Retirement
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06-09-2014, 07:49 AM
RE: Retirement
....add to errand list for this morning...buy lottery tickets...

See here they are the bruises some were self-inflicted and some showed up along the way. - JF
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06-09-2014, 07:58 AM
RE: Retirement
(04-09-2014 06:26 PM)earmuffs Wrote:  Seriously though, I don't think it's that hard.
You just need to

a) not have kids I'm with you on this one.
b) don't get married because when you get divorced there goes half your shit - False. Divorce doesn't have to be this way, you can get a co-petition if both parties are civil (I did this).
c) don't buy an expensive car/vehicle. Car's are a huge money waste. They don't hold value and their purpose is the same if they're $500 or $50,000. Exceptions obviously, but as long as you have one that is fuel efficient and reliable then it doesn't need to be fancy. Disagree. Cars are an investment in happiness for me and I'm still doing fine saving for retirement. This depends on the situation. But that is a factor of disposable income.
d) Have as big as possible deposit when you buy a home and don't buy one at your limit if you can find one that you like and fits your brief at a fraction of your limit. And never go over your limit. Agree. My mortgage is small, my house is not huge, but it's plenty for me and I'm find with that. In fact, right now where I live it is cheaper to own a house than rent.
e) put money aside in a savings account (that you can't touch until a specific date/age) each pay check. Even 2% adds up, especially with interest. Savings accounts aren't making jack shit right now. 2% would be great, but it's more like .02% or .10%, if you want to make interest, toss it in a CD (which also suck right now) or dividend stocks.
f) before you buy something on a whim stop and think, "do I need this or should I instead save the money". Can agree with this. Frugality is good. But it still feels nice to splurge now and then.
g) go on cheaper holidays and look out for deals and cheap flights. Often if you book several months in advance you can get it alot cheaper. Yeah but flights still suck.
h) get one of those things that tell you how much power you're using and use it to conserve power. Turn off lights, unplug stuff etc.. Those help. But so does checking your power bill for trends Wink and that's free.
i) shop around, find cheaper power companies, phone companies etc.. Yeah, saved a lot with my phone provider. We don't have alternative power companies here.
j) shop at cheaper stores No brainer.
k) Don't buy lots of cloths, just what you need. I still have my Star Wars Episode 1 shirt from high school, but mostly because I'm a nerd.
l) Walk, don't drive. Not an option for some of us.
m) Cook, don't get fast food (plus it's healthier) 100% agree with you on this, making food from scratch can cost less, is healthier and cooking is a nice skill to have.

Official ordained minister of the Church of the Flying Spaghetti Monster. Please pm me with prayer requests to his noodly goodness. Remember, he boiled for your sins and loves you. Carbo Diem! RAmen.
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06-09-2014, 08:05 AM (This post was last modified: 06-09-2014 08:19 AM by Full Circle.)
RE: Retirement
(06-09-2014 07:43 AM)Colourcraze Wrote:  
(06-09-2014 06:42 AM)Dom Wrote:  I agree that buying a house as early as possible is good strategy.

If you are single (and at that stage you still should be) you can buy the crappiest house on the block. I did that when I was 18. The thing wasn't selling because it was half a step away from falling down. It was in a lower middle class neighborhood, the other houses were not spectacular but well taken care of. I approached the owner directly and proposed to him that I would buy it from him, with a tiny down payment for one year, the rest of the down payment and the entire balance being due a year from purchase. He was sick of owning the house (had inherited it) and agreed. I moved in and started working on it like a maniac. I took risks, I used credit cards to buy supplies. Remember, I was 18, I had no money. My income came from tutoring. At the end of the year, the basics were all working, the floors were solid, and with paint and cosmetics I had raised the value by 30%. The bank liked motivated buyers and lent me the money, keeping back the closing costs. The seller was happy. I was happy. I had a pocket full of cash left over after paying off the credit cards.

I used that pocket full of cash to start a tutoring agency. And an entrepreneur was born. (actually I started my first biz in grade school, but that's another story.)

I sold the house 10 years later for 3 times the purchase price. The market was booming and I got out and bought another rotting house in a much better neighborhood. I had a big chunk of money left over and used it to fix that place up.

The sale of the first business funded the second one. And so on and so on. After the third house and 4th business I was able to buy a house and start the next business without taking out a loan. No more mortgages. All that time I put 10% of income and 15% of profits from sales in savings.

