All Forum Posts by: JD Martin

Quote from @Sunny Burns:

Quote from @Eric James:

@JDMartin

Regarding health insurance: Obamacare (healthcare.gov). Plans as low as $0/month.

I have the same view regarding work. Except my view is that a W2 job is low return compared to what can be done working independently to build wealth.

Agreed so much better value I can provide to the world than what I was providing through my W2.

I mean I already coach soccer, basketball, and teach Personal Finance and STEM at my kids homeschool Co-Op. Now I'm thinking to start and Ulimate Frisbee League for Kids in my County.

I also want to become more of a regular speaker about FIRE and Strong Families, hopefully travel around the world with my family during the process.

I feel my W2 more than most had certain elements of Ikigai, but definitely lacked in a lot of regards. Door is now wide open to fulfill my true life purpose.

 Maybe the problem wasn't your job but your organization. I don't want to be negative but I can't possibly fathom how ultimate frisbee is more of what the world needs (or at least the United States) than highly skilled mechanical engineers, especially when you're already involved with soccer and basketball. Unless you really sucked at your job - and if that was the case, maybe the federal pare-down made sense - you have knowledge, skills and abilities possessed by a very small number of people worldwide, and even less Americans. You can't think of a single worthwhile endeavor that requires the input of a skilled mechanical engineer? Now I suppose if you hated the job completely, then you made a mistake when you went to college and whomever backstopped your education also probably should have done more due diligence, whether it was your parents, subsidized loans or Pell Grants, etc (unless you paid all cash for your education).

Again, I'm not trying to be negative. If teenage frisbee is your life's calling, well then I guess you should go for it. I'm just saying as a civilization we need talented, educated people to give back to society, and your way just seems like a big middle finger to society when you have talent and skills that are sorely needed. That's my biggest problem with the whole FIRE idea - young people getting to enjoy all the advantages of society without contribution. 

 I started off buying houses all cash. Eventually when I started using financing none of the banks I used cared a nickel that I had paid-off houses, other than just looking good on my asset sheet. They wanted to know how much cash reserves I had, how much loan to value I was looking for, and how much income outside of rentals I had available for my expenses and that of the rentals. 

On your second question, never bet solely on appreciation. There are too many things that can work against you that you can't control. If a property can't generate at least enough cash flow to pay for itself (that includes reserves for capital expenses, maintenance and vacancies) you really should pass. Also - even at 7/8% - good rental properties should be profitable with or without a mortgage. 

In my market you'd have to take a discount on rent for something without a dishwasher as that is definitely consider C or lower housing. Younger people put *everything* in the dishwasher. If your dishwashers are causing that much damage, like others said you're either using some real cheap junk or the installs are junk (cheap water lines, cheap fittings). We provide dishwashers, washer & dryer, over-the-stove microwaves, range, refrigerator, and central heating & air, and nothing comes close to service issues like HVAC. If there was something I could get rid of, it would be that. But again, no CHA is junk housing in my area. If you want good money, you got to provide good amenities. 

 I think the rub is that you can do anything you want, by and large, until you are audited, and even then worst case scenario is the denial of the loss. The reward is large and the risk small. Reasonable attorney fees and a reversal of the deduction is not enough stick to avoid the practice in the first place. Imagine in an environment like today how much those tax losses might be worth.

 Without seeing what you have, one is likely a defined benefit plan and the other is likely a hybrid or 401k type plan. With defined benefit you have to be vested to earn benefits - usually 5 years, never heard of 10 in the public sector - and once you are vested you get a monthly payment until death at retirement, which will depend on how many years of service, age, etc. Until you are vested you only own the money you put in plus interest, not that put in by the system or your employer. A hybrid or pure 401 type plan you own your contributions from the beginning, but the value of your account is tied directly to investments, usually the stock market or bonds or a combination. If the system does terrible, you make nothing or lose your money, if it does well you make money. 

