What Do I do If I Inherit a large sum?

[Wade Alderson]

My father died 2 years ago and left everything to my wonderful step mother. My step mother has made it very clear that the balance of her estate is to be divided 3 ways between my sister, my sisters daughter/my niece, and myself. Part of the estate includes a 401K worth at this time just over $3,000,000. Because the stock market is a scam and I know that IRA's and 401K's are a rip off I am going to take the up front tax hit and cash out and after taxes I could maybe get around $600,000. My question is... when that very sad day comes and my wonderful step mother passes... what would you do with $600,000? I have read "7 Years to 7 Figures" and I like the idea of taking a bit of a short cut and buying the 75 unit apartment, or should I just bite the bullet and go with buying 20 single family homes, or should I think about all the garbage dealing with so many property managers and just take the middle road of "7 Years to 7 Figures" and buy two 20 to 30 unit apartment buildings and just use the cash flow until I can flip them for the 75 to 100 unit apartment building.

My wonderful step mother beat cancer 4 months ago, but now she has no lymph nodes and her doctor told her if she gets sick it might kill her. Right now she isn't feeling well, and if I had hair I would be pulling it out (I shave my head) but she says she is fine (she is a really tough woman and never wants us kids to worry) 

I am ALL ABOUT THE CASH FLOW I don't care about the take the money and party, go on vacation, or any of that other nonsense... I just want to do the right thing with the money, and then hid until my grief passes. And I want to make that happen as soon as I can so that my grief does not get in the way and I do something stupid like buying a condo in Costa Rica and thinking I can start a coffee farm, or even worse a hard wood farm. (20 years for cash flow... are you kidding me?) 

Any advice you can give I would love a heads up, think about this, you need to worry about that, kind of stuff.  

[Pavel U.]

@Wade Alderson the post above was great, very interesting, educational and entertaining :) I don't do 401K/IRA's/Stocks either, and recommend investing in either small or mid-size multi family properties. Single family homes are OK if you can get them dirt cheap and in A/B areas. Where I live a 3-4 bedroom single family home in B- area will bring about $2000/month and tenants are responsible for all utilities, including lawn care and snow removal, but for a bit more money you can get a duplex that will bring about $4,000/month before expenses. I don't recommend commercial properties, you might be sitting vacant for a year before anyone takes it, and that's in good areas. As for market crashing and you losing your tenants - my rental properties in 2010 were all occupied and bringing same rents as they're today. People that lost homes due to foreclosures were my clients in 2010 and paid $1,600/mo for a small 3 bedroom rambler.

[Wade Alderson]

@James Canoy I really truly love my wonderful step mother but she is not the most financially intelligent person on the planet. For her my father took his brokers advice over what I said, so she will do what my father did because my dad was the most intelligent person she knew.  I had told her, and my sister both who have very high valued 401K's that I expect a stock market and real estate crash in the next 3 to 5 years and they really should get out now and invest in cash flowing assets (because they both have over $1,000,000 I told then to put $1,000,000 into a life settlement investment paying 50% in from 2 to 5 years, and to just keep recycling that when it pays out, and to put another $1,000,000 into bridge loans that are currently paying around 7%  or they could invest in cash flowing real estate. 

But alas as much as I LOVE my family, they are BRAIN WASHED by the bobbing heads in the media (all who make their money off of convincing you to buy!) and they for some very strange reason believe that because the 401K was created by the government than it muse be good for you. 

When I tell them that the creator of the 401K Ted Benna HATES the 401K and calls it a MONSTER they just roll their eyes.

Here is how my world works... only about 5% of the people I talk to actually research anything I say, and of those less than 3% actually do anything to take advantage of the things I tell them.

