moody202

What is your JPM position?

Kernan adds no value! Not sure what his purpose is on the show.

I have been investing in real estate for about 13 years. I own and manage single family condos, vacation rental properties and a multifamily property. I use a separate LLC for each property with a separate bank account. The idea is to create a legal barrier so that in the event you are sued by a tenant, they can only go after the assets of the business that owns the property that they occupy. One issue is that unless you have significant cash to purchase the property with, the mortgage will probably be in your name as opposed to the shell company. It is my understanding that his could create a weakness in the corporate vail, but I am not an attorney. I am not sure what the best legal entity would be if you were using OPM to buy real estate. This is a good question for a real estate attorney. I suspect that a hedge fund type structure with a LP managed by an LLC would work well, but again I don't know for sure and it may vary by state. Has this structure ever been useful to you?

I hear this recommendation on a regular basis too but nobody has given me a good reason why one LLC per property. Sounds good to say but rationale is weak. LLC is an asset protection vehicle so it really comes down to how you would want to segment your assets and exposure. There is a cost, with each LLC you end up paying annual filing fees and tax preparation that adds to costs not to mention paperwork to keep track of. If I was doing apartment buildings, I would put each one under it's own LLC. If doing single family houses/condos -- I would be comfortable putting 5-7 under each LLC. Not that is helps eliminate the confusion, I am sure you see major private companies run as LLC's so clearly there is guideline of how big the asset is before you branch off into multiple LLC's or different kind of entity. If you are a serious RE investor, land trusts are a good option to explore for personal holdings!

Thanks everyone....really appreciate all the responses. The video was great too!

I am researching the private equity companies and wanted to get opinion from board members if they make good investment. What should I watch out for before investing in these companies. They had great dividend yield in 2013, is that sustainable? Here a list of companies I am contemplating. Fortress Investment Group KKR Carlyle Group Apollo Global Management

Zach: This is definitely a topic that could sustain a whole thread. There are books & courses designed with JUST this question in mind... Basically, what you want to do is limit your risks from a catastrophe AND have a tax pass through advantage. If you are dealing with relatively small amounts of capital AND relatively few principals who live in the same state, you could do a LLC, or a subchapter S company. A chapter "C" company has the double taxation problem, BUT can have principals from different states and can handle huge amounts of capital. As a rule of thumb, you want to stay away from partnerships... If you are going to be doing anything with investors, it is DEFINITELY worth a few hundred dollars to consult with a competent attorney in your jurisdiction. An ounce of prevention is worth a KILOGRAM of cure. Here is tip...the legal market has COLLAPSED. Many attorneys are looking for work (or out of work) and have mind blowing student loans to pay off. So feel free to negotiate over attorney fees. I agree on the LLC. For small investors, it a the best vehicle for asset protection without any tax penalties. If you are going to consult an attorney, look for specialization, go for a real estate attorney. Also -- depending on the topic, you will need to consult different attorney, one attorney won't cover all topics.

Outliers ia great book. However, I look at achievement in a couple ways. First, obviously, is being able to do well on tests. The other is more from a creative viewpoint. Innovation tends to happen on the latter. If we're so focused on the "science" of something, we often miss on on the "art." If we focus on the rigidity of processes it can make us miss the big picture. Agreed. Said another way, success is a combination of traditional IQ and Emotional Intelligence (EI). The schools are great at focusing on IQ but don't focus on EI. We see plenty of people with high IQ that don't achieve too much success.

Agree. If only one could combine elements of primary education from the East with creativity, problem solving and higher education from the west....will make for a great education. Or if nothing else, just push the kids harder in school. Schools these days are afraid to push the kids in education which flies in face of how often time the coaches get the athletes to perform better...pushing them hard...to the breaking point.

My theory is that wages are local markets and are facing competition from globalization. Why would anyone pay someone a high wage to someone when they can pay a lower wage to someone else to do the same job? Technological advances are only making working remotely and globally easier. The wage differential between developing and developed markets will continue to narrow over time. I do not think I am saying anything insightful, but I feel developed markets will continue to face wage headwinds even after a recovery. If it was that easy to replace jobs with cheaper personal offshore...most of us would un-employed by now! Yes, but it is easier to work remotely now. And aside from the very top schools, you don't think the gap between american and global education is shrinking? I'm sure people working Berkshire in the 40s thought they were irreplaceable too because they were just so skilled. Higher education in America is still one of the best. Yes, technology makes it easier to work remotely but there is still no substitute for a local person that understands the culture and how business is done in here. Also -- It is usually not a 1 to 1 replacement offshore. Generally it takes more than one offshore person to do the work of one person in US. Call centers maybe an exception to this. Just look at the amount of unfilled technology jobs out there and what they pay. Offshore is not killing these jobs, just taking the more basic and mundane one's offshore.

