how to protect cash against inflation?

[jaygreenb]

Not the same as other investments. Real estate investors leverage a financial institution’s money for reoccurring cash flow. Market appreciation is just the cherry on top.

Leverage goes both ways, not always a win. What works in a declining interest rate environment doesn't always work going the other way. You didn't really address the purchase price aspect if prices go down over an extended period due to high rates. You're not going to be able to cash flow a property now(for the most part) with debt and where interest rates are. What do you think happens to commercial real estate prices if rates stay elevated and work from home stays a trend? Why do you see major funds walking about from huge properties?

 

[EyeBRollin]

You didn't really address the purchase price aspect if prices go down over an extended period due to high rates.

They don’t go down over an extended period. There’s always a market for cash flow. People need to live.

 

[BeExcellent]

@EyeBRollin is spot on. Real estate. I mean be smart & don’t be an idiot. But ask your mom & dad how much their home cost back 20, 30, 50 years ago.

It takes money to buy real estate. As more money is required to buy real estate values rise. That is the trend over time period. That is why real estate is the single best inflation hedge. Problem is, like gold bullion, it’s not liquid. It’s less liquid than bullion depending on the local market too.

And bear in mind another unique thing is that in real estate all markets are local. Real estate can be correcting as a national aggregate for example, and yet still be booming somewhere due to local factors.

You do have to understand various risks, interest rate risk, market direction risk etc. If I’m free & clear? Interest rates can go to 20% for all I care. That can’t affect me on a free and clear property. And rents will rise too because fewer people can afford to buy. Win-win. And I’ll have better quality renters who would others buy.

The bigger concern I see is the erosion of the middle class. That is somewhat by design. People will segregate into the haves who will control most of the assets and the have nots who will always remain wage slaves who can never quite afford anything.

 

[jaygreenb]

@EyeBRollin is spot on. Real estate. I mean be smart & don’t be an idiot. But ask your mom & dad how much their home cost back 20, 30, 50 years ago.

It takes money to buy real estate. As more money is required to buy real estate values rise. That is the trend over time period. That is why real estate is the single best inflation hedge. Problem is, like gold bullion, it’s not liquid. It’s less liquid than bullion depending on the local market too.

And bear in mind another unique thing is that in real estate all markets are local. Real estate can be correcting as a national aggregate for example, and yet still be booming somewhere due to local factors.

You do have to understand various risks, interest rate risk, market direction risk etc. If I’m free & clear? Interest rates can go to 20% for all I care. That can’t affect me on a free and clear property. And rents will rise too because fewer people can afford to buy. Win-win. And I’ll have better quality renters who would others buy.

The bigger concern I see is the erosion of the middle class. That is somewhat by design. People will segregate into the haves who will control most of the assets and the have nots who will always remain wage slaves who can never quite afford anything.

Have to disagree with you here, gold is one of the most liquid assets on the planet. You can sell it almost anywhere in the world in any currency at anytime for close to spot. You make take a hit on premiums but can easily be offloaded quickly in any metro area. If you own paper gold, can be done anytime during market hours. If you have size, potentially different issues with transport/portability. Respectfully, nothing remotely close to real estate. Physical also is a bearer asset with nothing financialized tied to it.

Owning real estate outright is a different ball game than using leverage, there is a lot more flexibility. In your example of rates going to 20%, if using debt you really do not think that impacts commercial or residential prices? What does that do to borrowing costs and cap rates? The on top of that commercial is variable rate, what happens in a city like SF where there is a glut of space then have to refi doubling your costs. Market will not support that level of rent raises

Real Estate is a great tool for building wealth, without a doubt. A lot of people get blown up too. Like anything you have to know what you are doing

 

[jaygreenb]

They don’t go down over an extended period. There’s always a market for cash flow. People need to live.

