FYI: 6% till 9/28

[d]

as noted at bankdeals http://bankdeals.blogspot.com/, FNBO Direct is offering an e-savings account with 6% APY. https://www.fnbodirect.com/01d/html/en/

 

[calmloki]

as noted at bankdeals http://bankdeals.blogspot.com/, FNBO Direct is offering an e-savings account with 6% APY. https://www.fnbodirect.com/01d/html/en/

Perfect timing! The sale of 2 of our little rental houses funds tomorrow and this looks like a perfect short term place to park some $$ - nice and mobile too. The 6% interest will actually bring in $25 more/month than we were charging for rent. And no insurance, no property taxes, no maintenance, no phone calls.... no appreciation either, but we'll manage..
Tanks!

 

[Sam]

Anyone here has a saving account with fnbo? This rate is really good, and they allow 3 links. Much better than ELoan.

Is there any gotcha, fineprint that I need to be aware of? I looked but did not see anything negative.

 

[pfpelican]

There is no indication that I can see of duration. Am I missing it, or could they change it to 4% tomorrow?

 

[pfpelican]

ok...I see it's good till 9/26

 

[modhatter]

I just called them. The rate is only good until Sept. 28th, then it will be adjusted to a "competative rate."

 

[tryan]

The 6% interest will actually bring in $25 more/month than we were charging for rent. And no insurance, no property taxes, no maintenance, no phone calls....

I hear this ..... can only seem to pull 4-5% from my units; 6% sounds like a bargin (except Uncle and state taxes will take a bunch). Now if I could just get a vacancy.

 

[ESRBob]

Funny, we just sold a condo rental, too, and I got the cash today. I'll come out way ahead putting the money in the Vanguard's Prime MM or a CD compared to the amount I cleared in rent after taking out taxes, fees etc we got as a landlord. (It was actually Canadian, so fortunately we made out well as the $C appreciated against the $US, but everything else was a wash.)

 

[modhatter]

You usually always get more "hassle free" monthly income by selling and putting money in CD or other money generating vehicle. What you give up with the "hassle" is capitol appreciation. However, that is not even a word used at the momment in many parts of the country as far as real estate is concerned.

Real estate is really not that different from the stock market. You have wild run ups about every 25 years or so, periods of decline, and flat periods. If you buy in at the wrong time during the top which is usually always followed by either flat or decling periods and have to sell before the next run up, you could lose your shirt.

I have always liked real estate, and have always felt it was a safe investment vehicle (which I still do) as long as your not on a tight time frame and you have enough cash to carry you during vacancies or non payment of rents. Also, if you are not a do it yourselfer, repairs and constant re-models can really eat away your profits big time.

Overall, I have heard, but not 100% convinced, that the stock market generally over the long haul surpases real estate as an investment. This is probably true in most areas of the country, but may not be so in areas like New York City or certain areas of California.

The BIG advantage with real estate is leverage, and if you are lucky enouth to time it right before the next run up, taking $200,000 and using $25,000 down to buy eight rental properties to hold for an upward ride of 15% to 20% a year, you could do very nicely on your $200,000 investment.

Even without a run up, (but much harder to do today with high costs of real estate) is the plan to buy eight units as stated above with a $200,000 investment and provided you can get at least enough rent to cover your mortgage and taxes etc. and keep properties till your tenants have paid your mortgage off after 30 years or less. This however is a tough way to go and sometimes a full time job in itself, but if your young enough and have a decent backup $ cushion, it is a guaranteed winner in the end.

 

[calmloki]

Delicious - got word back from our tax lady - looks like Oregon state and federal tax will eat 23.5% of the sale price on our two little long-held rental houses. AMT will be about 12.5% of the federal tax burden. Selling a 7-unit in Salem this year will incur about the same tax cost as the two rental houses, even though there will be some more AMT to deal with. Gotta decide whether the hassle of self management is outweighed by the irritation of giving Uncle Sam a 1/4 of the proceeds. Hiring management is a losing proposition on the quirky creaky 7-unit - ya gotta know just where to hit that pipe to get the flow started again.....
This is barely relevent to to this thread in that 6% of the sale price is better than the gross rental income, but 6% of 75% of the sale price gets closer to the profit. Kinda like trading loss of appreciation for loss of rental headaches.

