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January 22, 2013 at 10:56 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758227
an
ParticipantI don’t like those “Target” funds. It’s too rigid and a lot of time, they don’t do what you think they do. Look at the 2005 target funds. You’d expect them to weather the last crash well, but they didn’t. If I was retiring in 2005, I would be better off doing my own asset allocation and put 80-90% of my investment in bond or better yet 5-10 years CDs that were paying 6-7% back then. I would have losed a lot if I was retiring in 2005 and put my money in a 2005 target fund.
ParticipantYou ask for more inventory, right? 😀
January 22, 2013 at 9:53 AM in reply to: What do people think about berkshire hathaway as an investment… #758223January 22, 2013 at 9:49 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758222Participantflyer, I’m also aware of the stats about 5% of the population who are financially solvent. I’m also aware of the average boomer’s nest egg being <$100k (excluding their home). But like flu have said and you mentioned, I don't give a flying rats a$$ that most people can't save. I'm saving and I'm looking out for my own. Growing up in SoCal, I've seen many smoke and mirrors and I'm not impressed by those. But, whatever floats their boat. I'm not here to judge them. I'm concentrating on my own situation and make sure I'll be financially independent by the age I want to be (50-55). I've ran many many scenario and there's no way I can get their without leverage. At the end of the day, it's all about net cash flow and risk appetite. Leverage is just one of the many tools one can use and are often used by many. I don't see how ER can condemn debt and stating people who yo-yo by using debt. While, he himself, took major risk and cash out his 401k to start his business. I too have seen people did exactly what he did, but wasn't as lucky and their business crash and burn. So, just because you pay things for cash doesn't mean the risk is any different. Sometimes, it's even greater, because you have nothing left to try again. flu, I completely agree with you about the prevailing attitude of learned helplessness and sense of entitlement. Those attitude exist through out the entire income spectrum, so, I wouldn't demonize one group vs the other. It's just the way most American feel. I feel that way when I see the press publicizing Cory Booker's point about living on $4.32/person/day. This is the budget for supposedly the poor. I've seen poor people who have gotten by with much less and still have healthy 3 meals a day. My family on average live on less than $4.32/person/day. I don't feel entitled to my money and that I have to work hard to keep it and take appropriate risk to grow it. Who here can say they've served a meal for 15 people with $15-20? This mean will trump anything you can find at a restaurant as well. We just did it a few weeks back. My wife made Pho from scratch. We fed 15 people for <$20. The Pho taste better than anything you can find at a restaurant, because we don't use MSG and we take proper time to stew the bones. Pho is not the only kind of food you can eat that cost $1/person. There are many Asian meals that will cost you about that much. Maybe Asians have experienced long bought of poverty, so our food take full advantage of what's available and be able to feed people for much less and still be very tasty. These food have been evolved and passed down for many generations.
January 21, 2013 at 11:53 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758206ParticipantI think you guys/gals are convoluting two different points. One is creating wealth and the other is keeping wealth. Those are two different things. Leverage is good at helping you make more in a shorter period of time, but it won’t help you in keeping it if you’re spending more than you make. So, description of superficiality of Californian have nothing to do with creating wealth (leverage) but more to do with the ability to keep wealth (save what you’ve made). With regards to Yo-yo, I don’t know all the details but I’m sure different people yo-yo for different reason. Just because they yo-yo doesn’t mean they don’t know how to save. What if they’re just not always lucky and that’s the main cause of the yo-yo. I’m not going to sit here and judge them.
My main beef is CAR’s blanket statement that successful people tend to avoid debt at all cost while unsuccessful people don’t avoid debt. I can probably name at least 10 if not 100+ successful people who didn’t avoid debt at all cost for every one person you can name that is unsuccessful by avoiding debt at all cost. Also, for every one person you can name who yo-yo because of debt, I can probably name 100+ unsuccessful people who avoided debt (renters) who also live pay check to pay check.