The point I am trying to make is if purchased incorrectly it will not cash flow or you will be upside down on the loan. Not saying real estate isn't a great tool for building wealth but you need to know what you are doing

 

[jaygreenb]

One last thing, I'm sure there are better articles explaining what I am talking about but just did a quick search. There are long term cycles that play out in interest, debt and bond markets. I believe we just had the fastest or close to it rate rise in history. The is a strong sign of a long term trend reversal and would not count on the next few decades being the same as the last few. Ray Dalio has a great book on this but there is a lot of historical information on this if you do a search

30 years of summer, followed by 30 years of winter | firsttuesday Journal

Mortgage rates are on their way up.

journal.firsttuesday.us

 

[BeExcellent]

You’re a bright guy OP and you are asking the right questions. I built my net worth through real estate investing as a strictly cash flow investor. I paid attention to everything because when I started around 2005 I had a high income but no assets outside my own home.

I also supported a family of 5 solely on my income. Private schools, organic food, nice things. Not an inexpensive proposition. I had to be very smart and at times quite shrewd.

Yes you need to “get it”. Pigs get slaughtered in any investment arena. Hell. There was a time around 1999-2000 time frame where precious metals tanked. So you could have lost your ass there too. If you were young and held on of course you’d be fine now. I had 100 shares of Google at $110 a share 20 years ago. Oh well huh?

Why are you asking for advice only to swat down the advice people give you? I’m not the fraidy cat one worried about the sky falling. You are. I’ve got a 7 figure net worth. All I have to do is pivot. And put the top down and go for a drive in my exotic car. Not a care in the world.

I have a friend fighting stage 4 cancer. The home he owns in a prestigious area he can AirBnB for income, it’s nearly paid off and it’s worth 2.5M. He can downsize after he gets through the cancer thing, buy something small outright, invest the rest and he’ll live modestly but be set for life. So he’s pretty happy he has that asset. He’s 58. I could retire tomorrow but it’s silly to leave a decent six figure income potential on the table when I can be completely debt free and retire before 60 (and ski and travel and enjoy the good life.)

But no. None of us here have any idea what we are doing. Clearly. SMH.

Apparently you were not alive in the early 1980s.

 

[Reincarnated]

It's an interesting time to ask this question given how a lot of funds are sitting on larger cash balances than they typically hold historically, and markets in general haven't been this overweight in bonds vs. equities since 2009 I believe.

For work this week I was actually tasked by one of the members of our board (publicly traded bank) to pull historical performance metrics/ trends for our bank from the 1970s - present, inflation adjusted. So this has been at the front of my mind. The poster who mentions time horizon really hit it dead on. By looking at data from 1970 - now, I kind of got a feel for the ebs and flows of multiple inflationary/economic cycles.

My conclusion is that the only wrong move would be to do nothing. Even boring old bank CDs can get you north of 4% on a multi-year duration, so if the only goal is to hedge inflation, that's not a terrible option. Equities in general are probably undervalued, but you'll probably need to be willing to stomach some volatility, since I am 100% certain a moderate recession is coming (these things lag further than we anticipate). No need to get complex with crypto or commodities options if the goal is just to hedge. Hell even the 10 year is somewhere around 3.50 at the moment, and I'd peg that as undervalued by 10-15 bps.

By definition a hedge is a defensive risk-mitigator, so unless the risk you're hedging is speculative (which it isn't with cash inflation) then you can forget about any speculative choices. It might be old accounting language, but an effective hedge falls within an 80-125% range, so it's not going to make you rich.

 

[Reincarnated]

Leverage goes both ways, not always a win. What works in a declining interest rate environment doesn't always work going the other way. You didn't really address the purchase price aspect if prices go down over an extended period due to high rates. You're not going to be able to cash flow a property now(for the most part) with debt and where interest rates are. What do you think happens to commercial real estate prices if rates stay elevated and work from home stays a trend? Why do you see major funds walking about from huge properties?

I tend to agree with this, I'd add CRE office/multi use is completely decoupled from the residential market right now. The dynamics souring commercial real estate are pretty unique and isolated, their will be a period of default that's going to eventually catch up to some banks, but residential is a different story. What I'm seeing is a big pullback in the demand pipeline from property developers at all levels, the math just doesn't work for a lot of new projects in the short-term.

I can't imagine an inexperienced and likely leveraged newbie looking to get into the rental game would fair well right now. You're better off waiting for the market to stabilize. A lot of the success stories people have had in this business over the last 20 or so years is directly related to a relatively easy money environment, with some exception

 

[jaygreenb]

You’re a bright guy OP and you are asking the right questions. I built my net worth through real estate investing as a strictly cash flow investor. I paid attention to everything because when I started around 2005 I had a high income but no assets outside my own home.

