[iflyjetzzz]

Originally Posted by ddrhazy

If you can guarantee 4% on a stress free diversified portfolio, I'd rather take that option, had you asked me 20 years ago. Unfortunately I've had bad experiences which make me avoid the stock market now.

A diversified portfolio would include bonds - they tend to offset stock returns. When stocks are shooting higher, bonds will drag down your returns. Conversely, when stocks are tanking, they'll increase your returns.
Looking back to 1995, a 10 year treasury would have returned 7.5-8%.

Simply stocks and bonds oversimplifies a diversified portfolio; here's a link that shows the construction of 4 different diversified portfolios - from Aggressive to Conservative. Needless to say, as you get closer to retirement, your portfolio should be more conservative. https://www.fidelity.com/viewpoints/...iversification


I'm not opposed to being a landlord, but I missed the window on the best deals and I know it. If the opportunity presents itself again, I'll buy some rental properties. My sister and her husband took my advice and bought 4 rentals in Jacksonville in 2012 and 2013.

[henderson702]

Originally Posted by iflyjetzzz

Scoop et al, my apologies if ANY of my posts come across as combative or offensive - not my intent (I know that my writing sometimes comes across in that tone). I'm merely trying to discuss the topic from a different point of view.



Depends; I'd argue in favor of a larger diversified portfolio while carrying a 4% home mortgage. Why? Because I should be able to beat 4% after tax return on a diversified over a reasonable timeframe (call it 10+ years because I have that amount of time before I retire and will look at recalibrating my portfolio at that time). A 4% mortgage is cheap money. Conversely, if mortgage rates were at late-1970s levels of 15+%, I would much prefer being debt free over even a small diversified portfolio. At this point in time, I'd consider 7% mortgage rate to be my personal inflection point. YMMV.

The big reason why real estate has been an attractive investment over the years is due to the leverage it has afforded. Coupled with long term capital appreciation, real estate can be a wealth generator. Let's assume you have 25% equity in a home and it appreciates at 3% per year - that yields a 12% ROI. The other side of the leverage sword is that a 10% decrease in your home's value (assuming initial 25% equity), you've lost 40% of your equity in your house.



I've considered buying rental properties. My concern is the amount of damage that a single renter can do to your property. As someone who's rented for almost 20 years, I've seen a lot of rental properties that have been heavily damaged by renters. It doesn't take long for a single renter to destroy years of equity built up in a property. Due to that risk, I've opted to not buy rental properties.



I hope you're not equating high risk/high beta VC (venture capital) mutual funds to a diversified portfolio. That's the opposite of diversified. Turns out investing in venture-capital funds isn't a great idea - CNET

I've known one person who rented out their house and it got turned into a meth lab. The cost of cleaning the hazardous waste site (formerly known as a house) exceeded the value of the house.
My nephew's currently renting a house near Reno that was being used as a marijuana grow house. The propane tanks exploded, destroying most of the house - the owner rebuilt it, but it wasn't covered by insurance.

We all can find examples that are the exception, not the rule.

By no means am I saying that real estate is a bad investment, but I would never recommend putting all of one's assets into real estate. Nor would I recommend anyone putting all of their assets in stocks. The only people that I'd recommend a nondiversified portfolio to are those older than 75, and I'd recommend fixed income assets (bonds, CDs) to cover any expected expenses for the next five years - any excess assets could be invested in other asset classes.

Too much optimism is not a good thing when it comes to investing.

[iflyjetzzz]

Originally Posted by henderson702

Too much optimism is not a good thing when it comes to investing.

If a 4% long term return on a balanced portfolio sounds overly optimistic, you're doing something terribly wrong with your investments and would be better served turning over your asset management to a professional. There are a lot of things that I don't do because others can do those things a lot better than me.

[007 license to sell]

If you were wondering how home sales are doing in Las Vegas. They are doing great.

Check out the article below:


Las Vegas home sales surge, rivaling pace of boom years

Nevada still has a lot of properties that are underwater that the banks either own or are owner occupied. Here is the latest update on what's happening with distressed properties in Vegas.

Nevada sees drop but still No. 1 for underwater homes

• http://www.reviewjournal.com/business/economy/nevada-sees-drop-still-no-1-underwater-homes
  
• By Jennifer Robison Las Vegas Review-Journal
• Jul 30 2015 - 6:19am
• 11 Comments

Nevada posted the second-biggest drop in homes with mortgages worth more than value in the second quarter, but the decline couldn't keep the state out of the top spot for such underwater homes.

[BBMW]

The question is "What is better, a bigger diversified portfolio, or being debt free and having a smaller diversified portfolio."

