Author Topic: "I invest in Real Estate"  (Read 2767 times)

Sulame66

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"I invest in Real Estate"
« on: February 03, 2017, 07:39:53 AM »
Does this mean the person utilizes REITs?

I heard an ad for rich uncles, and don't currently qualify - but might within a few years. Over the last few months I've come to realize I don't think I want a house or larger property. My 550 sq ft apartment could be a little larger, but I can't imagine doing much with more than 750.

With that said, I'm trying to figure out what to do with my money after I finish paying off my debt this year. I already heavily invest in the S&P500 through my 401(k) and would have just opened up a mutual fund account and dumped money in there. I'm not aware of much else to do with it other than let it rot in a savings account or put it in a 'money mutual' account which is fuzzy to me.

NoStacheOhio

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Re: "I invest in Real Estate"
« Reply #1 on: February 03, 2017, 08:55:14 AM »
It could mean REITs or it could mean that they use their money to purchase real estate directly, then rent it out.

Retire-Canada

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Re: "I invest in Real Estate"
« Reply #2 on: February 03, 2017, 09:12:02 AM »
Does this mean the person utilizes REITs?

I heard an ad for rich uncles, and don't currently qualify - but might within a few years. Over the last few months I've come to realize I don't think I want a house or larger property. My 550 sq ft apartment could be a little larger, but I can't imagine doing much with more than 750.

With that said, I'm trying to figure out what to do with my money after I finish paying off my debt this year. I already heavily invest in the S&P500 through my 401(k) and would have just opened up a mutual fund account and dumped money in there. I'm not aware of much else to do with it other than let it rot in a savings account or put it in a 'money mutual' account which is fuzzy to me.

Based on your post I would do nothing until I educated myself to at least a basic level about investing. Then decide on what your investment plan is and put it into writing and then execute.

Ramparts

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Re: "I invest in Real Estate"
« Reply #3 on: February 03, 2017, 09:49:25 AM »
I heard an ad for rich uncles, and don't currently qualify - but might within a few years.

I had to look up what "an ad for rich uncles" was, and found out it's a non-publicly traded REIT. I hope you're not seriously thinking of investing with them in a few years.

Rockies

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Re: "I invest in Real Estate"
« Reply #4 on: February 03, 2017, 11:26:26 AM »
I'd thoroughly read the comments here before investing in Rich Uncles. Hopefully you will also conclude its a really bad idea. http://reviewopedia.com/workathome/rich-uncles-reviews-legit-or-scam/

Instead look for an REIT mutual fund or ETF from Vanguard, but I personally would not put more than 10% of your net worth into it.

A lot of people will argue you don't need to hold any real estate to be successful. Sure - buying property to live in or buying property to rent can be very profitable, but its not a necessary component to success. Investing in the S&P 500 is also a great way to earn money long term. It sounds like you don't love the idea of being a home owner or a landlord, so you should probably stay away from it. Even among those who advocate diversifying into REIT's, most don't argue for a very high percentage (I don't think I've ever seen someone advocate for more than 10% of your net worth before) of your portfolio to be allocated towards it. In the long run it does help to diversify, but it only matters at a very nit picky level of detail.

I'd first make sure you have your ideal breakdown of domestic/international stocks/bonds figured out - that will be more important. If you want to invest in buying actual real estate thats a different game, and a decision you should not take lightly. Spend a lot of time researching it.
« Last Edit: February 03, 2017, 11:33:08 AM by Rockies »

Sulame66

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Re: "I invest in Real Estate"
« Reply #5 on: February 03, 2017, 02:40:04 PM »
Not currently investing in anything other than the S&P so I'm only 'diversified' in the sense that my risk is split across those 500 companies. This particular REIT looks compromising, but I know Vanguard offers some and those would be legit. I just always thought of 'real estate investing' as going out and buying $300k property after $300k property like that's somehow possible. I don't really want to be a landlord (especially before I even become a homeowner myself) so REITs would be the only option. Other than looking at the long term returns for an index or fund (say I go there today to invest $5,000. I would see Fund A has a 25 year annualized return of 5% and fees of 1%. Fund B has a 25 year annualized return of 4.5% and fees of .4%. I would go with fund B and assume this is the better option) I don't have any way to actually value anything. And I don't do individual stock or day trading, I'm only passive.

Monkey Uncle

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Re: "I invest in Real Estate"
« Reply #6 on: February 04, 2017, 04:35:43 AM »
At your current level of investing knowledge, I would suggest one of Vanguard's life cycle funds.  That would get you some more diversification than your current S&P 500 fund without exposing you to novice mistakes, which you appear to be prone to given your consideration of a non-listed REIT.

Then, if you're interested in getting more hands-on, do as Retire-Canada suggested and start getting more educated about investing basics.  But really, you don't have to.  If all you ever do is dump a lot of money into a life cycle fund, you'll be better off than about 99.9% of investors.

Physicsteacher

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Re: "I invest in Real Estate"
« Reply #7 on: February 04, 2017, 05:21:42 AM »
At your current level of investing knowledge, I would suggest one of Vanguard's life cycle funds.  That would get you some more diversification than your current S&P 500 fund without exposing you to novice mistakes, which you appear to be prone to given your consideration of a non-listed REIT.