The value of the call option gets reduced by the amount of the dividend. Nestle pays a high div. I don't understand how this works. Do you have articles you can refer me to?

My theory is that wages are local markets and are facing competition from globalization. Why would anyone pay someone a high wage to someone when they can pay a lower wage to someone else to do the same job? Technological advances are only making working remotely and globally easier. The wage differential between developing and developed markets will continue to narrow over time. I do not think I am saying anything insightful, but I feel developed markets will continue to face wage headwinds even after a recovery. If it was that easy to replace jobs with cheaper personal offshore...most of us would un-employed by now!

Don't you pay capital gains when you eventually sell the depressed stock for gain?

To illustrate overvaluation, What'sApp was bought of 19B and SnapChat owners declined a $3B offer. How in the world are these companies worth these valuations when neither one of them produces a dollar of revenue (not profit) if I am not mistaken! Commenting on the buyers, Google is in so many different business models at this point but FaceBook is essentially a one trick pony and seem to have been scared out of their minds on declining usage numbers in Asia so bought What'sApp as survival strategy. To add, most of the people in US don't even know what What'sApp is!

My opinion is that it's hard to compare today's market to pre 90's as there were no software companies back then. If I look at today's market, the cloud/mobile/big data companies are overvalued as they have to execute perfectly to deserve their current valuations. However, if you look at traditional brick and mortar businesses, I don't see overvaluation.

I'm curious to know if you apply any poker strategies to investing and do you generate any income in poker?

If I went down this route, I would make sure the Chef has some kind of financial investment in the business too, gotta have skin in the game if he/she is going to be a 50% partner.

Randomep – We both have perspectives and there is no right or wrong as what works for you depends on your personal financial situation, risk appetite and number of other factors. So my intent is not to prove that my views are correct and yours not. Here are a few thoughts to consider. 1. Yes – income is taxable but expenses are not. Also – you get to take depreciation out of you income. Your capital gains taxes (when you sell) are lower than regular income tax. 2. I know firsthand of people producing 15%+ on properties. Leverage it up and you go north of 20. While hard to hit these numbers in the current market with values goin g up, 9% is very achievable. 3. I can agree with what Shiller says. However, inefficiencies exit in all market and you are a value investor and know how to take advantage of them. 4. Yes, its 6% but can be managed to lower number. Number of techniques available. 5. Agree - - there is stress that can come with renting. To me that is not very different from investing in stocks where I get stressed when my stock goes down 25%. May be you handle the market stress better. Agree that investing in stocks provides you the ability to work from anywhere 6. I don’t know what you are trying to say here. All the landlords I know understand finane 101 and are making money. 7. My 2 cents -- try to stay away from renting to friends and family. You are better off finding a good tenant that pays a fair price I am not implying that renting is a better option that investing in stocks, just sharing that it is a worthwhile avenue for cashflow and consistency. It is different from the stock market where you can have a phenomenal year followed by a rough patch.

You are right, risk has to be factored in. However, you may be making the assumption that risk is high, which may not be the case. Risk is an individual think that depends on number of personal factors so what may be low risk to you could be dangerously high risk to me. Obviously the least risky solution maybe to stuff it under the mattress, yet we all go and do things that carry higher risk. As some on this thread have pointed out, even putting money in your own house has risks to capital like earthquake ...... Here's another example. What if I take the money and invest in rental property that produces 9% pre-tax and potential upside? Will that be a risk worth taking?

Wow..... You all are smart guys but talk about making a simple issue complicated. I am conceptually with bargainman. The way I look at it, money invested in my primary residence generates ( or saves ) about 4% ( lower if you consider tax deductions). I can take the same money and invest in private mortgages at 12% pre-tax or 7% + post tax. As long as risk is within limits, why will I not do this? Someone mentioned tax liens at 18%. I have not used that but sounds a good option.

Where can I find the writeup?

So...if I believed in India story, what are some effective ways to play this ?