Diversify with a vanguard index etf??

Question

Account Closed · Answer

Daniel,

As you have found out, saving money to invest is a long and slow route. Unless you want to gamble and invest in start-up companies, most other type of investments don't produce much yield. 10% CCR on a $100k investment is only $10k/yr. How long does it take for you to save $100k?

This is where being able to "Buy for below FMV, Rehab, Rent, Refinance, Rinse and Repeat comes in." It allows you to have your hard earned money working over and over again.  On a value-add deal, one can add $75k-100k in equity on a $100k investment. That's 75-100% ROI. Just do one to two deals a year and you're way ahead of your peers.

Spend sometime and figure out HOW to find value-add deals, and HOW  to get agents give you the first dip at them compared to your competition rather than try to work harder and save more. That path takes way too long.

It's hard to believe but my partner and I picked up a 6-unit deal off-market THIS year for $1.3M. Unit mix consists of four 1/1's and two 2/1's. It's currently grossing $10,400/mo and still has upside in rent. We put a 75% LTV on it at 4% interest with 1 point prepay penalty for the first year and 0 point thereafter. We intend to do a cash-out refinance on the 1-year anniversary. We anticipate the value to come in between $1.65-$1.7M. Why did the agent bring this deal to us instead of our competition? Just something to think about.

Have fun figuring it all out. It's quite rewarding once you have discovered the proven path.

David Faulkner · Answer

The stock investing scheme that makes the most sense to me, and has the most parallels with owning rental property (which is probably why it makes sense to me) is Dividend Growth Investing (DGI). It takes some time to research and select individual securities to invest in and build a portfolio, but the idea is that you are investing in the stocks for their dividend yield, the steadiness and growth of that yield, much in the same manner as you would invest in a rental property for its cash flow. So, if done properly in theory you would never need to sell the stock in order to benefit from owning it (though you still could), but rather just live off the dividend income, which if your portfolio is selected and managed properly should be more stable than stock prices. REITs are also a good option that often play in with this type of strategy, but that does little for diversifying your already RE heavy portfolio. Not to plug a BP competitor in the stock investing space, but I've found value in the website "Seeking Alpha" and particularly their "Dividends" sub forum if you are interested in learning more on this particular technique.

Oops ... just realized that this post was originated over 2 years ago, so I'm sure the OP has figured it out by now :) Information above should still hold today, though ...

Brett Goldsmith · Answer

I personally believe in utilizing a ROTH IRA,  SEP IRA and/or 401k. I'm long term 30+ years in my strategy. I go primarily the index fund route with some common stock too. I put the rest of my money into Real Estate.

Calvin Kwan · Answer

I have money in Wealthfront.  Over 7% returns in the last year without any management on my side.  Last week wrecked me a bit though...

Account Closed · Answer

Dimitry is right on this one.

Paul Allen · Answer

You are accepting a high amount of risk by investing in stocks for short (less than 5 year periods) to accumulate cash for real estate purchases. If you're OK with potentially losing 25% or more of your investment, then there is nothing wrong with this strategy. If losing 25% of your investment is going to make you miserable and/or derail your plans, you should keep your money somewhere more stable than stocks.

The stock market has been on a good run for a lot of years now. People tend to forget about the down side when things have been good for so long. But, there will be a down side in the future. I can't predict when that will be. Might be tomorrow. Might be years from now. If you can't deal with it when it happens you should not be invested in stocks.

Steve Bracero · Answer

@Daniel Gonzalez

I have been investing in etf's thru vanguard for a few years now.... My plan long term is to put most of my money in real estate. I put money here until I am ready to buy my next property. I have no complaints from vanguard. Check it out if you'd like

DG A. · Answer

I'm looking for a way to grow the cash that I'm saving, as I'm saving it up for down payments on future property.

Is anyone one else doing anything like this? I live in the SF Bay Area where real estate is really expensive.

Is there anyone else in expensive markets like Oakland, San Jose, San Francisco, Manhattan / NYC, San Diego, or Los Angeles that is using the stock market to grow their cash as they stock pile it to deploy on future real estate purchases?

I'm curious what others think of this idea. And interested to know how it's been for anyone that's actually done it.

Morris Lucas · Answer

So did you continue to set up your Vanguard? I am contemplating setting up an ETF mutual fund this month, as i don't have the capital for any RE rentals yet.

Diversify with a vanguard index etf??

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