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Dum Cumpster posted:You don't think most would encourage their clients to sell? I'm reading Red Notice right now, the book about American financial advisor that worked in Russia during the 2000s, and at one point it talks about how the fund was down 90% but he still made a decent living out of adviser fees and could do so as long as his clients didn't sell what was left.
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Sep 28, 2018 21:39
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As an advisor, you need AUM to earn the big bucks.
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Sep 28, 2018 22:07
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Yeah, but any AUM is better than 0, which is what they get if they tell their clients to sell, right?
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Sep 28, 2018 22:18
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Ur Getting Fatter posted:Yeah, but any AUM is better than 0, which is what they get if they tell their clients to sell, right?
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Sep 28, 2018 22:20
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Well of course they'd tell them to reinvest in these sweet gold stocks that are doing so well. Nothing safer than gold.
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Sep 28, 2018 22:31
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FordCQC posted:Would this be the right thread to talk about financial/investment advisors? If so, what's the popular opinion on them, waste of money or depends on your situation?
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Sep 28, 2018 23:18
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Hoodwinker posted:As an advisor, you need AUM to earn the big bucks. That's why you encourage your clients to sell into something "safe" to ride out the crash, then have them buy back in at the "bottom". If you're getting them into loaded funds then you get a bunch of money just from them moving it around and you still get that sweet AUM. Win win
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Sep 28, 2018 23:32
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FordCQC posted:Would this be the right thread to talk about financial/investment advisors? If so, what's the popular opinion on them, waste of money or depends on your situation? You might also benefit from a single session with an advisor to get overall advice like what insurance you need, what kind of estate planning you need, etc. Make sure it's a fiduciary fee-only planner, not a broker or a retail "advisor". Honestly, "stick all your money in Vanguard Retirement 20XX and leave it there" will already get you ahead of like 99% of people. Posting in this thread if you have any questions will get you better advice than 99% of advisors. Then you can get an advisor when you need to plan your million dollar bonus vested over five years, your own company starts making six figures, you inherit a trust, and divorce the person you bought your home and rental property with.
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Sep 29, 2018 17:17
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Shorthand rules: 1) if you need to use a lawyer and accountants (regularly, I'm not talking about writing a will once/doing taxes) to handle your assets/structuring you should probably also have an adviser working with them. 2) if you're an accredited investor or other similarly unrestricted person and use the adviser for access to non-public products, you should probably consider an adviser. 3) if you have no discipline, panic easily, and/or make short-term decisions, you should probably have an adviser as a prophylactic, though it's less a value-add then and more a less-value-subtracted. Otherwise you're likely losing more on their fees than any advantage they give you over "stick it in a couple of Vanguards."
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Sep 29, 2018 21:10
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At what point should I think about "alternative" investments? I'm getting married in just a few short weeks and I'm trying to figure out how to balance our savings. Unfortunately, we don't have access to creative strategies like mega backdoor Roth IRAs, so we're limited to 11k backdoor Roth + 37k 401k + employer matching. The remainder has to go to taxable accounts. At what point should we think about investing in things like rental properties?
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Sep 30, 2018 03:45
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Residency Evil posted:At what point should I think about "alternative" investments? I'm getting married in just a few short weeks and I'm trying to figure out how to balance our savings. Unfortunately, we don't have access to creative strategies like mega backdoor Roth IRAs, so we're limited to 11k backdoor Roth + 37k 401k + employer matching. The remainder has to go to taxable accounts. At what point should we think about investing in things like rental properties?
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Sep 30, 2018 03:53
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You can invest in equity or bonds in taxable brokerage accounts just fine. Matching your current allocation is a good start; the Bogleheads wiki has good information on how to maximize tax efficiency by putting different asset classes in taxable or non-taxable accounts. Ultimately, though, the total volume of savings and your acceptable level of risk will matter a lot more than squeezing every penny out of tax strategies. Rental properties are effectively a small business that you can run on the side. They can be lucrative, but they're very different from anything you buy on the market. Your ETF won't ever cost you a bunch of money because a lovely tenant decided to trash the place. On the other hand, they do well in bad economic times, and the income they produce tends to line up well with the local cost of living. Don't get into them without a clear understanding of what you're doing.
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Sep 30, 2018 04:03
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Residency Evil posted:At what point should I think about "alternative" investments? I'm getting married in just a few short weeks and I'm trying to figure out how to balance our savings. Unfortunately, we don't have access to creative strategies like mega backdoor Roth IRAs, so we're limited to 11k backdoor Roth + 37k 401k + employer matching. The remainder has to go to taxable accounts. At what point should we think about investing in things like rental properties? Only if you actually want to deal with rental properties.
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Sep 30, 2018 16:23
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Harry posted:Only if you actually want to deal with rental properties. I'm not sure of the answer to this question, or how to compare investing $100k versus using that $100k on a downpayment, and having rental income help pay for a mortgage.
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Sep 30, 2018 18:29
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Residency Evil posted:I'm not sure of the answer to this question, or how to compare investing $100k versus using that $100k on a downpayment, and having rental income help pay for a mortgage. Look at it like buying $400k of stocks with $300k of margin to buying a $400k house with a $300k mortgage and model your expected cash flows. Real estate can get cheaper leverage, but also is illiquid and is a concentrated investment.
