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Escoguy
Participant[quote=Coronita]Well, this was an unexpected result.
I made a mistake on my 2019 federal taxes and had to file a 1040x amended return to get back money that I accidentally overpaid. (Basically, I accidentally double counted the capital gains on a custodial account for my kid on both her individual taxes and my own taxes, because of a minor oversight of the TurboTax/Brokerage import tool that imported it into both tax filings)….
Anyway, the IRS returned me the overpaid taxes in 2019…plus interest…And the interest was much more than how much I would have earned leaving the amount in a 2-3 year CD…. So I was curious exactly how much interest is paid for overpaid taxes, and I found this from the IRS…
[quote]
June 24, 2020Interest on individual 2019 refunds reflected on returns filed by July 15, 2020 will generally be paid from April 15, 2020 until the date of the refund. Interest payments may be received separately from the refund. By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly. The interest rate for the second quarter, ending on June 30, 2020, is 5% per year, compounded daily. The interest rate for the third quarter, ending September 30, 2020, is 3% per year, compounded daily.
[/quote]So, yes overpaying your taxes and then asking for a refund does in fact give you better returns than leaving the same money in your 1.5%-2% CD, lol.[/quote]
A highly compensation person I worked with 500K+ was late on his taxes and quite stressed until he learned his interest rate was only like 1% (back in 2019).
I’m assuming the IRS will now raise the rate it charges too, and not only the rate it pays.
So suddenly, anyone on a multi-year tax repayment plan may have to check if they are impacted.
Participant[quote=svelte]Why does anyone think this is a good deal?
The fixed rate is zero and remains that way for the life of the bond.
Therefore, the rate of the bond is twice the semi-annual inflation rate, ie it is the rate of inflation. And that is calculated twice a year.
In other words, your money is just staying pace with the rate of inflation!
You’re not making money – you’re just breaking even![/quote]
Most bonds, if you buy a bond fund and interest rates rise, well the bond loses value. So if you want bonds without principal risk, this is an option.
The ones I bought 20 years ago are up about 300% and have paced the S&P 500 but that was with an additional 3.5% guaranteed return. I hope inflation peters out in a few years. But who knows, one by product of excessive government spending is inflation.
ParticipantI’ve owned some for about 20 years, got in the first time back in early 2000 when the fixed rate was 6.5%, those now yield about 10.3%.
Needless to say, buying more now.
Kind of weird that one can borrow at 2.9% for 30 years but get paid 7-10% at least for now.
Often overlooked, the interest is tax deferred.
October 29, 2021 at 7:26 PM in reply to: Zillow bought a house in a neighborhood where I’m active #823473Participant[quote=sdrealtor]Zillow just bought this one in MM for $787,500. That is full retail on it. It may even be a touch high for this one in that condition. They put it back on at a price that is no better than breakeven if they get that price.
https://www.zillow.com/homes/10842-Whitehall-Rd-San-Diego,-CA-92126_rb/16788569_zpid/%5B/quote%5D
So looks like flipping in a hot market isn’t so easy if one isn’t nimble:
Part of me wants them to succeed but not sure this is the model.
In fact, I’m fairly certain Zillow flipping is not the way to go.October 23, 2021 at 11:00 AM in reply to: Zillow bought a house in a neighborhood where I’m active #823418ParticipantIf Zillow could conceivably have enough inventory for both sides of the transaction, that would be a real win/win. I.e. not just buy but also have an upgrade/downgrade new investment property.
Me thinks they would need thousands of properties to make that happen but they could go through a prearrangement process. i.e. if we find something, then you could sell and buy.
In Russia, years ago property transactions could take months, as the buyer would usually need to find a buyer for his place etc, I heard of buyer chains of upwards of 5-7 transactions involved.
Participant[quote=gzz]
The main point of contention is whether the recent rise in inflation will be temporary or more protracted.
You know I am on Team Transitory. My view that the Fed is doing a great job and should be commended is the true contrarian take of 2021.
That aside, I am dubious that moderately higher inflation will actually have any effect on interest rates. Not even a couple years of 6% inflation, which is very unlikely.
The old model where inflation and nominal interest rates moved closely in tandem was based on a world where the marginal and median dollar saved was from middle class families. That world is dead, replaced by our current world of extreme inequality and elite domination. And while a middle class family may decide to spend more if inflation is high and return on their bank account balances is low, the wealthy just don’t work that way.
Rates are low and will continue on a secular path even lower, real and nominal both, because demographic and technological change has resulted in a permanent “creditworthy borrower’s” market. We are getting rarer, and savers are getting more common.
You have savings to lend, but want stability, low risk, and liquidity? Take a number bub, nobody cares in 2021.
The idea that savers can say “Due to higher inflation, I won’t lend out my money unless I get a commensurable higher rate” just doesn’t fly. The marginal and median dollar saved is saved by someone with a high net worth who does not have a bunch of consumption he will substitute for savings if he doesn’t get his desired rate.
