Author Topic: 800K what should I do with it? Total investment newbie  (Read 9360 times)

pudding

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800K what should I do with it? Total investment newbie
« on: April 07, 2016, 11:06:36 PM »
If I sell my house I can net 7 to 800k

I have absolutely no idea about investing.

Im 54 and I have a small renovation / carpentry business.

Could I actually live off the interest I wonder?  I have no idea what I could actually get in interest etc.. 

Is investing something that is hard to master, if it is maybe I'd be better keeping my house as always somewhere to live and can rent bits out etc...

I have this idea of selling, investing and then working part time and living happy ever after, just not sure if its realistic.

Can anyone give me any thoughts on this?

Much appreciated!

Frankies Girl

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Re: 800K what should I do with it? Total investment newbie
« Reply #1 on: April 07, 2016, 11:32:17 PM »
You might be able to live off the cap gains and dividends (there is no interest earned) off of investments. (but I would question where you'd live if you sold your house?)
 
But it also depends on what you need for living expenses, how comfortable you are with investing in general, and several other factors we won't be able to answer for you.

I'd suggest reading through Jim Collins' stock series to get a strong understanding of how investing is supposed to work in plain (but entertaining) English.
http://jlcollinsnh.com/stock-series/

You'll also need to figure out your yearly expenses using something like Mint or Personal Capital to track everything if you haven't already been doing this.

You then need to figure out an investment policy statement, and what asset allocation you're comfortable with.
https://www.bogleheads.org/wiki/Investment_policy_statement
https://www.bogleheads.org/wiki/Asset_allocation

Once you've got a good grasp of all of that, then investing is really pretty simple. You can do a simple "lazy" portfolio with Vanguard (the gold standard for investment companies).
https://www.bogleheads.org/wiki/Lazy_portfolios



I honestly knew next to nothing about 3-4 years ago. I went through all of those links (and others on the Boglehead site too), and now am managing not just my own accounts but my mother's as well and I'm FIREd as of last year (Financially Independent, Retired Early) meaning I quit my job and won't ever work again unless I find something amazing, and as of this year the husband is also done working unless he wants to... so we are living off of our investments. If I could do it, anyone can. ;)

Do check out the stock series and come ask any questions here - there are some fabulously helpful/knowledgeable people around this forum. :)

kiwigirls

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Re: 800K what should I do with it? Total investment newbie
« Reply #2 on: April 07, 2016, 11:39:24 PM »
Short answer: If you can live on $30,000 pa including rent and taxes then yes you can invest your 750,000 in stock/bond portfolio and live off your investments.

Long Answer: read through MMM posts start to finish over the next month or so

LadyMaWhiskers

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Re: 800K what should I do with it? Total investment newbie
« Reply #3 on: April 08, 2016, 12:03:49 AM »
Given that you have construction skills, you might be a good candidate for real estate invest. Could you buy a multi-family for the 800k? That would give you some pace to live plus income. Of course, you do need a plan for where to live. The "renting bits out" is quite a bit more convenient when there are actual dwelling units involved.

pudding

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Re: 800K what should I do with it? Total investment newbie
« Reply #4 on: April 08, 2016, 12:06:03 AM »
Thanks for your answers.

I live in Vancouver Canada and the real estate here has gone up and up. My house went up almost a 1/4 million dollars last year.

It's good but makes me a bit anxious that it could all come down again.

I'll be doing a lot of reading on here next few weeks, I'm looking forward to it.

The idea of being financial free and able to not work if I don't want to is truly amazing!  and I think I have to remind myself that if I got off Vancouver's real estate roller coaster I could almost retire now.

I would hate to have my house drop by 30% and have missed the boat. But I suppose any investment has its ups and downs

pudding

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Re: 800K what should I do with it? Total investment newbie
« Reply #5 on: April 08, 2016, 12:22:09 AM »
Given that you have construction skills, you might be a good candidate for real estate invest. Could you buy a multi-family for the 800k? That would give you some pace to live plus income. Of course, you do need a plan for where to live. The "renting bits out" is quite a bit more convenient when there are actual dwelling units involved.

The house I have now has potential for adding value. I looked into it and I can build a 700 square foot house out the back as well as keep the existing house.
Existing house has a basement suite that has been there for years but recently picked up by city bylaw enforcement. So I'm in process of getting suite authorized.

If I did build a house and authorize suite Ill have 3 addresses on one lot, which would be worth a lot.

The only thing is that I've had that place 9 years and worked a lot on it and put money into it and so far never had any real time pay back from it. Though I have a ton of equity.

Start building the small house and another year and more equity and still nothing in my pocket... if at top of cycle could put all that hard work into it and might not be worth more that it is now if market has topped out.

