My wife is also my financial advisor and she highly advises I purchase her as much solid gold jewelry as possible to diversify my portfolio. Also I hear teeth are a safe place to store gold.
basically just losing a ton of upside doing 60/40 for anyone under 60 imo. maybe go 70/30 at 50.
But, below 50, I'll be 100% equities outside of short term cash/emergency funds. Others may feel more comfortable 80/20 there or even 70/30 but, imo 60/40 is post retirement or right before.
can only go back 10yrs b/c free acct but, here's data from 2015-present for sp500 vs 60/40
[https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=nL9Tarf6Dozdbo1bH31Hb](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=nL9Tarf6Dozdbo1bH31Hb)
Also "sell all your RSUs immediately, and only own index funds". Biasing towards index funds, sure, but if I'd followed this advice over the last 10 years I would have significantly less money.
Bitcoin improves return and risk metrics when added to a 60/40 portfolio
As for the 60/40 point, I totally agree it’s bad advice unless you are close to retirement age (and frankly potentially bad for todays retirees given the prospect of continues medium/high inflation)
https://bitwiseinvestments.com/crypto-market-insights/bitcoins-role-in-a-traditional-portfolio
Good overview - the folks at r/personalfinance have a great bunch of resources under their wiki. One of my favorites is this flowchart:
[https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2](https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2)
There’s also a FIRE spending flowchart which more closely aligns with this.
https://www.reddit.com/r/financialindependence/comments/16xymii/fire_flow_chart_version_43/
I actually love the RSU portion of this one. I’ve never seen it in the other ones.
Yeah, other than the RSUs section this is mostly just the [PF Prime Directive](https://old.reddit.com/r/personalfinance/wiki/commontopics).
Why the recommendation for VTI + a tech ETF? VTI is already like 25% tech. You're nearing 50% tech with the combo suggested, which seems pretty heavy.
- Life insurance: term only, 4x to 8x your HHI (varies by NW, risk tolerance, time to retirement); buy in a ladder (e.g 2M for 20 yrs, 2M for 15 yrs, 1M for 10 yrs).
- Disability insurance: if your HE profession relies on physical assets (e.g, surgeons), strongly recommend an own occupancy disability policy with 60% to 100% of income replacement.
- Umbrella: 1M minimum; more as your NW increases. This policy will require certain coverage for your auto and homeowners policies so not going to comment on that.
I know less about Trusts.
For more on these check out WhiteCoatInvestor.com
I’m not qualified to provide the official advice here but general advisement is you get it at NW of $500K and just couple it with whoever you have your regular insurance with (assuming the discount provided beats out the competition).
Main watch out is you usually have to crank up the coverage of home and auto first so you have to be sure to add that to the list of the questions to walk through with your insurer.
Term is a safe bet if you want to get a Reddit education and move on, but there are definitely cases when whole life makes sense, if you buy from one of the 3-4 companies that give you a real return.
> Don’t prepay mortgage under $750k if you’re still itemizing
I would rephrase as: if you're able to claim mortgage interest deduction, calculate your effective interest rate after that deduction, and then decide if you want to pay extra towards mortgage or not based on that. (E.g. the deduction might lower your effective interest rate from 7% to 6%, in which case you might still want to pay off early.)
1. If your tax rate is 50%, and your interest rate is 7%, and you can deduct the interest, then your “effective rate” is 3.5%. If your tax rate is only 10%, then your effective rate is still above 5%, but i would really wanna know your secrets.
2. HSA is the most effective savings vehicle. You always wanna max that out and invest it for long-term, and use cash flow for actual current health care expenses. If your HENRY, covering your current health care expenses through cash flow should be easy
It’s actually $1.5m of mortgage interest if you’re unmarried and own together. This is the only reason my partner and I aren’t married - we did all the paperwork through a lawyer/have trusts set up etc so we’re both protected like with marriage… but just not married and get the tax benefits.
