Search found 2270 matches

by jimb_fromATL
Wed Aug 16, 2017 9:33 am
Forum: Personal Investments
Topic: TSP Loan vs Credit union Loan
Replies: 24
Views: 2928

Re: TSP Loan vs Credit union Loan

These are two very, very different "things". A credit union loan is actually (probably low interest rate) a loan. The TSP "loan" is actually a redemption of the investment and repurchase of the investment (or another investment) with more that is called "interest". Go with the actual loan from a credit union. Thanks, I understand the difference you mention. However, I am more interested in your rationale for choosing a "traditional" credit union loan especially given the difference in net value between the two options. I can't do or cite a detailed analysis - but I believe the flaw in your logic is that you have chosen a part of your TSP on a low return choice. If I understand what you are saying, I ...
by jimb_fromATL
Fri Aug 11, 2017 10:50 am
Forum: Personal Finance (Not Investing)
Topic: .x.
Replies: 37
Views: 9579

Re: "Upper Middle" Class - ditch WLI or ride it?

Ditch it. Take the money, pay off your debts, then take payment money and invest it! IMO it's not good use of the money to postpone any tax-deferred or tax-advantage retirement space to pay down manageable debts, matched or not. The OP is in the 25% tax bracket for the feds, plus probably paying state income tax too. That's at least 25% or more of income that will not be paying bills, buying necessities, saving for the down payment, paying down the debt, or earning compound interest for the rest if his life either. The taxes alone will be several times more than the interest that the after-tax money will save in interest on the debt. Even in the best case of reinvesting the freed-up payments after this relatively small loan is paid off, it...
by jimb_fromATL
Tue Aug 08, 2017 4:07 pm
Forum: Personal Finance (Not Investing)
Topic: When does renting make sense
Replies: 112
Views: 14923

Re: When does renting make sense

imperio wrote:
jimb_fromATL wrote: That doesn't prove anything except that renters typically have a lot less income and live in a lot less expensive homes.

You can indeed rent more cheaply than buying provided you rent a less expensive place. You can also live in a van down by the river or in your mom's basement cheaper than renting a more comfortable place.

However, in normal markets and economic times --other than in bubble and burst periods -- the cost of renting will be about the same or more than buying a comparable home.
,,,
when comparing renting versus buying comparable homes...
jimb


[Citation needed] :happy

Arithmetic.

jimb
by jimb_fromATL
Tue Aug 08, 2017 2:56 pm
Forum: Personal Finance (Not Investing)
Topic: When does renting make sense
Replies: 112
Views: 14923

Re: When does renting make sense

You will spend more on your housing expense when you buy a house. KlangFool [Citation needed] Here's one.... ...Housing expenditures remained markedly different for homeowners and renters. Homeowners continued to spend a larger sum of money on housing than renters did; however, renters spent a larger share of their expenditures on housing than homeowners. https://www.bls.gov/opub/btn/volume-1/pdf/a-comparison-of-25-years-of-consumer-expenditures-by-homeowners-and-renters.pdf https://image.ibb.co/evqePv/Untitled.png That doesn't prove anything except that renters typically have a lot less income and live in a lot less expensive homes. You can indeed rent more cheaply than buying provided you rent a less expensive place. You can also live in...
by jimb_fromATL
Tue Aug 08, 2017 1:15 pm
Forum: Investing - Theory, News & General
Topic: Why do graphical comparisons of mutual fund trailing returns change with the length of the time horizon?
Replies: 18
Views: 2187

Re: Why do graphical comparisons of mutual fund trailing returns change with the length of the time horizon?

Try portfolioVisualizer.com It compares total return with dividends reinvested. Unclick "logarithmic scale" to get a better look at the difference. And while you're at it, try it with periodic investments like a monthly amount you'd be contributing to a 401(k) or perhaps yearly contributions like an IRA .. the way I did in the chart at that link. PortfolioVisualizer is one of the few online packages I know of that allows periodic contributions. It's important IMO because the results will often be considerably different depending on whether the start date happens to be at a high or low in the market. And most people don't just invest one lump sum and never add anything else to their portfolio for the rest of their life anyway. jimb
by jimb_fromATL
Tue Aug 08, 2017 12:35 pm
Forum: Personal Finance (Not Investing)
Topic: Buying a house with a current tenant?
Replies: 14
Views: 2085

Re: Buying a house with a current tenant?

in many (but not all) states you can evict a renter on purchase IF you are purchasing to occupy the place yourself. You cant do it to be able to raise rent etc, but if you purchase a place to be primary it can be terminated the lease Not if the tenant has a lease. A lease goes with the property. Even if the lease has expired and it has become a month-to-month tenancy, state laws define how much notice is required before the tenant must leave. From this site and many other sources: "... In almost every state, the lease and security deposit must be transferred with the property, and the new owner becomes the new landlord. A fixed-term lease does not automatically terminate when a property is sold..." another article ... of many on ...
by jimb_fromATL
Mon Aug 07, 2017 11:28 pm
Forum: Personal Consumer Issues
Topic: Metal vs Vinyl sheds
Replies: 25
Views: 3475

