Common Sense Investments for Life

Recent events in the stock market have left many investors rattled and looking for more stable places to put their money. Even some Money Market Accounts have lost value and needed government intervention. While most "market experts" avoided the words recession and especially depression like the plague, a prolonged recession is exactly what happened. I believe that we narrowly escaped a depression, at least for now.

With all this going on, is there a safe place to invest? The stock market and bond market are hardly stable. Giving your money to companies that may be mismanaged and can go under at any time, such as the U.S. Auto Industry, is not the best way to ensure a comfortable retirement. Fundamentals have fallen by the wayside and emotions from the latest news now drive the markets. What about Forex? That's about as close to gambling as you can get. The average investor loses 98% of the time in the Forex market. This area is better left to the big players.

There are investments out there that can provide stability for your future and can even provide for future generations of your family. These investments and strategies have value that is more than just monetary. These are not new ideas, but they are ideas that most of us have gotten away from in the pursuit of the double digit gains of market investments. In this article, I want to outline some of these investments and other strategies that can provide stability and peace of mind.

Investment #1 - Buy Raw Land

There is no more land being made. The amount of land is finite. In some areas of the country, it is even downright affordable. The more land you can buy, the better. While it is possible for land to lose value like any other real estate, there are advantages that raw land offer that other real estate can't. I know of land investor-owners that have:

• Leased land to farmers to grow crops.
• Sold leases for individuals to hunt the property.
• Harvested trees in a sustainable plan, providing endless income.
• Harvested other products, like soil, clay, limestone, granite etc.
• Leased waterfront property for others to build "camps".
• Built a land portfolio, and sold property as they needed it to provide income.
• Drilled water wells and sold water to power plants when surface water was not available.
• Leased land for Communications Towers.
• Leased rights of way.
• Leased the water or mineral rights.

You can also choose to use the land to grow products that you can market yourself. I have seen raw land used as christmas tree farms; pick your own crop farms, market gardens and plant nurseries. The uses are limited only by your ambitions and local zoning ordinances. Of course, through research is required before purchasing land. Think about what the possibilities are for the property and check the local zoning laws. One of the good parts about this type of investment is that it is something that you can see, touch, and walk around on. Try that with a stock.

Investment #2 - Rental Properties

Rental properties can be good investments but can also be very stressful. Property should be properly maintained, and tenant issues should be addressed in a reasonable amount of time. I do not recommend being an absentee landlord, since some tenants tend to not take care of the property when they know the landlord is not around. Therefore, I recommend owning landlord occupied properties, such as duplexes and multi-family apartment buildings. A landlord who lives in the building has a vested interest in the proper maintenance of the building and the rental units. They are also available to address any problems immediately. In addition, the opportunity to get to know the tenants personally is a good idea, since they will come to see you as more than just a landlord. My parents raised me and my siblings in an apartment where the landlord occupied the downstairs apartment. Our two families were very close and we stayed in that apartment for 20 years before buying our own home. As a landlord, you have a duty to provide a well maintained, safe place to live for your tenants.

The only exception to the above would be purchasing condo units as rentals. With condos, there is no exterior maintenance, no yard work to worry about, and no snow removal to take care of. The only maintenance is on the inside of the unit. Make sure to understand the condo association bylaws, and just what the maintenance fees cover. Maintenance fees will be included in the rent, so that must be considered when calculating what to set the rent at. As with the owner occupied rental, addressing unit maintenance and tenant issues in a reasonable amount of time is crucial. I would recommend owning units in local condo complexes so that a quick personal response to issues can be provided.

Investment #3 - Antiques

How do antiques fit in as an investment? Well, the same idea as land and rental property. Antiques are a physical asset that you can touch and hold, and as long as you buy smart, they appreciate in value. You need to buy furniture anyway right? Why not buy antiques and have furniture that is useful and appreciates in value? I understand that this idea is not for everyone. If you have a bunch of kids, antique furniture is probably not practical. Also, some people just don't like antiques. For those who do, it makes sense to buy a piece of furniture that you need anyway that increases in value. But don't just think of furniture, consider vintage jewelry, money, vehicles and other antiques. The bottom line is there is a ready market for antiques if you need to raise some cash.

Tax Lien Sales

While no one likes paying taxes, but for some, taxes can sometimes be profitable. Just ask those who own tax credits or participate in tax lien auctions. In fact, a whole new industry has boomed from people that scour local auctions for real estate sales, caused by delinquent taxes. These forced sales, or tax lien sales, are becoming more and more mainstream and popular with the general public. What is a Tax Lien? In most jurisdictions, when a property owner is late on paying real property taxes, the county or municipality will issue a tax lien on that person's property. Certain states allow the tax lien to become a first lien on the property, which is then turned around and sold at auction as a tax lien certificate. After placing a successful bid, buyers of a government-issued tax lien certificate will then get one of two things:

1. A state-mandated yield from the lien, which the delinquent taxpayer must pay in order to release the lien, OR

2. Title to the property (after a certain amount of time, set by the jurisdiction) if the delinquent taxpayer fails to pay up.

