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A place for Get Rich Slowly readers to ask questions
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 Post subject: John 2013 Goals
PostPosted: Sun Jan 06, 2013 10:46 pm 

Joined: Sun Jan 06, 2013 10:30 pm
Posts: 103
Hello guys/gals my name is John, I am 26 years old and I am new to the forum. Just wanted to introduce myself and get some advice from the expert out there. I am single and currently working oversea and I do not have to pay for any food/transportation nor cell phone, which is really good. Any critique and suggestion will be helpful. I have listed some of my information for 2012. I wanted to set some goals 2013 and hoping to get your input. I am aiming to increase my EF fund to 40,000 and have a minimum of $20,000 in liquid cash. Will max out my 401k and IRA for 2013. Currently investing $300 a month into lending club but I am debating if I should put $500 a month in it. Also want to look into investing in commercial properties in self storage unit or if I should use the extra money to pay either my home mortgage or my rental mortgage? Any input will help.

2012 Annual Summary
Annual Gross Income – $200,000
401k Contribution – $17,000
Traditional IRA Contribution - $5,000
Liquid cash - $22,000 (Keep a minimum of $20,000 not sure if this is too much)
EF saving - $15,000 (working on increasing to 40,000)
Own a car paid in full
Rental home Account(For maintenance, repairs, etc) $1,700
Lending club - $5,400 (adding $300 monthly to this account) Net annual return currently at 12%
1st Mortgage Loan - $105,631 @ $479.58 monthly
2nd Mortgage Loan (Rental Home Investment Property) - $63,622 @ $579.44 monthly
Income from rental home - $950.00 monthly – 10% property management fee = $855.00 of income.
No CC debt (paid in full every month)
Currently maxing out my company 401k and it is broken down in this investment plan.
Currently have @ $24,500 in 401k at the moment
Vanguard small cap index S 10%
Vanguard Inst index 50%
Vanguard total intl stk index sig 20%
Vanguard ttl bnd mrk indx inst 20%
Also I have Roth Ira, Rollover Ira, Traditional IRA which is set up as 80% stock and 20% bond total @ $34,000 broken down as:
T Rowe Price – U.S. bond enh index – rollover ira - $10,000
T Rowe Price – Equity Index 500 – Roth Ira – 18,000
T Rowe Price – Equity Index 500 – Traditional IRA - $5,100

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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 10:36 am 

Joined: Fri Jul 27, 2012 8:28 am
Posts: 88
Wow - what a great situation. If I was you, since you have the cash flow, I would pay down the mortgages. It's a guaranteed return and Lending Club is pretty risky. Also, it means that you'll have that much more cash flow later.

Since you are already maxing out your 401k, I might just open a Vanguard brokerage account and start saving in index funds whatever is left.

Honestly though, you are in such a good spot that anything you do right now is gravy!


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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 1:12 pm 

Joined: Sun Jan 06, 2013 10:30 pm
Posts: 103
Hey Ms. Kitty thanks for the input. Would it be wise to pay off my personal property or my rental home. I was reading an article saying that i can deduct tax on my rental property for repairs and depreciation. So i guess its better to pay my personal property off first or should I pay my rental property to get the cash flow from it? Thanks

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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 2:08 pm 

Joined: Fri Jul 27, 2012 8:28 am
Posts: 88
I would start with your personal property, but I would still pay off the rental unless a better investment opportunity appears.


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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 2:09 pm 

Joined: Tue Jun 12, 2012 4:34 pm
Posts: 470
jpham540 wrote:
Hey Ms. Kitty thanks for the input. Would it be wise to pay off my personal property or my rental home. I was reading an article saying that i can deduct tax on my rental property for repairs and depreciation. So i guess its better to pay my personal property off first or should I pay my rental property to get the cash flow from it? Thanks


Remember, you can also deduct the interest paid on your mortgage. So you'd have to run the numbers to see which makes more sense financially. Or, if you have different interest rates for each mortgage, it never hurts to pay off the loan with the higher interest rate first.


