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Investing for Monthly Income

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ashdel13
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Investing for Monthly Income  Reply with quote  

hi. i have a basic investing question.

my wife's family owns 2 nyc taxi medallions, held in a corporation. together the medallions are worth about $1.9 million. we lease the medallions to a taxi company for $5600 a month, which is the going rate. there is a $545,000 loan against the company, which was primarily used to finance the second medallion years ago.

medallion owners traditionally use 3-year balloon loans, which my wife's family did. the balloon payment - the entire principal - comes due soon, so we will need to get a new loan.

my question: we have $300,000 that we're thinking of investing in the medallions when we get a new loan, knocking down the principal and getting a better interest rate. the monthly money from the taxi company that now goes to pay the loan will then come to us. after taxes and other expenses, we should clear about $3500 a month.

we want to have monthly income so we can live abroad and travel. we also want to knock down the principal on the loan. in 5 years or so, we'll probably want to buy a house. we may then have to take a loan against the medallions to do that. upside: we get to live as we want to and still have collateral when we return. downsides: we will be paying interest on that $300k mortgage, if we need to get one in 5 years. and when we reduce the principal on the $545,000 loan by investing our $300k, taxes on the corporation will most likely go up. (i'm right about that, aren't i - less debt to write off, higher taxes?)

so is investing the $300k in the medallions a good idea? i can't see any other way of getting good monthly income out of them, especially when living abroad. suggestions? alternatives? thanks.
Post Thu Apr 07, 2011 2:20 pm
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coaster
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Can that be refinanced for a longer term? Seems to me your major risk is refinancing frequently, thus being subject to increasing interest rates, which seems likely.
Post Fri Apr 08, 2011 5:10 am
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ashdel13
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thanks for the note. we're looking into a 5-year or 10-year balloon. the amount of money we get on the lease should rise year by year (as it has done historically for the last few decades), so even if rates go up, we'll only be refinancing $245k and the rise in income should cover it.
Post Fri Apr 08, 2011 7:51 am
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eastmn
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Interesting article Wink
Post Sat Apr 09, 2011 3:45 am
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emmiculture
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I dont know but i agree with the above person, the major concern seems to be refinancing frequently.
Post Mon Apr 11, 2011 11:23 am
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pobox2001
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In my opinion, I'd pay down the debt with the $300k - and more if I could (either up front or over the term of the new loan). That way, more (and eventually all once the loans were paid in full) of the monthly income is mine! And no more worries about getting more loans, interest rate changes, etc.

Would it "cost" you more in taxes as you'd lose an interest write off? Yes, but why pay $1 in interest to save $0.30 in taxes? I'd rather pay the $0.30 in taxes and keep the other $0.70 for me (instead of giving it to the bank).

If youd like, you take the higher monthly income and save for a house, or to buy more medallions. Your choice....but how great would it be to have that freedom.
Post Tue Apr 12, 2011 11:01 am
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oldguy
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quote:
so is investing the $300k in the medallions a good idea?


I would not. You are only getting a 3.5% return on the medallians. I would diversify and invest the $300,000 into the appreciating assets - stocks/real estate. The general broad stock market index (SP500) has averaged about 11%/yr for over 30 yrs. At that rate the $300k would grow to $2,420,000 in 20 yrs. At that point you would have options - you could pay off the medalians, buy houses, etc.
Point - you can put the $300k to higher & better use than locking it into the medallians.
Post Tue Apr 12, 2011 1:16 pm
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ashdel13
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thanks for the replies. in response to oldguy, for the last decade the stock market has been returning about 4%, not 11%. when you factor in inflation, you're barely making anything. and it might be more important to us to live off the money than to take the chance to have a higher payoff in 20 years. the drawback to stocks is that you can't touch the money in those 2 decades.

still thinking this over, any other thoughts appreciated.
Post Tue Apr 12, 2011 6:21 pm
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jimmyjhonson
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You can go for mutual funds, rather than stock market first. Income is dependent on how much to invest in the period. About 10-12% u can get a refund.
Post Wed Apr 20, 2011 1:47 pm
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terrancebrandt
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That is very interesting. It seems to get a little complicated. Well, don't all money-talks get much complications when money and interests rates and loans are put altogether.
Post Wed Apr 20, 2011 4:12 pm
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jennypaul
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Investment is not an easy thing; you must be mentally prepared for any kind of investment. Before investing your hard earned money you must analyze everything, like returns, risk and rewards etc. There are many people who are making huge money with good investment. Proper investment can really generate huge money.
Post Mon Apr 25, 2011 6:46 am
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jeffreymint
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Investment can be very scary and risky at the same time. But if you would really like to have a good business for you in the long run, it is worth the risk.

eQuote Rocks!
Post Thu May 05, 2011 2:27 pm
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jennypaul
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It is said that "high risk and high profit, if someone wants to gain high profit then he must take high risk as well. It is impossible to gain high profit without taking any risk, however you can control you loss so that you can avoid investment .risk
Post Mon May 09, 2011 11:19 am
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