Individuals have been buying tax liens more and more because of these two benefits. A fixed percentage rate mandated by a government agency or the title to property at a substantial discount are incredible benefits rarely seen with other real estate transactions. In most auctions, if you are the successful bidder, you will be required to hand over a check or cash at the time of the auction. The unfortunate part of this process is that you are profiting from another person's hardship, but it is going to happen regardless. Check with your local Tax Assessors Office to find out when their next auction will be. Most counties will permit an individual to sit at the auction as an observer if you just want to see how the process works the first time.

These life strategies, while not what you would think of as typical investments, dovetail well with the above traditional investment ideas. Used in combination, they should provide financial stability with a minimum of stress. This is not subject matter that is typically discussed in investment literature and financial web sites.

Life Strategy #1 - Multi-Level Employment

What is multi-level employment? It is simply having multiple sources of income that can be tapped as needed. I'm not talking about multi-level marketing and pyramid schemes here. I define this as having primary, full time employment that provides health, retirement and other benefits, as well as a majority of the income needed for financial support of yourself and your family. This is the primary career that you put most of your focus on. This can either be working for an employer or self employment in your chosen profession. By the way, if you have a 401(k) plan available at work that provides a company match; contribute the amount of money that gets you the maximum company match, but no more. Invest that money into the most stable investment offered in the plan, since you are making 50 - 100% on the money anyway. Make every effort to choose a profession that you like. Hopefully something that you enjoy and are passionate about. If you love your job, it's not really work. I work in the environmental field, and I have a job I truly enjoy, and I like the most of people I work with. While some may say that sometimes you have no choice what job you end up with, the choice to stay in that job is entirely up to each individual. Everyone has an idea of what they would like to do for a living. Work towards getting to where you want to be. There's nothing worse than going to a job you hate, day after day. I have had jobs that I absolutely despised, working with people I despised, but I kept the goal of my dream job in sight and did everything I could to get there.

Once you have a primary career established, you can explore other income sources that you can tap as needed. These should be part time ventures that do not require a lot of effort. These ventures should not take focus away from your primary career, or take up a great deal of personal time. Examples would be:

• Working a second job part time business in addition to your primary career.
• Running a part time business. (Consulting, Flea Market Vendor, Teaching, etc.)
• Using a hobby to generate income. (Music lessons, Photography, Art, Sewing etc.)
• Using the Internet to generate income. There are endless possibilities here, but choose carefully.

The idea is to have many irons in the fire, but not putting forth a lot of effort to maintain these income sources. When you get yourself set up this way, you have the freedom to turn these income sources on or off as needed. The main idea here is to balance life and work. (Work to live not live to work.) What does this have to do with investing? It is providing basic day to day financial stability and generating money that can be invested.

It is worth mentioning here that every effort should be made to establish a 3 to 6 month emergency reserve account that could carry you through any unforeseen situation such as a loss of your primary source of income due to lay off or a prolonged illness. A major part of this life strategy is to carry little or no debt. The less debt you carry, the less impact a loss of any income streams will have on your financial as well as physical health.

Life Strategy #2 - Make Quality Purchases

I thought this was about saving money, not spending it? Well, wisely spending the money you earn has advantages. We do not always consider quality when we make purchases. For example, I can buy a used car cheaper than I can get a new one. Everyone knows that new cars depreciate in value as soon as they leave the lot. But, unless you personally know the previous owner, and know that the car was well maintained, you are taking a chance of buying someone else's problems. I believe it is better to take the time to do some research on quality and reliability of a vehicle before purchase, then buy new. Consumer Reports is a great resource for this. When a quality vehicle is purchased new and properly maintained, unless it is in a major accident, it could easily last 20 to 30 years or more. It is always cheaper to maintain the vehicle you have, than to buy another one, no matter what the problem is. In reality, most of us get rid of our cars because we are bored with them and want a new one. Having to drive a new car every 3 years is a waste of money in my opinion. Leasing a car is worse, because all you are doing is paying money for something that you will never own.

This same principle can apply to clothes, housing, yard and garden equipment, appliances, and whatever else you need to buy. Do the research, but the best quality product you can find, and take care of it. For example, I like to buy clothes from LL Bean. They have a no questions asked lifetime guarantee. I have sent items back that I have had for years that are simply worn out from use. They send me back a brand new item, no problem. They make high quality items and they stand by them. You can't argue with that!

Conclusion

Most of these investment strategies are what you could call old fashioned. These are how individuals managed their investments before the internet age. Prior generations were less prone to gambling with their hard earned money, and the get rich quick mentality was not as prevalent. I still say that I would rather be a "turtle investor" and earn steady returns over a long period of time, rather than a "rabbit investor" trying to make all of my money in 2 years. I find that turtles are much less stressed than rabbits.