I’m 32yo, net worth 1.5M, all invested in Vanguard index funds (mostly VTI, VXUS and a little bit of muni bonds). I keep dumping what’s left of my paycheck in my Vanguard account, roughly 15k a month. I live in the Bay Area and I’m a happy renter with a girlfriend and no kids (won’t have kids ever), I am minimalistic and I don’t like to have stuff to take care of. For this reason, the only investment I could stomach is probably a small condo where I live in, just as an hedge against rising rents. A house would be too much work for me, and space. I also don’t want to buy any rental out of state, that’s not for me. But basically I’d like to get a foot into some sort of real estate investment, to make sure I get the benefit of the government subsidized low rates, tax benefits and leverage. What would you do?
To all the people who voted to buy a condo: how do you deal with changing job and having to commute to, say, MTV rather than SF as part of a new opportunity? I’ve been in the bay for a decade and literally moved 5 times to be very close to the new office every time. Major quality of life boost.
Rent it If it’s in prime area like MV or Sunnyvale. Or sell it u will get ur investment back - unless u time it pretty badly
Given this additional datapoint I would probably just keep renting. Until/Unless you land a role that you think is potentially long term. Otherwise the hassles of buying/selling/renting out the condo diminish the value of the purchase. You move once, and dont sell, instant landlord. From your OP, that is not something you want to do, and for good reason, it's a pain in the ass. Many lose money on those transactions. It's ok to be a renter until the time is really right. you're saving gobs of money and crushing it at 32. Just invest and wait. Presumably your income is rising faster than rents anyway so you're fine. Read vanguard fund super fan JL Collins book Simple path to wealth.
yu need to up your game..1.5 million is too less for bay area..
Well I’m not done yet! I have a lot of unvested equity and hopefully time on my side, I don’t think it’s necessarily a low amount of money for 32! What would you suggest? How much should one have saved at 32? I had a late start because I was in a lowballing H1B company for a few years and wanted to stay put until green card. I was just able to take more risks over the past 5 years or so. But I learned to live frugally and that helped accumulating.
I moved to the Bay from another city couple of years ago where I bought a condo. I rented it out when I moved and the it covers everything mortgage, HOA, property tax and occasional repairs, it pays for itself. If I had 10-15k of Savings every month, I’d buy a house as a long term investment and to diversify. Land appreciates better over time (10+ years) than a condo. Plus you don’t have to deal with HOA, and it’s not tax deductible. House is a larger upfront cost initially but over time it’s a solid investment.
You could retire on 1.5, at 4% withdrawal you could get $60k per year for expenses. If you tie it up in a house then you can't use the money. If you want to work a few more years, 2 mil would get $80k (my goal).
What the f dude, $10-$15k a month in savings??! What the hell do you do??
No mortgage, no kids, 3k total expenses a month (share rent cost with my gf for 1.5k and have 1.5k of discretionary expenses myself), 350k TC == 15k after tax savings a month.
350k TC not including stock?
Tax benefits from owning are almost zero now (effectively no property tax deduction). The only thing you get is a tax rebate on interest, your effective interest rate = (actual interest rate)*(1 - your-marginal-income-tax-rate). NASDAQ is a good hedge against home prices in the Bay Area. I like your thinking about the convenience cost of buying a home - if work changes, you get a long commute. Or you don't change jobs at all.
Housing is terrible investment nowadays stay in stocks
OP: super impressive! Couple of questions: Are the dividends paid by VTI/VSUX taxed as ordinary income as opposed to capital gains? If so with your high income bracket wouldn’t most of that dividend go away in taxes? Also, which broker do you use to buy those ETFs? Vanguard?
No way! The vast majority of dividends are taxed as qualified dividends, so the tax rate is basically long term capital gains. That’s the beauty of efficient index funds. And muni bonds are entirely tax free (of course their rate is lower, so they’re priced to make you come ahead if your marginal tax rate is 28%+). I just use a single Vanguard account.
Thanks for info!
Congrats on making good money. Now the next step is keeping it Read this article which talks about how Ray Dalio recommends investing. He is the founder of the richest hedge fund in America https://finance.yahoo.com/news/tony-robbins--ray-dalio-s--all-weather--portfolio-161619133.html To create a balanced portfolio that works in all 4 periods he recommends the following portfolio allocation. I have provided sample ETFs that map to these allocations 30% Stocks (S&P 500) - Example ETF VOO 15% 7-10 year treasuries - Example ETF BIV 40% 20-25 year treasuries - Example ETF BLV 7.5% in Gold- Example ETF IAU 7.5% in commodities- Example ETF DBC
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