Author Topic: 100K+ Earning .0?% Please help me  (Read 7319 times)

SenoritaStache

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100K+ Earning .0?% Please help me
« on: January 03, 2014, 04:29:50 PM »
Hello just wanted to know what the MMM forums would recommend.  I have 100K+ just sitting there in a couple of different accounts, looked at the credit unions and local bank rates and the best I could find was .30% and that's in their PREMIER accounts, initially I was going to purchase a 3rd rental property cash, but now they seem to not be worth it since price was gone up.  I would estimate that I have about 110K-160K and it just seems so silly to only make .30% on that type of money.  I have never invested in stocks or peer to peer lending, so to start is intimidating.  Just looking to see what others have done and options I may have to work this $ as I figure out what I want to do!  Thanks for your help and suggestions!!  The money is liquid and ready to roll! LOL *also I'm pretty conservative this being the 1st time I look into investing, so I think this might be part of my horror!
« Last Edit: January 03, 2014, 06:53:49 PM by SenoritaStache »

KingCoin

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Re: 100K+ Earning .0?% help me please
« Reply #1 on: January 03, 2014, 04:36:28 PM »
Are you open to investing in stocks and bonds?

AlanStache

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Re: 100K+ Earning .0?% help me please
« Reply #2 on: January 03, 2014, 04:57:44 PM »
You should read up on the investing posts by mmm.  there is no short cut, one needs to educate them self on investing in the market. but it sounds like you have some understanding of how the system works if you have rental properties.

Khan

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Re: 100K+ Earning .0?% help me please
« Reply #3 on: January 03, 2014, 06:09:52 PM »
Yup, .3% interest is terrible, absolutely terrible.

See about getting a Vanguard account, and dump all the money into there. Consider your age, though for you I'd go (80 - age), and that's the number you put into stocks, so if you're 30, you'd put 50% in stocks, 50% in bonds. Not the most aggressive plan, but it sounds like you're afraid of doing things here, and this is to prevent you from doing something dangerous to your financial health if it goes down(50/50 is a very conservative mix).

Then only check it once a year. Do not ever listen to talk about the market crashing or anything else, just stay the course.

Read
http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit
http://www.bogleheads.org/wiki/Investment_policy_statement

Call/speak to
https://investor.vanguard.com/what-we-offer/investing-help/help-me-when-i-need-it

The important thing you need to know about Vanguard, is they are unlike the rest of the financial services industry, which operates a lot more like parasites on the rich and dumb then anything else. They have a completely unique ownership structure, which guarentees that they're fiduciary responsibility is to their customers first and foremost.

SenoritaStache

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Re: 100K+ Earning .0?% help me please
« Reply #4 on: January 03, 2014, 06:37:34 PM »
I currently am 26 years old :) and yes im looking to learn about anything that makes over .3%, just kinda wanted to know what you guys/gals do with your stache? I own my home and have 2 rentals on the side if this helps any, thanks for your replies
« Last Edit: January 04, 2014, 08:59:40 AM by SenoritaStache »

SenoritaStache

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Re: 100K+ Earning .0?% help me please
« Reply #5 on: January 03, 2014, 06:40:41 PM »
Are you open to investing in stocks and bonds?

Im open into learning about them I have read the MMM posts about investing but even then this area is unknown to me so just want to get educated 1st.  As you can tell Im way more confortable investing in real estate, but that may not be an option for the moment, so want to educate and explore other avenues, thank you for your comments + replies

KingCoin

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Re: 100K+ Earning .0?% help me please
« Reply #6 on: January 03, 2014, 06:51:42 PM »
There's a similar thread with a few recommendations here as well:
http://www.mrmoneymustache.com/forum/investor-alley/new-to-investing-unclear-on-income-return/

Basically, you're going to want to get yourself to the library and pick up 4 books on personal finance and investing and read them. You want to familiarize yourself with basic asset classes (stocks, bonds, REITs) and their risk/return characteristics. There are some good suggestions in MMM's recommended books section.