I also supported a family of 5 solely on my income. Private schools, organic food, nice things. Not an inexpensive proposition. I had to be very smart and at times quite shrewd.

Yes you need to “get it”. Pigs get slaughtered in any investment arena. Hell. There was a time around 1999-2000 time frame where precious metals tanked. So you could have lost your ass there too. If you were young and held on of course you’d be fine now. I had 100 shares of Google at $110 a share 20 years ago. Oh well huh?

Why are you asking for advice only to swat down the advice people give you? I’m not the fraidy cat one worried about the sky falling. You are. I’ve got a 7 figure net worth. All I have to do is pivot. And put the top down and go for a drive in my exotic car. Not a care in the world.

I have a friend fighting stage 4 cancer. The home he owns in a prestigious area he can AirBnB for income, it’s nearly paid off and it’s worth 2.5M. He can downsize after he gets through the cancer thing, buy something small outright, invest the rest and he’ll live modestly but be set for life. So he’s pretty happy he has that asset. He’s 58. I could retire tomorrow but it’s silly to leave a decent six figure income potential on the table when I can be completely debt free and retire before 60 (and ski and travel and enjoy the good life.)

But no. None of us here have any idea what we are doing. Clearly. SMH.

Apparently you were not alive in the early 1980s.

Assuming you are referring to me here since OP is not involved in this discussion and you are referring to my comments. Since we are resume flexing, I am 43, owned a business for 13 yrs and have a 7fig net worth too. Liquid, the real meaning of the word. Made and lost money in many areas, not scared of anything. Also spent a lot of time and money to continually learn as well. I am also a member of organizations where I deal with people in these industries on a high level. Just pointing out your factually incorrect statements and addressing your vague comments. Happy to stay on topic and actually discuss the merits of it instead of just doing the hyperbolic deflections and anecdotal stories.

 

[jaygreenb]

I tend to agree with this, I'd add CRE office/multi use is completely decoupled from the residential market right now. The dynamics souring commercial real estate are pretty unique and isolated, their will be a period of default that's going to eventually catch up to some banks, but residential is a different story. What I'm seeing is a big pullback in the demand pipeline from property developers at all levels, the math just doesn't work for a lot of new projects in the short-term.

I can't imagine an inexperienced and likely leveraged newbie looking to get into the rental game would fair well right now. You're better off waiting for the market to stabilize. A lot of the success stories people have had in this business over the last 20 or so years is directly related to a relatively easy money environment, with some exception

This is what I am hearing too. I know one of the biggest commercial brokers in my area, said he is doing around 10- 20% of what he did a year ago. Market has started to freeze up. Another guy I have money with in a fund has completely moved away from strip malls and office space which was his bread and butter before. Now really focused on wharehouse/distribution centers and apartments. Most small to mid size commercial loans are with regional banks which are having a number of issues outside of that already

 

[BeExcellent]

Good OP.

Then you understand that irrational fear is the enemy.

If you are already a millionaire at 43 by net worth then obviously you’re doing something right. Do not develop a fear of losing what you have built. That belies a scarcity mindset. It is fear based and fear is the enemy.

There are myriad books about real estate investing and many many different strategies. The correct path is determined by the particulars of your situation. My affairs are structured according to my particulars which are not the same.

I mean the easy peasy solution is buy 10 rent houses in Orange County, CA for 80k each, rent & hold for 30 years and self manage the whole way & you’ll be set for life. I personally know a couple who did exactly that and each house is worth a million now and brings in 4K a month and all are free & clear. They are in their 80s and live very comfortably in the OC. They will leave a very profitable business to their children.

Those days are gone, obviously. But there are plenty of opportunities in today’s climate. You just need to be able to recognize them….

Real estate requires a plan specific to your situation, which isn’t the same as mine. I will tell you I read and researched and evaluated things for 4 years before I bought any investment property. I designed a strategy specific to me. There are aspects of how I do things are unique and few people can do or are willing to do what I’ve done. And there have been disappointments and expensive lessons along the way.

Squawking about the sky falling doesn’t help you. Figure out a way to solve your own personal problems. Waste no energy worrying about stuff you can’t control. Pivot. Adapt. Learn.

