Ideas for Foolproof Means of Production

[IdahoCopper]

This thread is for anyone to suggest ideas for foolproof, or less risky, means of production.

What would you liquidate your hoard to buy that would earn a steady, reliable income; while maintaining, or increasing the value of the original investment?

I have another nibble on the line to sell my domain, beefjerky.com. When I told him my asking price was $2M, he didn't choke. Two weeks later I emailed him to say I would consider negotiating my asking price. He called back and discussions & analysis have begun, but he hasn't proposed his offering price yet. At today's spot, accepting 1000 AGEs, or FRN equivalent might be enough to let the domain be sold. After tax, I should have about $1M, a lot more if AGEs can be income taxed at face value, lol.

I need some ideas on what to do if the domain sells.

So far, I'm considering becoming a private lender on real estate, homes. I'd lend at 6.5% with a minimum of $20,000 down, 30 year fixed, with a 10 year balloon. There would be a 5-year pre-payment penalty clause. I could lend on 5 to 8 homes. The down payments would install $100k to 160k equity up front. The 6.5% monthly payments would be $65,000 per year of interest income on the $1,000,000 invested. My multiple mortgages would be secured by the properties, so if a default or two happens, I'd foreclose and get the property and all the equity. I see some SHTF risks to this option, so I'm looking for other ideas.

It would also be enough money from the domain to do a business emigration to New Zealand or Australia, or any other country that allows that kind of thing.

[Hawkeye]

My first thought was to buy some land and grow something on it, or rent it out to someone else to grow something on. But, being an Iowan, the desire to have land, and plant and grow things on it is in my blood. So that might not be the best advice. If it were me, I might buy some land and start growing an organic orchard, and selling the fruit as a processed product (dried fruit, fruit leathers, granola, etc.) It would be work that I enjoy with a good potential profit and value added to the original investment on the land. But that's what I would do.

Your idea of private lending is interesting, and sounds like it would do what you want it to do.

Start a payday/cash advance loan business. I just read the other day that the median APR on those is 322% and the average APR is 339%.

I also like your business emigration to somewhere, but I'd assume you would still have to have some some business to run once you got there.

Whatever you decide to do, good luck with getting your domain sold.

[TXBullion]

I personally would not go that route if you have no prior experience. I would say there is a lot of risk and learning curve in that business model but I don't do that so take the free advice for what its worth. I know when you do it and you take back a property, you are assuming you get the equity. What if the market turns, what if your house is trashed, and it turns into a negative equity situation? Also sounds like you want to loan on a stabilized property if you are doing 30 year amm and 10 yr balloon. Why would I loan from you if I can go to the bank like everyone else and get money at 30 amm, 30 fixed, and only pay the privilege of about 4.5%. Perhaps you are looking to borrow to higher credit risk people? That changes the risk profile substantially.

Also, not sure if its only for FHA loans or what the application is , but I remember hearing something about how you can't do pre pays (again, I would check what this applies to as it was maybe just an FHA guideline??)

Some food for thought.

I would find an income producing asset levered to about 50 % with some reserves set aside.

So lets say you would have 1M. I would find a property about a 9% capitalization rate

You would buy it for 1.8 M . Get 50% financing on it so you have to come up with 900k. and then owe 900k on it.

Have 100k set aside in reserves.

Your 1.8M property generates 162,000 per year. Your annual debt service, lets call it 70k. So then you are left with around 92k per year. Thats a 10.2% cash on cash return (that does not include your principal pay down). Ideally you will increase rents as well etc to do this. If you put less down your cash on cash return increases, just depends on your goals and risk profile. Ideally your equity increases over the years and if you sell , you would have to add all that back in to do a more accurate blended return which should be higher. Examble you sell and you make 200k after 5 years. You have to "add back in" 40 k per year on the annual return so your blended ROI was really 14.67%.

Just one scenario.

[IdahoCopper]

Some food for thought.

I would find an income producing asset levered to about 50 % with some reserves set aside.

So lets say you would have 1M. I would find a property about a 9% capitalization rate

You would buy it for 1.8 M . Get 50% financing on it so you have to come up with 900k. and then owe 900k on it.

Have 100k set aside in reserves.

Your 1.8M property generates 162,000 per year. Your annual debt service, lets call it 70k. So then you are left with around 92k per year. Thats a 10.2% cash on cash return (that does not include your principal pay down). Ideally you will increase rents as well etc to do this. If you put less down your cash on cash return increases, just depends on your goals and risk profile. Ideally your equity increases over the years and if you sell , you would have to add all that back in to do a more accurate blended return which should be higher. Examble you sell and you make 200k after 5 years. You have to "add back in" 40 k per year on the annual return so your blended ROI was really 14.67%.

Just one scenario.

So this could be an apartment block, or a business property?

[TXBullion]

IT could be anything you want it to be which is why i called it "income producing asset" an asset that produces an income. It will depend on your risk profile, the market, the outlook, the industry etc.

