How to retire at 30 on $1 million • Hacker News Board

Re: How to retire at 30 on $1 million

#21

Post by ryanwaggoner » Wed, Aug 25, 2010, 1:35 PM UTC

sdz wrote: post #19

Not so fast on those tax benefits. Yes, you can depreciate your real estate and not pay taxes on them that year. However, if you later go on to sell that property for a gain, there is something called recaptured depreciation [1]. In essence, you will pay taxes on those gains at the orginary income tax rate until all the depreciation you reported is covered. Only the remaining gains can be taxed at the much lower capi…

Yeah, I decided to avoid getting into that because the article was already long, but it's a good point. However, to be fair, you should also point out 1031 exchanges, which allow you to defer those capital gains taxes even further down the line:

http://en.wikipedia.org/wiki/1031_exchange

Re: How to retire at 30 on $1 million

#22

Post by noodle » Wed, Aug 25, 2010, 1:37 PM UTC

Super_Jambo wrote: post #18

ryanwaggoner wrote: post #10

Earlier quoted context omitted.

There are no sure things in investing. If you have some specific quibble with my scenario that you can back up with data or experience, please post it.

The basic problem I see with this scenario is the tail risk. You're probably going to be just fine. However there is a non-zero (and impossible to calculate) risk that you're going to lose the entire income stream. Equities / ETFs allow much greater diversification. The bit which bugs me though is why are you spending 200k a year. Countless studies show that greater income is not linked to happiness above a fairly lo…

> The basic problem I see with this scenario is the tail risk.

you don't think that there's a similar risk in the market? sure, you pick how much risk you take when you invest, but i'd say that you're doing the same when investing in this type of real estate -- making a choice to exchange some safety for higher returns.

> The bit which bugs me though is why are you spending 200k a year.

i don't believe this was point of the article.

Re: How to retire at 30 on $1 million

#23

Post by jacquesm » Wed, Aug 25, 2010, 1:39 PM UTC

noodle wrote: post #22

Super_Jambo wrote: post #18

Earlier quoted context omitted.

The basic problem I see with this scenario is the tail risk. You're probably going to be just fine. However there is a non-zero (and impossible to calculate) risk that you're going to lose the entire income stream. Equities / ETFs allow much greater diversification. The bit which bugs me though is why are you spending 200k a year. Countless studies show that greater income is not linked to happiness above a fairly lo…

> The basic problem I see with this scenario is the tail risk. you don't think that there's a similar risk in the market? sure, you pick how much risk you take when you invest, but i'd say that you're doing the same when investing in this type of real estate -- making a choice to exchange some safety for higher returns. > The bit which bugs me though is why are you spending 200k a year. i don't believe this was point…

It's not like real estate and stocks are your only options.

Re: How to retire at 30 on $1 million

#24

Post by endtime » Wed, Aug 25, 2010, 1:42 PM UTC

ryanwaggoner wrote: post #9

smackfu wrote: post #7

Is this really retirement though? Or just using your retirement assets to fund a career change to apartment management?

You're definitely not managing the property in this scenario; part of the operating expense is hiring professional managers. REITs and other institutional investors own and operate properties like this from a distance all the time. EDIT: I should mention that I own several smaller properties in another state that are managed and I spend maybe an hour a month on them. I'd spend more on larger properties like this, but…

> part of the operating expense is hiring professional managers.

I don't think smackfu meant to imply you'd be replacing lightbulbs yourself. But if you have employees who provide a service, and if they screw up it can affect your future income (and you therefore need to do some degree of management, minimal though it may be), well, that sounds a lot more like a job than retirement to me. It might not be 40+ hours a week in an office, you might not be writing code, but that doesn't make it retirement.

Re: How to retire at 30 on $1 million

#25

Post by hammmatt » Wed, Aug 25, 2010, 1:42 PM UTC

rwebb wrote: post #8

oh yeah that's a sure thing. no one has ever gotten fucked owning B grade multifamily housing. slam dunk.

There are good and bad investments of everything. What matters is results. If the housing is a good deal and won't fail, then logically it is a smart move.

I don't think you can decide on a hypothetical without investigating. At the very least, this article has given you another point of view of a problem most of us try to solve every single day.

Re: How to retire at 30 on $1 million

#26

Post by noodle » Wed, Aug 25, 2010, 1:43 PM UTC

jacquesm wrote: post #23

noodle wrote: post #22

Earlier quoted context omitted.

> The basic problem I see with this scenario is the tail risk. you don't think that there's a similar risk in the market? sure, you pick how much risk you take when you invest, but i'd say that you're doing the same when investing in this type of real estate -- making a choice to exchange some safety for higher returns. > The bit which bugs me though is why are you spending 200k a year. i don't believe this was point…

It's not like real estate and stocks are your only options.

agreed, but pretty much every investment is about deciding on that tradeoff between risk and return

Re: How to retire at 30 on $1 million

#27

Post by jeffepp » Wed, Aug 25, 2010, 1:44 PM UTC

A better way to invest your money in real estate is to purchase a primary residence and (with some cosmetic improvements) sell the house (after 2 years) for a tax-free gain.

You get the obvious mortgage deduction, while living there as well.

I am on my 2nd house (I bought #1 in Metro Detroit in '08) with no experience fixing up houses, so it can be done.

Have to be willing to be patient and study the market. Generally, you make your money on the "buy"

Re: How to retire at 30 on $1 million

#28

Post by thibaut_barrere » Wed, Aug 25, 2010, 1:45 PM UTC

dabeeeenster wrote: post #17

My dad spent 30 years in private banking for a big swiss bank, investing money long term for rich people. His advice to me when he retired: The only way to invest money long term and relatively risk free is through property - everything else is just bullshit.

I really believe this is true, from what I've seen around me.

That said, bankers and advisors know that this is somehow assumed to be common sense, and quite often use that as an argument to get you onboard investments that are not interesting at all in most cases (apart for them :-).

Re: How to retire at 30 on $1 million

#29

Post by ryanwaggoner » Wed, Aug 25, 2010, 1:45 PM UTC

jeffepp wrote: post #27

A better way to invest your money in real estate is to purchase a primary residence and (with some cosmetic improvements) sell the house (after 2 years) for a tax-free gain. You get the obvious mortgage deduction, while living there as well. I am on my 2nd house (I bought #1 in Metro Detroit in '08) with no experience fixing up houses, so it can be done. Have to be willing to be patient and study the market. Generall…

This can be a better way to start in real estate, but it's also highly dependent on the specific market, timing, and your skills. It also doesn't scale very well.

Re: How to retire at 30 on $1 million

#30

Post by davidu » Wed, Aug 25, 2010, 1:45 PM UTC

endtime wrote: post #24

ryanwaggoner wrote: post #9

Earlier quoted context omitted.

You're definitely not managing the property in this scenario; part of the operating expense is hiring professional managers. REITs and other institutional investors own and operate properties like this from a distance all the time. EDIT: I should mention that I own several smaller properties in another state that are managed and I spend maybe an hour a month on them. I'd spend more on larger properties like this, but…

> part of the operating expense is hiring professional managers. I don't think smackfu meant to imply you'd be replacing lightbulbs yourself. But if you have employees who provide a service, and if they screw up it can affect your future income (and you therefore need to do some degree of management, minimal though it may be), well, that sounds a lot more like a job than retirement to me. It might not be 40+ hours a…

Most property management companies are actually just managing the contractors who fix the sprinklers... those people aren't on your payroll. Usually property managers just take a fixed % of all the rental revenue.