*In general* at the public level defined benefit is better, even if you leave before vesting, because you can transfer that money to a traditional IRA. Once you are vested your benefit will usually surpass that of a 401. But if you are certain you are leaving before being vested, you will probably do a little better short term in the hybrid or 401 plan because any market gains are yours when you leave.

Long leases don't reduce tenant turnover; people leave whenever they want to leave, lease or not. Month to month for the win, though we always do one year leases at the outset as good tenants generally balk at the lack of security of a month to month lease when they first start out.

 We don't kick anyone out of here. Well, once in a while but usually just spammers :) 

It sounds like the apartments aren't permitted, and depending on where you are that could cost a boatload of money. It sounds like a lot of "what ifs" here to drop that kind of cash on. Unless you want to live in the camper full time I would think finding a reasonable house hack - a duplex or triplex - might be a much better goal in both giving you a home and bringing in rental income, and then perhaps in a couple of years transition yourself out of the unit and buy another one. In the right areas with high enough rents you could live very well on under 10 units. 

Don't forget - you *have* to include depreciation, because the IRS is going to include it for you eventually whether you took the deduction or not. Example: You have a house with a cost basis of $275,000. Your depreciation is going to be $10k per year (27.5 years). If you sell that house 5 years from now, the IRS is going to recapture $50k of depreciation from you even if you didn't take the deduction every year. 

Taxes are a huge part of real estate, and if it's not your forte definitely find yourself a good RE tax accountant because you do not want to miss out - or worse, pay on benefits you didn't even take. 

 PS: You're not this Dave Matthews, are you?: 

Most people would be in doomsday scenario if escrow were removed, because a significant portion of buyers would not be disciplined enough to set aside the funds themselves for payment and would then be in tax or insurance default. Your partner (the bank) knows this, which is why they're not crazy about the idea.

That said, I agree with you about removing escrow if you're the type that knows what you are doing and always keeps sufficient reserves (I don't really get the redeploying the capital other than keeping it somewhere safe and liquid, since you'll need it every year like clockwork). I hate escrow for 3 personal reasons:

1. I have had two different instances in the past where my lender failed to pay property tax and insurance. In both cases I had to pay out of pocket until it was resolved. Both were eventually resolved but at great time & aggravation to me.

2. I do not trust the record keeping of lenders. I had a loan once sold 3 times in 2 years, and the last buyer suddenly insisted I had a $25 late fee on my account for some mystery late payment from years earlier from one of the previous note holders. When I inquired which lender & which payment (I keep records on everything), they couldn't identify it, only told me that I'd keep getting the notice it was on my account until I paid it. Coda: I told them they could kick rocks unless they identified what payment & lender it was, and that they could send me letters until I was dead and I'd sooner set $25 on fire in the middle of the lawn first. After 2 years of sending the monthly letter (they probably spent more on letters than $25), I suddenly got a letter one day that because of my excellent payment record they were granting me a courtesy convenience waiver of the fee.

3. I like paying my insurance and taxes depending on when I need deductions. Sometimes I pay just before the end of the year, other times I will pay just the minimum on insurance and/or taxes before our 2/28 deadline depending on where I am with write-offs. I don't get that luxury with escrow. 

I'm generally a subscriber to "hold until you die", but I'm not dogmatic about it. It's all about what can I do with this money that's more profitable and equal or less risky and equal or less work than what I'm doing now. The profitable part has to take into account a lot of factors, including your age, tax considerations, skill set, investment options, heirs or lack thereof, income requirements, and so on. If I sold everything tomorrow and put it all into stocks - even a mutual fund - that would be less work than what I'm doing now, probably somewhat more risky than what I'm doing now, and probably less profitable than what I'm doing now since I bought (mostly) at a time where I can still see 20% annual returns, and it's pretty unlikely I could match that without really getting out on a limb. To do better I'd have to have some real specialized skill and knowledge like @Jay Hinrichs with timber and land sales.