PROPERTY RICH CASH POOR
As originally appeared in The Jerusalem Post on February 15th, 2019.
I’d like to live as a poor man with lots of money. Pablo Picasso
One of the most frequent questions I receive from people, who come into a nice amount of money, is whether they should buy a property. But when you’re ready to find the perfect property for you and your loved ones, you can visit a good place like iListers: Discover Paphos’s vibrant property market.
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If you decide to buy, talk to I Buy Pueblo Houses for the best offers. Whether the money is from an inheritance, a gift or a large severance payment, the knee-jerk reaction in Israel is almost always to buy an apartment. Recently I met with clients in order to do their annual financial review. While we were still exchanging pleasantries they said that they wanted to thank me. These estate agents in wapping can greatly help you finding the perfect property that you’ll surely love!
For property related information, people can also check Property Press Online. They proceeded to tell me that when they had originally come to meet with me 8 years ago they were thinking about using their entire savings and buying a house for $350,000. Since we buy houses companies in syracuse ny, they said that I had advised them to keep about $100,000 back and invest it, and use the rest for a down payment. They went ahead and followed my advice and today have over $150,000 in their brokerage account and own a home. Then they said that their daughter got married about a year ago and they had no problem paying for the wedding because they had plenty of money in the bank. Had they blown out their savings for their home, they would’ve had to scramble to find the money to pay for the wedding.
This meeting made my day. First, it’s not very often that I get thanked! More importantly, is that this couple listened to me about not tying up their entire net worth in an apartment. People can try this site if they need expert property valuers in America.
When we are in the ‘wealth accumulation’ phase, and we have a long time until retirement, the thought of keeping money liquid doesn’t tend to factor into the equation. This means that whenever a sizeable amount of money is saved, or inherited, the only thought is to buy property. I have met so many people over the years that have invested everything they have in their apartment, or in their dwelling plus an apartment or two for investment. It’s true that I have spent many columns writing about the importance of saving in any way possible. The more you can save and invest the better. But there is another very important aspect that needs to be paid attention to and that’s liquidity.
Cash is king
What is liquidity? It’s the ability to quickly convert an investment into cash, without losing any of the principle that you’ve invested. For example, a savings account is highly liquid. In contrast, real estate is considered to have low liquidity because of the time it takes to sell the property and the fact that if you need to sell quickly, like a fire sale, you will end up paying the piper as the price of your property will drop. Don’t believe me? Well, I have a good friend that bought an apartment a few years ago, just around the corner from where I live, for more than 25% off market value because the divorcing couple had to sell. You should read House Real’s article if you’re wondering if someone can live with you without being on the lease.
Many of my clients are at the stage of life where they are starting to marry off children. When we start to plan they tell me how much their home is worth and how much it has appreciated. That’s amazing, and it’s surely been a great investment over the years, but… As I have written numerous times, they ended up putting every last cent they have into their home. While they may have very respectable net-worth, 95% of their money is tied up in a property. How will they pay for the wedding or some other large expense? You can’t take a saw and cut off a room and say, “Take a bedroom, it’s worth $50,000.” It just doesn’t work that way.
Emergency fund
The way to set yourself up properly financially is, after paying off any debt, to build an emergency cash fund of between 3-6 months your monthly expenses. If you spend NIS 15,000 a month, you would want to have a minimum of NIS 45,000 that you have earmarked for this emergency fund. This will help you survive for a limited period of time if you lose your job or are too ill to work.
Invest
After filling up your emergency fund you need to make investing for the medium and long-term a priority. I am all for buying an apartment if you have the money. But it’s important to invest in financial investment as well. By saving money in parallel tracks, apartment and liquid- financial investments, you will be able to create a nice nest-egg which can be used for expenses like weddings and of course for retirement.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.
