|
|
Joined: Dec 2008
Posts: 8,317
Campfire Outfitter
|
Campfire Outfitter
Joined: Dec 2008
Posts: 8,317 |
The more I read about Dave Ramsey the less credibility I think he is. SOME of his advice is common sense and good. SOME is good for some people and not for others. He was a complete utter failure in finances and ended up in debt up to his eyeballs because of bad choices. His advice is geared toward people heading down that path, or already where he was. People who make good decisions from the beginning might find another path works better.
A home isn't as great a financial asset as many believe. My mom and dad paid $25K for the lot and to have a home built in 1972. After they passed it sold for $103K 41 years later in 2013 for a $78K profit. But in those 41 years they paid insurance and property taxes every year. It was painted twice, re-roofed twice, the HVAC system replaced twice, water heater twice, kitchen appliances replaced, new floors and the driveway was repaved once and finally broken up and new concrete installed. For whatever reason the septic system lasted about a year after we sold it and the new owners replaced it.
When you back out the money spent for taxes, insurance, and upkeep there was very little profit after 41 years. Probably still a better financial outcome than renting for 41 years. My parents had two homes at retirement, one in town and a smaller one at the beach. Both homes were long paid for, they recently sold the home in town they bought in 1976 tax free. They just didn't need a large home in town anymore. Now they live at the beach, and will rent or buy a small place in AZ for the winters. All the money they put into the house came back to them plus some. A much better RTOI than renting for 40 years and having nothing.
"Life is tough, even tougher if your stupid"
John Wayne
|
|
|
|
|
Joined: Feb 2010
Posts: 16,105 Likes: 2
Campfire Ranger
|
Campfire Ranger
Joined: Feb 2010
Posts: 16,105 Likes: 2 |
The more I read about Dave Ramsey the less credibility I think he is. SOME of his advice is common sense and good. SOME is good for some people and not for others. He was a complete utter failure in finances and ended up in debt up to his eyeballs because of bad choices. His advice is geared toward people heading down that path, or already where he was. People who make good decisions from the beginning might find another path works better.
A home isn't as great a financial asset as many believe. My mom and dad paid $25K for the lot and to have a home built in 1972. After they passed it sold for $103K 41 years later in 2013 for a $78K profit. But in those 41 years they paid insurance and property taxes every year. It was painted twice, re-roofed twice, the HVAC system replaced twice, water heater twice, kitchen appliances replaced, new floors and the driveway was repaved once and finally broken up and new concrete installed. For whatever reason the septic system lasted about a year after we sold it and the new owners replaced it.
When you back out the money spent for taxes, insurance, and upkeep there was very little profit after 41 years. How much rent would they have otherwise paid in those 42 years? A person has to hang his hat somewhere.
|
|
|
|
|
Joined: Nov 2004
Posts: 7,114 Likes: 1
Campfire Tracker
|
|
Campfire Tracker
Joined: Nov 2004
Posts: 7,114 Likes: 1 |
The more I read about Dave Ramsey the less credibility I think he is. SOME of his advice is common sense and good. SOME is good for some people and not for others. He was a complete utter failure in finances and ended up in debt up to his eyeballs because of bad choices. His advice is geared toward people heading down that path, or already where he was. People who make good decisions from the beginning might find another path works better.
A home isn't as great a financial asset as many believe. My mom and dad paid $25K for the lot and to have a home built in 1972. After they passed it sold for $103K 41 years later in 2013 for a $78K profit. But in those 41 years they paid insurance and property taxes every year. It was painted twice, re-roofed twice, the HVAC system replaced twice, water heater twice, kitchen appliances replaced, new floors and the driveway was repaved once and finally broken up and new concrete installed. For whatever reason the septic system lasted about a year after we sold it and the new owners replaced it.
When you back out the money spent for taxes, insurance, and upkeep there was very little profit after 41 years. that is because its georgia, my first house appreciated 17k in 4 years. that was net after fees and closing. my payment was $450 a month, (25 years ago) while it wasn't free to live there it wasnt that far off. A neighbor down the street from me, I looked up his house and after 9 years it appreciated 40k more than the sum total of the piti payments. principle, interest, taxes insurance. So he got paid 40k to live there for 9 years time. in 20 years most properties in my area have appreciated 130-150%. I think this is why dave's advice is so universal, The problem is so many real estate markets are so stagnant and don't perform. This is something you need to study very well if you are interested in real estate investing. The area must have a draw to it. so many places in the south and back east have nothing going for them as an area to attract people to move there. I think many of dave's biggest fans live in the bible belt. which coincidentally has some of the crappiest performing real estate out there. probably has something to do with the general advice he gives.
