, and they are way off their highs so there is room to grow as housing/rentals improve. You just have to watch them and make sure no bad news comes out. NRF is a good example (too pricey now) but I bought low and it's up a ton now... but still paying an awesome dividend.

 

Medium Risk: Stocks/Bonds/ETF's with decent dividends. Think GE, DOW etc. Basically bigger companies that pay decent dvidends consistently.

 

Low Risk: CD's, etc.

 

Whatever you do don't day trade. That's a quick way to lose if you don't know what you're doing.

 

 

Edited by brian0123

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I'm a fan of stocks/bonds and tend to stay in the High-Medium risk categories. Here's what I like that has served me well so far...

High Risk (but not dangerous): Mortgage REIT's that pay high dividends. They were battered down when the market crashed, some pay 11% quarterly, and they are way off their highs so there is room to grow as housing/rentals improve. You just have to watch them and make sure no bad news comes out. NRF is a good example (too pricey now) but I bought low and it's up a ton now... but still paying an awesome dividend.

Medium Risk: Stocks/Bonds/ETF's with decent dividends. Think GE, DOW etc. Basically bigger companies that pay decent dvidends consistently.

Low Risk: CD's, etc.

Whatever you do don't day trade. That's a quick way to lose if you don't know what you're doing.

Would all of my money be liquid if an business opportunity or njce piece of property comes along and I wanna dump everything to spend it elsewhere?

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I vote real estate, but like any investment, only if you've done your research.  I bought a place in Panama City Beach a couple of years ago right on the ocean during the height of the bank failures and oil spill and in my opinion it was way undervalued.  Put down 25K and a little elbow grease and started to rent it out to beach goers.  Today if I were to sell, my back of the napkin profit calculation would be about $60K, so more than double in just two years.  I spent my teenage years in Calgary and met one of my dad's friends who gave me some amazing yet simple business advice. Huge profits are made during disasters.  Read the news and find stories that single out disastrous events (not necessarily environmental) and think about how profits can be made off of them.  A huge well blowout: don't be interested in the company that had the blowout, look into the company that has the lease next door and decide if they may in fact be sitting on a huge reservoir themselves.  

 

Several years ago Toys R Us had a PR nightmare where they received so many Christmas orders from their website that they couldn't deliver them in time for the holidays.  The news sites got a hold of that and TOY shares plummeted.  Common sense to me dictated that this is a good problem to have and once the furor died down, TOY would rebound.  So I bought.  And doubled my money in less than two years.

 

Stocks are easy, just buy and watch.  Banks and Pharmacy are on my radar now given the financial rebound and baby boomer retirement but those are long term.  Real estate is harder, but I think in this climate of rebound, really good money can be made.  All investments are a gamble, but unlike Vegas, you control the odds as long as you do your homework.

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Funny you write about stocks like toy.

When I was younger (my 20's) I kept hearing how AAPL was the "stock of the century". Then I hear rumors of this new "iPhone" and how it was going to change the world. Well i had just come into some money (about $10,000) and I really belie ed this iPhone was gonna take off so I took a gamble and dumped all my money into apple shares. I bought them at $69/share. Well wouldnt ya know it, the iPhone was the best thing since sliced read and the shares skyrocketed to $189/share. I was amazed but shortly after the initial iPhone craze wore off prices started falling.......and I panicked. I dumped all my shares at around $170/share (making a nice profit of $100/share) and I walked away feeling like Warren Buffet lol!

Well, long story short, AAPL now hovers @ ~$450/share. Ahhh if I could just go back in time. I dont think there will ever be another aapl but I could be wrong. Lesson learned though, patience is king on wall street.

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Would all of my money be liquid if an business opportunity or njce piece of property comes along and I wanna dump everything to spend it elsewhere?

 

Yes, REITs that are publicly traded on the market can be sold at any time. Just check volume to make sure it's a more popular one in case you want to sell it fast.

 

Another thing I suggest (and I don't know your income) but if you don't have a Roth IRA I suggest opening one and dumping 5k in it right away (and do so every year to max it). The money you put in can be taken out at any time... and any capital gains you make in it are not taxed until you withdraw later in retirement. Dump 5k onto a decent dividend stock and you're getting money that isn't taxed.

 

As mentioned prior, real estate is also good but you are not liquid. I keep getting tempted by real estate but I just don't like the fact that my money is tied up in it. I have my main house w/ money in it, and I just can't stomach locking money up in another property.

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Another thing I suggest (and I don't know your income) but if you don't have a Roth IRA I suggest opening one and dumping 5k in it right away (and do so every year to max it). The money you put in can be taken out at any time... and any capital gains you make in it are not taxed until you withdraw later in retirement. Dump 5k onto a decent dividend stock and you're getting money that isn't taxed.

