RE: Retirement and College Planning

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chickpea
Posts: 9
Joined: Thu Aug 10, 2017 9:09 pm

RE: Retirement and College Planning

Post by chickpea » Fri Aug 11, 2017 8:58 pm

Hi All

I wonder if you could help me to with my investment portfolio for retirement, consolidation of the old retirement portfolio and future college planning for 2 children under the age of one. I am returning back to investment planning after spending 12 years abroad and have just planning for retirement.
Age: 50
Tax filing status: Single
Job: Self-employed for one year
Maximum allowed under tax-deferred funds for 2017: $52,000
Investment portfolio from previous jobs:
Fidelity 401k: 31617E836 Fid Growth Comp Com Pool $27,000
Fidelity 401k: BAIRD MID CAP $2500
TIAA 403b: TCRIX TIAA-CREF Lifecycle 2030 Fund Institutional Class $4500
Present investment portfolio:
Vanguard:
i401K: VTIVX Vanguard target retirement fund 2045: $34,000
I have just added the following into my i401K:
VFINX Vanguard 500 Index Fund Investor Shares and VIVAX Vanguard Value Index Fund Investor Shares
TRA:
VBINX Vanguard Balanced Index Fund Investor Shares
VLACX Vanguard Large Cap Index Fund Investor Shares
I also opened a taxable account with Vanguard and have included VFINX Vanguard 500 Index Fund Investor Shares
I have cash in $ 250,000 from the sale of my condo.

Should I continue this strategy for now and hold on to cash for 2 years as I am worried that the market is inflated? I am hoping for financial independence by age 60-65 but not sure if I could achieve this goal in 10-15 years.
Thankk you
Thank you

JBTX
Posts: 1733
Joined: Wed Jul 26, 2017 12:46 pm

Re: RE: Retirement and College Planning

Post by JBTX » Sat Aug 12, 2017 12:21 am

Am I right you only have $70k in retirement accounts at 50 years old? If so you have work to do to fund your retirement in approx 15-20 years and especially if you want to help with kids college. Of course how much you need depends on how much you spend which i don't think you spelled out.

Not wanting to put big chunks of cash in this highly valued bull market right now is understandable but at the end of the day neither you nor I can call the tops and bottoms of the market. I'd max out your retirement account and put it an a 60/40 balanced fund or a low fee lifestyle retirement date fund.

Max out your Roth IRAs if eligible. You may be able to do some sort of back door Roth given it looks like you have no traditional IRAs. Dollar cost average your investments over time to a reasonable conservative asset allocation - maybe 60/40 or 50/50 if you are petrified of a market dip.

Because of your market aversion and conservative nature and the likelihood of very modest stock and bond returns over the next decade the primary way for you to build your portfolio is through saving not investment gains.

Hopefully as self employed you are minimizing your taxes as much as legally possible.

Again don't know how much you make or spend but given your goals I'm thinking you will need to work well past 65, especially if you want to help fund kids college.

chinto
Posts: 297
Joined: Wed Jan 04, 2017 7:39 pm

Re: RE: Retirement and College Planning

Post by chinto » Sat Aug 12, 2017 2:10 am

With children the age of yours I would simply not plan for college. You can sniff around on this, but I would say the odds are college will be tuition free in the future and visualization practically assures that free options will be available. Already some states offer free college. And to the best of my knowledge many employers are starting to show a preference in hiring toward graduates of virtual colleges.

User avatar
CyclingDuo
Posts: 934
Joined: Fri Jan 06, 2017 9:07 am

Re: RE: Retirement and College Planning

Post by CyclingDuo » Sat Aug 12, 2017 7:51 am

chickpea wrote:Hi All

I wonder if you could help me to with my investment portfolio for retirement, consolidation of the old retirement portfolio and future college planning for 2 children under the age of one. I am returning back to investment planning after spending 12 years abroad and have just planning for retirement.
Age: 50
Tax filing status: Single
Job: Self-employed for one year
Maximum allowed under tax-deferred funds for 2017: $52,000
Investment portfolio from previous jobs:
Fidelity 401k: 31617E836 Fid Growth Comp Com Pool $27,000
Fidelity 401k: BAIRD MID CAP $2500
TIAA 403b: TCRIX TIAA-CREF Lifecycle 2030 Fund Institutional Class $4500
Present investment portfolio:
Vanguard:
i401K: VTIVX Vanguard target retirement fund 2045: $34,000
I have just added the following into my i401K:
VFINX Vanguard 500 Index Fund Investor Shares and VIVAX Vanguard Value Index Fund Investor Shares
TRA:
VBINX Vanguard Balanced Index Fund Investor Shares
VLACX Vanguard Large Cap Index Fund Investor Shares
I also opened a taxable account with Vanguard and have included VFINX Vanguard 500 Index Fund Investor Shares
I have cash in $ 250,000 from the sale of my condo.

