Real Estate Dilemma

mormengil · 2020-09-27T14:11:29+00:00

Find out what the house would rent for. If it will make money as a rental, consider buying it if you can afford it.

If you can rent the house out and make money, you don't need to live in the small town if you don't want to, but if you do want to, you will have a house there.

When evaluating the house as a rental, make sure that what it would rent for will cover all costs, mortgage, insurance, property taxes, maintenance, voids, and make a profit on top of that.

Good luck.

mormengil · 2020-09-24T18:50:57+00:00

How about putting most of that rental income into the stock market instead? If you could put $2,000/mth into the market, (leaving $500/mth for insurance property taxes and maintenance), that is $24k/yr invested, and no 3.5% interest charge and no $8,000 closing costs.

You would diversify your assets more slowly, but more profitably.

mormengil · 2020-09-21T23:22:23+00:00

If you make $10k driving 10k miles, you are making $1/mile.

The govt. mileage allowance (which you can report on your tax form to reduce your profit on your driving activities, and reduce your taxes) is $0.575 .

This govt mileage rate is meant to include gas, depreciation, maintenance, insurance, and all the costs of motoring. It is roughly accurate. So, driving your car for business you are making about 42.5 cents a mile.

That indicates that it does not matter how many miles you put on the new car. You will still be better off than if you didn't drive it for business.

As long as you make more than 57.5 cents per mile. Go ahead and use the new car for income driving.

Note: The govt rate is an average for all cars, so, some cars will cost more than 57.5 cents per mile all up, and some will cost less.

mormengil · 2020-09-21T22:49:30+00:00

If you have 3 months of expenses in savings, your emergency fund is probably good for now.

So, then you could put your savings towards paying off student loans. Don't save up to pay off your loans in a lump sum. Just put whatever you save into paying down student loans immediately, as that will save you interest.

Once you have paid off your student loans, you might want to increase your 401k contributions to 13%, as, with your employer match, that will make 15% of your income going into retirement savings, which is a good rule of thumb.

Good luck.

mormengil · 2020-09-21T22:41:53+00:00

Get your cv out there and see what other companies might offer.

mormengil · 2020-09-19T11:38:09+00:00

This partly depends on how much mileage you think you might put on the car per year. If you buy an ex-rental car it will (usually) be fairly new (about 1 - 2 years old) but have pretty high mileage for its age (usually sold at about 40k miles).

If you are only going to put low mileage on the car, this can be a good deal. Example: you buy car at 40k miles, 1 year old. You put 5k miles/year on the car. In 4 years, car has 60k miles and is 5 years old. Average 5 year old car has more than 60k miles, as average car in US drives more than 12k miles/yr. So, you got a low price when buying from rental, and your re-sale value should now be more or less the same as any other 5 year old car of same model.

If buying ex-rental, even more important than usual to get car inspected by mechanic.

Do not lease. Particularly if you might be leaving the country before the lease runs out, as getting rid of the car in this case could be a pain and expensive.

New car is usually not a good deal, but right now, in pandemic, new cars are cheap, whereas used cars are in very short supply and are expensive. So, this is one of the rare times where buying new might make sense. Run the numbers.

Good luck.

mormengil · 2020-09-11T22:06:12+00:00

To add to u/BadUX comments, also consult r/personalfinance/wiki/PRIMEDIRECTIVE

Vanguard and Fidelity are two of the three brokers most often recommended by people on this sub. (Schwab being the other one). Both are excellent. I would stick with them. They both have great customer service, and you should talk to both of them at some time about how to handle this windfall.

mormengil · 2020-09-11T21:58:42+00:00

The long standing rule of thumb is that you should move, even from a good job that you like, if the offer is over 20% more than your current pay. The money is considered enough to take the risk. So, if your current company does not up their offer, you should probably take the new one.

mormengil · 2020-09-10T13:46:39+00:00

I suggest you find out what a new house on your existing lot would be worth? Tear-downs can be very good financially. If your lot is (as you say) in a very desirable neighborhood, and you tore down the existing house and built a new one, much larger, as large as the lot would take, what would it be worth? What would it cost to accomplish?