Negative real rates are our future, and negative nominal rates will be a regular thing too in a large and growing portion of the world.[/quote]
Going out on a limb here but I think 24-36 months out we could be setup for a meaningful soft patch with odd side effects:
Not sure there is any specific action a person can take other than to have some reasonable liquidity/reserves/open lines of credit: much of the stimulus funds are unspent but think by 2024 that is gone.
1. the supply chain issues will have worked themselves out, even PC demand is set to slump about 5% in coming 12 months heard on CNBC today
2. shipping costs will come back to historical trends
3. energy prices will soften (perhaps at somewhat elevated levels)
4. housing will enter a period of 3-5 years of under performance (mean reversion) 2023-2026 it may still be 1-2% nominal increases but likely below inflation (over 3 years could drop 5% adjusted for inflation).
5. unemployment will rise and stay below 2019 levels in tourism/restaurants
6. will hit some limits of government stimulus
7. USD will stay relatively flat with low interest rates (safe haven effect) but continued political infighting will prevent signifiant boost to growth via public investment
8. US growth may actually outpace China for a couple of years as China starts to show age from demographic shifts (10-15 years out it gets worse for them)
9. stocks are the hardest to predict as there has been so much obsession with the US market so momentum likely to continue, many international markets are more fairly valued but the momentum catalyst is often missing
10. Don’t want to make political predictions but if we don’t get better choices in 2024 (could be catalyst for meaningful volatility), revulsion at whoever is perceived as extreme could cause more damage
11. certain commodities (think coffee) may be the best investments (something like 1/3 of the Brazilian crop was wiped out in August and may take years to recoverIn a nutshell, I’m not going to go hard on raising rents. I can be fine with lagging the market but having higher quality tenants. The more secure cash flow is more important than getting every last dollar. Content to play catch up as the occasional one opens up.
I put this out there as the rental income would potentially become the money I live on if I work less or retire. The predictability is more important.
October 18, 2021 at 8:35 PM in reply to: Zillow bought a house in a neighborhood where I’m active #823381ParticipantNow that Zillow is pausing, they have at least a dozen or so in North County, haven’t done a formal tally.
The “explanation” is they can’t find enough people to prep the houses for sale etc.
Will be notable to see how the buy and flip goes at that level.
Not really convinced the model works, most landlords rely on cashflow and owners get place to live, Zillow only gains if the momentum keeps up which today may be 50/50 on a month to month basis.
Kind of a shame, they get in skew the data some and come up with a lame excuse to pause.
Given the corporate overheads, the need to bring in margins of 3-5K per month to breakeven. Individuals don’t need that kind of short term gain to cover a payroll. So in a sense this business model is borderline ridiculous. But what do I really know?
Participant[quote=Coronita][quote=an][quote=Coronita]Or just tell your kids to marry up and not marry down, that would be easier. Why would someone with “considerable real estate holding” actually want to marry significantly downward where a prenup would be necessary….just saying..[/quote]
It just reminds me of Jessica Simpson and Nick Lachey.[/quote]Well, like I said. I have some pretty weird friends of friends.
One colleague is a surgeon in late 50ies who married a trophy spouse completely at the other extreme roughly in 30ies. After 3 kids, wife files for divorce and total horndog. While married, asked spouse for a 4-some. I shit u not. The sad part is person is total status symbol driven.. Like all she does is talk about design brand, design this designer now. She’s really annoying. Every single time we see her, both of us wants to drop kick her.
See, what I find very interesting is the people who are really wealthy in my sphere of friends are really cool people and don’t give a flying fck about all these status things. It’s the wannabe wealthy that feel like they constantly have to remind people about the money they have and status. Really ghetto and pretty pathetic. And the most boring ass parties you can possibly attend. I guess that’s why the spouse was into 4-somes, lol.[/quote]
My worldview has been rocked, my next phase of life was meant to include designer clothes and foursomes. Now I need to throw my master plan out the window and the well of all my ambition.
I guess there’s still Bingo in St George though!
Participant[quote=sdrealtor][quote=Coronita]Yeah, well I was one of the people that actually took some money off to the side to be a little more cautious. But you know when I did that, it wasn’t significant enough to save my accounts when the markets declined…since when the markets declined the rest of my portfolio took a hit…at the same time, when the markets climbed fast, my portfolio didn’t climb as fast…Slow going up fastcoming down still…Story of my life….I should have just left things alone…
50-60% is impressive. I think my 1 year underperformed @ 27%
50-60% would have been nice. no early retirement for me…[/quote]
Im sure you did great. Part of that roughly 60% was leveraged real estate though it wasn’t highly leveraged. Someone highly leveraged on real estate would’ve done amazing also. I’m sure we know at least one or two of those also[/quote]
As an accountant by profession, I almost have this instinct to track net worth/values/change in net worth, but for my personal funds/assets, I take a slightly different approach.