Re: Metal vs Vinyl sheds

We are unfortunately running out of space in our small (1300 sqft) home. I plan to purchase and install a shed in our 5-ft wide sideyard (and converting the garage to an office). I am looking at some 4ft-by-Xft metal/vinyl sheds listed below but am not able to decide whether to go with vinyl or metal. 1. 4x10 metal shed ~$500: https://www.amazon.com/Arrow-Shed-YS410-10-Feet-Storage/dp/B00097IDJE/ 2. 4x8 vinyl shed ~$600 https://www.amazon.com/Duramax-06625-SideMate-4x8/dp/B00BKAJ02S/ Many folks on another thread ( https://www.bogleheads.org/forum/viewtopic.php?t=216096 ) recommend wooden sheds. But wooden sheds seem to be expensive (>$1000) and/or require some prior experience building with wood. Would appreciate any inputs on whether to g...
by jimb_fromATL
Mon Aug 07, 2017 8:35 pm
Forum: Personal Finance (Not Investing)
Topic: Buying a house with a current tenant?
Replies: 14
Views: 2085

Re: Buying a house with a current tenant?

You will have a loan at a non owner-occupied rate and may need to put more than 20%. You will need a rental insurance policy. You will want to do a walk through just before escrow closes and get confirmation of the state of the premises with the tenant. You risk having to do an eviction at the end of the lease term if the tenant doesn't want to move. The price should compensate for the above referenced risks. Non owner-occupied rate? Googling it, it seems there's indeed a higher rate for investment properties. But this isn't an investment property. It's merely a delay before I can move in. If someone asked the purpose of the purchase, I feel I could honestly say that it is for me to live in. What's rental insurance? I'd have regular homeow...
by jimb_fromATL
Mon Aug 07, 2017 4:41 pm
Forum: Personal Consumer Issues
Topic: Replace car battery after X years or wait till it dies?
Replies: 162
Views: 33661

Re: Replace car battery after X years or wait till it dies?

The Dan wrote: To get the battery out, you have to put the passenger seat all the way forward and up. However, all the seat controls are electric, so if the battery dies, then you are forced to unbolt the seat to get it out of the way. What an "interesting" design!
I didn't think even Daimler's influence on Chrysler products would come up with something that hard. Sho 'nuff, according to the online owner's manual there are remote battery jumper terminals under the hood. Jumping it long enough to move the seat would seem to be easier.

On the plus side, your battery probably runs cooler and lasts longer, and the average thief is not as likely to steal it if they can't find it.

jimb
by jimb_fromATL
Mon Aug 07, 2017 1:48 pm
Forum: Personal Consumer Issues
Topic: Replace car battery after X years or wait till it dies?
Replies: 162
Views: 33661

Re: Replace car battery after X years or wait till it dies?

Chip wrote: I did get sort of stranded once, but I had ignored the warning signs. But I was lucky enough to be in the parking lot of a discount store that sold batteries. And had tools with me. :D
That reminds me of the time the fuel pump failed on my '80 Corolla when it was about 9 years old. This was in the days of carburetors, with mechanical fuel pumps mounted on the engine that could be changed by removing two nuts and two fuel line connections. It failed while it was in a covered parking garage at work downtown. I told co-workers that Toyotas were so dependable that if they do fail, they're designed to do it where it's convenient to fix them.

jimb
by jimb_fromATL
Mon Aug 07, 2017 1:39 pm
Forum: Personal Consumer Issues
Topic: Replace car battery after X years or wait till it dies?
Replies: 162
Views: 33661

Re: Replace car battery after X years or wait till it dies?

Modern-day batteries don't usually give you the old-fashioned warning of problems by becoming progressively weaker like batteries did in the old days. ... I have also learned from experience that no matter how expensive the battery or how long the warranty, the average life of a car battery is about 3.5 years. We have different experience bases. I also keep cars a long time and haven't yet been stranded without warning. I did get sort of stranded once, but I had ignored the warning signs. But I was lucky enough to be in the parking lot of a discount store that sold batteries. And had tools with me. :D ... I've been averaging 7 year life on the batteries I buy. As other posters have mentioned, when they're starting to fail I hear the starte...
by jimb_fromATL
Mon Aug 07, 2017 12:09 pm
Forum: Personal Consumer Issues
Topic: Replace car battery after X years or wait till it dies?
Replies: 162
Views: 33661

Re: Replace car battery after X years or wait till it dies?

I replace mine when needed. Just listen to how your car starts, you'll know when its time. Not my experience. Absolutely no problems til I left the radio on for 5 minutes while parked at the airport waiting to pick up guests. Car wouldn't start; needed jump; fairly awkward place for that to happen. I could have easily been at a trailhead at dusk with no one around and no cell service. Will look into the jump starters. Consumer reports says they don't work well at colder temperatures and aren't approved at very hot temperatures, such as would be found sitting in a closed car during the summer. But better than nothing. Modern-day batteries don't usually give you the old-fashioned warning of problems by becoming progressively weaker like batt...
by jimb_fromATL
Sun Aug 06, 2017 3:49 pm
Forum: Personal Finance (Not Investing)
Topic: Want to finish mortgage in five years, how much to pay?
Replies: 15
Views: 2950

Re: Want to finish mortgage in five years, how much to pay?