Should I continue this strategy for now and hold on to cash for 2 years as I am worried that the market is inflated? I am hoping for financial independence by age 60-65 but not sure if I could achieve this goal in 10-15 years.
Thankk you
Thank you
Welcome back to the US!

Achieving Financial Independence by age 60 or even 65 may be difficult with your current amount already saved. Of course, that depends on other factors (possible windfall via inheritance coming in the future, salary, desired spending level in retirement, etc...).

You didn't mention your income level, but it looks like you are shooting for $52K in tax deferred accounts this year which is good. Lifecycle funds are a sensible approach in both the TIAA and the Vanguard funds. You have opened a lot of Index 500 Funds, but at age 50 you might want to have about 30-35% exposure to bonds (you could use Muni bonds in your taxable), and or the Total Bond Fund in your tax-deferred.

What to do with the $250K from the condo sale? With your concerns about the market, certainly an approach of spreading it out in terms of investing over time might allow you to capture some lower entry points. No doubt corrections and pull backs are a normal part of the process. We wouldn't rush into deploying all of that at once. If you are worried about the market direction, you could use some CD Ladders of varying lengths so that cash is earning some interest (3, 6, 9, 12, 18, 24 month CDs)...

livesoft
Posts: 57335
Joined: Thu Mar 01, 2007 8:00 pm

Re: RE: Retirement and College Planning

Post by livesoft » Sat Aug 12, 2017 8:13 am

It seems that this is just a typical "save and index" for retirement request since you will be around age 70 when the grown-up children might be in college. That is, there will be no early withdrawal penalties for withdrawals from retirement accounts and you might even be collecting social security.

Thus, all you have to do is decide how much you can invest every year and do that. The typical methods described all over this place will work. You know, maximize retirement plan contributions, invest tax efficiently in a taxable account, minimize taxes and expenses, and you are on your way.

As for what to invest in, that's pretty simple, too: Start with index funds and select an asset allocation such as 60% equities and 40% bonds. Or something else. Then fill it up with the 3-fund portfolio or just Target Retirement funds.

One thing: You didn't clarify if the children were your children or someone else's children. College planning for them is simple, too: Get them to grow up, get them in school starting from kindergarten, get them graduated from high school, and have them apply for college just like all their friends will be doing.
Last edited by livesoft on Sat Aug 12, 2017 8:15 am, edited 1 time in total.
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cherijoh
Posts: 4071
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: RE: Retirement and College Planning

Post by cherijoh » Sat Aug 12, 2017 8:15 am

JBTX wrote:Am I right you only have $70k in retirement accounts at 50 years old? If so you have work to do to fund your retirement in approx 15-20 years and especially if you want to help with kids college. Of course how much you need depends on how much you spend which i don't think you spelled out.

Not wanting to put big chunks of cash in this highly valued bull market right now is understandable but at the end of the day neither you nor I can call the tops and bottoms of the market. I'd max out your retirement account and put it an a 60/40 balanced fund or a low fee lifestyle retirement date fund.

Max out your Roth IRAs if eligible. You may be able to do some sort of back door Roth given it looks like you have no traditional IRAs. Dollar cost average your investments over time to a reasonable conservative asset allocation - maybe 60/40 or 50/50 if you are petrified of a market dip.

Because of your market aversion and conservative nature and the likelihood of very modest stock and bond returns over the next decade the primary way for you to build your portfolio is through saving not investment gains.

Hopefully as self employed you are minimizing your taxes as much as legally possible.

Again don't know how much you make or spend but given your goals I'm thinking you will need to work well past 65, especially if you want to help fund kids college.
+1
OP - were you working for a US company while living overseas? Were you paying into SS? Do you have any kind of pension on which to fall back?