On my "Build a Bigger and Better Life" page on Facebook I share all kinds of weird and off the wall ways to make extra money so you can invest in real estate (as an example... 1 bed 1 bath condo/apartments are NOTORIOUS bad real estate investments the turn over is a nightmare, but if you buy a $35,000 1 bed 1 bath condo in a vacation hot area and furnishing it, then rent it out using a AirBNB property manager you could have a cash flow of around $1,000 to $3,000 a month after all cost... if the local government flips and out laws short term rentals just rent it out month to month on AirBNB until the local government get a tap on the shoulder from short term rental lobbyist and then go back to 1 day rentals. A few stared doing that, my hope is that as their success grows and they start to boast about it, more people will be prompted to quit goofing off going out getting drunk as a form of entertainment and start to take part of the money they make and invest in at least one cash flowing property a year (even if its a mobile home, if you sell it right. The secret is to buy mobile homes on postage sized lots, you sell the mobile home at cost, say $1,000 down and $451.30 a month for 3 years... but you hold on to the lot and rent it out for $200 a month, that way when the mobile home is paid off you still have the cash flow of the land... It's brain dead simple and fool proof) I have a dream to teach and have 1,000,000 people financially independent because of what I tell them on Build a Bigger and Better Life, and I hope they each teach at least 1 person  and ask that person to do the same and ask the same of their students. 

Other dreams I have is to get married and have beautiful (they take after their mother) children, but the 1,000,000 people who are financially independent who teach 1,000,000 more thing seams a lot easier to make happen. 

[Loren Becker]

@Wade Alderson

Don't try California because that amount of money wouldn't even get you a modest home.  

Your best bet is to go to some real estate investing meetings and get to know the private lenders.  I buy 1st and pay between 7-9% with little risk.

The only downside with this investing is you give up depreciation.  

Good luck!

[Account Closed]

@Wade Alderson   It is impossible to know what to do at this point.  It will depend on the point in the different cycles we are at when your step mother dies.

For example, I think this is a particularly bad time to invest in the stock market.  Some real estate markets are not much better.

[Wade Alderson]

@Loren Becker I listen to around 20 to 50 podcast a week about investing in real estate where you don't live and one of my favorites by @Jason Hartman about the peoples republic of California always reminds me of what a nightmare it is to buy cash flowing real estate there. I use to buy mobile homes there and sell them on payments ala Lonnie Scruggs and even that became outrageously expensive before I fled California in November of 2003. You know when mobile homes on postage sized lots are selling for over a million dollars in Sacramento County that the world has gone nuts and you better run away before it infects you too. My general rule for where I want to invest is anywhere that I want to avoid like the plague... no coastal states, no vacation locations unless it has a really powerful theme park with high attendance all year long, and to focus on places where rents are high but housing cost are low. I have read @Brandon Turner's book on landlording like twice but I don't want to live in Ohio or Illinois I just want to own property their and rent it out to blue collar workers so that whole "Manage it your self" thing is more like a job to me than a passive income investment. (how I see it... when I go and invest in high yield stocks no one expects me to go work at that company do they, so why do people want to keep telling me I have to manage my own properties if I want it to be a PASSIVE investment... it's like they are control freaks and have no idea what the word "Passive" actually means. (unless they are being passive aggressive and then like those people who keep trying to tell me to invest in the stock market they have that passive aggressive thing down cold). So I just want to use Brandons book to manage my managers. If I get lucky and can buy around 25 Single Family Homes as rental units and have Platinum Investments manage them for me that would be great... if i have to I will turn to Biggerpockets and find property managers the community know and trust who uses Brandons methods. 

Here is my thing folks... when I experience heart break I am my own worse enemy as my sister Kimber puts it. I do goofy stuff like forget to pay bills and sit in the dark all day talking to the walls how if I were king of the world things would be different. 

So I have a 4X6 index card that I wrote up after my wonderful step mother called a family meeting and said "One of these days I am going to die, here is what I want you kids to do, here is where things go, I have a list of who gets what for my side of the family, you kids get the rest." kind of thing and I had my first anxiety attack.