I would love to be done with our mortgage five years from now on but at our current rate of payment we will be done in seven more years. I cannot increase my monthly payment anymore as our budget does not allow it but I can allocate additional money annually from a bonus. How much would I have to put down annually to pay the mortgage off in five years? Four years? Details: Original loan: 312k Rate: 4.125% Current balance: 280k Started: September 2016, 15 year loan Paying an extra 1500 in principal monthly Lump sum payment would begin October 2017 and be in October of each year after. Thank you for the help! IMO, for irregular prepayments, the easiest and most accurate way for people who are not strong with spreadsheets is usually to build ...
by jimb_fromATL
Sun Aug 06, 2017 1:47 pm
Forum: Personal Finance (Not Investing)
Topic: The age old debate 30 vs 15 [year mortgage rate]
Replies: 41
Views: 7097

Re: The age old debate 30 vs 15 [year mortgage rate]

My wife and I did a 15 year loan 2 years ago. The rate was 2.875% the day we closed, as opposed to 3.5% for the 30 year at the time. We ended up buying our rate down to 0.125%. Getting the 15 year was the best financial decision we've ever made in our lives. I assume you mean you bought the rate down by 0.125%, not to 0.125%. I can't imagine any bank issuing a loan at an eighth of a percent, unless perhaps you fronted them the entire loan amount. :mrgreen: NACA has subsidized loans that low which are intended for low to moderate income folks who commit to buy homes and live in low income/economically distressed areas ... along with a lot of rules and restrictions and participation in programs. About NACA "...NACA’s eligibility require...
by jimb_fromATL
Sun Aug 06, 2017 7:05 am
Forum: Personal Finance (Not Investing)
Topic: 401k loan for house down payment?
Replies: 11
Views: 1956

Re: 401k loan for house down payment?

Here is my situation that I hope to collect some wise suggestion form Bogeheads: I am owning a house but I am going to convert it to a rental property due to recent job relocation (do not suggest selling it or getting HELOC). I am going to purchase a new house but do not have enough CASH for down payment. I have more than enough stock equity in taxable accounts. If I sell stock equity, the substantial investment gain will result in too high MAGI to influence my qualification for Roth IRA contributions that I have done for 2017. Now I am thinking to sell partial stock equity and get a 401k loan partially to fund my down payment. I will probably be able to repay the 401k loan within 1 year. Any risks? Any other suggestions or comments are ap...
by jimb_fromATL
Fri Aug 04, 2017 3:27 pm
Forum: Investing - Theory, News & General
Topic: VGSTX: Is Vanguard STAR Still A Star?
Replies: 22
Views: 9490

Re: VGSTX: Is Vanguard STAR Still A Star?

Remember that since its inception, Wellesley Income has only trailed the S&P 500 by .4% CAGR. Considering its AA and its comparatively low volatility, I think that's pretty incredible. Considering that interest rates have nowhere but up to go for a while, I don't think if it will be able to continue that track record, but still... Are you sure about the 0.4% CAGR difference? The Price & Performance web page for the fund gives the Annual Total Return as of 07/31/2017 since inception (07/01/1970) as 9.84%. The historical values I have for the S&P 500 total return index for those start and end dates are 34.26 and 4774.56, respectively. The CAGR calculated from those index values is 11.06%. Don't get too hung up on minor difference...
by jimb_fromATL
Fri Aug 04, 2017 2:39 pm
Forum: Investing - Theory, News & General
Topic: VGSTX: Is Vanguard STAR Still A Star?
Replies: 22
Views: 9490

Some Gee-Whiz information

Here's how the Star fund has performed compared to some other Vanguard funds and a few others I happened to have on file -- through 2016. This shows the growth of a lump sum, plus the growth of periodic contributions, which is probably more meaningful for people who invest for retirement every year -- instead of one single lump sum at the beginning of their careers. CAGR (Compound Annual Growth Rate) or APY for a single lump sum and APY for DCA (Dollar Cost Averaging) with annual contributions: VG Star fund: For 31 years from 1986 through 2016 VGSTX has had a CAGR of 9.083% for a lump sum. The APY for DCA with annual contributions has been 8.38%. For the last 17 years the lump CAGR has been 6.322% and DCA contributions have averaged an APY ...
by jimb_fromATL
Thu Aug 03, 2017 9:22 pm
Forum: Personal Finance (Not Investing)
Topic: Should i switch to a 15/1 fixed mortgage
Replies: 6
Views: 1179

Re: Should i switch to a 15/1 fixed mortgage

How much are the closing costs? Will you pay them up front out of pocket or roll them into the loan? How long do you expect to own the home? What are the caps for each change and the maximum rate? What index does the current mortgage follow? What index, and what are the caps on the new loan? The problem is that you're guaranteeing to pay several thousand dollars more interest on the new mortgage than you will on the current mortgage between now and the first adjustment. So ... you'll need to live in the home for some time past the first rate adjustment, and have the rate go up substantially before the savings for the higher 2.8% rate can make up for the closing costs and lower rate of the current mortgage. Unless you're going to live there ...
by jimb_fromATL
Wed Aug 02, 2017 10:14 pm
Forum: Personal Finance (Not Investing)
Topic: Buying Boat - Equity Loan or Cash
Replies: 9
Views: 1423

Re: Buying Boat - Equity Loan or Cash

Is it a house boat? If so, go for it.