You mention being able to save up to $52K/year, but realistically how much are you actually going to be able to put away? To be blunt, your track record based on your age and posted portfolio doesn't suggest that you are suddenly going to become a super-saver.

Since you are self-employed, you need to keep a larger emergency fund than someone who is an FTE at a stable employer. This will limit how much of your cash stash from the sale of your condo that you can in vest.

JBTX
Posts: 1733
Joined: Wed Jul 26, 2017 12:46 pm

Re: RE: Retirement and College Planning

Post by JBTX » Sun Aug 13, 2017 3:12 pm

I'm thinking realistically you have two options at your stage in life given where you are:

Save aggressively for retirement until 68-70 and perhaps you will have enough to retire. Then:

1. Leave the financing of your kids education to them. They can go to community colleges or state schools and perhaps get some favorable loans.

2. Continue to work all the way through your kids college and help fund their education through cash flow.

chickpea
Posts: 9
Joined: Thu Aug 10, 2017 9:09 pm

Re: RE: Retirement and College Planning

Post by chickpea » Tue Aug 15, 2017 12:25 pm

Thank you all for your valuable advice. I have been tardy with my financial planning but it's better late than never! I am looking into the bond marker right now to include them in my portfolio for a balanced outlook.

Thank you again.

WanderingDoc
Posts: 355
Joined: Sat Aug 05, 2017 8:21 pm

Re: RE: Retirement and College Planning

Post by WanderingDoc » Tue Aug 15, 2017 1:12 pm

CyclingDuo wrote:
Sat Aug 12, 2017 7:51 am
chickpea wrote:Hi All

I wonder if you could help me to with my investment portfolio for retirement, consolidation of the old retirement portfolio and future college planning for 2 children under the age of one. I am returning back to investment planning after spending 12 years abroad and have just planning for retirement.
Age: 50
Tax filing status: Single
Job: Self-employed for one year
Maximum allowed under tax-deferred funds for 2017: $52,000
Investment portfolio from previous jobs:
Fidelity 401k: 31617E836 Fid Growth Comp Com Pool $27,000
Fidelity 401k: BAIRD MID CAP $2500
TIAA 403b: TCRIX TIAA-CREF Lifecycle 2030 Fund Institutional Class $4500
Present investment portfolio:
Vanguard:
i401K: VTIVX Vanguard target retirement fund 2045: $34,000
I have just added the following into my i401K:
VFINX Vanguard 500 Index Fund Investor Shares and VIVAX Vanguard Value Index Fund Investor Shares
TRA:
VBINX Vanguard Balanced Index Fund Investor Shares
VLACX Vanguard Large Cap Index Fund Investor Shares
I also opened a taxable account with Vanguard and have included VFINX Vanguard 500 Index Fund Investor Shares
I have cash in $ 250,000 from the sale of my condo.

Should I continue this strategy for now and hold on to cash for 2 years as I am worried that the market is inflated? I am hoping for financial independence by age 60-65 but not sure if I could achieve this goal in 10-15 years.
Thankk you
Thank you
Welcome back to the US!

Achieving Financial Independence by age 60 or even 65 may be difficult with your current amount already saved. Of course, that depends on other factors (possible windfall via inheritance coming in the future, salary, desired spending level in retirement, etc...).

You didn't mention your income level, but it looks like you are shooting for $52K in tax deferred accounts this year which is good. Lifecycle funds are a sensible approach in both the TIAA and the Vanguard funds. You have opened a lot of Index 500 Funds, but at age 50 you might want to have about 30-35% exposure to bonds (you could use Muni bonds in your taxable), and or the Total Bond Fund in your tax-deferred.

What to do with the $250K from the condo sale? With your concerns about the market, certainly an approach of spreading it out in terms of investing over time might allow you to capture some lower entry points. No doubt corrections and pull backs are a normal part of the process. We wouldn't rush into deploying all of that at once. If you are worried about the market direction, you could use some CD Ladders of varying lengths so that cash is earning some interest (3, 6, 9, 12, 18, 24 month CDs)...
Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

bigred77
Posts: 1938
Joined: Sat Jun 11, 2011 4:53 pm

Re: RE: Retirement and College Planning

Post by bigred77 » Tue Aug 15, 2017 1:24 pm

WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm

Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.

