Anonymous
12/06/2012 13:17
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:Hmm. I am in a different boat from most posters here.
26 years old and single.
Work two jobs for a total of $300,000 before taxes.
$15,000 remaining in student debt.
$1,500 in credit card debt (I know, I know).
Owe $8,400 more on a $21,000 car.
No assets, really.
where does your money go?
Anonymous
12/06/2012 13:09
Subject: Re:What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:This is nice, OP. Thanks for not being mean or snarky.. you know how it usually goes here.
Me: 32, FT employed, 92.5k
DH: 33, FT employed, 50k
DD is two, in daycare 4 days/week. No health issues, no SN or anything.
House: bought at height of boom (I KNOW) for 275k, 0 down (I KNOW). Current mortgage: 180,000 first lien @ 7.5%ish (ARM) and 50,000 second lien @ 10.5% (fixed). Total 1800/monthly. House is currently worth about 150k on market, if we're lucky (I KNOW).
Cars and insurance roughly 700 monthly (but we pay insurance every 6 mos), 6k credit card debt, 40k student loan debt @2.7%
6k savings - 50k my retirement plan, 80k DH's. The balance on mine is growing in bounds due to employer matching (only a few years worth of input).
529 has a couple thousand.
DH has a life insurance policy that will be worth 2 mill @55 (intended for retirement savings, not actual life insurance, provided he lives that long, lol)
We have fabulous medical/dental coverage, as well as life insurance on me, through work (monthly cost $800). Current value of insurance policy: 1/2 mil
utilities, phones, internet/cable: approx 400 monthly
groceries approx 500 monthly, with probably 100 monthly for eating out, takeout, etc
probably 150 monthly for gas.
We both have excellent credit (750, 830)
DH's old (paid off) car just DIED, thus those car numbers above are higher than they have been for awhile (but he has DD on his own quite a bit, and for our family he NEEDS a reliable car).
Here's the thing: We both work in industries which will be highly affected by the impending national austerity crisis. So our concern right now is cash on hand, just in case. I have an old 401k that I am considering cashing in NOW. It has just barely rebouded to where it was in early 2008. It's worth about 10k after taxes and penalties. Our plan is to cash it in NOW before the markets crash and sock it in savings. If/When the crisis is past, we will throw it at the credit card debt. If we need it to pay the mortgage due to loss of a job, we would do that obviously.
The other issue is the house. It no longer works for our family but for obvious reasons, hard to get out from under. Both of our parents have offered early withdrawals from our planned inheritances (and they can afford it, no issue there) if we need it for a DP, etc.
WWYD?
Not OP, but first of all, you should make sure whoever decided that the right way for you to save for retirement is through an expensive permanent life insurance policy that is not intended as life insurance (your words) forfeits any further say in your finances. My god, woman - do you have any idea how much money you're wasting on insurance you don't need? And if you DO actually want insurance - he's young, get a term policy and surrender his current policy. (And definitely do this before cashign in an old 401k!) Invest the leftover premiums in something - whether it's a tax-advantaged vehicle orreal estate, as OP undoubtedly will suggest.
Anonymous
12/06/2012 13:09
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Not OP, but first of all, you should make sure whoever decided that the right way for you to save for retirement is through an expensive permanent life insurance policy that is not intended as life insurance (your words) forfeits any further say in your finances. My god, woman - do you have any idea how much money you're wasting on insurance you don't need? And if you DO actually want insurance - he's young, get a term policy and surrender his current policy. (And definitely do this before cashign in an old 401k!) Invest the leftover premiums in something - whether it's a tax-advantaged vehicle orreal estate, as OP undoubtedly will suggest.
Anonymous
12/06/2012 13:03
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:I haven't dug through all of the posts but it sounds like the advice is to buy rental properties that have positive cash flow. Is it more complicated than that?
I was just going to post the same thing. That does seem like the extent of the advice. No exactly earth-shattering concepts.
Anonymous
12/06/2012 13:00
Subject: Re:What a self made multiple millionaire would do in your shoes to increase your net worth.
PP here... I should add that we are currently in a school district which will require private school for DD. Our hope is to move to a better (read: acceptable) public school district.
Anonymous wrote:This is nice, OP. Thanks for not being mean or snarky.. you know how it usually goes here.
Me: 32, FT employed, 92.5k
DH: 33, FT employed, 50k
DD is two, in daycare 4 days/week. No health issues, no SN or anything.
House: bought at height of boom (I KNOW) for 275k, 0 down (I KNOW). Current mortgage: 180,000 first lien @ 7.5%ish (ARM) and 50,000 second lien @ 10.5% (fixed). Total 1800/monthly. House is currently worth about 150k on market, if we're lucky (I KNOW).
