All Forum Posts by: Account Closed

Apparently she likes to bling... http://reut.rs/2stsWmy and obviously haven't been reading your post!  lol 

When you start talking about the futures market.. this is a market where people go to for various hedging and speculative activities not just in gold any hundreds of commodities. In the stock market, there are those who buy stock and hold for whatever their holding period is and then there are those that delve into options contract which is a different level of speculation.

Speculative? Then what do you call buying a stock? How many companies on any exchange have been trading for say the last 200 years? How many companies currently trading today will be trading 50 years from now or even exist at all? 

If you really have the hard on for gold and need more than a few bars, you can always try to buy the company (not just the stock) GoldCorp GG with current market cap about $12 billion or see if you can get Newmont Mining Corp NEM with current market cap about $18 billion. These are businesses in the business of mining Gold and other precious metals. 

The historical performance gold is public information. Investors invest in any array of assets based on what their objectives are and more importantly, facts not necessarily emotion. You need to do some research into the topic of demand and supply to better understand the rationality of investment decisions.

It is a common misconception. The NOI is not a tool for measuring the soundness of financing decisions. There are countless ways to finance a property and financing decisions alone can mask the intrinsic profitability of the property.

The NOI attempts to address that by piercing through such mask and focusing on operating expenses and not financing expenses.

If you are familiar with the anatomy of the income statement, the Operating Income = EBIT; EBIT = Earnings Before Interest and Taxes. The goal is to measure the performance or profit potential of the investment 'regardless' of how it is financed.

Without complicating the issue, perhaps you can peruse these sites to get some more insights into the topic? 

http://bit.ly/2qCy0ne
http://bit.ly/2r7TSuB
http://bit.ly/1RbJ2LO

ROI for financed properties = [ NOI - Mortgage Payment] / [Down Payment + Closing Cost + Remodeling cost]

It is an interconnected world! 

Regarding gold, it is usually a longer term strategy although there are always those looking to capitalize on short term price movement. 

To get some perspective on gold, between 2011 and 2015, worldwide, the total quantity of gold produced averaged 2,848 tons per year.  Currently, 1 ton of gold goes for approximately $40,576,000 million

If you have $40.57 million laying around that you are certain you won't have need for in 20 or 30 years, but that you cannot afford gambling with by investing in riskier or other comparatively illiquid assets, you would look to gold to solve that problem. 

Investors typically like the reasonable assurance (if there is such a thing in investing) that it will hold its value and in all likelihood increase when they need to access the funds. Between Jan 1969 and Jan 2016 for instance, gold have averaged 10.58% per year and a median of 6% per year which beats inflation.

Think in terms of a monetary 'store of value' especially in the long term. The theory of gold having an inverse relationship with equities is shaky and doesn't always hold true based on what time frame you are looking at.

Maintenance vs Remodeling Cost

So we can view 'maintenance' as things you have to fix in the rental unit once the tenant moves in and that probably worked prior to their moving in. Broken door knob, plumbing etc. these are normal rental expenses. 

'Remodeling cost' however can mean much more than just maintenance and can be used to describe work performed on the building prior to the tenant moving in. This is usually the case with many newly acquired fixer upper that may require considerable work to get it in a livable or rentable condition. How you classify such cost however can have a material effect on perceived investment performance.

If you buy a foreclosure rental property for $70,000 but that requires substantial work done to get it into a livable/rentable condition -- say it has a torn roof, busted tiles/floors, needs a new ceiling etc. You spend $30,000 on these so your total cost of acquiring the rental property in a pure accounting sense is not $70,000 but $100,000. You wouldn't count the $30,000 as a normal rental expense when computing 'Net Operating Income' (NOI) but would count it towards the building acquisition cost - the initial investment.

You may be utilizing the same guy that does your 'remodeling' for 'maintenance' but you still have to properly dissect and classify the cost to better measure investment performance. Using the example above, if computing the cap rate, NOI/$70,000 gives a different result than if using NOI/$100,000. How you classify the cost in this case also affect the NOI.

Full time remodeling guy? Could you clarify that. If you typically have to remodel the properties to get them into habitable condition, technically, the remodeling cost would typically be a part of ' total acquisition cost' and hence not an expense per se and would affect computation of net operating income.

Sorry to hear.. many invest in stock and never physically 'hold' the stock or stock certificate. The primary concern is what direction the price goes. Trying to keep gold at the house so you could physically caress or touch it can be risky.

Sometimes they just like the feel of this Andrey