
Good investment for a tech guy? - landlord
I'm a web developer, and managed to make about $200k after tax on a project. I want to invest this in a healthy way, currently it is a mix of stocks and a 2% interest bank account. I'm looking to diversify more, and shift more away from the bank deposit.<p>I've been thinking about buying an apartment to rent out, since it would be less risk than stocks, but better than a bank account (seems you could conceivably make around 4% per year on one). But it seems a bit silly, I would have to deal with renters and issues with the apartment, which is not my core skill. I am a developer, isn't there some sort of investment more suitable for me?<p>I could imagine for example buying existing web sites that have proven ad revenue, assuming there are some owners that are risk-averse enough to sell. Or, what other options are there?
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Huppie
If you don't want to lose the money, don't simply 'bet on one horse' and put
it in a house / websites / whatever. It makes more sense to get a properly
diversified portfolio of index-funds / ETFs.

I think the best investment you could make is to put that money away in a
lifecycle fund. (E.g. Vanguard's 'Target Retirement 2040' fund
[https://personal.vanguard.com/us/funds/snapshot?FundId=0696&...](https://personal.vanguard.com/us/funds/snapshot?FundId=0696&FundIntExt=INT)
) I.m.h.o. the best thing about a lifecycle fund is that it's a set-and-forget
investment. It's deviation will get less in time.

Of course, if you're a bit more of a control freak (like me) you could create
your own (properly diversified) investment portfolio. In that case I would
suggest you have a look at 'The smartest investment book you'll ever read'.

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0wned
Property managers usually get roughly 10% of the rental income and handle
paperwork, screening renters, phone calls, minor repairs, etc. You still have
to pay for major repairs (new fridge, AC, burst pipe), but depending on your
situation, you may consider hiring a PM.

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eru
If you buy an apartement and rent it out, or acquire the websites, that is not
only an investment, but also a (part-time) job you are buying. Whereas putting
your money into an index-fund or a bank account are just investments.

Both can be nice --- but keep the additional work in mind, when you make
comparisons.

(Disclosure: I just bought the index-fund with the lowest fees I could find.)

By the way, have you thought of buying stuff that will reduce your
expenditures --- like a fuel efficient car, or buying an apartment for you to
live in; or if you already have a house, putting proper insulation on it?

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landlord
Yes, I took that into account. I figured I would spend about 10 hours per year
having to deal with apartment stuff (maybe more at first when I'm still
clueless), and that it would be empty one month per year while I look for
renters.

Apartment is also not that suitable for me, because I will very likely not
live in one country that long, and couldn't really check on the apartment
always. Of course there are companies that can handle this for you, but then
you take a hit in the profit.

And on your second point, yes I am always looking for things to reduce
expenses. But because I don't know where I will live after a year, I can't buy
an apartment for myself to live in. Currently I am renting, and don't have a
car. My biggest expenses right now are food ($450 / month), rent ($450) and my
vice energy drinks ($270).

~~~
eru
> Of course there are companies that can handle this for you, but then you
> take a hit in the profit.

I guess on average that should not be worse than stocks --- the public
companies have managers, too.

~~~
landlord
Yes, it might be a good idea to get such a company to handle the details for
me, I haven't really looked into how much it costs. I wonder how this is
different from just buying the stock of some property holding company directly
though.

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dotBen
There is no point buying-to-rent if you already rent unless you either live in
a city where it's arguably cheaper to rent than buy (SF is an example) or u
don't want to settle.

Buying to live in is always the best return because you have no renters to
deal with and what used to go on rent now partly goes on capital.

If u don't want to buy a place, a portfolio of managed funds, perhaps some
individual stocks and also bonds/commodities would be a good mix.

But $200k is a lot of money and its what financial advisers are for. You would
gain a lot from going to see an _independent_ financial advisor and paying him
$500-$1000 to create a long term plan for you -- which might include tax
efficient schemes like putting some of this into a 401(k) etc.

