Author Topic: Due diligence in notes  (Read 4029 times)

Cigar2011

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Due diligence in notes
« on: October 23, 2014, 06:43:56 AM »
Hey fellow mustachians

         I will keep it short as to not bore you to much.  I was doing research on investing, that lead me to a blog that suggested this blog and jlcollins and then onto biggerpockets.com which by the way is extremely awesome. So I do some reading and listen to some podcast and come across note investing and a guy named Jeff Brown aka the Bawldguy. He speaks of some pretty amazing things and it really resonates with me.  So now I'm at my due diligence step.  Can anyone chime in on both sides the good and the bad of Jeff Brown.  I have no problem with risk, hey the worst that happens is I keep working. But to trust someone I don't really know although he has as steller rep from what I can see and believe without asking everyone just doesn't sit with me.  So what say you?

P.S a great big THANK YOU for opening my eyes up. I have and will continue to change the way I live to better conform to the mustachians way. The best tip so far republic wireless has saved me over 1200 a year. You guys ROCK!

Neil


Cheddar Stacker

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Re: Due diligence in notes
« Reply #1 on: October 23, 2014, 08:31:09 AM »
Welcome to the forum Neil. I know nothing of Jeff Brown or note investing. I'm glad you said due diligence though because it's important to educate yourself a bit before jumping into any investment. Good luck finding what you're looking for.
Indecision may or may not be my problem.

surfhb

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Re: Due diligence in notes
« Reply #2 on: October 23, 2014, 10:22:03 AM »
What does he say that resonates with you?   What type of investing does he talk about?   It looks like real estate and his site wants an email to enter.    Looks red flaggy to me

If it doesn't conform to this list regarding market investing then I'd run

1 Develop a workable plan
2 Invest early and often
3 Never bear too much or too little risk
4 Diversify
5 Never try to time the market
6 Use index funds when possible
7 Keep costs low
8 Minimize taxes
9 Invest with simplicity
10 Stay the course

http://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy

The Collins site has great info too

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/
« Last Edit: October 23, 2014, 11:06:33 AM by surfhb »

arebelspy

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Re: Due diligence in notes
« Reply #3 on: October 23, 2014, 10:55:29 AM »
I'd be happy to discuss Jeff Brown.  I've spoken with him a number of times and read a large amount of his material.  Feel free to PM me.

Forum member "Another Reader" has also had discussions/interactions with him, and may chime in here, or you can reach out to him.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

Cigar2011

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Re: Due diligence in notes
« Reply #4 on: October 23, 2014, 01:34:01 PM »
@cheddar thanks for the warm welcome.  It's amazing how much a site like this opens your eyes.  The biggest way my eyes have been open so far is traveling to and from work and how much your car really drains out of you.

@surfhb.
Wow!  Great questions that can really get one to think. Below are brief answers. I will thoroughly dig into later tonight thank you.
What does he say that resonates with you?   
Purposeful planning. After tax income. Converting my 457 into a Roth yes I will take a big hit but then it can use that money to create more tax free money. EIULs which is life insurance that can be borrowed from. This will create another tax free steam of money 15-20 yrs out.

What type of investing does he talk about?   
Mostly buying notes through a Roth and EIULs.

It looks like real estate and his site wants an email to enter.    Looks red flaggy to me
Yes it would look red flaggy to me but Jeff has a very good rep at biggerpockets. That's how i first found him and listen to his podcast.

If it doesn't conform to this list regarding market investing then I'd run

1 Develop a workable plan.       
 Yes he preaches creating a plan and putting it to work for you. Purposeful planning.
2 Invest early and often.         
  Yes especially for the EIULs. Buy a note collect buy another. Etc.
3 Never bear too much or too little risk.     
He speaks of discounted notes in first and second position. Unsure of the actual risk. That's why I am educating myself.
4 Diversify.        
Yes in the sense of own a rental property, own notes, own an EIUL. Though it's all   Real estate based though
5 Never try to time the market. 
He does not time the market, though if he did I wouldn't
6 Use index funds when possible
Yes from the perspective of EIULs but he never speaks of say vanguard funds mostly notes
7 Keep costs low.   
Haven't gotten that far yet. So I'm not sure what the. Cost would be.
8 Minimize taxes.     
Absolutely. One of his main goals is tax free money
9 Invest with simplicity.       
Not sure what you mean here
10 Stay the course.     
Back to purposeful planning.  Create the plan then put together a strategy to  put the plan into action long and boring but it works and will create financial independence.

http://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy
I will check this out

The Collins site has great info too
Yes it does. I frequent it also.

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/
I have read this already. I like Collins site very much. I was all set to buy the vanguard fund and make my 6-8%. Then I came across notes and thought I should educate myself.

@arebelspy Thanks for the offer. I will reach out to you.

@another reader.  I would love to hear your views also. Either here or in a PM. Thanks

arebelspy

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Re: Due diligence in notes
« Reply #5 on: October 23, 2014, 01:40:14 PM »
Stay far, far away from EUILs.  Life insurance and investments should not be mixed.

They are very subpar investments.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

Cheddar Stacker

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Re: Due diligence in notes
« Reply #6 on: October 23, 2014, 02:02:03 PM »
Stay far, far away from EUILs.  Life insurance and investments should not be mixed.

They are very subpar investments.

I'm completely against whole life on the surface. I don't know much about EUILs.

