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Stupid questions about Financing/Investing

bert

Enjoying the real world
pilot
Contributor
So here is my situation:

I own a home in IA and have been renting it out through a property manager since October. The renters extended the lease early last month through July 2010, and yesterday I received an e-mail from a realtor at the same company that I use for property management that said my renters were interested in buying the house.

I don't have much equity in the house (I've only purchased it in July 2005) and the rent covers the mortgage minus property taxes but the annual tax credit when filing is twice what I pay in property taxes. So, basically I'm breaking even/making a little having renters in the place.

The market in the area is saturated, there are 4 comparable houses on my street that are/have been on the market for over a year with prices varying form 10G below to 20G above the last assessed value of my house. If I were to sell for exactly the assessed value I'd probably break even or come out with a $1000 check when all fees, taxes, etc were taken into consideration.

Also, the area is a college town, so there seems to always be an abundance of renters, although I'd rather not rent to undergrads since it is more of a family oriented neighborhood.

So, what do I do? I won't sell for a loss. If offered enough to walk away from the house with little or no cash to me do I go for it, or hold on to the place for a while, build equity and hope to sell later?

I have a 30 yr fixed at 5.5. Definitely not more house than I could afford.

Hmmm after writing this I think I've already made up my mind, but would still like to hear coments.
I've been in a similar situation: a guy made an offer to buy my house in Colorado Springs when I was between renters (sadly enough, the nice old lady about to rent it was put in a nursing home by her kids...). Long story short, though I actually wanted to keep the place I sat down and did the math to come up with a number that would get me to sell it. When you are calculating it out, don't forget to factor in the taxes you will owe on the profit (we didn't have the 2/last 5 years wicket) and the potential for being bumped up a bracket with the loss of the deduction, legal fees, commission, etc. Additionally, if they meet that number, know ahead of time how much money you will be willing to pay to fix any items found during the inspection. Good luck.
 

Tycho_Brohe

Well-Known Member
pilot
Contributor
EDIT - For those that don't know, withdrawals from a Roth IRA are not taxed but the contributions cannot be deducted from your income.
I know this is an old thread, but I thought I should clarify this point a bit. Contributions can be withdrawn tax-free at any time, but any earnings your contributions may have generated will be taxed if you withdraw them before age 59 1/2 (plus a 10% penalty for "early withdrawal" applies to those earnings as well.) Some exceptions apply: most notably, if you're buying your first home you can withdraw up to $10,000 tax-free and penalty-free.
 

voodooqueen

DAR Lapsarian
[

$250 for Truck
$260 for PUMA
$700 for Student Loans
$2000 for Manatee Food


You should qualify for student loan forgiveness for public service. It looks like you have a big enough debt to have the remaining balance written off after 10 years; military service qualifies you. Also, that means that any payments after 2007 when the ed. committee changed the rules will count, as long as you have records. The Dept of Ed site will have details.
 

MasterBates

Well-Known Member
Just checked it..

You have to have 10 years of Federal Service starting 1 OCT 2007.. Time served before.. Does not count.

They won't forgive loan balances until 1 OCT 2017.. Mine are paid off in 2016.
 

Ray-Ban

Well-Known Member
None
I like it with one big exception (fwiw I haven't used another brokerage in so long that I can't think if this would even be an issue with others):
The other day I wanted to place a trade, but forgot that it takes 7 days for the money to move from checking (USAA) to brokerage account (USAA). By the time the money would have been available the good deal was gone. I passed on it, it did go up substantially and was a bummer. You would think with modern technology being what it is, it should be a quick process to move digital money from one account to another at the same company.
Just as an FYI for anyone who is researching this topic; this is no longer the case. It does take a few days to fully show the transfer, but USAA let me execute a trade immediately once it knew I was transferring from a USAA Checking account into my USAA brokerage account. Overall, the account is pretty damn good. The 50 free trades is nice, plus if you really need to trade more frequently than that (some brokers are offering 100-150), you are probably going to get boned on the taxes for short-term CG tax anyways. The interface is useful and pretty basic, but their mutual fund screener was monumental in choosing the right funds for my financial goals. I highly recommend to anyone that wants to invest in mutual funds with USAA's account services to do it through their brokerage account, not their "USAA Mutual Fund" account. The Fund account is very limited and its really nice to have all your investments in one place. I have stocks, funds and I think an ETF all trading through my mutual fund.

Now a question for the market savvy: what's your opinion on REITS as a major player in a portfolio? I have about 50% in index funds, and about 10% in REITS, however it seems that the consensus is that commercial real estate should be climbing in the next two years, and companies like Simon Property Group (SPG) seem to be performing very well. I have about $7000 left over from my USAA Starter Loan after paying off my student loans, and I am strongly considering buying up shares of SPG or a REIT fund.
 