|
|
|
|
|
Joined: Nov 2004
Posts: 7,114 Likes: 1
Campfire Tracker
|
|
Campfire Tracker
Joined: Nov 2004
Posts: 7,114 Likes: 1 |
Lots of good points here. Ramsey has good ideas for people just getting started. He mentioned getting an financial advisor. I had there and they were just awful. The time came when I knew the last one was just terrible. He sold me Non Traded REITS and loaded Franklin funds. It has been 5 yrs now and the Non Traded REIT is stuck there , not able to sell it and went from 25 per share to 17 and 7% dividends to 4%. Five years and still under water. The Franklin funds were sold but I track them and I would likely be up 5%?? after 5yrs. I stayed with him for a little over a year and was gone. Did not even bother to return his call and to make matters worse my sone worked there and they fired him a while later. For what it's worth , there is a Pimco bond fund I have been happy with for about a year. The ticker is PONAX. It pays monthly and comes to a bit over 5% in dividends per year. The share price stays almost the same but goes up and down a bit. I put my temporary money in it like future tax money I saved for property taxes ETC and in a ROTH. I low 5% is not much but it only lost 10% in the crash 10 yrs ago and went back up pretty good. I am way ahead doing my own investments . Here is the catch. I could get rentals and do well. I have been a carpenter for 38 yrs. I could go work on properties for sweat equity , or I could stay at work for $45-50 per hr. I put in two bids on 2 rentals 6 yrs ago. I would have done better had I go those two houses. I went with stocks and some bonds. My income is about $18,000 per yr. Not bad, and almost completely tax free with ROTHS, 401's and qualified dividends that are low taxed, with my Municipal bonds that are tax free on the divies. I have 38 investments from $2,000 in Owens Corning to $100,000 in British Petroleum and everything else in between. Here is one catch though. I studied investing for about 5 yrs now , almost every night . I learned that it is very hard to beat a handful of index funds and a few bond funds. I make almost exactly what the market does but I do it with almost half the volatility. A good way to start is index funds if you are young, but not if you are over 50 or so cause the market is very high, but might go a lot higher. Safe dividend stocks like the Dividend Kings are a good bet. AT&T, Exxon Mobil, Walgreens, AO Smith, Kroger Foods are good companies that have raised their divies an awful long time, even through the crash. I hope to get to about $25,000 in divies in 4 yrs when I turn 60. I should get $1,700 form S.S. but lets say $1,500 and hope for $700 from my Carpenters pension. This gets me $50,000 a yr. I think I can do that forever cause I made only $40,000 last year and saved $18,000. I am cheap , love life on the cheap. Get a kick out of guys with $50,000 boats. My boat is 29 yrs old as of Saturday and I catch more walleyes that almost all of them hot shots. Also, I have no debt and house has been payed for 10 yrs. The Lord with contentment is great gain. very insightful post, your tip on the pimco fund isn't a bad one. 5% isn't a bad gig if you can liquidate it easily. This is an interesting thread. I think it shows different people view retirement and what is enough totally differently. I think this depends on where you live and also what standard of living you want. There is no right or wrong answer. Its you and your own happiness. For me enough is a check for $20k/month in passive income. I don't see how you are going to accomplish that in stocks and "good growth stock mutual funds" The dave ramsey miliionaires aren't coming to the table with that level of passive income. I would also ask that if anyone knows someone that has built a portfolio with stocks that reaches 20k/month and didn't use inheritance or some lucky lump sum to get there I would be highly interested in talking to them. I personally think those people don't exist. I think the dave ramsey millionaires are people that have a paid for house, have 120k in a 401k, colllect $1500 a month in social security. and collect a pension, which probably totals 5-6k in income /month and they are calling themselves retired with that. The problem with dave's strategy on real estate is that its kinda a mediocre investment if you don't use financing to accelerate it. Lets say you have 300k in cash to buy a rental house. Your investment is only appreciating 3% a year, That only keeps pace with inflation. So your cash nest egg investment most likely never gains in net value relative to inflation. Instead if you buy 3, 300k houses. you are getting appreciation on 900k in assets. so instead of 9k/year in appreciation. you are going to be getting 27k in appreciation on the 300k investment, that is 9% right there!!! even if you broke even on rents. Also the other beauty of real estate is you are able to keep rolling up and never pay taxes on the appreciated value. AND there are other things you can do with depreciation, google cost segregation study if you are bored. with stocks you are paying taxes on the gains, with real estate you are deferring those taxes if you do it correctly. with stocks you have no leveraged appreciation. Also in most cases when you invest in the stock market you are depending on appreciation of the stock, Depending on a value increase IMO is gambling. If done correctly you invest for cash flow with real estate. That way you don't depend on appreciation, instead that is the giant cherry on top when you go to sell. Less than 3% of retirees have 1 million or more. You said you need to have 20k a month, and that would be 6 million dollars in a liquid account. General rule is 10-14 times income in retirement, so I guess you make 500-600K per year? how to I plan to reach that? 7 million in gross real estate holdings, 2 million equity posistion, 12% cash on cash return on my 2 million. Its not a cake walk to pull that off but if you study it, are careful its doable even in the insanely priced real estate market I live in. Its going to take me about 10 years to get to this point. the 401k people will never hang with this. Dave ramsey has no answer for this level of income.