The answer is, whatever gives you a better net return. That may very well be the latter.

Irrational fear of debt is like irrational fear of fire. Both can burn you if your stupid. Both can be very useful if used carefully and intelligently.

Originally Posted by ScoopLV

What's better? A diversified portfolio? Or being debt-free and having a diversified portfolio? There's no reason why an investor can't have it all.


(And frankly, I don't care about the minor tax breaks for a mortgage on a primary residence. That doesn't amount to much. Rental properties allow so much depreciation that they pay almost as much in reduced tax liability as they do in rent.)

[ScoopLV]

Large Debt = retire at 65+

No Debt/Minimal Debt = retire at 45-


Some debt is necessary. It builds credit score. But keeping a large debt load is a risk. Keeping a large debt load because it might yield an extra six or seven figures in eventual return is beyond foolish. Optimal investing is not about "net worth at time of death." It's all about "quality of life along the way."

[SportyandMisty]

Originally Posted by ddrhazy

That's actually not true. It is an unknown variable. It could go down, it could be completely wiped out.

Only if we have a zombie apocalpyse.

And if we do, I have my plan. I'll hole up inside Sam's Club. The walls are concrete, and everyone knows zombies can't get in without a Sam's Club card.

[UTES]

Originally Posted by ScoopLV

No Debt/Minimal Debt = retire at 45-

In my case: Retired at 44

Bill

[iflyjetzzz]

Originally Posted by ScoopLV

Large Debt = retire at 65+

No Debt/Minimal Debt = retire at 45-


Some debt is necessary. It builds credit score. But keeping a large debt load is a risk. Keeping a large debt load because it might yield an extra six or seven figures in eventual return is beyond foolish. Optimal investing is not about "net worth at time of death." It's all about "quality of life along the way."

LOL! If this was directed at me, you're barking up the wrong tree. My family financial planning is much more complex than that.

My wife and I both draw military pensions along with having well paying jobs. Our expenses could be covered by my retirement check alone (all of our cars are paid off; we haven't had a car loan since the 1990s) but my wife wants to continue to work and I've got a job that I enjoy.

Because we have two military retirement checks, we don't anticipate the need to spend any of our savings during our lifetimes and we have put both our IRAs and 401ks into Roths for the express purpose of passing those assets on to our children tax free. While we retain control over the money, we do not expect to spend a dime in our lifetime. In addition, we also have investments outside of our IRAs and 401ks - we also doubt that we'll ever need to draw on those assets in our lifetime other than to purchase a car for cash or similar big ticket items - frankly, my only toy is my Porsche Cayman S which I bought used with high miles so it was relatively inexpensive.

In addition to the tax benefits of writing off the interest on our mortgage, we don't want to prepay any of the mortgage because it's a fully assumable 3 3/4% VA loan. If interest rates rise, having an assumable low interest mortgage makes our home more valuable should we decide to sell it.

My wife and I have been debt free since the late 1990s; the home purchase late last year was the first debt we've taken on in almost two decades. Could we have paid cash for the house? Yes, with most of our non-IRA/401k investment assets (I used a bunch of investment money in 2014 to pay taxes on converting my wife's TSP to a Roth IRA). But I chose to take out a mortgage for the reasons mentioned above - it's about tax/estate planning. Since we're deep into the 33% marginal tax bracket, the effective cost of our mortgage is less than 3% - I consider that to be dirt cheap money.

The downside is that we're so close to the itemized deduction/personal exemption phaseout kicking in that we now have to make all 401k contributions with pretax money in order to keep our AGI below/not too far into the phaseout. At this point in time, I'm planning on rolling the taxable retirement savings into Roth accounts after I/we retire but before I/we reach 70 1/2. But this is a good money problem vice the bad money problems that most people face.

I applaud you for being debt-free; very few people can say that. It gives one freedom to make life choices that 'debt slaves' (typical people with mortgage, auto loans, credit card interest, etc) will never know. All the best to you.

[ScoopLV]

I was going to post more investment crap. But it doesn't matter. This isn't an investment thread. And we have personal finance forum for people who are interested in such matters.

This is a Las Vegas real estate thread. And buying in Las Vegas is better than renting for the vast majority of people. Buying rental property is an even better thing to do, because it pays two ways -- rental income, and massive tax deductions. When I hear people whinging on about rental property, I know they don't have any. Because otherwise they'd be crowing about the tax ramifications.

Sure, I don't want a tenant to start a meth lab in one of my houses. But if a tenant does, so what? That's what insurance is for. Knock it down, build another, rent it out and start that sweet, sweet depreciation ball rolling again.

Many people are simply DETERMINED to make this stuff more difficult than it actually is.