What should my wife and I do if we make too much???

[LookoutBelow]

reccommending using the professional services like lawyers and tax accountants, comes with a caveat. I agree with the accountant part, but lawyers ? No way….
I’ll pass on some sage advice my father gave me when I was quite a bit younger than the old fart I am today, he said:

“Son, if you live your life in such a way that it does NOT require the use of either the hospitals and or the court rooms, you will have done a great service to your family and to yourself.”

I have and continue to live that way, I have NEVER needed a lawyer in my life except for wills and some estate issues that needed filing. I have only been in the hospital once.

If a deal requires a lawyer, its already bad. GET OUT!

I have closed many deals, some pretty big for an individual, and never so much as once consulted a lawyer. I dont have anything against them ……except they’re crooks and cannot be trusted at all. God have mercy on he who is compelled to trust one.

Buy a desk copy of the “Blacks Law Book” and you will know all you need to know.

Stay OUT of deals that require lawyers any more than absolutely necessarry for filing or required legal paperwork.

[masayako]

“What should my wife and I do if we make too much???”

Donate the money to the needed. Help to make the world a better place.

[nhamlin]

With interest rates climbing holding cash is much less painful than it was a year or so ago. Investment real estate has some wonderful tax advantages but the depreciation deduction is not a real big deal. If you buy a $1,000,000 apartment property with improvements valued at 75% of purchase price your annual depreciation deduction is only 750,000/29.5 yrs = $25,000 for a tax saving of about $12,000 ignoring AMT considerations.

Some day that depreciation deduction will have to be recaptured at a tax rate of 25% (assuming tax laws don’t change.)

About going out of town. I have heard several stories that began: I was an inexperienced investor and I decided to invest out of town. I figured the locals didn’t know what they had. Very few of those stories had a happy ending and several had tragic endings.

A few months ago Greenspan gave a speech that was not double talk. He very articulately expressed some sentimens I have had for some time. The gist of the speech was: Investors have forgotten the concept of investment risk and premiums for accepting that risk. Investors have been purchasing risky investments for nearly the same price as safe investments with similar investment returns. He believes that the concept of a major economic downturn is being totally ignored in the pricing of assets.

He finished by saying that “When that has happened in the past it has usually ended badly”.

This has happened in most or all asset classes. Some obvious ones are the spread between treasuries and junk bonds. I don’t know where they are today, but a few months ago the spread was at an all time low.

In real estate terms City Heights apartment buildings were recently selling for only slightly less than North Park Properties. North Park is a much superior neighborhood that attracts higher income residents with better credit histories and fewer bodies per unit. As the apartment market has softened North Park Prices have held up much better than City Heights Properties. I think that process is just beginning.

The point being virtually all assets are currently over priced and in the process of being re-valued. Cash is still trash but it is changing fast.

Any little hickup on the international scene, could lead to a tightening of credit. A perfect example is the monetary tightening going on right now in Japan where short term interest rates have been at zero for a decade.

My suggestion: Pay your taxes take pride in being such a good citizen. Put your money in very safe short term debt instruments. With today’s flat yield curve there is little or no premium for buying long term debt instruments.

Norman Hamlin
[email protected]

[powayseller]

ocenter – thanks for the followup. Very interesting…

lookoutbelow – interesting perspective. My attorney helped me get back my rental deposit. I don’t share your aversion to lawyers. I believe in division of labor and hiring professionals to improve my outcome.

nhamlin – good warning. I was told that nationally, all markets are cooling except Texas and North Carolina. But I’m sure their turn will come. I never could understand why people buy properties in areas they don’t know. It’s like buying a stock you know nothing about, just because you like its name. But people are doing that – buying real estate sight unseen, or they visit the town for a day first and think that gives them the necessary information. These stories usually end badly, because the seller inevitably overpays, since he doesn’t understand the local market.

[carlislematthew]

When/if things get *really* bad in the economy, that’s when you’ll need as much cash (or near cash) as possible. I’m in a similar situation to you and have seen my tax bill sky-rocket. If you or your wife are self-employed, then look into solo 401Ks. If not, then I would say the obvious stuff is to avoid paying tax as much as you can!!! As others have said, a good CPA will really help with this.

Ultimately, the tax rates right now are very low and I think they’ll probably go up. Therefore, if you’re able to save cash in Roth 401ks, or IRAs that you can convert (post 2010) to Roth IRAs, then look into that too.

My feeling is that the near future (next 5 years or so) are going to require the following:

-Liquid assets. Helps with unemployment *and* opportune buying moments when things hit bottom. The interest rates will probably suck at the time, and you’ll need wads of cash to get half decent rates.

-A mix of tax deferred and tax paid retirement assets so you can blend withdrawals from both when you retire.

CASH IS KING! 😉

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