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How to retire at 30 on $1 million

ryanwaggoner.com

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Re: How to retire at 30 on $1 million

#41

Post by dedward »

thibaut_barrere wrote: post #28
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 :-).

THe key point in there is "long term" .... as in youth to retirement... .and that fit the lifestyle of people who are old retired bankers now.

It's still true - real-estate, by it's nature, is probably a good long-term investment when compared to anything else.

Re: How to retire at 30 on $1 million

#42

Post by gyardley »

djm wrote: post #34

I didn't see Tony Wright's article the other day, but I've just read it and the article linked here. I have a few comments. First, for the rest of this comment I'll define income as 'what you've got coming in' and wealth as 'what you keep or what you grow'. Most people fail to make this distinction (If you ask somebody if they are wealthy they will start talking about how much they get paid), but it's important, espe…

I've no idea how the govt would be able to do this in a workable way though - how to you value the appreciation in somebody's house when the only meaningful way to value a property is to sell it?

A bureaucrat called a 'tax assessor' makes an assessment - which may or may not be fair - of your property's current value. You're then charged a percentage of this assessed value in taxes. That's how property tax works across America today.

Re: How to retire at 30 on $1 million

#43

Post by patio11 »

djm wrote: post #34

I didn't see Tony Wright's article the other day, but I've just read it and the article linked here. I have a few comments. First, for the rest of this comment I'll define income as 'what you've got coming in' and wealth as 'what you keep or what you grow'. Most people fail to make this distinction (If you ask somebody if they are wealthy they will start talking about how much they get paid), but it's important, espe…

how to you value the appreciation in somebody's house when the only meaningful way to value a property is to sell it?

I think property taxes are fairly widespread in the US, actually. Your county has a group of assessors, who pick a SWAG based on comparable recent sales and -- ahem -- their desire to have the county generate tax revenue this year, and then you get to pay .8% or whatever of the assessed value in property taxes.

My father has drolly noted more than a few times that he wishes this assessment came with a shotgun clause (i.e. if the assessors tell you your house is worth $X, you could say "Sweet! I'll have the lawyer draw up the sale documents. You can have the keys tomorrow.")

Re: How to retire at 30 on $1 million

#44

Post by pchristensen »

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.

This is assuming stable economic and population growth. There are lots of rural and inner-city property owners who could provide a cautionary tale to this theory.

Re: How to retire at 30 on $1 million

#45

Post by mechanical_fish »

ryanwaggoner wrote: post #39
jeffepp wrote: post #36

Earlier quoted context omitted.

You can make the market timing argument for any property. Like I said, I bought in Detroit area in Jan '08. Look at the numbers, the timing was awful. The purchase itself, was not.

True, though buying for appreciation is much more speculative, in my opinion, as opposed to buying for the return of a stream of cashflow.

buying for appreciation is much more speculative, in my opinion

We need to say this louder and stronger.

Examine the chart at the bottom of this article:

http://motherjones.com/kevin-drum/2010/08/chart-day-housing-...

Then try, as hard as you can, to realize that if you've been paying attention to house prices over the last decade you've been training yourself to think that this epic once-in-a-lifetime bubble is "normal" behavior for real estate prices. It isn't.

Re: How to retire at 30 on $1 million

#46

Post by pchristensen »

MikeCapone wrote: post #38

I'd like to hear what people think about REIT ETFs to invest in real-estate more indirectly. Do they bring most of the same potential returns as owning a building yourself, with the added benefit of diversification, or are they a completely separate thing? What if that million was invested in a low cost REIT index?

They are indexes (REIT) and funds (ETF) so you get diversification at the loss of control. Kind of like buying an S&P Index or investing in a mutual fund as opposed to investing in specific company stocks.

Re: How to retire at 30 on $1 million

#47

Post by dedward »

hammmatt wrote: post #40

It seems like a matter of philosophy. There are going to be distinct advantages and disadvantages with any investment philosophy you wish to make your own. The real question is what are your long term goals? This is how I see real estate investment. PROS - After paying off the mortgage you can still sell the house for its current value. If you select wisely, this is an additional investment. - Monthly income that is…

I think a good read of "Rich dad, poor dad" would do many good on the philosophy end of things.

His point is to define "rich" as having your assets (which he defines as investments that produce income) produce enough income to cover your expenses. As soon as you reach that point, you can quit your day job and focus on managing your assets.

The point about redefining the meaning of asset is a good one - real-estate is his thing too - but he points out that the cycle joe average has been playing (at least, pre-crash) where he gets a mortgage, waits for the market to go up, then sells, then just goes out and mortgages a bigger/better place and keeps doing that...... he chooses not to define this as an Asset in this context because it's not generating income for you - it's a constant liability and bill you have to pay.

Re: How to retire at 30 on $1 million

#49

Post by jeffepp »

ryanwaggoner wrote: post #39
jeffepp wrote: post #36

Earlier quoted context omitted.

You can make the market timing argument for any property. Like I said, I bought in Detroit area in Jan '08. Look at the numbers, the timing was awful. The purchase itself, was not.

True, though buying for appreciation is much more speculative, in my opinion, as opposed to buying for the return of a stream of cashflow.

This only scales if the value of the property appreciates and allows you to refi and purchase another property with the equity. If the value goes down, the cash flow will as well.

Re: How to retire at 30 on $1 million

#50

Post by mattmaroon »

MikeCapone wrote: post #38

I'd like to hear what people think about REIT ETFs to invest in real-estate more indirectly. Do they bring most of the same potential returns as owning a building yourself, with the added benefit of diversification, or are they a completely separate thing? What if that million was invested in a low cost REIT index?

Here's a good list of REITs I was looking at recently:

http://www.forbes.com/forbes/2009/0316/056_reit_stuff.html

They've unsurprisingly been hammered over the last year or so. In the long run investing in focused REITs (like apartment rental, etc.) will give you similar exposure to investing in their target market yourself.

Of course, you pay the standard laziness premium. The REIT takes a fee, and sometimes their incentives are not aligned with yours. Perhaps they have $x they are incentivized to invest, forcing them to buy and run properties without top-tier ROIs and you, with a tiny fraction of $x, could do better. Perhaps you could just flat out do better than them by knowing your market and running your properties better.

But REITs are probably not a great way to go as a solo investment. Most that I've found have underperformed the S&P 500 over the last decade. I'd use them more to hedge though as we've seen recently, it's entirely possible for both the stock market and the real estate one to nosedive together.

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