|
|
|
|
|
Joined: Aug 2009
Posts: 3,026
Campfire Tracker
|
|
Campfire Tracker
Joined: Aug 2009
Posts: 3,026 |
Irfubar........sorry about that.....I don't take you for being someone who is arrogant.....pushed post to fast.
I was ready to go all mch there for a minute....Bob
|
|
|
|
|
Joined: Dec 2003
Posts: 2,244
Campfire Regular
|
|
Campfire Regular
Joined: Dec 2003
Posts: 2,244 |
Yeah, but you probably missed out on the jacked-up F-250, toyhauler, and wake-board boat in your 30’s. 😀 Sounds like you had/have your priorities straight to me. Congratulations.
I guess I am different than most:
Was let go at 50 and used severance to pay off my mortgage.
I have invested the max in my 401k for years. Guided myself, primarily stocks and mutual funds.
My securities portfolio is now 20+ times my base salary.
Next birthday I will be 70. I like and am allowed to work. Retirement is not something I look forward to doing. I will continue as long as my employer allows and the health of my wife and I are blessed to allow.
My wife of 49 years has always been a stay at home mom and grandmother.
This year I re-worked my estate plan and turned over management to professionals. I plan to pay for grandchildren’s education and give them a start on life.
Each of us is differently positioned. I thank God’s goodness that I am where I am today. I am blessed, know it and appreciate it. Glory to God.
"There's no schadenfreude like Hillary Clinton schadenfreude."
- Tamara Keel
|
|
|
|
|
Joined: Aug 2009
Posts: 3,026
Campfire Tracker
|
|
Campfire Tracker
Joined: Aug 2009
Posts: 3,026 |
I am in the camp that does not consider your home an investment to build wealth... maybe for your heirs?
You need a home to live in. Now if you plan to downsize or move to a much cheaper locale that could work. Maybe a reverse mortgage? Otherwise don't lie to yourself......
if you are tied to your home and can never see yourself moving......I would agree with you.....but for those that don't get emotionally attached to their house......different story......bob It's got nothing to do with emotional attachment. It's got to do with "moving". It's a PITA and gets worse every year that you get older. You can't do it all like when you were younger. No but there sure are people that will do it for you if you pay them. Not too hard to figure out. Plus do it while you are young.....Bob
|
|
|
|
|
Joined: Oct 2006
Posts: 4,213
Campfire Tracker
|
|
Campfire Tracker
Joined: Oct 2006
Posts: 4,213 |
Good thread. Great reading.
I have not yet seen Capital Gains Tax mentioned.
For those who have had their rentals value increase nicely over time it seems like there are only 2 options for selling 1) take a big tax hit, or 2) re-invest in a similar property.
Anyone here dealt with that issue?
|
|
|
|
|
Joined: Dec 2008
Posts: 8,317
Campfire Outfitter
|
|
Campfire Outfitter
Joined: Dec 2008
Posts: 8,317 |
Good thread. Great reading.
I have not yet seen Capital Gains Tax mentioned.
For those who have had their rentals value increase nicely over time it seems like there are only 2 options for selling 1) take a big tax hit, or 2) re-invest in a similar property.
Anyone here dealt with that issue? Long term capitol gains is 15% federal, plus state. So that's probably around 22% of your profits for most people. Two possible ways you might deal with capitol gains on properties. 1. move into the property for 24 months withing 5 years of selling it. 2. Setup a self directed IRA and LLC to buy the properties. When you sell money stays in the IRA, taxes get deferred until you pull the money out at retirement, hopefully at a lower rate. I'm not a tax professional, so don't listen to my advice and talk to tax professional.
