6 ms·

The concept makes sense, but the specifics written here seem oversimplified and are going to mislead people. Realistically, it's not easy to turn a single vendi

by dbish 5y ago

The concept makes sense, but the specifics written here seem oversimplified and are going to mislead people. Realistically, it's not easy to turn a single vending machine or a purchased content website into a largely passive source of (significant) income for most people. Likewise, real estate purchasing is speculation in many cases and you can end up on the wrong side of that like many have in the past, losing everything when they can't rent out a place and they lose their job (like what happened in the last real estate downturn to many folks). Absolutely agree that if you are using debt, use it wisely, but I would have loved to see more specific and nuanced discussion of how to evaluate options for doing so.

klyrs 5y ago
I mean, you're right about the little stuff. And that's why it's not beneficial for a poor person to invest in a single large investment (eggs in a single basket, as it were). But, folks with enough money will diversify their investments. Thus, they can tolerate a sunk vending machine or a brief downturn in property value. When the very rich lose because the entire market is crashing, they're still better off than the rest of us, because we experience the same crash (unless it's something stupidly esoteric like tulips, and even then, the upper-middle class tend to get stuck holding the bag)
- deleted 5y ago
  [deleted]
suifbwish 5y ago
Most of the time, real wealth is generated when something new is created that did not exist before.
- sologoub 5y ago
  Sure and that’s how you get major independent wealth quickly. The little by little approach also works but takes discipline and commitment to the future that’s hard to keep when you are poor and don’t know where the next piece of bread is coming from. When I first started making (by my then measure) good money, pretty much all of them were flushed down the drain one way or the other. It took me years to snap out of that. The examples are pretty weak, but substitute index funds and REITs and you are in a better place. Does it fluctuate? Sure does. Does it also accumulate? Yup it does that too and that’s the key.
- john_moscow 5y ago
  Except due to globalization this process has moved out to cheaper countries. Where the wealth is created and then parked in more politically stable West. And we keep wondering why our Average Joe can't afford a house anymore.
  - adventured 5y ago
    Since when can Average Joe not afford a house? That's a combination of pop myth and extrapolating isolated local phenomenon to the national housing & income context. The home ownership rate in the US is currently on par with where it was in 1995-1996, higher than it was throughout nearly all of the 1980s, and higher than it was throughout all of the 1950s, 1960s and almost all of the 1970s. If you chop off the particularly artificial five to six years of the housing bubble, the US is presently only about 1 to 1.5 points off from all-time highs on home ownership. Now, having pointed this fact out, the obvious next response is to claim that today's home ownership is somehow a lesser form. Houses are quite larger today than they were in the 1950s-1970s however, and superior in most every possible way. And home owners have been building equity pretty consistently since the great recession, with US household balance sheets in good condition overall, including with debt service costs at historically low levels (which includes mortgage payments). Realistically the primary people suffering versus the past re home ownership, are in select few locations like San Francisco, Los Angeles, New York City, Seattle and similar.
    - john_moscow 5y ago
      Home ownership rate measures the percentage of the homes occupied by their owners (i.e. how many % are not rented out). It would not show the number of young adults who never had a chance to move out. It will also not show a difference between a single family renting a detached house vs. 5 adults sharing a rented apartment. A much more interesting metric would be the number of shared households, that appears to be rising (although I couldn't easily google up a concrete graph). >Realistically the primary people suffering versus the past re home ownership, are in select few locations like San Francisco, Los Angeles, New York City, Seattle and similar. Well, that's where the jobs are. Sure you can afford a home in Salty Creek with a median Seattle salary, but that's not what most people would want to do. These days, unless you are in STEM (big cities) or trades (rural areas), you are pretty outpriced.
