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I have a pretty odd financial situation and I thought it'd be worth making a thread here to solicit advice. Going to split this between "good news" and "bad news." Bad news: I'm 29 and spent my 20's scraping by. I really didn't save anything. I only just opened a retirement account last month. Good news: I recently got a "nice" job (~$79k). I think I have the potential to be making 6 figures in the next few years. Good news: I have basically zero debt. I have $2746 left on a 0% APR Affirm loan which I split with my boyfriend, and that's it. I have no credit card debt, no student loan debt, nothing. I have one credit card I've been paying off every month for about twelve years, so I have excellent credit, too. Well, I have an excellent credit score, anyway. Extremely good news, and the reason I made this thread: I recently learned that my uncle, who struck it rich in the 2010s, is giving me and my brother about $850k each this June through an irrevocable trust he had set up. This is life-changing for me. The first thing that comes to mind is owning property. I never imagined owning property until I received an inheritance (my parents are upper-middle-class.) I live in a major coastal US city, and the real estate market is on fire now. Basically, I am trying to decide whether it is smart to buy property at this stage. Like, this summer. Probably a 2-3 bedroom apartment, or a house, which here costs $800k-1.2m. Prices show no signs of going down. It seems like a smart investment - I'll get more for my money now than I will in the future and the value of it should appreciate over time, and I don't have to keep throwing rent money into a hole that builds me zero equity. However, I am also an idiot who doesn't know the first thing about investing (see above). Thoughts? Questions? Comments? Anger? varys fucked around with this message at 18:35 on Mar 5, 2022 |
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Mar 5, 2022 18:02
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look out here comes some bad advice; maybe dont worry about ranking up at the job to those six figures for a little while atleast, get a handheld console or if you're opposed get some ebooks on whatever, find an air bee and bee by a tiny quiet tropical beach and just dont do poo poo but quaff coladas and dai.. quiri's for 5 months? maybe observe colorful birds? anyway try not to actively hunt and kill the homeless and destitute indirectly or otherwise through clever investements and sorry about your new lease on life i clicked this thread from the front page lol what gross secret subforum is this. theres a sticky post in gbs where the OP does/did not have money enough to live okay bye
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Mar 5, 2022 20:31
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Just to be clear, I have no intention of becoming a landlord or a real estate investor. I'm looking to buy a place to live in. I might consider renting it out in the summer while I travel.
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Mar 5, 2022 21:47
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so the whole thing with money is that it's just a means to an end. what are your goals?
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Mar 5, 2022 22:48
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If you live in a place that has average apartment prices of 800k-1.2M and you are making 79k, you do not have 'lots' of money, imo.
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Mar 5, 2022 23:15
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varys posted:I have a pretty odd financial situation and I thought it'd be worth making a thread here to solicit advice. Going to split this between "good news" and "bad news." one thing i would lead with is that the property market is very hot right now. it might stay hot for a number of years, it might not. no one knows the future, there's always an element of risk, and if this money is truly life changing, my personal preference would be to diversify across several different investments rather than sinking the majority of it into a single investment that being said, the general advice is that when buying a property to live in, you should be very confident that you're going to live there for at least 3-5 years. generally that's how long it takes for price appreciation to outweigh the fees and other costs associated with buying and selling another thing to consider is that even if you buy a property with cash, or with a very small mortage, you'll still have ongoing costs like property taxes, home insurance, and upkeep. these costs will be less than rent in a comparable property, but you should include them in your calculations so you're not buying too much house i agree with kyoon griffey jr that identifying your goals would be helpful in figuring out what to do with this money.
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Mar 6, 2022 01:48
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At this stage in your life, I would not worry about getting into property. The markets may go up or down in the future; what you need to realize is that you are in a highly variable spot. Whether you marry soon or have kids soon, your needs for housing may change drastically. I would wait until you have a better idea of what your near-to medium future goals are before spending a ton of money on a home that may or may not suit you in five years. Make sure you are maxing out your retirement savings. Apart from that, it really depends on what you want to do with your life.