User avatar
CyclingDuo
Posts: 934
Joined: Fri Jan 06, 2017 9:07 am

Re: RE: Retirement and College Planning

Post by CyclingDuo » Tue Aug 15, 2017 1:51 pm

WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm
CyclingDuo wrote:
Sat Aug 12, 2017 7:51 am
chickpea wrote:Hi All

I wonder if you could help me to with my investment portfolio for retirement, consolidation of the old retirement portfolio and future college planning for 2 children under the age of one. I am returning back to investment planning after spending 12 years abroad and have just planning for retirement.
Age: 50
Tax filing status: Single
Job: Self-employed for one year
Maximum allowed under tax-deferred funds for 2017: $52,000
Investment portfolio from previous jobs:
Fidelity 401k: 31617E836 Fid Growth Comp Com Pool $27,000
Fidelity 401k: BAIRD MID CAP $2500
TIAA 403b: TCRIX TIAA-CREF Lifecycle 2030 Fund Institutional Class $4500
Present investment portfolio:
Vanguard:
i401K: VTIVX Vanguard target retirement fund 2045: $34,000
I have just added the following into my i401K:
VFINX Vanguard 500 Index Fund Investor Shares and VIVAX Vanguard Value Index Fund Investor Shares
TRA:
VBINX Vanguard Balanced Index Fund Investor Shares
VLACX Vanguard Large Cap Index Fund Investor Shares
I also opened a taxable account with Vanguard and have included VFINX Vanguard 500 Index Fund Investor Shares
I have cash in $ 250,000 from the sale of my condo.

Should I continue this strategy for now and hold on to cash for 2 years as I am worried that the market is inflated? I am hoping for financial independence by age 60-65 but not sure if I could achieve this goal in 10-15 years.
Thankk you
Thank you
Welcome back to the US!

Achieving Financial Independence by age 60 or even 65 may be difficult with your current amount already saved. Of course, that depends on other factors (possible windfall via inheritance coming in the future, salary, desired spending level in retirement, etc...).

You didn't mention your income level, but it looks like you are shooting for $52K in tax deferred accounts this year which is good. Lifecycle funds are a sensible approach in both the TIAA and the Vanguard funds. You have opened a lot of Index 500 Funds, but at age 50 you might want to have about 30-35% exposure to bonds (you could use Muni bonds in your taxable), and or the Total Bond Fund in your tax-deferred.

What to do with the $250K from the condo sale? With your concerns about the market, certainly an approach of spreading it out in terms of investing over time might allow you to capture some lower entry points. No doubt corrections and pull backs are a normal part of the process. We wouldn't rush into deploying all of that at once. If you are worried about the market direction, you could use some CD Ladders of varying lengths so that cash is earning some interest (3, 6, 9, 12, 18, 24 month CDs)...
Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Sounds like a bad infomercial. Thanks for not providing an 800 number...

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Okay, should we not be so sad and tell the OP "yes, it is entirely feasible and possible that you can retire comfortably at age 60? Just follow the yellow brick road...." We'll let you talk him through the process of making it there via the rental properties, and exactly what is involved to turn that $250K into enough to produce $3-5K per month in income. I'm not sure 10 years is an eternity in real estate. The median price in the US just climbed back to what it was 10 years ago in 2007. Ten years of "flat" for most of us.

By the way, there is nothing wrong with working until one's full retirement age which happens to be 67 for the OP as long as employment is available, and one can utilize the income to save for retirement.

The OP currently has $68K in tax deferred investments, and $250K sitting in cash from the condo sale for total of $318K at age 50 with two children under the age of one to take care of, raise, finance, cloth, feed, etc... . If we go with the historical average return of equities, it's more than likely that $318K would double between now and when the OP is age 60. That's a good return! Luckily the OP commented that they would be adding $52K this year to retirement funds as the "catch up" phase begins. Using the historical return, and adding $52K per year would grow to $1.3M by age 60. Might not be enough to retire and life the type of lifestyle the OP wanted at age 60 with that amount, hence the suggestion that it might be difficult to attain the goal by age 60. 65 adds an additional 5 years of income, and if everything goes well would put the OP in much better shape.

There is nothing "sad" about that. Many of us on the BH forums come from families where parents and grandparents all worked to age 65+. It's not like it is some "sad" and morbid existence in our culture, as well as other cultures to work that long to make retirement a comfortable reality.

