Advanced Income Strategies

[WSUCoug1994]

Hi - I am a NOOB on this site but I love all of this stuff.  It appears that 50% of the readers/contributors are in the early evolution of their frugality and 50% of them are seasoned veterans of the game.

I would suspect that I am in the second camp.  I would like to start a discussion about Advanced Income Strategies.  I am a fairly reasonable investor - I manage my own money and have had an 11+% return on my portfolio since 2002.  I am pretty happy with that. 

I need to diversify away from the stock market and the residential real estate market.  I would like to consider things like Private Equity Investments and Commercial Real Estate.  In my perfect scenario, when I retire in 8ish years, I have a nice portfolio of different investments that can keep me mentally engaged day to day.

I am also open to other ideas - I want to develop and flex some new muscle in some of the other areas of high return.  I would love to hear your thoughts and suggestions about where to take my investment strategies from here.

[bobechs]

Legal dope growing?

http://www.wikihow.com/Grow-Legal-Cannabis

[DaveR]

I need to diversify away from the stock market and the residential real estate market.

Uh, why? Mental stimulation is a bad reason to risk your portfolio...

I am also open to other ideas - I want to develop and flex some new muscle in some of the other areas of high return.  I would love to hear your thoughts and suggestions about where to take my investment strategies from here.

High return = high risk.

I would guess you already have a handle on this since you self-qualify as a seasoned veteran. Carve out a very small chunk of "play money" for alt investments. Money that you can afford to lose and is not essential in any way to retirement. Then have fun with it... options, forex, hedges, high-stakes poker, whatever. Commercial RE might be more capital than you'll have available to risk. I do have a fondness for private equity (as an angel making direct investments, not via some hands-off fund). The startup game can be loads of fun and there are an endless supply of problems to mentally engage your brain.

[Retired To Win]

... I need to diversify away from the stock market and the residential real estate market.  I would like to consider things like Private Equity Investments and Commercial Real Estate...

For commercial real estate, I've placed some of my money into (specialty) REITs.  I've also got a fair amount of money in MLPs.  Yes, I know both trade as shares in the stock market but the investment goal is different because it is all income-driven.

Have you gone through these already?

[Jeremy E.]

Hi - I am a NOOB on this site but I love all of this stuff.  It appears that 50% of the readers/contributors are in the early evolution of their frugality and 50% of them are seasoned veterans of the game.

I would suspect that I am in the second camp.  I would like to start a discussion about Advanced Income Strategies.  I am a fairly reasonable investor - I manage my own money and have had an 11+% return on my portfolio since 2002.  I am pretty happy with that. 

I need to diversify away from the stock market and the residential real estate market.  I would like to consider things like Private Equity Investments and Commercial Real Estate.  In my perfect scenario, when I retire in 8ish years, I have a nice portfolio of different investments that can keep me mentally engaged day to day.

I am also open to other ideas - I want to develop and flex some new muscle in some of the other areas of high return.  I would love to hear your thoughts and suggestions about where to take my investment strategies from here.

One option could be investing in an online business. If you are technically savvy(which I assume to be true since you are a fellow Coug), you could learn to create your own website, learn about SEO, etc. When you are VERY comfortable with everything involved, you could buy an online business and start running it. I think Empire Flippers is a great place to buy online businesses, most require at least 2 hrs/week of maintenance, new material, paperwork, etc. But you are able to do more than that if you choose. Just be sure, if you decide to go this route, know what you're doing before you sink too much money into it.

[WSUCoug1994]

Legal dope growing?

http://www.wikihow.com/Grow-Legal-Cannabis

This is the kind of "out of the box" thinking I was talking about. 

[WSUCoug1994]

I need to diversify away from the stock market and the residential real estate market.

Uh, why? Mental stimulation is a bad reason to risk your portfolio...

I am also open to other ideas - I want to develop and flex some new muscle in some of the other areas of high return.  I would love to hear your thoughts and suggestions about where to take my investment strategies from here.

High return = high risk.

I would guess you already have a handle on this since you self-qualify as a seasoned veteran. Carve out a very small chunk of "play money" for alt investments. Money that you can afford to lose and is not essential in any way to retirement. Then have fun with it... options, forex, hedges, high-stakes poker, whatever. Commercial RE might be more capital than you'll have available to risk. I do have a fondness for private equity (as an angel making direct investments, not via some hands-off fund). The startup game can be loads of fun and there are an endless supply of problems to mentally engage your brain.

First of all, thank you for your thoughtful comments.  I probably didn't describe my interests well.  I don't need it for mental stimulation but I would like to have a portfolio of investments that are diverse and income generating beyond the stock market.  I am also ultra-conservative - so when I say high returns I really mean diversified returns.   Out of the various different books I have read and the areas where I feel I can contribute to my portfolio - real estate happens to be one of them.  I am particularly interested in industrial real estate as they have longer leases, less turn over, lower maintenance tenants and price consistency.

