John Dean, Dennis Wilson, Folger discussed on The Kristen Hagopian Show

Automatic TRANSCRIPT

What about the rain? Oh. This song. Swore this song off on this program. A long time ago. One of the radio station owners didn't like helter skelter. Oh, didn't we get something from one of the? Yeah. Remember that? There's nothing wrong with a song. The birds. Yeah. That wasn't McCartney's fall. The beatles. No, it was what's his name? Dennis wilson. He's the one who invited them. Dennis wilson. Well, he's the one who. Resident his house or something? Oh, no, no. It was the folger's house. And it was rented the Sharon. What's her name? No. That was fifty years ago. Oh, lord. Yeah. Nobody knows what we're talking about early man's. Look it out. Look it up. They've done a bunch of documentary. Yeah. Very fascinating stuff. But I guess it is but anyway, they wrote all over the walls. All right. So back to you had said the worst twenty five year period of time in the stock market since nineteen fifty since one thousand nine hundred fifty so in the modern era, if you wanna call it that returned seven point nine four four Burton Malki. I'll call it. Eight percent seven point nine four. If you want to be exact rate of return over twenty five years, you're making an assumption that somebody who's going to retire at the worst possible time stock market takes a dive. There are three fifty goes down over the next couple of years, whatever it is. But over twenty five years we've backed way up what's that three hundred fifty thousand dollars worth. So I was counseling John dean when he retires in ten years with his million dollars. I said we'll John here's what I think you should do because here's what I would do. I would take a portion of it. Now John wants to annuity is at all what I was talking him down. I. I said take twenty five percent of it and annuity is it. They're safe guaranteed. You get about call it fifteen grand year for you. And Chris what kind of what are we talking? What kind of annuity for people who are just I mean, you have different types. You listen variable. Let's just say it's a life a new life. All right, guaranteed guaranteed. And maybe there's inflation. Maybe there's not. All right. What I assume not. And then I said take another two hundred and fifty thousand dollars and go out and buy a property for let's say cash like a rental home somewhere, and you should be able to get a six percent net yield on that property. Now, you've got to hire a property manager. You know, me I think it's a risky business. But it doesn't have to be. And when you buy all cash, the risk goes down quite a bit doesn't it would tend to. So if it were me because I'm a little more risk tolerant than you. I'd buy two of them and put one hundred twenty five thousand dollar mortgage on. So you would leverage though. Yes, I wouldn't pay two hundred fifty a cash for one you pay one hundred twenty five one hundred twenty five for to have two mortgages for one hundred twenty five thousand you would pay the mortgage, and you would take whatever's leftover no my tenant would pay. Well, yes, yes. And I'd still get at least fifteen thousand maybe. Here's here's the what is I don't wanna get sidetracked. It's okay. Here's what the thinking is. You gotta have some guts some of this stuff. I guess you do what if the tenant moves out? What if it goes on rented for two months? You know, you Brian an area that all of a sudden gets depressed. You know, there's certain areas like Texas or somewhere with the oil you've seen that. And all of a sudden, you can't get the rents that you want. I mean, all the stuff would go through my head. I have to show you some of the returns on the self storage facilities that my partner Carlos bought way back twenty five years. I know you too. Well, it's it's. I don't even want to bring it up. I thought of it. But you're right. There is risk. And you've got to be willing to take that risk. I would suggest to you that if you look at areas that are hot areas for rent and you've seen rents go up. And then you go back to the last two recessions and take a look at how much rents had to go down in order for you to keep your tenant because you don't usually lose tenants unless you did a bad job of looking at them up front. Or somebody else build something across the street. That's nicer for less money. Right. So so you gotta go back. This is just it's all part of the protocol. When you're buying real estate. I didn't want to get into that. But I'm getting into it. So you go back, and you look at what the rents had how much you had to take it in the shorts and for how long and you make sure that you've reserved all right up money to cover that. Because sooner or later, rents go up just go back to the housing census bureau, whatever they call it. And look at what houses sold for and rented for ten years ago fifteen years ago twenty years ago and see what the running for today, rents always go up over time sometimes intermittently they go down, and you need to be prepared for that. That's why it's an alternative investment. That's why you don't over Leverett. Now, you ask the other question. And this example, if you drained down your safe money over fifteen years, and if you had a crappy I fifteen years with your stock market money beginning in year, sixteen you needed an income stream of I think it was fifty four thousand dollars from your portfolio to buy what forty thousand dollars bought fifteen years. Earlier we had a rotten fifteen years. We get eight percent. So we don't liquidate stocks. We wait we wait. But we do liquidate those two rental houses or one rental house. Now, one rental house later houses are easy to sell and. Yeah, you may not get a huge sales price. But I only assumed what two percent growth. On an all cash property. I think that's reasonable. It'd be like two hundred and fifty thousand dollar property would be worth three hundred and twenty five thousand bucks. So now withstanding taxes we can get really technical and all that stuff. But you you'd have about an asset worth three twenty five three fifty at the end of fifteen years you sell it you need to supplement your income you needed how much then. Well in fifteen years. You two percent inflation on a forty thousand dollar income need today. That's when you need to fifty four thousand bucks, right? So fifty four thousand minus the fifteen grand you're still getting from the annuity thirty nine thirty nine thousand dollars where am I going to get that? Well, I'm going to sell the real estate I've got say after taxes three hundred and twenty-five thousand so how long will that three hundred and twenty five thousand dollars last at thirty nine thousand dollars in payments. If I can earn call it three three and a half percent of my money for a ten percent waiter withdrawal rate. That's scary. Yeah. Because you're gonna spend all the money, exactly. And it lasts eleven year say last ten years. So you now have had your stock market money and your annuity, and that's all that's left..

Coming up next