No pigeon holing the OP into mutual funds only from us. We own plenty of individual stocks, real estate, and alternative investments in addition to solely mutual funds. :mrgreen:

WanderingDoc
Posts: 355
Joined: Sat Aug 05, 2017 8:21 pm

Re: RE: Retirement and College Planning

Post by WanderingDoc » Tue Aug 15, 2017 2:13 pm

bigred77 wrote:
Tue Aug 15, 2017 1:24 pm
WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm

Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.
Several misconceptions I'd like to address.

1. Real estate is hard.
- No, it requires the ability to perform about the level of 3rd grade math.
2. Real estate is a "job", real estate is time consuming.
- No, I invested in RE as a busy medical resident, with a few hours a month put into managing real estate.

I am speaking of net income. All of the things you mentioned. Depending on who you ask, CapEx may or may not be included in the Net Operating Income, for apartments it usually isn't. For SFHs, I am including all of the things you mentioned.

$180K down on a 8-10 unit apartment building valued at $900K, NOI of $70K, after debt service, yields ~$30K net net annual cash flow after debt service, all expenses including property management, and cap ex reserves. That's an EASY $2500+ per month cash flow, without even spending the full $250K.

Instead of dismissing real estate, why not be curious and learn how it can be done? Be open minded.

As Jack Bogle once said (I'm paraphrasing here) "You can't argue with humble arithmetic."
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

bigred77
Posts: 1938
Joined: Sat Jun 11, 2011 4:53 pm

Re: RE: Retirement and College Planning

Post by bigred77 » Tue Aug 15, 2017 2:39 pm

WanderingDoc wrote:
Tue Aug 15, 2017 2:13 pm
bigred77 wrote:
Tue Aug 15, 2017 1:24 pm
WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm

Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.
Several misconceptions I'd like to address.

1. Real estate is hard.
- No, it requires the ability to perform about the level of 3rd grade math.
2. Real estate is a "job", real estate is time consuming.
- No, I invested in RE as a busy medical resident, with a few hours a month put into managing real estate.

I am speaking of net income. All of the things you mentioned. Depending on who you ask, CapEx may or may not be included in the Net Operating Income, for apartments it usually isn't. For SFHs, I am including all of the things you mentioned.

$180K down on a 8-10 unit apartment building valued at $900K, NOI of $70K, after debt service, yields ~$30K net net annual cash flow after debt service, all expenses including property management, and cap ex reserves. That's an EASY $2500+ per month cash flow, without even spending the full $250K.

Instead of dismissing real estate, why not be curious and learn how it can be done? Be open minded.

As Jack Bogle once said (I'm paraphrasing here) "You can't argue with humble arithmetic."
I have an open mind. I really do. But 1 maxim always comes to mind:

If it sounds too good to be true, it probably is.

If it was so easy to achieve these returns, requiring 3rd grade math, a few hours a month, and access to 180k, why wouldn't someone else come along and just pay more for the property, accepting a slightly less return but still well in excess of more traditional investments? Is there such a surplus of the deals out there there people just can't get their hands on financing fast enough? Why are you, a medical resident with no formal training in real estate management finding and executing deals professional real estate investors just can't seem to manage (I swear I'm not trying to be snarky, just ask yourself if it's so easy why aren't more people doing it?)

By the way, if I was able to make 25% year in and year out (you previously claimed 50%+ was being conservative) I personally, bigred77, would be a billionaire by age 66 without saving another penny. I just don't think that highly of myself :mrgreen:

WanderingDoc
Posts: 355
Joined: Sat Aug 05, 2017 8:21 pm

Re: RE: Retirement and College Planning

Post by WanderingDoc » Tue Aug 15, 2017 3:25 pm

bigred77 wrote:
Tue Aug 15, 2017 2:39 pm
WanderingDoc wrote:
Tue Aug 15, 2017 2:13 pm
bigred77 wrote:
Tue Aug 15, 2017 1:24 pm
WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm

Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.
Several misconceptions I'd like to address.

1. Real estate is hard.
- No, it requires the ability to perform about the level of 3rd grade math.
2. Real estate is a "job", real estate is time consuming.
- No, I invested in RE as a busy medical resident, with a few hours a month put into managing real estate.

I am speaking of net income. All of the things you mentioned. Depending on who you ask, CapEx may or may not be included in the Net Operating Income, for apartments it usually isn't. For SFHs, I am including all of the things you mentioned.