 

Gains are not taxed in a Roth if you wait til retirement time to withdraw (they were already taxed as income when you received the income). And of course there are certain exceptions that let you withdraw gains before retirement without paying a tax penalty.

 

When I first got my Roth, I was stunned at all the benefits. It's almost too good, and I worry Congress will raid Roths some day. But maybe I'll get lucky.

Edited by kylejack

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Gains are not taxed in a Roth if you wait til retirement time to withdraw (they were already taxed as income when you received the income). And of course there are certain exceptions that let you withdraw gains before retirement without paying a tax penalty.

 

When I first got my Roth, I was stunned at all the benefits. It's almost too good, and I worry Congress will raid Roths some day. But maybe I'll get lucky.

 

Yes, Roth's are awesome. I doubt they'll ever be raided. It would be politically VERY unpopular and they know we already have a retirement savings crisis in this country. My guess is that they could eventually change the rules for contributing into it... so take advantage of it as much as you can right now.

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Yes, REITs that are publicly traded on the market can be sold at any time. Just check volume to make sure it's a more popular one in case you want to sell it fast.

Another thing I suggest (and I don't know your income) but if you don't have a Roth IRA I suggest opening one and dumping 5k in it right away (and do so every year to max it). The money you put in can be taken out at any time... and any capital gains you make in it are not taxed until you withdraw later in retirement. Dump 5k onto a decent dividend stock and you're getting money that isn't taxed.

As mentioned prior, real estate is also good but you are not liquid. I keep getting tempted by real estate but I just don't like the fact that my money is tied up in it. I have my main house w/ money in it, and I just can't stomach locking money up in another property.

I make about $150,000 currently (which is why I was thinking "high risk/high return" investment).

Were you suggesting the $5,000 figure on the Roth, just because of my $25,000 question, or would you have suggested $5,000 in any case? What im saying is, would you suggest me dumping MORE into a Roth, they sound like such a safe bet.

Also, speaking of property, what Im REALLLLY considering, and I wouldnt be worried about having my money tied up, is buying a multi-family property such as a 4-plex, living in one unit, and renting out the rest. From what I hear I can buy one with about 20% down with a non-recourse loan. Now I know NOTHING of the rental business but I dont think I could go too wrong with only 3 units to rent out and me living in one, Im also a very handy-man with lots of tools who can fix anything around the house, so I wouldnt have to hire any management people. Only thing I need to be versed in is legal matters, evictions, etc, but yea, a 4-plex sounds like the longest term income producing asset I can come up with right now...

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I've been thinking of trying some residential real estate flipping. I am looking at buying houses in the 40-50,000 range, fix and flip.

Ive also wanted to do this, but, someone correct me if Im wrong, I was told flipping is basically impossible in Harris County because of some kind of law stating a new property owner must own the property for no less than 90 days before re-selling it, or something along those lines, so youd have to sit on the house for a while

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Were you suggesting the $5,000 figure on the Roth, just because of my $25,000 question, or would you have suggested $5,000 in any case? What im saying is, would you suggest me dumping MORE into a Roth, they sound like such a safe bet.

Also, speaking of property, what Im REALLLLY considering, and I wouldnt be worried about having my money tied up, is buying a multi-family property such as a 4-plex, living in one unit, and renting out the rest. From what I hear I can buy one with about 20% down with a non-recourse loan. Now I know NOTHING of the rental business but I dont think I could go too wrong with only 3 units to rent out and me living in one, Im also a very handy-man with lots of tools who can fix anything around the house, so I wouldnt have to hire any management people. Only thing I need to be versed in is legal matters, evictions, etc, but yea, a 4-plex sounds like the longest term income producing asset I can come up with right now...

 

He said $5000 because that has been the limit in 2012 and prior years. You can still make 2012 contributions to a Roth until April 15, 2013. The limit for 2013 has been raised to $5500, so right now you can put $10,500 in a Roth and never be taxed on gains (within the rules). In 2014 you can add another $5500, or whatever the limit is.

Edited by kylejack
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Congrats Howard-

 

***Disclaimer, a lot Haifer's will not like my initial comments but by the end it will make a lot of sense.

 

Forget the stocks and INVEST in YOURSELF (i.e. bizz opp's, real estate, etc.). Honestly, outside of Tanith's comments I'd ignore 75% of the other comments on this thread and only take advice from those who have done what you're attempting to do. Otherwise you will do what average people do and remain average (8-10% before inflation & taxes via stocks). Take Calculated Risk like the wealthy do. The problem is that the wealthy won't tell you all of their secrets because that would dilute their market, right?