"Life is tough, even tougher if your stupid"
John Wayne
|
|
|
|
|
Joined: Jan 2002
Posts: 12,879 Likes: 5
Campfire Outfitter
|
|
Campfire Outfitter
Joined: Jan 2002
Posts: 12,879 Likes: 5 |
Bottom line?
Dave Ramsey has a plan.
95% or more of the average Joe's out there don't.
Therefore, Dave Ramsey's plan wins 95% or more of the time.
You can sit and split red pu$$1 hairs arguing if it's better to save and invest in real estate, or REIT's or dividend stocks, or health care stocks, or index funds, or ETF's, but it is all whining about how many angels can dance on the head of a pin.
Dave Ramsey's plan is simple:
1) Be deliberate in your career. Don't get stuck in a dead end low paying job. Make some money.
2) Be deliberate with your money. Spend some, save some, give some. Devise a plan and stick to it.
That's it, really. You can go all Pharisee on the details and fuss about all kind of stuff, but if you do 1) and 2), things will be just fine.
Sic Semper Tyrannis
|
|
|
|
|
Joined: Feb 2010
Posts: 16,105 Likes: 2
Campfire Ranger
|
|
Campfire Ranger
Joined: Feb 2010
Posts: 16,105 Likes: 2 |
Good thread. Great reading.
I have not yet seen Capital Gains Tax mentioned.
For those who have had their rentals value increase nicely over time it seems like there are only 2 options for selling 1) take a big tax hit, or 2) re-invest in a similar property.
Anyone here dealt with that issue? With mutual funds, I've learned to avoid most of it by purchasing low turnover funds like index funds. Management fees tend to be lower on these as well. Although I own a bit, I'm not a real estate trading guy.
|
|
|
|
|
Joined: Feb 2010
Posts: 16,105 Likes: 2
Campfire Ranger
|
|
Campfire Ranger
Joined: Feb 2010
Posts: 16,105 Likes: 2 |
Bottom line?
Dave Ramsey has a plan.
95% or more of the average Joe's out there don't.
Therefore, Dave Ramsey's plan wins 95% or more of the time.
You can sit and split red pu$$1 hairs arguing if it's better to save and invest in real estate, or REIT's or dividend stocks, or health care stocks, or index funds, or ETF's, but it is all whining about how many angels can dance on the head of a pin.
Dave Ramsey's plan is simple:
1) Be deliberate in your career. Don't get stuck in a dead end low paying job. Make some money.
2) Be deliberate with your money. Spend some, save some, give some. Devise a plan and stick to it.
That's it, really. You can go all Pharisee on the details and fuss about all kind of stuff, but if you do 1) and 2), things will be just fine. You stated Dave's plan very well.
|
|
|
|
|
Joined: Jun 2012
Posts: 4,774
Campfire Tracker
|
|
Campfire Tracker
Joined: Jun 2012
Posts: 4,774 |
Bottom line?
Dave Ramsey has a plan.
95% or more of the average Joe's out there don't.
Therefore, Dave Ramsey's plan wins 95% or more of the time.
You can sit and split red pu$$1 hairs arguing if it's better to save and invest in real estate, or REIT's or dividend stocks, or health care stocks, or index funds, or ETF's, but it is all whining about how many angels can dance on the head of a pin.
Dave Ramsey's plan is simple:
1) Be deliberate in your career. Don't get stuck in a dead end low paying job. Make some money.
2) Be deliberate with your money. Spend some, save some, give some. Devise a plan and stick to it.
That's it, really. You can go all Pharisee on the details and fuss about all kind of stuff, but if you do 1) and 2), things will be just fine. You stated Dave's plan very well. He comes across as crabby as Dave too, which adds flavor.