Although many of my clients are Private Equity Firms - I need to further explore how someone like me can contribute to a new fund.  That is something that I am exploring now.  Start-ups - clearly surrounded by them here in the Bay Area - are too high risk for my well being and even though I spend my professional life around technology - I am clearly not the right person (nor do I have the proper skill set) to be conducting due diligence on the upside potential of some widget.

[WSUCoug1994]

Hi - I am a NOOB on this site but I love all of this stuff.  It appears that 50% of the readers/contributors are in the early evolution of their frugality and 50% of them are seasoned veterans of the game.

I would suspect that I am in the second camp.  I would like to start a discussion about Advanced Income Strategies.  I am a fairly reasonable investor - I manage my own money and have had an 11+% return on my portfolio since 2002.  I am pretty happy with that. 

I need to diversify away from the stock market and the residential real estate market.  I would like to consider things like Private Equity Investments and Commercial Real Estate.  In my perfect scenario, when I retire in 8ish years, I have a nice portfolio of different investments that can keep me mentally engaged day to day.

I am also open to other ideas - I want to develop and flex some new muscle in some of the other areas of high return.  I would love to hear your thoughts and suggestions about where to take my investment strategies from here.

One option could be investing in an online business. If you are technically savvy(which I assume to be true since you are a fellow Coug), you could learn to create your own website, learn about SEO, etc. When you are VERY comfortable with everything involved, you could buy an online business and start running it. I think Empire Flippers is a great place to buy online businesses, most require at least 2 hrs/week of maintenance, new material, paperwork, etc. But you are able to do more than that if you choose. Just be sure, if you decide to go this route, know what you're doing before you sink too much money into it.

Always love to hear from fellow Cougs - such a big win for us last weekend.  I believe it was Tim Ferriss' book that had me looking seriously at starting one of these online businesses, based on my work I have great access to engineering talent/resources as well as a nice ecosystem of guidance if I was to go this direction.  After some preliminary research it was clear that I need to do a lot more research to figure out what market(s) make sense and I am still exploring this area. 

[PencilThinStash]

Legal dope growing?

http://www.wikihow.com/Grow-Legal-Cannabis

This is the kind of "out of the box" thinking I was talking about.

Only a small window of profitability left before the whole country legalizes. Once that happens... Good luck competing against Philip Morris. All the little mom&pop growers won't stand a chance.

[Shane]

Have you thought of trying investing in P2P loans?

[Shane]

Legal dope growing?

http://www.wikihow.com/Grow-Legal-Cannabis

This is the kind of "out of the box" thinking I was talking about.

Only a small window of profitability left before the whole country legalizes. Once that happens... Good luck competing against Philip Morris. All the little mom&pop growers won't stand a chance.

It's unlikely opportunities for small scale growers will completely disappear just because bigger players like Philip Morris enter the market. As with other commodities, big industrial players will probably end up only growing a few strains, at most, leaving many niche market opportunities for smaller operators.

Right now my state is in the process of taking applications from interested investors for permits to operate medical marijuana dispensaries. In order to be considered for a permit, an applicant must have a minimum of $1.2M in the bank. However, A recent Pacific Business News article quotes "experts" as estimating the start up costs of a successful dispensary operation as being more in the $3-7M range...

[WSUCoug1994]

Have you thought of trying investing in P2P loans?

I haven't looked into it seriously.  Maybe a year ago I started browsing some of these crowd-funding and P2P sites.  I should investigate these a little more.  Thank you for the idea.

[WSUCoug1994]

... I need to diversify away from the stock market and the residential real estate market.  I would like to consider things like Private Equity Investments and Commercial Real Estate...

For commercial real estate, I've placed some of my money into (specialty) REITs.  I've also got a fair amount of money in MLPs.  Yes, I know both trade as shares in the stock market but the investment goal is different because it is all income-driven.

Have you gone through these already?

I have three REIT's in my portfolio today - really my toe dip into commercial property.  I know nothing about MLP's - this sounds pretty interesting.

[mr_orange]

For the real estate portion there are many new real estate crowdfunding sites that offer investments like what you're describing.  You need to be an accredited investor for most of the projects so that may be a constraint for you.  In general being an accredited investor is going to be a ticket to the game for most private equity constructs. 

You may also consider looking into hard money loans.  Some of the crowdfunding sites offer these, but if you can't find projects that you like your local hard money lenders will likely have way to invest with them too.  Look for people with long track records that know how to underwrite and price risk properly and understand the securities laws. 