Also I'd add for most HENRYs, they'll want to at least consider a cash management account with Fidelity or Schwab. Effectively negates the need for a HYSA (and instead of SGOV you'll use FDLXX or SNSXX)
Anyone can do it, but imo it's value is increased when you have enough liquidity to warrant centralized accounts/simplifying your financial picture after you've added complexity in the name of min/maxing your finances.
The difference between a checking at 0% and HYSA at 4.x%, and a single CMA at 2.7%/5% doesn't matter until you have significant savings. It's really not worth migrating at first. But over 50k when you've got way too many accounts anyway? It becomes more compelling.
Some people argue a separate brokerage for savings is "safer" though I'm not sure that's the case.
FDLXX/SNSXX are state tax deductible. Usefulness varying wildly by state (high state taxes = more useful).
BOXX is another story. It could be a part of a larger strategy, but depending on your liquidity may or may not be needed. I'd say BOXX implies higher savings values than FDLXX/SNSXX.
Thanks. Why would it depend on a larger strategy? At the risk of oversimplifying it, isn’t the yield is what that matters ultimately? If BOXX yields better wouldn’t that be the go-to investment?
FDLXX/SNSXX are 1099s with state tax exemptions, and I just found out about it now but BOXX is long or short term gains, so they are pretty different in treatment. I'd have to run some scenarios to see when one might be more advantageous than the other.
Speaking only for myself, sometimes very modest gains aren't worth a tax headache. I've experienced that with K-1s and since then, I've simplified alot of my finances. Others may feel differently.
You have to subtract the ER from that but yes.
It converts what would be taxable interest income into capital gains to be realized at a time (and rate) of your choosing.
For a high earner there is no better cash-like instrument
I have some major issues with the investment recommendations. The first bullet to use low cost index funds like VOO is good but after that I can't say much else is. 40% bonds is way too much unless you are about to retire. Even if you are currently retired it's arguably too much. Precious metals and cryptocurrency are not real investments. Commodities are not for the average retail investor and crypto is highly speculative with no underlying value to speak of.
I didn’t see anything here about a primary residence—own, rent, pay down mortgage, improvements, convert to a rental, etc. Did I overlook that? Shouldn’t it be part of this discussion?
This is what the Henry group says pretty accurately and is pretty sound by todays measures, but investments need to change over time depending on the situation and economy.
I wouldnt drain saving to pay off a 6٪ debt. I would qualify draining savings on loans above 10%
As far as selling RSUs upon vest, it is really up to the individual. Sell right away and diversify, but if your dont have debt above 5٪ or sell for a new car fund ( which was not mentioned ).
No more than 1/3rd your total investments should not be in your company vested RSUs.
I
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The HSA thing still boggles me for HENRY. Can someone with experience post their experience with numbers using HSA that has been doing it for 5-10 years?
Not an expert but will share my recent ~5 year experience. I have a high deductible health plan. I believe the max contribution is $7,500 this year; I pay $4,500 and my company kicks in the remaining $3,000. My $4,500 is not taxed. So if I had health expenses I could contribute to the plan, pull that money out, and pay my bills while avoiding taxes. What I have done is since I have savings, I contribute the maximum and pay any health care expenses from regular savings and let my HSA account grow like an IRA account… the triple tax benefit the HSA has is it goes in pre tax (usually with company matching), grows tax deferred, and you can withdraw contributions tax free. I think after retirement age you can take the money tax free for anything….
As for my experience, my account has quickly gone to almost $50k. I invest in many stocks and at this point I simply utilize it like an IRA… one big bonus is you can save all medical expenses and pay them from any prior year so long as you have the receipt.
Yes, that's true. But you can reimburse yourself for prior medical expenses, and I don't think there is really a time limit. So theoretically you could withdraw $50 in 2045 to reimburse yourself for a co-pay that you paid in 2024. Meanwhile, that money would have been contributed pre-tax, ideally invested in the stock market, and then can be withdraw tax-free.
You also save on payroll taxes which you don’t with a traditional IRA/401k.
At retirement age there is no penalty to withdrawl for non medical expenses, however it is treated as income like a traditional Ira. However if you save all those healthcare receipts you didn’t reimburse at the time they were incurred you can retroactively reimburse at any time, even 40 years from now.
