Author Topic: Open minded, creative, practical mustacian input sought!  (Read 1233 times)

willystache

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Open minded, creative, practical mustacian input sought!
« on: May 07, 2016, 05:36:51 PM »
apologies for long thread, but details are important, right?!

Scenario: we are closing this week (sellers) on one of our rental properties (this one was not intended to be a rental, has since appreciated significantly, hot area, were given an offer out of the blue that we couldn't refuse). After fed and state CG taxes, and depreciation recapture, we will be left with about 150k to do something with.

Background: DW and I both work, 2 kids. 8.5/10 on the hardcore mustacian scale.
Emergency fund:20k.
Rental reserves 20k.
457: 125k.
 Roths: 85k.
State IAP (like a state funded 401k): 60k.
Taxable account 100% VTSAX: 60k.
 Simple IRA: 20k. (All that DW has available via employer)
529: 25k.
HSA: 5k.
 RHSP: 3k.
If I work until age 53, I will retire with 50% of my base salary for life (today would be 95k/2=47.5k).
DW is in the private sector. Combined income is 230k.
 We own and self manage 3 rental houses that we bought as fixers when we were young and put a lot of blood, sweat and tears into: college town duplex, college town sfh, and a cottage on a big lot in a very desirable town. Total CF is about 20 annually. Loan to value is combined 360k:900k. Mortgages are 3.17-3.875%, 15 year fixed.  Home: owe 160k, value is 350k+. 12 years left on 15 year fixed, 2.875.

My plan: we live in a cool mid century 2000 square foot house that needs updating. I'd love DW to have a blast and blow 30k. I'd like to give about 10k away to good causes and teach my kids how fun it is to be generous and support people and causes we believe in. I'd like to fund my backdoor Roth for 2016. I know that we will need to upgrade the cottage at some point, and would like to put 10k aside for that anticpated expense. That leaves 100k.

Question: other than throw 100k into my taxable account (vtsax), any other good ideas? (Not interested in another rental. I don't want to be a long distance landlord and our local market right now is high demand, low supply, high prices....0.5% rent:sales price is tough to find). My risk tolerance is moderately high with these funds. I'd love to maximize the tax incented investing angle, of course.

Thanks for any thoughts. I admire this forum and have learned so much by reading here. Any feedback is appreciated (acknowledging all the usual disclaimers, of course!)

Rezdent

  • Pencil Stache
  • ****
  • Posts: 815
  • Location: Central Texas
Re: Open minded, creative, practical mustacian input sought!
« Reply #1 on: May 08, 2016, 07:58:28 AM »
So after selling this one you will still have three rentals?
I would put 20k more into reserve - one rental can chew through 20k with one big repair.
I would then max my tax-advantaged accounts even if it meant zero paychecks because I could pull living expenses from the sale proceeds.
Then I would push the excess into after tax accounts.
But I am more conservative than many.

humblefi

  • Stubble
  • **
  • Posts: 107
    • Humble FI
Re: Open minded, creative, practical mustacian input sought!
« Reply #2 on: May 08, 2016, 11:59:36 AM »
Congrats on a good portfolio!

>> other than throw 100k into my taxable account (vtsax), any other good ideas?
One way to address this question is to ask what factor do you want to optimize? For example,

1.
Optimize Income w.r.t. tax efficiency
+ VTSAX is tax efficient....other ways might be to explore MUNI funds like VWIUX (National MUNIs, federal tax free) and perhaps state MUNIs(like VCADX in CA....federal and state tax free). Compare the tax equivalent yield for MUNIs before discarding this option....

2.
Diversify income sources geographically
+ VTMGX is Tax managed international (develop countries only). Perhaps some of your income can come from outside the US?
+ There are some new International dividend and dividend growth funds from Vanguard as well....

3.
Aim for capital gains but tax efficient way
+ Look into VTCLX(mostly large cap, some mid) and VTMSX(small cap)....both are tax efficient capital growth funds

4.
Accelerate 529s...
Depending on how close the kids are to college, you can accelerate funding the 529s....tax free growth...assuming you are not already maximizing yearly 529 contribs

5.
Keep some fresh powder....
....all signs point to the market heading down...perhaps $25K of cash in a high interest account might be useful for later this year...


Hope that helps.