Stock Market gurus? Real Estate hounds? Tell me about your financial intelligence.. - Page 2

[lazydaisy]

I guess I'm the odd woman out. I've invested in real estate, and I'm doing great. I don't look at our residence as an investment, necessarily, but our rental properties certainly are.

Right now we're getting 25% return on one, which we bought dirt cheap. The first property we bought is giving us a 17% return and has been for the last 5 years.

Meanwhile, our IRA has steadily lost money since we opened it 2.5 years ago. We finally quit putting money in there. We'd much rather save up some more capital and invest in another rental property.

[TexasSuz]

We are in a pretty good situation right now. Here are a few of our financial rules, hints that we live by.

1) Track every dime - I use Quicken for this

2) Make a budget a live on it - it has to be a realistic budget and allow extra money for those things that always seem to come up like cars problems, etc

3) Live debt free - (except for a mortgage) - no credit cards, pay off car loans early if you have to get them.

4) Live below your income for a few years if you can and put lots of money into savings - we did this and now have 6 months reserves in savings (in case dh gets laid off) and were able to buy a great house.

5) This should be #1 - GIVE TO OTHERS. No matter how much you make, you can give something to others - a church, school, family in a rough spot. I don't believe in garage sales - if we don't want something anymore, then I find someone else who can use it. My tithe and charity giving is also part of my budget.

We also were able to buy a bigger house than we needed and plan to stay here for the next 30 years and pay it off. This way our family can grow into the house as we have more kids, and we save lots of money not having to sell/buy at higher interest rates.

I think having a paid for house during retirement is very important. My mom and dh's parents both have house payments on a retirement budget and it is difficult. I don't want to be in that situation.

[Hilary Briss]

The idea of owning rental property as an investment has never seriously appealed to me. It seems too much like real work. You have to find good tenants that won't trash the place, you're responsible for maintenance and repairs, and I don't think you can shelter your income from taxes very easily. If you choose the right stocks or funds, all you have to do is watch your balance grow, and it's a lot more liquid than owning real property as well. I guess I saw Pacific Heights too many times. I'd be afraid my tenant would turn into Carter Hayes.

[chase]

[/B][/QUOTE] I've been walking around the world thinking that student loans and home mortgage are "acceptable" debt...and they are. But if you can figure out how to eliminate these, one has many many more life choices, much more freedom. [/B][/QUOTE]

This is excellent advice!! It is so rare to hear people about this. My mom looks at me like I have 4 heads when I talk about $0 mortgage. This month I'm starting a debt payment plan to eliminate all of our student loans in 3 years and home mortgage in 10 years. It may happen sooner but I want to be realistic. I believe anyone can achieve financial freedom you just have to plan for it.

[DebraBaker]

TexasSuz,

Great point (#5) I think when we live for something beyond ourselves someone upstairs seems to take more of an interest in our own welfare (but it can't be motivated by greed!!!)

HilaryBriss, you crack me up!! (about the real work comment)

DB

[Kim]

You have to find good tenants that won't trash the place, you're responsible for maintenance and repairs, and I don't think you can shelter your income from taxes very easily.

Totally agree with the first part of this statement. My dad finds distressed properties and fixes them up for a living -- many times renting them out, sometimes selling. He's had good tenants and some very bad ones.

If you can set up a C-Corporation there are some ways to benefit tax-wise. Although you'll need an accountant involved to find some of these loopholes.

[member234098]

I have owned and managed income property for 18 years.

I have had terrible tenants trash the place, overcrowd the place, and then stop paying the rent. CA is a very pro-tenant state, in which an experienced tenant can play the legal system for six-twelve months and stay in a house/unit without paying rent and even win the unit as a judgement against the landlord.

In AZ and NV, I understand that the Marshall is out on the third day the tenant is late with the rent.

I had a tenant threaten to kill me; I had plenty of witnesses to this event; this tenant skipped out on her lease and then won a judgement against me because I held her security deposit against the lost rents for her leaving before the lease was up.

I do not recommend rental property in CA anyway. The setting for "Pacific Heights" took place in SanFran, CA.

I have one unit left with decent tenants. As soon as they check out as tenants, so do I as a landlord.