- rhizome 5y ago
  What did the founder(s) of Little Caesar's Pizza create?
  - scarmig 5y ago
    Little Caesar's. Particularly, they discovered an underserved market niche and found a way to satisfy people's desires in a cost efficient way.
    - rhizome 5y ago
      That doesn't make sense as far as the point goes. There has to be something more than a tautology.
      - insert_coin 5y ago
        Well, if what you ask is a tautology the answer is almost obvious. Almost.
      - chiph 5y ago
        No, that's pretty much it. In comparison, Pizza Hut and Domino's have slightly better pizza, at a higher cost. Little Caesar's discovered that enough people (college students, in my experience) were willing to eat slightly worse quality pizza - that was larger, but at a slightly cheaper price. From memory, Domino's was $12 for a 14" pie, but Little Caesar's was $10 for two 10" pies, that weren't as tasty, but were "good value for the money" They originally saved money by using a cardboard tray not a box, that had a paper sleeve over it to keep the pizza sanitary. They could get two pies in there for what it cost the bigger chains to deliver one.
        ztjio 5y ago
        Also their original breadsticks were amazingly good.
        kevin_thibedeau 5y ago
ashleyn 5y ago
I feel like the easiest way to accomplish this is just investing into stable dividend stocks. I don't know the first thing about running a vending machine, or upkeeping a condo. But I know people who do - dividend-paying companies. I get ~$20 a month on a $6600 position. Could earn way more if i shifted other investments but it's not the best tax-wise (neither is running a vending machine, compared to buying an index fund).
- gruez 5y ago
  Is there a reason to prefer dividend paying stocks when they're less efficient than long term capital gains (ie. buybacks)?
  - simonh 5y ago
    The dividend income is cash flow so which isn’t tied to the future value of the stock. You don’t need to worry so much about timing when you need to sell the stock to get back the best profit. Sure it’s not the best long term and in aggregate, but if you need an income then it’s a reasonable choice.
    - ivalm 5y ago
      But you can just sell stock continuously, as it is more tax efficient. Eg 2% dividend is just 2% of portfolio sold every year.
  - ac29 5y ago
    Dividends are taxed the same as capital gains in the US. There can be value to deferring taxes, but $1 worth of capital gains via say a buyback is worth the same as $1 paid out in dividends, net of taxes.
    - dentalperson 5y ago
      A buyback does not trigger a taxable event, unlike a dividend. So the tax deferred value of buybacks is compounded over the years, which can be significant.
harles 5y ago
There was definitely a disconnect between the title and the content - it seemed to be about reinvesting your cash flow rather than leveraging debt. It would’ve been nice to see a comparison with simpler investments like stocks as well. As an anecdote of actually using debt to generate future cash, when I purchased a house my mortgage was bundled with a home equity line of credit that was used for the down payment. My plan was to pay this off as soon as possible since it had a higher interest rate than the base mortgage. All the advice I got told me not to - everyone said take the 10 years they offer of paying interest only and reinvest what you would’ve put in. It turned out to be great advice and any time I can make this trade on debt, I will.
- Spooky23 5y ago
  That’s good advice in this rate environment — if your income stream is secure. When it’s not, you’re screwed. I have a relative who was a exec with a credit card bank. Great job, etc. Then the bank moved off to South Dakota, and didn’t pack him.
- PaulDavisThe1st 5y ago
  Sam purchases the beach house using debt.