Cars and insurance roughly 700 monthly (but we pay insurance every 6 mos), 6k credit card debt, 40k student loan debt @2.7%
6k savings - 50k my retirement plan, 80k DH's. The balance on mine is growing in bounds due to employer matching (only a few years worth of input).
529 has a couple thousand.
DH has a life insurance policy that will be worth 2 mill @55 (intended for retirement savings, not actual life insurance, provided he lives that long, lol)
We have fabulous medical/dental coverage, as well as life insurance on me, through work (monthly cost $800). Current value of insurance policy: 1/2 mil
utilities, phones, internet/cable: approx 400 monthly
groceries approx 500 monthly, with probably 100 monthly for eating out, takeout, etc
probably 150 monthly for gas.
We both have excellent credit (750, 830)
DH's old (paid off) car just DIED, thus those car numbers above are higher than they have been for awhile (but he has DD on his own quite a bit, and for our family he NEEDS a reliable car).
Here's the thing: We both work in industries which will be highly affected by the impending national austerity crisis. So our concern right now is cash on hand, just in case. I have an old 401k that I am considering cashing in NOW. It has just barely rebouded to where it was in early 2008. It's worth about 10k after taxes and penalties. Our plan is to cash it in NOW before the markets crash and sock it in savings. If/When the crisis is past, we will throw it at the credit card debt. If we need it to pay the mortgage due to loss of a job, we would do that obviously.
The other issue is the house. It no longer works for our family but for obvious reasons, hard to get out from under. Both of our parents have offered early withdrawals from our planned inheritances (and they can afford it, no issue there) if we need it for a DP, etc.
WWYD?
Anonymous
12/06/2012 12:58
Subject: Re:What a self made multiple millionaire would do in your shoes to increase your net worth.
This is nice, OP. Thanks for not being mean or snarky.. you know how it usually goes here.
Me: 32, FT employed, 92.5k
DH: 33, FT employed, 50k
DD is two, in daycare 4 days/week. No health issues, no SN or anything.
House: bought at height of boom (I KNOW) for 275k, 0 down (I KNOW). Current mortgage: 180,000 first lien @ 7.5%ish (ARM) and 50,000 second lien @ 10.5% (fixed). Total 1800/monthly. House is currently worth about 150k on market, if we're lucky (I KNOW).
Cars and insurance roughly 700 monthly (but we pay insurance every 6 mos), 6k credit card debt, 40k student loan debt @2.7%
6k savings - 50k my retirement plan, 80k DH's. The balance on mine is growing in bounds due to employer matching (only a few years worth of input).
529 has a couple thousand.
DH has a life insurance policy that will be worth 2 mill @55 (intended for retirement savings, not actual life insurance, provided he lives that long, lol)
We have fabulous medical/dental coverage, as well as life insurance on me, through work (monthly cost $800). Current value of insurance policy: 1/2 mil
utilities, phones, internet/cable: approx 400 monthly
groceries approx 500 monthly, with probably 100 monthly for eating out, takeout, etc
probably 150 monthly for gas.
We both have excellent credit (750, 830)
DH's old (paid off) car just DIED, thus those car numbers above are higher than they have been for awhile (but he has DD on his own quite a bit, and for our family he NEEDS a reliable car).
Here's the thing: We both work in industries which will be highly affected by the impending national austerity crisis. So our concern right now is cash on hand, just in case. I have an old 401k that I am considering cashing in NOW. It has just barely rebouded to where it was in early 2008. It's worth about 10k after taxes and penalties. Our plan is to cash it in NOW before the markets crash and sock it in savings. If/When the crisis is past, we will throw it at the credit card debt. If we need it to pay the mortgage due to loss of a job, we would do that obviously.
The other issue is the house. It no longer works for our family but for obvious reasons, hard to get out from under. Both of our parents have offered early withdrawals from our planned inheritances (and they can afford it, no issue there) if we need it for a DP, etc.
WWYD?
Me: 32, FT employed, 92.5k
DH: 33, FT employed, 50k
DD is two, in daycare 4 days/week. No health issues, no SN or anything.
House: bought at height of boom (I KNOW) for 275k, 0 down (I KNOW). Current mortgage: 180,000 first lien @ 7.5%ish (ARM) and 50,000 second lien @ 10.5% (fixed). Total 1800/monthly. House is currently worth about 150k on market, if we're lucky (I KNOW).
Cars and insurance roughly 700 monthly (but we pay insurance every 6 mos), 6k credit card debt, 40k student loan debt @2.7%
6k savings - 50k my retirement plan, 80k DH's. The balance on mine is growing in bounds due to employer matching (only a few years worth of input).