My personal opinion is that for the average person real estate is the single best wealth builder out there.

If you are a qualified sophisticated investor with a 7 figure net worth then park a million dollars with a trustworthy wealth management firm and go play. 1.5M can earn 10% in the current investment climate. That’s 120K annually. That’s a very comfortable living in most areas.

What you do and how you do it depends on your situation and your goals.

It is meaningless to explain exactly how I’ve done things. I’m not you.

 

[Bingo-Player]

In the UK the residential housing & rental markets are both close to implosion

We have people MASSIVELY over leveraged on (what was) cheap debt , now said debt is 500% more expensive and the cost of everything else has tripled in the last year and wages are actually declining because of inflation

so its absolutely inevitable that the core asset values will decline from these levels for a long time , I do not see property as a stable investment at the moment

Your best bet is too funnel cash into something that can produce more cash I.E commodity / luxury reselling

I am starting to take multiple positions in anything to do with renewable energy and food production as it's clear as day this will be the key to the next bull run in the 2030's

I also hold some gold bit obviously governments and central banks around the world are manipulating the spot prices for fun

 

[corsica]

My conclusion is that the only wrong move would be to do nothing. Even boring old bank CDs can get you north of 4% on a multi-year duration, so if the only goal is to hedge inflation, that's not a terrible option. Equities in general are probably undervalued, but you'll probably need to be willing to stomach some volatility, since I am 100% certain a moderate recession is coming (these things lag further than we anticipate). No need to get complex with crypto or commodities options if the goal is just to hedge. Hell even the 10 year is somewhere around 3.50 at the moment, and I'd peg that as undervalued by 10-15 bps.

By definition a hedge is a defensive risk-mitigator, so unless the risk you're hedging is speculative (which it isn't with cash inflation) then you can forget about any speculative choices. It might be old accounting language, but an effective hedge falls within an 80-125% range, so it's not going to make you rich.

Do you mean equities are overvalued?
P/E are at historically highs, SP500 (SPY) dividend at 1.65%. The idea of stocks is to have +risk but more upside potential. If you're certain a recession is coming, it means a downside is higher than upside.

As for real estate, also overvalued:
Money in the bank will generate double the amount you'll get from renting right now, passively. People like to use AirBnb as an example but that's not passive (unless you have a ****ty job, you can manage your properties like an hotel- answering guests, changing sheets, cleaning...).
You can feel great owning properties but they all belong to the bank for 30 years. That's a long time frame. If you invested in NYC in the 90s, you're fine. What if you bought in Detroit? What if you bought only your home and your property taxes went up exponentially above inflation and not your salary? Even if the house went up 3X after 15 years and you're forced to sell, you won't have anything since you just paid interest. Even if you had your house fully paid, you won't be able to buy 3 similar houses.

My cousin bought a nice apartment abroad. 5 years ago it was valued at $250k and he didn't want to sell. Now he wants to but the best offer ain't even $100k. Good luck waiting till it goes back to $250k.
A deceased uncle had 15 properties in a small but very rich town. He would rent during high season (two months out of the year) since there was no demand for the rest of the year. Due to a crisis in early 2000, tourism in that town went down and he couldn't rent the properties for years, losing most of it since property taxes were outrageous.
Another friend of mine has 5 properties in Patagonia (extreme south of the world). He used to travel the world with that income, even with high inflation (that Argentina is known for). Now he can't.

Check survival bias. You can read about successful cases but you won't see the graveyard of people who didn't made it.

What I like about real estate is the "safety" it provides since it's a very tangible asset and it's not like it can be stolen easily. If you have 10 small apartments in city centre at some busy capital (year round residents), I would say it's a safe bet that will always make money. The economy can tank and rents can go to half but you'll still have income. I would stay away from leverage and pay a mortgage in 10 years max. Getting a 30-year mortgage is great when interest rates are at zero.

As for crypto, most lost 99% of its "value". Most are rug-pulls. Just like ponzi schemes, who entered early, made money out of new suckers. Many made some money, just to risk everything thinking they would make even more money...just to get rekt. I met a young guy who lost all his savings.


