Search found 23 matches

by Lysander
Wed Oct 15, 2014 11:52 pm
Forum: Investing - Theory, News & General
Topic: The SWR on Real Estate Investments
Replies: 61
Views: 4385

Re: The SWR on Real Estate Investments

As I clarified, I said the real rate of return would be equal to the nominal inflation rate, say 3%. Cap rates do not measure profit; they measure revenue. It's a rule of thumb that half of rental income will be used for expenses such as repairs, management, and vacancies. So that would leave a real...
by Lysander
Wed Oct 15, 2014 3:22 pm
Forum: Investing - Theory, News & General
Topic: The SWR on Real Estate Investments
Replies: 61
Views: 4385

Re: The SWR on Real Estate Investments

In the long term wages also track inflation, so a paid-off property gets a real rate of return equal to the inflation rate. This is roughly equal to the rate of return of stocks. The long term real rate of return for stocks is roughly 0%? I should clarify: a paid-off property gets a real rate of re...
by Lysander
Wed Oct 15, 2014 2:54 pm
Forum: Investing - Theory, News & General
Topic: The SWR on Real Estate Investments
Replies: 61
Views: 4385

Re: The SWR on Real Estate Investments

Can anyone provide general guidance on tax implications of brick and mortar real estate investments vs taxable stock/bond index investments, assuming 401K etc maxed out yearly? I ask because my accountant told me today I need another property... Any book recommendations on the general topic of real...
by Lysander
Wed Oct 15, 2014 2:51 pm
Forum: Personal Investments
Topic: $72k in 3 fund or a $72k 2 bed/1 bath condo rented
Replies: 21
Views: 2091

Re: $72k in 3 fund or a $72k 2 bed/1 bath condo rented

The stock market is overpriced now (that's why it's falling) while real estate is still underpriced. Since you're committing a sum of money all at once you can't dollar cost average, so timing does indeed matter. I would buy the condo.
by Lysander
Wed Oct 15, 2014 2:27 pm
Forum: Investing - Theory, News & General
Topic: The SWR on Real Estate Investments
Replies: 61
Views: 4385

Re: The SWR on Real Estate Investments

If Robert Shiller is to be believed, and I think his data are solid, real estate appreciates at the rate of inflation. So for the term of the mortgage you are losing money on your down payment. Imputed rents cover this carrying cost in a typical region. So for a paid-off property, the value of the p...
by Lysander
Wed Oct 15, 2014 1:29 pm
Forum: Personal Finance (Not Investing)
Topic: Recent statistics of college majors
Replies: 35
Views: 3752

Re: Recent statistics of college majors

Hidden downsides of petroleum engineering include social isolation due to working in remote areas (very important if you are looking to start a family) and exposure to carcinogens. Chemical engineers also share the latter risk ( http://chemicalengineeringnews.org/benzene-cancer-link-increased-risk-m...
by Lysander
Wed Oct 08, 2014 8:19 am
Forum: Personal Finance (Not Investing)
Topic: Is there a "crossover" CAP ratio when selling is better?
Replies: 0
Views: 223

Is there a "crossover" CAP ratio when selling is better?

I own a rental property with a CAP ratio of 7.5%, which is typical. Is there a CAP ratio at which point selling the property makes more sense than continuing to rent it out? I understand there are many variables at play; I am looking for another rule of thumb to use in my analysis.
by Lysander
Thu Sep 18, 2014 5:08 pm
Forum: Investing - Theory, News & General
Topic: What are the components of inflation?
Replies: 33
Views: 2398

Re: What are the components of inflation?

If the value of a dollar goes down the price of everything goes up. That is inflation. Obviously the only way for all prices to go up is if the money supply increases beyond value. But consider what is happening in places like Silicon Valley. There a small proportion of the population, tech workers...
by Lysander
Thu Sep 18, 2014 4:35 pm
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 24162

Re: What evidence would prove the Boglehead mentality wrong?

Misapplying verb tenses can be hazardous to one's wealth. A publicly traded corporation is not Schrodinger's cat. If the stock market lost value for 1 year straight, would you throw in the towel? 5? 10? At some point everyone would, because no one can wait forever for stocks to recover. Index funds...
by Lysander
Thu Sep 18, 2014 4:19 pm
Forum: Investing - Theory, News & General
Topic: What are the components of inflation?
Replies: 33
Views: 2398

Re: What are the components of inflation?

1. Nope: this is just an increase in value. If productivity improvements in one area of the economy reduce production costs, but the money supply remains constant, that frees up money which inflates the value of everything else. 2. Nope: this is economic depreciation. If physical depreciation in on...
by Lysander
Thu Sep 18, 2014 4:11 pm
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 24162

Re: What evidence would prove the Boglehead mentality wrong?

Doing nothing is not always cheaper than doing something. If you have a leaky roof, and don't fix it to save money, eventually you will have a rotted frame. Doing no research can lead one to invest in companies that lose money. In this case that is worse than doing research, realizing the company lo...
by Lysander
Thu Sep 18, 2014 4:07 pm
Forum: Investing - Theory, News & General
Topic: What are the components of inflation?
Replies: 33
Views: 2398

What are the components of inflation?