I'll add, just because prices have gone up, doesn't make an investment a bad one. Using that criteria would rule out stocks which are up nearly 200% in the last 5 years. What are the yields on investment properties in your area?

SenoritaStache

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Re: 100K+ Earning .0?% Please help me
« Reply #7 on: January 03, 2014, 07:04:37 PM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Eric

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Re: 100K+ Earning .0?% help me please
« Reply #8 on: January 03, 2014, 07:07:24 PM »
Are you open to investing in stocks and bonds?

Im open into learning about them I have read the MMM posts about investing but even then this area is unknown to me so just want to get educated 1st.  As you can tell Im way more confortable investing in real estate, but that may not be an option for the moment, so want to educate and explore other avenues, thank you for your comments + replies

I really like the Stock Series from J L Collins:

http://jlcollinsnh.com/stock-series/


KingCoin

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Re: 100K+ Earning .0?% Please help me
« Reply #9 on: January 03, 2014, 07:11:42 PM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Those numbers aren't bad, but  I think diversifying a bit is probably worthwhile, especially since you're young and can take advantage of the longer term nature of equities.

Congrats on what you've achieved financially so far. Having a couple investment properties, a stack of cash, and the willingness to learn should take you a long way.

SenoritaStache

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Re: 100K+ Earning .0?% Please help me
« Reply #10 on: January 03, 2014, 07:39:07 PM »
Yes I'm very blessed! Thank you all for the links and info, I truly appreciate it!
« Last Edit: January 03, 2014, 07:40:44 PM by SenoritaStache »

Khan

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Re: 100K+ Earning .0?% Please help me
« Reply #11 on: January 03, 2014, 08:24:47 PM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Your home is not an investment, it's an expense. However, as an owned home with a low interest rate, it's a lot better of an expense then a rental, or a higher priced home.
Rental 1 has a yield of 9.75% yearly, as far as I understand it, rentals above 6% are a good deal.
Rental 2 has a yield of 10.9% yearly.

I think we need to flip this around, how bout instead of me teaching you about index investing, asset allocation, and all that, you teach me about being a landlord? Those numbers are awesome.

Take your time learning about investing, and you mind as well take your time averaging in(dollar cost averaging) your money into your investments after you decide what to do. I would say that a decent, high guarenteed return you have if you want to go for it is to sink money against rental #2, as a 5.125% guaranteed return is absolutely nothing to snub your nose at.

KingCoin

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Re: 100K+ Earning .0?% Please help me
« Reply #12 on: January 03, 2014, 09:29:50 PM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Your home is not an investment, it's an expense. However, as an owned home with a low interest rate, it's a lot better of an expense then a rental, or a higher priced home.
Rental 1 has a yield of 9.75% yearly, as far as I understand it, rentals above 6% are a good deal.
Rental 2 has a yield of 10.9% yearly.

I think we need to flip this around, how bout instead of me teaching you about index investing, asset allocation, and all that, you teach me about being a landlord? Those numbers are awesome.

Take your time learning about investing, and you mind as well take your time averaging in(dollar cost averaging) your money into your investments after you decide what to do. I would say that a decent, high guaranteed return you have if you want to go for it is to sink money against rental #2, as a 5.125% guaranteed return is absolutely nothing to snub your nose at.

A general rule of thumb is that the monthly rental rate should exceed 1% of the purchase price. These levels are achievable in many areas of the country in very liveable areas. The numbers above don't hit that bogey, but are close enough to classify them as OK investments, especially at low leverage levels and coupled with high cash reserves.

There are a lot of expenses that can and will accompany real estate investments, so calculating a yield isn't as simple as rent/price. Generally, 50%*rent/price is a good finger in the air estimate of "yield".

Biggerpockets.com is a good resource for potential real estate investors if interested.

