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American Capital Agency Corp. Message Board

  • xionrevolutions xionrevolutions May 7, 2013 4:13 PM Flag

    OT: NTI Calls Options and a Apartment Building...

    I purchased 150 NTI June13 $22.50 Calls today, I'm aiming to sell at $27.50-$28 range. I have made a big change in my investment strategy. I now only trade with 100k and less. I have placed my remaining 400k into real estate (planning to buy an apartment building soon with 24 units in a good neighborhood), a safer alternative to options. This apartment building can provide me with passive rental income for many years to come and I'm buying it cash. I'm just letting my friends here on the Forum know my whereabouts and what I'm doing. I'm also keeping my eye on BMY, the "swoon" of BMY is coming soon, I'm planning to scoop up some BMY $38 September13 Calls into my portfolio and ride them up to $42, God willing.

    Sentiment: Strong Buy

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    • Hey X,

      Smart move! No more "all in". The $100K limit will preserve your capital, and the apartment building will provide you with an appreciating asset that flows cash.

      Cheers

    • Smart move,as others have advised,use a management co.The tenants shouldn't know you personally,I tried to handle rentals hands on ,it didn't work well;they think you are rich and can afford,whatever they ask for in improvements.A trusted on site super is a must for those late night emergencies.Owning rental real estate can be as stressful as having money in the market,it's just a different form of stress(dealing with people as opposed to a computer screen) We all wish you well; go NTI !

    • Xion congratulations on your decision to diversify through buying an apartment building! I think it's a terrific idea and it'll also provide tax advantages as well. Great planning!

    • what will you net annually after taxes, ...
      PS where the hell can you buy a 24unit building for 400k?
      yoou cannot buy a 3bdrm single family in my neighborhood for that.

    • That is a great Idea there xion. One needs to be diversified. I pickup up three rental when I was 24 years old. Price was 50k (appraised 65K) then now worth 70k Rents per year are 16K and expense is just over 9500 per year. I pay the utilities. Your price is what 15k per unit that is great and super cheap. A person could never build one that size for that kind of money. I would think your rents for the year should be 100k or better. This will give you the ability to keep a real job, trade stocks, as well as live off your rental income. Can I ask what state you live in.

    • where can you get 24 units for under a $500K that's considered a "good neighborhood"? have you checked the backyard for fertilizer plants?

    • I have to agree with your purchase of a apartment complex. I have 96 units in 3 buildings and 11 single family homes (8 bought as foreclosures or short sale) all mortgage free. I have a management company that takes care of the property that does everything for 10% off the top. It's basically mailbox money. I have found that I have averaged about 7.5% ROI (net rents) each year with some tax advantages (depreciation) and now have seen some appreciation in the buildings.

      I have found that a good management company can make all the difference in occupancy rate and collection of rents. GL

      • 5 Replies to bovisutor
      • Bovistor ,
        wait a minute , can't you just buy a regular REIT and get that 7.5 ROI?

      • Every time I consider buying rental properties, I get as far as realizing that I can just as easily pick a good REIT, BDC, or MLP for an infinitesimal of the transaction cost, an order of magnitude better liquidity, and none of the headaches.

        Most income real estate investors have their ideal numbers vs real numbers, and they continue to think of the properties as ideal when the real return is much worse.

        MLPs will give me 5,6%
        REITs up to 10%
        BDCs up to 12%

      • I use a management company for my rentals because I work but my ex wife managers her own because she doesn't work. The management company does make it a zero effort situation. I would not do it otherwise. I think that even when I retire I will use management companies. I really never want to meet these renters. It is just an investment for me. I really don't want to deal with the details. It seems to me that these management people have to work too hard for what they make. Why put myself in their shoes? And besides, since they have a web page to advertise their rentals and a reputation know by a large number of potential customers, their occupancy rates are pretty high so long as your rent is not uncompetitive. It is hard to get that kind of exposure on your own. Normally it takes less than a month to find a renter through a management company.

        My neighbor on the other hand does everything himself and he had a home remain vacant for 6 months and finally rented it at below market rates. He could have paid management fees for years with that lost rental income. I thought that was rather dumb on his part. I guess some people have to learn the hard way. Though I don’t understand why because I thought this was a pretty predictable scenario if you just made the slightest bit of effort to think what everything entails. Some people just don’t think I guess. They do then learn from doing. This seems like a lot of extra effort to me. I'm too lazy for that. Just give the whole mess over to a professional and then read the mail. Works for me. You will get occasional calls asking for authorization for repairs but that cannot be avoided.

      • I bought the real estate primary for my family. When I am gone, I know my wife can run and operate the portfolio unlike trading stocks. Upon my demise, I will probably set the building up in a gift trust with my wife trustee and beneficiary and give each of my children a home in a 15 year residence trust with each child as co-trustees of each others residence trust. The kids will have a choice of a home I have selected for them (never to be mortgaged or rented) or 200K in the residence trust only to be invested in CDs (or home) with no ability to make distributions from the trust. I want to make sure my kids always will have a place to live and my wife income.

      • I agree and thanks for sharing your story too, Bovisutor. The reason why I decided to do real estate is because everytime I go in the market, there is always the risk that I can lose it all. My days of betting the "whole farm" in one single trade have ended, I want to have a good life, I want to live a long healthy life. I don't want to lose everything like what happened to me in December 2012, where I suffered a 90% loss in my options. That was a painful lesson for me.

    • GOOD FOR YOU X!

    • I saw your trade went through. Did the same two days ago.

      Sentiment: Strong Buy

 
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