|
|
|
|
|
Joined: Dec 2007
Posts: 3,474 Likes: 1
Campfire Tracker
|
|
Campfire Tracker
Joined: Dec 2007
Posts: 3,474 Likes: 1 |
Lots of good points here. Ramsey has good ideas for people just getting started. He mentioned getting an financial advisor. I had there and they were just awful. The time came when I knew the last one was just terrible. He sold me Non Traded REITS and loaded Franklin funds. It has been 5 yrs now and the Non Traded REIT is stuck there , not able to sell it and went from 25 per share to 17 and 7% dividends to 4%. Five years and still under water. The Franklin funds were sold but I track them and I would likely be up 5%?? after 5yrs. I stayed with him for a little over a year and was gone. Did not even bother to return his call and to make matters worse my sone worked there and they fired him a while later. For what it's worth , there is a Pimco bond fund I have been happy with for about a year. The ticker is PONAX. It pays monthly and comes to a bit over 5% in dividends per year. The share price stays almost the same but goes up and down a bit. I put my temporary money in it like future tax money I saved for property taxes ETC and in a ROTH. I low 5% is not much but it only lost 10% in the crash 10 yrs ago and went back up pretty good. I am way ahead doing my own investments . Here is the catch. I could get rentals and do well. I have been a carpenter for 38 yrs. I could go work on properties for sweat equity , or I could stay at work for $45-50 per hr. I put in two bids on 2 rentals 6 yrs ago. I would have done better had I go those two houses. I went with stocks and some bonds. My income is about $18,000 per yr. Not bad, and almost completely tax free with ROTHS, 401's and qualified dividends that are low taxed, with my Municipal bonds that are tax free on the divies. I have 38 investments from $2,000 in Owens Corning to $100,000 in British Petroleum and everything else in between. Here is one catch though. I studied investing for about 5 yrs now , almost every night . I learned that it is very hard to beat a handful of index funds and a few bond funds. I make almost exactly what the market does but I do it with almost half the volatility. A good way to start is index funds if you are young, but not if you are over 50 or so cause the market is very high, but might go a lot higher. Safe dividend stocks like the Dividend Kings are a good bet. AT&T, Exxon Mobil, Walgreens, AO Smith, Kroger Foods are good companies that have raised their divies an awful long time, even through the crash. I hope to get to about $25,000 in divies in 4 yrs when I turn 60. I should get $1,700 form S.S. but lets say $1,500 and hope for $700 from my Carpenters pension. This gets me $50,000 a yr. I think I can do that forever cause I made only $40,000 last year and saved $18,000. I am cheap , love life on the cheap. Get a kick out of guys with $50,000 boats. My boat is 29 yrs old as of Saturday and I catch more walleyes that almost all of them hot shots. Also, I have no debt and house has been payed for 10 yrs. The Lord with contentment is great gain. very insightful post, your tip on the pimco fund isn't a bad one. 5% isn't a bad gig if you can liquidate it easily. This is an interesting thread. I think it shows different people view retirement and what is enough totally differently. I think this depends on where you live and also what standard of living you want. There is no right or wrong answer. Its you and your own happiness. For me enough is a check for $20k/month in passive income. I don't see how you are going to accomplish that in stocks and "good growth stock mutual funds" The dave ramsey miliionaires aren't coming to the table with that level of passive income. I would also ask that if anyone knows someone that has built a portfolio with stocks that reaches 20k/month and didn't use inheritance or some lucky lump sum to get there I would be highly interested in talking to them. I personally think those people don't exist. I think the dave ramsey millionaires are people that have a paid for house, have 120k in a 401k, colllect $1500 a month in social security. and collect a pension, which probably totals 5-6k in income /month and they are calling themselves retired with that. The problem with dave's strategy on real estate is that its kinda a mediocre investment if you don't use financing to accelerate it. Lets say you have 300k in cash to buy a rental house. Your investment is only appreciating 3% a year, That only keeps pace with inflation. So your cash nest egg investment most likely never gains in net value relative to inflation. Instead if you buy 3, 300k houses. you are getting appreciation on 900k in assets. so instead of 9k/year in appreciation. you are going to be getting 27k in appreciation on the 300k investment, that is 9% right there!!! even if you broke even on rents. Also the other beauty of real estate is you are able to keep rolling up and never pay taxes on the appreciated value. AND there are other things you can do with depreciation, google cost segregation study if you are bored. with stocks you are paying taxes on the gains, with real estate you are deferring those taxes if you do it correctly. with stocks you have no leveraged appreciation. Also in most cases when you invest in the stock market you are depending on appreciation of the stock, Depending on a value increase IMO is gambling. If done correctly you invest for cash flow with real estate. That way you don't depend on appreciation, instead that is the giant cherry on top when you go to sell. You are describing the exact behavior that (in part) led to the financial crisis in 2008. People leveraging debt and making assumptions based on short term historical trends during an unprecedented time of low interest rates. There is a lot wrong with the assumptions you are making, but there is no way I can tell you it won't work out as you say. Your "accelerated financing" won't look so good if you get a sudden decrease in property values and/or increase in interest rates.