I don't think it's a good idea to put your home up as equity to guarantee a loan for anything you can't live in. If times were to get really tough financially and you can't make the payments on time all the time, you won't suffer a terrible hardship if the lender takes your car or boat. But if you've pledged your home as collateral with a home equity loan, they can take your home.

So ... if you insist on putting your home at risk, I recommend that it be only for a large car or van. That way if you do fall on hard times it will be big enough for you and your family to live in. In this case instead of living in a van down by the river, they would just be living in a boat on the river.

jimb
by jimb_fromATL
Wed Aug 02, 2017 4:34 pm
Forum: Personal Finance (Not Investing)
Topic: Refinance Questions
Replies: 8
Views: 1213

Re: Refinance Questions

Thank you for the responses. The reason for the refi is to get me off the mortgage, not for a lower interest rate or length of the loan. The wife and I have a legal separation and I gave her the house. The separation document says we either sell and she gets all the proceeds or she refinance with only her name on the mortgage . She decided to refi and keep the house. Sorry for the problem. But at least the potential extra cost is not an issue. I still can't understand this level of appraisal since the current mortgage balance is 140K, the tax assessed value is 220K which means the house has at least 80K in equity. Actually houses like ours are selling for over 300K so in reality there is probably more than 150K in equity. The house is in g...
by jimb_fromATL
Wed Aug 02, 2017 4:07 pm
Forum: Personal Finance (Not Investing)
Topic: Help with understanding - pay taxes now or in future
Replies: 59
Views: 5318

Re: Help with understanding - pay taxes now or in future

I have been confused about what seems like a black/white topic in reading personal finance articles. Hoping someone here can help clarify this for me. I understand the general approach in terms of hierarchy is to get the 401k/403b match, then max out Roth, then max out 401k/403b, before adding money to a taxable account. However, with the assumption that taxes always go up, doesn't it make sense to just pay today's known federal and state income tax rate instead of deferring and paying an unknown , likely higher, tax rate? If the fees and funds offered in a 401k/403b program are inferior, then this approach seems to make even more sense. In my situation, maxing out 401k/403b brings me down from 25% to 15% tax bracket, but at the expense of...
by jimb_fromATL
Tue Aug 01, 2017 5:26 pm
Forum: Personal Finance (Not Investing)
Topic: Refinance Questions
Replies: 8
Views: 1213

Re: Refinance Questions

Hello fellow Bogleheads, I've been reading and learning for over a year just retired and finally decided to join. Here's my issue; I am doing a no cash out refi thru my credit union and they are charging $750 for the appraisal and the appraisers have scheduled 45min to do their job such as take pictures inside and out and take measurements. They are also using 2 appraisers, the main guy and his supervisor. My house is just a bit less that 1000sq feet, the current mortgage balance is 140K, the tax assessed value is 220K so there is over 80K in equity. I refinanced 4 years ago through an online broker and the appraisal fee was $450 and appraiser never came into the house, it was always a drive by. My questions: Does the appraisal fee sound r...
by jimb_fromATL
Tue Aug 01, 2017 4:09 pm
Forum: Personal Finance (Not Investing)
Topic: The age old debate 30 vs 15 [year mortgage rate]
Replies: 41
Views: 7097

Re: The age old debate 30 vs 15

Since you don't expect it to be a long-run home, stick with the 30-year loan. Given the vagaries of the housing market, you don't want tie too much up is equity. Unless you're planning to default on the mortgage, you'll still have to pay the entire mortgage balance when you move. So it seems to me that the more equity and less interest you get for the same payment between now and then, the better off you'll be. By the way, after some more looks at current interest rates, it appears that some fixed rate jumbo mortgage may be available at not significantly higher rates. However, you still can't beat paying extra on the balance for a guaranteed return on the investment. One way to look at it is that paying extra to reduce the balance gives yo...
by jimb_fromATL
Tue Aug 01, 2017 3:20 pm
Forum: Personal Investments
Topic: Rent vs sell condo with big capital gain
Replies: 17
Views: 2360

Re: Rent vs sell condo with big capital gain

My initial take is that the risk of housing prices dropping and passing on the capital gains exclusion outweighs the financial benefit of renting. If we sell the condo, proceeds would be new investment into our current BH-style mutual fund portfolio. A few points to ponder: Pending some more details and number crunching, it sounds like a good rental investment. But it appears that the cap gains tax exclusion would be an awfully expensive sacrifice at some point in the future -- which will offset quite a bit of the advantage of renting it out. Because of the cap gains tax exclusion, and IF you really want to be landlords, I suspect you might come out better to sell it, get the exclusion, and use some of the proceeds to buy another rental pr...
by jimb_fromATL
Tue Aug 01, 2017 8:40 am
Forum: Personal Finance (Not Investing)
Topic: The age old debate 30 vs 15 [year mortgage rate]
Replies: 41
Views: 7097

Re: The age old debate 30 vs 15 [year mortgage rate]

Maybe do a 5 or 7 year ARM?
VaR wrote:I'll second the idea of the 5-7 year ARM.
limeyx wrote:Yeah I'd say definitely look at a 5-7 year ARM if you have an almost certain chance of needing to move again...the payment should be significantly lower
ARM rates have been going up for a while. According to a quick look at Bankrate.com and some other sites, 15 year fixed rates are considerably lower than most ARMs, and you might even find some 30 year fixed rates that are lower than some 5-7 year ARMs. Doesn't look worth the gamble to me.

jimb
by jimb_fromATL
Mon Jul 31, 2017 5:17 pm
Forum: Personal Finance (Not Investing)
Topic: How much income and down payment to afford 300k house?
Replies: 50
Views: 11764

Re: How much income and down payment to afford 300k house?