The 4X6 card is a list of the things I HAVE TO DO so that when I come out of the other side of a very dark place things will be in place already and I didn't have a chance to do something stupid like buy 200 acres of land in some tropical 3rd world country that is all buzz right now and think I am going to start a coffee farm on a place with no top soil (if you have read about any of the Costa Rica scams you know what I am talking about) and have NOTHING to fall back in when that blows up in my face. 

Worse case scenario the way I see it... Platinum Investments tells me they can't do the whole $600,000 at that time they have a waiting list kind of thing (I can sooooo see that happening, they are very popular with the turn key crowed so popular they have quite a few copy cats) and I have to go to their copy cats and they tell me the same thing... long list... yada yada yada... so I go to plan B and I try to do the "7 Years to 7 Figures" thing and I contact an apartment broker who sees me as wet behind the ears from a mile away and says' "Yeah Brah... I got you covered, but it's not going to work they way you think it is. all those books you been reading about small apartment investing are all fairy tales with fake glitter instead of pixy dust... it's more expensive than you think... and then he takes me to the cleaners and I end up being over charged by $100,000 and I only end up with one 24 unit apartment builiding paying out $3,000 a month for the $350,000 he charged me... so I limp back to the first tier of "7 Years to 7 Figures" and with my remaining $250,000 I set $50,000 aside and buy three 4plex (totally over paying for those too) each cash flowing after all cost $1,000 a month (bigger down payment higher cash flow) so I am all set at $6,000 a month.

3 months, a year later I come out of my fog of misery and I have a clear head and I see how I screwed up... and instead of having $9,000 a month in passive income after cost and tax I only have $6,000. And I am really upset with myself for screwing up... but unlike leaving the money in a IRA, 7 to 10 years later I can refinance those three 4plex and do the first level up of the "7 Years to 7 Figures" thing, and 7 years after that I can level up again. So in like 20 years I am golden. 

Before all that... I just suffer with the knowledge that I have enough to retire on but not really to live the retired life I want to be living... (if it cost $3,000 to take an 8 day Caribbean Disney Cruise than that's half of my passive income... and one of my first year goals is to go on 12 cruises in 12 months) 

Or even worse... I could go totally nuts and do that thing where I buy Class B RV and try to live in it on $400 a month because I spent all my money on something silly like the whole disney library of digital movies... all 643 of them. (that actually only comes up to like $75,000, but you get the idea)  and the only passive income I have is the two mobile home lots I rent out. 

So that could happen... so I am taking considerable measures to make sure it or anything like it does NOT happen. 

I might not be the sharpest man in the room all the time, but when it comes to finance I see, know, study, and understand things most people are not even aware of. 

But when it comes to how I react to when a loved one dies (or a girlfriend breaks up with me) I am about as sharp as a marble so I know I NEED to have this investment taken care of before I come  completely unglued and fall into a million pieces. 

Maybe having read all the biggerpockets books I only think I know what to expect, maybe there is a reason I don't understand why so many of you have said "self manage, get a feel for it, and then level up" but that's just INSANE TO ME... you do not go to work at a 401K that you invest in, yet you think managing a property is passive? I just do not understand you people. 

But like I said... maybe what I really truly do not understand is how NOT passive real estate investing is and I should really just put $100,000 into 6 different life settlement accounts and call it a day. Even in a deep dark place I can understand life settlements do not pay out for 2 to 5 years (By the way... all that nonsense you read about how life settlements being bad investments... take a leap and guess who writes those articles... did you guess the stock market people? An Oreo Cookie for you! All that crap about how they don't pay out for 20 years is all stupid. Do your research and you are going to learn that real life settlement brokers only let you in on 50% of each policy, meaning if it was true that it could take 20 years, they would be waiting 20 years too... do you really think they want to do that? Also if you read the policy of the account you are thinking of buying you will find the brokers did their job well and that all those people are on limited time. It's not morbid, you are helping someone in a time of need get value out of something they no longer need. And that's a good thing. 

