How to Apply New Rules for Investing (Pt. 1)

How to Apply New Rules for Investing (Pt. 1)

So, how do the new rules work? Maybe we need to mix them with some old rules. I took some investment classes about 100 years ago from a guy named Jimmy Napier. One of his rules was, “Never put more than 20% of you net worth in one investment.” Considering the way assets fluctuate in value today, maybe a better rule would be, “never put more than 20% of your cash in one investment.”

This means if one has $1,000,000 in cash, they should only put $200,000 in one investment. If we go with the high equity position rule, this could be pretty limiting. I have a friend who has a friend that keeps putting together groups to buy hotels and apartment houses. Each person puts in $100,000. They buy the property for cash, which gives a very high degree of flexibility. They have been achieving yields of around 30% over the life of the investment. They have a limited life of each investment.

I don’t know that someone else would achieve such a high yield. The real key to this program is the idea of friends and family. All of these guys know and trust one another. The lead investor puts his own money in the deal and has a proven track record. Group investments may be the wave of the future. The Asians have done it well forever. Why cannot others do it as well? This is shared ownership. It is not a fractional however. This may be a way that a good broker can build a new niche. The next article will talk about how.

David Segrest is a REALTOR® in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com He is also a contributor on Argentina to: http://realestatebloginternational.com/