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What would you do?

Discussion in 'Financial Cents' started by Clyde, Jan 15, 2011.

  1. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    As some of you know, I work in real estate as a consultant. My recent duties have put me in NYC as part of a 3 person team that is creating a luxury development company. NYC is one of those markets that has been somewhat insulated from the meltdown over the past few years. Yes, there was a precipitous drop, but prices have not reached pre-crash levels and in many cases, in the luxury market, there is limited supply which has created prices to rise in key markets that are based on simple economics....demand exceeds supply and there is little or no supply in the pipeline at the moment.

    I have put together a great property that will return to the partners (say $10 for simplicity sake) 3 time their initial investment plus their original investment. ($10 + $30 = $40 total). The investment timeline is 2 years.

    I have always been concerned about when the crash is going to happen, when we will default, etc, but I felt the world would have stopped propping this country up a few years back. It looks like Europe is worse off that we are and China is not ready to be pushed to the front of the fiat pack, so the world will have to deal with USD for a bit longer.

    Would you take the risk with a handsome chunk of money over the next few years with a project like this if you knew the end result would be that you could step out of the working world as we know it and pursue greener prepratory pastures?
  2. tacmotusn

    tacmotusn Mosquito Sailor

    I totally lost most of my assets when the stock market tech bubble burst. Took a 10 to 1 reduction. So, obviously I am very very conservative with all things money now. In my mind you answered your question in the way you stated your question. Or, I misunderstood. If you are close to your so called greener preparatory pastures, I don't see how fictional amount $10 on a $30 property that is going to return $40 in two years is going to help much unless..... your $10 is the total outlay to control this property for two years, and then it can be sold for $40. Even then it is serious speculation that could leave you in financial ruin. ...... If the $10 is in partnership with 2 others, then your return is only $3.33 and hardly worth the risk if you are that close to those greener preparatory pastures. IMO.....
    Hell, I am 60 and no longer take many risks. My chances of recovery at this point are severely limited. YMMV
  3. BTPost

    BTPost Old Fart Snow Monkey Moderator

    As the son of a Depression Era Banker, we were brought up to be very conservative in the Monetary area. I worked hard , saved my money and invested in my Living Spaces, but never put a dime, into Stocks, or Bonds, etc. Now that I am semi-reTired, I invest modestly in a 401K, and keep the rest of my assets in very liquid, Secured, low yield investments. I lost NOTHING, during the many Bubble Bursts, of recent times, with this conservative strategy, but I never made the "Big Bucks" that some of my friends and colleagues made, before losing it all in the crashes. The Long and short of it is: "Never invest MORE, than you can afford to LOSE, outright, PERIOD"... YMMV..
  4. Brokor

    Brokor Live Free or Cry Moderator Site Supporter+++ Founding Member

    I second that.
  5. Joboo

    Joboo Monkey+

    OP can you please define handsome chunk? I have some friends and family that may be interested.
  6. Equilibrium

    Equilibrium Monkey++

    "Would you take the risk with a handsome chunk of money over the next few years with a project like this if you knew the end result would be that you could step out of the working world as we know it and pursue greener prepratory pastures?" Ummm.... no. We can't eat money and.... if hyperinflation hits... and I think it's coming our way.... that money would have been better invested elsewhere even if all we bought with it were gold chains that could be used for barter snipping them apart link by link somewhere down the road.
  7. fireplaceguy

    fireplaceguy Monkey+


    Not unless my preps were (or quickly could be) 100% squared away without those funds. And, not unless I could afford to lose 100% of my investment without a second thought.

    You say that real estate prices have not fallen as much in that market, to which I would only add "yet"... I'd say the market is running on fumes. Do you understand how many billions of Fed bailout graft went to Wall Street bonus checks, and to what extent that props up the high end of the NYC real estate market? Do you think that corruption can continue at a level sufficient to sustain prices for another three years? And do you know where will prices be without further "bailouts"?