There are many other types of projects that you can diversify into that have nice returns as well.  Factoring businesses, purchase money finance, inventory financing, oil/gas crowdfunded ventures, angel investments, etc. are all worth looking into.  I don't know these types of investments nearly as well as I know real estate so I tend to look at investing in smaller amounts. 

[WSUCoug1994]

For the real estate portion there are many new real estate crowdfunding sites that offer investments like what you're describing.  You need to be an accredited investor for most of the projects so that may be a constraint for you.  In general being an accredited investor is going to be a ticket to the game for most private equity constructs. 

You may also consider looking into hard money loans.  Some of the crowdfunding sites offer these, but if you can't find projects that you like your local hard money lenders will likely have way to invest with them too.  Look for people with long track records that know how to underwrite and price risk properly and understand the securities laws. 

There are many other types of projects that you can diversify into that have nice returns as well.  Factoring businesses, purchase money finance, inventory financing, oil/gas crowdfunded ventures, angel investments, etc. are all worth looking into.  I don't know these types of investments nearly as well as I know real estate so I tend to look at investing in smaller amounts.

This is fascinating stuff Mr_Orange.  How do you go about becoming an Accredited Investor?  Is there a place you are familiar with for these hard money loans?  A place to educate myself?  Obviously I can resort to the google ;).  Real Estate is very interesting to me and I clearly have a lot to learn.

[mr_orange]

This is fascinating stuff Mr_Orange.  How do you go about becoming an Accredited Investor?  Is there a place you are familiar with for these hard money loans?  A place to educate myself?  Obviously I can resort to the google ;).  Real Estate is very interesting to me and I clearly have a lot to learn.

Do a Google search on "accredited investor" and you can get the full definition.  It is more complicated than what is written below, but in general you need:

1.  $1M in net worth not counting the equity in your primary residence, OR (not and)
2.  $200k in income or $300k with your spouse in the last 2 years with a reasonable expectation of the same this year

For investing in hard money loans I would recommend you look for a fund operator that you can develop a relationship with that has been in the game for a long time and knows how to price risk and handle workouts.  A local real estate club is a good place to start.  Many of the better crowdfunding sites have good beginning literature too.  Fundrise, Patchofland, and RealtyShares are all pretty good.  Disclosure: I own a site too, but it is not one of the ones listed here. 

I would also suggest you spent some time on Biggerpockets.com.  I have been posting on the site for many years and have learned a great deal.  There are thousands of forum posts there and just as many really good investors that know real estate inside and out. 

[WSUCoug1994]

This is fascinating stuff Mr_Orange.  How do you go about becoming an Accredited Investor?  Is there a place you are familiar with for these hard money loans?  A place to educate myself?  Obviously I can resort to the google ;).  Real Estate is very interesting to me and I clearly have a lot to learn.

Do a Google search on "accredited investor" and you can get the full definition.  It is more complicated than what is written below, but in general you need:

1.  $1M in net worth not counting the equity in your primary residence, OR (not and)
2.  $200k in income or $300k with your spouse in the last 2 years with a reasonable expectation of the same this year

For investing in hard money loans I would recommend you look for a fund operator that you can develop a relationship with that has been in the game for a long time and knows how to price risk and handle workouts.  A local real estate club is a good place to start.  Many of the better crowdfunding sites have good beginning literature too.  Fundrise, Patchofland, and RealtyShares are all pretty good.  Disclosure: I own a site too, but it is not one of the ones listed here. 

I would also suggest you spent some time on Biggerpockets.com.  I have been posting on the site for many years and have learned a great deal.  There are thousands of forum posts there and just as many really good investors that know real estate inside and out.

This is exactly what I was looking for.  Thank you so much for the help.  I hope I can return the favor some day.  If you are open to PMing me your site I would like to look at that too.

[Jeremy E.]

Have you thought of trying investing in P2P loans?

I haven't looked into it seriously.  Maybe a year ago I started browsing some of these crowd-funding and P2P sites.  I should investigate these a little more.  Thank you for the idea.

Here is an article from MMM about The Lending Club
http://www.mrmoneymustache.com/the-lending-club-experiment/

Also, I'd recommend reading the stock series below, you might just realize that stocks are diversified enough
http://jlcollinsnh.com/stock-series/
In my opinion, this stock series is the greatest resource for learning about stock investing. In Mr. Collins opinion, the U.S. stock market is very diversified. He explains why REITs and International funds are not necessary in the two articles below.
http://jlcollinsnh.com/2012/09/26/stocks-part-xi-international-funds-2/
http://jlcollinsnh.com/2014/05/27/stocks-part-xxii-stepping-away-from-reits/

Good Luck in whatever you decide!