AlexK

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Re: 100K+ Earning .0?% Please help me
« Reply #13 on: January 03, 2014, 10:23:01 PM »
If I were you (and my finances are very similar to yours) I would open a Vanguard account and put it all into a stock index fund. You are young enough to ride out the volatility and nothing has better returns than stocks over the long run.

ASquared

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Re: 100K+ Earning .0?% Please help me
« Reply #14 on: January 03, 2014, 10:46:47 PM »
Vanguard ETFs. Or betterment.com if you need more of a hands off approach.

Khan

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Re: 100K+ Earning .0?% Please help me
« Reply #15 on: January 03, 2014, 10:59:16 PM »
A general rule of thumb is that the monthly rental rate should exceed 1% of the purchase price. These levels are achievable in many areas of the country in very liveable areas. The numbers above don't hit that bogey, but are close enough to classify them as OK investments, especially at low leverage levels and coupled with high cash reserves.

There are a lot of expenses that can and will accompany real estate investments, so calculating a yield isn't as simple as rent/price. Generally, 50%*rent/price is a good finger in the air estimate of "yield".

Biggerpockets.com is a good resource for potential real estate investors if interested.

Ahh, thanks. Rentals are not something I'm interested in(I hate people and the work that would be involved) so I was talking straight outta my ass lol.

Hamster

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Re: 100K+ Earning .0?% Please help me
« Reply #16 on: January 04, 2014, 12:37:16 AM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Your home is not an investment, it's an expense. However, as an owned home with a low interest rate, it's a lot better of an expense then a rental, or a higher priced home.
Rental 1 has a yield of 9.75% yearly, as far as I understand it, rentals above 6% are a good deal.
Rental 2 has a yield of 10.9% yearly.

I think we need to flip this around, how bout instead of me teaching you about index investing, asset allocation, and all that, you teach me about being a landlord? Those numbers are awesome.

Take your time learning about investing, and you mind as well take your time averaging in(dollar cost averaging) your money into your investments after you decide what to do. I would say that a decent, high guaranteed return you have if you want to go for it is to sink money against rental #2, as a 5.125% guaranteed return is absolutely nothing to snub your nose at.

A general rule of thumb is that the monthly rental rate should exceed 1% of the purchase price. These levels are achievable in many areas of the country in very liveable areas. The numbers above don't hit that bogey, but are close enough to classify them as OK investments, especially at low leverage levels and coupled with high cash reserves.

There are a lot of expenses that can and will accompany real estate investments, so calculating a yield isn't as simple as rent/price. Generally, 50%*rent/price is a good finger in the air estimate of "yield".

Biggerpockets.com is a good resource for potential real estate investors if interested.
Not to beat a dead horse, but the 1% 'rule' needs to be taken with a huge grain of salt. 2% rent to price for a poorly maintained property, high vacancy, high taxes, HOA fees, management fees, and landlord paying utilities can be worse than 0.8% rent to price with low taxes, no HOA, low vacancy, etc. Running all the numbers with realistic assumptions is way more important than trying to meet this rule. Just don't cheat or be overly rosey in your assumptions.

SenoritaStache

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Re: 100K+ Earning .0?% Please help me
« Reply #17 on: January 04, 2014, 08:46:52 AM »
I'm sure someone has tried peer to peer lending? Toughts?

AlanStache

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Re: 100K+ Earning .0?% Please help me
« Reply #18 on: January 04, 2014, 09:25:22 AM »
p2p can get better returns than the larger market but it does take more work and has more risk-and the risks are less well defined with less historical data behind the assumptions.  It sounds like at your level of knowledge you would be best holding off on p2p for a bit until you have a better handle on traditional investing.   Again plenty of resources here in mmm. 

I have 1/5 of my roth with lending club and I can tell you I spend +80% of my time with the roth with the LC account, I have to log in and place orders weekly.  If I had more in there this could be automated. 

Also there is great variability in the quantity and quality of loans to invest in, so there are times when you will have a good bit of cash that cant be reinvested and is just sitting in your account. 

p2p can get better returns and be an interesting side deal but you really need to get up to speed on etf's and traditional market investing first.