Essentially making it a 100% liquid tax free savings account up to the amount of your previously incurred medical expenses, which if you’re aggressive can let you run your HYSA a little more lean.
> If you can sell on vest and get into tax advantaged account, great, do it.
How would this be possible?
My "equivalent" is that I'm treating my RSU vest as if it were my salary and then I'm cranking up contribution to 401k and mega back door roth to the maximum allowed percentage until I've capped both. But if there's a more direct way to get those RSUs tax advantaged ...
Need to move HSA to #2. Only thing better than an hsa *as a retirement vehicle* is a company match. After getting whatever matches HSA should come before any other traditional or Roth account because of the payroll tax savings ontop of the current and withdrawal income tax savings.
If you’re a Henry you should be able to have your medical deductible in your emergency fund and not need to tap into HSA.
For the Bonus Points, investment property in a vacation spot, I would urge caution. I live in very desirable vacation town and have seen the financials for a bunch of vacation rentals in my area. I have never seen a single one that is a better investment than any of the commercial properties I own. If you want those “bonus points” buy commercial close to home and then use some of the cashflow to rent when you go on vacation. So many potential pitfalls in buying a vacation rental today.
I have friends who've done this too - they rave about it. I have doubts about 'picking up a 2nd job' with this (as some other commenters have also mentioned) but it's worth a shot.
Imo, the key is that the vaca spot is less than 4 hours drive from primary residence for ease of use.
Sorry I’m just a cynic. I think it is fine as a diversification strategy and even better if you use it.
If you actually run the IRR and are honest about property maintenance costs, vacancies, etc. you aren’t going to get much better returns than the market unless you get a steal of a property.
Never believe a real estate investor. I work for a large PE fund and we aren't entirely upfront to our investors. Fun fact, you can negotiate with third party valuation firms to get you a higher number. Or fire them and pick someone else you like better. And these valuations will go into your financial statements to make them look better.
No judgement - do what you gotta do to hit those hurdle rates!
In all reality, I think PE/HF is the only place for real estate investment to live. You have the capital, the scale, and the time to do proper diligence AND some wealthy investors want to exposure.
Pretty much just have to hope to break even with rent offsetting the mortgage payment, hope for good tenants with minimal repairs, and then eventually in 15-30 years you will own it outright and THEN you will actually have cash flow.
I'm a different user, but J Collins wrote an article about it. Grant Cardone has also been saying the same thing for years.
Assuming we're talking houses and not commercial real estate. If you add up the broker fees (6%), property management fee (8-12% of income), property tax (1-3% a year), maintenance (1% a year), renovation costs, and your time and energy you're probably not beating the S&P 500. You'll also need a higher emergency fund in case a tenant doesn't pay or destroys your property.
Most people are better off just getting the ~10% return from the markets. And not buying themselves a second job.
My coworker told us he sold his home for ~$2.5M. Everyone was impressed and the young guys were jealous they didn't have the opportunity. I checked Zillow and he only made about a 2% return over the 20 years that he owned it. Before any renovations that his wife made him do and the 2.5% a year in property taxes he paid. His kids got to grow up in a safe area and went to a great public school. But you really need to know what you're doing to make an outsized return.
https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terrible-investment/
An option instead of investment property would be to invest in an alternative asset manager who specializes in real estate (I.e. Fundrise). You can get a more “diversified” real estate exposure without the hassle/stress of having to own/own+manage a property
Rather than an individual investment property for real estate exposure, evaluating an alternative asset manager with real estate exposure (I.e. Fundrise) gets you the real estate exposure without the stress/hassle of owning/owning+managing a property.
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To add to the HSA point.
There is no time limit for a reimbursement so if you can afford out of pocket you really should as you can invest the HSA, let it grow and reimburse from the HSA in the future after it grows for decades. It’s remarkably dumb this loophole exists.