[Ian Walsh]

If you inherit or come into a lot of money you should do the same thing as when you don't have a lot of money.  Learn your market and learn to market.

[John P.]

What if step mom lives along time and/or changes the beneficiary on what she can control? It does happen.

[Mike Dymski]

Hey Wade, where do you currently invest your savings...you may have missed my question earlier?

There are daily posts on BP asking what strategy to follow.  Members will reply on their (biased) preferred strategy and market without knowing the person's abilities and interests.  Giving someone advice on what investment strategy to follow without knowing certain things is like picking a stranger's dinner from a menu...every night for years.  We all have different interests, abilities, and opportunities.

[Wade Alderson]

@John P. If my wonderful step mother lives longer than I do that would be fine by me. I would just keep doing what I do now, flipping things on Amazon, flipping cars, and land flipping. I Love my life, I work like 5 to 20 hours a week and make more a week than most people do in a month when I am on my game. When I am not on my game (like what happened when my step mother got cancer) my life is like anyone in sales, when I don't work. I don't make money. But all that aside... I will save up a little bit of money every month and in time I will buy a cash flowing property. Cash Flowing Real Estate is NOT rocket science... I just can't do NOW what I want to be doing 5 years from now. It only takes $8,333.34 a month to make $100,000 a year, and from they way I see things. If your making $100,000 a year and you can't be happy... you are a moron and I don't what you anywhere near me. Any idiot can make things more complicated... I try to keep my goals as simple as possible. It does not matter if my step mother is alive or not. The only reason I still live in Oklahoma is because my step mother lives here. So instead of buying cash flowing AirBNB property in Florida, I will buy cash flowing property in class C and B neighborhoods in The Middle of America. I compartmentalize. Think of it like this... if you are investing in single family homes that cost between $60,000 and $75,000 (let's say your average initial investment with down payment, closing cost, and all the smoke and mirrors is $27,500) and at a 6% interest rate (I always calculate the interest rate high to give myself a decent buffer)  and after ALL cost you average $400 a month in pure cash flow. How many rental homes do you need to own to have a passive income of $8,333.34 a month?  Now the only problem we have is how do we get that $27,500... and the world is a Willy Wonka World of Imagination how to get that.  From where I am standing it only a question how long does it take to get to 21 homes cash flowing $400 a month. 

But again... "You Don't know, what you are unaware of, until you learn something you didn't know you needed to know" and that "I didn't know that" little zinger is the only thing I am afraid of in real estate. 

[Bob Smith]

@Wade Alderson I would agree cash flowing real estate is not rocket science but I would say it's not quite as automatic as you describe. It can certainly work out as you describe but it's not quite as simple as getting interest at a bank or even dividends on a stock. I would keep researching as it sounds like you are. Read every story on BP, and elsewhere, and remember you are mostly hearing the good stories and not the negative ones. Real estate need new roofs, new HVACs, etc... and then a tenant leaves in the middle of the night with your copper wire. Diversification is king.

Oh ya, you were talking about how bad 401ks are (and most agree the fees are very high) but you will be in an IRA (as you indicate) and fees in an IRA are what you make of them. To take all the money out as a lump sum and pay the tax is probably the most foolish financial decision you can make. Just do the self-directed route. Yes there are fees but you'll have so much more purchasing power if you want to buy real estate. Really, if you cash out a mil IRA and pay the tax on that lump sum... you are a moron and I don't what you anywhere near me.

[Chatree C.]

@Wade Alderson how about start building passive cash flow income now? You said your money stops when you stop working. If you start small today, you'll learn and be in the game so when the time comes, you have knowledge, track record, and connections to invest a larger sum. You don't need $600k to start learning (and earning while doing it).