Some examples could be, apartment buildings, duplexes, condos, single family packages, parking garages, self storage, hotel, retail, mails, office space, warehouse, industrial, assisted living, mobile home parks, oil wells, mineral rights, rv parks, hospitals, billboards, etc.

[fansubs_ca]

I have another nibble on the line to sell my domain, beefjerky.com.

Not really related to your question but I did a WHOIS lookup on your domain
and noticed it's registered to "Domain Privacy Group". Especially considering
it's potential value you might want to read over point #5 here:

https://web.easydns.com/10_things_to_kn ... gister.php

It might be a good idea to change it back to either your personal name or
your company name now just to reduce the chances of a problem down the
road (as remote as that may be).

I see the business address on your website it's self is a box at a UPS store
so putting that as the registered address on your WHOIS record really gives
you all the privacy you need so there is really no advantage offered by using
the "Domain Privacy Group".

[Tourney64]

Do something you have knowledge on, or you will lose the money learning the ropes of a new venture.
You can easily invest the money with an insurance company and guarantee 5% or better returns, risk free.

[IdahoCopper]

I have another nibble on the line to sell my domain, beefjerky.com.

Not really related to your question but I did a WHOIS lookup on your domain
and noticed it's registered to "Domain Privacy Group". Especially considering
it's potential value you might want to read over point #5 here:

https://web.easydns.com/10_things_to_kn ... gister.php

It might be a good idea to change it back to either your personal name or
your company name now just to reduce the chances of a problem down the
road (as remote as that may be).

I see the business address on your website it's self is a box at a UPS store
so putting that as the registered address on your WHOIS record really gives
you all the privacy you need so there is really no advantage offered by using
the "Domain Privacy Group".

Thank you for telling me this. I will make some changes.

[IdahoCopper]

IT could be anything you want it to be which is why i called it "income producing asset" an asset that produces an income. It will depend on your risk profile, the market, the outlook, the industry etc.

Some examples could be, apartment buildings, duplexes, condos, single family packages, parking garages, self storage, hotel, retail, mails, office space, warehouse, industrial, assisted living, mobile home parks, oil wells, mineral rights, rv parks, hospitals, billboards, etc.

That is a really great list of ideas. Got any ideas that are more passive investments? I'd like to get on the 40' yacht and sail over the horizon for a few years.

[messymessy]

Are you opposed to stocks? How about electric utilities? Typically a safe quarterly dividend with potential for principal appreciation.

If you are set on real estate, you could buy shares in a REIT. They typically own commercial properties and have to pay out 90% of their income every year.

If you're set on local real estate, you could buy apartments and turn it over to a management company. Screen your management company thoroughly. There's only one around here that I would ever use.

[TXBullion]

IT could be anything you want it to be which is why i called it "income producing asset" an asset that produces an income. It will depend on your risk profile, the market, the outlook, the industry etc.

Some examples could be, apartment buildings, duplexes, condos, single family packages, parking garages, self storage, hotel, retail, mails, office space, warehouse, industrial, assisted living, mobile home parks, oil wells, mineral rights, rv parks, hospitals, billboards, etc.

That is a really great list of ideas. Got any ideas that are more passive investments? I'd like to get on the 40' yacht and sail over the horizon for a few years.

Going down the list. Tourney makes a good point on the learning curve in that you can lose $$. When I look at something new, I try and read a lot of stuff on the topic to becoming a book expert on something then talking to people who are active in the field and trying to learn it to minimize the mistakes.

Regarding REITs. I dont do stocks but I see the deals that some REITs buy and the prices they pay and those aren't going to get you the best yields that i am referring to on a consistent basis. I believe this route might be worth researching though for your situation.

I also would not get an outside management company. You want to build your own management team. Thats my philosophy but Im sure you can be successful with a management co as well but its such a critical component of the business but can also vary by asset class.

In both of these scenarios its not really passive.

If I was looking to get a balance of passive and higher yield, id probably go about finding a person or small group that has a proven track record and is looking for capital. You want to find someone that you can trust as a person and their judgements. I think that would be a good foundation of coupling passive with better yields. Maybe start out with 100 grand-200 grand in one deal and then check your comfort levels etc.

Sticking to what you know, as mentioned, can be successful as well. I would think the pasty of least resistance is just doing the beef jerky thing if you are allowed to keep your customer base. I would try and find someone else to do the day to stay stuff of making/packing/shipping if your margins permit it so that would provide you income and scale back your requirements. There would be a learning curve and the risk if you have trade secret recipes etc. but another good route to keep in mind.

[Engineer]

I would think the pasty of least resistance...

I thought you were going to tell him to buy a strip club.

[TXBullion]

I would think the pasty of least resistance...

I thought you were going to tell him to buy a strip club.

Got to keep it interesting eh?


Don't let d2d see that

[dae2dae]

I'll go a 1/4 on one in a warm climate and 1/2 on one in a cold climate
just no male strip clubs again TX

I would think the pasty of least resistance...

I thought you were going to tell him to buy a strip club.

Got to keep it interesting eh?


