I need some sage advice from the finance guru's of TUSCL. I max out my 410(k) and IRA every calendar year. Both are Roth accounts. I have been putting the overflow in a (1.) CMA account to trade stocks and ETF's, and (2.) Goldman Sachs savings account that gives me 1.3% interest. Are there any better options for my overflow? Would investing in land or real estate be a good way to diversify?
Warren Buffet always tells people who ask to put their money in an S&P 500 index fund, then don’t touch it. You should earn 8-10% over the long haul, which is difficult to beat.
If you buy rental property, heavily leverage it, and manage it yourself, you might do better if RE keeps appreciating. Of course, you can go all in betting on red in Vegas and double your money, or lose it. Plus, you need to respond to 3am calls about water leaks and grease fires.
I’d never keep more than 18 months living expenses in any savings account
Your choices are good but remember real estate is not liquid if you need that money it can take a while to liquidate. At the present time the best investment vehicles are an ETF, either S&P 500 or the DJIA trading on the NYSE its easy to liquidate and has been quite profitable for the last few years. These two along with the NASDAQ ETF trading as QQQ are the most widely held diversified assets popular right now.
I don't know how much time or money you have and i'm no guru, but no one knows as much as they think they do; even the "experts" are way off sometimes.
IMO, if you have time on your side or even if you don't, indexed equity funds are generally very safe (much less risk than regular mutual funds), but have more upside than bonds but not the tax benefits of long term municipal bonds.
If you have a lot of capital and some time, you can't do better than real estate. I would give that "advice" to every stripper that does very well and is disciplined enough to save/invest the vast majority of her income. Real estate is still generally undervalued (pretty far from a bubble at least), and there are still a lot of foreclosed properties out there. Put a lot of money down, try to get a 15 year mortgage or less, rent them out, starting with one or two at a time. Try to pay off additional principal as soon as you can and any rents you get from them will go mostly to your pocket minus taxes and utilities, association dues. In the meantime you have an appreciating asset on a very finite resource (land) that will be worth 2-4 times it's present value by the time you "retire" that can be liquidated or rolled over tax free into a more expensive but undervalued property. It's hard to find good renters though and sometimes it could be worth your time to hire a landlord, but it's not that hard to do yourself at least when you start out.
Now if i could just stay away from the clubs so i had more money to invest...
Looks to me like you're in a good place. The only suggestion I might add would be to put some into tax exempt bonds, either individual positions in bond(s), or via mutual fund.
Rentals are good if you can get them in your 30s to early 40s. It takes time to pay down the mortgages... But once you own them free and clear, they can pay you a return for life if they are in a nice part of the city. It is easier to shrug off the management fees if you do not want to administer tenants yourself and have a thick monthly cash flow.
I used to live in Manhattan Beach California. Some of the richest people in town were retired cops, teachers. and firemen who had been buying rental properties all their lives. My landlord was an LA County Sheriff who bought the 5 unit property for $177,000. It is now worth well over $5M. But, it took many years, and a lot of work, to get there. Plus, he had the wisdom to buy in MB. Nearby cities didn’t appreciate at this rate.
I don't know why you would want to pay taxes upfront on your retirement accounts. Max contributions for a Roth IRA is about 5500 and for traditional 401k it's 18500, which can be tax deductible. I would max out my 401K traditional of 18500 if it's tax deductible which would drop you to a lower taxing bracket. In 5 years you can have about 100K (traditional) compared to 30K (Roth). Some 401Ks allow loans up to 50K to buy a property as your primary residence. I have used this method twice and have two property's on 15 year mortgages. Even if I don't save enough in my retirement accounts I will have income coming in from 2 properties. Investing is risky in both stocks and real estate, I'm not saying you should do this because it's your money. But it's what I do. I know finance experts will tell you not to tap in to your retirement, but it depends on timing and if you can take the L.
Roth works out much better for investors in their 20s and 30s. It’s not even close. I’ve run the numbers.