I compiled a list of "what would you do with X amount of money" here: https://www.biggerpockets.com/forums/48/topics/544... lots of discussion on cash flow investments with much less than $600k

Even not real estate, if you flip things on Amazon, or cars, etc. Can you try to make that more passive with process in place? When he time comes that you can invest a large sum in real estate, it would be even better that you have multiple source of income for your cash flow.

[Lynn Dee Murrow]

I agree with those who say to discuss it with someone you trust and that it is probably not a good idea to post on the internet how much cash you inherit. 

I think it is a good idea to wait a bit after inheriting money. It's easy to think you are ok and your judgement is sound at that time, but more people than not regret at least some of the decisions they made quickly after a loved one's death. That said, you seem to be thinking ahead and weighing the options. Get educated on your real estate investment options and take a look at how the numbers work in single family and multifamily. In multifamily you can increase the value of the property through operations because apartments are valued on Net Operating Income, not on comparable sales. In single family, your properties are valued based on comparable sales. For this reason I believe you should start in small apartment communities if you have the resources and knowledge to do so. It's important to remember that hiring 3rd party management is not a good idea unless you know the business, know what they should be doing, and are capable of managing the management company. I hope this helps.

[Wade Alderson]

Hi @Mike Dymski with the value of the dollar dropping in value by around 3% a year. I don't really have a savings... I just have money that I have not flipped yet by arbitrage. With that said let me, let you  into my off the wall world of finance. As an example if I know that I need to pay $1,780 a month on bills (not counting my student loan down to $17,000 from $300,000 in the last 20 years) I know that I need to flip 3 cars, or 445 boxes of baby formula or cereal, or one acre of land in North Carolina. Now to be honest... normally I have all these things happening at the same time so if I know I have a cell phone bill to pay next Thursday I know that I need to NOT invest the amount of money that pays my cell phone bill until that is paid. 

I realize this is kind of an unconventional thing to do. But around like 30 years ago I was working at a bank and realized how completely insane the banking system is compared to what banks ask their customers to do to get a loan. 

I was lucky enough to have a mentor when I was younger and one of the greatest things he ever taught me was to look at what successful people or organizations are doing to get what I want and copy their technique, he told me if I get the same results as those people or organizations I eliminated 90% of the grunt work to become successful. 

Banks are HORRIBLE places to keep money, (the only reason I have a few different bank accounts is because I am complete rubbish at paying bills so set up auto pay) they get loans from the monster called the Fed the creator of digital money out of thin air at super low rates and are supposed to use that money to jump start the economy by giving out small business loans, but what they really do with that money is they keep it in house as bonus for the psychopaths sitting behind oak desk in the bank and then make it almost impossible to get a loan. (the running joke about how to get approved to get a loan from the bank is to become so super successful that you don't need the banks money and then banks will bend over backwards to get your business... and alas.. that is another thing that proves to me that there is an invisible hand making poor people poorer and rich people richer) because if banks actually operated the way their commercials say they did the economy would be completely different. 

So to make a very long and complicated answer simpler. I figure out how much money I need to have in the bank to pay bills and then take what money I have in my wallet and make that much money appear in my bank by the time those bills are due. 

Is it a perfect system, are there hic ups... does this system come times turn around and bite me in my rear end? Yeah it does... like when I had $3,000 worth of pistachios sent back to me because of a samilia scare at Amazon and I had to scramble to pay my bills. If I had hair it would have been on fire.

It was this experience happening more than once that taught me I need to have a truly passive income to keep the lights turned on and I needed to quit screwing around and get serious about about cash flowing real estate. 

I hope that answered your questions 

[Rodney Miller]

You should take this time to get educated on all types of real estate investing.  Read books, Join the local real estate club, and start networking with your local real estate investors.  

[Wade Alderson]

Thanks for the link @Chatree C. I do all kinds of things to create the money I need to live my life. Like right now the car flipping thing is at a stall and I have a trip to Walt Disney World coming up in less than 2 weeks. So I am going to take the $1,400 I have in my wallet and go shopping at Wal Mart and buy $1,300 worth of things I use to be embarrassed to buy for my wife when I was married and then have the sales money sent to my bank about 3 days before I head to my happy place. 

