Author Topic: Build up stash of cash for vulture fund?  (Read 1823 times)

frugledoc

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Build up stash of cash for vulture fund?
« on: August 21, 2017, 02:09:12 PM »
Hi All,

On paternity leave recently been watching a lot of home renovation shows and quite fancy doing this with the wife some day.  Just had our second child so probably several years out at least.

At the moment,  we don't really have any cash and are fully invested. 

I'm thinking about stopping new investments for a while to build up a cash pile of say 100k over the next few years. 

This might time in nicely with a houshe price crash in the UK, which is when we could start buying distressed properties and doing them up.

Does this sound stupid? 

All of my investments have been doing great recently and the downside is that flipping houses actually requires effort, but I thought we might enjoy doing it together.

Mr. Green

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Re: Build up stash of cash for vulture fund?
« Reply #1 on: August 21, 2017, 02:31:19 PM »
There are always times when cash is King. Two of my best deals happened that way. Despite the fact that I know cash is a drag on my portfolio, I always want some in the event there is a deal I want to take advantage of and the market is in a bad place. I figure at least I can use that cash in a big recession as a silver lining. I'm not sure if I would stop all my investments to build up a stash though. I learned that lesson in hindsight from building up a huge 6-figure cash stash and missing out in big gains in 2013.

ChpBstrd

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Re: Build up stash of cash for vulture fund?
« Reply #2 on: August 25, 2017, 08:03:28 PM »
Holding cash is expensive. The market can run away from you and never come back. Perhaps a better strategy would be to hedge your investments with options, etc. so that if a rainy day comes, you can deploy your protected assets where they will do the most good based on where you and the economy are (stocks, real estate, traffickers and fake documents, who knows?).

Even with money available, you'll be caught flat-footed as a house flipper if you don't have an intuitive grasp of the amount of time and money required for various remodeling tasks, or if you lack general construction knowledge (quick, what gauge wiring must be used for an electric stove!? When is PVC pipe acceptable as an exhaust vent!?). Develop this knowledge first, by reading books, researching building codes, and doing your own hands-on work. Bonus: you might find you don't fancy this kind of life at all.

SeattleCPA

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Re: Build up stash of cash for vulture fund?
« Reply #3 on: August 26, 2017, 08:18:30 AM »
There are always times when cash is King. Two of my best deals happened that way. Despite the fact that I know cash is a drag on my portfolio, I always want some in the event there is a deal I want to take advantage of and the market is in a bad place. I figure at least I can use that cash in a big recession as a silver lining. I'm not sure if I would stop all my investments to build up a stash though. I learned that lesson in hindsight from building up a huge 6-figure cash stash and missing out in big gains in 2013.

+1 on above...

I add this. If you're holding or accumulating cash to (in reality) time the market, I think that's bad behavior.

If you're holding or accumulating cash to make what are really "absolute return" style investments, IMHO, that's pretty justifiable.

Two other comments... First, a while back, I blogged about some of the strategies that the top one percent use... and holding large cash balances seemed to be something one-percenters do:

http://evergreensmallbusiness.com/smart-wealth-strategies-of-the-one-percent/

A second comment: I would think a vulture approach would mean you're sitting there on the sidelines continually scouting for opportunities that won't come along very often... but when they do come along, you get gigantic ROIs. E.g., you've got cash to swoop in and buy some asset from a distressed seller he or she has priced at a firesale price.


Another Reader

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Re: Build up stash of cash for vulture fund?
« Reply #4 on: August 26, 2017, 12:06:01 PM »
The real estate market is easy to time because it's cyclical.  Save up cash and buy when there is blood in the streets.  The stock market is difficult to time.  Buying small shares in many businesses in increments over long periods of time will get you where you need to go.

Buying an entire business is more like buying real estate.  Warren Buffett says he hates cash but usually is about 30 percent cash.  He has target businesses and rates of return that have to be met or the wallet stays shut.

Vultures make a lot of money, even when the returns are calculated as equivalent compounded rates.  Just make sure you know what you want to buy and at what rate of return before you start one.