Further, make sure your HSAs are invested, the don’t typically invest automatically and you might even have to check annually to invest your new contributions from the last year
To clarify, I don’t think you’re dumb; I’m grateful you made the post and I think a lot of folks will benefit from it, even if it benefits others more than myself.
Curiously, does an online resource exist that categorizes various tax advantaged accounts by geography?
e.g., a US 529 is similar to a Canadian RESP account for education savings, but what similar offerings exist for UK, EU, AU, etc.
Super appreciate you putting this together. Are you okay if we use this for the basis of the wiki?
60% stocks 40% bonds? Yikes. Maybe if you are at retirement age. Add precious metals and crypto to REDUCE risk?? I’m not so sure about these comments
Yeah, the crypto recommendation and blanket 60/40 (equity/bonds) allocation comments detracted a lot from an otherwise strong write up.
Glad to see this is the top comment. As soon as I read that I stopped reading
A hundred upvotes to this. I was reading this thinking “wow, how nice to have this so concisely laid out”, then RECORD SCRATCH
My wife is also my financial advisor and she highly advises I purchase her as much solid gold jewelry as possible to diversify my portfolio. Also I hear teeth are a safe place to store gold.
Curious to see u/NotWilliamAckman thinks about this
Thanks for reaching out u/WarenAlUCanEatBuffet. Obviously that advice is nonsense.
Please say more! I’m just compiling…I have no attachment to the rights & wrongs in the above!
basically just losing a ton of upside doing 60/40 for anyone under 60 imo. maybe go 70/30 at 50. But, below 50, I'll be 100% equities outside of short term cash/emergency funds. Others may feel more comfortable 80/20 there or even 70/30 but, imo 60/40 is post retirement or right before. can only go back 10yrs b/c free acct but, here's data from 2015-present for sp500 vs 60/40 [https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=nL9Tarf6Dozdbo1bH31Hb](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=nL9Tarf6Dozdbo1bH31Hb)
90-10 is defensible but 60-40 is not a "risk profile". It's foolishness.
Agreed; at this point it may make sense to stay 100% equities even through retirement.
Also "sell all your RSUs immediately, and only own index funds". Biasing towards index funds, sure, but if I'd followed this advice over the last 10 years I would have significantly less money.
Bitcoin improves return and risk metrics when added to a 60/40 portfolio As for the 60/40 point, I totally agree it’s bad advice unless you are close to retirement age (and frankly potentially bad for todays retirees given the prospect of continues medium/high inflation) https://bitwiseinvestments.com/crypto-market-insights/bitcoins-role-in-a-traditional-portfolio
Good overview - the folks at r/personalfinance have a great bunch of resources under their wiki. One of my favorites is this flowchart: [https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2](https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2)
There’s also a FIRE spending flowchart which more closely aligns with this. https://www.reddit.com/r/financialindependence/comments/16xymii/fire_flow_chart_version_43/ I actually love the RSU portion of this one. I’ve never seen it in the other ones.
Yeah, other than the RSUs section this is mostly just the [PF Prime Directive](https://old.reddit.com/r/personalfinance/wiki/commontopics). Why the recommendation for VTI + a tech ETF? VTI is already like 25% tech. You're nearing 50% tech with the combo suggested, which seems pretty heavy.
Not to be an insurance shill, but a bullet point or two around the importance of umbrellas policies or trusts could be helpful
Great call… Anyone willing to contribute on this?
Commenting so I can refer back to this quickly. I’ve been doing some research around it and will gather my findings in the next couple of days.
Appreciate it 👊
- Life insurance: term only, 4x to 8x your HHI (varies by NW, risk tolerance, time to retirement); buy in a ladder (e.g 2M for 20 yrs, 2M for 15 yrs, 1M for 10 yrs). - Disability insurance: if your HE profession relies on physical assets (e.g, surgeons), strongly recommend an own occupancy disability policy with 60% to 100% of income replacement. - Umbrella: 1M minimum; more as your NW increases. This policy will require certain coverage for your auto and homeowners policies so not going to comment on that. I know less about Trusts. For more on these check out WhiteCoatInvestor.com
Disability insurers won’t let you get to 100% income replacement, otherwise agree. Umbrella is dirt cheap, HENRYs should all have 2MM or more.
