T Nation

Personal Finance Thread


#145

It makes me incredibly nervous. Although, it’s a house next door to family, which is a plus. I’m resisting my wife and her family very hard right now.

I prefer my current setup. I have a rental that I rent to the company I work for (when I stay there weekly) and my company gets reimbursed by their clients. Win-win-win!


#146

Why not hold the RE and buy more properties during the next crash, when they’re cheap? As long as they’re in an area where you expect population to keep rising over the next 50 years, then the rents will outpace inflation. If you buy properties that cash flow than the appreciation is just bonus.

Full disclosure: I really like RE over any other asset class for me.


#147

That’s quite a bit. Obviously not privy to the locations to know for sure, but depending on the absolute values that’s more than I’d be comfortable with.

If you’re worried about an economic downturn it’s probably a pretty great time to move into a bit of commodities

Why not convert it to precious metals at its peak and rebuy in if necessary post crash?

Me too. Probably a bit more than I should.


#148

Me too (no hashtag). I’m a construction guy after all. My wife is extremely pissed because whenever we go on a vacation after a few days I usually start inquiring about local property prices and real estate taxes.

Agreed, but I jumped in just before the Airbnb revolution. I started getting great returns and became reluctant to part with one property in particular that I originally intended to flip.

That was my original idea - divest into gold and then play dr. Doom and wait for the crash.


#149

There are a billion reasons. But #1 for me is the imperfect market. As a normal every day shmuck I can buy real estate for less than market value and far less than the NPV of the future cash flows.

I’m nowhere near sophisticated enough to buy gold, stocks, bonds, Euros etc… for less than market. Hell with the bid/ask spread I’m usually paying over market price for those things.


#150

Also, your personal efforts (maintenance, renovation…) can have a tangible positive effect on the market price of said RE, which is definitely not the case with other asset classes (unless you’re Soros).

Gives a sense of empowerment an even a possibility for rule-of-thumb arbitrage.


#151

And name any other business where if your product is better than 50% of your competitors in the right area you’ll literally have customers lining up to fight over your product.

The market analysis is stupid simple. Which is good for me because I’m simple. Rents for X bedrooms with Y amenities in Z area go for …/month, with an average of N days on the market.

Imagine having customers apply to be the guy that gets the next iPhone or the coca cola.

I think we’re seeing the beginnings of an international REIT. @loppar handles development, @pfury handles farmland acquisition and bud growing operations and I bring the $190M I just scammed those silly crypto investors out of.


#152

Also if you don’t over leverage it’s treasury-safe long term. Short of not having it insured, you can rest assured people will always need somewhere to fuckin sleep and that they’ll pay for it.

Friend of mine has parents whom are basically slum lords. They grew up in the ghetto, bought a house in the ghetto. Home isn’t worth more than 40k and dad worked in a factory and wasn’t on drugs, so got paid off VERY quickly. One day a house goes up for sale next door. They decide they don’t want to risk shitty neighbors, so they buy it. Home’s paid off in a few years and they rented it out to some aunt/uncle/whatever relative.

Fast forward to today, and they own like 2 dozen+ homes in that neighborhood, and still live in that first house. Funny thing is, there’s virtually no crime (relatively) on their couple streets. Everything is tag free. Worst you see is McDonalds cups and standard out-the-window litter. People all know it’s their neighborhood.

They both retired from ‘meh’ jobs when we were in High School. So like high 30s at the time. Guy has a sick ass boat…


#153

I interviewed with a woman who was third generation Jewish in Pittsburgh. Their family came over after the holocaust and bought one crummy apartment building. They bought buildings with cash one, by one… bootstrapping the whole way. Now they own dozens of fully paid for buildings in 30 holding companies and do north of $3M/month in margin.

I wanted to work there so friggin bad and learn commercial RE from the inside. But she was offering $65k to be controller and do 30 sets of books and all the AR, AP, Payroll, taxes etc… by myself. 1 man band finance department. Only time I’ve ever laughed in an interview.


#154

Another tip I thought of today:

Make your mortgage payment 30 days early. This significantly reduces the interest you would end up paying and reduces the amount of time the home is paid off considerably.


#155

Or add something to it each month. We have a small mortgage, which I took out to refinance kids’ student loans (7.9% on one of them, the usurious fuckers) and every month when we have our budget meeting we decide what we can send and shoot it off. We’re tracking to pay off a 10 year mortgage in 3 years. The principal is around $500 and altogether the payment is $1K. We’ve never paid less than $1500, and now that the above-mentioned credit card advances are paid off we’re sending $2500/mo. If we’re short one month, we dial back, but generally speaking in every situation involving interest we pay what we can, not what we have to.* So we don’t pay more than the actual payment on our 0% car loan, the credit card advances didn’t accrue interest so we didn’t over pay until the end, when we were sick of messing with it and wanted to clear it out.

According to my Calculate the effect of making additional monthly principal payments calculator, handily provided by the bank that services my mortgage, every additional $100/mo takes a month off the estimated maturity date. I love these calculators and will play with them wherever I find them. Impact on retirement of saving more? Yes please! Chart showing the impact of accrual of interest on credit cards? Ooooooh, interesting! And I particularly like running through the rule of 72 with young clients or compulsive over-spenders. It really is a “the more you know” situation. I’m always stunned by the avoidance people exhibit - like it’s too terrifying to look at, so they don’t. But small, incremental changes make such a sure and steady difference. Kind of like working out. You can go gangbusters, but even small efforts in that direction will make measurable differences.

*Obviously this is made possible by our preference for living below our means.


#156

keep going…whats the easiest way to set this up? I have the auto-pay setup currently with my checking account.

From what I’ve heard, and seen, the banks don’t exactly make it easy to take steps ahead like this. Mine is currently held by US Bank.


#157

Every time you get a raise, increase the amount you pay towards your mortgage by that amount. You don’t notice a difference (standard of living remains the same), but your mortgage gets paid off more quickly.

We try to do this with bonuses as well.


#158

Make an extra payment per year. Shakes out to the exact same effect.


#159

My mortgage payments are due the last day of the month. I pay mine on the first day of the month.


#160

Screw that. Bonuses are for shit I want.

Regarding raises. Once I hit a standard of living I liked, all future raises have gone towards investments and vacation savings.

If I actually felt like living in my house for more than 2-3 years, I might try and pay it off. I bought it for the 2-3 year appreciation and sell off. I talked to my mortgage broker yesterday and I’m going to refinance and lose the PMI. I’ve appreciated $50k in a year and a half.


#161

Where do you get investment money from in that case? Both for stock market, and for DPs on future real estate?

Or are you just counting on living in that house until the mortgage is paid off?


#162

He probably already has his 401k/Roths maxed.


#163

Same. But a 401k should just be a piece of your financial portfolio. That’s the fall back retirement fund in my view.


#164

Well unless you’re maxing out your on tax advantaged plans ($18.5k 401k, 5.5k IRA IIRC) then it doesn’t make sense to have a big taxable portfolio. Some people pay off debt faster to mitigate risk.