Remind me (again) how real estate isn't a GREAT investment?

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golfCaddy
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Joined: Wed Jan 10, 2018 10:02 pm

Re: Remind me (again) how real estate isn't a GREAT investment?

Post by golfCaddy » Mon Aug 20, 2018 5:52 pm

KlangFool wrote:
Sun Aug 19, 2018 4:17 pm
WanderingDoc wrote:
Sun Aug 19, 2018 4:12 pm
lostdog wrote:
Sun Aug 19, 2018 4:02 pm
patrick wrote:
Sat Aug 18, 2018 8:58 pm
WanderingDoc wrote:
Sat Aug 18, 2018 5:16 pm
No. If I tried utilizing my TSP balance today I would pay a 10 or 20% withdrawal penalty (I'm not over 65) and a 25% tax on traditional assets. Truly a (quality of) life-deferral plan. In a taxable account you have to pay 15-38% taxes. It's a mediocre investment for tax consideration purposes.
The penalty actually goes away sooner -- at 59 and a half. Furthermore, the penalty can often be avoided even before that (the contribution amount in a Roth is always penalty free to withdraw, and traditional balances can be converted to Roth and then the conversion amount is penalty free after 5 years).
72t also?
I am well aware of filling the lower tax brackets when you decide to retire. That is literally a joke. You have just decided that you want to be poor during your retirement. You have decided that you want a lower income when you are older. I don't know about you, but I want to have a higher income the older I get. That is my mentality. Consider expanding your thinking. Even Dave Ramsey makes more when he's older then he did when he was younger. That's what we all should strive for. Deciding to be poor and in lower tax brackets as a strategy to avoid penalties and taxes is laughable, at best.
WanderingDoc,

May I suggest you start your own topic with a title of "WanderingDoc System of Real Estate Investing"? Then, whoever is interested in your system can check out your thread and ask the question.

KlangFool
+1

Stormbringer
Posts: 609
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Re: Remind me (again) how real estate isn't a GREAT investment?

Post by Stormbringer » Mon Aug 20, 2018 6:46 pm

FoolMeOnce wrote:
Mon Aug 20, 2018 10:51 am
Here is a recent post with numbers explaining why he laughs at a measly 20% annual return: viewtopic.php?f=10&t=253819&p=4019435#p4017203
Here are my numbers on that property: https://docs.google.com/spreadsheets/d/ ... 4B/pubhtml

So, mid to high teens for a while, eventually decaying to single digit returns. The only way to get numbers anything like what he is saying is to make wild assumptions about the appreciation and assume you never have vacancies or maintenance expenses. Nor does it make much sense to assume that a $100K house is going to go up in value rapidly -- if that were the track record in that market, why is the house only worth $100K?
"Compound interest is the most powerful force in the universe." - Albert Einstein

columbia
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Re: Remind me (again) how real estate isn't a GREAT investment?

Post by columbia » Mon Aug 20, 2018 7:01 pm

Direct ownership of rental properties equals running a business.

Would you consider owning a pizza parlor an investment? I wouldn’t; it’s a business/work avenue for acquiring income.

andypanda
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Location: Richmond, Virginia

Re: Remind me (again) how real estate isn't a GREAT investment?

Post by andypanda » Mon Aug 20, 2018 7:12 pm

"Example #1

1) Be the top 10 students of the high school class of your country"

You reminded me of one of the ways my father motivated me when I was a very young child. He told me to study and do well, and that he had studied hard and finished 2nd in his high school graduating class.

A few years later I discovered that it was true, but that he had attended a three-room school in a rural area south of Charlottesville, Virginia. He did finish 2nd, but there were only 11 in his graduating class.

It worked for both of us.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: Remind me (again) how real estate isn't a GREAT investment?

Post by KlangFool » Mon Aug 20, 2018 7:18 pm

andypanda wrote:
Mon Aug 20, 2018 7:12 pm
"Example #1

1) Be the top 10 students of the high school class of your country"

You reminded me of one of the ways my father motivated me when I was a very young child. He told me to study and do well, and that he had studied hard and finished 2nd in his high school graduating class.

A few years later I discovered that it was true, but that he had attended a three-room school in a rural area south of Charlottesville, Virginia. He did finish 2nd, but there were only 11 in his graduating class.

It worked for both of us.
andypanda,

1) Whatever works for you.

2) It won't work for me. Many members of my family are top-ranked students of the country.

KlangFool

KlangFool
Posts: 10445
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Re: Remind me (again) how real estate isn't a GREAT investment?

Post by KlangFool » Mon Aug 20, 2018 7:24 pm

Stormbringer wrote:
Mon Aug 20, 2018 6:46 pm
FoolMeOnce wrote:
Mon Aug 20, 2018 10:51 am
Here is a recent post with numbers explaining why he laughs at a measly 20% annual return: viewtopic.php?f=10&t=253819&p=4019435#p4017203
Here are my numbers on that property: https://docs.google.com/spreadsheets/d/ ... 4B/pubhtml

So, mid to high teens for a while, eventually decaying to single digit returns. The only way to get numbers anything like what he is saying is to make wild assumptions about the appreciation and assume you never have vacancies or maintenance expenses. Nor does it make much sense to assume that a $100K house is going to go up in value rapidly -- if that were the track record in that market, why is the house only worth $100K?
Stormbringer,

Would you mind humor my simple mind? It is too hard for me to read the spreadsheet.

1) What is the PITI of your property?

2) What is the rent?

3) Is it cash flow positive?

Thanks in advance.

KlangFool

Stormbringer
Posts: 609
Joined: Sun Jun 14, 2015 7:07 am

Re: Remind me (again) how real estate isn't a GREAT investment?

Post by Stormbringer » Mon Aug 20, 2018 8:32 pm

KlangFool wrote:
Mon Aug 20, 2018 7:24 pm
Would you mind humor my simple mind? It is too hard for me to read the spreadsheet.

1) What is the PITI of your property?

2) What is the rent?

3) Is it cash flow positive?
1) Using the numbers WD provided, plus some guestimation of my own I come up with a PITI of $650.

2) WD said $900-950. I used the larger number.

3) Barely. Rent minus PITI leaves at most $300 per month. Then you have to account for vacancies, capital reserves, maintenance, and someone to manage it for you. You can probably count on about $50 a month in the first few years.
"Compound interest is the most powerful force in the universe." - Albert Einstein

KlangFool
Posts: 10445
Joined: Sat Oct 11, 2008 12:35 pm

Re: Remind me (again) how real estate isn't a GREAT investment?

Post by KlangFool » Mon Aug 20, 2018 8:41 pm

Stormbringer wrote:
Mon Aug 20, 2018 8:32 pm
KlangFool wrote:
Mon Aug 20, 2018 7:24 pm
Would you mind humor my simple mind? It is too hard for me to read the spreadsheet.

1) What is the PITI of your property?

2) What is the rent?

3) Is it cash flow positive?
1) Using the numbers WD provided, plus some guestimation of my own I come up with a PITI of $650.

2) WD said $900-950. I used the larger number.

3) Barely. Rent minus PITI leaves at most $300 per month. Then you have to account for vacancies, capital reserves, maintenance, and someone to manage it for you. You can probably count on about $50 a month in the first few years.
Thanks.

KlangFool

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Re: Remind me (again) how real estate isn't a GREAT investment?

Post by LadyGeek » Mon Aug 20, 2018 9:19 pm

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