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Investing question and 2 flat and other updates

October 4th, 2017 at 01:00 pm

All,

Quick question.

I put my money with an advisor at a 1% rate . This was done last year but 'everyone' knows you can often do better than an advisor when you invest yourself in a few mutual funds. I generally use Vanguard. What mix do you guys suggest for mutual funds. I know there was a recommended 3 mutual fund mix by Bogle a while ago. What have you guys heard? thinking of closing w the advisor and sticking w a 3 fund mix and just thinking long term and leaving it. Also easier to send money in etc to invest more.

I got assigned at work so expect my hours to pick up as of next week. I am still working on the 2 flat .. inspections etc.. so will have to manage that but will be good to make more money

Speaking of inspections I had the final inspector out for his first inspection. I have had plumbing, electric and now building. Building guy was the final and his list was very short 3 easy items.

Still have not found an electrical contractor. 2 guys faded away. one guy hoping for a quote today. will make some more calls.

IF all goes well. electric will finish mid/late next week and then 'all the rest' can start.

Goal is to have it ready to rent by 10/27 or end of month.

Not a great time to rent but it is what it is .

I have considerd selling this but will see how fix up goes. may be 'all fixed up' so why sell? On the other hand I am putting extreme pressure on myself to essentially pay off all 'fix up costs' and the mortgage down to $30k by June 2018 which is essentially $70k at this point. If I sell. even if I only make $20k from my total cost assuming a April/May sale and renting it in the meantime I will have already paid off quite a bit so the sale will give me cash in hand that I can invest.

Current payoff 'plan' has me only owing approx $40k by May which would mean with a NET payoff of let's say $120k I have $80k to stick in investments.

We shall see.

School starts 10/17, I am trying to get syllabuses ahead so I can start early

Courses
Hermaneutics
Intro to Theological research
Old testament

5 Responses to “Investing question and 2 flat and other updates”

  1. AnotherReader Says:

    I missed your last post until now. Lots of things have happened.

    Too bad you did not go with the 30 year last time with the idea of paying it off faster but leaving yourself an out if things went south. That's water under the bridge, so taking the 30 year now is probably the smart thing to do.

    Dump the adviser. Didn't we tell you not to go that route? Do the math. One percent is a large portion of your return, especially in a bad year. A limited fund portfolio with a tilt towards value is a good way to go. Fidelity offers funds comparable to Vanguard and the service is much better, as is the website. It's a heck of a lot easier to cherry pick and time the real estate market than the paper asset markets. Set it and forget it is the simplest thing to do once you determine your asset allocation.

    In your shoes, I would be focused on insulating myself by reducing debt and rebuilding cash. I'm having trouble following exactly what you have in the new property and how much is borrowed from where. Unless you are retiring or expect to be laid off, next April is just an arbitrary date you picked several years ago. Some flexibility on the goal completion deadline makes sense to me. For example, your contract renewals occur at year end. Where would you be if you moved the completion goal to December 2018?

    In tandem with reducing risk by reducing debt and increasing your cash buffer, I would be concerned about the lofty valuations in the paper asset markets right now. A bad turn in world events or a slowing economy could let some air out of what historically appears to be a bubble. I would not rush to buy a lot of stocks and bonds when your best return might be achieved by debt reduction. I would continue funding my tax advantaged retirement accounts, but direct most of the taxable investment money at cleaning up the real estate debt.

    Sorry about the electrical contractors. The good ones are probably to busy to bother with your job right now. Dealing with these problems is one reason why real estate, when bought right, pays a higher rate of return.

  2. My English Castle Says:

    I worked for a brokerage firm for 10 years, and unless folks have a special circumstance, I would never use an advisor. Tricky tax questions, international investing, other special situations maybe, but it sounds like you're pretty straightforward.

  3. Tabs Says:

    To me, 1% is still high to pay for a fund manager. I mean let's say you have $100k, well that 1% means you are still losing $1000 to the advisor, regardless of how well or poorly your funds perform.

    So yes, I am glad you have heard of Mr. Bogle and his index fund crusade. By far, the easiest method is to simply put the % of your age into index stock funds, and the rest in index bond funds. Say you are 46. That's 46% index stock fund, and 54% index bond fund.

    To take it a step further, you can buy Vanguard target age retirement funds that will adjust automatically for you. That's just one fund (of funds) that you need to look at, all the while still maintain that famous low expense ratio compared to that atrocious looking 1% fund fee.

    Conversely, if you prefer to do it manually, but still want to keep it simple, here's The Boglehead's Guide to Lazy Portfolios.

  4. Rachael777 Says:

    Initial reaction is maybe 12/2018 makes sense. I will look into Vanguard and Fidelity funds today. Aren't Fidelity more costly? I have approx $194k in taxable investments. does it make sense to sell now and transfer when the market is high with the potential for tax liabilities? I am thinking probably makes sense to just make the move and not try to time it. thoughts?
    I will post 2 flat debt and debt payoff plan details today. Thanks all. I too want to get rid of all this real estate debt asap!

  5. AnotherReader Says:

    If you use index funds, Vanguard and Fidelity are comparable in expenses. Fidelity offers a lot of no-commission ETFs if you go that route. You can transfer in kind to Fidelity for many funds and sell at your leisure.

    If the adviser has been trading funds in your taxable account, there may already be significant taxable capital gains. Selling and transferring cash may not be that expensive, depending on what capital gains have already been harvested.

    It would not make sense in your case to follow the oversimplified advice of your age in one asset class or another. Look at the results of Firecalc and some of the other more sophisticated models. Consider sequence of returns risk and what is an appropriate post-retirement glide path for your situation. So much of your income will be from real estate that the traditional parameters do not apply. I have very little in bonds because of the real estate income plus the pension and Social Security income. I find interest rate risk to be very underrated in bond valuations and prefer the higher returns of equities, as I can tolerate volatility. Your situation may be somewhat similar.

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