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Best way to generate income? 1)purchase rental property 2)start a food business 3)invest it into stocks

likesmartfunny
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Not #2

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Rental properties are super stable but youre looking at 7% roi. Some short term rentals can earn significantly more, like 20%. Stocks can be a crazier ride or more stable depending on your picks. Both offer similar return orherwise people would flood into the better returning one.

The benefit of stocks is then you read the WSJ more like a sports page each day.

Start a food business? Sounds like a lot of work.

likefunny

EY1 no, Rental is lower than stock. The upside of rental property is leverage.

I’m all stocks, boss. Taking care of my own house is enough work for me

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Shouldn’t we be talking about CAGR instead of ROI? ROI doesn’t include a standardized time.

1) rental = someone else’s money to grow, so low growth on a 200k loan with 40k down = 3% (5yr avg) or +$6k end of year one. Gains can be protected by rolling into other properties. You can also have monthly income from this, up to a few hundred/mo = +8-9k total of growth+rental income. This needs to net out for property taxes, maintenance, etc. And could therefore be much less.
2) food service = please no, don’t do this
3) if you have $40k down for a rental, you probably have 45-60k (including closing costs?). If you threw that in the markets it’d be ~10-14% reasonably (looking at total stock market returns last 10yrs), then that’d be 4.5-8.4k end of year one. Gains taxes are 0-15% for most people, depending on length of investment and other income sources.

1 and 3 are about risk, liquidity, and what you value. If you can beat 2-4% in home value growth or monthly rental income after taxes, you’re likely to come out ahead. Otherwise, market is the way to go. Market is what I’ve chosen for myself because I have high control, low relative risk (no vacancies), and can be aggressive for greater returns.

likesmart

Great analysis. I would add that my rentals are all in another state and managed by a service so no personal time requirements on my part. I may visit them every 5 years or so. You definitely need to do tons of homework by area on expenses and loan costs. First property will teach you lessons - read as costly mistskes. Takes about 200k minimum just for the down on most properties. My cap rate after all expenses ranges from 5.5% (my first lesson) to 10.5%. Im in C level appts. so never had a problem keeping them full.

I started in multifamily as an inflation hedge, but stayed for the stability. If you sell, then you can transfer any capital gains to the next property tax free.

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Depends on your risk tolerance and how much work you want to put in.
Rental - medium risk, medium work, ~10% ROI
Food - high risk, high work, higher ROI
Stocks (index fund) - low risk, low work, ~7% ROI

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Easiest and, in my opinion, one of the best ways is low cost index funds. I spend almost no time on it outside of work.

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1 and 3. #1 - ROI is 7%, but that doesn’t count on the property being an investment asset as well

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Sell covered calls on your stocks!

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How much work do you want to put in and how much risk can you stomach? If you want a set it and forget it, go index funds and plow money into that. If you want a little bit more work and therefore higher returns, you could research and invest in individual stocks or buy a rental property (after doing your proper research) and do a lot of the work yourself. For the highest returns, but also the most work and most risk, the business would be the best option there

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Not #2! I started one a few years ago and had to pour in >$100k in capital to get it up off the ground. I'm looking at about ~$400k in revenue this year, but margins are low and I expect to net less than $50k when all is said and done. It's also quite a time/manpower intensive operation.

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likehelpfulupliftingsmart

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