Wow - this topic became really long.

Thanks for the advice / reading material during lunch.

Bottom line - in one year i need to make more money :-)

Don wrote:
- quote -

John A. Weeks III wrote:
- quote -

Ok. Family of four (4) is about 33% above average, which looks like
three (3), by BLS quintile numbers. For the 4th quintile it's actually
given as 2.9. I looked over OP's posts and I saw that he is two years
out of college (I didn't see two kids).

So if you reduce the (family -of-four) 77k to (average-family-of-3)
48k, I fail to see what's negative about his situation.

In addition to the above, most families fall into income brackets below
50k. Over 60% make less; the representative age for all is above 40
years old. For the OP, an Excel Programmer, he's making above average
in his job grouping, if you assume it is "computer prorammers".
Finally, the top three quintiles spend less than they make. $41,614 -
$36,980 describes the middle quintile. And if he invested the savings
he'd have enough in 20 years to fund two kids through college.

dapperdobbs wrote:
- quote -

I need to quit before digger a deeper hole. The PDF, on page 6 (the
thirteenth page acording to Adobe) shows table 1.
All Households - 46,326
Family Households - 57,278
Married-Couple - 66,067

77,402 was my mistake, i was reading wrong column. sorry about that.
JOE

In article <1157419075.866865.239930[at]p79g2000cwp.googlegroups.com> ,
"dapperdobbs" <GeorgeCFL[at]hotmail.com> wrote:

- quote -

I simply typed "median family income" into Google, and looked at
the first hit, http://www.census.gov/hhes/income/4person.html.

- quote -

No. You can have a stay at home mom, or one spouse that does
not work, or only works part time.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

John A. Weeks III wrote:
- quote -

Mind if I ask where you get your data from? I've looked over the BLS
tables and the Census tables and I don't see anything about 50k being
"well below the median family income". (Maybe I can't read?)

- quote -

Well, if it's family income, then presumably both spouses are working.
No?

Joe:

The census table you referred to is data for 2005, and on page 31 shows
data allowing the simple calculation that 40.8% of households have
income greater than $50,000. Just add the number of households in the
upper three brackets and divide by the total number of households.

That would seem to coincide fairly closely to the BLS table showing the
upper two quintiles (40% of the population) with a lower limit of
$51,774.

What page of the census report do you get the $77,402 number? The table
on page 31 shows 28.3m households out of a total 114.4m (or 24.7%) have
income greater than $75,000. The 25% is pretty far from either median
or average.

joetaxpayer wrote:
- quote -

Have no idea where this data is coming from, since the BLS page

http://www.bls.gov/cex/csxann04.pdf

shows the 4th quintile income before taxes per consumer unit (defined
as household, with an average of 2.9 person) for 2004 is stated as
$65,100 dollars, and the lower limit for that quintile is stated as
$51,774. The 4th quintile begins with the highest 40% of income (the
lower limit of which is $51,774).

You're telling me the 3rd quintile (which would straddle the average)
jumped from $41,614 in 2004 to $77,402 in 2006? Hm.

joetaxpayer wrote:

- quote -

I withdraw my remark above. From the same site,
http://www.census.gov/prod/2006pubs/p60-231.pdf
shows that income for 'family households' (eliminating the single
household data) jumps to $77,402. Seems to me, the press release I first
quoted is somewhat misleading, or at best, easily misinterpreted.
JOE

John A. Weeks III wrote:
- quote -

Median family income for 2005 was $46,326.
See
http://www.census.gov/Press-Release/...th/007419.html
for the source of my data. "Average" income was far higher, of course,
but this is the median figure, straight from the horse's mouth.
JOE

In article <1157380824.359934.196710[at]b28g2000cwb.googlegroups.com> ,
darkness39[at]yahoo.com wrote:

- quote -

That might be OK for one person, but this person has a family
and two kids as I recall. What matters is median family income.
$50K is well below the median family income, with only West
Virginia, Mississippi, and New Mexico being under $50K a year
per family. It simply costs more than $50K a year for most
families to live these days, which is why so many have both
spouses working.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

John A. Weeks III wrote:
- quote -

John

50k 2 years out of college is well above the median US income for *all*
working people of any age.

I don't know the future income profile of the OP, but 50k is not bad
money (at the same point in my career, inflation adjusted, I was making
less than 35k).

I don't disagree that adding to human capital is good: be it JD, MBA,
CPA or other professional qualifications (Microsoft certificationi
etc.).

I agree also with you that it is an inopportune time for most people to
be investing in real estate: better to concentrate on building some
401k savings, and also a down payment for a personal residence (OP has
that money through parents, but a savings goal like that is always
useful).

It's quite likely there will be better bargains in real estate, in most
of the US, in 2 years time.

Thanks for sharing your experience on this, Will.

"Will Trice" <wwtrice[at]paragondynamics.com> wrote
- quote -

Elle wrote:

- quote -

Our rental property was a townhouse owned by my wife prior to our
marriage. She was reluctant to part with it after moving into my house
and wanted to give landlording a try. I ran the numbers and it seemed
that with reasonable rent, vacancy rates, maintenance, appreciation, and
a refi, we could expect to make 7% annualized after tax on our money
over the long haul. That's pretty comparable to what I'm guessing I can
make in the stock market after tax over the long haul, so it seemed like
it might be a good idea. Enter higher than expected vacancy, lower than
expected rent, higher than expected maintenance, and lower than expected
appreciation, and whammo. Near-term picture got ugly fast. OK, so
everybody has to ride out a bear market, right? But adjusting my
what-I-thought-were-already-conservative numbers for our rental, my
expected long term return dropped to about 5% after tax - and I would
have to wait a long time to get to that. That kind of return I can get
elsewhere with what I perceive as less risk.