    As much as I love to visit NYC, the place is utterly dysfunctional. They regulate everything, tax everything and have droves of government workers. Yet, they're thoroughly unable to get anything productive done and they're so deep in the hole that they're a poster child for municipal insolvency. You have festering immigrant/minority problems that could make the whole city uninhabitable within a week, unless Ahab brings in a dirty bomb, in which case it's instantaneous. (We all know Obammy needs his "Oklahoma City Moment", and what a great way that would be to mask the looming collapse of Ponzi Street!)

    High earners are leaving the state to reduce their tax burden, and that's part of a larger nationwide demographic trend. Your target market is fleeing in search of their own "greener preparatory pastures" and I only expect that trend to accelerate...

    Up until now, we've overcome all sorts of problems in this country. However, past success is no guarantee of future performance (!) and things are very different now. (As I like to point out, it's even later than you think.) We've never been in as deep a hole, we've never had such corrosive government and we've never before tried to climb out of any size hole without abundant cheap oil.

    Also, we're entering a new demographic era where the baby boom generation (which has driven every economic trend in the last 60 years) is now leaving productive, taxable employment at the rate of 10,000 people/day and trying to collect benefits from governments that are already broke. That's 10,000 new sellers of stock per day, as well, which should be of no small concern to Wall Street or anyone depending on Wall Street's health!

    And, never before have so many other countries been in similar straits at the same time...

    I wouldn't presume to predict when the final fiat money collapse will arrive in America. If, just ten years ago, you had told me that America could shed her productive capacity, remain utterly dependent on imported energy and minerals, destroy many high paying private sector jobs through outsourcing, import millions of marginally productive and culturally hostile people, have the feds take over automakers and health care, run trillion+ dollar annual deficits and still remain standing, I would have laughed at you. How we got this far is a constant source of amazement, and I honestly don't think we have much time left...

    And, should America ever wake up to what those Wall Street leeches have done to our country, most of your potential buyers will be dead! Regardless, you will need investors willing to finance bubble pricing two or three years hence. Who will buy that paper? What will inflation and interest rates be in two or three years, and which direction will they be headed? And what happens if, in a fit of fiscal sanity, rent is decontrolled in the meantime?

    I mean no offense and sincerely wish you the best. I will grant you that high prices are extraordinarily persistent in that market. This project could easily succeed, if only there's enough time left before all the world's problems converge. Too bad that's out of your hands...
  8. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Well Clyde
    I know you have in the past and figure you know way more about it than me, I say good luck!
    At least I will know another who made it big!
  9. melbo

    melbo Hunter Gatherer Administrator Founding Member

    I'd imagine that this deal is in the 100s of millions. With Clyde as the consultant, maybe he's not going to be putting down the cash but may want to know if it's worth the handholding it might take to see the deal to fruition and a healthy consulting fee.

    If he spends a year putting it together and the deal goes south before it finishes, he loses that year of his life as well as any other shorter term deals he may have been able to put together if not working on the Big One.

    Or maybe he feels that if he knew that greater collapses were imminent, his consulting should be on the side of caution over risk even though it may shoot himself in the foot with regards to his fee.

    I might need more specifics on this deal.
  10. ghrit

    ghrit Ambulatory anachronism Administrator Founding Member

    Likewise. It's more than likely that even a 128th of the partnership is out of my range, but knowing is better than guessing.
  11. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    I say go for it.[beer]
  12. Clyde

    Clyde Jet Set Tourer Administrator Founding Member

    I appreciate all your input and agree with the valid points. I have had my greatest successes in real estate investing and it is what I know. I believe strongly in the macro economic picture and international economic realities of the markets and exactly how much propping up is happening through the FED. One day that flood of money bubble will pop, too, and then the Greater Depression will truly take hold. NYC is just one of those markets which the propping seems to prop the most.

    Not sure what I will do, many reasoned responses here. My past risk taking in R.E. has paid off when I have trusted my gut. I will keep you apprised of my decisions.
  13. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Clyde = seesaw good luck friend.
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