Tycho_Brohe

Well-Known Member
pilot
Contributor
Now a question for the market savvy: what's your opinion on REITS as a major player in a portfolio? I have about 50% in index funds, and about 10% in REITS, however it seems that the consensus is that commercial real estate should be climbing in the next two years, and companies like Simon Property Group (SPG) seem to be performing very well. I have about $7000 left over from my USAA Starter Loan after paying off my student loans, and I am strongly considering buying up shares of SPG or a REIT fund.
I think a REIT fund is generally a better idea than any one REIT, because of the diversification of risk. If it's only 10% of your total portfolio, you could probably get away with one REIT, but anything more than that (closer to 25%) is a bit too risky. Unless the remaining 40% of your portfolio is in something very conservative.

Another alternative to REIT stocks if you're hunting for yield, which, let's face it, most REIT investors are doing in this low-rate environment, is REIT preferred stocks. I'm looking at the Armour Residential A-class of shares, which isn't callable until 2017, trades only 3% above par value (which you'll make back in interest payments), and yields around 8% (monthly payments; DRIP program, anyone?). The tradeoff is that you'll likely never see any capital appreciation and there's no reduced tax rate on the payments, so it'd be better to use it in a retirement account. They're safer than common stock by nature, because the company can't pay dividends on common until they pay them on preferred stocks.
 

Catmando

Keep your knots up.
pilot
Super Moderator
Contributor
Problems with the time to transfer funds for trading? Just sign up for a margin account.
Buy whatever, whenever you want without worrying about covering the transaction immediately. Just transfer the funds later at your leisure.

But do cover soon. Margin is dangerous, even if you know what you are doing.
 

Ray-Ban

Well-Known Member
None
Problems with the time to transfer funds for trading? Just sign up for a margin account.
Buy whatever, whenever you want without worrying about covering the transaction immediately. Just transfer the funds later at your leisure.

But do cover soon. Margin is dangerous, even if you know what you are doing.
True, but again with USAA you no longer have to do that anymore. Spoke with an advisor yesterday, I purchased a significant lump some of securities without the funds being transferred to the investment account; completely margin-free. Mind you I had the funds in my checking to back it up.
 

roflsaurus

"Jet" Pilot
pilot
Now a question for the market savvy: what's your opinion on REITS as a major player in a portfolio? I have about 50% in index funds, and about 10% in REITS, however it seems that the consensus is that commercial real estate should be climbing in the next two years, and companies like Simon Property Group (SPG) seem to be performing very well. I have about $7000 left over from my USAA Starter Loan after paying off my student loans, and I am strongly considering buying up shares of SPG or a REIT fund.
I can tell you that according to academic research, actively managing your fund means that you are more likely to make less money... But it looks like you may already know that being 50% Index Funds? I say, if your strategy involved 10% REITs and 50% Index Funds when you started, stick with 10% REITs and 50% Index Funds.

Here's a great article for anyone interested:
http://www.riskglossary.com/link/efficient_market_hypothesis.htm

... But then again what do I know. I bought AAPL at 465 because it couldn't possibly go any lower based on its valuations. Oops. The market can remain wrong longer than you can remain solvent.
 

Ray-Ban

Well-Known Member
None
I can tell you that according to academic research, actively managing your fund means that you are more likely to make less money... But it looks like you may already know that being 50% Index Funds? I say, if your strategy involved 10% REITs and 50% Index Funds when you started, stick with 10% REITs and 50% Index Funds.

Here's a great article for anyone interested:
http://www.riskglossary.com/link/efficient_market_hypothesis.htm

... But then again what do I know. I bought AAPL at 465 because it couldn't possibly go any lower based on its valuations. Oops. The market can remain wrong longer than you can remain solvent.
Haha, funny you say that. I bought apple a few weeks ago at $421, lucky me ;) The real looker right now appears to be American Airlines (AAMRQ). My stock has risen from 2.75 to 4.15 in a matter of several weeks. It's one to watch. Good gouge on the REITS. For best returns I do mostly have my money managed in funds, but I have a side pot for active trading just as a side hobby. It makes up a small portion of my total investments.
 

OscarMyers

oh its gonna fit...
None
I'm looking to learn about investing and was wondering if anyone knows of any good free resources available out there. I poked around on NKO and Navy E-learning, but didn't find anything of substance. It was mostly monthly budget type stuff.
 

villanelle

Nihongo dame desu
Contributor
Check out the MrMoneyMustache boards. There's even a guy who posts there who is somewhat of an expert in military financial matters (TSP, Roth TSP, etc). If you want something a little more comprehensive and that acts as a basic primer on investing, I like The Bogleheads' Guide to Investing.
 

Spekkio

He bowls overhand.
I'm looking to learn about investing and was wondering if anyone knows of any good free resources available out there. I poked around on NKO and Navy E-learning, but didn't find anything of substance. It was mostly monthly budget type stuff.
http://www.investopedia.com/

Start with these as you do your research and go from there:
http://www.bogleheads.org/wiki/Three-fund_portfolio
http://www.bogleheads.org/wiki/Lazy_portfolios

Also, utilize TSP (Roth or traditional depending on which is more beneficial tax-wise) for index investing. The fees are insanely low compared to anyone else. Most of those 'lazy portfolios' can be done with analagous funds in TSP...
https://www.tsp.gov/investmentfunds/fundsoverview/comparisonMatrix.shtml
 
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