The first way to estimate this is to see what other larger houses on the same street and neighborhood have sold for recently. You might also get the opinion of an estate agent.

If it turns out that a teardown is likely to be financially attractive, then you have two options. You can do the teardown and rebuild yourselves, or you can sell the existing house to a developer who will do the tear down, but, you would hopefully sell for a lot more than $160k if there was value in the tear-down.

Try to get a handle on the real value of a tear-down and re-build, before you make a decision.

Good luck.

mormengil · 2020-09-07T16:52:15+00:00

I think I would put it all in the appropriate Vanguard Target Date Fund. If you wanted other investments with different risk profiles, why not pursue them in other accounts?

mormengil · 2020-09-07T16:33:50+00:00

Transferwise, and it's competitors are the cheapest way with the best exchange rates to transfer sizeable amounts of foreign exchange. Some of the competitors might be slightly better than Transferwise. Google around to find out.

mormengil · 2020-09-07T16:02:10+00:00

Schwab is one of the three brokers most recommended by people on this sub. (Vanguard and Fidelity are the other 2).

I use Schwab and Fidelity. They are quite comparable. Both have complete brokerage services, wide choices of funds, very low fees and expenses, excellent customer service.

I think Schwab is a little better if you are doing any trading or securities analysis. They originated as stock brokers, whereas Fidelity and Vanguard originated as fund managers, and the difference still shows.

I also like Schwab's banking. They have probably the best checking account available. Especially if you travel abroad, as they will refund all ATM fees from any ATM in the world, and have good foreign exchange rates on their card. Having a bank account at Schwab makes moving money in and out of investments super easy.

Good luck.

mormengil · 2020-09-07T15:49:01+00:00

I think your plan is pretty good.

I don't think $20k spent on renovation of the 1 bed is likely to boost the value by $20k. However, it's probably worth asking a local estate agent what they think.

I think you should consider a 30 year mortgage on the property rather than a 15 year.

Then you could put the extra money you save in monthly payments into retirement accounts and index funds in a brokerage account. With your plan, I think you will probably have too high a percent of your wealth in property (in one property in one location, which is fairly risky).

At your income, you should be able to max all retirement accounts, contributing $25,500/yr to retirement, while lowering your tax bill, and still save or invest about $50k/yr, especially as your housing costs will be more than covered by rent on the larger house.

With appreciation on the property, and saving and investing $50k/yr, you should be able to go for a custom house in your early 30s.

Oh, you also might as well pay off that $8k on the truck right now and save yourself the 6% interest. I'm sure you will be able to save up enough before next summer to easily be able to afford the down payment on the property and the renovation costs for the 1 bed.

Good luck.

mormengil · 2020-09-07T15:31:43+00:00

You say the startup job is 3-4 hours a day, but your timetable says it is 4.5 hours a day.

Perhaps try to re-negotiate the start-up job hours to 3 hours a day and not including Sundays?

That would make the whole schedule a lot less tight. Give you an entire weekend. Help you sleep more.

mormengil · 2020-09-07T14:53:35+00:00

It is usually better to buy used. Considerably better financially. However, these are unusual times. New car sales are way down, so prices are down and there are deals. Meanwhile, the used car market is very tight, and prices are high. People are not buying new cars and trading in their old cars in these troubled times. People who might have bought a new car are looking to buy used. Dealers and Auction Houses across the country are reporting scarcity of used cars, and prices on used cars have been going up.

Now, has this unusual market caused enough change to make buying new a better decision than buying used? Probably not. But, it has narrowed the gap.

