Your average ROI in the last 15 years

[Nords]

Nords, are you sure?  That number looks low.  I don't know how the military work, but in the civilian world, the employer contributes an equal amount to SS on behalf of the employee.

Pretty pathetic, eh? Right off my W-2s, so it doesn't reflect anything kicked in by DoD. My 1977 employer (before I joined the Navy) might have kicked in his extra $92.

Actually the total is a bit low. There's an extra $1200/year "special military service credit" added to the 1978-2001 wage reports sent from DoD over to the SSA. At 6.2% that adds up to an extra $1785.60 above the $45,585, but I didn't have to cough that up and I'm not sure who foots the bill for it (other than the taxpayers).

You could be right, DoD could be kicking in the same amount that I did. However I've never checked into it. Any experts here from DoD on that subject? The Other Michael, what do you know from the SSA side?

Year FICA
1977 $92
1978 $102
1979 $217
1980 $235
1981 $275
1982 $536
1983 $712
1984 $854
1985 $1,154
1986 $1,381
1987 $1,507
1988 $1,680
1989 $1,782
1990 $1,929
1991 $2,037
1992 $2,246
1993 $2,435
1994 $2,572
1995 $2,696
1996 $2,837
1997 $2,974
1998 $3,138
1999 $3,307
2000 $3,531
2001 $3,710
2002 $1,646
2003 $0
2004 $0
2005 $0
2006 $0
2007 $0
2008 $0
2009 $0
2010 $0
2011 $0
2012 $0
2013 $0
2014 $0
2015 $0
2016 $0
2017 $0
2018 $0
2019 $0
2020 $0
2021 $0
2022 $0

 

[Sam]

Pretty pathetic, eh?  Right off my W-2s, so it doesn't reflect anything kicked in by DoD.  My 1977 employer (before I joined the Navy) might have kicked in his extra $92.

Nope, not pathetic at all.  My numbers are pretty much in the same range, except they are twice as large because of the employer's contributions.

Sam

 

[Jane_Doe]

Sam- Thanks for the outburst!  

I think it is hard for Az to see anything as other than "black or white"

Az- I didn't go into details, and I am NOT going to give you figures, BUT

We bought raw property (zoned commercial) somtine around 1989
Husband is builder and WAS paid to build commercial buildings
We have done maintance and paper work, however, we COLLECTED rents as we paid down our mortgage - that is payment (2x) NOT included in return on investment
We have held onto and built equity into this over the past 15 plus years
We live in a area that has really, really jumped up in the past couple of years (after being stagnant more or less for a long time -- it was way overdue)
We will continue to collect income until we sell - (don't NEED to sell, but will sell so that we can take winters in the warmer climes)

Quote:
"Who here invests 100% of their financial net worth exclusively in real estate?   Maybe just a small handfull?"

We have been close to 100% RE most of our married life.  It works for us.  I am not including any other RE we own other than our commercial project in this exercise -  don't worry it wouldn't change the numbers - just didn't feel the need to add those as they add up to less than one fifth of the project.  We are very picky on what we buy and when we sell.  

We have always paid our bills, had good credit and have a local bank which will lend us money if times are bad.

You are in a TOTALLY different world than someone like my DH who is an entreprenuer (NOTE _ I hate this word, it sounds so hoity-toity, but it describes him properly)  

There are others here who have built up businesses, dot coms, RE portfolios that have paid managers, etc.     I REALLY don't think it's just 1 or 2 members.

That's it - I'm not going to go around with you again about this.

Jane


P.S. If it makes you feel any better, we have no pension, no paid health benefits and won't pull much in SS. There is always a downside, too.

 

[scrinch]

I don't know about Azanon's issues, but mine was that those that could gain 16%+ returns were probably either very lucky or significant risk-takers, or possibly miscalculating (for example including returns from their labor in the portfolio ROI). Sounds like you put a lot of leveraged eggs in the real estate basket and let it ride that way for a long time. The degree of leverage decreased with time as the property's value increased and the mortgage decreased, so the risk level wasn't constant through time. You also had the capacity in the family to manage the risk to an extent since the investment was in the area of your DH's expertise. Still, I would characterize the investment as overall fairly risky, a your reward shows it. Congratulations!

 

[elroy]

10.3%. With some luck? BTW - Not proud of this admission. Took a 50K loan on my mostly equity 401K in January 2000 When my balance was only 128K. Paid back over the next 5 years at much lower prices. Never went back and figured it exactly but probably accounts for ~1% over the 15 year period. Get this, interest on the loan was 10.5% paid back to myself!

 

[bpp]

Excel sez: IRR = 12.6% from late 2000 to end of 2005. (Didn't start investing until 2000.) Up until 3 years ago, it was usually negative. Passive asset allocation.

Bpp

 

[gtmeouttahere]

Quote:
"Who here invests 100% of their financial net worth exclusively in real estate?   Maybe just a small handfull?"