Don't let d2d see that

[barrytrot]

I was going to recommend REIT's also. My father in law has been very happy with his. So much so that he is selling his rental properties and rolling them into REIT's.

Also they are 100% passive income.

[johnbrickner]

Well, If I were going to be the bank I'd never loan to anyone who has a credit score lower than my own and mine is pretty darn good.

If I were going to doe the rental RE route, I'd call my nephew (he's a sharp young man) in Buffalo, NY who would sell me the property, and manage it.
Why Buffalo? The RE market took little or no hit during the downturn. I mean after all, it's Buffalo.

Yea it's a shameless plug but you can find him at:
Matt Reitz
Reitz Properties in Buffalo NY
33 Humason Ave Buffalo, New York 14211-2117
(716) 880-0953

You can catch his smiling face here: https://www.keypropertyconsulting.com/about.php

[IdahoCopper]

There are a lot of good suggestions here. Thank you to everyone.

If we accent the term "foolproof" what ideas have the least risk? There are at least two types of risk, normal business risk, and SHTF risk. So two, or even four different ideas might be the way to go.

[Treetop]

Someone mentioned food already, but I thought Id put it in a bit different context. You might consider a treecrop if you have some land. Nuts being the slowest to produce but probably the easiest for someone without the knowledge to do well. In my case I just buy land that already has established pinion trees on it. Pinons being a very valuable and nutritious nut. They do not produce yearly but when they do I have large amounts of food, and they are easy to sell. In the vast bulk of scenarios I have something of value... I am also working on establishing fullscale orchards over the pinion forests, but even if I just had bought the land with the trees Id have about as foolproof of a means of production as I can think of. With trees, you could also set up for producing wood without TO much hassle. Whereas if you wanted to grow a commodity crop or a field of veggies you might need a deep backkround and much knowledge, some potentials with trees dont require that.

In general I often try to convince friends and family to establish fruits nuts and berries. They dont HAVE to be alot of work beyond getting them going, and pay dividends for many years with a little care. Not exactly what you are after, but finding land with some type of useful nut or for wood to sell is easy enough to get into.

[DTEJD1997]

There is no truly foolproof investment. EVERY investment is subject to some type of risk. Of course, some risks are more likely, and more severe than others.

One question I would ask you is how much work are you willing to do?

The more work you are willing to do, the more your options open up.

I would also suggest that if you can diversify to relatively LOW RISK, that will probably provide a superior return. The diversification will alleviate potential of any single item "blowing up".

Assuming you are willing to work 1-2 hours a week...you are probably going to be limited to stocks, bonds, other securities, and relatively passive real estate investments (NNN leases).

I have a portfolio of relatively high yield stocks. If you are willing to be patient, AND do the work, you can find relatively safe stocks that will yield 8% all the way up to about 20%. Of course, there is a TREMENDOUS amount of work that goes into this, hundreds to thousands of hours over the course of several years.

Additionally, you can "juice" returns on more liquid stocks by writing covered calls. This can be done on almost all S&P 500 stocks. Once you become proficient, you would only need to work a few hours a week...I would not be surprised if you could boost your portfolio's yield to 8%, relatively risk free.

There are all different types of REIT's too. For example, you have reits specializing in commercial real estate, retail, housing, residential, etc. The you have REITS that are not "operating" REITS. The best example of this is mortgage REITS. A lot of the mortgage REITS are yielding over 10% now...but they have their own special brands of risk.

You could go into the mining sector...There are many junior miners that have producing mines that have rock solid balance sheets and are paying dividends.

You could get into buying physical metals and then selling options on it to generate income...

You could loan "hard money" to real estate developers strapped for cash.

Owning a pawn shop would probably be pretty lucrative.

With $1MM in liquid capital, the world is your oyster!

[IdahoCopper]

With $1MM in liquid capital, the world is your oyster!

Awww, shucks. Lots of good suggestions here. On the side, my buddy owns http://www.42.com. He currently has 2 Chinese businessmen wanting it. One has offered $300k, the other $320k. We can't figure out why they want it so badly. There is no business presently on the site, and not much stray traffic.

[Treetop]

.........On the side, my buddy owns http://www.42.com. ........... We can't figure out why they want it so badly.

.... but idaho, 42 is the answer to the ultimate question.

[Engineer]

With $1MM in liquid capital, the world is your oyster!

Awww, shucks. Lots of good suggestions here. On the side, my buddy owns http://www.42.com. He currently has 2 Chinese businessmen wanting it. One has offered $300k, the other $320k. We can't figure out why they want it so badly. There is no business presently on the site, and not much stray traffic.

Even at 300k, it's probably a better investment than Chinese real estate..

[Copper Catcher]

With $1MM in liquid capital, the world is your oyster!

Awww, shucks. Lots of good suggestions here. On the side, my buddy owns http://www.42.com. He currently has 2 Chinese businessmen wanting it. One has offered $300k, the other $320k. We can't figure out why they want it so badly. There is no business presently on the site, and not much stray traffic.

They probably represent a company manufacturing 42" TVs and want the domain name to advertise such...