Also I have read mixed things about the tax consequences of taxable p2p accounts and the hassle involved.

0.02$

Daleth

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Re: 100K+ Earning .0?% Please help me
« Reply #19 on: January 04, 2014, 10:21:15 AM »
not sure what my yield on investment is, but Ill break the picture down below.

my house-single family home 3bed/2bath, 105K mortgage, monthly payment of $610 for 30yrs @4.25%
rental 1-single family home 3bed/2bath, no mortgage (house value 160K) receiving $1,300 on it.
rental 2-single family home 4bed/1bath, 67K mortgage, (house value 150K) monthly payment of $400 for 25 yrs @5.125, receiving $1,365 on it.  Thanks for the link Ill begin studying right away!

Rental 1 has a yield of 9.75% yearly, as far as I understand it, rentals above 6% are a good deal.
Rental 2 has a yield of 10.9% yearly.

I don't think we can calculate the return on Rental 1, because we don't know what it's costing her. It costs something to pay property taxes and insurance--that's normally included in a mortgage payment, so we can calculate the yield on Rental 2, but we don't have the info for Rental 1. Also, strictly speaking, to get an apples to apples comparison, you have to subtract out the average maintenance costs (and then when you compare it to any other investment, subtract out any fees and whatnot that you're paying the brokerage).

CDP45

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Re: 100K+ Earning .0?% Please help me
« Reply #20 on: January 04, 2014, 11:12:33 AM »
I'm sure someone has tried peer to peer lending? Toughts?

I would advise against this, compressed yields, people buying deeper into the pool to chase yield.

For the mean time, why not go to your local credit union and deposit into a high-yield checking account? Or a Credit union CD?
http://www.depositaccounts.com/checking/reward-checking-accounts.html

www.cutimes.com/2013/12/27/credit-union-cd-rates-top-banks

KingCoin

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Re: 100K+ Earning .0?% Please help me
« Reply #21 on: January 04, 2014, 11:40:48 AM »
Not to beat a dead horse, but the 1% 'rule' needs to be taken with a huge grain of salt. 2% rent to price for a poorly maintained property, high vacancy, high taxes, HOA fees, management fees, and landlord paying utilities can be worse than 0.8% rent to price with low taxes, no HOA, low vacancy, etc. Running all the numbers with realistic assumptions is way more important than trying to meet this rule. Just don't cheat or be overly rosey in your assumptions.

Of course. This is why I called it a "rule of thumb" rather than a "rule" and included a link for more information.


I'm sure someone has tried peer to peer lending? Toughts?

You can do a search for peer to peer lending on this forum as there are a number of threads discussing the pros and cons. It might be something interesting to dabble in as part of a balance portfolio. I wouldn't allocate more than 10% to it though.

In your situation, I'd consider a portfolio like this:

40% Domestic Equity
10% Foreign Developed Equity
10% Emerging Market Equity
10% REITs
10% Lending Club
10% Treasuries
10% TIPS

This works out to a well-diversified portfolio of about 70% equity-like and 30% bond-like investments, which should serve you well over time.



SenoritaStache

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Re: 100K+ Earning .0?% Please help me
« Reply #22 on: January 04, 2014, 02:50:44 PM »
Thank you all for your suggestions :)

WillPen

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Re: 100K+ Earning .0?% Please help me
« Reply #23 on: January 04, 2014, 03:30:09 PM »
The JL Collins Stock series (recommended above) is a great place to start. I would also recommend the Boglehead's Guide to Investing. I don't feel like it's very dry or difficult to understand.

kpd905

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Re: 100K+ Earning .0?% Please help me
« Reply #24 on: January 04, 2014, 05:12:07 PM »
If you don't want to do much research, you could either pick a 3 fund portfolio (50% US Stock, 30% International stock, 20% Bond as an example) or even a target retirement fund.