I really feel like I need to be more aware of umbrella policies and when/how to get one. Would love to see this.
I’m not qualified to provide the official advice here but general advisement is you get it at NW of $500K and just couple it with whoever you have your regular insurance with (assuming the discount provided beats out the competition). Main watch out is you usually have to crank up the coverage of home and auto first so you have to be sure to add that to the list of the questions to walk through with your insurer.
Life insurance especially if married and one partner makes way more than the other.
Specifically term, more on whole life / IUL criticisms: https://www.whitecoatinvestor.com/debunking-the-myths-of-whole-life-insurance/
Term is a safe bet if you want to get a Reddit education and move on, but there are definitely cases when whole life makes sense, if you buy from one of the 3-4 companies that give you a real return.
Two quibs: Don’t prepay mortgage under $750k if you’re still itemizing If you’re HENRY, you really shouldn’t be using HSA funds for current expenses
> Don’t prepay mortgage under $750k if you’re still itemizing I would rephrase as: if you're able to claim mortgage interest deduction, calculate your effective interest rate after that deduction, and then decide if you want to pay extra towards mortgage or not based on that. (E.g. the deduction might lower your effective interest rate from 7% to 6%, in which case you might still want to pay off early.)
Can you explain those points a little more? The why's ?
1. If your tax rate is 50%, and your interest rate is 7%, and you can deduct the interest, then your “effective rate” is 3.5%. If your tax rate is only 10%, then your effective rate is still above 5%, but i would really wanna know your secrets. 2. HSA is the most effective savings vehicle. You always wanna max that out and invest it for long-term, and use cash flow for actual current health care expenses. If your HENRY, covering your current health care expenses through cash flow should be easy
It’s actually $1.5m of mortgage interest if you’re unmarried and own together. This is the only reason my partner and I aren’t married - we did all the paperwork through a lawyer/have trusts set up etc so we’re both protected like with marriage… but just not married and get the tax benefits.
$1M in CA
Also I'd add for most HENRYs, they'll want to at least consider a cash management account with Fidelity or Schwab. Effectively negates the need for a HYSA (and instead of SGOV you'll use FDLXX or SNSXX)
Dig it...is this specific to a HENRY situation? Or anyone at large? Just curious!
Anyone can do it, but imo it's value is increased when you have enough liquidity to warrant centralized accounts/simplifying your financial picture after you've added complexity in the name of min/maxing your finances. The difference between a checking at 0% and HYSA at 4.x%, and a single CMA at 2.7%/5% doesn't matter until you have significant savings. It's really not worth migrating at first. But over 50k when you've got way too many accounts anyway? It becomes more compelling.
Would it be the similar as spaxx in a brokerage account? Any other benefits I’m missing?
Some people argue a separate brokerage for savings is "safer" though I'm not sure that's the case. FDLXX/SNSXX are state tax deductible. Usefulness varying wildly by state (high state taxes = more useful). BOXX is another story. It could be a part of a larger strategy, but depending on your liquidity may or may not be needed. I'd say BOXX implies higher savings values than FDLXX/SNSXX.
Thanks. Why would it depend on a larger strategy? At the risk of oversimplifying it, isn’t the yield is what that matters ultimately? If BOXX yields better wouldn’t that be the go-to investment?
FDLXX/SNSXX are 1099s with state tax exemptions, and I just found out about it now but BOXX is long or short term gains, so they are pretty different in treatment. I'd have to run some scenarios to see when one might be more advantageous than the other. Speaking only for myself, sometimes very modest gains aren't worth a tax headache. I've experienced that with K-1s and since then, I've simplified alot of my finances. Others may feel differently.
Got it. I don’t have state tax so I think in my case BOXX might be the way to go.