I don't know your age OP, but my retirement plan is to buy two apartments in some nice city in Europe. One to live, another one to rent. Income from it is to pay for maintenance of the one I live (HOA, property taxes, etc). That way I know I always will have a roof over my head. As for other investments, do what you think it's right.

 

[jaygreenb]

Good OP.

Then you understand that irrational fear is the enemy.

If you are already a millionaire at 43 by net worth then obviously you’re doing something right. Do not develop a fear of losing what you have built. That belies a scarcity mindset. It is fear based and fear is the enemy.

There are myriad books about real estate investing and many many different strategies. The correct path is determined by the particulars of your situation. My affairs are structured according to my particulars which are not the same.

I mean the easy peasy solution is buy 10 rent houses in Orange County, CA for 80k each, rent & hold for 30 years and self manage the whole way & you’ll be set for life. I personally know a couple who did exactly that and each house is worth a million now and brings in 4K a month and all are free & clear. They are in their 80s and live very comfortably in the OC. They will leave a very profitable business to their children.

Those days are gone, obviously. But there are plenty of opportunities in today’s climate. You just need to be able to recognize them….

Real estate requires a plan specific to your situation, which isn’t the same as mine. I will tell you I read and researched and evaluated things for 4 years before I bought any investment property. I designed a strategy specific to me. There are aspects of how I do things are unique and few people can do or are willing to do what I’ve done. And there have been disappointments and expensive lessons along the way.

Squawking about the sky falling doesn’t help you. Figure out a way to solve your own personal problems. Waste no energy worrying about stuff you can’t control. Pivot. Adapt. Learn.

My personal opinion is that for the average person real estate is the single best wealth builder out there.

If you are a qualified sophisticated investor with a 7 figure net worth then park a million dollars with a trustworthy wealth management firm and go play. 1.5M can earn 10% in the current investment climate. That’s 120K annually. That’s a very comfortable living in most areas.

What you do and how you do it depends on your situation and your goals.

It is meaningless to explain exactly how I’ve done things. I’m not you.

Lady, are you actually reading my comments or trolling me? I just told you I am not OP, why do you keep calling me that? It literally has zero to do with scarcity mindset, it is called properly evaluating markets, assessing current risk making good investments. If we are in a rate rising cycle a different set of variables need to be considered, that is all. Someone new who is levered up, buying today is not the slam dunk like it was previously. You also have the choice of a liquid risk free return of 5% in TBILLS. Risk adjusted far outweighs squeaking out a few percentage points more, which I don't think you could get if purchased today

All asset classes move in cycles where they are under valued, fair valued and overvalued. Not all assets are a good buy at all times, ESPECIALLY WITH LEVERAGE. It does not mean it is never a good buy or people didn't have success with it or a highly skilled person couldn't make it work. Buying a property 10-20yrs ago is a different environment than today. There are also different periods of risks/upside/downside. This is pretty basic investing here. Like I said a few times already, you really make the bulk of your long term return from when you purchased.

Next point, I live in California and banks want a 25% down payment on investment properties. Where in Orange County are you finding a home for 320K with an 80k down payment? I do not really know that area well but would bet a lot of money they do not exist. You also are not making 10% on a house purchased TODAY with current interest rates of around 7%. You are literally making up a non existent example to prove a point. Please provide real world examples purchased TODAY

This isn't 50yrs ago with your 80yr old couple example. You are going to be hard pressed to be able to cash flow anything in RE right now with with where interest rates are and prices. There is a much smaller margin for error so you must really know what you are doing to be playing with leverage. Then throw on top of that you have basically a risk free highly liquid return in TBILLS of 5%.

 

[BeExcellent]

Here’s the thing some of you do not grasp about leverage in the way of a mortgage.

A 30 year mortgage is “patient money”. Meaning you can pay it off sooner if you choose, but you aren’t required to. A ten year mortgage is not very smart. It will double the payment you are REQUIRED to make each month, maybe closer to triple it. That higher payment vastly increases your carrying costs for the 10 year period. It will wipe out the cash flow you would have with a 30 year mortgage. It means you make no money and you have high risk if suddenly you can’t carry the property due to unforeseen circumstances.

If a property cash flows with rent covering a 30 year mortgage payment & putting some money in your pocket? The renters pay the house off for you over time.

