Unconventional Investments

Time for a change in investing

Tag: investments

A Fun Investment

When I first wrote about investing in a small percent of a racehorse, I explained that this was a fun investment that could reap some dividends in the future.  Yesterday was definitely fun. Watching Work of Art being loaded into the starting gate, exiting in the 2nd to last position out of 11 horses, and then racing to the finish with a shot of winning was thrilling. He finished a very respectable 3rd place, earning $6,000 of the purse and showed that he has enormous potential. This should be a FUN ride.

Thanks for reading.

Jeff

 

 

A Winning Opportunity?

The best part of a very successful investment is the new opportunities that can be available with the extra cash flow. Since this blog serves the purpose to entertain as well as document the process of investing in unconventional assets, it is time to have a little fun.  A small stake in a horse racing partnership is my next venture.  I do not advocate this as an money making investment but as a means to generate a little excitement that can possibly provide some extra dollars with a little luck.  The priceless thrill of having your picture in the winner’s circle with your horse is the real payoff and a share of the winning amount is the bonus.

There are numerous horse racing partnerships that are always searching for new investors. Each one has its own process on the handling of expenses and proceeds so research is necessary. Some require that you purchase a specific percentage of named horse and then pay that percent of the monthly expenses (boarding, training, food, etc).  Winnings are also distributed based on the same percentage. Please read the stable’s operating agreement to be aware of your commitment.

I decided to start with a small stake in a horse partnership operated by Dare to Dream Stable, LLC, Dare to Dream is managed by two bothers, Allen and Michael Faber. They provide management on numerous horses and have campaigned many successful runners over several states.  Each horse partnership is structured as their own LLC with a specific objective for that venture. Investors share in the expenses and proceeds according to their purchase percentage.  They will maintain a 3 month reserve for expenses which can average $4,000 a month.  A horse named Work of Art cost me $1,582 for a 2% ownership and included expenses through August.  Work of Art is a 2 year old chestnut gelding training in Saratoga, New York that may be ready for his first race in the near future.  I plan on documenting this journey and diversifying into a couple of other partnerships whose costs will vary based on the caliber and percent owned of each horse. Thanks for reading.  Jeff

SUCCESS!!!

The purpose of this blog is to show how unconventional investments can add value to your portfolio.  The condo went to settlement a week ago and closed the chapter on this investment. Final sales price was $171,000 on a small beach condo purchased for $83,000 six years ago.  That was a 106% gross return on investment and an 88% return net of commissions and transaction selling costs. By all standards, this was a great success.  The condo paid for itself for all 6 years through rental fees and never required any additional operating cash from my personal funds.  A couple of observations from the past several weeks:

A.  When selling an out of state property, a hands on real estate sales person makes a huge difference. Sheila Geer with the St Pete office of Coldwell Banker  was fantastic in handling all aspects of the transaction, including meeting repair contractors and even the small tasks such as having keys made.  That level of assistance and expertise is very much appreciated.

B. The appraisal can throw a monkey wrench into the best of deals. In our case, it come in lower than our contract price but the buyer did not have a contingency in the contract for that circumstance. Even though they wanted a new price, the original was not changed.  My opinion is that the appraised price had not caught up to the fast sky rocketing prices the area was beginning to experience and the buyers were still getting a good deal.

C. Be aware of the tax consequences that a sale can incur and plan accordingly so surprises in April do not take you off guard. The right tax planning can make the difference so contact your tax professional for options.

As this investment gets placed in the plus column, it is time to look for a new replacement so let the fun begin…

Thanks for reading…

Jeff

 

Condo sale update

It was definitely the right time to list the beach condo for sale. Within 3 days, we had 3 offers to purchase the unit. With a list price of $179,900, the 3 offers were as follows:

1.       A full price offer with a contingency stating that their condo must be sold first

2.       A cash offer of $165,000

3.       A offer of $171,000 with a 24 hour deadline to accept and settlement in June

The 3rd offer was accepted after the party with the cash offer refused to go any higher. The contingency offer was not considered due to the uncertainty of their sale. After our contract was signed, we learned that the two others were considering a change to their offers in the event that our transaction does not make it to settlement; so it is great to have these as potential backups. There is no guarantee the transaction will be completed as it requires numerous steps to be attained. These include a property inspection, real estate appraisal and financing approval.

 An inspection has been done and requests by the buyer for additional settlement credits were countered with an offer to purchase a home warranty insurance policy on their behalf with a term of 1 year. This was accepted and is a common concession in these circumstances. A year policy can be purchased for around $500. Step 1 is now completed. Next step is to ensure that the unit is valued at the sales price by a real estate appraiser so that the bank will approve their financing. I will keep you posted on our progress.

 Thanks for reading.

 Jeff

Updates on Investments

I just wanted to provide an update on the current investments:

From Blog 1 – The St Pete Beach Condo rental is doing very well. We have weathered the east coast storms and on October 1st, a 6 month tenant rented the unit. This is very unusual for us. Besides very short term rentals, the longest  we typically rent is the 3 month in-season period from January to March. Again, I can’t say enough good things about utilizing an on-site management team that can look out for your interests. Ours found the tenant and are always available to insure their comfort. In return, we make every effort to prepare the unit to be in excellent condition for the tenant. Another suggestion for longer leases is to authorize a more thorough deep cleaning versus a regular one that is done before each guest rental.  This sets the stage for a good first impression. A  renter that appreciates the extra efforts makes life much easier.

From Blog 2 – I still am bullish on gold coins as an investment. Gold is currently selling  for $1277 per ounce. It is a little less than the $1345 from my previous purchase so I will be looking to add to my position before year end. Apmex should have some decent holiday sales or I will check with the dealer from my last transaction.

From Blog 3 – The Fundrise eREIT  ( Real Estate Investment Trust) purchased in September authorized an 8% dividend for the last quarter to the investors. This is a very good percent return. My amount was prorated since I only owned the eREIT for a small part of the quarter.  For the current quarter, I should see more money assuming a comparable distribution and ownership for the entire period.

Since this blog is devoted to unconventional investments, I would like to share an investment idea that is in the works. For years I have tried to research and locate the HOT toy of the holiday season, I have utilized Ebay to sell Furbys and Zhu Zhu Pets in prior years with very good profits. I think that a toy egg with an electronic stuffed animal called Hatchimals will be this year’s “have to own”.  I should have purchased some when I first did my research but had no idea that supplies would be extremely limited even before Thanksgiving.  Right now, all stores are out of inventory. I expect to be able to locate a few in the next couple weeks. They are selling on Ebay for $90+ with a retail value between $44-59 so there is some room for profit. Depending on supplies, Ebay prices could be in the $150+ range. I will provide an update if stores start to receive inventory.

Thanks for reading.  Jeff

 

 

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 – 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

122513picts 885 (2)

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.