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Mar 6, 2022 06:13
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Leper Go-getter posted:i clicked this thread from the front page lol what gross secret subforum is this. theres a sticky post in gbs where the OP does/did not have money enough to live okay bye
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Mar 6, 2022 06:26
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Goals is a difficult question, can you be more specific? Is that about having $x in the bank or is that about where the money takes me in life? I have a great apartment with my boyfriend now, but it's expensive ($1700/mo before utilities.) That money does nothing for me long term, so owning a place and having it appreciate makes sense to me, especially if I can rent it out in the summer for some flexibility. I like the city I live in and would prefer to stay here. Someday I'd like to own a decently nice car (like $50k?) but that's definitely not happening until I'm making more. And I'd like to retire somewhat comfortably around 65-70. I guess that's it. I guess the big one to bring up is that I have no plans to have kids and don't expect that to change. The future between me and my boyfriend is kinda unclear. I don't see myself finding a lifetime partner until sometime in my 30s. GhostofJohnMuir posted:one thing i would lead with is that the property market is very hot right now. it might stay hot for a number of years, it might not. no one knows the future, there's always an element of risk, and if this money is truly life changing, my personal preference would be to diversify across several different investments rather than sinking the majority of it into a single investment GhostofJohnMuir posted:that being said, the general advice is that when buying a property to live in, you should be very confident that you're going to live there for at least 3-5 years. generally that's how long it takes for price appreciation to outweigh the fees and other costs associated with buying and selling GhostofJohnMuir posted:another thing to consider is that even if you buy a property with cash, or with a very small mortage, you'll still have ongoing costs like property taxes, home insurance, and upkeep. these costs will be less than rent in a comparable property, but you should include them in your calculations so you're not buying too much house
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Mar 6, 2022 16:32
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What's the rest of your budget/savings/debt profile look like? 5% down on a $800k-$1.2M condo would run $40k-$60k, and then tack on closing and moving costs on top of that. Your monthly payment on a $760k loan would be $3,413/month (assuming 3.5% rate), PLUS taxes and insurance; you're looking close to $5k/month plus utilities and if its a condo, you likely will have association fees as well. $79k/year nets you only $5,715 (assuming nothing into 401k) per month. If you have no other debt, don't pay for groceries/food/entertainment/clothes/savings/anything else, you'd be spending close to 90% of your take-home on the property. Unless you've got a shitload of cash, the harsh reality is that with $79k/year, you do not make near enough to afford a place like that just yet. Unless you mistyped and forgot a 1 before the 79 Omne fucked around with this message at 16:48 on Mar 6, 2022 |
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Mar 6, 2022 16:45
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Omne posted:What's the rest of your budget/savings/debt profile look like?
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Mar 6, 2022 16:51
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varys posted:Goals is a difficult question, can you be more specific? Is that about having $x in the bank or is that about where the money takes me in life? it's very much about where you want the money to take you in life, and that sounds like a good set of goals varys posted:I agree with this, but my concern is that inflation coupled with rising housing prices in the long term may reduce the value of this money. If I'd had this 3-5 years ago, I would have gotten way more apartment/house for my money. 3-5 years from now, I could get much less for it than I'd be looking at today, while also losing money to rent. Are there investments I can make with the dough that safely grow this money so much that I can overcome these obstacles? Kinda skeptical about that. i will admit to some personal bias here, the great recession has left me leery about residential housing as an investment, but a large part of that is my hang-ups around the inflexibility which comes with it, and i try to put that aside when talking to others. plus buying a property outright eliminates a good chunk of that inflexibility. that said, i think you're undervaluing how powerful a diversified portfolio of index funds can be, especially for your retirement savings. others can correct me, but i believe that never in modern history has a portfolio of index funds (or there benchmark equivalent when they didn't exist) lost money when held over a 20-year period. there's pages that can be written about how to evaluate the various risks involved, but i'll skip that and say that in my opinion a portfolio of 60% stocks and 40% bonds is no riskier than the real estate market over a 30 year span, and offers more diversity than a single property. i'd encourage you to look at some of the resources posted in the long-term investing thread to inform your decision making on this one of course, if buying a residential property brings you a lot of peace mind and you don't think you could stomach investing in something like a target date index fund, i wouldn't say it's wrong to buy a house. you just really have to make sure whatever combo of mortage, condo fees, property taxes, insurance, and upkeep (1% of property value per year is the rule of thumb i see thrown around) you end up with is less than 30% of your take home pay. even if you own your home outright, you can't eat housing equity, especially if it's your primary source of shelter. moana suggestion to make sure you can max out your retirement contributions each year is a good one. i realize i've been a bit dour in my posting (i'll blame the current state of geopolitics), so let me say congratulations on your windfall. it sounds like your uncle might still be with us and distributing the money before his death? i hope that's the case, it's always nice to have the opportunity to thank folks for these life changing gifts to their face. sometimes when facing decisions like these i have to stop and remind myself that they are good problems to have
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Mar 6, 2022 18:49
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GhostofJohnMuir posted:another thing to consider is that even if you buy a property with cash, or with a very small mortage, you'll still have ongoing costs like property taxes, home insurance, and upkeep. these costs will be less than rent in a comparable property, but you should include them in your calculations so you're not buying too much house This is the big one here - property tax, insurance and maintenance on a million dollar place may be more than you can afford on 79k per year, let alone a mortgage on it.