|
|
|
|
|
Joined: May 2011
Posts: 2,205
Campfire Regular
|
|
Campfire Regular
Joined: May 2011
Posts: 2,205 |
The problem with dave's strategy on real estate is that its kinda a mediocre investment if you don't use financing to accelerate it. Lets say you have 300k in cash to buy a rental house. Your investment is only appreciating 3% a year, That only keeps pace with inflation. So your cash nest egg investment most likely never gains in net value relative to inflation. Instead if you buy 3, 300k houses. you are getting appreciation on 900k in assets. so instead of 9k/year in appreciation. you are going to be getting 27k in appreciation on the 300k investment, that is 9% right there!!! even if you broke even on rents. So I guess I don't see how you go from having 300k in cash to buy a rental, to having enough cash to buy 3 300K houses with the same money.
Laws aren't preventative measures. In other words, more laws won't prevent gun crime from happening.
|
|
|
|
|
Joined: May 2013
Posts: 1,520
Campfire Regular
|
|
Campfire Regular
Joined: May 2013
Posts: 1,520 |
Good thread. Great reading.
I have not yet seen Capital Gains Tax mentioned.
For those who have had their rentals value increase nicely over time it seems like there are only 2 options for selling 1) take a big tax hit, or 2) re-invest in a similar property.
Anyone here dealt with that issue? Long term capitol gains is 15% federal, plus state. So that's probably around 22% of your profits for most people. Two possible ways you might deal with capitol gains on properties. 1. move into the property for 24 months withing 5 years of selling it. 2. Setup a self directed IRA and LLC to buy the properties. When you sell money stays in the IRA, taxes get deferred until you pull the money out at retirement, hopefully at a lower rate. I'm not a tax professional, so don't listen to my advice and talk to tax professional. I'm not an accountant either, but there's lots of things you can do beside a 1031 exchange to shelter gains from real estate. I don't think a residence should be anyone's primary investment, but I don't know that its ever a bad deal unless you buy way more house than you can afford. So much of appreciation is based on an area's population and job growth, the higher those two things are the higher the appreciation. If you're in an area with flat or negative population growth you're probalby going to do about the inflation rate, which is basically a forced savings account when you consider you would still be paying principle, insurance, taxes and maintenance indirectly through a land lord if you rented. If you're in a faster growing area (say Atlanta, Austin or Houston and you bought 25 years ago) you're going to do better on a house than you probably would in a stock market or other passive investment, particularly if you plan to downsize on retirement and can tax the money tax free
|
|
|
|
|
Joined: Aug 2009
Posts: 20,824
Campfire Ranger
|
|
Campfire Ranger
Joined: Aug 2009
Posts: 20,824 |
Irfubar........sorry about that.....I don't take you for being someone who is arrogant.....pushed post to fast.
I was ready to go all mch there for a minute....Bob I am glad you didn't go all MCH on me..... I had to hide in the bunker for a week after that....  I will try hard to keep my arrogance in check.... Oh, and the wife and I drove through Paradise Valley last week..... around Chico she asked if we were on the reservation? LMAO......... around the next bend million $ homes
Originally Posted by Judman
PS, if you think Trump is “good” you’re way stupider than I thought! Haha
Sorry, trump is a no tax payin pile of shiit.