Tough call for me as I'm definitely the kind of person that would like to chill out and have options to not work so much. But also could build that small house myself in a year from start to finish and if sold then would put another 100k in my pocket (or not if market drops)

A true story here.. My good friend bought a house 10 years back and I did the renovation on it. He bought for 850k he sold it 18 months ago as he was in a financial jam for 1.8 million.   He sent me a link last night to a new listing for the house, the house is being listed with development plans for the house to be built out into 4 units, and the selling price is just shy of 5 million bucks !!!!!   My friend is going nuts.

http://www.huffingtonpost.ca/davidfine2/vancouver-real-estate_b_9201620.html

EscapeVelocity2020

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Re: 800K what should I do with it? Total investment newbie
« Reply #6 on: April 08, 2016, 12:27:41 AM »
I would no longer be thinking passive income / 4% SWR (which is counter-culture on this counter-culture forum).  All that great 4% SWR happened in the non-internet age.  Times when Vanguard / Index funds were a glimmer, and day trading was only for the Gordon Gekkos.  Going forward, I think Indexing is mainstream, which means that the long term return on equities will be equal to GDP or less.  Everything eventually becomes efficient.

If I were you, I'd go small business, be active.  Good tax strategies (probably even better in CA, but I'm no expert).  Basically, you can either go no income and manage the portfolio or have some active income and use an individual business as tax savings...

pudding

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Re: 800K what should I do with it? Total investment newbie
« Reply #7 on: April 08, 2016, 12:35:18 AM »
Another Vancouver crazy real estate story ... house sells for 1 million over asking price


http://www.vancitybuzz.com/2016/04/vancouver-home-1-million-over-asking-price-dunbar/


steveo

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Re: 800K what should I do with it? Total investment newbie
« Reply #8 on: April 08, 2016, 01:36:35 AM »
I would put money into one of those all in one Vanguard funds and just forget about the money. Just set how much you want to withdraw from it each year on auto-pilot.

arebelspy

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Re: 800K what should I do with it? Total investment newbie
« Reply #9 on: April 08, 2016, 01:41:37 AM »
You might be able to live off the cap gains and dividends (there is no interest earned) off of investments. (but I would question where you'd live if you sold your house?)
 
But it also depends on what you need for living expenses, how comfortable you are with investing in general, and several other factors we won't be able to answer for you.

I'd suggest reading through Jim Collins' stock series to get a strong understanding of how investing is supposed to work in plain (but entertaining) English.
http://jlcollinsnh.com/stock-series/

You'll also need to figure out your yearly expenses using something like Mint or Personal Capital to track everything if you haven't already been doing this.

You then need to figure out an investment policy statement, and what asset allocation you're comfortable with.
https://www.bogleheads.org/wiki/Investment_policy_statement
https://www.bogleheads.org/wiki/Asset_allocation

Once you've got a good grasp of all of that, then investing is really pretty simple. You can do a simple "lazy" portfolio with Vanguard (the gold standard for investment companies).
https://www.bogleheads.org/wiki/Lazy_portfolios



I honestly knew next to nothing about 3-4 years ago. I went through all of those links (and others on the Boglehead site too), and now am managing not just my own accounts but my mother's as well and I'm FIREd as of last year (Financially Independent, Retired Early) meaning I quit my job and won't ever work again unless I find something amazing, and as of this year the husband is also done working unless he wants to... so we are living off of our investments. If I could do it, anyone can. ;)

Do check out the stock series and come ask any questions here - there are some fabulously helpful/knowledgeable people around this forum. :)

This post is phenomenal!  +1 to everything.

Don't rush into anything for the moment.  Take a few months to really learn and study this stuff.  The six months you miss out on market gains (and maybe you get lucky and it goes down in the meantime, but it's not usually something to gamble on) will pay for itself in spades in mistakes avoided.

Definitely start here:
http://jlcollinsnh.com/stock-series/

It's the simplest, and best, place to begin, IMO.  Read his whole stock series and I think you'll have a great foundation!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Heckler

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Re: 800K what should I do with it? Total investment newbie
« Reply #10 on: April 08, 2016, 08:29:34 AM »
Three years ago, my friend in NV (north Van) sold his condo for good coin, with the expectation of having a down payment for a house. It took him two years to find a place he liked, and wasn't woefully outbid on. 

If you sell, plan on moving outta dodge.  I like living here, so will keep living my now paid off $800+ townhouse I bought for $275. In 2003 I thought it was ridiculous, coming from a $145 brand new house we had built in Ontario in 1998.

I hear rent isn't all that cheap or easy to find either.

Heckler

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Re: 800K what should I do with it? Total investment newbie
« Reply #11 on: April 08, 2016, 08:33:51 AM »
Ps - I knew we were in the same place from your first post!

IMO, prices will peak soon, but won't crash down. Look at 2008.

Quote from: flattire;2913336


Heckler

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Re: 800K what should I do with it? Total investment newbie
« Reply #12 on: April 08, 2016, 08:35:23 AM »
Spring is definitely the time to sell though. Don't wait a few months, wait a year.

NoStacheOhio

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Re: 800K what should I do with it? Total investment newbie
« Reply #13 on: April 08, 2016, 08:46:05 AM »
Are you opposed to building the back house, living there, and renting out the other units?

pudding

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Re: 800K what should I do with it? Total investment newbie
« Reply #14 on: April 08, 2016, 09:47:17 AM »
Thanks for your replies.