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Mar 6, 2022 20:48
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varys posted:Please remember to read the OP Touche, I missed that line. Go nuts
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Mar 6, 2022 23:50
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OP when you get a windfall of $X it is almost always the wrong reaction to look around for a thing that costs about $X to buy. As the saying goes, you don't have to spend it all in one place. Assuming that the $850k is coming in one lump sum, that would be about $555k after federal tax. Work with a CPA or tax professional to get that taken care of well before the Sept. 15 deadline. Had you looked into buying a home before you received this news? If that was already a goal that you had explored and then given up because you lacked the means, maybe you can now pick up where you left off. On the other hand if you started thinking about it only in response to the gift, I would suggest leaving the money in the bank (or banks) for a few months while you adjust to the situation and come up with a few different options to compare. (Not just real estate options, but real estate and other things.) The home market is "on fire" now precisely in the sense that prices are disturbingly high, driven partly by cheap credit that is expected to go away this year. Gazpacho fucked around with this message at 17:40 on Mar 7, 2022 |
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Mar 7, 2022 00:08
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I suspect that if you buy a 1.2 million dollar condo on 80k a year you will end up being house poor. In my city, you would owe about $12,000 a year in property taxes on that condo. It's a slightly high tax state and city, but there are localities with much higher taxes. You need to figure out this number. You should bet on about 1-2% per year for maintenance, repair, etc so that's another $12,000 to $24,000. If it's a condo, you'll have condo fees likely of a couple hundred bucks a month. So figure you are baking in about $30k of cost a year on the lower end, on an 80k salary, without paying any of the mortgage. That sounds like a recipe for disaster. When I read your goals, none of those goals are necessitated by owning a house. Before you think about buying a house, I recommend you read the housebuying thread in this forum, which cycles between being titled "why is everyone in this business so goddamn stupid" and "do never buy" so that you can go in to this with your eyes very much wide open.
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Mar 7, 2022 15:18
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Gazpacho posted:OP when you get a windfall of $X it is almost always the wrong reaction to look around for a thing that costs about $X to buy. As the saying goes, you don't have to spend it all in one place. Gazpacho posted:Had you looked into buying a home before you received this news? If that was already a goal that you had explored and then given up because you lacked the means, maybe you can now pick up where you left off. The fear is that this area will quickly become a California type situation where shitbox bungalows cost $3m. That would really suck for me as I would be locked out of home ownership forever. I really do not want to be in this position, to the extent that I am prepared to be "house poor" for it (if it is actually feasible to do this.) Gazpacho posted:The home market is "on fire" now precisely in the sense that prices are disturbingly high, driven partly by cheap credit that is expected to go away this year. I hadn't considered this aspect. If prices are actually slated to go down next year because of the credit situation, I'd certainly be down to wait, especially since I am expecting a substantial raise next year. That's assuming the advantage is not obviated by inflation. KYOON GRIFFEY JR posted:I suspect that if you buy a 1.2 million dollar condo on 80k a year you will end up being house poor. In my city, you would owe about $12,000 a year in property taxes on that condo. It's a slightly high tax state and city, but there are localities with much higher taxes. You need to figure out this number. You should bet on about 1-2% per year for maintenance, repair, etc so that's another $12,000 to $24,000. If it's a condo, you'll have condo fees likely of a couple hundred bucks a month. So figure you are baking in about $30k of cost a year on the lower end, on an 80k salary, without paying any of the mortgage. One option is to get a roommate in my new place until I can afford the taxes and maintenance on my own. I've run into a few people who did this. I really didn't want to become a landlord, but I guess I could be a really good one? To reiterate, my concern here is that if homebuying is my ultimate goal, to my knowledge, there are not really other investments out there that can catch up to the combination of inflation and skyrocketing home prices. If that were definitively shown to be untrue, I think that would change my calculus. KYOON GRIFFEY JR posted:When I read your goals, none of those goals are necessitated by owning a house. Before you think about buying a house, I recommend you read the housebuying thread in this forum, which cycles between being titled "why is everyone in this business so goddamn stupid" and "do never buy" so that you can go in to this with your eyes very much wide open. Thanks, I will read that. I would just qualify by saying that I'm most likely looking at buying a newer apartment in the city and not a house in the boonies. I grew up in a house dating to the 18th century and am fairly eyes-open about the kind of maintenance poo poo that entails, which I simply cannot afford. One thing I haven't mentioned here is that my parents offered me their house. This would likely entail me buying it from them at about half market rate (probably $600k.) I'm not ready to live out in the boonies just yet, but it's something I've kept in mind for when I'm in my 40s or so, if I have a spouse and am willing to completely forego my social life.