However, I did meet with a financial advisor/insurance agent over the summer as a typical networking meeting for my job. He wasn't personally selling me anything, just telling me what he does/sells and the expertise he could provide my clients. Here was his basic pitch which sounds a bit like what Cigar2011 might be talking about:

Get a life insurance policy, whole, EUIL, something else, I'm not sure.
Annual "premiums/contributions" to the policy were intentionally huge.
Death benefit coverage was intentionally tiny, so the insurance portion of this plan was small on purpose.
Whatever balance remained was invested heavily.
A HUGE cash surrender value builds up which can be drawn down as needed in retirement or earlier.
Upon death, since life insurance is not taxable this could allow for a huge cash surrender value to be passed on to heirs.

I have no experience with this other than sitting through one sales pitch, so I don't know all the intricacies. What I do know is there are many ways insurance can be packaged to act as a "non-qualified" retirement plan. They are not approved by the IRS/ERISA so they are non-qualified. This means they aren't tax deductible, but it also means they aren't really monitored and regulated as much, and since contributions are post tax, distributions aren't taxed.

The guy pitching this to me was saying he thought this was a safer way to save for retirement than 401k's/IRA's because it allowed for bigger contributions and it would only be taxed on the front end. He was also saying he thinks the next place the IRS will look for tax revenues is Roth IRA distributions. Of course playing devil's advocate I asked him what makes him think they wouldn't try to tax life insurance proceeds as well. I don't think he liked that.

I'm not promoting it, just saying there are creative ways people are using this stuff to get around certain limitations within the current retirement system. I wouldn't touch it personally, but there are some legitimate businesses using these type of vehicles.
Indecision may or may not be my problem.

arebelspy

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Re: Due diligence in notes
« Reply #7 on: October 23, 2014, 02:29:12 PM »
Yes, there are a few rare circumstances where it makes sense to use them.  If you have tens of millions, it can.

Otherwise, it really doesn't.

The estate tax exemption is over 5MM as of today.

If your net worth is over 5MM, look into it.

If it's not yet, don't.  (Don't fall into the trap of "it will be," so I'll do it - ala Steinbeck's temporarily embarrassed millionaires - if it will be, do it then.  No reason to pay high fees before necessary.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (occasionally) blog at AdventuringAlong.com.
You can also read my forum "Journal."

surfhb

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Re: Due diligence in notes
« Reply #8 on: October 23, 2014, 05:09:32 PM »
@cheddar thanks for the warm welcome.  It's amazing how much a site like this opens your eyes.  The biggest way my eyes have been open so far is traveling to and from work and how much your car really drains out of you.

@surfhb.
Wow!  Great questions that can really get one to think. Below are brief answers. I will thoroughly dig into later tonight thank you.
What does he say that resonates with you?   
Purposeful planning. After tax income. Converting my 457 into a Roth yes I will take a big hit but then it can use that money to create more tax free money. EIULs which is life insurance that can be borrowed from. This will create another tax free steam of money 15-20 yrs out.

What type of investing does he talk about?   
Mostly buying notes through a Roth and EIULs.

It looks like real estate and his site wants an email to enter.    Looks red flaggy to me
Yes it would look red flaggy to me but Jeff has a very good rep at biggerpockets. That's how i first found him and listen to his podcast.

If it doesn't conform to this list regarding market investing then I'd run

1 Develop a workable plan.       
 Yes he preaches creating a plan and putting it to work for you. Purposeful planning.
2 Invest early and often.         
  Yes especially for the EIULs. Buy a note collect buy another. Etc.
3 Never bear too much or too little risk.     
He speaks of discounted notes in first and second position. Unsure of the actual risk. That's why I am educating myself.
4 Diversify.        
Yes in the sense of own a rental property, own notes, own an EIUL. Though it's all   Real estate based though
5 Never try to time the market. 
He does not time the market, though if he did I wouldn't
6 Use index funds when possible
Yes from the perspective of EIULs but he never speaks of say vanguard funds mostly notes
7 Keep costs low.   
Haven't gotten that far yet. So I'm not sure what the. Cost would be.
8 Minimize taxes.     
Absolutely. One of his main goals is tax free money
9 Invest with simplicity.       
Not sure what you mean here
10 Stay the course.     
Back to purposeful planning.  Create the plan then put together a strategy to  put the plan into action long and boring but it works and will create financial independence.

http://www.bogleheads.org/wiki/Bogleheads®_investment_philosophy
I will check this out

The Collins site has great info too
Yes it does. I frequent it also.

http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/
I have read this already. I like Collins site very much. I was all set to buy the vanguard fund and make my 6-8%. Then I came across notes and thought I should educate myself.

@arebelspy Thanks for the offer. I will reach out to you.

@another reader.  I would love to hear your views also. Either here or in a PM. Thanks

Those points i listed were about market investing...not real estate or life insurance.   

I think saving %30-50 of your income and regular investing is a much quicker way to become independently wealthy then what the  bald dude is selling.   The best part is its guaranteed to happen and you have control of it.     

Thats what this site is about :)
« Last Edit: October 23, 2014, 05:33:34 PM by surfhb »

KBecks2

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Re: Due diligence in notes
« Reply #9 on: October 24, 2014, 06:06:03 AM »
I spoke w Jeff last year about working w him but did not move forward w it -- cold feet -- I have pursued a different strategy w stocks that felt like a better fit for me.  I got scared by re and want to start out small and possibly local. 
« Last Edit: October 24, 2014, 06:07:38 AM by KBecks2 »