Sounds to me like it's time to educate myself and become knowledgeable about investing.

Meantime I'll think I'll bite the bullet and build the small laneway house out the back. It'll be a bit of a pain but when it's done I'll have a great asset and lots of different rent/live options. 

Market might take a dip but if I'm not in a hurry to sell I can wait until it comes up again.

smedleyb

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Re: 800K what should I do with it? Total investment newbie
« Reply #15 on: April 08, 2016, 12:28:47 PM »
If I sell my house I can net 7 to 800k

I have absolutely no idea about investing.

Im 54 and I have a small renovation / carpentry business.

Could I actually live off the interest I wonder?  I have no idea what I could actually get in interest etc.. 

Is investing something that is hard to master, if it is maybe I'd be better keeping my house as always somewhere to live and can rent bits out etc...

I have this idea of selling, investing and then working part time and living happy ever after, just not sure if its realistic.

Can anyone give me any thoughts on this?

Much appreciated!

Based on Heckler's post, I wonder if there might not be some value in apartment complexes vs. single family homes.  Given your carpentry skills, maybe you can flip the equity in your home into a multi-unit complex where you live in one apartment and rent out the others.  You preserve equity (perhaps add to it by working on the units yourself, improving building, etc) while generating cash flow.  Of course there are a ton of variables to take into account, so I don't know how plausible my suggestion is. 

MustacheAndaHalf

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Re: 800K what should I do with it? Total investment newbie
« Reply #16 on: April 08, 2016, 07:58:24 PM »
"My good friend bought a house 10 years back ..."

Just to put this in context, it's great fun, but you can't go back and do the same thing.  It's great those stories represented buying cheap and selling for a premium, but there's no guarantee the same thing will happen for you.

Have you considered diversifying somewhat?  Some of your money in a house, or rental, and some invested in the stock market?  It doesn't have to be an all or nothing decision.

pudding

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Re: 800K what should I do with it? Total investment newbie
« Reply #17 on: April 08, 2016, 09:20:42 PM »
Are you opposed to building the back house, living there, and renting out the other units?

I could do. The only thing is that being a landlord Ive done it for 9 years this house and 2 years before on a different house.

It's not particularly freeing, it can be anywhere from mildly irritating to beep beep WTF @#$%^^   Once the government get involved if theres some kind of landlord tenant dispute its valium time ;)

I'm probably going to keep it for at least another year. I'm new to this forum and investing other than houses so if I find that I can invest elsewhere and leave the landlording behind I'll do that.


dess1313

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Re: 800K what should I do with it? Total investment newbie
« Reply #18 on: April 09, 2016, 12:58:32 AM »
try reading the bogleheads guide to investing, as well as millionaire teacher.  good books that keep it simple for even people new to all this investing stuff.

mikefixac

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Re: 800K what should I do with it? Total investment newbie
« Reply #19 on: April 09, 2016, 01:40:42 AM »
Basically you could do what is called "Geographic Arbitrage". See your place that is expensive and buy something inexpensive and fix it up with your skills. Sounds like you may be a single guy, so it would be easier to do. You won't be bothered using a bathroom that's still under construction.

Otherwise, if you take the comments and follow up on them, they'll serve you for life.

frugal_c

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Re: 800K what should I do with it? Total investment newbie
« Reply #20 on: April 09, 2016, 12:59:24 PM »
You are certainly right on the cusp of retiring, if you play things right.   I like the idea of selling your house and buying a multi-unit where you live in one and rent out the other units.   Vancouver has really low rent relative to real estate prices so to do this you would probably have to move to more interior BC, is that an option?  With this option you might need to still work a bit, but certainly not even close to full time.   The main thing will be to keep your expenses low.

Other things to think about are how much CPP you would get, if any.  You have your own business so I don't know if you have been paying into it.   If you are looking at a decent CPP payment then between that and OAS you don't need as much once you hit 65.   In that case you could use up some of your nest egg to cover expenses to 65 and then rely on the government money (CPP, OAS) to live off with your assets just being a little boost.   Obviously some risk to that but I will let you make the call.

As far as actually learning how to invest, there is not much to learn.  People will just tell you to buy a total stock market or perhaps canada/usa index fund which will take you 2-3 hours to figure out how to do.  Beyond that there is really not much to do as far as stock investing.  However, given that the US market is inflated I would look at hedging by putting your funds into real estate, hence the multi-unit idea.

FrugalFan

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Re: 800K what should I do with it? Total investment newbie
« Reply #21 on: April 09, 2016, 02:05:12 PM »
At your age, I would definitely cash in on that equity! I don't think those prices are sustainable. It would make the most sense to move somewhere where the cost of living is more reasonable. Or rent if you really want to stay in Vancouver. Rental prices are more reasonable there. With 30 k coming from your investments, you could scale back to very part time work. Do you have any retirement savings?

I also second the recommendation to read Millionaire Teacher (written by a Canadian). It's very easy to read and makes a compelling case. A great introduction to index investing.