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Mar 7, 2022 18:56
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varys posted:I hadn't considered this aspect. If prices are actually slated to go down next year because of the credit situation, I'd certainly be down to wait, especially since I am expecting a substantial raise next year. That's assuming the advantage is not obviated by inflation.
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Mar 8, 2022 02:16
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varys posted:To reiterate, my concern here is that if homebuying is my ultimate goal, to my knowledge, there are not really other investments out there that can catch up to the combination of inflation and skyrocketing home prices. If that were definitively shown to be untrue, I think that would change my calculus. Stop thinking of a home as an investment. It's a place to live. Financially, buying a house/apartment can sometimes be dumb and more expensive than renting. They can go down in value, or up. You shouldn't buy a house expecting it to increase significantly in price over the long term. Also, stocks have historically outperformed housing in just about any housing market.
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Mar 11, 2022 06:18
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As someone who has to spend $10k on brick work on the house I just bought, I would encourage you to not think of rent as "wasted money" vs. a mortgage payment. Also, what happens if you lose your job?
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Mar 11, 2022 17:45
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KYOON GRIFFEY JR posted:When I read your goals, none of those goals are necessitated by owning a house.
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Mar 16, 2022 14:58
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Or housing prices could crash like they did back in 2007/8. You have no way to predict if buying now is really the right move, and fear of getting priced out is one of the worst reasons to buy. Do you want to marry? Have kids? Your housing needs may change significantly in the next few years. I appreciate that you want to stay in place, but what happens if you or your bf get a great job offer elsewhere? Would he be OK with staying put if he got an offer to double his salary in another place? Is he not planning to move into the house with you? Either you're going to have a house too big for your needs for a while, or you will quickly outgrow your house. A roommate might help, but do you really want that? It seems like you are rationalizing and acting out of fomo, and that's just a recipe for disaster. You're right about taxes btw, you shouldn't owe anything.
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Mar 16, 2022 16:04
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varys posted:I've been thinking over this statement. At first I thought it made sense, but I've changed my mind - I actually don't think it's true. My goal is to live here for as long as possible in as nice a place as possible. The reason I am thinking about buying is that living here is going to get steadily more expensive till I'm priced out. If I keep renting for 5-10 years, my rent, and home prices, are going to keep getting pricier until there is just no way to keep living in this area. Again, the concern is that this will become a San Francisco situation, where I'd be required to move way out into the boonies and even then it would be hyper-expensive. what area is this out of curiosity
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Mar 16, 2022 18:05
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Oh and sorry, just saw your post saying you don't want kids. That helps, but suppose a future partner (current bf or otherwise) doesn't want to stay in the area, or more, doesn't like the place you decided to buy as a forever home? Maybe they are big into woodworking and would like a shop, etc. I'm giving these warnings because my situation changed dramatically after I was around your age, and being tied down to a house would have made things exponentially harder. I know it feels like homes will appreciate forever, but how would you feel if average home prices dipped 20% the year after you bought? You're putting all of your eggs into a volatile micromarket by buying a house with almost all your net worth. If you do buy, at least get a home loan for what you can, so that you can spread out your investments into stocks and bonds for some diversification.
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Mar 16, 2022 20:40
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KYOON GRIFFEY JR posted:what area is this out of curiosity moana posted:Or housing prices could crash like they did back in 2007/8. You have no way to predict if buying now is really the right move, and fear of getting priced out is one of the worst reasons to buy. moana posted:Your housing needs may change significantly in the next few years. I appreciate that you want to stay in place, but what happens if you or your bf get a great job offer elsewhere? Would he be OK with staying put if he got an offer to double his salary in another place? moana posted:Is he not planning to move into the house with you? Either you're going to have a house too big for your needs for a while, or you will quickly outgrow your house. A roommate might help, but do you really want that? moana posted:Oh and sorry, just saw your post saying you don't want kids. That helps, but suppose a future partner (current bf or otherwise) doesn't want to stay in the area, or more, doesn't like the place you decided to buy as a forever home? Maybe they are big into woodworking and would like a shop, etc. I'm giving these warnings because my situation changed dramatically after I was around your age, and being tied down to a house would have made things exponentially harder. moana posted:I know it feels like homes will appreciate forever, but how would you feel if average home prices dipped 20% the year after you bought? You're putting all of your eggs into a volatile micromarket by buying a house with almost all your net worth. If you do buy, at least get a home loan for what you can, so that you can spread out your investments into stocks and bonds for some diversification. The notion of getting a home loan to diversify out my investments definitely interests me. I agree that it would be better not to just dump all my money into buying the apartment outright. What kind of split in that regard makes sense?