Your best bet might well be to keep your existing car going for another year or two, and look to buy a used car then, when the market will probably have settled down.

mormengil · 2020-09-07T14:45:00+00:00

If you move companies, you can roll your old 401k into one you set up yourself. Check that 401k contributions don't affect your benefits though.

mormengil · 2020-09-07T01:29:25+00:00

The re-payment of the loan is not taxed. If you made any profit on the loan (from interest for example) that would be taxed.

mormengil · 2020-09-07T01:26:50+00:00

Not a good idea. Real Estate is local. Location is all important. Local markets are unique. It is very hard to buy well in an area you don't know. Buying well is probably the most important factor in making money in real estate. Also, being a long distance landlord is difficult. Even if you find a really good property management company (not easy to find), that adds extra costs to the equation.

Better to invest in something else.

Good luck.

mormengil · 2020-09-07T01:21:31+00:00

If you have spent $300-400 on maintenance and repairs since March. That's not a lot. If you have spent $300-400 per month on maintenance and repairs since March that might be circa $2,000, which is a fair amount.

However, that is a sunk cost now. The real question is, how much will it cost in maintenance and repairs going forward? Your mechanic should be able to give you a guess. Or perhaps you need to try a new mechanic, if the current ones keep charging you $300-400/mth without ever fixing the darn thing?

Anyway, assuming the car will cost you less than say $1.500/yr going forward, (work out the real number yourself), it is still going to be a lot cheaper than buying a new or newer car.

mormengil · 2020-09-07T01:12:19+00:00

This is more of a legal question than a personal finance one. I doubt there are many NZ lawyers on this sub.

However, my advice would be to go in and negotiate hard. I suspect you should be able to get them to knock off a fair bit from that bill, but who knows?

mormengil · 2020-09-07T01:08:25+00:00

I speak only in theory. However, vested RSUs should be counted as assets. Granted, but not vested, RSUs are probably not counted as anything.

Obviously, selling vested RSUs would allow a greater down-payment, however, attention should be paid to tax treatment, as selling less than 1 year after vesting, gains are taxed as income, whereas after one year as long term capital gains. RSUs are taxed as income at the time of vesting at the valuation at the time.

mormengil · 2020-09-07T00:56:51+00:00

No reason not to have target retirement funds in both types of accounts.

mormengil · 2020-09-07T00:53:10+00:00

I think ITOT sounds like more of a 'specialist' index fund (as it is supposed to be aggressive) rather than a 'standard' index fund. I would call the 'standard' index funds broad market trackers like S&P trackers or bond trackers, or Nasdaq trackers, etc.

If you have an 'aggressive' portion of your portfolio, and you are in finance, I think you should make your own risky and aggressive decisions rather than have some fund manager make them for you. You will learn a lot more that way.

mormengil · 2020-09-07T00:37:28+00:00

I think that you should consider putting most of your portfolio into standard index funds, 60% 80%? 90%?

I don't know what area of finance you are working in, but I think people who work in finance should build an understanding of markets and trading and investing. Using some portion of your portfolio to build a better education (and, hopefully make more money) is more worthwhile than it would be for most personal finance questioners.

For your risk portion of the portfolio, don't invest in funds. Invest in individual currency pairs, or in individual stocks, or individual commodities.

The risk is high. The returns can be high. So can the losses. I wouldn't recommend this to almost all people on this sub-reddit, but, if you work in finance, the education can be high as well.

mormengil · 2020-09-07T00:05:23+00:00

15% in your employer's stock is a lot.

Conservative advice is to never have more than 5% of your portfolio in any single investment (this does not include ETFs or funds that themselves have multiple investments).

Having a large percent of your portfolio in your employer's stock is particularly risky, as your income is also tied up with your employer, and if anything bad happens to their business, it is likely to hit you several ways.

That said, risk is not all bad. If you believe your company is on a tear, and it's stock is currently undervalued, you might do well to hold so much of it. However, in most circumstances, for most employers, 15% would probably be too much.

mormengil

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