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livinincali
Participant[quote=spdrun]I didn’t read this as a 5-yr amortization period. I read it as a loan with a 30-yr amortization period (or perhaps interest only) where the rate resets after five years.
In the 30-yr case, I’m getting $1879/mo through the end of the 5-yr period.[/quote]
It says it’s a 5 year loan right in the first paragraph.
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We own a good house in a desirable part of San Diego, purchased for about 700K, now worth about 1100K. The mortgage of 500K is five year fixed at 2.125%, since I refinanced 1.5 years ago when rates were lowest.
[/quote]Participant[quote=spdrun]If you can rent it out to decent folk at a profit or at a wash, then keep it. If it will cost you more than a few hundred $ per month and you can sell it at a profit, then consider selling.[/quote]
It’s a 5 year loan at 2.125%. The carrying costs are about $10K a month. You won’t rent it out for that but you could just use the rental income to rent in the other city.
ParticipantSeems kind of simple to me. Do you expect appreciation in excessive of the assistance benefit 3 years down the road. If yes, keep the house and use the rental income to rent in this far away city. If not then sell now. The over 1.4-1.5 million market is pretty slow but things are pretty good in the 1.1 million dollar range so you can probably expect some appreciation but I wouldn’t expect 10-20% per year meaning you’d get priced out.
Participant[quote=kev374]this is not a big deal… a small correction and then the market is going to resume it’s upward trend. We had a 26% gain in the market last year so what’s a 5-6% retraction, nothing really.[/quote]
All bubbles pop by starting with a no big deal correction. It’s why nobody manages to get out at the top and remain unscathed. Even once you start realizing the bubble might have popped, you wait for it to come back a little bit before selling.
ParticipantThe trick to getting rich. Get a little bit of money from a lot of people.
Participant[quote=CA renter]
Yes. BTW, are you using nominal CPI numbers (I haven’t fact-checked your numbers)? If so, the way they calculate CPI means that the inflation number here is understated, too.
[/quote]Isn’t CPI nominal by definition. It’s just an index that measures what the BLS thinks inflation is. Certainly it’s flawed/understated based on the typical house hold budget. It certainly misses asset price bubbles. Your led to 2 conclusions when the fed says they didn’t see the bubbles. Either they are too dumb to look outside of CPI or they are lying.
Participant[quote=SK in CV]
Deleveraging of what? Household debt? It’s been happening for the last 6 years. By some measurements, it’s at the lowest level in decades.[/quote]There’s been a little deleveraging in household debt but it’s not nearly as big as everybody thinks it is. Just go look at the Fed Z-1 and you’ll see that household debt peaked at 13.968 trillion in Q1 2008 and it’s currently at 13.083 trillion Q3 2013. Is a 6% decrease in household leverage a massive deleverging event. 10 years ago (2003) it was 9.463 trillion.
Take 1980 until 2013.
1980 Nominal Median Income = $16,542
2013 Nominal Median Income = $50,099
Increase of = 308%1980 CPI = 77.8
2013 CPI = 232.9
Increase of = 299%1980 Total Household debt = 1.3960 trillion
2013 Total Household debt = 13.083 trillion
Increase of = 1067%All leveraged assets will get hit if their really is a deleveraging.
Participant[quote=spdrun]There are already Lenovo branded phones, not sure if commonly sold in the US.[/quote]
Lenovo phones are not sold in the US but they are pretty big in China and other 3rd world countries. Nokia should have been able to take the low priced smart phone market but blew it. Now it’s Lenovo’s turn, to see if they can exploit their low cost manufacturing into profits.
Participant[quote=unnamed0404]
In regards to rent vs own, I know that I would probably be able to pay slightly less to rent (1400 vs 1500-1600 to buy) at venetian ( I have enough for 20% down), but thats only a hundred or 2 more, and at least I’d be building equity and getting some more tax deductions right? The rent seems to be going up too.[/quote]If you have the 20% down then the calculation changes quite a bit. Then you’re only looking at the couple hundred dollars more to buy vs rent. Obviously UTC will have UCSD so there’s always going to be people to rent too, well at least as long as there isn’t some kind of pop in student loan financing. I guess the biggest thing to worry about would be what kind of shape is the HOA in for the complex you want to buy in. Last thing you want is a special easement for $10K because of some kind of neglected building maintenance.
Participant[quote=FlyerInHi]Where is almost as good for $100k less for a 1 bedroom?[/quote]
I don’t love it but how much different is Mira Mesa vs UTC?
Participant[quote=SK in CV]With the exception of the curtailing of interest deduction on consumer debt, none of them were in any way retroactive. Those changes didn’t change future tax benefits of current holdings. It didn’t turn non-taxable investments into taxable investments.
[/quote]I agree that there isn’t a great example of tax laws being changed in a way that takes a non-taxable investment and make it taxable. IRA/Roth’s and other retirement plans don’t have a long history either. It’s not like we lived through a time where the government has been desperate for cash and there were special tax exemptions that could be attacked while these plans were in place.