I hate blanket statements. They’re always wrong, because there’s no way you can split the entire human race into two clean categories.
January 21, 2013 at 3:00 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758172Participant[quote=flu]
If I look over my total net worth (which I feel is worthless…different story) is split roughlyStock: 40%
Home(s) equity: 35%
Cash: 25%
Total Debt/TotalAssets: 21%…In a few days, hopefully after refi’s close, it will be more like
Stock: 40%
Home(s) equity: 30%
Cash: 30%
Debt/TotalAsset: 30%
[/quote]Yep, we’re pretty different here. For me:
Stock: 50%
Home(s) equity: 45%
Cash: 5%
Debt/TotalAsset: 40%January 21, 2013 at 2:47 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758171Participant[quote=flu]It varies…Even AN and I disagree on different levels of leverage. He’s a proponent of 30 years and refi with negative points. I get it, but I can’t bring myself to it. I do a 15 year because I’m a wuss. That’s why AN lives a luxury while I live an a crapbox.[/quote]Yep, we do disagree. Everyone have different level of risk tolerance. It might also be where we want to be at financial independence point. Our age also might make a difference too. Keep in mind that while you’re Gen Xer, I’m a little younger and am a Gen Yer :-P. FLU, FYI, I live in Pinoy Thug Life area while you’re in the 1% :-P.
January 21, 2013 at 1:45 PM in reply to: Over 21% of homeowners in SD County have paid off houses #758167Participant[quote=carlsbadworker]That still leaves us one question, AN/flu. What do you guys think is a proper cash holding right now in this kind of environment? I would think there would be some of emergency fund plus enough down payment for the next rental property? I don’t know what’s the magic formula here? Since you are not finding a rental property with the limited inventory in MM and you don’t want to pre-pay the house, you just watch the cash reserve starts to grow? Or just gamble it with the stock market even at the current high valuation?[/quote]
I don’t think there’s a right answer for all or even for 2 people. I think everyone’s situation is very different and the cash holding is very different. I personally would try to hold about 6 months of expense. Beyond that, I don’t think you need to have the down payment of the rental sitting in cash. Assuming you have access to the cash quickly and you have more than you need for down payment, you can have that money in the market to continue working for you. You can also put it in something like AGNC, so even if you don’t have an investment property yet, you’re still participating in RE. It’s a REIT that has been paying ~16% in dividend over the last few years. But I’m a lot less risk averse than a lot of people. If you’re more risk averse, you can keep it it cash and put it in a online savings account and make <1%.Participant[quote=bearishgurl][quote=SK in CV]I think you misunderstood BG. I don’t know if a 62 year old house is old. I think 100 year old house is, particularly in SD. 50 years old probably not. I was just asking for opinion. How old is an old house in SD? I don’t know the answer.[/quote]
I consider “old houses” in SD to be older than about 1927 (Arts and Crafts period). The Mills Act requires homes to be 75 years old and their owner to demonstrate through any means that their properties have “historical significance” for its area to qualify for tax abatement (severe reduction).
But there are a LOT of Piggs here (Gen Y?) whom I think would say a 1990’s-built home is “old.” :=D[/quote]
I’m Gen Y and I would say most that are pre 1980 is old.Participant[quote=bearishgurl][quote=AN]Lot B+, house D-. Based on the pictures, the layout seems dysfunctional to me. If I was given that house, I’d probably tear it down and rebuild from scratch to take more advantage of that view.[/quote]
LOL, nothing wrong with it … but this is typical example of a Gen Y opinion of a “dated” listing. The house doesn’t “flow.” :=0
Uhhh, AN?? This house sits on a 12,800 sf corner lot with a paved alley.
Not ALL alleys in 92106/92107 ARE paved.