We have been close to 100% RE most of our married life.  It works for us.  I am not including any other RE we own other than our commercial project in this exercise -  don't worry it wouldn't change the numbers - just didn't feel the need to add those as they add up to less than one fifth of the project.  We are very picky on what we buy and when we sell.  

We have always paid our bills, had good credit and have a local bank which will lend us money if times are bad.

You are in a TOTALLY different world than someone like my DH who is an entreprenuer (NOTE _ I hate this word, it sounds so hoity-toity, but it describes him properly)  

There are others here who have built up businesses, dot coms, RE portfolios that have paid managers, etc.     I REALLY don't think it's just 1 or 2 members.

That's it - I'm not going to go around with you again about this.

Jane


P.S. If it makes you feel any better, we have no pension, no paid health benefits and won't pull much in SS.  There is always a downside, too.   

My wife and I are in the same boat as Jane.  We had most of our eggs in the real estate basket and it worked out well for us.  I also invest in property and build homes as Janes husband does.  It has worked out WAAAY better than our stocks given the same time period. 

It has a lot to do with timing.  Real estate does not fluctuate as fast as other investments so it is far easier to "time".  That does not mean however that I won't be buying and holding other investments real hard in the future.  I just know I've lost my A** in recent years in the market and wished like hell I would have bought more real estate.  Hindsight......

I think what Jane and at least I'm trying to say is...if you have a talent in something like real estate or whatever, you are more comfortable with it and can probably do better in the long run.  Real estate fluctuates but, there is always different angles for different market conditions and if you know what the angles are, and when to attack, you have greater earning potential.

"Entreprenuer" I hate that label too.  I prefer capitalist. I take advantage of what the market is giving me.  Right now it has been real estate for me, in the future it could be something else.  The trick is to not be so closed minded to not see the gift horse looking at you in the face.  I hope I never have too much tunnel vision to not take advantage of what the surrounding market conditions are giving me. 

ps...

(don't NEED to sell, but will sell so that we can take winters in the warmer climates)

Agreed. 8) Panama here I come!!! 8)

 

[wabmester]

Maybe we should distinguish between ROI on passive investments vs active investments.

I decided in my 20's that the only way I could control my ROI was by investing in myself and taking active control over the outcome. 20% annualized returns for passive investments is pretty rare, but maybe it's not so rare for those with active participation in their investments.

 

[ladelfina]

I see a lot of people talking at cross-purposes here. In another thread I had run numbers for ROI and IRR; they can be significantly different. As Nords & others pointed out, ROI is most appropriate for a single investment at a particular point in time, whereas IRR gives a more accurate picture when you are moving $ in and out, and when you have dividends and multiple buys through reinvestment.

wab, it depends on how you would define "active" vs. "passive". Would you treat an actively-managed fund different from an index fund? If you are talking RE, someone buying/selling/building/renovating/managing properties that are not a primary residence should factor his/her labor costs in doing so, to arrive at an 'investment' profit figure one could compare more easily to results obtained from just a few hours a year of research, record-keeping, and rebalancing. In that case, though, RE sounds more like a business (j*b) than a pure capital investment... Maybe that's what you mean? Not sure how Jane would see it, but I agree that "building up a business" is kind of OT here; people are interested in how their savings can grow to support them in retirement, though they may "earn" their nest egg and reach FI in myriad ways.

Of course azanon's dad wouldn't have bothered to figure his IRR.. Now we have Quicken to do it for us!

azanon, I think you had better tone it down. I assume people here are giving it their best shot and don't impugn either their numbers or their motives. If you don't like the numbers they are "spouting", do you think that by bullying them, the numbers will change? This forum is all about learning how to reach financial goals, in particular, FIRE; there'll be tortoises and hares, and people will make mistakes (but will hopefully learn from them, and from the successes of others..). It's not helpful to imply something cannot be done, when people are telling you otherwise.

It's true the poll won't reflect the "average" investor. A.) The average investor doesn't have their antennae tuned to FIRE and the development of better investing strategies like indexing, asset allocation, dumping their advisors and high-cost funds, etc., to lower their investment expenses and increase returns (as so well investigated on this forum). B.) Of this first self-selected group, the average forum member may not have been tracking their progress as closely as would be required to supply a number; the second self-selected group of "trackers" may be more successful than "average" due to their heightened awareness.

I was surprised to see my IRR number. Then I read something recently in the Economist:

...women consistently earn higher returns than men... Women were less likely to "churn" their investments; and men tended to commit too much money to single, risky ideas. Overconfidence and overtrading are a recipe for poor investment returns.

How did I 'survive' 2000-2002? In hindsight, because I was too busy doing other things to bother getting on the tech bandwagon, and I had a healthy dose of international stocks. And I never sold. 17% IRR YTD 4/28/91-4/28/06. Does not include any RE, just brokerage accounts (and no REITs, either).

