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Real Estate & Personal Loans

by cgonzalez at 2:06 pm on September 19, 2019

If you've been following along with my market adventures, you'll remember that I sold... a lot. As always, I like to keep everyone up to date with what I'm doing.

So, in that vein, here's what is going on in my world.

The fed just dropped interest rates, again. And, if you're familiar with cash accounts, when that happens, your return on cash drops about the same amount the Fed cuts. So if the Fed cuts 25 basis points (0.25%) then your cash returns usually drop by the same amount. Not good...

I'm just waiting for the Wealthfront email letting me know that they "have to" drop my rates on cash again. Ugh... What is there to do?

I don't trust the market right now. There is way to much volatility and I smell a drop coming. I still have some exposure but not a lot.

Cash isn't a good option anymore so I'm getting into real estate and personal loans. I had an accountant a few years ago who told me a bit about getting into things like this and I haven't really had a reason to check it out, until now.

Just to be clear, I am not buying property. F*** that. Way too much overhead for me right now and I have friends who tell me their nightmare stories. Advice like that isn't something I take lightly.

So I got into real estate debt and equity and I don't have to manage properties. Yes!

I really like the Fundrise portal. They have a great summary landing page and do a great job of showing what types of debts and equities I own. Particularly, I like how they show me the diversification of risk in my portfolio. 

For those who don't quite get what I just said, here's a quick translation. My portfolio has a healthy mix of high risk (people who will probably have difficulty paying their mortgage) and low risk (people who I can almost guarantee will pay their mortgage). The reason why you want that mix is simple: the higher the risk, the higher the reward. But I don't want to lost my initial investment.

So, if I have a lot of high risk in my portfolio, I'm probably going to have above average returns (more money coming back to me). But, there's also a higher chance I'm going to lose some of my initial investment.

I added a good amount of low risk (remember, these are the people who will most likely pay back their mortgages) because there's a very small chance I'll lose my initial investment but my returns won't be that high.

So far so good! But I wanted to also try my hand at personal loans. The overall approach is very similar to real estate. I have a healthy mix of loans to high risk individuals (probably won't pay me back) with above average returns and low risk (I'll get paid back but with less interest on top).

I went with Prosper for the personal loans. Most of the others required that I be an accredited investor (and I am not one yet). Prosper also had one of the better UIs (for us techies).

So far, the returns are meh... Like I said, this was a test to see what kind of returns I would actually get doing this. Both Fundrise and Prosper threw some bigger numbers out there but I haven't seen them yet. But we will see. I'll keep you guys updated.  

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