[Quirky]

Originally posted by mom2david
Dh came home about 2 monthes ago from work asking to open up an account with ameritrade and start buying penny stocks as he and his co workings call them . I was ok with that . Then it was to invest 7% of our money into TSP (thrift savings plan ) threw the airforce , still ok . But i feel like we are doing all these things YET i don't know why?? And i don't know what eles is out there . know what i mean ?

The TSP is the government equivalent of a 401(k) or 403(b) retirement plan. How it works is you put a % of your salary in, and the government matches up to a certain %. This money comes out pretax, so you save by not paying taxes on it and the earnings grow tax-free. It is the best retirement deal out there in my opinion; it reduces your current taxes, gives you free money, and grows tax free.

If it were me and my dh, I would max out the contributions to the TSP and not let him open the Ameritrade account to buy penny stocks. First, those will not grow tax free unless you hold them through an IRA. Second, the money you use to buy stocks is coming from after-tax dollars, so no tax savings there. Third, no free matching money from the government. Fourth, you are much safer and more likely to profit investing in indexes (broad cross sections of the market) than individual stocks. Individual stocks are too risky to bet your retirement on IMO unless you already have a broad diversified portfolio and have a little extra money to play around with that you don't mind losing.

You can learn more about the TSP at www.tsp.gov. The most important thing to do (besides maxing out your contribution, or at least putting in to the point that you get all the free matching money) is figuring out an appropriate asset allocation within the funds offered by the TSP. I.e., what should the distribution be between stocks, bonds, international, etc. You can find good advice on asset allocation at places like www.fool.com.

NEXT TOPIC: IRAs for non-working spouses. I think it's important that stay-at-home parents take full advantage of the IRA contribution limit of $3000 for a spousal IRA. To my mind, that should be a funding priority for any couple with one working spouse and one stay at home parent. The stay at home parent is sacrificing a lot already in terms of lost income and no Social Security credit , and I believe all SAHPs need to have their own savings/assets in their own names.

Comments? Stories? Advice?

[mom2david]

Jane wrote:
The TSP is the government equivalent of a 401(k) or 403(b) retirement plan. How it works is you put a % of your salary in, and the government matches up to a certain %. This money comes out pretax, so you save by not paying taxes on it and the earnings grow tax-free. It is the best retirement deal out there in my opinion; it reduces your current taxes, gives you free money, and grows tax free.

If it were me and my dh, I would max out the contributions to the TSP and not let him open the Ameritrade account to buy penny stocks. First, those will not grow tax free unless you hold them through an IRA. Second, the money you use to buy stocks is coming from after-tax dollars, so no tax savings there. Third, no free matching money from the government. Fourth, you are much safer and more likely to profit investing in indexes (broad cross sections of the market) than individual stocks. Individual stocks are too risky to bet your retirement on IMO unless you already have a broad diversified portfolio and have a little extra money to play around with that you don't mind losing.

You can learn more about the TSP at www.tsp.gov. The most important thing to do (besides maxing out your contribution, or at least putting in to the point that you get all the free matching money) is figuring out an appropriate asset allocation within the funds offered by the TSP. I.e., what should the distribution be between stocks, bonds, international, etc. You can find good advice on asset allocation at places like www.fool.com.

NEXT TOPIC: IRAs for non-working spouses. I think it's important that stay-at-home parents take full advantage of the IRA contribution limit of $3000 for a spousal IRA. To my mind, that should be a funding priority for any couple with one working spouse and one stay at home parent. The stay at home parent is sacrificing a lot already in terms of lost income and no Social Security credit , and I believe all SAHPs need to have their own savings/assets in their own names.

Comments? Stories? Advice?

I had no clue the military matched your funds . i said i let hubby do what he feels best . I have say in it BUT cause i knew nothing i just said do what you think is best . Meaning he put in 7% of our paycheck in every payday . thats the max you can put in . He has yet to open up the other account cuase we took that money and put it down on a new hous we are going to rent . (this place has to many bugs and has tons of mold so we will be out of here soon) Well i am off to go check out info on the TSP and the other web sites about IRA's. Thank you agian !

[Missgrl]

with the influx of financial threads throughout the boards the Personal Growth forum has been expanded to host such threads. We are moving all financial related threads there. Good luck on your personal growth!