My ass someone made 16% in a portfolio over 15+ years, including 2000-2002.  I have some snake oil for sale too.

See, that's your overconfidence talking.   

 

[kramer]

Well, I voted that "I have no idea".

I only wrote down my net worth for the first time, on Jan 1., 2000. And have been doing it yearly since then.

In Jan. 2000, my net worth was well into 6 figures, so I wasn't starting from a small amount that would skew the figures [it was over 1.5 times my annual gross salary at the time].

The net worth has grown almost exactly 33% per year since then, including savings, up to the present month. And a graph of the yearly numbers actually tracks pretty well with that straight line curve. During the lower return years, my savings mattered more because the net worth was smaller. From 2003 on, I have gotten huge investment returns.

In terms of just raw numbers, I think my biggest wins were in my heavy commitments to small value and emerging markets, which each make up about 1/6 of my entire portfolio. These have 3 year trailing returns of 31% and 45% (per year), respectively.

When I look back, I still can't believe how well the investments have done. I really never could have predicted it. If I had to guess, and this is an educated guess, I would guess about 16% annual return during the entire time period (this is plugging in my approximate savings along the way, etc.). Also, I have paid only a small amount of net taxes, including dividends, during this time because everything is in passive index funds and I did some strategic tax loss selling and I am still deducting $3000 from ordinary income per year for those carry-forward losses.

I think the total net worth is about 1.1 times lifetime after-tax earnings, and I have been working at a regular job for just under 11 years. I am very happy with this outcome. 8) and realize that the luck of good returns had much to do with it. I have worked the entire time for a company whose stock is now down 95% or so from its high. Many of my co-workers went from being rich to middle class pretty quickly.

Kramer

 

[gtmeouttahere]

In that case, though, RE sounds more like a business (j*b) than a pure capital investment... Maybe that's what you mean? Not sure how Jane would see it, but I agree that "building up a business" is kind of OT here; people are interested in how their savings can grow to support them in retirement, though they may "earn" their nest egg and reach FI in myriad ways.

If you would call 8 hours a week(at the most) a J.O.B (and I'm building more than one home), I guess you would be right but...I buy the vacant land w/help from my realtor who knows my profit margin, provide the funding for building, hire a project manager, and sign the closing documents at the front and the back end of the deal.  

It takes minimal supervision as I use the same people over and over again and I feel like it is a "pure capital" investment.  It may take a few phone calls in the beginning a few site visits followed by a phone call when each phase of construction is complete from my manager.  Then I call my agent to list the property when complete.  I never pound a nail,  just provide the funding and some guidance on what I want done.  

I know people who spend a hell of a lot more time on their portfolios than I do at my real estate ventures.

I doesn't feel like work to me.  But the profits are sure nice right now.

 

[ladelfina]

I know people who spend a hell of a lot more time on their portfolios than I do at my real estate ventures.

You're right! Sounds like you know what you are doing and have a good system set up with reliable agents and contractors. Not sure if personally I would want to spend even 8 hours a week, but I assume your profits make it well worthwhile..Also, it would take me a lot more time than that to get up to speed with figuring out locations, valuations, who to trust, etc... But I do wish you all the best in your RE investments!

 

[justin]

But 8 hours a week at, say, $25 an hour is $10,000 per year. Based on this assumption, you would have to discount your profits by $10,000 per year to account for your labor input into your "investment".

Then there is the issue of leverage. If you make $50,000 profit on a house and you only put $50k into the "deal", you have a profit of 100%, right? But you also borrowed $450k to get the deal done. Maybe your profit is only 10% ($50,000 divided by $500,000). The rate of return really depends on what you are measuring.

Based on how some of the "returns" are calculated here, I'd say I probably have an ROI of at least 20-25% from 1998 to today when I include businesses I've started, real estate "investments" and stock market investments. This, of course, includes triple digit returns from the market each of the last few years, due to leverage. It also ignores my labor inputs.

Ignoring leverage and considering labor inputs, I probably have a much more typical 10-12% ROI. But I voted "I have no idea" because I haven't kept the extremely detailed and accurate records to calculate the number.

 

[scrinch]

Then there is the issue of leverage. If you make $50,000 profit on a house and you only put $50k into the "deal", you have a profit of 100%, right? But you also borrowed $450k to get the deal done. Maybe your profit is only 10% ($50,000 divided by $500,000). The rate of return really depends on what you are measuring.

ROI refers to the return on YOUR investment...the capital you invest, not on the total capital invested. If you leverage your investment by using borrowed capital, you are hugely magnifying the potential for % gain or loss on your investment. In this case, with no leverage, if the property value goes up or down 10% in a year, that is your ROI. In the case of a 90% leveraged investment, if the value goes up or down 10%, then your ROI is + or - 100%. I suppose it may just be a semantic issue here, because we here all understand how leverage works, but I doubt the average homeowner who leverages his home "investment" 90-95% realizes how his mortgage affects the risk of his investment.