529 has a couple thousand.
DH has a life insurance policy that will be worth 2 mill @55 (intended for retirement savings, not actual life insurance, provided he lives that long, lol)
We have fabulous medical/dental coverage, as well as life insurance on me, through work (monthly cost $800). Current value of insurance policy: 1/2 mil
utilities, phones, internet/cable: approx 400 monthly
groceries approx 500 monthly, with probably 100 monthly for eating out, takeout, etc
probably 150 monthly for gas.
We both have excellent credit (750, 830)
DH's old (paid off) car just DIED, thus those car numbers above are higher than they have been for awhile (but he has DD on his own quite a bit, and for our family he NEEDS a reliable car).
Here's the thing: We both work in industries which will be highly affected by the impending national austerity crisis. So our concern right now is cash on hand, just in case. I have an old 401k that I am considering cashing in NOW. It has just barely rebouded to where it was in early 2008. It's worth about 10k after taxes and penalties. Our plan is to cash it in NOW before the markets crash and sock it in savings. If/When the crisis is past, we will throw it at the credit card debt. If we need it to pay the mortgage due to loss of a job, we would do that obviously.
The other issue is the house. It no longer works for our family but for obvious reasons, hard to get out from under. Both of our parents have offered early withdrawals from our planned inheritances (and they can afford it, no issue there) if we need it for a DP, etc.
WWYD?
Anonymous
12/06/2012 12:45
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
I haven't dug through all of the posts but it sounds like the advice is to buy rental properties that have positive cash flow. Is it more complicated than that?
Anonymous
12/06/2012 12:08
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
10:39- PP here with the insane car debt.
I know. I made a huge mistake. It's a 2009 Honda, and everyone keeps telling me Honda's are great and it'll last me forever, which is one reason I kind of want to just stick it out (once it's paid off, I'll be done with the payments and have a car sitting in the driveway if I ever need it- and 2.5 years isn't too long). But, that's also almost $500/month I could be putting into saving for a home.
I know. I made a huge mistake. It's a 2009 Honda, and everyone keeps telling me Honda's are great and it'll last me forever, which is one reason I kind of want to just stick it out (once it's paid off, I'll be done with the payments and have a car sitting in the driveway if I ever need it- and 2.5 years isn't too long). But, that's also almost $500/month I could be putting into saving for a home.
Anonymous
12/06/2012 10:39
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:I take in $36,000 after taxes (700/week)
My portion of rent/utilities: $700/month
Phone bill: $90
Debt: $11,000 left on car loan ($330/month)
$1,200 on 2 CC's
Car insurance: $130/month
Health insurance: $120/month
Public trans: $80/month
Groceries: $300
I don't make a lot, but I SHOULD be saving a fair amount. I am not however. My car is what's killing me. I want to get rid of it, but I owe more than it's worth (by about $2500). I have 2.5 years left on my loan. I take public transportation so I don't even technically use it. I put away $50/week to a savings account but end up dipping into it a lot. Once the holidays are over I need to pay off my CC's and start plowing money into savings.
I would love to save up and buy a home.. but that won't be for a while.
Not OP, but you really ought to consider getting rid of that car. Spending $460 per month on something you don't need or seem to even use is nuts. Bite the bullet and take the $2500 hit. The $460 a month will put you even in less than 6 months and you're in the black after that. Good luck!
Anonymous
12/06/2012 09:08
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
I take in $36,000 after taxes (700/week)
My portion of rent/utilities: $700/month
Phone bill: $90
Debt: $11,000 left on car loan ($330/month)
$1,200 on 2 CC's
Car insurance: $130/month
Health insurance: $120/month
Public trans: $80/month
Groceries: $300
I don't make a lot, but I SHOULD be saving a fair amount. I am not however. My car is what's killing me. I want to get rid of it, but I owe more than it's worth (by about $2500). I have 2.5 years left on my loan. I take public transportation so I don't even technically use it. I put away $50/week to a savings account but end up dipping into it a lot. Once the holidays are over I need to pay off my CC's and start plowing money into savings.
I would love to save up and buy a home.. but that won't be for a while.
My portion of rent/utilities: $700/month
Phone bill: $90
Debt: $11,000 left on car loan ($330/month)
$1,200 on 2 CC's
Car insurance: $130/month
Health insurance: $120/month
Public trans: $80/month
Groceries: $300
I don't make a lot, but I SHOULD be saving a fair amount. I am not however. My car is what's killing me. I want to get rid of it, but I owe more than it's worth (by about $2500). I have 2.5 years left on my loan. I take public transportation so I don't even technically use it. I put away $50/week to a savings account but end up dipping into it a lot. Once the holidays are over I need to pay off my CC's and start plowing money into savings.
