In this week’s Weekly Wealth Digest, we answer your questions. How will the Fed tapering effect the stock market, how to buy a good rental property, earn extra income, and details of when we will release a new micro-documentary.
Trend Mail Q&A
If the FED Tapers, as is the rumor now on Wall St., will stocks crash?
If the FED tapered, we would expect a 10% decline in the overall stock market. Mainly because if they did, it wouldn’t eliminate the entire $85 billion dollar bond purchasing program over night, it would probably reduce it to say $70 billion a month. However this is NOT what I think will happen at all, I think it is more likely that the FED will INCREASE its bond buying program. Perhaps it could taper a little just to bluff the markets, but the fact is the economy is slowing. China is slowing, Europe is in a recession, and the U.S. is seeing a decline in its GDP numbers. The core inflation rate that Bernanke tracks is at its lowest point since President Kennedy was in office; so I honestly see the FED increasing its quantitative easing program. Here are a few points that should be noted…
Unemployment rate is higher than the FED’s stated goal
Inflation is lower than the FED’s stated goal
U.S. GDP is declining, with Europe already in a recession
These 3 things alone, not even mentioning the long term deflationary pressures like the baby boomers peaking in spending, are reason enough to believe that the FED is not even close to reducing its currency devaluation programs. The FED also knows that the Federal Government is dealing with its own budgetary problems and that the FED alone will need to stimulate the economy.
I don’t have time for another 20 hour part time job, how many hours are we talking about for these extra income ideas you offer in your Smart Money Newsletter?
Last week we presented Extra Income Idea #2, this idea can take anywhere from 4 hour plus per week, with about half that time being at home, and the other half being in front of your computer. However Extra Income Idea #1 was all from home, and the hours depended on your commitment to it. Next month we will present Extra Income Idea #3, which will only require a set up, then it requires no time, you will literally make money for almost doing nothing.
The thing to remember is these extra income ideas aren’t get rich quick schemes, these are realistic businesses you can do to make a few hundred to a few thousand extra dollars per month. My staff and I are vetting hundreds of ideas narrowing them down to just 12 that we can present to our members. 1 of them we have already made money on and the 2nd we are just starting out and will keep all of you updated. As we see economies in crisis, our goal is to help you make your best investment…yourself!
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When buying rental property, do you manage them yourself? Also, what criteria do you use to buy?
I personally recommend you find a good property manager for all your rental properties. They usually charge between 7-10% of the gross income (rents) which is fair. Your time commitment to each property will be reduced to less than a minute a month, at least this is my experience, since all I do is read the monthly statements. All other issues like finding tenants, repairs, inspections, and the occasional tenant complaints are taken care of by the property manager. Most property management companies today even offer direct deposit, so you won’t even have to go cash a check, the money will just automatically be deposited into your checking account.
As to your second question, what is my criteria for buying a rental property, the easiest way I can think of is to look in areas where your Gross Rent Multiplier (GRM) is between 5-9. The math is easy, take the gross annual rental income, lets say for example $12,000, times it by 9, which is $108,000, this should be the most you are willing to pay for a rental property with this income. If you are looking for safety, than use a GRM of 5, this means that for the same property the most you would be willing to pay is $60,000. You will always need to run the numbers for each individual property, every region has different taxes, management fees, and vacancy rates. When I run the numbers, if I can get at least a 15% return on my money, I am a happy man and will be happy to make a deal.
Remember, rental income is for long term wealth building and should not be considered an extra income idea for the short term. Years of positive cash flow are often erased with a new roof, AC unit, or a few months of vacancies. The real money in rentals comes after you own them for 10 or 20 years and the properties are paid off.
Thank you so much for doing these weekly wealth digests, this is truly something I look forward to every Wednesday.
Your interviews lately have been some of the best you have ever done. Keep up the good work!
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When will you release a new micro-documentary, these are what FutureMoneyTrends.com is the best at.
Possibly as soon as this Friday we are putting the final touches on a new micro-documentary that focuses on your future, the state of the economy, and the destruction of the middle class in America. Look for it in the next 3 to 10 days.
Have a great week everyone.