 

[Jane_Doe]

I agree it is tricky to figure out ROI for a RE investment that is actually being managed, maintained, etc. I am too lazy right now to put too much thought in it (My mind is on my DD's Prom tonight - 1st of 2 - his and hers! :)

Anyway, I figure that the amount I earn/earned in rental income - some went into our pockets, some to improvements (figure that as added into initial investment figures- as part of the total investment) some to mortgage interest and some to principal (technically iour pockets, again) PLUS we have had tax write-offs - BONUS! I don't figure in any of that in my ROI - that seemed more than fair. So, yearly income plus ROI. Again, your milage may/will vary. Did I say how wonderful my DH is??!!

Jane

 

[Sam]

You could be right, DoD could be kicking in the same amount that I did.  However I've never checked into it.  Any experts here from DoD on that subject?

Nords,

At the bottom of page 3 of the annual "Your Social Security Statement", there is report on the amount of taxes paid for Social Security.  On mine, it says:

You paid:  $70,512
Your employers paid:  $70,793

Don't ask, I have no idea why there's a $281 discrepancy.  But since the extra was not paid by myself, I won't complain 

Sam

 

[Nords]

At the bottom of page 3 of the annual "Your Social Security Statement", there is report on the amount of taxes paid for Social Security.

You're absolutely right, I stand corrected, I never noticed that before...

Mine has the same numbers for both me and my employer.

 

[sailor]

You paid: $70,512
Your employers paid: $70,793

Don't ask, I have no idea why there's a $281 discrepancy. But since the extra was not paid by myself, I won't complain

Sam, this can happen (as happened to me) when you are employed in two places and both companies withold SS taxes and you exceed the taxable income limit for SS.
You will get your overpaid part of SS taxes returned, but your employers would not.

sailor

 

[Sam]

Sam, this can happen (as happened to me) when you are employed in two places and both companies withold SS taxes and you exceed the taxable income limit for SS.
You will get your overpaid part of SS taxes returned, but your employers would not.

sailor,

I think you're right about having more than 1 employer in one year.  It happened to me a few times in the past.

Question:  Did you specifically request the refund from SS?  I don't recall ever receiving a refund check from SS.

Sam

 

[Papi]

Question:  Did you specifically request the refund from SS?  I don't recall ever receiving a refund check from SS.

Sam

Hi Sam,

THis happened to me a few years ago, but it was an internal accounting error due to the company changing names.  TurboTax caught it for me -- this one catch paid for about 7 years worth of TurboTax!!.  I ended up getting the overpayment returned to me by the goverment.   The finance dept. thought it would be easier for me to get the refund than have the company fix the mistake (read: too lazy to fix their own problem ).

If it was a few years back you probably should contact the SS about it.

 

[Martha]

Yes, when you file your taxes you claim the refund.

http://tinyurl.com/kvqef

 

[Sam]

Yes, when you file your taxes you claim the refund.

http://tinyurl.com/kvqef

Thank you, Martha.  Looking back, I think I did pay more  than required.  I am sure I never did ask for any refund.  Live and learn 

Sam

 

[youbet]

Looking back, I think I did pay more  than required.  I am sure I never did ask for any refund.  Live and learn 

If you overpay SS by having multiple employers and earning, in aggregate, more than the SS max, you receive the overpayment as a credit when doing your fed income taxes.  You don't contact the SS folks to get it.  It would be pretty hard to miss when doing your taxes.

 

[Sam]

If you overpay SS by having multiple employers, you receive the overpayment as a credit when doing your fed income taxes.  You don't contact the SS folks to get it.  It would be pretty hard to miss when doing your taxes.

youbet,

Not sure I understand.  Are you saying that the IRS will figure out the overpaid amount and send me a credit WITHOUT my asking?

Sam

 

[youbet]

Sam:

If you use a program such as TurboTax, the amount of SS overpayment will be automatically calculated from data you enter from your W2 forms.  If you use a professional tax preparer, they will always check for SS overpayment if you had more than one employer.  If you are doing your taxes yourself manually, you would have seen to check for the SS overpayment in the instructions for form 1040 and you would have entered the amount on line 67 of form 1040.  It's pretty hard to miss.

The amount you enter on line 67 will increase your fed tax refund or reduce the amount of fed tax you owe but will not result in a separate refund check from SS.

In the year you think you might have payed excess SS tax, did you have more than one employer and, in aggregate, did you earn more than the SS max for that year?  If so, go back and check form 1040 for that year and see if you took the credit.

BTW, I'm not an accountant or CPA, just a guy who does his own taxes.  So, do your own diligence following up on my suggestion!  But, that's how I think it works.