Where to Invest Money Right Now?

**riser4** · 01-13-2023, 09:50 AM

Originally Posted by TNKen

Attachment 442506

Heh. If only, if only.

**TNKen** · 01-13-2023, 10:35 AM

Originally Posted by riser4

Heh. If only, if only.

Yeah, I sold a bunch to put kids in coledge. Sold an MP5 SD to buy a fricking horse. Paid $8k for the gun, sold it for $16k, sold the horse for $1,500 after sinking thousands in it. SD is worth probably $55k today.

**phatty** · 01-13-2023, 11:12 AM

Originally Posted by skaredshtles

I mean - at this point, you should be able to fairly easily get more than 1.875% on other investment vehicles, so paying the 15y note early doesn't seem to make a lot of sense.

That's why I mentioned my wife's extreme risk averse nature. Sometimes a happy marriage is worth more than a few extra points on an investment.

**skaredshtles** · 01-13-2023, 11:21 AM

Originally Posted by phatty

That's why I mentioned my wife's extreme risk averse nature. Sometimes a happy marriage is worth more than a few extra points on an investment.

I mean - you can get more than that on *virtually* risk-free vehicles.

ETA: think CD's, savings accounts, etc.

**altasnob** · 01-13-2023, 01:24 PM

Originally Posted by californiagrown

I have a condo i bought a few years back at 4.25%. Have since married, made a kid, and bought a house on the other side of town. I now rent the condo for a $200 profit each month (enough to keep up with assessments and maintenance). As a family we are in a good place with finances (no debt other than mortgages, large emergency fund, live well below our means etc).

I have a chunk of cash just hanging out right now. Too afraid to put it into the market currently (i have a maxed 401k and a YOLO etrade account), so im thinking of just paying down the principal on the condo mortgage. I wouldnt totally pay it off, but it would halve the principal at this point. Think that is a good idea, or should i just keep the powder dry for now? I would like to have cash-on-hand in the next 5-10 years to buy and develop property on my own (something closely related to my day job) so that is a consideration too.

If you think you can't find an investment that returns more than 4.25%, then pay down the mortgage. If you think you can beat 4.25%, do that.

Mortgage interest is deductible from your rental income. So in a way, it is ok to have a bunch of monthly interest payments on a rental property debt. If you owed it outright, you wouldn't be able to take advantage of this tax law (so best to have debt on rental property, so long as you are comfortably cash flow positive). Once debt on rental property is paid down, or debt on primary residence is paid down, you can do a cash out refinance to go purchase your next real estate investment. Best rates will be on your primary residence and even though the debt is on your primary residence, and not your rental property, if you are using the money to purchase a rental, you will still be able to deduct the interest from rental income (interest tracing).

You're aware that if you rent your condo for more than 3 years and then sell, you will not be able to take advantage of the 500k capital gains exemption for married couples? If you are past this point, you will have to do a 1031 exchange to avoid paying capital gains tax, and depreciation recapture tax. A 1031 is not necessarily a bad thing just wanted to make sure you know this before you get past the point of no return on the rental.

**californiagrown** · 01-13-2023, 01:55 PM

Originally Posted by altasnob

If you think you can't find an investment that returns more than 4.25%, then pay down the mortgage. If you think you can beat 4.25%, do that.

Mortgage interest is deductible from your rental income. So in a way, it is ok to have a bunch of monthly interest payments on a rental property debt. If you owed it outright, you wouldn't be able to take advantage of this tax law (so best to have debt on rental property, so long as you are comfortably cash flow positive). Once debt on rental property is paid down, or debt on primary residence is paid down, you can do a cash out refinance to go purchase your next real estate investment. Best rates will be on your primary residence and even though the debt is on your primary residence, and not your rental property, if you are using the money to purchase a rental, you will still be able to deduct the interest from rental income (interest tracing).

You're aware that if you rent your condo for more than 3 years and then sell, you will not be able to take advantage of the 500k capital gains exemption for married couples? If you are past this point, you will have to do a 1031 exchange to avoid paying capital gains tax, and depreciation recapture tax. A 1031 is not necessarily a bad thing just wanted to make sure you know this before you get past the point of no return on the rental.