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Sep 30, 2018 19:35
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Among many other reasons you might want to avoid real estate: https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/ SpelledBackwards fucked around with this message at 20:42 on Sep 30, 2018 |
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Sep 30, 2018 20:35
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SpelledBackwards posted:Among many other reasons you might want to avoid real estate: I get asked all the time why I don’t own, and I give reasons like these, but this is a great link going over all options. Great link.
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Sep 30, 2018 21:03
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SpelledBackwards posted:Among many other reasons you might want to avoid real estate:
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Sep 30, 2018 21:27
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dexter6 posted:thank you That's completely inapplicable to real estate investing. It even says so. crazypeltast52 posted:Look at it like buying $400k of stocks with $300k of margin to buying a $400k house with a $300k mortgage and model your expected cash flows. Real estate can get cheaper leverage, but also is illiquid and is a concentrated investment. You're never getting that level of margin, let alone the rate. Comparing it is dumb. Residency Evil posted:I'm not sure of the answer to this question, or how to compare investing $100k versus using that $100k on a downpayment, and having rental income help pay for a mortgage. Rental income shouldn't "help" pay the mortgage, it should pay it all and then provide a return on top. The most important part of a rental property is purchase price. If you gently caress that up, it's near impossible to recover.
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Sep 30, 2018 21:41
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Harry posted:You're never getting that level of margin, let alone the rate. Comparing it is dumb. This is a good point, the comparison should be a maximally leveraged portfolio for the same initial equity investment to compare apples to apples. My point was that comparing a leveraged real estate return to an unlevered stock portfolio’s return is going to skew your results.
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Sep 30, 2018 21:49
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Harry posted:You're never getting that level of margin, let alone the rate. Comparing it is dumb. Interactive Brokers has margin rates around 2.5-4%, which is less (and infinitely more flexible) than rental property mortgage rates. Margin requirements vary by stock, but you could also just buy futures contracts to effectively get 25+:1 leverage at what are essentially the same kind of low rates (interest is built into the cost of rolling the futures contracts every 3 months).
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Sep 30, 2018 22:05
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Harry posted:Rental income shouldn't "help" pay the mortgage, it should pay it all and then provide a return on top. The most important part of a rental property is purchase price. If you gently caress that up, it's near impossible to recover. Is this actually true in all cases? Sure that's ideal, but I wonder if that's always the case between the mortgage, insurance, maintenance, taxes, etc. In any case, I understand that we shouldn't think of our primary residence as an investment, but I'm curious about something like a duplex/four-plex or something.
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Oct 1, 2018 00:51
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Residency Evil posted:In any case, I understand that we shouldn't think of our primary residence as an investment, but I'm curious about something like a duplex/four-plex or something. FWIW, the article I linked did say why YOUR house is a terrible investment, and not talking about a purchase specifically for investment purposes. But a lot of the points still apply as written.
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Oct 1, 2018 05:17
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Residency Evil posted:Is this actually true in all cases? Sure that's ideal, but I wonder if that's always the case between the mortgage, insurance, maintenance, taxes, etc.
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Oct 1, 2018 15:26
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Residency Evil posted:Is this actually true in all cases? Sure that's ideal, but I wonder if that's always the case between the mortgage, insurance, maintenance, taxes, etc. Unless you are buying a trophy class AA 500+ unit building in the best markets of NYC or SF, no apartment investor can get financing without property NOI covering all of that plus some kind of cushion.
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Oct 1, 2018 15:34
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Residency Evil posted:Is this actually true in all cases? Sure that's ideal, but I wonder if that's always the case between the mortgage, insurance, maintenance, taxes, etc. If you're losing money on the house after expenses, the only thing you have left is the hope that the property significantly outpaces inflation. And you have to manage a property.
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Oct 1, 2018 16:26
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gvibes posted:Do you want to be a landlord? Why? I don't want to be a landlord, but I do want to make money, and my risk tolerance might be slightly higher with some money than with our regular retirement money. I was thinking that real estate might be one possibility of getting a higher return.
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Oct 1, 2018 17:00
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Consider a small cap index maybe? From my friends' and family's experience: real estate is more like a part job than passive investment.
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Oct 1, 2018 19:38
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Get a 5+ unit apartment property that can be professionally managed, or get a single-tenant office/warehouse building that only needs to interact with you once every 5 years. Do you have at least $200,000 in cash for a down payment?
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Oct 1, 2018 19:41
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GoGoGadgetChris posted:Get a 5+ unit apartment property that can be professionally managed, or get a single-tenant office/warehouse building that only needs to interact with you once every 5 years. You can get 4-plexes without having to do commercial financing, at least in some states. A cheap 4-plex could be as low as $200k and only take like $50k down + $5k closing nonsense.