I would love to save up and buy a home.. but that won't be for a while.
Anonymous
12/06/2012 01:04
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:Anonymous wrote:OP, curious how you calculate your self worth. Have seen some very very well off real estate moguls implode when markets headed south.
Could you share the following?
Current market value of my real estate minus mortgages = ___% of my net worth.
OP here. I hope you mean net worth as the two have deminimis correlation.
Ok, you are wise. Thanks for the answer and the reminder about diversification.
Anonymous
12/06/2012 00:43
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:OP, curious how you calculate your self worth. Have seen some very very well off real estate moguls implode when markets headed south.
Could you share the following?
Current market value of my real estate minus mortgages = ___% of my net worth.
OP here. I hope you mean net worth as the two have deminimis correlation. 45%. That said about another 5% are private mortgage notes. It is a major mistake not to invest in real estate, but one is crazy not to diversify. I would also hope that you see from my posts that I am far more concerned with cashflow than value of the underlying asset. I'd much rather make $9K a month on a $100K property than $1K on a $900K property.
Anonymous
12/06/2012 00:35
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:Anonymous wrote:"I think the OP took off when he"
Hmm, I assumed OP is a she.
Smarty pants! OP said this:
When I first started I always did my own management (and did until I had about a dozen properties).
The likelihood that "she" fixed the toilets, repaired the roofs and roughed up the deadbeat renters is comparatively low, so I went with "he." No apologies, either.
OP here. I am not disclosing (it is irrelevant). But, let me assure you that while I managed my own properties I am not technically inclined. I found a very good handyman.
Anonymous
12/06/2012 00:33
Subject: What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:Wow, OP this is cool of you. I am interested but wary of posting so much personal data. Maybe you can answer with some general comments based on the following. DH and I work in stable jobs making 225k combined. Have been contributing to 403b's and 529 for a few years, don't have enough cash for a 20% down payment where we would like to live, and would like to have a second child soon but feel like that will put us into the slog. No debt, but saving is slow. What should we do?
OP here. Buy with an FHA loan. Rates are so historically low that not taking a loan now is in and of itself a major mistake. i also believe that there will be very high inflation coming. You need a major hedge. If we get the type of inflation I expect and you have a fixed mortgage it will change your financial output for the rest of your life. I am mistaken it will make minimal difference to you if I push you into buying now. This is a good example of calculated risk. The risk of not taking a fixed real estate loan now is way higher than the likely upside of taking one.
As I have urged other posters, please consider a multi unit to live in (DC has great houses with basement rentals). Takoma Park, Hyattsville, and Arlington have some too.
Anonymous
12/06/2012 00:28
Subject: Re:What a self made multiple millionaire would do in your shoes to increase your net worth.
Anonymous wrote:I am having a hard time figuring out how to model the below in excel. Can you help me understand better by reviewing my calculation and tell me if I am expressing it correctly? The one issue with my calculation is I am not sure where I can purchase a home for this price that rents for $2750, but let's suspend that part of reality for a moment so I can get the spreadsheet set up!
You need to pick a rate of return that is acceptable for you in rental real estate. When I first started that figure for me was 8% cash on cash return, net of all expenses, preferably with a fixed mortgage. The following is the rough formula I use to assess a property. Take the gross monthly expected rent and multiply time 85%. This affords me 5% for repairs, 5% for management fee and 5% for vacancy factor. You have to make 8% cash on cash return on 85% of the gross income after PITI (principal, interest, taxes and insurance). When I first started I always did my own management (and did until I had about a dozen properties). As a result of managing them myself my true vacancy rate was less than 1%. But, still you shouldn't buy something unless it works at 85% (if you have a property manager that charges more than 5%, you need to lower the 85% number accordingly).
Property Purchase Price: $400,000
Downpayment Required by Lender: $100,000 (25% b/c Investment Property right?)
Gross Monthly Rent: $2750
Less PI: $1520.06 (300k at 4.5%, 30 year fixed)
Less Ins: $62.50 monthly
Less Taxes: $375 monthly
Remaining: $792.44 monthly, $9,509.33
85% of remaining: $8,082.93 annually, which is approximately 8% of downpayment amount ($100,000)
OP here. Almost $2750 times 85% equals $2337. Leaves profit of $379 per month. Times 12 months is $4548. Divided by $100K is 4.548% cash on cash ROR. Incidentally you can get investor loans at most banks at 20% down. And you can do much better than 4.5% today. To quickly ballpark properties any time you can get 1% of the purchase price in rent, you almost always have a winner. 1/2% is always a loser.