I started this blog to document the purchase of unconventional profitable assets that are not the norm. Sometimes that journey can be just a short trip. This time every year, I research trends and try to determine which toy will be the “must have” gift. Through the years, I have been very successful with selections including Furbys, Zhu Zhu pets and Hatchimals. This year, I believe WowWee’s Fingerlings will be the toy that has parents paying a premium on eBay. Fingerlings are small electronic interactive monkeys that wrap around a child’s finger. They come in several different colors and versions. After an extensive search including the Internet, phone calls and locating the only store in the area that had a few in stock, I just purchased two from Toys r Us. I paid $14.99 each and verified that the eBay price is now at least double due to the low supply. I wouldn’t be surprised to see to see the price in the $50-plus range by Christmas. My goal is to locate and purchase at least 25 of these items to be sold on eBay. If you are lucky enough to find any Fingerlings at a store, keep your receipt just in case the manufacturer floods the market during the holiday season and the demand does not materialize. Or you can simply gift them to a young friend or family member.
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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.
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In August, I posted that I purchased a small stake in a thoroughbred race horse named Work of Art (WOA). The plan was to race at Saratoga, NY in September, but the horse was not ready at that time. Well, tomorrow is the day for his debut at Belmont in NY and a chance to see if WOA has what it takes. His workout times were very good and he showed ability. WOA will be running in the 6th race on the turf for a $60,000 purse with jockey Eric Cancel at the reigns. The winning horse typically keeps 60% of the purse and the remaining amount is distributed down to 6th place. From the winnings, there are numerous expenses, including the jockey’s and trainer’s share. A win at this level to start would be very positive and would position the horse to run for higher purses in the future. My cash outlay so far is $1,582 for my 2% share, plus $360 to cover estimated expenses through December. I will provide an update of the results tomorrow. Unfortunately, I am not able to travel to Belmont for this race so I will be watching WOA on the television.
Some quick other investment notes:
A. Fundrise just deposited a 3rd quarterly dividend of $60 into my account based on the $3,000 in their real estate investment trust.
B. The iPO investment of $4,000 seems to be status quo based on the updates given by the company as they continue to build shareholder value.
C. Gold prices have rebounded to $1,306 an ounce so that investment is nearing break-even.
D. After the significant gains from the St Pete condo, I am spending time researching geographic areas for my next purchase. I was very fortunate to have sold prior to Hurricane Irma hitting that area. Weather-related problems are part of the equation when investing in tropical destinations, but I believe the potential gains are worth the risks if the numbers make sense.
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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
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…
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
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