Then, if you're interested in getting more hands-on, do as Retire-Canada suggested and start getting more educated about investing basics.  But really, you don't have to.  If all you ever do is dump a lot of money into a life cycle fund, you'll be better off than about 99.9% of investors.

If your next step in investing is to open a traditional or Roth IRA, I second the advice of choosing either a Vanguard Target Date fund or Vanguard Lifestrategy Growth fund. You'll gain exposure to small and mid cap U.S. stocks in addition to the S&P 500, international stocks, and some U.S. and international bonds while still having a portfolio that will maintain itself on autopilot. There will be no tax consequence for trading this in for some other portfolio of your choosing after you've had more time to educate yourself, but it would also be a perfectly good buy and hold for life option.

If, however, you are investing in a taxable account (and especially if you might be in a high tax bracket someday), tax efficient fund placement could become more important. Having to sell in a taxable account a decade or two down the line to reconfigure your portfolio to take that into account could result in some big capital gains taxes so you are better off getting that right early on. For a taxable account, I'd suggest starting with VTSMX, Vanguard's total stock market index (or VTSAX, which is the version with lower fees that your shares automatically turn intimate once you have $10k invested).

Sulame66

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Re: "I invest in Real Estate"
« Reply #8 on: February 06, 2017, 10:04:10 AM »
Well, I currently put 33% of my income, split evenly, into both my Roth 401(k) and my tradiational 401(k). The Roth is on pace to get maxed (what happens after I hit the cap and I'm still trying to put some in?) and the 401(k) is on pace to not hit the cap. However, later this year I should have my remaining debt taken care of which would free up $500 a month in minimum payments (car payment is $120, both student loans are $75. I'm currently saving up 3.5 months of an EF and then using the .5 months to make a big payment on the highest interest loan and going back to 3 months, back up to 3.5 months etc. But I wanted to put more than the minimums while saving so I'm doing $200 towards the car and $150 towards each loan = $500).

With that extra $500 I would be able to finish maxing out the 401(k) - if not this year, then certainly next year when I start with no debt. I would then also have some of that $500 leftover that I'm ok investing, and I may put some more. If I decide not to save for a house I have more that I can allocate towards other investment vehicles.

I haven't looked outside my company because they have fantastic expense ratios (.06 for S&P500, .12 for the 2060 target retirement which is the riskiest mix offered) and I didn't see a reason to go outside the company now that I'm vested. If I leave I can transfer the balance to Vanguard but the fees are higher so there was no point. Now I'm at that point where I have to go outside the company and so am in the deep end without a paddle.

Don't think I'll ever be in a super high tax bracket. I'm not aiming to become senior leadership but I do see an avenue to capping out around $80-$100k in 10+ years time. I doubt I'd ever go higher.

What is the difference between a money mutual account, a brokerage account, a taxable account, and a mutual fund account?

FrugalFisherman10

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Re: "I invest in Real Estate"
« Reply #9 on: February 06, 2017, 03:39:12 PM »
What is the difference between a money mutual account, a brokerage account, a taxable account, and a mutual fund account?
Well, good job with what you're doing so far. It sounds like you have  a plan to continue paying down your debt and keep investing more money in the market.
As for the accounts you asked about:
Investopedia and Bogleheads wiki are great places to 'google' certain terms you are unfamiliar with. A quick search of investopedia returns this blurb about Money Mutual funds (edited by me a little for simplicity):
Quote
"With a money market fund, you can still write checks and transfer money into your checking account when you need it, but it is no longer a savings account - it is an investment.
The returns are better, the risk/security is comparable, and taxes and access are easily handled...you will find that a money market account will help you to see some returns from the money you are keeping as an emergency fund or just waiting to invest."
Basically, this would be a fine place to put your emergency fund.

A Brokerage account as commonly referred to in the personal finance world (like MMM forums, Bogleheads, etc.) is often synonymous with a "Taxable account". As opposed to your Traditional 401k or a Traditional IRA, Brokerage/Taxable accounts hold money that has been taxed already and you are choosing to invest it. Additionally, interest, gains and distributions from investments held in a Taxable/Brokerage account will be taxable.
Traditional 401ks and Traditional IRAs are 'pre-tax'.
"Taxable/Brokerage" accounts are 'after-tax' money (for a simplistic and not quite precise example...you're employer already withheld the federal and state taxes from your paycheck, because you didn't tell them to put it in a Traditional 401k first. Now you only have the leftover money after it has been taxed to put into a Taxable/Brokerage account).

A mutual fund is not an account but rather a type of investment.
Mutual funds can be held in any of the above accounts mentioned so far... A Money Market Mutual account is likely holding a type of mutual fund, a Traditional 401k, taxable/brokerage account, etc. can all hold mutual funds. I've handed you a few fish..At this point I would suggest you perhaps search investopedia/bogleheads wiki for explanations of what a mutual fund is..

Also, check out blog posts at JLCollins Stock Series to keep furthering your learning if you haven't read those already http://jlcollinsnh.com/stock-series/

Hope that helps some!