Michelle Singletary of The Washington Post has an interesting article which covers financial decisions made by couples. The first part is about a manipulative fiancee who won’t marry his betrothed unless she agrees to empty out her 401k and spend it on his daughter’s education (and buy her a new car). Of course, that’s crap – big decisions like emptying out a 401k need to be unanimous.
Archive for July, 2006
Question: I own a couple of homes, but they’re both two family and not really complicated from an operational or investment perspective. I was considering getting into the multi-dwelling game (probably 6 family), and wanted to know a good place to start as far as understanding the expenses and risks.
I want to invest soon because I’m too liquid (I’m the diarrhea of investing), and I’m concerned that I’ll get killed by inflation. Right now, it’s wrapped up in a CD because I was expecting to pull the trigger on something this year, but the prices hadn’t dropped as much as I’d hoped so I’m stuck in the waiting phase. I guess it is better to wait and get screwed a little than rush and face the potential of getting royally screwed. Anyway, I’d appreciate some advice.
Answer: The only people who need to be worried are the ones who are illiquid when the sh%t hits the fan. It sounds like you know the game in your other investments, and if you have the liquidity for a multi-family, it means you’re probably in good shape. Every bad decision I’ve made as an investor has come when I’ve been in a hurry to put capital to work.
I’d rather give up a little to inflation than force a bad investment. When an investment is right, it’s scary but you know that you’ve got the right call. If you are overly concerned about inflation, add a little gold or oil to your portfolio as a hedge.
Now for some advice. Good value is good value — you have to analyze the building cost soley on its expenses vs it’s income — and not it’s intrinsic value — that’s a separate calculation — and if you’re paying more than 8x the annual rent roll you have to look at the bottom lines even more carefully
Of course, here in NYC right now, getting anywhere near 8x (interesting rule of thumb there) seems to be impossible. Especially if you’re considering that 8x after expenses, most of the places I’ve seen haven’t come close.
Most sellers ask for 10x plus in my experience — most banks won’t give a valuation larger than 8x — there is your profit margin in a nutshell — if there is no high upside and the price is 10x you gotta walk — if you are just going to be staying even — going higher than 8.5x is suicide in this market unless the rent roll is exceptional against the expenses.
Also, make sure you get realistic numbers on expenses. When I bought apartments I got lied to more than the guys who rent hotel rooms out by the hour.
From the big Microsoft fine to bad news for Haliburton there is certainly reason to be bearish on stocks short term. Rising oil and gold prices again remind us of the need to diversify. If all my money were in tech stocks I’d be a lot more worried than I am now. Having money in CEF and other gold plays sure seems like a good move to me.
It seems that speculators are hard at work in the New Orleans real estate market. Homes in the suburbs (which didn’t flood) are selling for a quite a bit more than they used to. However, “flooded houses in the city are being bought as well, often at deep discounts of as much as $50 a square foot less than they would have sold for before the hurricane.”
Since the houses in the city itself often end up being the most desirable, I think this is a risk that might pay off for the speculators.
I think there’s a very strong chance that the market is overreacting to North Korea’s missile tests. As a result, I think it’s time to look for buying opportunities in these declining Korean companies.
I’m not real interested in POSCO because I worry that we may see government subsidies exposed. LG is an interesting company and the biggest decliner recently. Kookmin Bank and Woori Finance are both solid financials. In fact, I do business with both banks. Anyway, just some stock worth looking at.
I found another finance site that I want to share, the Investing Site. Like this blog, they cover more than just investing; topics like tax and loans are also discussed.
The primary focus is on investing though, and they have a good collection of links for learning to invest. I was going to complain about their link to Motley Fool’s fool school, but I discuss their articles fairly often even if I don’t agree with their sales tactics.
Motley Fool shows up again in their stock market links, apparently it’s their personal favorite. They do link to my favorites, including Yahoo Finance and Morningstar. They also get more specific, with categories like IPO information and others.
With non-investing stuff, I’d at least check out their debt resources. It’s a topic I cover occasionally, but it’s a huge topic and the dedicated sites they link to are going to be much more comprehensive than the few times I mention loans in this blog.
As you can tell, I think this is a good site that’s well worth visiting for its focused collection of quality investing and finance resources.
According to this article about the 2008 Dodge Challenger, some believe this is the right direction for US automakers:
“The problem the domestics have had for years is that they abandoned their blue-collar buyers and ventured out into new horizons and forgot their roots,” Lindland said.
The domestics attempted to win over Toyota and Honda buyers with high-mileage sedans, rather than wooing the millions of NASCAR fans with performance.
With gas prices being what they are, I’m not so sure that muscle cars (and I’m sure the Cahllenger will be popular – heck I want one) are really a large growing market.
This article (which has a picture you can enlarge) goes into a bit more detail about why this is a good decision – apparently it will be chaep to produce, using lots of stuff from cars already in production.
If the Challenger really is priced to compete with the Mustang, this might help the company’s stock.