|
|
|
|
|
Joined: Nov 2004
Posts: 7,114 Likes: 1
Campfire Tracker
|
|
Campfire Tracker
Joined: Nov 2004
Posts: 7,114 Likes: 1 |
Lots of good points here. Ramsey has good ideas for people just getting started. He mentioned getting an financial advisor. I had there and they were just awful. The time came when I knew the last one was just terrible. He sold me Non Traded REITS and loaded Franklin funds. It has been 5 yrs now and the Non Traded REIT is stuck there , not able to sell it and went from 25 per share to 17 and 7% dividends to 4%. Five years and still under water. The Franklin funds were sold but I track them and I would likely be up 5%?? after 5yrs. I stayed with him for a little over a year and was gone. Did not even bother to return his call and to make matters worse my sone worked there and they fired him a while later. For what it's worth , there is a Pimco bond fund I have been happy with for about a year. The ticker is PONAX. It pays monthly and comes to a bit over 5% in dividends per year. The share price stays almost the same but goes up and down a bit. I put my temporary money in it like future tax money I saved for property taxes ETC and in a ROTH. I low 5% is not much but it only lost 10% in the crash 10 yrs ago and went back up pretty good. I am way ahead doing my own investments . Here is the catch. I could get rentals and do well. I have been a carpenter for 38 yrs. I could go work on properties for sweat equity , or I could stay at work for $45-50 per hr. I put in two bids on 2 rentals 6 yrs ago. I would have done better had I go those two houses. I went with stocks and some bonds. My income is about $18,000 per yr. Not bad, and almost completely tax free with ROTHS, 401's and qualified dividends that are low taxed, with my Municipal bonds that are tax free on the divies. I have 38 investments from $2,000 in Owens Corning to $100,000 in British Petroleum and everything else in between. Here is one catch though. I studied investing for about 5 yrs now , almost every night . I learned that it is very hard to beat a handful of index funds and a few bond funds. I make almost exactly what the market does but I do it with almost half the volatility. A good way to start is index funds if you are young, but not if you are over 50 or so cause the market is very high, but might go a lot higher. Safe dividend stocks like the Dividend Kings are a good bet. AT&T, Exxon Mobil, Walgreens, AO Smith, Kroger Foods are good companies that have raised their divies an awful long time, even through the crash. I hope to get to about $25,000 in divies in 4 yrs when I turn 60. I should get $1,700 form S.S. but lets say $1,500 and hope for $700 from my Carpenters pension. This gets me $50,000 a yr. I think I can do that forever cause I made only $40,000 last year and saved $18,000. I am cheap , love life on the cheap. Get a kick out of guys with $50,000 boats. My boat is 29 yrs old as of Saturday and I catch more walleyes that almost all of them hot shots. Also, I have no debt and house has been payed for 10 yrs. The Lord with contentment is great gain. very insightful post, your tip on the pimco fund isn't a bad one. 5% isn't a bad gig if you can liquidate it easily. This is an interesting thread. I think it shows different people view retirement and what is enough totally differently. I think this depends on where you live and also what standard of living you want. There is no right or wrong answer. Its you and your own happiness. For me enough is a check for $20k/month in passive income. I don't see how you are going to accomplish that in stocks and "good growth stock mutual funds" The dave ramsey miliionaires aren't coming to the table with that level of passive income. I would also ask that if anyone knows someone that has built a portfolio with stocks that reaches 20k/month and didn't use inheritance or some lucky lump sum to get there I would be highly interested in talking to them. I personally think those people don't exist. I think the dave ramsey millionaires are people that have a paid for house, have 120k in a 401k, colllect $1500 a month in social security. and collect a pension, which probably totals 5-6k in income /month and they are calling themselves retired with that. The problem with dave's strategy on real estate is that its kinda a mediocre investment if you don't use financing to accelerate it. Lets say you have 300k in cash to buy a rental house. Your investment is only appreciating 3% a year, That only keeps pace with inflation. So your cash nest egg investment most likely never gains in net value relative to inflation. Instead if you buy 3, 300k houses. you are getting appreciation on 900k in assets. so instead of 9k/year in appreciation. you are going to be getting 27k in appreciation on the 300k investment, that is 9% right there!!! even if you broke even on rents. Also the other beauty of real estate is you are able to keep rolling up and never pay taxes on the appreciated value. AND there are other things you can do with depreciation, google cost segregation study if you are bored. with stocks you are paying taxes on the gains, with real estate you are deferring those taxes if you do it correctly. with stocks you have no leveraged appreciation. Also in most cases when you invest in the stock market you are depending on appreciation of the stock, Depending on a value increase IMO is gambling. If done correctly you invest for cash flow with real estate. That way you don't depend on appreciation, instead that is the giant cherry on top when you go to sell. You are describing the exact behavior that (in part) led to the financial crisis in 2008. People leveraging debt and making assumptions based on short term historical trends during an unprecedented time of low interest rates. There is a lot wrong with the assumptions you are making, but there is no way I can tell you it won't work out as you say. Your "accelerated financing" won't look so good if you get a sudden decrease in property values and/or increase in interest rates. . This is why I say invest for cash flow. I owned a rental during the darkest days of the Great Recession. That houses value dropped by 100k. But the rents stayed the same during that time. I still covered my pay emend. If you invest for cash flow with a buffer you are not going to go broke. The reason for the collapse is people were getting 600k mortgages with no money down making 60k / year. Property investors using traditional financing need 20% down in almost all cases. They also have cash reserve requirements as you get more loans.