I dont know what the fuck im doing. Never planned to keep the condo as a rental, but got hit with a 70k assessment just before we planned to move and so the place was unsellable at that point. Construction finally wrapped up and i have tenants signed through 2024. Just winging it right now. Good to know. We finally got a tax person/financial advisor this year so i have a lot to talk to him about haha.

**altasnob** · 01-13-2023, 02:08 PM

Originally Posted by californiagrown

I dont know what the fuck im doing. Never planned to keep the condo as a rental, but got hit with a 70k assessment just before we planned to move and so the place was unsellable at that point. Construction finally wrapped up and i have tenants signed through 2024. Just winging it right now. Good to know. We finally got a tax person/financial advisor this year so i have a lot to talk to him about haha.

Renting it is a great investment if it is cash flow positive. You can rent for a year or two but you must sell within 3 years to take advantage of the capital gains tax exemption. So you are at point of deciding do you want to have a rental property for the rest of your life (not necessarily the condo, but the investment money will be a rental property) or do you want to get out of the rental real estate game for now (always can go back in at a later time). Our tax laws are so fucked up to encourage rental real estate investments that I think everyone should have at least one property rental if they can swing it (all the deductions and 1031 make it so you hardly ever pay taxes, ever).

When you die, your kid(s) will get a step up basis so that is the time when it is advantageous to sell (lucky kids).

**jm2e** · 01-13-2023, 06:51 PM

Is there a way to take one or more rental properties that you don’t want to live in again, roll them into a deluxe pad that you do want to live in, rent it for a couple years, then move in yourself?
Then sell it in 3 or 5 or 10 years without capital gains?

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**altasnob** · 01-13-2023, 07:37 PM

Originally Posted by jm2e

Is there a way to take one or more rental properties that you don’t want to live in again, roll them into a deluxe pad that you do want to live in, rent it for a couple years, then move in yourself?
Then sell it in 3 or 5 or 10 years without capital gains?

You can sell all the rental properties you want and roll the proceeds into another rental property investment (doesn't matter if single family, multifamily, commercial) and avoid paying capital gains in that transaction.

If you sell your homes, and use 1031 to purchase a duplex, and then move into the duplex, you will still not be able to take the full primary residence capital gains tax exemption. There is also a minimum time must first rent the duplex before moving in (I believe 2 years). And then if you move into the duplex, live there for a few years, and then sell, you may get a primary residence capital gains exemption but it is reduced by the ratio of years you rented the place.

This is getting complicated and I am not a tax or real estate profession. So better ask californiagrown's tax guy to be sure.

https://apiexchange.com/1031-exchang...ary-residence/

SB · 01-13-2023, 08:15 PM

Gas stoves

**Tips^Up** · 01-13-2023, 09:24 PM

The exit strategy I've heard is sell all rental properties, 1031 into a big house with an ADU.
But before you do that, tenants are paying off the mortgage, the mortgage interest is deductible from income taxes. While the property is likely appreciating, annual depreciation decreases income taxes (free profit). Residential rentals are legally set up to pay little in taxes.
Bonus in Colorado, residential rentals (including all the way up through mega apartment complexes) pay ~4x less in annual property tax than other commercial real estate investments.

PS - if anyone in Colorado needs a commercial appraiser/consulting with a lot of property tax expertise, hit me up.

**AmmergauerTele** · 01-14-2023, 06:54 PM

I'd play the long game, keep the condo. You are already $200 cash positive / month on it and haven't owned it too long. I've done the same thing with a rental house. We originally lived in it, moved a few years ago - been renting it for four years. We've owned the house since 2007....6.25% interest rate, refinanced twice (long story), now have a 15-year loan on it at 2.25% (11 more years left). I'm 49, I don't really need the money now, I want the money from the rental when I'm in my low 60s and retired. If you are already cash positive at this stage, you should be great in ten years. We are +$1,100 a month and that doesn't include the principal that is being paid down. More like netting $1,900 month with the extra over our monthly payment of $1,100 and the principal coming off the top. Every time I have to go over and fix something I have to talk myself off the cliff of selling it. Buy the time I get to the first stop light I'm good to go. I don't know how old you are but definitely think of the long game. Use as income when retired? Look at your mortgage schedule and see what you will be netting 5 to 10 years down the road.