$180K down on a 8-10 unit apartment building valued at $900K, NOI of $70K, after debt service, yields ~$30K net net annual cash flow after debt service, all expenses including property management, and cap ex reserves. That's an EASY $2500+ per month cash flow, without even spending the full $250K.

Instead of dismissing real estate, why not be curious and learn how it can be done? Be open minded.

As Jack Bogle once said (I'm paraphrasing here) "You can't argue with humble arithmetic."
I have an open mind. I really do. But 1 maxim always comes to mind:

If it sounds too good to be true, it probably is.

If it was so easy to achieve these returns, requiring 3rd grade math, a few hours a month, and access to 180k, why wouldn't someone else come along and just pay more for the property, accepting a slightly less return but still well in excess of more traditional investments? Is there such a surplus of the deals out there there people just can't get their hands on financing fast enough? Why are you, a medical resident with no formal training in real estate management finding and executing deals professional real estate investors just can't seem to manage (I swear I'm not trying to be snarky, just ask yourself if it's so easy why aren't more people doing it?)

By the way, if I was able to make 25% year in and year out (you previously claimed 50%+ was being conservative) I personally, bigred77, would be a billionaire by age 66 without saving another penny. I just don't think that highly of myself :mrgreen:
Your maxim is silly. It doesn't matter if "everyone" did something. It only matters if "some people" did it. Just because not everyone on earth is a good skier, doesn't mean that some people cannot become good skiers.

I personally went from a negative net worth to a $8xxK net worth investing in real estate in a few short years. If my properties went down to $0 tomorrow (fat chance of that happening in a coastal market), I would still receive $4-5K of net cash flow between my rentals and K-1 partnerships. See if I care that you don't believe me. I actually had fun with it, I didn't even take it particularly seriously.

I personally know 10-12 people that did what I did, many of them less intelligent that you or I.

And by the way, I read and studied real estate for 2 years before pulling any triggers. But then again, most people on this forum spend an equal amount of time reading about securities and retirement accounts.

Judging by the many PMs I have already received in the last couple days on this forum from folks who are looking for something a little different than the 30-40 year plan, it warms my heart and lets me know that people are waking up, and want to take control of their investments and future.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

bigred77
Posts: 1938
Joined: Sat Jun 11, 2011 4:53 pm

Re: RE: Retirement and College Planning

Post by bigred77 » Tue Aug 15, 2017 3:48 pm

WanderingDoc wrote:
Tue Aug 15, 2017 3:25 pm

Your maxim is silly. It doesn't matter if "everyone" did something. It only matters if "some people" did it. Just because not everyone on earth is a good skier, doesn't mean that some people cannot become good skiers.

I personally went from a negative net worth to a $8xxK net worth investing in real estate in a few short years. If my properties went down to $0 tomorrow (fat chance of that happening in a coastal market), I would still receive $4-5K of net cash flow between my rentals and K-1 partnerships. See if I care that you don't believe me. I actually had fun with it, I didn't even take it particularly seriously.

I personally know 10-12 people that did what I did, many of them less intelligent that you or I.

And by the way, I read and studied real estate for 2 years before pulling any triggers. But then again, most people on this forum spend an equal amount of time reading about securities and retirement accounts.

Judging by the many PMs I have already received in the last couple days on this forum from folks who are looking for something a little different than the 30-40 year plan, it warms my heart and lets me know that people are waking up, and want to take control of their investments and future.
Ok... sounds like a get rich quick scheme to me, but good luck to you in the future.

stoptothink
Posts: 3790
Joined: Fri Dec 31, 2010 9:53 am

Re: RE: Retirement and College Planning

Post by stoptothink » Tue Aug 15, 2017 3:55 pm

WanderingDoc wrote:
Tue Aug 15, 2017 3:25 pm
bigred77 wrote:
Tue Aug 15, 2017 2:39 pm
WanderingDoc wrote:
Tue Aug 15, 2017 2:13 pm
bigred77 wrote:
Tue Aug 15, 2017 1:24 pm
WanderingDoc wrote:
Tue Aug 15, 2017 1:12 pm

Why are you writing him off so quick.. You don't think he could be financially independent in 10-15 years? That timeframe is an eternity if he invests in real estate. His $250K cash will buy him enough rental properties to generate $3000-5000 in monthly income in the next 18-24 months tops. That's paying retail. He could do better if he looks for below-market deals.