[mamaley]

Dh and I have been talking a lot about this stuff lately. He's had his Roth IRA for a few years now and I plan to open one this year. We're pretty young--early 20s--so I'm glad we're getting started early.
About paying yourself first--this is something I always hear but haven't been taking too seriously--we have a good amount in savings, is it best for me to start my Roth IRA asap, or should we wait until we're sure we have "enough" saved in the bank for emergencies, etc?
El's--thanks for the velcro tip!
Do any of you read the Bottom Line?

[Hilary Briss]

we have a good amount in savings, is it best for me to start my Roth IRA asap, or should we wait until we're sure we have "enough" saved in the bank for emergencies, etc?

I'd say get that Roth started ASAP. If I'm not mistaken, it's always possible to withdraw contributions from a Roth, since the income has already been taxed. You won't be penalized unless you start to dip into some of the gains. Obviously, looting your retirement funds should be a last ditch thing.

[Kim]

Sorry -- I lost track of this thread when it was moved!:

Any good stockpickers out here? Do you adhere to any methodology? We have a chunk of change that we'd like to throw into the market, but are having trouble committing.

Motley Fool has a theory in which you take the top 30 companies on the S&P and rate each by yield, then compare the yield with stock price. Essentially, you are left with 5 companies that are supposedly poised for growth. We did the work and came up with Eastman-Kodak, Honeywell, Alcoa Industries, General Electric, and SBC Communications. Two of these companies I've never heard of (SBC and Alcoa). And, I'm not keen on Kodak.

Peter Lynch tells us to follow the 'Rule of Five' and "Don't buy anything you can't draw in crayon". Basically, buy what you know.

I like this idea better, but am afraid I won't see any growth. The companies we tend to choose seem to have pretty stable/moderate growth. This is good for the long term, but we were hoping to be aggressive with this money. Our 401k's and Roth IRA's have the more moderate-aggressive balance.

Any idea's? How do you all choose stocks/funds?

[Hilary Briss]

I think the Motley Fool theory you're mentioning, is what they used to call the "Foolish Four", which was a variation on the Dogs of the Dow style of investing, popularized in "Beating the Dow". The Fools later ditched this strategy in a very public way, so I'd be surprised if they're still touting it.

I do think the original Dogs of the Dow strategy does have some merit, it's basically a mechanical approach to value investing, where you buy companies that are undervalued, and are likely to come back. I don't see anything wrong with just choosing from the 30 companies in the Dow, since they're all big, solid companies. I've probably owned shares in about half of them at one point or another.

I'm not buying anyhing right now, especially since the market has run up so much in the last few months. I think we're near a short term top right now, and the market could head south in a big way very soon. I'm thinking about buying shares in companies that mine gold, since there could be a good deal of economic chaos coming our way, and gold tends to do well in times of trouble.

[steph]

this has been a really interesting thread, i'm glad i stumbled upon it! this may be a little ot, but here's where this discussion - esp. the real estate parts got me thinking....

dh and i have our home and mil's house (which we rent out and use the $ to pay her apt. rent)... between the 2 of those plus credit card debt, we owe around $210,000... we could sell our house today, pay off the mortgages and cards and have about 50k in hand... so here's the thing - if we did that and lived in mil's house mortgage free, we'd be living in a town that neither of us like. it's rural, red-neck (sorry if that offends some, but even the locals there would probably self-describe that way), conservative - not to mention the house is located next to orchards that are regularly sprayed. and there's no work to speak of. however, if the economy picks up even modestly, allowing us to continue our business here (if it goes anymore flat or tanks we could be in deep doo and have to move anyway ), paydown our mortagages/debts and in 10 yrs. would only owe $116,000 and have real estate assets of $219,000 (that's if our houses did not appreciate in value at all).... we live in a town we love and have work we enjoy.

so, to my mind it makes sense to stay put and pay the piper (assuming all is ok with the economy)... but what do some of you think? is being mortgage free with a small but decent savings living in a crappy place better than being in debt but relatively happy?

[Quirky]

I don't have the answer to your question but wanted to remind you to calculate the tax savings from the mortgage deductions into your equations. I think a lot of people put too much stock in being mortgage free, and don't run the numbers to see what they're paying in interest vs. what they're saving in taxes. And are you deducting both mortgages on your taxes? I think you can deduct both, although you need to check with an accountant to make sure.

What interest rates are you paying on the mortgages? Now is a great time to refinance, you could save a bundle!

I also put a real premium on quality of life, myself. What's the point of living somewhere you hate if you can afford not to?