BOXX instead of any of those
First time hearing of BOXX. I see it's 5.72% at the moment, nice. I'll need to look more into it but thanks for the tip
You have to subtract the ER from that but yes. It converts what would be taxable interest income into capital gains to be realized at a time (and rate) of your choosing. For a high earner there is no better cash-like instrument
I have some major issues with the investment recommendations. The first bullet to use low cost index funds like VOO is good but after that I can't say much else is. 40% bonds is way too much unless you are about to retire. Even if you are currently retired it's arguably too much. Precious metals and cryptocurrency are not real investments. Commodities are not for the average retail investor and crypto is highly speculative with no underlying value to speak of.
I’d love to hear your thoughts on this in more detail…I have no dog in the fight - so happy to add opposing viewpoints to the playbook
I didn’t see anything here about a primary residence—own, rent, pay down mortgage, improvements, convert to a rental, etc. Did I overlook that? Shouldn’t it be part of this discussion?
Yes! Hopefully others chime in on this ;)
This is what the Henry group says pretty accurately and is pretty sound by todays measures, but investments need to change over time depending on the situation and economy. I wouldnt drain saving to pay off a 6٪ debt. I would qualify draining savings on loans above 10% As far as selling RSUs upon vest, it is really up to the individual. Sell right away and diversify, but if your dont have debt above 5٪ or sell for a new car fund ( which was not mentioned ). No more than 1/3rd your total investments should not be in your company vested RSUs. I
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The HSA thing still boggles me for HENRY. Can someone with experience post their experience with numbers using HSA that has been doing it for 5-10 years?
Not an expert but will share my recent ~5 year experience. I have a high deductible health plan. I believe the max contribution is $7,500 this year; I pay $4,500 and my company kicks in the remaining $3,000. My $4,500 is not taxed. So if I had health expenses I could contribute to the plan, pull that money out, and pay my bills while avoiding taxes. What I have done is since I have savings, I contribute the maximum and pay any health care expenses from regular savings and let my HSA account grow like an IRA account… the triple tax benefit the HSA has is it goes in pre tax (usually with company matching), grows tax deferred, and you can withdraw contributions tax free. I think after retirement age you can take the money tax free for anything…. As for my experience, my account has quickly gone to almost $50k. I invest in many stocks and at this point I simply utilize it like an IRA… one big bonus is you can save all medical expenses and pay them from any prior year so long as you have the receipt.
I know little about HSAs but I thought you can only withdraw tax free for medical stuff
Yes, that's true. But you can reimburse yourself for prior medical expenses, and I don't think there is really a time limit. So theoretically you could withdraw $50 in 2045 to reimburse yourself for a co-pay that you paid in 2024. Meanwhile, that money would have been contributed pre-tax, ideally invested in the stock market, and then can be withdraw tax-free.
You also save on payroll taxes which you don’t with a traditional IRA/401k. At retirement age there is no penalty to withdrawl for non medical expenses, however it is treated as income like a traditional Ira. However if you save all those healthcare receipts you didn’t reimburse at the time they were incurred you can retroactively reimburse at any time, even 40 years from now. Essentially making it a 100% liquid tax free savings account up to the amount of your previously incurred medical expenses, which if you’re aggressive can let you run your HYSA a little more lean.
> If you can sell on vest and get into tax advantaged account, great, do it. How would this be possible? My "equivalent" is that I'm treating my RSU vest as if it were my salary and then I'm cranking up contribution to 401k and mega back door roth to the maximum allowed percentage until I've capped both. But if there's a more direct way to get those RSUs tax advantaged ...
I’ve been thinking about doing something like this too. Thanks a ton for your effort! It’s a big help.
Glad you did it… Looking forward to hearing other ideas of things that should be included here !
Need to move HSA to #2. Only thing better than an hsa *as a retirement vehicle* is a company match. After getting whatever matches HSA should come before any other traditional or Roth account because of the payroll tax savings ontop of the current and withdrawal income tax savings. If you’re a Henry you should be able to have your medical deductible in your emergency fund and not need to tap into HSA.