A house is not just a place to live. If it is money you want, you can use houses as a starting point. Of course you have to learn a lot of stuff to make it all work, but I have always enjoyed learning new stuff. Today you have the added advantage of the web to look just about anything up. I had piles of books to work from. The younger you are when you start, the better. You do have to be willing to get your hands dirty and put in physical work if you are going to make a house your starting point. But most importantly, in anything you do, you need to research, research, research.

I think I would love to flip a few houses but I'm afraid of becoming like so many people on HGTV who get way in over their heads! My aunt and uncle have done it a couple of times though, as far as I know they were successful. It seems so intimidating.

If you are going to try your hand at "flipping" you best have a contingency plan such as "I'll move in if I can't sell it" or "I'm ready to take a loss and dump it so as not to ruin my credit".

Things to think about:
-If the house is priced so attractively why didn't the Realtor buy it for themselves?
-How long can I make mortgage payments on the investment property and my own house before I run out of money?
-Do I have any experience in investment properties?
-After I pay the comissions will there be enough profit to justify the risk?
-Will there be any profit? (After commissions, repairs, carrying costs AND selling at or just below market price? (be realistic, we are, after all, skeptics)

I have lots of experience in construction and real estate and as told all my friends and relatives when the market was booming and everyone wanted to flip houses and even the local landscaper had mortgaged their own house and was sitting on five properties he couldn't sell: "What makes you think that without any experience or access to a multiple listing service you can take the biggest monetary gamble of your life and succeed when others who do this for a living aren't always successful? "You don't see me hanging a shingle that says "Brain Surgeries performed here" when I can't even stitch a small cut.

Sorry if this sounds like rant but quick rich schemes usually mean that the other guy gets rich at your expense and I'd hate to see any of you lose your shirts.

You want to talk about investment properties? Fine, PM me.

“I am quite sure now that often, very often, in matters concerning religion and politics a man’s reasoning powers are not above the monkey’s.”~Mark Twain
“Ocean: A body of water occupying about two-thirds of a world made for man - who has no gills.”~ Ambrose Bierce
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06-09-2014, 08:16 AM
RE: Retirement
I saw Muffsy's post and got all ready to do a line by line breakdown
(e.g. Marriage/Divorce -- Thanks mate, NOW you tell me!
and, Don't buy property in Thatcher's Britain etc.)

... but f stop beat me to it.

Instead, I'll just point out that you don't need to retire from something that you didn't join in the first place.

Sleepy

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06-09-2014, 08:40 AM
RE: Retirement
(06-09-2014 08:05 AM)Full Circle Wrote:  
(06-09-2014 07:43 AM)Colourcraze Wrote:  I think I would love to flip a few houses but I'm afraid of becoming like so many people on HGTV who get way in over their heads! My aunt and uncle have done it a couple of times though, as far as I know they were successful. It seems so intimidating.

If you are going to try your hand at "flipping" you best have a contingency plan such as "I'll move in if I can't sell it" or "I'm ready to take a loss and dump it so as not to ruin my credit".

Things to think about:
-If the house is priced so attractively why didn't the Realtor buy it for themselves?
-How long can I make mortgage payments on the investment property and my own house before I run out of money?
-Do I have any experience in investment properties?
-After I pay the comissions will there be enough profit to justify the risk?
-Will there be any profit? (After commissions, repairs, carrying costs AND selling at or just below market price? (be realistic, we are, after all, skeptics)

I have lots of experience in construction and real estate and as told all my friends and relatives when the market was booming and everyone wanted to flip houses and even the local landscaper had mortgaged their own house and was sitting on five properties he couldn't sell: "What makes you think that without any experience or access to a multiple listing service you can take the biggest monetary gamble of your life and succeed when others who do this for a living aren't always successful? "You don't see me hanging a shingle that says "Brain Surgeries performed here" when I can't even stitch a small cut.

Sorry if this sounds like rant but quick rich schemes usually mean that the other guy gets rich at your expense and I'd hate to see any of you lose your shirts.

You want to talk about investment properties? Fine, PM me.

Yeah. All these things I have considered, hence the intimidation. And also I haven't jumped right in because I know what I don't know!

Also, it's not really that I'd be looking for a get rich quick type of thing (though I'd hope to make a profit, obviously), I really think I'd just enjoy doing renovations. The smaller stuff that I've done has been nice, if challenging at times. Maybe one day I'll find a way to do it.