This is exactly what I do with my properties. Then I have strategically sold here and there, taken the proceeds and paid off other properties. You want the lowest payment possible to maximize cash flow. Let the rents pay the place off.

I have a number of 100% financed interest only mortgages for exactly this reason. Without amortization (principal payments) the monthly payment is reduced, which increases cash flow.

A property that runs in the black has an infinite holding period. Think about that.

And that higher cash flow means the ability to maintain the properties well and increase value through upgrades over time, which benefits you at time of sale.

It’s nice when you can sell one, turn around and pay off three, which I have done. If I’m doing that then it’s best to have the lowest payments/highest cash flow. I cut the interest off at the knees with an early pay off.

And I do interest only on properties where I know I got a great deal and where I know I can improve the property to increase the value. My interest only properties have all doubled at least since purchase.

You must be very disciplined in this and understand the risks. But there are risks everywhere. You cannot escape risk. You do well if you can understand it and manage it.

I do not know the markets in UK. Real estate markets are quite local. What I do works well in US.

In real estate I get the most control. In the financial markets I have no clout. I am at the whim of politics, influence of huge funds, corporate decisions etc. I cannot control or influence any of that.

For that reason I got out of the financial markets long ago. I can control what I buy and when; I can control what I sell and when. I can buy low & sell high and rent for operating capital & income while I hold. I don’t get that kind of discretion in the financial markets (sure you can buy or sell stocks but as an individual you can only react to pricing. You can’t actually influence it.).

Real estate is tangible and far more simple.

 

[BeExcellent]

Lady, are you actually reading my comments or trolling me? I just told you I am not OP, why do you keep calling me that? It literally has zero to do with scarcity mindset, it is called properly evaluating markets, assessing current risk making good investments. If we are in a rate rising cycle a different set of variables need to be considered, that is all. Someone new who is levered up, buying today is not the slam dunk like it was previously. You also have the choice of a liquid risk free return of 5% in TBILLS. Risk adjusted far outweighs squeaking out a few percentage points more, which I don't think you could get if purchased today

All asset classes move in cycles where they are under valued, fair valued and overvalued. Not all assets are a good buy at all times, ESPECIALLY WITH LEVERAGE. It does not mean it is never a good buy or people didn't have success with it or a highly skilled person couldn't make it work. Buying a property 10-20yrs ago is a different environment than today. There are also different periods of risks/upside/downside. This is pretty basic investing here. Like I said a few times already, you really make the bulk of your long term return from when you purchased.

Next point, I live in California and banks want a 25% down payment on investment properties. Where in Orange County are you finding a home for 320K with an 80k down payment? I do not really know that area well but would bet a lot of money they do not exist. You also are not making 10% on a house purchased TODAY with current interest rates of around 7%. You are literally making up a non existent example to prove a point. Please provide real world examples purchased TODAY

This isn't 50yrs ago with your 80yr old couple example. You are going to be hard pressed to be able to cash flow anything in RE right now with with where interest rates are and prices. There is a much smaller margin for error so you must really know what you are doing to be playing with leverage. Then throw on top of that you have basically a risk free highly liquid return in TBILLS of 5%.

Not true. You just have to know where to look and what to do.

Most of my bank loans are commercial and have always been in the 7% range and are ARMs so they adjust. One adjusted up last month. I’ll probably pay that one off altogether in a few months.

My hard money loans are 10%. But no amortization so the payments are actually lower.

You can bold your stuff and yell at me all you like. There are always markets where you can make money. You’ve got to be savvy, that is true. But SoSuave is not the platform for education in real estate investment. There are other places for that.

Do your homework. Think.

There is a reason I get asked to speak at real estate investment meetings and national conferences. I have no product to sell. I simply teach strategies and risk management at those things.

So perhaps I know what I’m doing. I dunno.

 

[HaleyBaron]

I invest. Depending on your timeline.

S&P 500. The gov will do ANYTHING in its power to avoid a collapse. If it completely collapses EVERYTHING is screwed.

Alternatively you if you want to simply minimize inflation, you can get over 4.5% in money market accounts now. You're still losing, but not as much.

I'd be cautious with that line of thinking. Nothing is a guarantee. But what is a guarantee is gold, cigarettes, alcohol, food, and bullets.

