All Forum Posts by: Michael Masters

For my first property I put down 10%, got a mortgage for 80% and then another loan with a higher APR for the remaining 10%. The higher APR was cheaper than paying PMI fees for a 90% mortgage.Also, I probably saved with a cheaper APR on the mortgage itself. Afterward, I paid off the higher APR loan as quick as I could.

Most brokerages have default methods but also allow you to choose exactly which shares are sold, the ones recently purchased or the ones from a decade ago.  I always personally pick the shares to minimize tax cost.  Typically this means those stocks purchased at least 366 days ago (to get long-term rate) but not the oldest purchases (as they will have the most gains).  In some cases I've sold for under 365 days as its a loss not a gain and so its actually a tax write-off.

Finding how to manually pick hares can be difficult, call your broker if you can't figure it out. 

Originally posted by @Ernesto Hernandez:

Read jlcollinsnh.com

Then get a Vanguard account and go VTSAX. Call it a day. 

 Interesting you should recommend VTSAX, it's equivalent to the VTI fund I recommended and raises another question:  which is preferable an ETF or a mutual fund?  There are plusses and minuses with each.  Consider the following choices from Vanguard:

VTSAX - Total Stock Market Index - Mutual Fund Admiral Shares

VTSMX - Total Stock Market Index - Mutual Fund Investor Shares

VTI - Total Stock Market Index - Exchange Traded Fund

These are all the same exact product just sold to you in different ways.  In fact, if you go to the annual statement for any of these, it will lead you to the same exact document.  So which is best for you?  First let's see expenses and minimum investments:

Annual Expense Charge (as a % of invested funds)

VTSAX = 0.04%

VTSMX = 0.15%

VTI = 0.04%

Minimum Investment

VTSAX = $10,000

VTSMX = $3,000

VTI = 1 share = $137

Given this is the same exact product, I would never buy VTSMX because with its higher expense you are guaranteed to get a lower return (0.11%) than both VTI and VTSAX.  This higher expense can be seen in the 10-year return for each product:

10 Year Average Return

VTSAX = 8.72%

VTSMX = 8.60%

VTI = 8.72%

So now you have two to choose from, VTI and VTSAX.  If you don't have $10,000 minimum the choice is easy, only VTI is available.  Otherwise it comes down to whether you prefer mutual funds or exchange traded funds (ETFs). 

For me, I like ETFs because they can be sold instantaneously during market hours, this has the advantage of letting you know exactly how much you are paying or receiving for a trade.  In contrast, to buy/sell a mutual fund you must put the request in prior to market close and then the price is determined based on the market close price.  This means if you want to know approximately what you will pay/get you need to decide minutes before market close and hope pricing doesn't move too much.

The advantage of mutual funds is the quicker availability of funds.  If you sell an ETF on Monday you must wait until Wednesday to be able to access the money.  For mutual funds, the money from a Monday sale would be available on Tuesday.

Here's a good summary of the trading differences between ETFs and Mutual Funds:

https://www.fidelity.com/learning-center/trading-investing/trading/trading-differences-mutual-funds-stocks-etfs

I will just make a quick suggestion on an index fund that’s broader than S&P 500. I use VTI which is an index fund that includes mid-sized and smaller companies. Basically it covers the whole US market not just larger companies. I do this because research shows smaller and mid-size companies outperform large companies and therefore its good to have an index fund which includes these. However, even these broader indexes are largely made up of S&P 500 companies because the market caps of big companies are so large compared to smaller companies.

The credit card companies report the balance in your monthly statement. I’m obsessive and check my score weekly so I’ve learned a lot of the tricks. First, as others have said, definitely pay down your credit cards just before the credit card’s closing date for the month. If your statement cuts off on the 15th, pay on the 12th. I forgot to do this one month and my credit score dropped 40 points overnight. Second, don’t pay all credit cards down to zero. Your credit score is actually better if you have a small balance on 1 or 2 of your credit cards to show you’re managing your finances responsibly.

I'm referring to the "Small Balance" Freddie Mac loans linked below:

http://www.freddiemac.com/multifamily/product/pdf/small_balance_loan.pdf

They have a 9 month principle+interest liquidity requirement.  I took one of these loans out last summer, looking to do it again but my post-close cash might need some help to meet requirement.

I have a multifamily property I'm interested in but it would put me on the edge as far as post-close liquidity. 

Consider the following:

Required liquidity = $200,000

Cash accounts = $150,000

IRA accounts = $500,000

Would the IRA account get me over the liquidity requirement or does this type of account get excluded?

I plan on filing an extension, I’ll call you on April 17th! ;-)

I prefer the apps/websites mentioned above that allow you to specifically filter on multifamily, however, you can use keywords on zillow and specify “multi”.

My biggest problem with this tax bill is now I know the day I'm going to die....December 31 2026.  After that the estate tax threshold goes back down.

Starting my tax planning now, renting a boat for me sale into the Bermuda Triangle circa December 2016.