Carnival of Investing

I made the 26th Carnival of Investing. Check it out. It has several good posts.

The first post is about buying properties to become a millionaire. Quite a stellar approach! He’s going to buy 5 properties at 200k each. He thinks he’ll get an 8% yield on 4 of them which will net him $64k/yr. [This is of course after the houses are paid off].

The good thing about this approach is that rents are indexed for inflation, so if things become more expensive he’ll get to raise the rents. The bad thing is that as time goes by, your return on equity decreases. Earning 8% on your 10 million dollars is fine, however if you have a lot less, you should strive to earn a lot more.

In some of my investments I’ve made 1500% in 6 months, others have yielded 1000% return in 18 months. Quite a lot have made 100% in less than a year. This is your cash on cash yield [which is what concerns you] and not the total yield of the investment. For example, assuming you buy a $200k house with $5k down and you sell it after 12 months and profit $40k, your yield is 800%. This beats the stock market anyday!

Of course when dealing with leverage, one must remember it cuts both ways. In a down market, you can be reduced from a millionaire to a pauper in a few years. Donald Trump is reported to have once said the difference between himself and a homeless person was that the homeless person’s networth was higher by several hundred million dollars.[Of course, if you owe the bank several hundred million dollars, its the banks problem, not yours!]

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