A little bird through the vines is telling me that there is an exit strategy coming soon from the elites. Basically to rob the country and have the dollar deliberately crash while the new empire is sent overseas. Reminder, the London British empire moved to New York, which is why New York City is the defacto capital of the US [not Washington DC]. And they are preparing to move again, this time to another haven. Some are spectating that haven is Israel.

 

[jaygreenb]

Here’s the thing some of you do not grasp about leverage in the way of a mortgage.

A 30 year mortgage is “patient money”. Meaning you can pay it off sooner if you choose, but you aren’t required to. A ten year mortgage is not very smart. It will double the payment you are REQUIRED to make each month, maybe closer to triple it. That higher payment vastly increases your carrying costs for the 10 year period. It will wipe out the cash flow you would have with a 30 year mortgage. It means you make no money and you have high risk if suddenly you can’t carry the property due to unforeseen circumstances.

If a property cash flows with rent covering a 30 year mortgage payment & putting some money in your pocket? The renters pay the house off for you over time.

This is exactly what I do with my properties. Then I have strategically sold here and there, taken the proceeds and paid off other properties. You want the lowest payment possible to maximize cash flow. Let the rents pay the place off.

I have a number of 100% financed interest only mortgages for exactly this reason. Without amortization (principal payments) the monthly payment is reduced, which increases cash flow.

A property that runs in the black has an infinite holding period. Think about that.

And that higher cash flow means the ability to maintain the properties well and increase value through upgrades over time, which benefits you at time of sale.

It’s nice when you can sell one, turn around and pay off three, which I have done. If I’m doing that then it’s best to have the lowest payments/highest cash flow. I cut the interest off at the knees with an early pay off.

And I do interest only on properties where I know I got a great deal and where I know I can improve the property to increase the value. My interest only properties have all doubled at least since purchase.

You must be very disciplined in this and understand the risks. But there are risks everywhere. You cannot escape risk. You do well if you can understand it and manage it.

I do not know the markets in UK. Real estate markets are quite local. What I do works well in US.

In real estate I get the most control. In the financial markets I have no clout. I am at the whim of politics, influence of huge funds, corporate decisions etc. I cannot control or influence any of that.

For that reason I got out of the financial markets long ago. I can control what I buy and when; I can control what I sell and when. I can buy low & sell high and rent for operating capital & income while I hold. I don’t get that kind of discretion in the financial markets (sure you can buy or sell stocks but as an individual you can only react to pricing. You can’t actually influence it.).

Real estate is tangible and far more simple.

Here is the thing you are failing to grasp, you're not going to positive cash flow most RE right now with prices and rates if you bought TODAY. Your 350k property in Orange Country that yields 10% does not exist if you bought TODAY. Would you buy a property that is cash flow negative? A property that runs in the red is going to drain your capital, think about that. Then through in you can get 5% risk free and liquid today which you haven't been able to do in decades. Maybe that changes behavior, Think. If we are in an interest rate change environment and they trend up the next few decades like they have historically are the same strategies going to be as effective? Look at long term historical trends, think. The adjustable rate and interest only loans do not work if rates are in a long term uptrend

The blanket statement that real estate is always the best place to allocate at all times and all conditions is naive.

You are picking and choosing anecdotal evidence from different points in time, leaving out key factors or providing examples that literally do not exist. You are also just making surface level statements with no understanding of macro or investment cycles outside of real estate. You obviously fail to grasp what risk adjusted returns are or mean. Past two decades because cash almost offered basically zero yield it drastically changes investment behavior and returns. It pushed investment far out on the risk curve and drove irrational returns on anything tied to cheap debt. Do your homework, Think.

I know you are old but don't let your recency bias and emotions cloud your judgement. Think.

I am not saying real estate is bad, I own some. Just it is a different environment and much smaller margin for error, better know what you are doing. Not the same lay up it once was, no idea what the future holds

 

[yellowstoneman2012]

I invest. Depending on your timeline.

S&P 500. The gov will do ANYTHING in its power to avoid a collapse. If it completely collapses EVERYTHING is screwed.

Alternatively you if you want to simply minimize inflation, you can get over 4.5% in money market accounts now. You're still losing, but not as much.

S&P Index Fund? Can't go wrong with that