I do mark securities/stocks to market and combine that with liquid funds/change in debt to get a monthly/year to date net change.
For property, I track two values, a core equity value which is probably 30% below current market but more of a “if the world goes to hell value”.
I have a side calculation which I call “unbooked equity” or unrealized gains which is closer to the current market. I do slowly bring up the “go to hell value” over time to book a portion of the market gain. This practice is inspired by the accounting for German insurance companies which for many years held real estate at the acquisition cost which created “hidden reserves”. Of course, Warren Buffet would figure this out long ago. Still it does make me think of that summer back in Munich as an auditor after the wall came down.
If I go off the mark to market value, the 14 month gain since June 2020 is a solid 33% but overall lagging the market as I’ve kept about 10%-30% in cash to buy more property (10% current).
If I factor the “unbooked equity”, things look much better, and I come in at 53%.
I need to keep some perspective here, the amount is over $2M in gains in 14 months which is probably more than I will spend on discretionary items for a few decades. It certainly begs the question if going to work still makes sense.
My normal target return going forward is only about 4% which may well be too conservative. Eventually all the stimulus measures will peter out and the economy and real estate will converge at some natural growth rate which I estimate at about 1.5%. I’m not saying sell or even change the allocation, but I think the past 14-18 months have had greater returns than the next 5-6 years combined. Hope I’m wrong but am making long term consumption and spending plans based on what I think is a sustainable rate.
August 6, 2021 at 1:24 PM in reply to: Zillow bought a house in a neighborhood where I’m active #822898Participant[quote=XBoxBoy]I notice that this home is now pending. I wonder how much zillow will make off this transaction?[/quote]
My guess is about 50K for owing it one month.
Pending after 4 days.
Just one more indication, there is a structural gap (lack of supply).
I expect they will do this as often as they can.
Margin may drop over time but expect they will target 20-30K min per transaction.
August 2, 2021 at 8:17 PM in reply to: Zillow bought a house in a neighborhood where I’m active #822768ParticipantI do want the HOA to contact them though as they let the lawn go to hell.
Participant[quote=DataAgent]We have 2 non-Tesla EVs and an over-sized rooftop solar array. Our solar panels power our house and both of our cars. We use net-metering and pay no monthly electric bills. We net-up in November. In November of 2020, out total electric bill for the entire year of 2020 and late 2019 was $50. I’m satisfied with a $50 annual electric bill. However, there are members of my local EV Club who spend lots of time trying to get their annual electric bill as close to $0 as possible. Their Zoom presentations bore me to log-off early.[/quote]
I am content with the $16 per month EVTOU5 rate which powers the house/pool and two EVs plus one plug in hybrid. Solar covers the usage. The climate credit brings the annual bill down to approx $150.
The discussion about gas prices bore me so I often go to sleep when it is discussed.
Participant[quote=deadzone][quote=sdrealtor]So here is some data for EP.
My hometown of Cherry Hill NJ has a median HH income of $105K. It has demographics similar to Carlsbad, top rated schools and healthcare. Its an easy one hour drive to lovely Jersey Shore towns. Its an easy 15 minute drive to Philadephia with great jobs, multiple teaching hospitals some of which rank among the best in the country and Ivy League schools nearby. They have professional sports and world class musuems and theatre in Philly. School funding is among the highest in the country. The median home price is $336K.
The median HH income in St George is under $50K. It has none of that. School funding is among the lowest in the country. The only university was recentlya two year associate degree college. No theatre, no international airport, no teaching hospitals, no major industries, no pro sports, no beaches, no culture or diversity. The median home price is $430K.
And you dont think you just bought into one big time bubble that will come crashing down as soon as the economy turns? You have bought into Hemet circa 2005.[/quote]
You make some good points sdr but come on, lay off the guy. He is going there to retire and live out his golden years among like minded people. Don’t think he cares if the RE bubble bursts in St George. If it bursts there it will be due to the everything bubble bursting anyway (obviously it will crush St George far worse than SD or other areas granted).[/quote]
Drought, now floods: I hope everyone stays safe but with an eye on Germany, some forces of nature can be very impactful:
Participant[quote=an][quote=gzz]Here’s a MM 5/2 (only 3/1 permitted) that sold for $269k in 2009:
https://www.zillow.com/homes/7916-Peach-Point-Ave-San-Diego,-CA-92126_rb/16786665_zpid/%5B/quote%5D
Imagine if you have the income/asset to qualify to buy 10 at this price and put down 20% each. Down payment would have been ~$540k. Today, that house would sell for ~$750k today, so that’s a gain of ~$4.5m w/in 13 years.I think RE is the only investment vehicle where you’re only required to put in 5-20% and borrow the rest. Also, you and the house want the same thing.[/quote]
I hit about 3.5M with 8 but yes these would have needed a lower downpayment and thus higher ROE, but we roll with with what we get.
If I had to venture a guess, I’d say 200-300K more appreciation per unit over next 13 years can be in the cards.
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