One thousand dollars invested at 25 should grow to $16,000 at 65. Would you rather avoid taxes on $1,000 or $16,000 ?
Yes, there is also a matter of time value of money for taxes paid, but it’s still not close.
As the resident expert in this topic, I would recommend that you keep doing what you're currently doing, but more of it.
If you're overflow is going into equities and an interest bearing account, keep doing it because you've maxed out your Roth's allowing you to go to the club as often as you like.
By the way, anything more than your primary residence is a crap shot for in eating in real estate. Sometimes buying housing as an investment can be too costly to maintain, and it can be more of a head ache than what it's worth, imo.
I agree it's a crap shot, real estate and stocks. Look at Enron and the housing crash in 07-08. Corporations always try to minimize their tax bill, and that's why I try to pay the minimal amount of taxes. I'm salty.nutz incorporated.
I also doing carry more mortgages that I won't be able to pay without a tenant. If i pay taxes up front I'm giving the IRS money and who knows if I will live that long. Also, my dick probably won't get as hard then, so I want my money now.
I bought my first home in Dallas in the mid 80s. I sold it several years later for half what I paid for it. Shit happens. Plug the “shit happens” variable into any investment model you use. It’s not all roses and unicorns.
True, there are many scary stories about what deadbeat, careless, druggie tenants can do to a rental property. Risks are real and that is why I handle good tenants with quick turnaround when they bring up a repair. Most of my tenants have been paying me for 4 or more years. They treat the properties like their own and send me thousands of dollars a month. Works fine by me!
Two of mark94's posts drives home the adage that past performance doesn't guarantee future results, as his Dallas experience was almost the total opposite of his MB landlords experience.
I'm guessing the landlord sheriff bought the MB property somewhere in the 1975 to 1977 time frame. I'm further guessing that he could have sold property at virtually any point between then and now and made a tidy profit. What do you think the odds are that somebody buying a property most anywhere between 2005 and 2007 could say the same thing ?
I don't know. I just like real estate because it provides cash flow unlike gold, but it's also a real tangible investment (land) which will only get more scarce and valuable.
But it want low risk and low headache, indexed equity funds is probably your best bet as their floor is 0% but their ceiling is around Long term muni bonds are too dependent on the current rates when you buy them.
^ Okay, with a little more research, the guaranteed minimum returns with indexed equities only seems to apply to annuities and cash value insurance. So it requires a longer commitment, but also provides tax deferral or even tax avoidance (with insurance).
^^^ Dirk there is no ceiling on index funds unless you're using an indexed annuity which will cap growth at a ceiling. This is why insurance companies can provide guarantees with an annuity because the insurance company gets to keep all profit north of 12%(In your example).
There is no free lunch. I would rather put money into income producing stocks and other equities. You dont have the hassle of managing risks other than market and business risk, which can be diversified away. It's hard to diversify away housing/tenant issues. The more houses you have the more headaches and repairs you'll receive.
IDK much about investing nor real-estate, but perhaps real-estate is good if one just flips them for a decent profit and not have the headache of having tenants or other costs associated w/ owning a property (taxes, insurance, etc).
IDK how good the flip-market is these days and it probably requires a decent amount of effort in finding the right properties and fixing them up, and still making a decent profit.
I just think you missing a strong income potential if you're only flipping the properties and not renting them out. Also, you don't need to put as much down to make as much money as the tenants are paying off the mortgage. And you don't have to sell as quickly and can sell when it's most convenient and profitable for you. Finally, it's easier to let someone living in the house to maintain it, then taking care of an empty neglected house remotely over a period of time, provided they don't trash it, but most people want to live in good conditions.
^ flipping gets you instant profit and liquidity which you can use towards your next flip - renting is longer term and entails extra-expenses (upkeep, taxes, insurance, etc) - I have not done either thus I don't have first-hand experience but the flip-model is more attractive to me personally and I've known folks that have done very-well flipping - there is also the risk w/ a rental that further down the line the area may not be in favor and the property not worth as much like in Mark94's case; although it seems like most properties in at least decent areas increase in value w/ time.
