The $7 Million 7 Years Wealth System

Sounds like a good start in getting some real estate practice, Josh! If it were me, I would probably be begging my folks to turn it over to me so that I could live in it, pull the equity out and get a jumpstart shooting for the stars, but I understand the element of risk that partakes on any parent that’s worked hard to obtain such an investment.

I’m concerned about maintenance requirements that average $650 a month! What’s wrong with the place? Does that include taxes and insurance, perhaps? Seems an excessive amount of outgoing cash on a piece of property that’s owned 100%.

I like Scott’s idea of your parents gifting the property to you so you can use it as an investment start-up/learning. There are some limits on gifting, but the costs are cheaper than inheritance taxes I believe. Your parents should be thinking along those lines as well.

And, if you’re more comfortable with the stock market, I don’t see why you would need to move into Making Money 301 yet, but learning slowly is always a strategy you can pursue.

@ Josh I know it would break one of our “rules” but if you ever want to move to Kansas, I’ll let you move in with us and can use the rent money. 🙂

@ Adrian – I wish my family wasn’t so risk adverse. Taking equity out of propery they own would seem sacrilegious to them. I’ve talked to them many times about this, and explained the many reasons why 100% equity is a bad idea, I guess there just scared.

@ Scott – The property is actually my grandmothers, and the cash flow from it will go to her to supplement her persion/medicare/savings. Money making 301 for her, and a great learning opportunity for me.

@ Diane – That $650 is charged by the co-op which covers any repairs needed within the walls of the apartment as well as the grounds keeping, water, heat, and property taxes. Electricity is paid for by the owner or tenent in our case. That charge is actually reasonable compared to comparable one bedrooms in the area I live.
The gifting idea would be great, although it’s not really an option, I feel very blessed to be in the position i’m in where I can committ a large amount of my income to investing.

@ Lee – Thanks for the offer, once I retire, I’m definitly coming out there to hang out.

@ Me – recourses = resources, sorry for the spelling.

Ahh New York and $650.00 a month just for maintenance fees. I guess there’s a premium on living in the center of the universe 😉

@Josh – Definitely a good experience to pursue. I’m trying to encourage one of my siblings to manage a small property that is 100% paid for as well. However, since this property is not in the US, I can’t comment on how easy it is to pull out equity from it.

@ Josh – yes, your grandmother (via you!) is executing a sound MM301 strategy …

… perhaps your parents will decide – when the time comes – if they should do the same, or perhaps withdraw 50% of the equity and buy another … small steps 🙂

If the property somehow ends up in your hands (perhaps you can agree on a future buy price ‘option’ – IN WRITING – with your grandmother / parents in return for managing the property?) you may decide on an even more aggressive strategy; e.g.

Withdraw, say, 75% of the equity to fund a share trading fund … using margin loans for the other 50% of the portfolio. This is what i did, and only lost 15% in the current market crash … which, as far I can tell, is a 25%+ ‘gain’ on the the rest of the market (AND, I was 100% leveraged).

A VERY high risk MM201 ‘jumpstart’ strategy … but, if you truly believe in your Bio Trading Strategies … 😉

@ Adrian – Thanks for the idea. There isn’t really any interest in giving the apartment to me, although I think I have worked out an agreement with my grandmother where she’s going to pay me 100$ a month for managing it.
I have been considering the equity fund and plan to meet with an attorney to explore some options. Just from my own research, I think a Limited Partnership would be the way to go, with close family and friends working as the passive partners. Then throw the money into a brokerage account, while taking advantage of margin, and I may have a nice chunk to invest. I would organize it with the standard distribution rates of hedge funds, taking 20% of profits after 3% increase and charging 1% of total equity per year.
What do you think?

@ Josh – it more depends on what your ‘limited partners’ think!

I would be more comfortable looking for investors, if I could first show a statistically valid track record with my own funds … do you currently have just an idea or is it already a ‘proven’ business model?

On the other hand, many a great business has launched on the back of Friends, Family, Fools … 😛

Very true. It always comes down to performance and whether I can deliver or not.
Using my current strategy, I’ve been able to realize a 70%+ return for the past 4-5 months. Although I find my biggest errors are not staying in long enough and not investing as much as I should. Usually my error in being to careful.
Some chores on my “to do list” is wright a prospectus, and build a web site.
The main reason I’m planning to do this is to “officially” build some sort of track record. The people I plan on asking to be a part of it are family and close friends and I anticipate them agreeing to participate based on our relationship, not necessarily because they believe I’m going to succeed, although I have no doubt I’m going to be successful.
So I’m basically using them so I can plot a real track record.

70% huh? Hmmm….

Adrian is it against the rules to invest in Josh’s hedge fund?

I think I know the answer. 🙂

Awesome job Josh. Keep up results like that and you’ll go far, without a doubt.

Thanks Jeff, unfortunately, if your reading this, your excluded from the potential investor pool.

@ Josh – The Good News:

1. 70%+ every 4 – 5 months gets you to your target on the back of your own investment performance pretty quickly, and

2. None of us can invest until AFTER you reach the 7 year milestone and remember us ‘little guys’ from your 80 sq. ‘beach house’ in the Caymans

The Bad News:

3. It’s not a ‘statistically valid track record’ … yet 😉

4. Investors (outside, not family … they’ll just be plain scared) – in the current market – will actually be scared off by such high quoted returns:

http://topics.nytimes.com/top/reference/timestopics/subjects/f/frauds_and_swindling/ponzi_schemes/index.html?scp=1-spot&sq=ponzi&st=cse

These days, people are just scared in general, the Madoff scandal just puts the cherry on top.
Some portion of the high returns could be attributed to the small investing capital. If it were 500 Mil istead of 5000, things might be different.
Also for reference, what would you consider to be “statistically valid”?

@ Josh – If pushed, I would say that it depends on your clients’ expected investing time frame: for example if measured in ‘trades’ then 200 consecutive trades might be enough; if in ‘days’ then 200 consecutive days; if in ‘years’ then you might need 20 trades over 10 years.

I’m not sure which of these can be regarded as statistically valid, but I always thought that 200 data samples would generally be enough …

… say, aren’t YOU the MBA-In-Training?! Why don’t you research it and tell us! 🙂