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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 3:03 pm 

Joined: Sun Jan 06, 2013 10:30 pm
Posts: 103
Well my rental home interest rate is at 4.5% and my personal property is at 3.5%. So I will try to pay my rental home off also for the deduction on interest rate does it apply for both personal property and rental property? Thanks

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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 4:50 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 273
Location: Atlanta, Georgia
jpham540 wrote:
For the deduction on interest rate does it apply for both personal property and rental property? Thanks

Not if you don't ever live there. Below I am pasting an excerpt from an IRS publication, and I'm also providing a link to the source material: http://www.irs.gov/publications/p936/ar02.html

Qualified Home

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home.

Second home not rented out. If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. You do not have to use the home during the year.

Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.


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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 4:52 pm 

Joined: Tue Jun 30, 2009 9:44 pm
Posts: 273
Location: Atlanta, Georgia
LeRainDrop wrote:
Second home rented out. If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. If you do not use the home long enough, it is considered rental property and not a second home. For information on residential rental property, see Publication 527.

And here is the link to IRS Publication 527 on residential rental property. http://www.irs.gov/pub/irs-pdf/p527.pdf


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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 6:22 pm 

Joined: Tue Apr 15, 2008 6:48 am
Posts: 526
Location: Arkansas
While you are currently working overseas... my guess is you plan to come back since you have a personal and rental property. With the way things are going in this country... I'd rather be debt free than worry about whatever small gains I could get come tax time. If it goes south (like a lot folks think it will) then owning your own house will be a godsend if that time comes. It will be one less thing to worry about in an already stressful time.

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 Post subject: Re: John 2013 Goals
PostPosted: Mon Jan 07, 2013 9:19 pm 

Joined: Sun Jan 06, 2013 10:30 pm
Posts: 103
Thanks for the info Leraindrop. Yea eventually I will move back not sure when yet, but I will probably try to pay down my personal property down first. Also I am looking into investing in commercial properties, but that will be later on.

Made some short term goals I want to achieve within 1-5 years.
Build my Emergency fund to at least $40,000
Have at least $20,000 in liquid cash
Invest in several commercial properties either office spaces, self storage units or apartment buildings.

Long term goals: 5 years +
Financial Freedom
Have enough passive income and travel the world.

I know it’s an ambitious plan but I would like to set these goals so it can be more challenging. Hopefully it will work out all I can do is try and learn from my mistake. I been reading a lot of books and hopefully joining this forum I can meet people that have the same goals like me and can share their success and experience.

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 Post subject: Re: John 2013 Goals
PostPosted: Sat Aug 31, 2013 10:41 am 

Joined: Sun Jan 06, 2013 10:30 pm
Posts: 103
Hello again just wanted to update my goals and get some input.
401k - will be max by the end of the year.
Roth IRa - currently $3,700 will max out at the end of the year.
Liquid Cash - $18,000
Emergency Fund - 40k
Saving account - 4k (will be used for either another rental home or maybe school)
Rental home account for (maintenance/repairs) - $2,600
No CC bills paid in full every month
Lending Club - $5,800
1st Mortgage Loan - $100,693 @ $479.58 monthly 3.5% rate
2nd Mortgage Loan (Rental Home Investment Property) - $60,921 @ $579.44 monthly 4.5% rate
401k - $41,000
Roth IRA - $40,000 (Vanguard Total Bond Market VBTLX @ $10,000) (Vanguard Total stock Market Index VTSAX @ $30,000)

Taxable Investing
Vanguard Prime Money Market Fund $3,000
Vanguard Total International Stock Index Fund $15,000
Vanguard Total Stock Market Index Fund $5,100
Scottstrade - $41,000 (AMD - $17,000, BAC - $11,000, CLNE - $6,919,
GA - $6,000)

I made a couple of changes since my last post. I have move most of my fund from T row to Vanguard to take advantage of the low cost index fund. I think I went over board with buying individual stock. I stop contributing to the lending club account but I reinvested the money I earn from lending club. I mention before that I was going to pay off the rental home but barely made a dent in it. I will be adding a extra $1,000 in principal from now on, since I think I can make more from investing in index fund. I will also start to invest more into my taxable index fund, instead of individual stocks. I will probably try to invest $4,000+ a month toward either the Vanguard total intl stock or the total stock market index. Also I was thinking about buying vanguard dividend investment fund so I can earn more passive income. I do get some dividend from the total stock market index fund and international fund, but I was wondering if I should buy the vanguard dividend fund or just add more money to the total stock index funds? Which option will be better? Just trying to see if I am going in the right direction and get some feedback.
Thanks

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