Better to marry someone who makes more than you do.
I had a rental in Manhattan Beach when I got out of school, @Mark94. Walking distance from the ocean. Bought a custom home in foreclosure in Dec 2009 which has been a headache, but a good investment (not in California).
Depends on when you want to retire. Stocks are over due for a cluster f*ck. Historically long bull market, irrational valuations not supported by fundamentals. If within 5 years of planned retirement, I would be hedging my bets. Otherwise, nothing wrong with low cost mutual funds/eft in a taxable account for extra investing.
@Papi
I don't want to get into a long debate over an already side-tracked discussion, but IMO it's more of an effort and headache to "fix" a property and then try to sell it immediately, then to say just buy a relatively new condo or townhouse (preferably foreclosed on) with mostly new fixtures and appliances (so less repairs) and let the association do almost all of the work (in terms of external maintenance) while the tenant (the hardest part of the equation to find) pays for all the costs and then some. Unlike the flip, i wouldn't have to sell to the first few bidders at whatever they or the market dictated and could just continue to collect income and wait for the property to increase in value as opposed to shouldering all the interest, insurance and taxes if i hold on longer for the flip. But even for me (only one property currently that seems to be working out with regards to quality tenants) this is mostly just armchair investing, so to each their own...
^ just one more addendum. If the housing market was to crash or decline again in the near future (yikes), i could still hold on until it recovers with the rental strategy (although my rents might have to go down a bit temporarily) as opposed to the flip where i would be screwed which did help in my favor.
As a kid, our family moved every year or two. I know what we paid for each and have looked at Zillow to see the current value. The current value ranges from under $200,000 to over $2M. It’s all about location, location, location. It also has to do with timing on the real estate cycle. Most didn’t appreciate more than 2% per year. One appreciated well over 5% for many years. That home was in a historic neighborhood that became very desirable.
For me, even if rent payments cover monthly expenses, the 2% appreciation isn’t worth the hassle.
Well once my property gets paid off hopefully in a few years, i'll have a small but steady kitty fund for SCing :) as well as a decent but growing nest egg. That's just a part of the plan anyway...
All of you people who favor real estate need to remember that liquidity is also important, with that being said I own some commercial properties and in the past have been involved in some residential properties as well. Even though the residential was profitable I would never buy other than my own home a residential property again , there are just too many problems and I no longer care to deal with them. As far as commercial properties are concerned you need a long time horizon and if you don’t have deep pockets you will probably run out of time before turning a real profit.
My situation is simple I own the building that my business is located in and rent out space in this building to many other businesses it is a quite a large property and I was positioned perfectly to buy it from my landlord a few years ago during the downturn of 2008-9. What it cost me in rent pays the mortgage easily and the other income generated covers taxes maintenance and creates a nice profitable second business that compliments my business.
I wish you guys well but there is no one investment vehicle that suits everyone. Smarter people than myself have lost money in most everything and that’s true, but if you don’t try you’ll never know so just keep trying hopefully it will work out well and you’ll be able to use the profits as a tool to enhance your happiness money alone is not going to make anyone happy
I will probably rent out my current home when I move out of it. But I do think I will invest more in REITs for passive income. My rental portfolio is large enough to generate a nice side income with minor oversight. But I do not want to be a full-time landlord.
I’m curious to see the tax reform details when they are finalized. Realtors are up in arms about it already. In Arizona, there are lots of second homes and residential rentals. Real estate investment depends heavily on favorable tax treatment. In fact, it’s claimed that 95% of taxpayers would not itemize, which undercuts the advantage of primary home ownership.
Last I heard the mortgage deduction would be capped at $500K, but only on new purchases. It would hurt real estate market in places like California where $1M buys a box house.
