Money Management Thread

[franklin]

Thanks a lot man, that was actually quite helpful.

What does everyone think about renting vs. buying a home/condo/etc.? I have been doing some research lately and from what I can gather, it seems that renting is actually the better investment. Until home prices start to go up again, you will be losing most of your equity to interest if you were to buy a home, whereas renting is a much cheaper option, thoughts?

Geography plays too big a part in it, but generally speaking, if I were sure I would stay in one spot for the next 7-8 years minimum then there's no way in hell I'd pass on these housing prices & loan rates. Prices are the most affordable they've ever been on record (going back into the 1950's IIRC).

You're in Texas, right? From what I've read, Texas is very sprawally and low density in a lot of places, which kept a lid on prices even before 2008. If that's the case then renting might be the way to go. However, I can almost guarantee you that inflation will be higher than the 3.25% rate we are getting on 30 year mortgages. Long running average is 4% by the Federal Reserve's calculation. I also own stock in a commercial RE company that has long been positive on the Texas markets linked to the energy cooridor.

I have seen people rent for much more than a loan lately. I would buy now while prices are still low, and rates are unbeatable if you can. View it as a long term investment, and it should add value before too long. I don't see the bottom dropping out again at least for quite a while. Just my opinion.

If you do your research, you can still find homes that will be steady and not lose you money.

This. We looked at some condos about a month back that were selling for about $100k-$110 (both short sales and regular) that were getting a ridiculous $1095/month in rent across the board. That's twice the loan, taxes, & insurance. Needless to say, they didn't stay on the market for more than a few days.

 

[larryselbows]

So it sounds like I should:

1) Max out all matched retirement benefits my company offers.
2) Invest in a Roth IRA.
3) Possibly rent, possibly buy based on location and the financial variables that are geographically associated with them.

How do you feel about investment beyond these three goals? I have heard that if one is not stock market savvy, one should invest in mutual funds or index funds rather than try to play individual company stocks. I have also heard that precious metals are fairly safe investments. Anybody have a take on this?

 

[Jazz Spazz]

So it sounds like I should:

1) Max out all matched retirement benefits my company offers.
2) Invest in a Roth IRA.
3) Possibly rent, possibly buy based on location and the financial variables that are geographically associated with them.

How do you feel about investment beyond these three goals? I have heard that if one is not stock market savvy, one should invest in mutual funds or index funds rather than try to play individual company stocks. I have also heard that precious metals are fairly safe investments. Anybody have a take on this?

Were you planning on using your company's 401K match, and then doing an IRA as well? Might as well do it all through your company, and you can roll your 401K to an IRA if/when you leave. You can do a Roth 401K too.

Not sure on the investment part, others here are more savvy in that regard. As to the Metals, they are usually high when stocks are low, and low when stocks are high. This may not be the best time to get into metals and commodities... this is when you get out after you bought them when they were low. My 2 cents.... see if you get the same advice from others.

 

[Archie Moses]

What's the key to managing 23 dollars? With that said, I have a 789 credit score beeotchs and I just bought a townhouse.

 

[Jazz Spazz]

What's the key to managing 23 dollars? With that said, I have a 789 credit score beeotchs and I just bought a townhouse.

I would invest in piggy banks.

 

[franklin]

How do you feel about investment beyond these three goals? I have heard that if one is not stock market savvy, one should invest in mutual funds or index funds rather than try to play individual company stocks. I have also heard that precious metals are fairly safe investments. Anybody have a take on this?

I've heard people who are stock market savvy should invest in index funds rather than try to play individual company stocks.

Don't get me started on precious metals. Why anyone would speculate with their retirement fund is beyond me.

 

[bigb]

As far as the house thing goes: If you think you are stable (long-term employment looks good, you're not planning on moving away any time soon) I would buy. At least here in Utah. Home sales in my neighborhood are through the freaking roof, with prices going up on most of them. My next door neighbor just sold in a week. I think things have turned back around and prices are going to start going up again.

 

[bluenote]

This has been said one way or another, but just to confirm I would in this order

1) Match employer contributions in anything (stock/401k) to the max.....free money.
2) Pay off credit card debt
3) Start a Roth IRA and do max contributions every year. Put them in mutual funds if you don't have the time to manage.
4) Then if you have leftover cash I would go back to your 401K and contribute as much as you can.

