Unconventional Investments

Time for a change in investing

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Blog #3 Going with the crowd…

Time for another investment. As I already own a rental property (beach condo) in my portfolio, I would like additional real estate returns but without the headaches. Fundrise, LLC seems like it might fit the bill. Their website states that they had the “simple idea to give everyone the opportunity to invest directly in high quality real estate, without the middle man”.  They combine online crowd source funding with technology and commercial real estate to locate the best deals for their members, now numbering 80,000+.  A Fundrise investment  in 2015 would have returned 13% according to their website. For 2016, they now have two offerings: an Income eREIT (focuses on income through debt) and a Growth eREIT (focuses on growth through equity).  REIT stands for real estate investment trust. A REIT is a “company that combines the capital of many investors to acquire or invest in a diversified pool of commercial real estate”.  These REITS are not publicly traded on the stock market so they do not fluctuate with the broader market and have a 1% management fee which is lower than their publicly traded counterparts.  The Income eREIT has lower risk with fixed returns. The Growth eREIT may provide higher returns but with higher risk associated with their investments. Both pay quarterly dividends.

I am going to invest in the Growth eREIT so I will only focus on that portfolio.  The objective of the Growth eREIT is “to produce moderate returns over the life of the investment, with the potential for much higher returns paid out at the end of the investment”.  In order for Fundrise to show accountability to their investors, they will pay a penalty to the eREIT if certain preset annual return objectives are not met. It is their version of skin in the game. There are currently 4 property investments in this eREIT at cost totaling $19.5 million. Returns are produced from rental income and appreciation when the properties are sold. The company does have a redemption plan but I definitely consider this a long term investment. There are risks associated with this type of investment so any purchase should be made after doing due diligence. I would recommend researching all aspects of any purchase by going to the company’s website and searching the internet. Since a REIT is required to distribute at least 90% of the taxable income that it earns annually, there are tax implications of which one must be aware.  I will choose to limit my initial investment to $3,000 (their minimum required amount is $1,000) with another $2,000 in reserve to be invested after seeing how this proceeds. Since my mission is to learn and educate by diversifying into many investments, I will limit each particular investment and document the asset’s cycle through this blog.

41 Unit Property in Denver held by the REIT

Thanks for reading.

Jeff Kahn CPA

 

Unconventional Investments – Blog #2 – A Golden Opportunity

 In looking for my next investment, I decided to explore the area of gold, silver and coins. With the Internet, there are many possibilities. In the past, I have purchased a few gold coins from a website called Apmex. As one of the big names in the industry, they sell a vast assortment of coins and precious metal objects. Ebay offers many precious metals for sale but I am hesitant to purchase costly coins unless they are third party certified. Gold and silver coins are priced with a premium over the quoted spot cost per ounce. Old coins usually have an additional premium for their historical value and rarity. Every once in awhile, Apmex runs a flash sale and there are some decent discounts on the premium. There are numerous other sellers out there so make sure you find one that is reputable. Many counterfeits are being sold as the real item.
For my research, I went to a brick and mortar dealer in Maryland. Baltimore Coin & Stamp Exchange, Inc has been a wholesaler of gold, silver, platinum and diamonds since 1974. They specialize in US Coins and Stamps. I met with the owner, Carl Pund, and asked him about the opportunities in this market, I explained that I was open to any investment that he believed would appreciate in value. We talked about old coins but based on our current economy, an investment in American Eagle Gold Bullion Coins was the simplest with which to start. A brochure in his store stated its many benefits. Produced by the US Government through the United States Mint, these coins are a tangible asset and provide a great way to diversify an investment portfolio. They are minted in four weights:1/10, 1/4, 1/2 and 1 ounce. Spot gold was $1,345 an ounce (on 8/19/16) so I purchased 1 coin (1 ounce) for $1425, which included a 6% premium over the spot price. The premium was about average for buying from a reputable local dealer and I did not incur any shipping fees. Another benefit of the American Eagle is the ease of selling this type of coin. Carl will buy back the coin for the spot price at the time of sale. Anything over 6% appreciation will be profit. I plan to purchase additional Eagles using dollar cost averaging as the gold market fluctuates. One final recommendation is to store valuables such as these coins in a bank safety deposit box. Thanks to Mr. Pund for the information and thanks for reading…  Jeff Kahn CPA
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Unconventional Investments – the 1st blog

The purpose of this blog is to provide educational entertainment exploring the possibilities of unconventional investments. Unconventional investments will be defined as any asset that has the ability to generate positive cash flow, no matter what the level of risk. The method of education may include interviews with experts in their fields, in conjunction with an actual cash investment that will follow the process from start to finish and provide quantitative results. I plan to include investments in real estate, precious metals, currency, antique cars, tax liens, racehorses, collectibles and an assortment of other purchases.

For my first entry, I am covering a real estate investment previously purchased on April 11th, 2011 and is still on going. Future investments will be detailed with a more hands-on approach to content, but I wanted to include this as part of the regular updates that include the good, the bad and the ugly. In purchasing this property, there were 4 criteria that I required:

1. Small, low maintenance condo or townhouse

2. Management on site

3. On the beach

4. Purchased for cash (no mortgage).

A condo located on the beach in St Pete Beach, Florida met all the requirements. A college friend and I split the investment 50/50. She and I purchased an efficiency unit for $83,000 in an all-cash deal. This investment has been quite a learning experience. I can’t say enough positive things about having the right manager on site. Our manager deals with all renter issues and every broken and missing item (which are many and frequent). Even with the headaches, this has been a profitable investment so far. We generate between $12 to 15K in gross yearly rent and I believe that the current value is at least $105,000. In addition, it serves as a great getaway vacation during the off-season when it is not typically rented.

the view from the condo

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The plan is to display each asset purchased in the following manner with regular updates:
Asset:   St. Pete Beach Condo
Date Purchased: 04/11/2011
Costs:  $83,000 + $1,000 in settlement charges – my costs @ 50% ownership = $42,000
Date Sold:
Proceeds:
Cash Flow Generated: $12K-15K year (gross)
Pros and Cons: low vacancy during season  due to beach location
Update:

Thanks for reading….

Jeff Kahn CPA

Legal Notice:
This blog is for educational entertainment only and under no circumstances should be construed as advice regarding investments. Past performance is no guarantee of future results. Accordingly, this blog is protected by copyright laws of the United States and international treaties.

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