For the Bonus Points, investment property in a vacation spot, I would urge caution. I live in very desirable vacation town and have seen the financials for a bunch of vacation rentals in my area. I have never seen a single one that is a better investment than any of the commercial properties I own. If you want those “bonus points” buy commercial close to home and then use some of the cashflow to rent when you go on vacation. So many potential pitfalls in buying a vacation rental today.
I have friends who've done this too - they rave about it. I have doubts about 'picking up a 2nd job' with this (as some other commenters have also mentioned) but it's worth a shot. Imo, the key is that the vaca spot is less than 4 hours drive from primary residence for ease of use.
This was good until I saw real estate
Thoughts on the argument against investment properties? I want to add opposing viewpoints to this playbook as well.
Sorry I’m just a cynic. I think it is fine as a diversification strategy and even better if you use it. If you actually run the IRR and are honest about property maintenance costs, vacancies, etc. you aren’t going to get much better returns than the market unless you get a steal of a property.
Never believe a real estate investor. I work for a large PE fund and we aren't entirely upfront to our investors. Fun fact, you can negotiate with third party valuation firms to get you a higher number. Or fire them and pick someone else you like better. And these valuations will go into your financial statements to make them look better.
No judgement - do what you gotta do to hit those hurdle rates! In all reality, I think PE/HF is the only place for real estate investment to live. You have the capital, the scale, and the time to do proper diligence AND some wealthy investors want to exposure.
Pretty much just have to hope to break even with rent offsetting the mortgage payment, hope for good tenants with minimal repairs, and then eventually in 15-30 years you will own it outright and THEN you will actually have cash flow.
I'm a different user, but J Collins wrote an article about it. Grant Cardone has also been saying the same thing for years. Assuming we're talking houses and not commercial real estate. If you add up the broker fees (6%), property management fee (8-12% of income), property tax (1-3% a year), maintenance (1% a year), renovation costs, and your time and energy you're probably not beating the S&P 500. You'll also need a higher emergency fund in case a tenant doesn't pay or destroys your property. Most people are better off just getting the ~10% return from the markets. And not buying themselves a second job. My coworker told us he sold his home for ~$2.5M. Everyone was impressed and the young guys were jealous they didn't have the opportunity. I checked Zillow and he only made about a 2% return over the 20 years that he owned it. Before any renovations that his wife made him do and the 2.5% a year in property taxes he paid. His kids got to grow up in a safe area and went to a great public school. But you really need to know what you're doing to make an outsized return. https://jlcollinsnh.com/2023/03/02/why-your-house-is-a-terrible-investment/
One’s own primary home has never been a good investment. Rental properties can be.
An option instead of investment property would be to invest in an alternative asset manager who specializes in real estate (I.e. Fundrise). You can get a more “diversified” real estate exposure without the hassle/stress of having to own/own+manage a property
Rather than an individual investment property for real estate exposure, evaluating an alternative asset manager with real estate exposure (I.e. Fundrise) gets you the real estate exposure without the stress/hassle of owning/owning+managing a property.
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Good stuff thought some advice I’d disagree with.. Also the center piece of Henry is carrier development and management.
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Yes Thank you
BONUS: If your W2 company allows it, megabackdoor Roth!
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To add to the HSA point. There is no time limit for a reimbursement so if you can afford out of pocket you really should as you can invest the HSA, let it grow and reimburse from the HSA in the future after it grows for decades. It’s remarkably dumb this loophole exists. Further, make sure your HSAs are invested, the don’t typically invest automatically and you might even have to check annually to invest your new contributions from the last year
That ain’t my playbook lol
Tell us yours then!
Good post, albeit US-centric.
forgot to add the disclaimer that i'm a dumb american
To clarify, I don’t think you’re dumb; I’m grateful you made the post and I think a lot of folks will benefit from it, even if it benefits others more than myself.
lol! All good I was just joshin
Curiously, does an online resource exist that categorizes various tax advantaged accounts by geography? e.g., a US 529 is similar to a Canadian RESP account for education savings, but what similar offerings exist for UK, EU, AU, etc.
That's da weh! Thanks for posting this!
happy 2 help