As far as the house, I would only buy if you know you want to keep the house for 5 years and realize the amount of responsibility that comes with it. Repairs, maintenance, etc. If you are ready for that, and depending on your personality, I would recommend purchasing a duplex or a house with a mother in law apartment and rent out the other side while you are young. The rent you receive will pay for a large portion of your mortgage and you can write off some $ in taxes as well. Also in a few years you could decide to keep it and rent out both sides and buy another, or sell it and upgrade. But again, you have to have the personality for it and realize being a landlord adds additional responsibility. I think it's worth it.

I started all of the above at 30 but wish I would have a few years earlier.

Good luck!

 

[larryselbows]

This has been said one way or another, but just to confirm I would in this order

1) Match employer contributions in anything (stock/401k) to the max.....free money.
2) Pay off credit card debt
3) Start a Roth IRA and do max contributions every year. Put them in mutual funds if you don't have the time to manage.
4) Then if you have leftover cash I would go back to your 401K and contribute as much as you can.

As far as the house, I would only buy if you know you want to keep the house for 5 years and realize the amount of responsibility that comes with it. Repairs, maintenance, etc. If you are ready for that, and depending on your personality, I would recommend purchasing a duplex or a house with a mother in law apartment and rent out the other side while you are young. The rent you receive will pay for a large portion of your mortgage and you can write off some $ in taxes as well. Also in a few years you could decide to keep it and rent out both sides and buy another, or sell it and upgrade. But again, you have to have the personality for it and realize being a landlord adds additional responsibility. I think it's worth it.

I started all of the above at 30 but wish I would have a few years earlier.

Good luck!

Hey, that was great advice, thank you for that. That is an interesting proposal about renting a house or duplex and I agree with you on the personality aspect. It would seem to be fitting for someone driven and focused. How skilled were you at household repairs when you started renting out? Is it important to be able to repair minor malfunctions? Do you have much conflict with the people you rent to? If so, how have you dealt with it?

I would actually be open doing such a thing in the future when I get my feet on the ground.

 

[bigb]

I would love to have a house or two that I rented out. I'm pretty handy with repairs and stuff (I've never paid anyone to fix anything in my house). I know several people with rentals and they give mixed results. The tenant is always the deciding factor. One person I know has a few houses up by the U and starts one year contracts every August. He says he never has vacancy. Another guy only rents to those who get government housing. Guaranteed rent every month.

 

[bluenote]

So I have 2 places that I rent out and I think I might stop there. Keeps me busy enough on the side, brings in some extra money each month, long -term will really pay off, plus it isn't a ton of work once I got each place dialed in. Repairs come up - I have fixed a lot on my own, but really the most common emergency problems will be plumbing and electrical which I usually just call someone.

As far as tenants, you never know - I have had good and bad, but I found that the higher the rent is, the fewer issues you have. So basically, be sure to get a place where renting is and will always be competitive, then you can have your choice of tenants. Also, make sure you have a good lease to protect you and give you an out if the tenant is bad.

Location is everything - find a place near a university, near transit, walkable to a grocery store, park or something interesting. You should also really know the area and have a pulse on the rents/trends. If you are married, I would recommend a house with a mother-in law apartment downstairs. This way it feels like you still have the house to yourself, you get the driveway, backyard, garage, but you have a tenant (student) who rents downstairs.

Really, this could be a two hour discussion and I don't have time to type everything, but there is so much information online that you can search when the time comes. Also, I would recommend this book to anyone who is interested in investing in real estate. It's not a get rich quick on real estate book - it's about real world, long-term strategies.

https://www.amazon.com/Investing-Real-Estate-Fourth-Edition/dp/047132339X

Keep in mind, before you buy you need to have money for the down payment, plus emergency money for repairs and enough to cover to mortgage for a few months. As you said, you really need to be driven and have the energy for it, but I really think real-estate is a smart way to balance stock investments, it will protect you against inflation and will set you up for future cash flow coming in every month. Every person you talk to will have a different story, but I say go for it if you are interested in real-estate, finance, are good with people, plan on being around for 5 years and have some extra time and energy to put into a project.