Atheism is the only way to truly be free from sin.
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06-09-2014, 08:50 AM
RE: Retirement
I always lived where I renovated. Unless you want to become a flipper, which is a very high risk endeavor, you need to count on a combination of improvement and natural appreciation to make you the money in a safe, albeit slower way.

[Image: dobie.png]Science is the process we've designed to be responsible for generating our best guess as to what the fuck is going on. Girly Man
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06-09-2014, 08:55 AM
RE: Retirement
(06-09-2014 04:50 AM)f stop Wrote:  
(04-09-2014 08:46 PM)earmuffs Wrote:  Never buy a home no-money down. Yuck! Rent can be a waste of money I agree, but if you have a high mortgage you are going to be paying a lot in interest which is most certainly wasted money.
Interest is simply rent on money. If you rent money the amount you owe goes down while the value of what you bought goes up, at least that's usually the case with real estate. If you rent real estate it's value goes up. Your landlord profits both by 1)the increased value of his property and 2)the increased amount he can charge you for rent.
(04-09-2014 08:46 PM)earmuffs Wrote:  Plus, rent is cheaper.
That has not been my experience. I admit that the mortgage on my first house was more than we had been paying in rent, but not much. Plus we moved into a much bigger house than the apartment we had been renting, so it was worth it.
(04-09-2014 08:46 PM)earmuffs Wrote:  Even if you have a small deposit the point about buying a cheap home still stands. The point is that you want as low as possible mortgage because the interest is the part that kills you.
Some times it is better to rent and save then buy now and pay lots of interest.
If buying now costs you an extra $10,000 in interest but renting and buying later will cost you only $8,000 in renting then it's better to rent and buy later.
Buying later will not save you money in interest because inflation will drive the price of housing up. The rate at which you save and earn interest on those savings will not keep up with the increasing value of the property you want.

This is what mathematicians call an optimization problem. Do all the math and you will find the person who utilizes a government guaranteed loan program to buy a home with little or no down payment is way ahead of the one who saves for years to make a big down payment.

The big unknown in this type of problem is inflation. How much will the price of the house raise before you have saved the down payment? How much will it be worth when you sell? Can you expect your income to raise at the same rate?

Suppose you want to buy a $100,000 home. To get it for nothing down you have to persuade the seller to pay all closing costs, yours as well as his. To do this he demands (and you agree) on a selling price of $105,000.

Here is the U.S. interest rates on mortgages are under 5%. No telling how long that will last. The monthly payment on a $105,000 loan for 30 years at 5% is $536.82. The bank will demand that you buy hazard insurance. That's $50 per month in my case. Property taxes are $100 per month. That's a total monthly payment of $686.82.

The mortgage payment is forever fixed at $536.82 per month. Taxes and insurance can be expected to raise with inflation. What will be your situation in 30 years?

You will have paid $193,255.20 for the mortgage.
You will have paid $120,000.00 in taxes and insurance.
Total $313,255.20

The house will be worth $432,000. A net profit of $118,775 on zero initial investment.

If your strategy is to save up a 20% down payment (which conventional loan makers demand) how long will that take.

A rule of thumb is that a $100,000 house rents for $1,000 per month. I think it's realistic to get one for $800 per month. Immediately you are paying $113.18 more by renting. But lets assume you can put $1000 per month into housing, $800 for rent and $200 to save.

How long until you have the down payment? Eight years! That's assuming
  • an inflation rate of 5%.
  • your income keeps up with inflation.
  • your investments return 10%
By that time the house you want will cost $140,000 and the down payment will be $28,000 of which $7,000 will go for closing costs. The amount you will have to finance will be $133,000. The mortgage payment will be $751.55, taxes and insurance will be $220 per month, a total of 971.55 (down from the $1100 per month you will be paying in insurance by then).

You will walk away from the closing with a house worth $140,000 and $21,000 in equity. You will have paid $91,000 in rent and $7,000 in taxes on your investments. That's $98,000 to buy $21,000 of net worth.

Where will you be in 30 years?

You will still have 8 years to go on your mortgage. You will still owe $48,000 on the note. It will be worth $432,000 and your equity will be $384,000.