Before my step mother got cancer my original goal was to level my Amazon sells up to $3,000 a month in profit and then hot foot it to Florida and then start to build my life there. Now even though my step mother is almost pushing me out of Oklahoma to go and live in Florida because she knows I will be so much happier there I don't feel right leaving her and she will not move to Florida. She hates Florida just about as much as I hate Oklahoma (funny thing we both hate the two states for roads but for different reasons. My step mother hates how busy the road are in Florida, and I HATE how the roads in Oklahoma are not built up to national safety standards on Indian land. My step mother never has to drive anywhere in bad weather so she has no idea what a nightmare it is to ride on one of the Indian  turnpikes in a down poor and there are 27 hydroplaning accidents in an hour on average) so instead I am just going to steadily level up on Amazon Sales, get my used car dealers license, and keep flipping land like I do and the best I can hope for it sot become a snow bird until things change for my step mother (On a side note... my sister told me that my step mother thinks she is in early stages of either dementia or alzheimer's, and according to my sister the reason why my step mother keeps telling me crazy things about why I need to move to Florida is because she doesn't want me to remember her with one of those afflictions, she wants me to remember her as she is now and just hear about how bad she has become. But until I hear about something like that directly from my step mother I am staying in Oklahoma because I love her and want to be there for her if she needs anything) 

[Mike Dymski]

Thanks, there's nothing unconventional with determining our monthly financial needs and figuring out how to cover them.

It sounds like you have hands on experience in the stock market and a lot of educational knowledge in real estate investing.  You have likely reached the point where more book knowledge and our feedback won't help much.  The next level of answers may require action and then you pivot as you go.  Pick one the real estate strategies that you have researched, studied, and like and give it a shot.  A property is less like an investment and more like a tiny business, with income and expenses.

On a side note, the stock market and active real estate investing are not comparable asset classes...or alternatives for the same set of investment objectives.

I'd recommend killing the commentary on idiots, morons, suckers, and scams and stick with the positivity around your family and other things that lite you up.  One is a turn off and the other is a magnet for success.

Hope that helps.

[Wade Alderson]

Thanks @Rodney Miller I have about 300 books about different kinds of real estate investing, and I have done a few small deals with mobile homes thanks to the book "Deals On Wheels", but as for the local real estate club... do you think that would still be good for me since I really don't want any thing linking me to Oklahoma when I leave. This might be prejudicial of me but I see having a rental property in a state I really want to run away from like having an unwanted child when you are divorced from someone who flat out lied to you about who they were and broke  your hart. My back of the envelope (written in pencil) plan is to move to Florida in 3 years or less. 

[John Kunick]

Wade, if you want current cash flow, then take the $600,000 and either pay cash for 5-6 properties - or put 20% down on ten properties (the max # of mortgages currently allowed).  I've done both at various times and there are pros/cons.  Feel free to contact me and I can meet with you and show you what we've done.

[Todd Dexheimer]

@Wade Alderson I like the multi-family route or commercial space. Buying a bunch of houses is just not that efficient and will take a lot of your time and energy. Also, it will really depend on timing of the market. If your step mother passes and we just went through a crash, then you should be focusing on the asset class that has the most potential value to be created. 

As for what would I do?: I would use that money and other funds that I have to purchase 1-2 Multi-family buildings, Mobile home parks or self storage units. 

If you want to be more passive, the you should consider options like commercial NNN lease buildings, DST investments, syndications, crowdfunding.

[Dave Foster]

@Wade Alderson, If your plan is to move to a tax advantaged state like FL then all other considerations aside wisdom would say that you also move income producing assets there as well in order to take full advantage of the tax free nature of your new resident state.  Oklahoma does not have a clawback on 1031 assets transferred out of state.  So if you have/sell your OK properties and 1031 them to a tax free state then you'll completely eliminate all state tax by virtue of living in a tax free state.

