Options. What to do!?

W

want2bewealthy

Hi!

Just thought I'd shre my thoughts out loud collectively.
I am in the midst of a possible property purchase, but because the banks are
very skittish at the moment, not many loans, even well presented are getting through to the keeper.

I'm looking at considerations as to where to place my cash if this deal does not go through. Love to hear ideas if anyone has any?

In short, I have about $60,000 cash that I'm not using and am negatively geared slightly with my current prtfolio, and am thinking of possibly purchasing one or two cheap cash-flow positive properties for a change?

Just looking to enhance my cash-flow and my main goal is to reach the ability of optional retirement asap.

I've alwys loved property, but would be willing to at least look in-to other forms of wealth creation.

Thank you.
 
It the money isn't already in one, start buy putting the cash into an offset account until you do figure out what to do with it.

You could use it to 'add value' to your existing portfolio and create equity and increase rental yield if there's scope to do this.

If you're looking to alternate investments, you could visit a financial planner. You won't get a 'this is the road to instant riches' outcome, but you might get a well thought out roadmap to meet your goals over time.
 
Thanks PT.

I will certainly stash it in an offset if I do not use it immediately.

Thanks for the thought about seeing a financial planner, but no thanks.
Unless this planner is seriously wealthy then I refuse to take advice.

We've spent quite a lot of money renovating our PPOR the past year and other properties are looking good and do not require any makeovers right now. It would not improve capital, plus at the moment it is hard to redraw your cash back out because of stricter lending procedures so thats not a good thing to be doing right now when cash is king and hard to get out.

I see myself as quite investment savvy, just reading Kiyosaki's 'retire young, retire rich' he installed some keen interest in accelerating the process and not standing still when I ould be moving forward somehow.

It's not like I'm not doing well or anything, but it's human nature that I always want to better my situation and self. Why not!?
 
You are overweighted in property.

Learn how do do shares & options trading.

If you knew what you were doing:
Buy 1,000 shares of BHP (trading at $43.60 ea). This will cost you $43,600 + brokerage.
Write a call option with a strike price of $44.00 for expiry next month 25/8/11.
This will give you an option premium to keep of $1.20 per share = $1,200 - brokerage.
If the share price goes over $44 then you will be exercised and have to make a profit on the share sale of 40c ea = $400 - brokerage.
Total profit in 1 month = $1,600 or 3.6% per month.
Do this 10 months of the year to make over 30% pa.
Leverage it up with a margin loan and you can do better.

Not for the novice but a fairly 'safe' way to learn.
 
Hi Alan.

Thaks for the info. It sounds very interesting to me and I'm excitedly keen
to learn more from you on this.

Are you happy to have a chat by PM or phone?
Thanks mate. :)
 
Worth sharing the other side as well. Sounds great when the market is rising. But what happens when you received your $1,200 premium and the stock falls to $38 ?
 
coastymike said:
Worth sharing the other side as well. Sounds great when the market is rising. But what happens when you received your $1,200 premium and the stock falls to $38 ?
Click to expand...

Absolutely correct - there is, as they say, no free lunch.

But whan you buy a stock (or a house for that matter), you have to accept that the price can move in both directions. If you can't accept that risk, then you don't invest.

In answer to coastymike's specific Q, there are defensive strategies you can undertake, like writing another call for more premium and then rolling up and out if it looks like you are going to be exercised. The premium generated should more than offset the loss in the underlying share price.

But this is a property forum and specifics of such derivatives trading is probably better left for another place. ;)
 
Belbo said:
Prop's gone batting for the other team now?
Click to expand...

Now, now, Belbo, just because I'm a big believer in real estate as a wealth creation vehicle does not mean that is the only asset class I invest in. If you do a search in here, you'll see I believe in both. It does not have to be one or the other you know.

The OP, Jeremy, had a lazy $60K lying around. I'm not a fan of buying cheap cash flow property with low or no CG in the sticks. He asked for our opinions. I gave mine....with a warning that it was not for novices.
 
Propertunity said:
Now, now, Belbo, just because I'm a big believer in real estate as a wealth creation vehicle does not mean that is the only asset class I invest in. If you do a search in here, you'll see I believe in both. It does not have to be one or the other you know.

The OP, Jeremy, had a lazy $60K lying around. I'm not a fan of buying cheap cash flow property with low or no CG in the sticks. He asked for our opinions. I gave mine....with a warning that it was not for novices.
Click to expand...

Dear oh dear Prop. Can't fault your logic, but can't shake the suspicion that Mordor has taken a hold on you. Beware the Ents!
 
Propertunity said:
You say I've been spending too much time on the North Shore? :confused:
http://www.somersoft.com/forums/showpost.php?p=809403&postcount=1
Click to expand...

Far, far worse: The stock . . . market!

(Although I still can't help laughing about that map of 'Mordor' either.)

If had a lazy $60K, and had to choose something on the sharemarket, I think I'd leverage into BHP with a 50:50 margin loan. But I'd be doing myself a disservice, dont you think?

Released from the Tower of Saruman, if I was feeling conservative I'd leverage 75:25 (including costs) into a nice apartment somewhere offering cash flow neutrality and healthy cap gains prospects.

But that wouldn't be enough fun for me personally. I'd go a full-throttle blind dash for the summit: 90:10 (including costs) for a wildly cash flow positive mining town investment.

Naturally, I'd keep this to myself because I wouldn't want anyone thinking I was absolutely barking mad. That would not fit my SS persona at all.
 
options for spare cash!

I am always keen on the idea of diversity when investing.... that's why I feel spreading across property, cash and shares is a good idea.

with $60K, that could serve as a good deposit on a property... it could also be used to buy a few different shares across different categories... (some growth driven and some dividend driven).. you could also put some cash into an online high interest savings account... especially if only temporary... at least you are guaranteed your monthly interest..

property investing is great when done well but shares, and cash possibly offer more immediate returns especially if your property is negatively geared....(being too negatively geared can sometimes be a big drain on cash flow especially if additional expenses come your way like nasty maintenance surprises... (eg. hot water service blowing up - or you need to eradicate termites etc!)

all the best,

Peter.
 
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