**climberevan** · 01-14-2023, 07:16 PM

Do you guys have any thoughts to share about lending money to friends/family for the purpose of buying property? "Hard money loan" is the common parlance. I guess my main question would be how to secure the loan and how durable any claim one might have to the property would be with a promissory note.

**Hott Butt Mud** · 01-14-2023, 07:26 PM

Originally Posted by climberevan

Do you guys have any thoughts to share about lending money to friends/family for the purpose of buying property? "Hard money loan" is the common parlance. I guess my main question would be how to secure the loan and how durable any claim one might have to the property would be with a promissory note.

My opinion is that seems like a very bad idea. Friends/family loans for something like that would be a great way to end a friendship. You'd literally need to have some legal document created and hope it hold up in court. How long is it good for? Either gift the money or leave it alone. Imagine your friend/family always thinking about how you're part owner of their home? It might not be something either party wants to have thoughts of in their mind as they live their lives.

**jm2e** · 01-26-2023, 10:07 PM

Originally Posted by AmmergauerTele

Every time I have to go over and fix something I have to talk myself off the cliff of selling it.

Truth

**old goat** · 01-26-2023, 10:39 PM

My accountant likes series I bonds, although it might be worth waiting to see if they shit on the debt ceiling. (OTOH if they do shit on the debt ceiling the only place to put your money is to buy canned goods while the money still worth something.)

**mtndave** · 01-27-2023, 06:32 AM

Bought a $10K I-bond two days ago @ 6.89%. Worth the gamble, lol.

**toast2266** · 01-27-2023, 07:13 AM

Originally Posted by old goat

My accountant likes series I bonds, although it might be worth waiting to see if they shit on the debt ceiling. (OTOH if they do shit on the debt ceiling the only place to put your money is to buy canned goods while the money still worth something.)

It's seems semi plausible that there could be a relatively short period of time where you cannot cash in bonds. Which would be a giant mess, but probably not a huge deal for most people. If they refuse to honor the bond at all, then I would think that's a huge, huge deal that probably marks the end of our current financial system.

**dunfree** · 01-27-2023, 07:50 AM

If you are worried your US savings bond will be zeroed - you’ll get nothing back at all - you better worry about everything else because that’s a collapse of the fiscal/political/nation. Don’t horde canned food and firearms, start raising your warlord army.

**riser4** · 01-27-2023, 03:31 PM

Treason caucus is gonna run us off the cliff. Putin won't have to fire any nukes.

**old goat** · 01-27-2023, 04:23 PM

Originally Posted by toast2266

It's seems semi plausible that there could be a relatively short period of time where you cannot cash in bonds. Which would be a giant mess, but probably not a huge deal for most people. If they refuse to honor the bond at all, then I would think that's a huge, huge deal that probably marks the end of our current financial system.

you are (almost) certainly right. I was joking (I hope).

**4matic** · 01-27-2023, 06:55 PM

TIPS have better liquidity, longer duration, and unlimited capital investment vs. I bond. Depends on your timeframe, risk appetite, and capital allocation needs. I-bonds are great because there is absolutely no risk other than illiquidity and mitigated return. TTM on TIP etf is 7%.

**LeeLau** · 01-27-2023, 08:12 PM

Originally Posted by 4matic

TIPS have better liquidity, longer duration, and unlimited capital investment vs. I bond. Depends on your timeframe, risk appetite, and capital allocation needs. I-bonds are great because there is absolutely no risk other than illiquidity and mitigated return. TTM on TIP etf is 7%.

I was going to mention TIPS. They're my go to