by dbish 5y ago

klyrs 5y ago

I mean, you're right about the little stuff. And that's why it's not beneficial for a poor person to invest in a single large investment (eggs in a single basket, as it were). But, folks with enough money will diversify their investments. Thus, they can tolerate a sunk vending machine or a brief downturn in property value. When the very rich lose because the entire market is crashing, they're still better off than the rest of us, because we experience the same crash (unless it's something stupidly esoteric like tulips, and even then, the upper-middle class tend to get stuck holding the bag)

deleted 5y ago
[deleted]

suifbwish 5y ago

Most of the time, real wealth is generated when something new is created that did not exist before.

sologoub 5y ago
Sure and that’s how you get major independent wealth quickly. The little by little approach also works but takes discipline and commitment to the future that’s hard to keep when you are poor and don’t know where the next piece of bread is coming from. When I first started making (by my then measure) good money, pretty much all of them were flushed down the drain one way or the other. It took me years to snap out of that. The examples are pretty weak, but substitute index funds and REITs and you are in a better place. Does it fluctuate? Sure does. Does it also accumulate? Yup it does that too and that’s the key.
john_moscow 5y ago
Except due to globalization this process has moved out to cheaper countries. Where the wealth is created and then parked in more politically stable West. And we keep wondering why our Average Joe can't afford a house anymore.
- adventured 5y ago
  Since when can Average Joe not afford a house? That's a combination of pop myth and extrapolating isolated local phenomenon to the national housing & income context. The home ownership rate in the US is currently on par with where it was in 1995-1996, higher than it was throughout nearly all of the 1980s, and higher than it was throughout all of the 1950s, 1960s and almost all of the 1970s. If you chop off the particularly artificial five to six years of the housing bubble, the US is presently only about 1 to 1.5 points off from all-time highs on home ownership. Now, having pointed this fact out, the obvious next response is to claim that today's home ownership is somehow a lesser form. Houses are quite larger today than they were in the 1950s-1970s however, and superior in most every possible way. And home owners have been building equity pretty consistently since the great recession, with US household balance sheets in good condition overall, including with debt service costs at historically low levels (which includes mortgage payments). Realistically the primary people suffering versus the past re home ownership, are in select few locations like San Francisco, Los Angeles, New York City, Seattle and similar.
  - john_moscow 5y ago
    Home ownership rate measures the percentage of the homes occupied by their owners (i.e. how many % are not rented out). It would not show the number of young adults who never had a chance to move out. It will also not show a difference between a single family renting a detached house vs. 5 adults sharing a rented apartment. A much more interesting metric would be the number of shared households, that appears to be rising (although I couldn't easily google up a concrete graph). >Realistically the primary people suffering versus the past re home ownership, are in select few locations like San Francisco, Los Angeles, New York City, Seattle and similar. Well, that's where the jobs are. Sure you can afford a home in Salty Creek with a median Seattle salary, but that's not what most people would want to do. These days, unless you are in STEM (big cities) or trades (rural areas), you are pretty outpriced.
rhizome 5y ago
What did the founder(s) of Little Caesar's Pizza create?
- scarmig 5y ago
  Little Caesar's. Particularly, they discovered an underserved market niche and found a way to satisfy people's desires in a cost efficient way.
  - rhizome 5y ago
    That doesn't make sense as far as the point goes. There has to be something more than a tautology.
    - insert_coin 5y ago
      Well, if what you ask is a tautology the answer is almost obvious. Almost.
    - chiph 5y ago
      No, that's pretty much it. In comparison, Pizza Hut and Domino's have slightly better pizza, at a higher cost. Little Caesar's discovered that enough people (college students, in my experience) were willing to eat slightly worse quality pizza - that was larger, but at a slightly cheaper price. From memory, Domino's was $12 for a 14" pie, but Little Caesar's was $10 for two 10" pies, that weren't as tasty, but were "good value for the money" They originally saved money by using a cardboard tray not a box, that had a paper sleeve over it to keep the pizza sanitary. They could get two pies in there for what it cost the bigger chains to deliver one.
      - ztjio 5y ago
        Also their original breadsticks were amazingly good.
        kevin_thibedeau 5y ago

ashleyn 5y ago

I feel like the easiest way to accomplish this is just investing into stable dividend stocks. I don't know the first thing about running a vending machine, or upkeeping a condo. But I know people who do - dividend-paying companies. I get ~$20 a month on a $6600 position. Could earn way more if i shifted other investments but it's not the best tax-wise (neither is running a vending machine, compared to buying an index fund).

gruez 5y ago
Is there a reason to prefer dividend paying stocks when they're less efficient than long term capital gains (ie. buybacks)?
- simonh 5y ago
  The dividend income is cash flow so which isn’t tied to the future value of the stock. You don’t need to worry so much about timing when you need to sell the stock to get back the best profit. Sure it’s not the best long term and in aggregate, but if you need an income then it’s a reasonable choice.
  - ivalm 5y ago
    But you can just sell stock continuously, as it is more tax efficient. Eg 2% dividend is just 2% of portfolio sold every year.
- ac29 5y ago
  Dividends are taxed the same as capital gains in the US. There can be value to deferring taxes, but $1 worth of capital gains via say a buyback is worth the same as $1 paid out in dividends, net of taxes.
  - dentalperson 5y ago
    A buyback does not trigger a taxable event, unlike a dividend. So the tax deferred value of buybacks is compounded over the years, which can be significant.

harles 5y ago

There was definitely a disconnect between the title and the content - it seemed to be about reinvesting your cash flow rather than leveraging debt. It would’ve been nice to see a comparison with simpler investments like stocks as well. As an anecdote of actually using debt to generate future cash, when I purchased a house my mortgage was bundled with a home equity line of credit that was used for the down payment. My plan was to pay this off as soon as possible since it had a higher interest rate than the base mortgage. All the advice I got told me not to - everyone said take the 10 years they offer of paying interest only and reinvest what you would’ve put in. It turned out to be great advice and any time I can make this trade on debt, I will.

Spooky23 5y ago
That’s good advice in this rate environment — if your income stream is secure. When it’s not, you’re screwed. I have a relative who was a exec with a credit card bank. Great job, etc. Then the bank moved off to South Dakota, and didn’t pack him.
PaulDavisThe1st 5y ago
Sam purchases the beach house using debt.