March 23, 2009

Our First House Sold! And We Only Lost a Little Money!

In the never ending saga that is building wealth, trying to get rich, and now a day just trying to survive, our first house flipping adventure is over with the sale of house number one. It closes on Friday, and everything appears to be a go. Although we did end up losing a little money ($6,000 or so), it could have been so much worse, and is worse for so many others out there. I think the difference was, we weren't necessarily trying to get in and out to make money on the bubble. We created value and just happened to get a time in the housing market when everything went down. Oh well.

Now that we have sold the house, we are looking for a different place, much smaller, in a different city (Seattle - new job). Before we get a new house, however, I think we are going to rent for a bit. One of the major downfalls of our new living spaces will be a new lack of closet space. Before we had a huge walk in closet with a large amount of space. Now we have nothing but a little dinky 8 by 3 foot closet. So organizing the closet is going to take a little work. I think instead of looking all over the place for a book on space I'm just going to buy some closet organizers and use them to do all of the work for me.

I guess though, if the closet space is my biggest worry, then that isn't too bad. And as far as our next house, I think we are going to continue to look for value that we can add and then sell, but maybe not quite the undertaking we did the last time. I'm thinking appliances, some paint, but not the entire house. Nothing that costs over $5,000. And it will have a ton of closet space, which will be nice.

I'll continue to keep you up to date on all of my financial workings, hopefully in a little more detail than I have been. But in the meantime, remember that the key to financial success, to working toward the "big closet" if you will, is to keep costs low, keep returns high, and keep your nose to the grindstone.

March 16, 2009

Building Wealth | Can Anyone Start a Hedge Fund?

As the economy gets worse and worse, and it appears as though much of it is tied to the banking industry, whether through bad real estate loans, poor management of funds, or out and out fraud (i.e. Bernie Madoff), I recently wondered if just anyone can start a bank, financial institution, or hedge fund.

When I googled how to start a hedge fund I got a wide variety of answers. I must admit, I know little to nothing about hedge funds, except they are notorious for making the creators of the fund and those allowed to buy into the fund tremendous amounts of money (except recently). If what I have heard is true, hedge funds are very hard to get into, take a lot of money to get started, don't necessarily have a lot of risk associated with them, and pay out handsomely. That is a combination I think anyone would go for, if you had the money.

I guess I might want to figure out what a hedge fund is before I figure out if I can start one. It appears that hedge funds are very similar to other investment vehicles, like mutual funds, investment companies, etc. Unlike mutual funds, however, hedge funds aren't registered with the government, and, like I thought, inclusion in the club is by invitation only (hedge funds are not traded publicly like stocks). Also, hedge funds can have all sorts of fun stuff in them, including: fixed income securities; currencies; exchange traded futures; over-the-counter derivatives; futures contracts; commodity options; and other non-securities investments. It appears that hedge funds are aptly named - the money put together in the fund is used as an investment tool to "hedge" against large swings in the market.

Knowing what I now know about hedge funds, I don't think I'm capable enough to participate in one, much less create one. I think I'll just have to stick with my mutual funds, individual stocks, and bonds. Although they aren't as lucrative, they don't take as much cash up front to get started, which means I can participate today.