|
|
|
|
|
Joined: Jan 2002
Posts: 12,879 Likes: 5
Campfire Outfitter
|
|
Campfire Outfitter
Joined: Jan 2002
Posts: 12,879 Likes: 5 |
[
I don't think a residence should be anyone's primary investment, but I don't know that its ever a bad deal unless you buy way more house than you can afford. So much of appreciation is based on an area's population and job growth, the higher those two things are the higher the appreciation. If you're in an area with flat or negative population growth you're probalby going to do about the inflation rate, which is basically a forced savings account when you consider you would still be paying principle, insurance, taxes and maintenance indirectly through a land lord if you rented. If you're in a faster growing area (say Atlanta, Austin or Houston and you bought 25 years ago) you're going to do better on a house than you probably would in a stock market or other passive investment, particularly if you plan to downsize on retirement and can tax the money tax free
So I was poking around San Francisco this weekend, and the redhead wanted to know about San Fran real estate. We were in the Russian Hill neighborhood (east of Pacific Heights), and according to Zillow, the median real estate value dropped 6% over the last 12 months, and the forecast is for another 4% drop.over the next 12. That would smart a little, especially since the median home price is 1.6 million. Losing 160K in two years does make leveraging look less smart. Even in San Fran, that's a good bit of money.... To your other point of modest returns in many markets, that is true. However, one of the benefits of buying a home is that your rent never increases. So even if you make 3% on your investment on paper, if you pay 50% less after 10 years than you would have for equivalent housing, that's also a "return" of sorts. However you come to it, to me the it's just a question that I'll never have another landlord do a walk through of the house four times a year. People coming into my house either have an invitation, a warrant, or a chance to get shot.....
Sic Semper Tyrannis
|
|
|
|
|
Joined: Dec 2008
Posts: 8,317
Campfire Outfitter
|
|
Campfire Outfitter
Joined: Dec 2008
Posts: 8,317 |
Good thread. Great reading.
I have not yet seen Capital Gains Tax mentioned.
For those who have had their rentals value increase nicely over time it seems like there are only 2 options for selling 1) take a big tax hit, or 2) re-invest in a similar property.
Anyone here dealt with that issue? Long term capitol gains is 15% federal, plus state. So that's probably around 22% of your profits for most people. Two possible ways you might deal with capitol gains on properties. 1. move into the property for 24 months withing 5 years of selling it. 2. Setup a self directed IRA and LLC to buy the properties. When you sell money stays in the IRA, taxes get deferred until you pull the money out at retirement, hopefully at a lower rate. I'm not a tax professional, so don't listen to my advice and talk to tax professional. I'm not an accountant either, but there's lots of things you can do beside a 1031 exchange to shelter gains from real estate. I don't think a residence should be anyone's primary investment, but I don't know that its ever a bad deal unless you buy way more house than you can afford. So much of appreciation is based on an area's population and job growth, the higher those two things are the higher the appreciation. If you're in an area with flat or negative population growth you're probalby going to do about the inflation rate, which is basically a forced savings account when you consider you would still be paying principle, insurance, taxes and maintenance indirectly through a land lord if you rented. If you're in a faster growing area (say Atlanta, Austin or Houston and you bought 25 years ago) you're going to do better on a house than you probably would in a stock market or other passive investment, particularly if you plan to downsize on retirement and can tax the money tax free Here is some fake real estate math from the great recession to now  Lets say you buy a house in 2010 for $130k, rent it for 1200 month. After taxes, insurance, maint, you make 12,000 a year. That's about 9% cap rate. Now jump ahead to 2018, eight years later and that house in now worth $230k a 55% upside over 8 years or 12.5% annual. So at the end of the day your 120k investment payed 21.5%, in a tax shielded in a IRA. That 130k is now $326,000 once you sell it. Even with rehab job thrown in for $20k that's still in the 18% ballpark. If things go to chit you still get 1200 a month, every month. Yes, you have to deal with renters, maintenance, voltile markets,etc There are risks and seldom is the market that good.
"Life is tough, even tougher if your stupid"
John Wayne
|
|
|
|
|
581 members (16penny, 12344mag, 10gaugeman, 1234, 160user, 17CalFan, 56 invisible),
1,884
guests, and
1,095
robots. |
|
Key:
Admin,
Global Mod,
Mod
|
|
|
Forums81
Topics1,192,875
Posts18,497,665
Members73,980
| |
Most Online11,491
Jul 7th, 2023
|
|
|
|