Now, I wasn't diversified. I could have rolled the proceeds from our
sale into another, more profitable rental property. And I could have
bought more properties to get diversified. But I don't have the
willingness to research real estate. Not my gig. And being a landlord
was not fun. Still not my gig. And funds for diversification are an
issue at my net worth level, unless I increase risk with loans. No thanks.

All this being said, I mentioned here before that I have friends who say
that they are successful at landlording (I have no way to verify). Most
of these have several properties. I think that it can be a profitable
business. I just don't think I want to be in that business.

- quote -

Ah yes, the proceeds are going straight to my brokerage account... Thanks!

-Will

On Tue, 29 Aug 2006 08:42:56 -0500, Douglas Johnson
<johnson[at]classtech.NOTPARTOFADDRESS.com> wrote:

- quote -

Two more points should be considered when looking at all the cash
needed for upkeep. The rents should gradually increase over a period
of many years, especially if inflation is an issue, and eventually the
temporary short fall should disappear. Also, the mortgage balance
should gradually decline as payments continue over the years, leading
to a period when there is no mortgage at all and cash flow suddenly
increases in one big jump. If I had it to do over again I would opt
for a 15 year fixed mortgage instead of a 30 year fixed. Never mind
the reduced cash flow in the early years; in the long run the savings
would be large.

Don <dwzimm[at]telus.net> wrote:


- quote -

I'd sure like to see the IRR on a property that requires all that continuing
cash. What kind of price appreciation is necessary to get a return as high as,
say, a money market fund?

-- Doug

"Sgt.Sausage" <nobody[at]nowhere.com> wrote:

- quote -

what other businesses you had?

rentals it?

"Douglas Johnson" <johnson[at]classtech.NOTPARTOFADDRESS.com> wrote in message
news:7a64f2t1kr3sgqdg4p8e84aveg178ob9fg[at]4ax.com...
- quote -

Since it's me y'all are talking about, let me chime in here.

I, personally, think it's both an investment *and* a business. Not
"instead of".

In fact, I'd say that the best investment one can make -- it's not some
stock out on some exchange somewhere, or any "traditional" investment
vehicle. The best investment one can make is in a business that you,
personally, control and run. Paybacks make traditional investments
look like peanuts. You do, however, have to go in *knowing* it's
a job, and not a passive investment -- and it's certainly not without
risk -- but I've made far more money with businesses I've owned
(or owned part of) and actually run myself than some J. Random
stock where I own, like ... (what ?) one billionth of the company.

- quote -

I'm well diversified, thank you very much (real estate holdings are
currently
at a bit over 25% of combined (Wife and I) net worth have recently
fluctuated
as high as about 33%, depending on what the wife's holding in the rehab
pipeline -- but that doesn't lessen the importance of your statement.

Eggs. One basket. Y'all know the story.
Listen to his words, and listen well -- one basket
full of eggs is (highly):

- quote -

On Mon, 28 Aug 2006 12:29:17 -0500, BreadWithSpam[at]fractious.net wrote:

- quote -

Yes, real estate is very risky if you buy with the intention of
selling after a short time, maybe something like two years to five
years in the future, or if you have to sell because of an emergency.
That would be the same as buying a mutual fund and knowing that you
will have to sell it next year or a few years from now because of an
urgent need for cash. It is a gamble in both cases. But I cannot see
that cash flow as such is all that important. Cash flow is important
in real estate because you have to make monthly mortgage payments and
other expenses, especially if you do not have enough money set aside
to ride out the temporary shortages. But it seems to me what really
matters is the value of the property after 20 or 30 years.

On Mon, 28 Aug 2006 12:14:12 -0500, Douglas Johnson
<johnson[at]classtech.NOTPARTOFADDRESS.com> wrote:

- quote -

I agree with everything you are saying about the special and unusual
expenses in real estate as opposed to stocks. But to me this amounts
to saying that real estate investment requires a larger initial
capital outlay than stocks and mutual funds. You need to have a enough
money set aside in the first place, not only to buy the property, but
also to keep up with the taxes, temporary vacancies, and so on. And
even adding to the expenses by having a property manager to deal with
day to day problems is a good idea. But given those things, I believe
that in the long run investment in rental property can be an excellent
estimate for people who have a lot of patience and do not have to
worry about when the next rent checks from the tenants will come and
when the roof has to be fixed. I certainly would not recommend it for
someone who needs the cash flow from the property to cover mortgage
payments and expenses.

Don <dwzimm[at]telus.net> writes:

- quote -

With a highly leveraged investment, cashflow and being able
to be current is essential.

If the short-term cashflow isn't enough, one's finances get
strained and one can easily be forced to cash out at exactly
the wrong time.

This is a big part of what happened to some of the hedge
funds that have blown up, and it's what happens when folks
get whacked with margin calls.

It typically does not happen with plain old non-leveraged
long positions in stocks or mutual funds.

- quote -

It's a potentially bad idea. It's a horrible idea to buy a
real estate property which is substantially cash-flow negative
when one has little other money to live on.

But you're really comparing apples and oranges.

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