Inflation seems to be composed of three components to me: 1) Financial appreciation of extant assets due to productivity improvements 2) Physical depreciation of extant assets (this subtracts from inflation) 3) Printing money Absent (3), (1) and (2) seem to represent opposite sides of the same coin....
by Lysander
Thu Sep 18, 2014 3:42 pm
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 24162

Re: What evidence would prove the Boglehead mentality wrong?

And that is because the costs for the average actively managed dollar are higher, even in the pendulum-swing scenario above. Is this true? If an index is a zombie index, and it's obvious to Joe-on-the-street, Joe doesn't need to do much research, or even rumination, to figure out how to invest more...
by Lysander
Thu Sep 18, 2014 8:15 am
Forum: Personal Consumer Issues
Topic: Most cost effective means of protecting physical assets
Replies: 56
Views: 7108

Re: Most cost effective means of protecting physical assets

An alarm system from ADT will cost about $50 a month for two years. This includes monitoring and paying down the cost of the hardware. After that you pay for monitoring alone, which is like $30 per month. You get a homeowners insurance deduction, the value of which I forget. I don't think the econom...
by Lysander
Tue Sep 16, 2014 12:11 pm
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 24162

Re: What evidence would prove the Boglehead mentality wrong?

If everyone invested using index funds, then at some point the makeup of those funds would calcify and become unmoored from value. An index fund is actively traded by its managers, but these trades are executed at a very slow rate using simple algorithms based on public rather than proprietary knowl...
by Lysander
Mon Sep 15, 2014 3:05 pm
Forum: Personal Consumer Issues
Topic: Is Vanguard's website glitchy today?
Replies: 6
Views: 583

Re: Is Vanguard's website glitchy today?

As an index investor, why do you need to check Vanguard's website so frequently? :D
by Lysander
Mon Sep 15, 2014 2:52 pm
Forum: Personal Consumer Issues
Topic: Good hobby for a bright/obsessive 9 year old?
Replies: 73
Views: 8320

Re: Good hobby for a bright/obsessive 9 year old?

I'm not sure if this is the direction we want to encourage him in. I know the world will be computer-centric going forward but it would be great if he had some other skills too. I wish I had been more computer-centric in my childhood. If you are determined physical fitness can be gained in a year o...
by Lysander
Thu Sep 11, 2014 5:51 pm
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 262
Views: 54367

Re: "Why 97% of People Don't Use 529 College Savings Plans."

In 20 years, the limit for 401(k) annual contributions will be $100K a year, so just cut back on your contributions when the time comes (your salary will be $800K anyways) and you will be able to afford a college education. That's how it worked out for us (we paid for one of those $200K+ college ed...
by Lysander
Thu Sep 11, 2014 5:40 pm
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 262
Views: 54367

Re: "Why 97% of People Don't Use 529 College Savings Plans."

$200k of student debt is rare now. But upper middle-class and up parents paying $200k for a bachelors degree is not rare at private schools, especially if they qualify for no need-based aid. Furthermore, I am looking at paying for college 20 years in the future. Unless the higher education bubble bu...
by Lysander
Tue Sep 09, 2014 5:04 pm
Forum: Investing - Theory, News & General
Topic: Why does the stock market "always go up"? Will this persist?
Replies: 50
Views: 17159

Re: Why does the stock market "always go up"? Will this pers

Stocks don't always go up. Japanese stocks are still below their early 90s heights. Other people have addressed the phenomenon that stocks earn more than other asset classes. An even broader question is why the economy usually grows over time. I will first preface this by saying that this "usual" gr...
by Lysander
Tue Sep 09, 2014 4:28 pm
Forum: Investing - Theory, News & General
Topic: "Why 97% of People Don't Use 529 College Savings Plans."
Replies: 262
Views: 54367

Re: "Why 97% of People Don't Use 529 College Savings Plans."

I myself am anticipating a major shakeup in higher education that cuts costs. At some point it makes more sense to give your children a duplex that they can live in and get a sinecure from than pay for $300,000-$400,000 worth of college.
by Lysander
Tue Aug 26, 2014 3:20 pm
Forum: Personal Finance (Not Investing)
Topic: Gut rehab vs. teardown to avoid cap gains tax on sale?
Replies: 3
Views: 1011

Re: Gut rehab vs. teardown to avoid cap gains tax on sale?

ralph124cf wrote:Are you planning to convert this to a single family house during the remodel?
Thanks Ralph. Yes, I would be converting a duplex to a single-family house.
by Lysander
Sun Aug 24, 2014 10:54 pm
Forum: Personal Finance (Not Investing)
Topic: Gut rehab vs. teardown to avoid cap gains tax on sale?
Replies: 3
Views: 1011

Gut rehab vs. teardown to avoid cap gains tax on sale?

I own a rental property and live in one of the units. I am interested in rehabbing and selling the property. I have some questions about the 1997 and 2008 tax laws regarding the capital gains tax exclusion on primary residences. According to the 1997 law up to $250,000 of capital gains are tax-shelt...