 

[brewer12345]

calmloki, never let the tax tail wag the investment dog. If the after tax amount and the other particulars have the deal making sense, do it.

 

[ESRBob]

Yeah, good point re: that the CD has no appreciation potential. Leverage is interesting, and presumably mortgages are available at better rates than a
margin account? Otherwise, those would be equivalent (since at least for straight purchases of taxable securities, margin interest is deductible up to the limit of investment income, making the tax treatment similar to a mortgage, so the only difference would arise from the interest rate paid). My sense is that people are generally more comfortable holding a mortgage than a margin loan, but if the interest rates were similar, in my view those are pretty equivalent trades. (Though forced sale foreclosures are probably less of a hassle than margin calls)

I'm never sure whether it is wise to invest in real estate with the idea that your upside will come from capital appreciation. Sometimes (like the last 15 years), then yes - of course. But the long run series I've seen on same-house-sales (Office of Federal Housing Enterprise Oversight) suggest that long term average appreciation is not that great -- a few percent ahead of inflation. Some areas are better, though -- coasts have been good. But that may be a bit like saying growth stocks have been good or value stocks have been good -- is that an "always-true" or "been true for awhile' kind of situation?

 

[calmloki]

calmloki, never let the tax tail wag the investment dog. If the after tax amount and the other particulars have the deal making sense, do it.

Absolutely agree - Tryan had me all freaked out a couple months ago talking AMT -I had no idea how we would be affected by it, so after April 15 I asked our tax lady to plug in the 2007 sale of the two houses to see how we would be affected using the 2006 numbers - figured they would be pretty close to 2007 income #s. Then had her add the prospective sale of the 7 unit. If her numbers are correct we will be hit about the same tax percentage on the additional sale as on the sale of the two houses. Tax isn't wagging the dog, but I needed to have some idea of how big the hit would be. Now, if I knew whether prices were going up, down, or sideways and exactly when they were doing it over the next 5 years I'd be set.
We took advantage of a sunny day to go take some pictures of the place this afternoon and had a neighbor come up and introduce himself and ask to be informed if we were selling. I took that as a positive sign....

 

[Martin0128]

"...We took advantage of a sunny day to go take some pictures of the place this afternoon and had a neighbor come up and introduce himself and ask to be informed if we were selling. I took that as a positive sign...."

Now what you may want to do is, instead of outright selling and collecting your equity and therefore paying Uncle Sam all those capital gains and AMT taxes, consider selling that rental property and carrying back the loan for the buyer. Collect interest/principal payments and spread your capital gains tax over years instead of all up front

 

[Delawaredave5]

Overall, I have heard, but not 100% convinced, that the stock market generally over the long haul surpases real estate as an investment. This is probably true in most areas of the country, but may not be so in areas like New York City or certain areas of California.

I wish I had the numbers but Bernstein in Four Pillars has a table of historical returns and standard deviation for various asset classes.

Real Estate was inbetween Bonds and Stocks - RE had 2% lower average returns (something like 8 or 9 to 11%) but also lower standard deviation of returns.

Anybody have that data/chart handy ? I don't have the book (library guy) and could not find it on web.

 

[tryan]

Tryan had me all freaked out a couple months ago talking AMT

Sorry for that.

P.S. I still think alt min is something to get freaked out about ... they need to fix it.

 

[calmloki]

Sorry for that.

P.S. I still think alt min is something to get freaked out about ... they need to fix it.

No doubt about it. And I really hope our tax lady got the numbers right - on our places held for 20+ years it looks like a bit under 25% tax on our sale price. The gal is 16.3% fed and 7.5% state inclusive of AMT. IF our tax lady's projections are correct. Gee, i really hope they are - only paying out 1/4 of our profit to the tax man is pretty sweet - I thought keeping the terrorists from our shores was much more expensive!

 

[tryan]

only paying out 1/4 of our profit to the tax man is pretty sweet

A bargin indeed .... last one I sold I lost over 1/3 to uncle and TWO states. Was working at mega corp so I hit AMT real quick (26% federal) THEN MA took 5% AND NH took 5% (because it was sold from an S corp and NH taxes dividends).

Quickly learned to deed the property back to myself THEN sell (to avoid the dividends tax.)

Having left mega corp, I'll bet I can get my next sale down near 25%.