Here rent is cheaper.
The national average for a 3 bedroom home (so family size) is $380 a week.
The average house price is $400,000 and so at the current mortgage rate of 6.5%, the weekly repayments on the mortgage alone would be $581 (with zero deposit on the mortgage). You then have to have home insurance and have to pay rates (sorta like your property taxes I guess. They change depending on your area and fund local shit) ontop of that.

I'll take an example of a young couple because my data is based on 3 bedroom homes. This is also a common occurrence, young couple buying a 3bedroom home so they can start a family.

For a 3 bedroom home, no deposit (which the bank wouldn't do), $400,000. That's a weekly repayment of $581, excluding insurance and rates.
After 30 years they would have paid $910,080 in mortgage repayments (provided the interest is fixed for the life of the loan) and have a house worth $1,728,777 (at an average 5% increase yearly). Giving you a difference of $818,697

The average income for someone in NZ is $844 a week. If in the case of a young couple this will be $1688 a week combined income. A couple saving for a home deposit with a combined income like this could easily save a $50,000 deposit within 2 years. It's only about $250 each a week, which is entirely doable and I know it's doable because I did it when I was pumping gas for minimum wage and my income was less then the national average.

2 years rent is $39,520.

After 2 years the value of the $400,000 home would have rose to $441,000.
With a $50,000 deposit the repayments (over 30 years) would be $568 a week.
After 30 years they would have paid $889,560 in mortgage repayments and have a home valued at $1,905,976 giving a difference of $1,016,416.

So results after 32years:
Case 1:
-$910,080 - mortgage
+$1,905,976 - home value
total: +$995,896

Case 2:
-$889,560 - mortgage
+$1,905,976 - home value
-$39,520 - 2 years wasted rent
total: $976,896


*scratches head* Well that didn't go entirely as I had planned it would...
I swear I'm missing something.. Consider

OH! Light bulb. Got it. You're missing one detail, the whole point in a deposit. To keep repayments small OR keep the length of the loan short, the later being better (financially in the long term which we're talking about.).

New results: 30 years
Case 1:
-$910,080 - Mortgage
+$1,728,777 - Home value
total: +$818,697 (this excludes the extra 2 years worth of home insurance and rates they would have to pay)

Case 2:
-$850,080 - Mortgage. Paying the same amount weekly as case 1, but starting 2 years later (so buying a $441,000 home, where as case1 brought a $400,000 home) and finishing at the same time as case 1 (so over 28 years instead of 30).
+$1,728,777 - Home Value
-$39,520 - Wasted rent for 2 years.
total: $839,177

Ha! It worked. Second time lucky.
That's why it's better to save and have a deposit then have no deposit, because you can pay it off quicker and pay less in interest.
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06-09-2014, 08:54 PM
RE: Retirement
One thing you can do (if you like dogs) is train service dogs. It can be very rewarding both emotionally and financially. This is my dream retirement job.
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08-09-2014, 06:57 AM
RE: Retirement
If you want to retire early do not have kids, seriously. Between school cost, bigger house cost, activity cost, food, cloths, etc. they cost me over half my paycheck
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08-09-2014, 08:42 AM
RE: Retirement
It all depends on where you live I suppose. Because I am in the military and we tend to move every 3 years, AND I am retiring from the military in under two years with the added concern of not knowing where the job market will take the wife and I, for us, renting is MUCH cheaper.

I live in a very nice apartment community on the edge of williambsurg Virginia, it is a 1510 sq foot 4 bedroom, 3 bath, fireplace apartment for $1250 USD a month. My ex lives in a townhouse 2 miles down the road with less sq footage, one less bedroom and bathroom, no fireplace and her mortgage is $1850 a month, plus $250 a month in maintenance fees that include yard maintenance, water and power bill combined are about $500-700 USD a month, plus the expense of garbage pickup. The bonus for me is the military gives me $2100 USD additional pay per month for living expenses, I pocket a nice chunk of that Smile

My water is included for free and my power is never over $130 a month. I win in this scenario. She is trying to sell it, but she has only been in it 4 years and is upside down on the mortgage, now she is trying to sell it for $5,000 less than she owes......

There is no tried and true best scenario, every scenario, region, value statistic is different. Normally though, if you can put down the 20% and plan to stay in that home at least 10 years, you will end up on the positive side of equity.

Just my ramble for the day Drooling

"Belief is so often the death of reason" - Qyburn, Game of Thrones

"The Christian community continues to exist because the conclusions of the critical study of the Bible are largely withheld from them." -Hans Conzelmann (1915-1989)
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