 

4 recommendations:

 

1) Purchase some rental real estate in a quality area as the area and price point will help screen tenants. Hold it for at least 8 years and at that point you're tenants will have provided some serious equity (increasing you're net worth) and this is a great inflation hedge as rents increase with inflation. Don't worry about repairs, that's part of the game (lowers taxable income). I own real estate (positive cash flowing) in Houston and have been successful managing the properties while living over 1,000 miles away, I'm sure you can do this locally.

 

2) Look for investment opp's in you're current profession as you're learning curve will be highly reduced and you may be able to find another capital partner who will also help mitigate you're risk especially if they bring business and complimentary skills to the table that you don't possess. For example, in 2011 I took a risk with $21k that eventually required an additional $20k ($41k total). We broke even 9 months later and now with increased margins our investment has increased more than 200% and we keep reinvesting into this "Non Sexy" business. I'd love to tell you what we are involved with but that'd be bad for business. Focus on the "Non Sexy" and increase your comfort level with Failure (i.e. w/a good accountant if u lose all $25k, u will capture @ least 50-80% of that back come tax time)

 

3) Look around your social and professional circle, and surround yourself with like minded individuals like yourself. If successful, you will always be short of capital, but not ideas. Also, be sure to invest in what you or someone you're close to is knowledgeable or an expert.

 

4) Why not keep increasing you're capital and be prepared for the right opportunity. Here's some investment ideas I've been presented:

   - Self serv car washes (i.e. will also own the real estate), Parking lots, Parking spaces (Dense Cities), Mall Kiosk

   - Ownership in Minor league baseball teams, Liquor company, Medical facilities, Commercial Real estate (These all offered ownership @various levels..$10k = 1-5%, $20k=5%, etc.)

 

Edited by sowanome
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Another thing I suggest (and I don't know your income) but if you don't have a Roth IRA I suggest opening one and dumping 5k in it right away (and do so every year to max it). The money you put in can be taken out at any time... and any capital gains you make in it are not taxed until you withdraw later in retirement. Dump 5k onto a decent dividend stock and you're getting money that isn't taxed.

If you have children and are planning to send them to college, you should look into opening an ira, either traditional or roth, to use for building up a college fund. One of the few penalty-free ways to take money out of a traditional ira is for higher education expenses. You'll have to fill out an extra form when you file your taxes and pay normal income taxes on the distribution (for the traditional ira). And if they don't go to school or don't use all the money then you've got it already set up for retirement. Doing this with a traditional ira can give you 18+ years to grow the money tax free.

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Congrats Howard-

***Disclaimer, a lot Haifer's will not like my initial comments but by the end it will make a lot of sense.

Forget the stocks and INVEST in YOURSELF (i.e. bizz opp's, real estate, etc.). Honestly, outside of Tanith's comments I'd ignore 75% of the other comments on this thread and only take advice from those who have done what you're attempting to do. Otherwise you will do what average people do and remain average (8-10% before inflation & taxes via stocks). Take Calculated Risk like the wealthy do. The problem is that the wealthy won't tell you all of their secrets because that would dilute their market, right?

4 recommendations:

1) Purchase some rental real estate in a quality area as the area and price point will help screen tenants. Hold it for at least 8 years and at that point you're tenants will have provided some serious equity (increasing you're net worth) and this is a great inflation hedge as rents increase with inflation. Don't worry about repairs, that's part of the game (lowers taxable income). I own real estate (positive cash flowing) in Houston and have been successful managing the properties while living over 1,000 miles away, I'm sure you can do this locally.

2) Look for investment opp's in you're current profession as you're learning curve will be highly reduced and you may be able to find another capital partner who will also help mitigate you're risk especially if they bring business and complimentary skills to the table that you don't possess. For example, in 2011 I took a risk with $21k that eventually required an additional $20k ($41k total). We broke even 9 months later and now with increased margins our investment has increased more than 200% and we keep reinvesting into this "Non Sexy" business. I'd love to tell you what we are involved with but that'd be bad for business. Focus on the "Non Sexy" and increase your comfort level with Failure (i.e. w/a good accountant if u lose all $25k, u will capture @ least 50-80% of that back come tax time)

3) Look around your social and professional circle, and surround yourself with like minded individuals like yourself. If successful, you will always be short of capital, but not ideas. Also, be sure to invest in what you or someone you're close to is knowledgeable or an expert.

4) Why not keep increasing you're capital and be prepared for the right opportunity. Here's some investment ideas I've been presented:

- Self serv car washes (i.e. will also own the real estate), Parking lots, Parking spaces (Dense Cities), Mall Kiosk

- Ownership in Minor league baseball teams, Liquor company, Medical facilities, Commercial Real estate (These all offered ownership @various levels..$10k = 1-5%, $20k=5%, etc.)

Wow, lots of good info here, thank you very much! Youre opening my mind to lots of possiblilities I hadnt thought of.

I wish you could go deeper into your non-sexy business, youve got me chompin at the bit!