In your opinion, what percentage of the asking price represents the lot and what percentage represents the house and deck?[/quote]
90% lot and 10% house.January 21, 2013 at 11:13 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758151ParticipantVery well said flu. That’s my point exactly. Leverage is a double edge sword. You need it to get financially independent if you weren’t born with a silver spoon. But you should also be aware of the down side of leverage and use it wisely. But to make a blanket statement like what CAR made is pretty hilarious.
January 21, 2013 at 10:50 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758149Participant[quote=cvmom]Good point, we did do mortgages on our first few homes. Then moved around the country with work, selling one and moving up to another. Only recently did we feel comfortable enough with our financial cushion to pay off the mortgage completely.
Judicial use of minimal mortgage debt, as several others have mentioned. But no car debt, student debt, credit card debt, etc…[/quote]
I agree unsecured debt is generally bad. I don’t have student loan debt or credit card debt either either. But I do have car debt. I can’t resist the low interest rate, especially when I can use that cash to buy investment properties that return 6%+ cash on cash.My main point is, majority of the people who got to their financial goal gotten there with leverage. Most used mortgages as their main source of leverage. Mortgage is also the only source of leverage that allow you to only put 20% (or less) skin in the game. If I don’t leverage, in order for me to get to my $5M by 55 goal, I would need to save $151k/year and start at 22 years old. I would say that’s nearly impossible. Even if you extend that age to 65 years old, I would still need to save $116k/year for 43 years. That still seem impossible to me.
I have no problem with paying off your house once you’ve reached your nest egg goal. I too will probably do the same. But until then, if I pay of my house earlier, it would be that much harder for me to get to my nest egg goal. Especially when I’m not even at my peak earning years yet.
January 21, 2013 at 10:40 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758146Participant[quote=cvmom]I tend to agree with CAR. My husband and I are relatively risk-averse, have a paid-off house and enough in the bank that we could both retire tomorrow if needed, plus fund the kids’ educations. And we got that way by getting somewhat lucky in our real estate purchases, but mostly by spending much less than we earn.
However, I think our peer group (and perhaps CAR’s peer group) has a different definition of success. I think Early’s financial position is WAY different/better than ours, if I had to guess. So I think the smart risk-taking when young is probably the way to go, if you can. It just never appealed to me, so I think second best (for those of us with maybe fewer smarts or cojones) is definitely the spend-less-than-you-earn-and-avoid-debt route.[/quote]Thanks for proving my point. Key point is, you got there by being lucky with your real estate purchases. I assume you didn’t pay cash for those.
Just because you leverage doesn’t mean you have to spend more than you earn. I’ve discuss spending many times before and I’m sure I underspend even compare to most on here. How else would I have the capital needed to leverage? Even if I save 100% of my gross income, I still would not be able to reach my goal of $5M by the time I’m 50-55 if I don’t use leverage. It seems like you got to your number by leveraging as well. If you rushed to pay off your 1st home, would you have the cash needed to buy your second home without needing to sell your 1st home?
January 21, 2013 at 10:28 AM in reply to: Over 21% of homeowners in SD County have paid off houses #758144Participant[quote=earlyretirement]
Actually I’ve noticed the same thing as CA Renter. (Not to say that I haven’t met lots of successful people that leveraged as well). But I mostly work with high net worth and ultra high net worth individuals and families and ironically almost none of the clients I work with came from wealthy families or got inheritances.Most of them are self made type people that started a business, work super hard and lots of hours and also avoid debt. This is not to say that these people didn’t utilize some debt to get ahead. Because most of us at some point in our lives (especially when we are starting out) have had to take on debt.[/quote]There in lie my point. Even your high and ultra high net worth people you know used debt to get started. Do you think they’d be where they are if they didn’t take on debt? I never suggest debt in perpetuity. I too would want to get completely debt free one day. But that day will be when I reach my early retirement goal where I can live off my interest and not have to worry at all about income. Until that day, I’ll continue to try and grow my nest egg and not pay off my primary a day early. Especially when we’re talking about low 2% loan after mortgage deduction. It’s all about income and expense to me.
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