Money Matters
LillibetteV
member
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Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
balancing retirement portfolio
I FINALLY get to join my 401(k) (they make you wait until the first full quarter after your one year anniversary...considering they don't match it's pretty sucky). I'm happy that they have a Roth 401(k) option which I will be taking, but I'm pretty underwhelmed by my fund options. The only one I like that I don't think is too expensive is the Vanguard 500 Index. Since my old 401(k) accounts have all been rolled into an IRA with much better investment options my plan is to stick all of my new 401(k) money into the Vanguard 500 and then balance it with some other options in the IRA so that the total of my accounts has the stock/bond ratio that I want. Any downside that I'm missing? I don't need to have each individual account balanced as long as the total of my accounts is right? Thanks!!
Re: balancing retirement portfolio
If your 401k were your only investment vehicle, I'd be more worried.
We're actually at the point now where we're looking for other investments. We both have 401ks (funded to match), Roth IRAs (fully funded), a 529 for the little one. Even have some taxable investments. Thinking about opening a general brokerage account. @short+sassy even has me wanting to try my hand at real estate.
On my recent travels to your neck of the woods, my H and I noticed a lot of cute multi-families in Revere Beach
It was hilarious. During our morning walks, we'd count the number of electrical meters or mailboxes for whatever house caught our eye, to figure out how many units it was. What features we liked, what repairs we'd make, etc. Rough calculations on rent vs. cost.
We have zero interest in investing so far away. But we do that all the time at home and just couldn't help ourselves, lol.
I wouldn't blame you for wanting to redo your kitchen first, though. And, while not a return on investment you would see until you all sold the house, kitchens are one of the few renos that will often pay for themselves with the added value to the home.
Unfortunately we'd have to buy further out for a rental if we wanted to buy next year because multi-family properties in Revere start at $400k and just keep climbing. Basically the areas we can afford right now are full of less than desirable potential tenants. But I might be willing to do a little laddering to eventually get some nicer rentals.
There is an abandoned house with a pool on the next street. There's notices taped to the front door that it is abandoned and winterized. Somebody is doing basic mowing trimming on the front, but the back has run wild. I looked up the tax records and it isn't a bank. Regardless though, I wouldn't touch that house with a ten foot pole with my current experience level.
I don't blame you. I showed her a couple of houses for $20k each. Could maybe snag them for $9k based on prior list prices. She wasn't amused. :P
One strategy to get your 20-25% down payment investment back much quicker is to purchase a house that needs some work, but will have a good bit more equity than the "all in" price when the rehab is completed.
1. Buy the house, which does require that annoying 20-25% down payment. You can also do a construction loan to get the rehab included also. But those do have a higher interest rate and are harder to acquire.
2. Fix it up.
3. Rent it out.
4. Do a "cash out refi" in 6-12 months. Most refis will allow a loan for 70-80% of the value of the home. Obviously the original loan will be paid off, but then you'll also be receiving in cash 70-80% of the equity in the house. Assuming it was a decent deal to start with, you'll typically get most of your initial investment back out. Heck, for a really good deal, you can even get more than your initial investment back out.
Of course, in this strategy, your new loan will be higher because you'll be paying yourself back the down payment. But, as long as you're still cash flowing at least a few hundred bucks a month* (including set asides for maintenance/vacancies)...in the end...it ends up being an increased income with little to no money out of your pocket.
*that's a few hundred "per door".
Lol. I know you're kidding. But, ironically, cheap houses are often a terrible investment. They're in bad neighborhoods. They're not worth much even after a rehab. They are low rents.
The low rents can be the killer. Because a new roof (or most repair/maintenance) for a 1,000 SF house is pretty much the same cost...whether you are collecting $500/month in rent or $2,000/month in rent.
To me, it looked like many of the multi-family Revere houses had started as HUGE single family homes. And then got divided up over the years.
I'm sure there are quite a few illegal apartments going on also. I'm positive the AirBnB we stayed was one, lol. We were in a one-bedroom basement. It was very DIY'ed and poorly done. There was NO sound proofing...AT ALL. We could hear every foot fall of the people above, including the creaky floor, even though they weren't being loud. It sounded like laminate wood flooring that they didn't even bother to put a pad under. No sound proofing also means no fire separation either.
We loved the Revere Beach location for access to Boston. But were definitely not happy with our specific accommodations. Oh well, what can you do. Really not sure why they had so many and such good reviews, lol. We didn't even have a mattress. It was 2"-3" of foam on a box spring. Seriously. Foam (rolling eyes). It was advertised and reviewed as pretty basic accommodations, but still! Even flea bag motels have real mattresses.
Yeah, I was kidding. Ironically, if the pictures aren't faked, it looks like the guy did do a renovation on it and supposedly the rents are in the $700/month range, but again, it's in a crappy neighborhood. But I don't see buying rentals in a $300k neighborhood being realistic either.
That's a good point also. HCOL areas will certainly have lovely, sky high rents...but are often impossible to cash flow in because property prices are also sky high.
"Bad neighborhood" is a relative term. I was more referring to the worst of the worst. Where it is very difficult to find tenants at all and, they ones you do find, are going to have problems paying.
However, I've considered rentals in low income neighborhoods with a fair amount of crime. Openings are usually easy to fill because the rents are lower. But, when I do my analysis calculations, I add 5% more than what I usually do to my "maintenance" set aside and double my "vacancy" set aside. To account for a higher chance of having to deal with an eviction. Honestly though, for me personally, it would have to be a pretty stellar deal for me to consider a high crime area. You're just going to attract sub-par tenants who are always more time and hassle to deal with. And I didn't get into this business to spend a lot of time on it, lol.
I've been finding my sweet spot is low income, but also low crime areas. Properties are on the cheaper side. Rents and demand are decent, though you do need to be open to Section 8 (housing assistance) applicants.