[Wade Alderson]

@Todd Dexheimer I did a lot of research on NNN Lease Buildings, the future of such places is written on the wall of the deaths of business caused by Amazon. Stores that we know are going to be put out of business just like blockbuster was by Netflix. If I were to put my money into NNN Leases I would be locked into a dying beast that I could not get out of. The Internet is changing the world in ways that we of today can not imagine, it is projected that with Amazon same day delivery the super market's days are numbered and with artificial intelligence in the back ground the "Suggested for you" will open up whole new ethnic markets to white anglo saxon descendants.

With the self driving car, the work at home, and the issue of machines replacing entry level positions (how long ago was it that there was only 1 or 2 self check out registers at Wal Mart and Target, now at my TINY town the Wal Mart has like 10, McDonald's started self serve soda how long ago? now McDonalds is on they way to automation over 50% of their fast foods locations. Truck Driving has an on going problem with the turn over of long haul drivers, and who is the fastest investor in self driving big rigs? (And there is a protected sad part of the story of self driving big rigs, as they start to spread in usage, well paid skilled truck drivers will be forced to move to other lower paying trucking delivery companies, but as the self driving trucks warranties run out those trucks will be sold on the secondary market and who will be buying them?  If you guessed the lower paying trucking delivery companies you get a Gold Star.  So the job market of entry level unskilled workers is going to almost evaporate over time and much sooner than most people expect.

There is an upside to all this... as incoming immigrants have proved time and time and time again many generations can live in a 1 bed 1 bath apartment, the human race has one real down fall... most mammals know to quit breeding when resources become scarce, but Humans like to scratch that itch so unless pleasure robots get really super popular and dirt cheap uneducated economically challenged people will do what they do and the result will be the exact same as it is 9 months after every black out that last more than 4 hours... even though there is no work babies are still going to be born 

As the flood of under employed people start to flood the housing market the wear and tear on the rental homes will be greater and the rents will have to go up to compensate for so many people living in a small area. Those investing in Class A neighborhoods will have a problem because no one will be able to rent them as time unfolds, 

Mean while those invested in Class B and C will have people moving up and people moving down the economic scale of prosperity, and the Class D neighborhoods is going to explode.

A truism statement said by someone I don't want to google is "Those who do not learn from history are doomed to repeat it" if we learned anything from the industrial revolution in the world it's that when technology makes people unemployed there is a tipping point where desperate people go nuts and do unreasonable things that cause great damage to local business (and oddly enough not just the ones who put people out of work... it's always the little guy who bears the bruises of big bothers selfish actions) but history also shows us that the people who became wealthy during these times was always the guys and girls running boarding houses that made out like bandits. 

So if you read the futurist best guesses of what is in our 10 to 50 year future your best bet is to invest in cash flowing rental properties. 

Now Stephen Hawkings has made it very clear we need to fear the machines and that with all certainty that when AI becomes self aware we are all screwed so it is my hope that there is a global edit degree made that out laws all "Thinking Machines" as Frank Herbert called them in the Dune series so maybe the dark days of the robot putting working people out of work will not be so bad, but right now if you google "Will a robot take my job" you will find any number of sites that tell you how bad the odds are (Ironic isn't it that doctors and layers are doomed when only 50 years ago mothers were telling their daughters to marry a doctor and fathers were telling their son if they wanted their pick beautiful woman to marry that now they are the most likely jobs to be replaced by computers because of all the research and mistakes made by both professions, and the very sad news is how famous it is how for the first 5 years doctors make hardly any money because they are drowning in debt and the futurist are saying they will own debt that they will never pay off before they die. ) 

The only hope we have is that most of the guesses by futurist predictors turn out to be totally wrong.... but while we wait that out... I think it's best to cover our bets and buy cash flowing residential real estate. 