On the issue of investing in website: as tech people it's something we all
know and it's therefore attractive. However it's unlikely u'd get attractive
terms investing in a proven business and going down the venture/angel route is
very risky and usually pursued by people with a much bigger personal wealth.
Its also easy to get sucked into spending more time than u intended on these
investments because its your profession - which then reduces your return
because you are essentially "working".

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rbboova
Relatively new to mid-level web developer wondering (if you don't mind) what
type of project you undertook that paid you that much money?

~~~
landlord
It was something that generated ad revenue and was later acquired.

~~~
rbboova
Thanks for the reply.

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sokoloff
Since you later say that you travel/live out of the country, stay FAR away
from rental real estate. No way on earth that an individual piece of rental
real estate is less risky than a basket of stocks in my mind.

If I were you, I'd stay away from any store of value that is dollar
denominated (other than perhaps TIPS), as I believe that the US will have to
devalue the dollar to pay its debt. That means oil/metals/commodities, or
perhaps easier/safer, profitable companies whose profits are not predominantly
made in US dollars. (It's fine or even good if they are repatriated into
weakening US dollars.) Ideal would be a company with revenues in foreign
currencies and expenses in US dollars.

If you were staying put, I'd agree with the buy real estate to live in as a
anti-dollar hedge and if you wanted to live in the 2-4 unit type of housing,
that would be even better. But leaving the country for long periods of time:
forget about it.

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charlesju
This is my take on investing.

Fact 1: Most professional investors do not beat the market.

Fact 2: The market has returned on average 12% for large cap stocks, 18% for
small cap stocks year-to-year (#s are not adjusted for last recession, but
discount 4-5% if you want)

Fact 3: You are not a professional investor.

With those facts in mind, I have found that the best expected value for an
investment return is simply to dump all the money into a mix-bag of ETFs that
leverage the market (they pretend to borrow money so you gain double or lose
double the market rate)

DDM, QLD, MVV, etc.

To balance that out (hedge) with the weakening US dollar and shift in world
powers, I would probably also throw some money into an emerging markets ETF
and/or China/India funds.

But, as a caveat, I am personally invested in nothing b/c the startup life is
the riskiest investment anyone can take (generalized), and my hedge against
that is to keep the rest of my money safe in CDs and online savings accounts.

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cyman
Keep in mind there is _always_ overhead. There's no such thing as a cash
machine that requires no maintenance.

I'd look at high _dividend yield_ stock that pays out monthly (6% yield or
more). This will give you monthly income with minor hassles, since the
companies are large. Unless you are a fantastic investor, don't look for
capital gains (making money off stock price increases) because there's lots of
speculation: [http://simoniqe.wordpress.com/2009/10/25/how-to-not-lose-
mon...](http://simoniqe.wordpress.com/2009/10/25/how-to-not-lose-money-in-
stocks/)

Domestic oil pipeline companies are a good bet because they pay high dividends
and are stable in price since they get paid no matter what. Investing in oil
is an ethical dilemma but there are domestic oil companies that are better.
PIF.UN is an example of a domestic Canadian one that pays about 10% monthly
dividends with no hassles, but if in the US you must never trade in other
currencies. Preferred stock also provides a stable price and in this economy
you can easily get 10% or more monthly div's. Investigate DDR.PR.G or other
Real Estate Investment Trusts (REITs) if you like the real estate angel. Be
careful if the yield is above 12% because it could be that the stock's price
is falling, which inflates the yield %. I AM NOT A CERTIFIED INVESTOR. I AM A
STUPID PROGRAMMER WHO FOUND THESE STOCKS IN IDLE TIME. DO YOUR OWN RESEARCH
BEFORE BUYING!

A great resource is Stock Chase: <http://www.stockchase.com/> It's like a
Twitter but only from professional investors.

Both real estate and web acquisitions have little _daily_ work but are very
interruptive. You have leaks, storms, tenants causing problems and for the
web, downtime events or security updates that often the need attention of an
owner at 3 AM at night.

"I could imagine for example buying existing web sites that have proven ad
revenue" I've gotten burned bad on small website acquisitions. There is full
time work involved for many months in terms of at least ensuring the
acquisition is worthwhile, and often without dedicating workers full time to
deal with it, things go south. Owners claim they do little work to maintain it
and this is generally false.

