As I'm getting older and starting to get tired of the every day of dealing with tenants and properties (although I seldom have problems with either I am talking just the normal day to day), I have been looking at different invetments where you must be an accredited investor. I qualify. That said, I am a control freak and not sure how I would deal with this. I assume it's like investing in a mutual fund in the stock market - cross your fingers and hope everyone else out there is doing their jobs (smiley face inserted here!). This would be for money I am sitting on. I really am not buying the past year or so because local real estate is out of control and I've got no idea how anyone can make money with the sales prices and rent charged we have locally.

Any thoughts on any of these type deals? I know there are some local folks who have their own sort of private group investing but exactly sure how that works or any details other than you must be referred by a current member. I'm more concerned with the ones that are open to everyone.

Good old Warren Buffett gave an excellent piece of advice--don't invest in things you don't understand. I did not follow that advice when I was younger. Pretty much every deal I put money into that I did not understand I lost the money.

Another piece of advice he gave was check every person, and company for knowledge, good business practices and integrity. If the people involved don't have integrity, the first two don't matter and don't get involved.

As I got older, the things I know and understand have produced gains.

Mr Buffett's company, Berkshire Hathaway, has produced exceptional returns for over 60 years. Looking back, I would have done better if I had just put my money into that company and left it there.

You talk about investing in things where you need to be an accredited investor. Lots of those are risky, that's why only accredited investors are allowed to invest - because these investors KNOW that there is a chance of losing ALL their money.

I began buying my first rental, a 3+2 with a pool in Canoga Park for $72,000, back in 1978 at the age of 18. I was in the growing Jewelry trade, making money hand over fist. By 20 I had 5 rentals.

I tell you this because over my 48 years of owning rentals, homes, duplex's, triplex's, 4 units, 5 units and up -- plus commercial too.

Owning rentals became a challenge, since I'm located in Los Angeles, where City Government is corrupt, and landlords are treated like criminals. I'm also a Licensed contractor, so I find myself challenging big brother often.

So back in 2005, I began my quest to find Real Estate Investment that I could do a 1031 Tax Free Exchange into and preserve my net equity and grow my income under the "Sponsor's" watchful eye and management.

This is where my research and investing will give everyone here something to think about.

So I sold a million dollar apartment property back in 2007 and looked for up to three up-tick investments under the 1031 tax free exchange process.

#1) The Accomodators at the time were looking out for themselves. Around 4% of them would "Borrow" Trust Funds of another and try to FLIP a property with our 1031 exchange money. Their insurance Bond couldn't cover all of their fraud. Example: one Accommodation Firm used 21 million dollars of sellers funds, trying to make money in under 30 days, when that money would be needed to buy the landlords up-tick trades. The market began to fall and the AccommodatOR couldn't close the deal and lost the deposit (investors 1031 funds).

The problem is the insurance only was for $1,000,000 total, so 20 million was lost. But the landlords who SOLD and parked their funds with the AccommodatOR, STILL HAD TO TAXES TO THE IRS FOR THEIR LONG TERM CAPITAL GAINS TAX...

So my solution, was to use IPX 1031 with a $100,000,000 bond per client.

#2) Now finding the UP TICK Property. It could be:

Triple Net

Triple Net free standing 1 business

Any type of real estate income property

Land

Hotel

Land Lease

ETC.

So I took my $1,000,000 proceeds from the sale of my apartment house and "Tried" to invest in three different deals.

First Deal: A Hotel. We would purchase it, get a loan for 100% of our down payment, so it would be leveraged.

Second Deal: Oil Lease, Oil Drilling. For the money we would get 10 drills for oil. If the two failed, then the third drill would be an sucessful producing stock oil well. So we were guaranteed 3 or 10 would produce good income.

Third Deal: Larger Apartment House or Strip Mall.

So the Hotel deal ran short of literature. So I was sent a copy via airmail special delivery. I found fraud. The Sponsor purchased a hotel for 11 million dollars. Closed and with chipped paint. He made the Hotel look pretty, then leased it out to a National Chain on a 3 year lease.

If you buying in a traditional manner, the road has been bumpy for a few years. The numbers just don't make sense at all. There are still some ways to buy out there though. Sub 2, estate sales, off market places, and sheriff sales all have been used the past 18 months here. I am sure you can use these same tools there too.

I, like you, qualify as an accredited investor. I, like you, am perhaps too much of a control freak to invest in most of them. Apartment syndications, vacation rentals, a couple more that I can't remember...it seemed like the originator was pocketing most of the money and we were assuming most of the financial risk. There are so many ways to misrepresent things that it's hard to find something I feel comfortable investing in.

Two exceptions: we occasionally invest with a company that has been in business for over 20 years, buying underperforming business properties, upgrading them, leasing out and then selling. Basically, flipping business properties. The same three guys have been doing it since the beginning, are very selective in how they invest, are very conservative in what they anticipate the return to be, and put a substantial amount of their own money in.

The other is a small apartment building that we invested in with four other people, all of whom we know and who have both experience and integrity.

I, like you, qualify as an accredited investor. I, like you, am perhaps too much of a control freak to invest in most of them. Apartment syndications, vacation rentals, a couple more that I can't remember...it seemed like the originator was pocketing most of the money and we were assuming most of the financial risk. There are so many ways to misrepresent things that it's hard to find something I feel comfortable investing in.

Two exceptions: we occasionally invest with a company that has been in business for over 20 years, buying underperforming business properties, upgrading them, leasing out and then selling. Basically, flipping business properties. The same three guys have been doing it since the beginning, are very selective in how they invest, are very conservative in what they anticipate the return to be, and put a substantial amount of their own money in.

The other is a small apartment building that we invested in with four other people, all of whom we know and who have both experience and integrity.

... and again we have another RJ story where someone else ripped him off.

I have been seeing a pattern here for sure.

I spent quite a bit of time sorting through several of them a year or two ago. By the time everyone gets their commission the returns were abysmal.

The other thing that miffed me when I started reading the doc's was the ownership, it was convoluted at best. The syndicator maintained title to the property and maintained a first position for his sweat equity shares. Investors were given second position shares which best I could figure was somewhere equal to a second mortgage. In other words if the deal went south the Syndicator was going to get all of his fees and the investors would take all of the financial hit. He had no financial incentive to keep it on track. Besides, this deal was only projected to make 3% a year for 3 years. You would be better off putting it in a CD for the same rate with no risk. So, be sure and read the Doc's in detail when looking at those deals.

I've switched to private equity lending for a few local kids I have mentored over the years. The returns are much better, I know the risks inside out since I've been doing this for almost 40 years, and no toilets to deal with. I'll probably continue doing this until the bottom falls out of interest rates and then start looking for the next highly passive investment strategy.

Thanks all. I guess above I received the confirmation I needed. It's too risky when I don't understand enough about "it" ... whatever "it" actually is.

For the first time ever I did build a six unit on land I owned and it truly was an eye opening experience. It will take 10 years until the initial costs are recouped. I have another property that I wanted to build on but I don't think I am going to because again, I just don't see how a decent return can be made.

When people talk about balancing or broadening the portfolio, I think about owning more houses, not about investing in new ideas that I don't understand.

At least if we lose money on a housing project, I know exactly why. We spent too much money to support the end result.

When we lose money in the stock market, I am completely clueless.

When people talk about investing in safe stocks, I think MCI and Enron.

When they talk about alternative investments, I think Beanie Babies that were supposed to pay for college.

Maybe Beanie Babies will make a come back like bell bottom jeans tried.