What do you think 

[Wade Alderson]

@ Dave Foster, thanks for the heads up, I am all about excitement with the 1031 exchange, and luckily we dodged a bullet with the tax change, but that is just for now, there is no telling what will happen in the future. So the way I look at such things is IF I DID have a property right now and I wished to sell the 1031 thing would be a great thing to do, but in my exit window for leaving Oklahoma what if the 1031 exchange is no longer in existence?  

I can't remember who taught me this, but one of the things I know for sure is that the future is not written in concrete so we can not count on what is law or tax that will be the same in 5 years. 

With Politics in America now looking so much like the Italian politics in the late 80's and the early 90's the circus of the absurd is only just starting and what mayhem Trump brought to the markets is only the beginning of a 10 year cycle of uncertainty  

[George Skidis]

First, I am not an expert on self directed IRA's. That is why I recommend Equity Trust to my members.

Can your step mother move these funds into a ROTH IRA? Hopefully she lives a long life and does not pass quickly. From the day she opens the account it takes five years for it to "Season". The date of inheritance is not an issue. The seasoning starts the day the account is opened. If she passes before the account is 5 years old the beneficiary must wait until it is seasoned to avoid early withdrawal penalties. If in a ROTH IRA at her death it can be used to earn income tax free. You cannot manage the funds. The trust manager does but listens to your instructions.

Depending on how the funds are disbursed, you should consider placing as much as you legally can into a self directed ROTH IRA for you and another for your spouse.

With a self directed IRA you can loan money to other investors with Equity Trust as a third party administrator and avoid the perils of Tenants and Toilets. The earnings are tax free and after the ROTH has seasoned 5 years distributions to the new owner can be made before they are 59.5 and if done correctly are tax free.

Open a ROTH now with your children and grandchildren in mind.

Avoid a traditional IRA. Only use ROTH.

[Wade Alderson]

@George Skidis like I have posted in another long winded post... my step mother is a wonderful woman but she has absolutely no financial intelligence at all. Ever since my father lost over a million dollars in the 2003 crash I have been telling my parents their broker is a moron and they need to dump the 401K, put the money into a Self Directed IRA, and to use the Self Directed IRA to invest in cash flowing real estate. I knew that with the over 2 million dollars that was left in the 401K if they put all that into an apartment building and make more a month then that 401K could EVER give them also with real estate doing it's little hookey pookey with prices going up and going down it was a good bet that in like 10 years they could take the equity out of that apartment and put a really good sized down payment on another apartment building about half the size of the first one and have an even bigger cash flow combined.

At the time I KNEW that my fathers 401K was only paying out $60,000 a year using the 3% rule and fear of them touching the principal. I explained to my father and step mother that odds were they would be making around $10,000 a month and with a flat tax of 15% they would be pocketing a HUGE amount more than their 401K. 

My father being an engineer before he went into sales said he would have to look into it and then went and bounced the idea off his broker who told him all kinds of crap about how bad the real estate market is and how you can never get back the money that you put into it...  Now this guy LIKE ALL OF THEM makes his money off of what people put into what he recommends... LIKE all brokers he he realized that my fathers account was a great big huge chunk of his paycheck for his tiny brokerage office for AG Edwards ... and he LIED HIS REAR END OFF.

My father came back from his brokers office and told my step mother he would come back from the grave if she ever took the money out of the 401K because it would be one of the dumbest things anyone could ever do.

And since 2003 my step mother became a convert to the ponzi scheme the 401K. 

[Will G.]

hope your step mom lives for a while longer cause multi fam is ridiculous right now, record low cap rates, and many eagerly overpaying for the next round of future defaults.

Any hiccup in the market, decline in rents etc and many will be squeezed,

Buy now at 5% cap and 5% interest rate and sell or refinance 10 years from now at a 7% cap rate and much higher interest rate environment and see if any of your cash flow survives