Here’s another possibility. The details will matter. Like, if REITs get caught up in this.
"On the corporate interest, the deduction is just going to go down to 70 percent. Companies that issue lots of debt would be losers there, like a Macy's. If you're a big debt issuer, you're not going to be able to deduct the full amount,"
I’d strongly recommend waiting for the tax plan to be finalized before making any large decisions about beginning investments.
The cap on property value interest deductions is one thing - and a cap on deductions for property taxes - may both hurt the market.
Real estate is generally a good investment - but if you are buying properties - it’s not like putting money in a mutual fund. It’s less liquid - and it requires work (to maintain the property and structure). If you aren’t a handyman - it can become either a pain in the ass - or it can become expensive to hire help.
Invest your money in yourself, put it into your own affairs and those of a circle of close associates. Resist this Reaganite temptation to become a financial speculator, one of the "investor class".
@SJG: Haven't you been following? I am going to be working on crypto-currencies next year. Just building up the close associates as you put it right now. Try and keep up with these discussions here, dumbass!
SJG one day: you should do blah, blah, blah,...
Me: yep exactly what I'll be doing
SJG next: I don't care what you are doing
But I guess your contradictory thoughts/statements never bothered you before so why should they now>
Will definitely be doing more good for the world than your faggity church which is nothing but a transparent ploy to get no-mind to worship you and for you to finally get sex without having to pay.
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If you buy rental property, heavily leverage it, and manage it yourself, you might do better if RE keeps appreciating. Of course, you can go all in betting on red in Vegas and double your money, or lose it. Plus, you need to respond to 3am calls about water leaks and grease fires.
If you are younger - you can handle more risk - as you have more years to recover before retirement.
If you are 5 or so years from retirement - then you might want to stay with something risk averse - with a more fixed return (usually lower).
Your choices are good but remember real estate is not liquid if you need that money it can take a while to liquidate. At the present time the best investment vehicles are an ETF, either S&P 500 or the DJIA trading on the NYSE its easy to liquidate and has been quite profitable for the last few years. These two along with the NASDAQ ETF trading as QQQ are the most widely held diversified assets popular right now.
"Sinclair's Cabaret"
IMO, if you have time on your side or even if you don't, indexed equity funds are generally very safe (much less risk than regular mutual funds), but have more upside than bonds but not the tax benefits of long term municipal bonds.
If you have a lot of capital and some time, you can't do better than real estate. I would give that "advice" to every stripper that does very well and is disciplined enough to save/invest the vast majority of her income. Real estate is still generally undervalued (pretty far from a bubble at least), and there are still a lot of foreclosed properties out there. Put a lot of money down, try to get a 15 year mortgage or less, rent them out, starting with one or two at a time. Try to pay off additional principal as soon as you can and any rents you get from them will go mostly to your pocket minus taxes and utilities, association dues. In the meantime you have an appreciating asset on a very finite resource (land) that will be worth 2-4 times it's present value by the time you "retire" that can be liquidated or rolled over tax free into a more expensive but undervalued property. It's hard to find good renters though and sometimes it could be worth your time to hire a landlord, but it's not that hard to do yourself at least when you start out.
Now if i could just stay away from the clubs so i had more money to invest...
One thousand dollars invested at 25 should grow to $16,000 at 65. Would you rather avoid taxes on $1,000 or $16,000 ?
Yes, there is also a matter of time value of money for taxes paid, but it’s still not close.
If you're overflow is going into equities and an interest bearing account, keep doing it because you've maxed out your Roth's allowing you to go to the club as often as you like.
I also doing carry more mortgages that I won't be able to pay without a tenant. If i pay taxes up front I'm giving the IRS money and who knows if I will live that long. Also, my dick probably won't get as hard then, so I want my money now.
I'm guessing the landlord sheriff bought the MB property somewhere in the 1975 to 1977 time frame. I'm further guessing that he could have sold property at virtually any point between then and now and made a tidy profit. What do you think the odds are that somebody buying a property most anywhere between 2005 and 2007 could say the same thing ?