Aren't you tired of pigeon-holing everyone into a set plan that involves investing in mutual funds solely, and waiting 20-30 years and hope he doesn't retire in a market correction? He doesn't need that long, or even 10 years, to be financially independent.

It's truly sad that a grown man living in the US is being told that he needs to work until he's 70 to have a chance at retirement.
Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.
Several misconceptions I'd like to address.

1. Real estate is hard.
- No, it requires the ability to perform about the level of 3rd grade math.
2. Real estate is a "job", real estate is time consuming.
- No, I invested in RE as a busy medical resident, with a few hours a month put into managing real estate.

I am speaking of net income. All of the things you mentioned. Depending on who you ask, CapEx may or may not be included in the Net Operating Income, for apartments it usually isn't. For SFHs, I am including all of the things you mentioned.

$180K down on a 8-10 unit apartment building valued at $900K, NOI of $70K, after debt service, yields ~$30K net net annual cash flow after debt service, all expenses including property management, and cap ex reserves. That's an EASY $2500+ per month cash flow, without even spending the full $250K.

Instead of dismissing real estate, why not be curious and learn how it can be done? Be open minded.

As Jack Bogle once said (I'm paraphrasing here) "You can't argue with humble arithmetic."
I have an open mind. I really do. But 1 maxim always comes to mind:

If it sounds too good to be true, it probably is.

If it was so easy to achieve these returns, requiring 3rd grade math, a few hours a month, and access to 180k, why wouldn't someone else come along and just pay more for the property, accepting a slightly less return but still well in excess of more traditional investments? Is there such a surplus of the deals out there there people just can't get their hands on financing fast enough? Why are you, a medical resident with no formal training in real estate management finding and executing deals professional real estate investors just can't seem to manage (I swear I'm not trying to be snarky, just ask yourself if it's so easy why aren't more people doing it?)

By the way, if I was able to make 25% year in and year out (you previously claimed 50%+ was being conservative) I personally, bigred77, would be a billionaire by age 66 without saving another penny. I just don't think that highly of myself :mrgreen:
Your maxim is silly. It doesn't matter if "everyone" did something. It only matters if "some people" did it. Just because not everyone on earth is a good skier, doesn't mean that some people cannot become good skiers.

I personally went from a negative net worth to a $8xxK net worth investing in real estate in a few short years. If my properties went down to $0 tomorrow (fat chance of that happening in a coastal market), I would still receive $4-5K of net cash flow between my rentals and K-1 partnerships. See if I care that you don't believe me. I actually had fun with it, I didn't even take it particularly seriously.

I personally know 10-12 people that did what I did, many of them less intelligent that you or I.

And by the way, I read and studied real estate for 2 years before pulling any triggers. But then again, most people on this forum spend an equal amount of time reading about securities and retirement accounts.

Judging by the many PMs I have already received in the last couple days on this forum from folks who are looking for something a little different than the 30-40 year plan, it warms my heart and lets me know that people are waking up, and want to take control of their investments and future.
Besides the fact that I know several very intelligent people who had horrible life-changing experiences in real estate investing (myself included, and my PhD isn't in math, but I can do it at a 3rd grade level), what does any of this have to do with the OP?

bigred77
Posts: 1938
Joined: Sat Jun 11, 2011 4:53 pm

Re: RE: Retirement and College Planning

Post by bigred77 » Tue Aug 15, 2017 4:00 pm

stoptothink wrote:
Tue Aug 15, 2017 3:55 pm

Besides the fact that I know several very intelligent people who had horrible life-changing experiences in real estate investing (myself included, and my PhD isn't in math, but I can do it at a 3rd grade level), what does any of this have to do with the OP?
I derailed it. That's on me. I should have known better.

I apologize to the OP for hijacking the thread.