Edited by Howard Huge

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While sowanome's advice is very good, keep in mind that a lot of that advice falls into a very high risk category. You will need to determine what level of risk you want (and make sure you totally understand the space you are getting into). You will also need some luck.

 

As mentioned earlier, if you have kids you can also start socking away for their college. I like 429's, but you can also go the traditional IRA route to withdraw later (as mentioned above).

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While sowanome's advice is very good, keep in mind that a lot of that advice falls into a very high risk category. You will need to determine what level of risk you want (and make sure you totally understand the space you are getting into). You will also need some luck.

 

Howard-

 

I totally agree with the risk profile, but like I mentioned you must become comfortable with the idea of failure. For example, here are 2 quotes that I consistently think of:

 

" You will miss 100% of the shots you don't take " Basketball reference that applies to bizz risks

" You can't win if you're not in the game and you certainly can't win without a chance of losing (failure)"

 

If you're worried about risk, then base risk on you're net worth (i.e. take risk in the 5-15% range of you're net worth, so that you can easily replace in a year or 2 with you're income/wages considering that you seem like a decent saver.)

 

Other Non-sexy's (Think of opp's and jobs that seem beneath you, seriously): mobile pet cleaning bizz, home insulation company(Hello Hot/Humid Weather!!), SENIOR CITIZEN Services (Baby Boomer$$$!!), etc.

 

These opp's typically work because those who can participate rarely have the capital and those with the capital seem to always think on a much larger scale. You can also consider buying struggling businesses as well.

Edited by sowanome
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Howard-

I totally agree with the risk profile, but like I mentioned you must become comfortable with the idea of failure. For example, here are 2 quotes that I consistently think of:

" You will miss 100% of the shots you don't take " Basketball reference that applies to bizz risks

" You can't win if you're not in the game and you certainly can't win without a chance of losing (failure)"

If you're worried about risk, then base risk on you're net worth (i.e. take risk in the 5-15% range of you're net worth, so that you can easily replace in a year or 2 with you're income/wages considering that you seem like a decent saver.)

Other Non-sexy's (Think of opp's and jobs that seem beneath you, seriously): mobile pet cleaning bizz, home insulation company(Hello Hot/Humid Weather!!), SENIOR CITIZEN Services (Baby Boomer$$$!!), etc.

These opp's typically work because those who can participate rarely have the capital and those with the capital seem to always think on a much larger scale. You can also consider buying struggling businesses as well.

Sowanome-

Youre very astute, I save like a crazy person, some may call me a miser, I know my girlfriend does. :P

In all seriousness, I could live very well right now but I choose to live well below my means because I have my eyes on a bigger picture, i want to be filthy rich.

At the rate im going now, i can easily continue putting away another 6-7 grand every month, soooooo, should I just keep saving and wait for the right opp to come along? I know the more seed money i have, the bigger the possibility to hit the jackpot with a bigger investment, correct?

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 I know the more seed money i have, the bigger the possibility to hit the jackpot with a bigger investment, correct?

 

Yes, and in that same notion with one bad investment all your money is gone.  I would start small for sure.  Learn how things are done, get some successes under your belt.  And some failures.  Find your strengths and above all, like what you do.  Call it the cost of educating yourself.  Personally, I like using other peoples money.  That's why I invest in real estate. My investment skills and elbow grease pay me more than the 4% mortgage on my properties.  I make money by taking out loans from the bank.  But I never would do what I do without having some failures along the way so I can learn what risks I'm willing to take.  But one rule I do keep for myself (at least for now) is because my properties require renters to fund my profits, I have to live with the idea that I may not have rental income every month so my current salary is adequate enough to cover any unexpected expenses.

 

So plan to succeed, but have a plan for failure.  Because you'll do both.

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Short term: It's anyone's guess.  Nobody really knows.

 

Long term: Land.  Buy ranches and farms surrounding medium-sized cities in the Southwest.  Lease the land back to the farmers and ranchers.  Wait for the suburbs to expand.  Profit.  

 

This is an especially good strategy if you're thinking of it as an investment for your children or grandchildren.

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There are income limits on Roth - @ $150K / yr I think you are already above the phase out limit assuming you are filing alone.  For 2013 if your MAGI is above $127K you are ineligible

 

 

 

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I would suggest that you start your very own online business using a passive income model. This will ensure that you have money coming in for the rest of your life and it will ensure time, money and location freedom for you.

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This thread is very old, but I guess the question is still valid and so is your answer Vishen. I like the idea of having the freedom to work any time and from anywhere that I choose, that's why I chose to work online as well. 

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You know I'm always surprised at the number of people who will tell you that they want more money and yet if you ask them what they would do with that money, they couldn't give you a straight answer. So many people would love to have that $25K but not many would be able to wisely invest it. 

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