Getting a late start. 38yr old seeking advice.

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Unstoppable247
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Joined: Sun Jul 30, 2017 9:16 pm

Getting a late start. 38yr old seeking advice.

Post by Unstoppable247 » Sat Jan 27, 2018 5:40 pm

Hey all. My current situation looks like this. I currently have 2 homes. One is a rental and has 10 yrs left. Renter covers my 15 yr loan payment so we break even on that. We have a primary home also that has 20yrs left with just over 100k equity. I am in the mortgage business and commission paid. Income a month fluctuates from 8-15k a month. I have laid low the last 7 years raising my 2 boys who are now back in school so dad is back to work full time. My company matches up to 6% in 401k. I am unsure as if I should max 401k or start buying 1 or 2 single family homes a year for the next 5 years. I am in Knoxville TN and homes are still affordable and I see lots of potential. Originally from Orange County CA. I don't claim to be the smartest guy in the world but I do know I have an unbelievable work ethic and am not afraid of hard work. With that being said I can use some guidance. All signs are pointing to my income getting to that 20-25k a month very soon. What do I do? I'd like to be somewhat retired by 55. No other assets other than the 2 houses we have.
Wife is a teacher and will have a decent pension.
I am a risk taker.
Rental numbers. Owe 110k value of 190
Primary home owe 295k value 400k
What little savings we had was used to pay off about 40k in debt, student loans and credit cards. Just did this!

Starting from scratch. Seeking knowledge! Thank you!

PFInterest
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Joined: Sun Jan 08, 2017 12:25 pm

Re: Getting a late start. 38yr old seeking advice.

Post by PFInterest » Sat Jan 27, 2018 10:16 pm

If you make ~200K/yr you can spare 18K in 401k and still plan on buying rentals.

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camillus
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Re: Getting a late start. 38yr old seeking advice.

Post by camillus » Sun Jan 28, 2018 12:26 am

I would make sure to capture the 6% 401k match at the very least. I agree with PFinterst that maxing your 401k is a great idea.

Other than that, this is an investing forum and not a real estate forum. I would expect that someone like you could leverage your expertise in home buying into a neat little real estate portfolio.

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rocket354
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Re: Getting a late start. 38yr old seeking advice.

Post by rocket354 » Sun Jan 28, 2018 12:52 am

Unstoppable247 wrote:
Sat Jan 27, 2018 5:40 pm
Renter covers my 15 yr loan payment so we break even on that.
Even assuming you are including taxes and insurance in that, you still have maintenance and repairs that you are responsible for. Therefore, you aren't breaking even. You are operating at a cash loss. I don't know how much equity buildup/appreciation you will get or expect to get, but you likely have better uses for your money.

Unstoppable247
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Joined: Sun Jul 30, 2017 9:16 pm

Re: Getting a late start. 38yr old seeking advice.

Post by Unstoppable247 » Sun Jan 28, 2018 7:42 am

Maintenance and repairs not included however the 1100 in rent receive is my total house payment piti. I will start maxing out my 401k. By end of year I should have close to 100k to invest in. Should I concentrate solely in equities? 3-5 rock solid companies or index funds. I have a small stake in Cisco, bought at 20 a share and has performed nicely. Sad part is I only have like 50 shares of it. Love stocks always wanted to be a stock broker when I was growing up. Love hearing all the success stories and the discipline it takes for so many om here and honestly looking to duplicate if possible.

TwstdSista
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Re: Getting a late start. 38yr old seeking advice.

Post by TwstdSista » Sun Jan 28, 2018 8:12 am

In a taxable account, consider solely equities -- specifically VTSAX Vanguard Total Stock Market Index Fund Admiral (.04%) and/or VTIAX Vanguard Total International Market Index Fund Admiral (.011%).

Hold bonds (per your desired asset allocation) in your pre-tax accounts. Your emergency fund should be in a high interest savings account earning at least 1%.

As for rentals, not my things. So I have no advice for you there. Best of luck, and keep reading and learning!

kjvmartin
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Joined: Wed Jan 21, 2015 8:57 am

Re: Getting a late start. 38yr old seeking advice.

Post by kjvmartin » Sun Jan 28, 2018 8:30 am

#1 Pick a Target Date Retirement fund in your 401k. Max your 401k.

When I compare the average return of index funds vs. the average return of real estate and then consider the work involved in owning real estate...

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Pajamas
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Re: Getting a late start. 38yr old seeking advice.

Post by Pajamas » Sun Jan 28, 2018 11:03 am

Max out your retirement account. At a minimum, go for the full employer match. Why leave part of your compensation on the table, especially in a tax-advantaged account?

How have residential real estate values risen in Knoxville in the past? Have they provided better capital gains than equities or even bonds? I am not familiar with the market there but a little Googling makes me think you should not expect much appreciation of real estate there beyond inflation.

chevca
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Re: Getting a late start. 38yr old seeking advice.

Post by chevca » Sun Jan 28, 2018 11:20 am

So, combined you and DW have quite a nice income? I'd say definitely max out your 401k. Then what does DW have available to her, 403b, 457b... plus the pension contributions? Have her max out what is available to her. You guys are probably in backdoor Roth territory. Look into getting those going. Then between taxable or real estate... I'd choose taxable, but with your insight to mortgages and wanting to be a landlord, maybe real estate for you.

Age 38 isn't that late of a start and you guys are in a good position to start adding up the portfolio quickly.

ChinchillaWhiplash
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Location: Colorado

Re: Getting a late start. 38yr old seeking advice.

Post by ChinchillaWhiplash » Sun Jan 28, 2018 11:33 am

What tax bracket are you in? Don't forget you can save a bunch on federal and state taxes by contributing to your 401k. You fund your retirement AND get the tax credit. You can potentially save thousands by doing this and make money too.

Unstoppable247
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Joined: Sun Jul 30, 2017 9:16 pm

Re: Getting a late start. 38yr old seeking advice.

Post by Unstoppable247 » Sun Jan 28, 2018 12:24 pm

We will be somewhere in the 28-33% tax bracket range. I just started working full time again back in July of 2017. I have not been in this tax bracket in nearly a decade. Stayed home with my 2 boys 8-6 and did flips and loans on a Part time basis. It is definitely nice hearing that I am not over the hill and can get a good jump start being so late to the party. The mortgage business is very iffy so I am trying to make all I can while the getting is good. Hoping for a good run 5+ years where income can be anywhere from 100-300k pre-tax. Again there are a lot of moving parts therefore the wide range in income. 401k is close to max but I will go ahead and max out the 18k a year.

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