WanderingDoc
Posts: 355
Joined: Sat Aug 05, 2017 8:21 pm

Re: RE: Retirement and College Planning

Post by WanderingDoc » Tue Aug 15, 2017 4:28 pm

stoptothink wrote:
Tue Aug 15, 2017 3:55 pm
WanderingDoc wrote:
Tue Aug 15, 2017 3:25 pm
bigred77 wrote:
Tue Aug 15, 2017 2:39 pm
WanderingDoc wrote:
Tue Aug 15, 2017 2:13 pm
bigred77 wrote:
Tue Aug 15, 2017 1:24 pm


Ok WanderingDoc, you got to me. I didn't really engage with your posts previously claiming you were seeing sustainable 50% returns in real estate but I'm curious and asking you now if you can explain to me how to see 14.4% - 24% cash yields in real estate investments. I have more than double what the OP has and if I could turn that into 10k/month income I obviously would. I'm incredibly skeptical of claims of such high returns. If it was so, why wouldn't everybody be doing this? Perhaps you are confusing "income" with "revenue" (or maybe I am, in real estate are you calling total monthly rent money "rental income"? What about after expenses, taxes, debt servicing, capital reserve replacement, and maintenance costs are paid? That what I'm referring to as "income". Net monthly income after all expenses and allocation of capital for predictable future expenses)?

People keep recommending mutual fund investing because this is a self selecting board that really believes it's the best way to achieve the best risk adjusted returns. People who are very high on real estate may participate here but bigger pockets is their main website. I've gone over there and looked around myself but am more convinced of the Boglehead philosophy.
Several misconceptions I'd like to address.

1. Real estate is hard.
- No, it requires the ability to perform about the level of 3rd grade math.
2. Real estate is a "job", real estate is time consuming.
- No, I invested in RE as a busy medical resident, with a few hours a month put into managing real estate.

I am speaking of net income. All of the things you mentioned. Depending on who you ask, CapEx may or may not be included in the Net Operating Income, for apartments it usually isn't. For SFHs, I am including all of the things you mentioned.

$180K down on a 8-10 unit apartment building valued at $900K, NOI of $70K, after debt service, yields ~$30K net net annual cash flow after debt service, all expenses including property management, and cap ex reserves. That's an EASY $2500+ per month cash flow, without even spending the full $250K.

Instead of dismissing real estate, why not be curious and learn how it can be done? Be open minded.

As Jack Bogle once said (I'm paraphrasing here) "You can't argue with humble arithmetic."
I have an open mind. I really do. But 1 maxim always comes to mind:

If it sounds too good to be true, it probably is.

If it was so easy to achieve these returns, requiring 3rd grade math, a few hours a month, and access to 180k, why wouldn't someone else come along and just pay more for the property, accepting a slightly less return but still well in excess of more traditional investments? Is there such a surplus of the deals out there there people just can't get their hands on financing fast enough? Why are you, a medical resident with no formal training in real estate management finding and executing deals professional real estate investors just can't seem to manage (I swear I'm not trying to be snarky, just ask yourself if it's so easy why aren't more people doing it?)

By the way, if I was able to make 25% year in and year out (you previously claimed 50%+ was being conservative) I personally, bigred77, would be a billionaire by age 66 without saving another penny. I just don't think that highly of myself :mrgreen:
Your maxim is silly. It doesn't matter if "everyone" did something. It only matters if "some people" did it. Just because not everyone on earth is a good skier, doesn't mean that some people cannot become good skiers.

I personally went from a negative net worth to a $8xxK net worth investing in real estate in a few short years. If my properties went down to $0 tomorrow (fat chance of that happening in a coastal market), I would still receive $4-5K of net cash flow between my rentals and K-1 partnerships. See if I care that you don't believe me. I actually had fun with it, I didn't even take it particularly seriously.

I personally know 10-12 people that did what I did, many of them less intelligent that you or I.

And by the way, I read and studied real estate for 2 years before pulling any triggers. But then again, most people on this forum spend an equal amount of time reading about securities and retirement accounts.

Judging by the many PMs I have already received in the last couple days on this forum from folks who are looking for something a little different than the 30-40 year plan, it warms my heart and lets me know that people are waking up, and want to take control of their investments and future.
Besides the fact that I know several very intelligent people who had horrible life-changing experiences in real estate investing (myself included, and my PhD isn't in math, but I can do it at a 3rd grade level), what does any of this have to do with the OP?
The same can be said for an equal number of horrible life-changing experiences investing in mutual funds at the height of the most recent market crash. Many folks who have worked their whole life, investing their savings in the stock market, had to go back to work or signing receipts at the exit of Costco in their 50s, 60s, and 70s, because they trusted their future to their 401k.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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