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rphlx
Real estate and business investments are illiquid, often hard to value, and
require constant work. Consider the stock market instead. I like ETFs:

spy dia qqqq uso dba ung tlt jnk slv gld ewa adre fxi

$200k of JNK provides >$2000/mo interest income.

Of course, you should diversify. Follow macro trends, use multi-week or multi-
month investments, don't daytrade or try to pick individual companies. Aim for
long term capital gains.

Use tight risk control (trailing stops etc). I highly recommend automated
trading as it reduces human emotional errors. Run a model real-time (rather
than backtesting) before using it on real money. etc.

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catweasel
_"I am a developer, isn't there some sort of investment more suitable for me"_

You've answered you're own question, you're a developer. Invest in what you
love doing. Invest in the area of your skills and knowledge.

If you dont' know a lot about real estate, and don't have much desire to
learn, then investments in real estate are likely to go south for you.

I second the recommendation to invest in yourself, that's the one investment
anyone can make that will always give a good return.

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fnid
Renting out a house is a lot of work and a lot of risk. I have rented out a
house to some free loaders and they destroyed my house causing more in damage
than they ever paid in rent and causing me a lot of work and hassle. I do not
believe renting a house is less risk. It's also a lot of work because you have
to find renters, repair the house or find a management agency, etc. Consider
that option very carefully.

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HeyLaughingBoy
Being a landlord is a serious responsibility. Don't take it lightly: you're
responsible for people's housing.

If I had 200k lying around, I'd start looking at franchise opportunities. Most
McDonald's restaurants make more than most software startups (ducks!).

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santacruz
1\. Max out investment in yourself first of all - better food, accomodation,
time saving stuff...

2\. Keep away from anything stock-market related - there are 2 types of people
there - those who earn for living there and who feed them.. you are not the
former 100%...

3\. Get mortgage ( don't pay in cash everything ) apartment and rent it out -
pay the reminder with cash and in 20 years you will have it for half price for
your children.

4\. Put the rest of your money in 2 different banks - hassle free, some %,
liquidity when you will need it when you done with #5...

5\. Start to learn about investing ( google passive income ) - you are really
abnormal person if you got it to 200K and don't know what to do next.

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ashishk
If you haven't done this already, you could buy an apt. and live in it. Might
be the simplest real estate investment.

~~~
landlord
Would definitely do, except I won't be in this country for long.

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antidaily
Collectible plates from the Franklin Mint. They're not guaranteed to go up in
value, but all the other ones have.

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LCG
Invest in Electric Battery Maker and distributor (Battery for Car)...over the
next 5 to 10 year....10 fold

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ecq
1) pay off your debt 2) buy a 2 - 4 unit apt. live in 1 unit. rent out the
rest. 3) invest in your self (certification/training/mba/etc)

~~~
landlord
Thanks for yours and all the other advice given here.

I guess I should have clarified that I am not currently living in the US. I
don't have debt and education is free in my country, but unfortunately I'm
more into creating web stuff than studying, although I am (very very) slowly
getting my masters. Buying a place for my own use doesn't really apply,
because it is very likely I will move to another country soon.

I noticed there are some nice companies out there holding properties and
paying dividends every quarter, for example ADC, GTY and PEI. Can't think of
any reason why I would buy an apartment to rent out instead of just buying
stock in these companies, considering they seem to be getting better bang for
buck for their real estate than I could. Would be nice to find something like
this not tied to USD though.

~~~
landlord
Found non-US real-estate companies. In Nordic stocks, I found Wihlborgs,
Klövern and Citycon that each have yield of over 6%. I now feel I will invest
in a mix of these instead of buying a single property myself.

~~~
Huppie
It's still a lot safer to diversify and not just buy stocks in real estate in
your country. Better to diversify it at least a bit by splitting the money
e.g. 50% Nordic Real estate 25% European Real estate index 25% US Real estate
index (E.g. Vanguards' REIT Index VGSIX)

Ps. I am not living in the US either.