Short answer: No 50k a year salary should not carry a mortgage bigger than 100k in my opinion. That is 3x gross income- what makes you think that USAA should have rejected that? OP can afford it just fine without tenants. Your view of having a mortgage not more than 2x income ($100k mortgage on $50k) is unrealistic, IMO. Even 3x income would be very conservative in this low rate environment. Yes, this person can afford it. I follow the one-third rule of thumb, 20% downpayment and 30 year conventional loan. That is, mortgage payments should not exceed one third of take home pay. I would ignore renters as you may not be able to find reliable ones. A $50k salary is about $3k take home. A $200k mortgage at 4% APR is about a $1000 monthly mortg...
by jimb_fromATL
Mon Jul 31, 2017 2:01 pm
Forum: Personal Finance (Not Investing)
Topic: 529 or Mortgage
Replies: 38
Views: 4727

Re: 529 or Mortgage

No I am not maxing out Retirement account, I am matching enough to get company's match. No I do not get any tax break for 529 savings. Since I already have 51k in today's dollars in 529 plan. My question is how much more should i save it. Should I keep doing 1k/month or reduce the contribution. Absolutely do NOT reduce the contribution to the 401(k). You don't get ahead in the long run by taking a voluntary cut in pay by giving up the employer match. In fact to put your money to best use you need to contribute more to retirement before you contribute anything more to the 529 or pay anything extra on the mortgage. If it became necessary, the kids could work their way through school or borrow money via student loans. But you cannot borrow yo...
by jimb_fromATL
Mon Jul 31, 2017 10:17 am
Forum: Personal Finance (Not Investing)
Topic: 1031 Exchange
Replies: 20
Views: 2337

Re: 1031 Exchange

boomer wrote:I went to my H and R Block program and plugged in numbers for the property I need to sell. I have been renting it since 1987. If I live there two years there is an exclusion on some of the gain. Of course this is because I have owned it and rented it for so long. Also it is a single family home so this would work and I realize that is not your situation.

Look at the worksheet. If you meet the test of living it for two years then it appears the exclusion will be for that two years. Not for any of the time it was in rental service, and not for any of the depreciation.

jimb
by jimb_fromATL
Sun Jul 30, 2017 10:51 pm
Forum: Personal Investments
Topic: Annuity versus Lump Sum math
Replies: 12
Views: 2532

Re: Annuity versus Lump Sum math

Hello, my husband retired last month and we are trying to decide what to do with a cash-balance pension account from his employer of 33 years. We are trying to decide between two options: 1) a lump sum payment of $197,000 2) a single life immediate annuity of $1,430 per month He is 55 years old. Neither he nor I need this money so it would be left to nieces and nephews . We think the decision comes down to a guess of how long he will live. The SSA life expectancy calculator says 27 more years for him. If neither of you needs the money, then presumably you must have substantial other income. What kind of income and how much? What are your top tax brackets for federal and state? When do you feel that you will need to start receiving social s...
by jimb_fromATL
Sun Jul 30, 2017 12:03 pm
Forum: Personal Finance (Not Investing)
Topic: 1031 Exchange
Replies: 20
Views: 2337

Re: 1031 Exchange

Thank you for all the great replies. My follow up question is: If we were to go through with the 1031 Exchange and buy a property that conceivably could be our primary residence down the road, rent it out for the first two years and live in it for five years, then sell it. Now would the capital gains be prorated between two years of rental and five years of residence, or, would it be prorated for five years of residence and two years of rental at this new place as well as nine years added from the previous time we rented the old place. In other words, would the non qualifying years be tacked on the to the new place? Thanks! To reiterate all over again, the 2 out of 5 year loophole has been closed ... as shown in the worksheet from publicat...
by jimb_fromATL
Sun Jul 30, 2017 10:27 am
Forum: Personal Investments
Topic: All at once or bit by bit?
Replies: 11
Views: 1774

Re: All at once or bit by bit?

Here are some real numbers to quantify the risk versus the reward for lump sum versus DCA depending on when you happened to start investing in the past. This is for VBINX, the investor share fund, which has a longer history and virtually identical results. VBINX -- Vanguard Balanced Index Inv: For 285 rolling 12 month periods from 10/1992 through 06/2017 a lump sum invested in VBINX did better than DCA for the same amount 80.4% of the time. Average: Lump sum investing has averaged 7.69%. A lump sum of $150,000 would have grown to an average of $161,945 DCA investing has averaged 7.67%. Contributions of $12500 per month totaling $150,000. would have grown to an average of $156,378 Worst rolling periods The worst lump sum had a loss of 27.68%...
by jimb_fromATL
Sat Jul 29, 2017 4:06 pm
Forum: Personal Finance (Not Investing)
Topic: How much income and down payment to afford 300k house?
Replies: 50
Views: 11764

Re: How much income and down payment to afford 300k house?