Look at the conversation about corporate tax loop holes or even something like prop 13, where proponents of changes say it’s not fair that people with money get a special tax break (corps benefiting from prop 13). Roth IRAs are likely held by a small minority of people that are comparatively rich to the general population. How long do you have before someone decides it’s not fair for you to get a tax break on a Roth IRA. Especially if you have considerable other wealth/income. I know they attempt to address that through the contribution side, but look at people trying to back door it. When does abuse get to a point where the government says F that and decides to change the tax implications of a Roth.
What if we do simplify the tax code such that all income is treated that same. Do you really think in a large tax change agreement like that they would carve out a special exemption for Roth IRA income. I think it’s far more likely that if we did get a radical overhaul Roth IRAs would just end up being collateral damage.
Eliminating special treatment for Roth’s in favor of a simplified tax code might fly sometime in the future. Broaden the base eliminate the special interest loop holes (if that means Roth’s get hit so be it).
Participant[quote=SK in CV]
Any examples of future tax benefits that have been written into the law and then reversed and repealed? I can’t think of any.[/quote]What about the tax act of 1986. It did all of the following things that would seem to be removal of various tax advantages.
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Moreover, interest on consumer loans such as credit card debt was no longer deductible. An existing provision in the tax code, called Income Averaging, which reduced taxes for those only recently making a much higher salary than before, was eliminated (although later partially reinstated, for farmers in 1997 and for fishermen in 2004). The Act, however, increased the personal exemption and standard deduction.The Individual Retirement Account (IRA) deduction was severely restricted. The IRA had been created as part of the Employee Retirement Income Security Act of 1974, where employees not covered by a pension plan could contribute the lesser of $1500 or 15% of earned income.[6] The Economic Recovery Tax Act of 1981 (ERTA) removed the pension plan clause and raised the contribution limit to $2000 or 100% of earned income. The 1986 Tax Reform Act retained the $2000 contribution limit, but restricted the deductibility for households that have pension plan coverage and have moderate to high incomes. Non-deductible contributions were allowed.
Depreciation deductions were also curtailed. Prior to ERTA81, depreciation was based on “useful life” calculations provided by the Treasury Department. ERTA81 set up the “accelerated cost recovery system,” or ACRS. This set up a series of useful lives based on 3 years for technical equipment, 5 years for non-technical office equipment, 10 years for industrial equipment, and 15 years for real property. TRA86 lengthened these lives, and lengthened them further for taxpayers covered by the alternative minimum tax (AMT). These latter, longer lives approximate “economic depreciation,” a concept economists have used to determine the actual life of an asset relative to its economic value.
Defined contribution pension contributions were curtailed. The law prior to TRA86 was that DC pension limits were the lesser of 25% of compensation or $30,000. This could be accomplished by any combination of elective deferrals and profit sharing contributions. TRA86 introduced an elective deferral limit of $7000, indexed to inflation. Since the profit sharing percentage must be uniform for all employees, this had the intended result of making more equitable contributions to 401(k)’s and other types of DC pension plans.
[/quote]Participant[quote=UCGal]I’m wondering of the “MyRA” mentioned last night by the POTUS at the SOTU is another way of doing a backdoor roth.
From what I’m reading – you can contribute up to $15k (total) in post-tax money to this MYRA. When it hits $15k, you can/must roll it to a Roth IRA.
Presumably you can rinse and repeat this.
While it’s in the MyRA it’s in the equivalent of the TSP G-fund… which is a great option for fixed income stuff not normally available to non public workers.
I’m hoping I’m reading the tea leaves right on this.[/quote]
I not a huge fan of Roth IRAs because I fully expect the government to rescind the tax benefit before most people will receive it. If they can go after government pensions it won’t be hard to go after Roth IRA tax benefits (you’re minority group that has it better than the general population). I prefer the known tax benefit now rather than hopefully getting a tax benefit down the road.
ParticipantSo here’s a quick rent to buy calculation for the venetian. Obviously this is just current data I found but it’s in the ballpark. Craigslist posting look like this place rents for about $1400/mo for a 1 bedroom. A recent comp for 1 bedroom in this complex is $235K and the lowest current 1 bed listing is $259/K. So let’s just assume you can get one for $250K.
You don’t have a big down so we assume FHA financing.
You take out a loan for $240K @ 4.5% which corresponds to principal and interest of $1216/mo. Then we add FHA MIP which is 4375/12 = $364/mo + taxes 2815/12 = $234/mo + $169/mo HOA. Let’s assume the HOA covers insurance. So to buy costs = $1216+364+234+169 = $1983/mo. Doesn’t seem like all that great of a prospect to buy, when you can rent the same thing for $1400/moAnother way to think about it is this way. Say you buy it and pay the extra $600/mo to buy versus renting. Say you want to sell the place in 5 years. 1/1 condo in UTC probably isn’t your long term home. In 5 years you spend $36000 extra dollars to buy vs rent (granted rents could go up so it might be somewhat less than this). In order to break even in 5 years you need 2.5% appreciation per year. The place needs to be worth $290K at the end of that 5 year period. Anything less than that and it would have been better to rent. Anything more and it was better to buy.
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