The risk is way higher with housing/real estate especially if you're leveraged.
But it want low risk and low headache, indexed equity funds is probably your best bet as their floor is 0% but their ceiling is around Long term muni bonds are too dependent on the current rates when you buy them.
the ceiling for EI funds are usually about 12% depending on the fund...
There is no free lunch. I would rather put money into income producing stocks and other equities. You dont have the hassle of managing risks other than market and business risk, which can be diversified away. It's hard to diversify away housing/tenant issues. The more houses you have the more headaches and repairs you'll receive.
IDK how good the flip-market is these days and it probably requires a decent amount of effort in finding the right properties and fixing them up, and still making a decent profit.
There's the added bonus of meeting prospective tenants at my property close to the college. So far I've only rented to female students :)
I had a rental in Manhattan Beach when I got out of school, @Mark94. Walking distance from the ocean. Bought a custom home in foreclosure in Dec 2009 which has been a headache, but a good investment (not in California).
I don't want to get into a long debate over an already side-tracked discussion, but IMO it's more of an effort and headache to "fix" a property and then try to sell it immediately, then to say just buy a relatively new condo or townhouse (preferably foreclosed on) with mostly new fixtures and appliances (so less repairs) and let the association do almost all of the work (in terms of external maintenance) while the tenant (the hardest part of the equation to find) pays for all the costs and then some. Unlike the flip, i wouldn't have to sell to the first few bidders at whatever they or the market dictated and could just continue to collect income and wait for the property to increase in value as opposed to shouldering all the interest, insurance and taxes if i hold on longer for the flip. But even for me (only one property currently that seems to be working out with regards to quality tenants) this is mostly just armchair investing, so to each their own...
1. Graduate High School
2. Marry and stay married
3. Don’t get arrested
On average, someone who does these things is much more successful than someone who doesn’t.
Stay out of trouble and stay employed and stay grounded. Who would have thought?
For me, even if rent payments cover monthly expenses, the 2% appreciation isn’t worth the hassle.
My situation is simple I own the building that my business is located in and rent out space in this building to many other businesses it is a quite a large property and I was positioned perfectly to buy it from my landlord a few years ago during the downturn of 2008-9. What it cost me in rent pays the mortgage easily and the other income generated covers taxes maintenance and creates a nice profitable second business that compliments my business.
I wish you guys well but there is no one investment vehicle that suits everyone. Smarter people than myself have lost money in most everything and that’s true, but if you don’t try you’ll never know so just keep trying hopefully it will work out well and you’ll be able to use the profits as a tool to enhance your happiness money alone is not going to make anyone happy
"On the corporate interest, the deduction is just going to go down to 70 percent. Companies that issue lots of debt would be losers there, like a Macy's. If you're a big debt issuer, you're not going to be able to deduct the full amount,"
True, but w/o $$$ the strippers won't love us and that would def make most of us unhappy
The cap on property value interest deductions is one thing - and a cap on deductions for property taxes - may both hurt the market.
Real estate is generally a good investment - but if you are buying properties - it’s not like putting money in a mutual fund. It’s less liquid - and it requires work (to maintain the property and structure). If you aren’t a handyman - it can become either a pain in the ass - or it can become expensive to hire help.
http://acurrie.me/wp-content/uploads/201…
Invest your money in yourself, put it into your own affairs and those of a circle of close associates. Resist this Reaganite temptation to become a financial speculator, one of the "investor class".
SJG
SJG
SJG one day: you should do blah, blah, blah,...
Me: yep exactly what I'll be doing
SJG next: I don't care what you are doing
But I guess your contradictory thoughts/statements never bothered you before so why should they now>
Will definitely be doing more good for the world than your faggity church which is nothing but a transparent ploy to get no-mind to worship you and for you to finally get sex without having to pay.