If this person has a FICO of at least 750, they can get approved with an income of 50k, with 20% down, for a 30 yr fixed at current rates. I was able to 3 years ago. Whether they want to depends on their rental environment (if they can rent a room for $700, it's on its way to nightmarish, but not quite there until it hits >$1000). It's doable, but not exactly a joy. This person should also keep in mind that live-in landlord is a different relationship than roommate. You qualified for a $240K mortgage with $50K income? Did you have any other debt? Were you able to use the potential of future rent in qualifying for the loan? With typical property taxes and insurance costs, the front-end DTI ratio alone would be higher than the total front+ba...
by jimb_fromATL
Sat Jul 29, 2017 3:29 pm
Forum: Personal Finance (Not Investing)
Topic: 1031 Exchange
Replies: 20
Views: 2337

Re: 1031 Exchange

Just as an FYI, and not regarding the 1031 exchange... from my understanding the 2 yr and 5 yr rules are based on 2 OF the 5 years prior to sale, not separate. Example 1, buy house as homestead; live there for 24 months; rent it for next 35 months; sell it just prior to month 60... you get the capital gains exclusion ($250k for single, $500k for married). Example 2, rented a house for 3 years, then moved in for 2 years. Get capital gains exclusion. Example 3, live for 1 year, rent it for 3, then live again for 1. Get capital gains exclusion. Example 4, live for 10 years, rent for 3, sell. Get capital gains exclusion as this is just like example 1 but with longer homestead at beginning. Example 5 - your case; I don't know the proration sche...
by jimb_fromATL
Sat Jul 29, 2017 11:46 am
Forum: Personal Finance (Not Investing)
Topic: 1031 Exchange
Replies: 20
Views: 2337

Re: 1031 Exchange

I am not a CPA or anything just a landlord. If you read the IRS Pub (523 I believe) on selling housing and scroll WAY down (as several on here have not and gotten confused) it has a work sheet at the bottom on how to truncate gains of rental vs owned periods. In short. Yes of course you have to pay taxes on depreciation recapture--the government just doesn't give out free lunch!! but really what is two years. You also have to pay capital gains taxes on 2 years too of appreciation. It works in short like this Buy house for 100k, Own for 10 years, live in for last 8 years (since you said 2 rental) sale for 200k. Capital gains is 100k of which 1/5 was in rental service so you owe taxes on 20k, plus depreciation which would be fairly low since...
by jimb_fromATL
Fri Jul 28, 2017 5:39 pm
Forum: Personal Finance (Not Investing)
Topic: How much income and down payment to afford 300k house?
Replies: 50
Views: 11764

Re: Can this person afford a 300k house?

Derivative wrote:
What about renting out 1-2 rooms at $700/room? This is a medical center/university area.
You could not have read my previous post, since we coincidentally posted during the same minute. But I addressed that in my post ... that potential rent will not be counted in qualifying for a normal mortgage ... and probably not for any loan at any reasonable rate.

I'd guess the only way would be for some relative to be willing to cosign the loan. And they need to have a lot of money that they will never need and don't mind risking if they're willing to do it.

jimb
by jimb_fromATL
Fri Jul 28, 2017 5:33 pm
Forum: Personal Finance (Not Investing)
Topic: How much income and down payment to afford 300k house?
Replies: 50
Views: 11764

Re: Can this person afford a 300k house?

Let's say this person has 150k cash (liquid). 8k car loan. Let's say 50k in yearly income. No other debts. No other major purchases. No kids, no spouse, etc. Can this person afford a 300k house? Can this person afford to buy more? If so, how much more? Let's say this person will rent 1-2 rooms out netting $700/room. How much house can this person afford then? This person will probably not be able to find a normal lender willing to give them a mortgage. Mortgage lenders are not in business to speculate on potential rental income. So the borrower' debt-to-income ratio for the mortgage, taxes, insurance, HOA fees, and possibly an allowance for maintenance probably cannot be more than about 28% of income that can be verified from the last coup...
by jimb_fromATL
Fri Jul 28, 2017 5:01 pm
Forum: Personal Finance (Not Investing)
Topic: Chipping away at the mortgage
Replies: 48
Views: 11944

Re: Chipping away at the mortgage

Very few things in life can beat the wonderful, secure feeling of owning your own home and property absolutely free and clear - sweep away the naive and overly optimistic rationalizations about cost of money, debt leverage, opportunity cost, and other finance-babble, and it is just that simple. I can vouch for that from from real-life experience plus the benefit of 20/20 hindsight. It is true that you might be able to earn more in the stock market. But it is also true there might be a market crash that takes you 5 to 10 years or more to recover from the loss. Meanwhile, you have a big mortgage payment. I've known a number of folks who gambled with their home equity that they might earn more in the market -- and lost the bet. Some had to po...
by jimb_fromATL
Fri Jul 28, 2017 3:43 pm
Forum: Personal Finance (Not Investing)
Topic: Help with Amortization Schedule with Extra Payments
Replies: 33
Views: 22591