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Oct 1, 2018 19:49
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baquerd posted:You can get 4-plexes without having to do commercial financing, at least in some states. A cheap 4-plex could be as low as $200k and only take like $50k down + $5k closing nonsense. (I asked the $200,000-in-cash-in-hand question to screen whether this guy is thoroughly money'd that it makes sense for him to be concentrating wealth in the EXTREME risk/minor reward environment that is regional investment grade real estate)  In My Opinion If you don't have 7 figures of diversified equities, it's too soon to worry about owning physical real estate.
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Oct 1, 2018 19:56
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GoGoGadgetChris posted:(I asked the $200,000-in-cash-in-hand question to screen whether this guy is thoroughly money'd that it makes sense for him to be concentrating wealth in the EXTREME risk/minor reward environment that is regional investment grade real estate) You’re in CRE too, aren’t you? I would say the same thing for net worth requirements, because while there are people who luck into succeeding at real estate investing without capital, to actually do it right really needs the ability to tie up capital for extended periods of time.
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Oct 1, 2018 20:15
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GoGoGadgetChris posted:Get a 5+ unit apartment property that can be professionally managed, or get a single-tenant office/warehouse building that only needs to interact with you once every 5 years. Yes. GoGoGadgetChris posted:(I asked the $200,000-in-cash-in-hand question to screen whether this guy is thoroughly money'd that it makes sense for him to be concentrating wealth in the EXTREME risk/minor reward environment that is regional investment grade real estate) Fair enough. I'm just curious when it makes sense to think about putting things away in things beyond a Roth/401k.
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Oct 1, 2018 20:15
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GoGoGadgetChris posted:
I'm on board. I think any one property should be at most 5% of your net worth (and preferably <2%), and overall direct holdings probably need to be kept to <20% of AA, so those numbers align pretty well. I've got a friend that is all-in on real estate and has fully embraced the biggerpockets lifestyle. It seems to be going OK for him, but he's since downsized his family of 6 into a 2 bedroom unit of a place he just bought because they wouldn't extend financing if it wasn't going to be owner-occupied (which also took some convincing to get the lender to believe him). He keeps trying to toss these new schemes around and doesn't seem to quite grasp that leverage when buying real property for direct income purposes is a bit less risky than leverage when buying speculative assets and he's probably going to lose his shirt writing options and buying leveraged commodity futures.
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Oct 1, 2018 20:25
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Residency Evil posted:I'm just curious when it makes sense to think about putting things away in things beyond a Roth/401k. Do you put $18,500 into your 401k and $5,500 into your Roth IRA every year? It's at least beyond that! Also, your post makes it sound like you feel real estate is adding additional diversification beyond your IRA/401k. It is the opposite. Your IRA/401k (hopefully) contain index funds that provide you with full exposure to everything under the sun. Buying a specific type of building, in a specific city, in a specific neighborhood, will reduce your diversification and make you more susceptible to changes in, say, Office rent levels, or investor/tenant demand for unreinforced masonry buildings, or [Your City] income levels, that would be a tiny ripple to your equities but a colossal swing to your property.
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Oct 1, 2018 20:35
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GoGoGadgetChris posted:Do you put $18,500 into your 401k and $5,500 into your Roth IRA every year? Yes? GoGoGadgetChris posted:Also, your post makes it sound like you feel real estate is adding additional diversification beyond your IRA/401k. It is the opposite. Your IRA/401k (hopefully) contain index funds that provide you with full exposure to everything under the sun. Buying a specific type of building, in a specific city, in a specific neighborhood, will reduce your diversification and make you more susceptible to changes in, say, Office rent levels, or investor/tenant demand for unreinforced masonry buildings, or [Your City] income levels, that would be a tiny ripple to your equities but a colossal swing to your property. Fair enough. I'm not sure where I mentioned that real estate would give me additional diversification, but I did mention that I realize it'd be riskier, and that I'm wondering when it makes sense to think about. Seems like there's some agreement that 7 figures is a reasonable threshold.
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Oct 1, 2018 20:45
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Residency Evil posted:I don't want to be a landlord, but I do want to make money, and my risk tolerance might be slightly higher with some money than with our regular retirement money. I was thinking that real estate might be one possibility of getting a higher return. You're a doctor right? How many hours a week do you work? The White Coat Investor guy says real estate plus a 70 hour job is really hard to do. But it's do-able.
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Oct 1, 2018 20:53
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I think you are going to get better responses if you ask your question on the bogleheads forum, or a forum targeting high earners. Bogleheads often point people towards https://www.biggerpockets.com/ when they are high net worth and looking to diversify into real estate.
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Oct 1, 2018 20:53
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A lot of Bogleheads will tell you the same as here. Here's a guide from last year on Bogleheads regarding landlording: https://www.bogleheads.org/forum/viewtopic.php?t=226980 After reading all of that, if you don't want to just dump more money into stocks, then maybe you should be a landlord
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Oct 1, 2018 21:22
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Why limit yourself to residential real estate? Commercial buildings have higher cap rates (as in, you get more income per dollar spent on the property) and have fewer interactions with your tenants. I've never had a commercial tenant ask for an extension on the rent because their mom died and their kid needs an operation and it's Christmas.
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Oct 1, 2018 21:25
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