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Mar 16, 2022 21:59
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varys posted:I think if my boyfriend complained that I should buy them a new house so they could have a woodshop, that would fall into the category of "no and suck it up." That's certainly a scenario you present, but the Real Life Scenario moana was describing is when a partner says "I want to move, this place doesn't fit my needs" at which point you either choose the house or the spouse It's common, and not a reason to avoid property ownership, but it's worth keeping in mind that if you're financially trapped in a house, you might have some limitations on your romantic life.
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Mar 16, 2022 23:21
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There's a lot of bad analysis and comparisons being thrown around in this thread. You have a pot of money, and you want to maximize your return on that money, which includes some non-financial elements. Home / Apartment ownership has some features: it's relatively illiquid, there are costs of getting into and getting out of that investment. It will probably appreciate but may do so at a lower rate than an appropriately diversified portfolio (which would probably include, ironically, some exposure to real estate). This also means sort of functionally putting all your eggs into one basket - owning a home means that a single asset essentially compromises your entire portfolio, so if it craters in value you lose everything. However, it also includes the possibility of you know, property ownership, which has some intangible benefits. Financial Instrument ownership is relatively straightforward, you'd buy a basket of debt and equity securities, assuming it's appropriately diversified you'd expect to receive the market return or so, which has averaged to about 8.2% over the last few years. There's also some costs of security ownership vs a home - ie. rent. Also, if you don't know anything about finance, owning intangible things that are essentially 0s may be less emotionally satisfying for your than owning a piece of property. There's also a middle-ground to consider, where you put some of your assets into securities etc.. and also use some of the funds the buy a home or apartment. The downside of this is you'll be paying interest on the mortgage, however the upside is that mortgage rates are very low, and your securities growth should easily outpace this, particularly as you are in the highest tax bracket and mortgage interest can be used as a tax deduction - however the tax deduction should only be considered in the marginal sense, since the IRS rules about standard deductions increased it to 12,000 you probably aren't going to be paying that much more than 12,000 in interest a year, though it's hard to say. To really analyze the situation we'd probably want to use real options, this is a classic case for it, but frankly I'm not going to build a tiered binomial lattice model for you. I'd really recommend that you consider, weirdly, taking on some debt, and maybe buying a home or apartment where you plan to rent out maybe a single room, since you're the landlord you can be pretty choosy. This would probably give you the best of both worlds. The next step is really to see how much of a mortgage at what rate you could get approved for, trying to calculate the true costs of property ownership (taxes, fees, licenses, etc..) as well as trying to figure out what your costs of securities ownership would be (include rent here) and pop it into excel.
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Mar 17, 2022 00:05
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pseudanonymous posted:I'd really recommend that you consider, weirdly, taking on some debt, and maybe buying a home or apartment where you plan to rent out maybe a single room, since you're the landlord you can be pretty choosy. This would probably give you the best of both worlds. imo this is like the worst of all possible worlds
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Mar 17, 2022 00:33
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Honestly? Put that poo poo 100% into nexo (stablecoins) make 8%/yr, live off 5-7% (of the 8) plus a job, always let that 1 compound and NEVER TOUCH THE PRINCIPAL EVER. Congrats, you win, the aristocrats. Do what you want in life but follow the caps rule. 5%is another 50k/yr at 0 risk minus some tax at 1m. On top of a 70k+/yr job, that's plenty to last you a long time and get ahead more quickly. Do not look into million dollars of homes when there's plenty of options for a 300k home (such as in other states) that you could arguably pay off in 3-5 years with actual patience due to your lack of debt. (USER WAS PUT ON PROBATION FOR THIS POST) notwithoutmyanus fucked around with this message at 21:22 on Mar 24, 2022 |
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Mar 23, 2022 20:59
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whoops accidentally quoted myself.
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Mar 23, 2022 21:00
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