Re: Help with Amortization Schedule with Extra Payments

The way I would do it (to be precise to the penny) is create a spreadsheet calculating the exact payment schedule and one with actual payments made. Not worth too much effort to be precise to the penny, because there's no rule about how lenders themselves round off the pennies on their amortization schedules. So the lender's schedule may differ slightly from yours or mine. A few dollars one way or the other over several years is not much anyway. It probably makes more difference on how the market is doing on any particular day when you start an investment than the difference in the last payment on a mortgage. The comparison tables I often post to help in mortgage and refi decisions use the amortization schedule(s). Only instead of displayi...
by jimb_fromATL
Fri Jul 28, 2017 3:14 pm
Forum: Personal Finance (Not Investing)
Topic: Chipping away at the mortgage
Replies: 48
Views: 11944

Re: Chipping away at the mortgage

But I think all that is besides the point here - my main interest in the comparison is the net worth total over the same period, using the same amount of cashflow If you are earning the exact same after-tax rate on your risk-free investment at the mortgage, it seems to me that the net worth total would be identical between making a prepayment on one hand, or investing on the other hand, over the same duration. The only difference would be reduced liquidity in the case of prepayment. And I have verified this to be the case with my own calculations - the only thing that I find different is the compounding difference between mortgages and savings account rates as quoted. Mortgage interest is calculated monthly and doesn't compound. Savings ra...
by jimb_fromATL
Fri Jul 28, 2017 2:42 pm
Forum: Personal Finance (Not Investing)
Topic: Chipping away at the mortgage
Replies: 48
Views: 11944

Re: Chipping away at the mortgage

After reviewing your figures more jimb, it looks like in the different best case scenarios involving making a lump sum $100k payment and continuing to pay the same rate vs. no-cost vs. roll-in the costs vs. paying them upfront, that the difference in interest paid is ~$25.5k, ~$19k, ~$19k, or ~$21k. That's not as significance as I had thought. Still though, it is money saved. Will have to think about what to do. It's a tough call. If you pay the closing costs out of pocket, you'll avoid paying the interest on that amount for the remaining life of the loan. If you pay the $100 +/- to reduce the mortgage balance and then refi, you'll avoid paying compound interest on the $100K for the remaining life of the mortgage too. If you keep the $100K...
by jimb_fromATL
Fri Jul 28, 2017 1:54 pm
Forum: Personal Finance (Not Investing)
Topic: Help with Amortization Schedule with Extra Payments
Replies: 33
Views: 22591

Re: Help with Amortization Schedule with Extra Payments

After-Tax Basic - 8% (Company matches this 8% Post-Tax (SEE MY QUESTION BELOW) Company match is always pre tax Correct, company match is always pre tax regardless if my eligible contribution is Pre or Post Tax. Thanks for the clarification. ...and if your income is within the limits to allow a Roth IRA, then once you get all matching available, it makes more sense to max out your Roth IRA before you put any more into the 401(k). Among other things, you have more control of the Roth IRA, and can probably find a plan with lower expenses than the 401(k). But the most important reason as discussed earlier is that you can withdraw your contributions from a Roth IRA at any time without tax or penalty. So it can be used as a secondary source of e...
by jimb_fromATL
Fri Jul 28, 2017 11:53 am
Forum: Personal Finance (Not Investing)
Topic: Help with Amortization Schedule with Extra Payments
Replies: 33
Views: 22591

Re: Help with Amortization Schedule with Extra Payments

If you have money to spare, then contribute up to the max allowed to tax-deferred 401(k)s. jb I think I discovered something that I should change. I have to admit I sometimes struggle with my company savings plan. Here's the description of the plan and contributions: Company X Savings Plan - Employer matches up to 8% of the eligible compensation elected as Pre-tax or After-tax contributions. - Employer matches 62.5% of the first 8% of pay. - Based on age and years of service, employer makes an automatic contribution of 3.5% After-Tax Basic - 8% (Company matches this 8% Post-Tax (SEE MY QUESTION BELOW) After-Tax Supplemental - 18% (the max allowed here is up to $42K) Contribution Total - 26% Employee Pre-Tax Catch-up - $6,000 for 2017 Compa...
by jimb_fromATL
Wed Jul 26, 2017 9:34 pm
Forum: Personal Finance (Not Investing)
Topic: Refinance Questions/Advice
Replies: 1
Views: 424

Insufficent Data

What is the home's current value? How much did you actually finance? (It sounds like you may have rolled closing costs into the initial loan balance.) What is the current balance? What is the payment for P&i alone on the loan itself? (T&I are not part of the mortgage. You have to pay taxes and insurance into escrow or else set the money aside regardless of the mortgage balance or even whether you have a mortgage at all.) How much is the PMI? How much will you end up refinancing? What is the rate? How long will the loan be? How much are the closing costs? Will you pay them out of pocket at closing, or roll them into the new loan? Or will it be a "no cosing cost" loan with the actual costs hidden in a higher rate? How much i...
by jimb_fromATL
Wed Jul 26, 2017 5:40 pm
Forum: Personal Finance (Not Investing)
Topic: Car Loan vs Investments
Replies: 10
Views: 1689

Re: Car Loan vs Investments

I'm anticipating the need for a new car in a couple years. Though I have the enough to pay for it outright leaving an acceptable emergency fund, would it not be better to finance the car while investing the value of the car? I understand there will be risk involved but wanted to get others opinion on the matter. Thanks While we haven't had a car loan since 1980 because it feels good, the truth is that the best time to borrow money is when you have enough cash that you can afford not to. HERE is a recent thread with some discussion of the pros and cons. One case where it is far better to borrow the money is when you might otherwise have to reduce or postpone contributions to any available tax-deferred or tax-advantaged retirement plan like ...
by jimb_fromATL
Wed Jul 26, 2017 4:05 pm
Forum: Personal Investments
Topic: Dollar Cost Averaging Help
Replies: 37
Views: 3365

Re: Dollar Cost Averaging Help

Someone nearing retirement with terrible market timing as an example would have cut his total portfolio in half by lump sum investing at the wrong time vs DCA. While it may be unlikely it still possible a very real risk. Yes, that would not be wise, but it is not a matter of DCA. It is a matter of investing at an inappropriate asset allocation. ... Yet in the next breath say lump sum investing is better than DCA based on past performance. Yes, that is inconsistent with the common mantra ("past performance does not ..." etc.) but that's not the reason why LS is recognized as better than DCA. It is based on math and has nothing to do with past performance. DCA embodies the (mistaken) belief that replacing one major price-change gam...
by jimb_fromATL
Wed Jul 26, 2017 3:31 pm
Forum: Personal Finance (Not Investing)
Topic: Help with Amortization Schedule with Extra Payments
Replies: 33
Views: 22591

Re: Help with Amortization Schedule with Extra Payments

Row Col A Col B 1 Rate 0.25% 2 Term 240 3 Principal 250,000.00 4 Regualr payment 1,386.494 = PMT(0.25%, 240, -250000, 0) 5 Extra payment 700.000 Col A Col B Col C Col D Col E Monthly Principal Interest Row Month Payment Balance Reduction Paid ... 42 168 1,386.49 51.23 4,138.39 21.09 43 169 51.36 0.00 51.23 0.13 --------- ---------- --------- 44 Total ?,???.?? 250,000.00 58,582.35 The main formulas are in cells B18:E18 and are copied down to row 43: [/quote] For anybody trying to do something like this for the first time I'd suggest totaling the monthly payments in Col B as well as the principle reduction (Col D) and interest (Col E). The total payments should of course equal the total principle reduction plus the total interest. This is a ...
by jimb_fromATL
Wed Jul 26, 2017 3:03 pm
Forum: Personal Finance (Not Investing)
Topic: Best way to handle selling investment condo to my son?
Replies: 7
Views: 1111

Re: Best way to handle selling investment condo to my son?

Bought condo 4 years ago for $180,000. Currently assessed at $277,000. I'm going to sell it to him for $230,000. He's giving me $30,000 down payment, and I'm going to finance the remaining $200,000 for him at 3.5% interest over 15 years. My questions regard the tax consequences. I would have to declare a $50,000 capital gain, right? Nope. It looks like your taxable amount is going to be a lot more than $50K. It's pretty complicated, so you definitely need to talk with a CPA or other tax specialist. Publication 527 and Publication 523 have a lot of information you need to read. Meanwhile, here are some points to ponder: As somebody already mentioned, if you sell to a relative for less than FMV (Fair Market Value) you'll have to report the d...
by jimb_fromATL
Wed Jul 26, 2017 7:48 am
Forum: Personal Investments
Topic: Dollar Cost Averaging Help
Replies: 37
Views: 3365

Re: Dollar Cost Averaging Help

Studies seem to indicate that lump sum works out better about 2/3 of the time vs DCA. Not sure how/if that would change if the investment of the lump is being made at or near market highs. That shows up when you do rolling averages which will cover starting at the highs and the lows and everywhere in between. We can't know what will happen in the future without a working crystal ball, but it can be helpful to know how it's been in the past. Using rolling averages for the 20 months it would take to DCA the $300K at $15K per month into VTSMX for 25 years from 05/1992 through 06/2017; A lump sum invested in VTSMX did better than DCA over those months 80.5% of the time. The worst lump sum of $300,000 with a total drop of 49.04% of principal (-...
by jimb_fromATL
Tue Jul 25, 2017 8:37 pm
Forum: Personal Investments
Topic: Dollar Cost Averaging Help
Replies: 37
Views: 3365

Re: Dollar Cost Averaging Help

Here are some actual dollar numbers that may help put the risk versus reward in perspective. This is from total monthly returns from Yahoo. Vanguard Total Stock Mkt : For VTSMX for 25.08 years from 05/1992 through 06/2017 the CAGR (Compound Annual Growth Rate, or APY) for a lump sum has been 9.022%. DCA contributions had an APY of 8.4%. For 282 rolling 20 month periods in VTSMX the average for a lump sum has been 8.8%. On the average, $300,000 would have grown to $347,215. The 20 month rolling average APY for DCA monthly contributions has been 8.92% compounded monthly. DCA contributions of $15000 per month would have grown to $324,558 for your investment of $300,000. The worst rolling 20 month period for a lump sum of $300,000 with a total ...
by jimb_fromATL
Tue Jul 25, 2017 8:10 pm
Forum: Personal Finance (Not Investing)
Topic: tax question about gifting father so he can buy condo
Replies: 5
Views: 906

Re: tax question about gifting father so he can buy condo

What would they expect the apparent subterfuge of a bunch of gifts to and from him to accomplish instead of just loaning him the money?

jimb