You can use higher leverage to get higher return without that 20K. But I want to play on safe side and keep leverage within factor of 4, and keep what I have already.
mortgage interest is less than your half, income is same as you, I trig AMT, how can you just trig a little AMT, I think that you still have special rule.
The match is 6K a year, 12k for both of us. I also have 30K at the starting point. I also contributed Roth in the first two years when my income is low.
Move your family to a low cost area with healthy growh potential, then you can re-start your leverage game to take advantage of the first pot of gold you earned in the high cost area. With 80% Loan to value ratio, think about how much your 1200K equity can borrow: 6000K. Total 7200K you can deploy in a low-cost area, think about how many low-cost houses you can buy...
I studied those rich people in real estate: 1) Developer, then you can stay locally. 2) Go across the US to best use his equity for sequential leverage.
Other than 1) or 2), I can't think of anyother way in real estate for you to grow from 1200K to 10M quickly. Of course, you can let inflation and time to grow your Bay area properties to 10M in 10-20 years, but that's not really making money, that's simply getting even with inflation.
my averaged return follows well with SP index. Never higher than 15%. you forget to include company match when calculate return. My average return is only 10%, take another 30 years to reach 10M.
I assume you are a software programmer because you are in Silicon Valley :-)
To get into IBank, there are too possible places, 1) Hedge funds in San Francisco, that I am not familiar, I am not sure how well they pay people. 2) You need to come to NYC or Greenwich, Connecticut, the so called Finance Valley. Nowhere else can you may more money than NYC/Greenwich, not in Silicon Valley (unless you are working Google, or next Google). Relocation to NYC is hard.
There are other consideration. Although you can make more in NYC than in Bay area, you may probably make 200K+ total comp after you earn at least 2 years experience, but initially, you may not. Nobody is gonna offer you 200K just because you can code C++, you need to know Fixed Income, FX, Commodity or Prop Trading.
Transferring to Finance is one way to increase cash flow, but sacrifice is often great too. In NYC, the work load is so high you basically have to sell your soul to the Banks, 12-15 hours a day is common. How would you get extra time to manage properties. Caring for family could be at risk too.
Your tough nut to crack also comes from Bay area's high home price, but low rental income, balanced cash flow is very hard. See, with the same cash I can buy 2 or 3 townhouses, but in Bay area I can only buy 1. This situation is hurting the LEVERAGE equation. It limits your growth. How you solve that problem, I don't know, it's hard, it may not be solvable unless you relocate to low-cost area. Let's look at Donald Trump, he didnot make all his money from NYC although this is where his home is. He has his investment team spread money across the nation, even across the world to stretch the power of LEVERAGE. Donald has lots of investment in low cost areas like Las Vegas, Phoenix and Dallas, TX. If he was confined to NYC, he won't be as rich as he is today. Trying to extend leverage in high price region is impossible. The cash requirement is forbiddenly high...
However, that N year is not as long as you might dread, but also not as short as anyone can jump in to make it tomorrow. Like I said, people sacrifice their life in NYC for 20W, burn-out in 5 years is common.
To tell you the truth, I work in an IB and my personal wealth is way beyond 1 million now. However, I think what I am defferent from this person is that I know I am paid far more than what I am actually worth. So I keep humble and make lots of charitable donations.
I do not care how this guy wants to make money... Actually what makes me uncomfortable is one of his comments "if you can refer me to IB, I can QQH". How much does he know about finance and hedging? Is he a qualified finacaial analyst? He wants to jump in whatever he can and do whatever makes money. Actully I can refer jobs. But will I let this guy in? Probably not.
Well, don't quickly judge others, that's arrogance too
There is nothing wrong in seeking money. When that person is rich, there is nothing wrong for him to donate.
Sharing a story cannot be considered un-humble because from every angle you look at Bayfamily's post, it's a TYPICAL money management quandary a Bay area family is experiencing. I feel deep inside of you, you are thinking "I am richer than this guy, what made him so flashy?" See, you are not a noble man either :-)
Let’s assume you don’t invest at all, you maximize your retirement account as you did, and you rent a 4 br house for 2.5k/m, spend another 2.5k/m for other expenses.
Your min annual income: 140k Your max annual income: 200k+220k = 420k Your medium annual income: (140+420k)/2 = 280k Your total income in 6 years: 280k*6=1680k Your max 401k contribution: 150k Your taxable income: 1680k-150k=1530k Your income after tax: 1530k*0.6=918k Your annual expense: (2.5k+2.5k)*12=60k Your total expense: 60k*6=360k Your total saving: 918k-360k=558k Your total retirement: 292k.
So, in the best age and best location of realty, you are not doing that well than 0-return investment. How can you be confidence that you will do better in the unknown future?
You plan has lots to question. For all the interests you paid, and for all the inflations will be for next 10 yrs, you are, in essence, make much less net profit than you thought.
10000000........in 2017, would that worth the same $ as today? by that time, you will say you need more than 10000000!
AMT rules out most deductions, e.g. mortgage interests and local taxes. Once triggered, you have to pay at least 28% tax. How could you pay a bit AMT? Nothing else, just want to discuss and learn from you.
by BayFamily
我的投资理财目标不大，有一千万就可以了。钱财多了有害无益。但适量的富足可 以给人带来安全，自由，舒适，和小小的成就感。我的计划是500万的时候，太太不 工作，可以全心照顾刚上小学的孩子们，一千万的时候我退休。 和va-landlord的目 标一样。 退休不是什么都不干了， 但是不为衣食工作，彻底实现finanical freedom. 计划看起来好像太遥远，但我觉得再有十年时间，运气不太坏的话，在 我们45岁以前是可以实现的。
我们家是BayArea再普通不过的家庭了。家庭税前年收入20万不到一点点，Bonus多 的时候可以达到22万。 六年前我们一文不名地来到弯曲的时候，那是年收入只有14 万，看着弯曲的天价房价，感觉生活毫无希望。那时经过密密麻麻的住宅区的时候 ，老是叹息何时才能有自己的家啊。 那时个别同事家房价已达800k,在我当时看来 如天上的银河一样可望不可及。
通过和弯曲前辈的接触，明白投资理财的道理后，才渐渐明白发家致富的渠道。只 怪刚到美国时，中西部的城市信息太闭塞，读书就开始注重投资的话，资产应是现 在的一倍。 五年前，我对太太说，五年后我们会有一百万。我太太说我做梦，就是不吃不喝， 不交税，把工资全存下也不会有一百万。我说不是这样算的。过去六年里，每年年 终我都会计算一下家庭的帐目，下表过去六年的总结。
2001/1 2002/1 2003/1 2004/1 2005/1 2006/1 2007/1
cash 0.5 0 3 2 5 1 2
stock 0.5 2.5 2 2 0 0 0
retirement 3 6 9 12 16.3 21.05 29.2
Net House Equity 0 8 12 23 45 64.75 89
total 4 16.5 26 39 66.3 86.8 120.2
Growth Rate 313% 58% 50% 70% 31% 38%
Total Debt 84
六年以后果然有了120万。买房时间是， 2002, 2003, 2005, 2006. 地点是弯曲， 中国轮着来。这样的数据大家可能都看腻了，同样的故事在弯曲千千万万的中国人 家庭里同样地上演着。
我想说的是，如何从120万，再用十年左右的时间里，达到一 千万。
首先看Growth Rate. 头几年的增长率比较高，在50~60％左右，因为还没有什么资 产，最近几年下滑在30％～40％。主要原因是盘面大了，每年固定的Cash进帐相对 减小。 我估算了一下，未来三年里growth rate会下降到15％，主要原因有两个：
leverage用光了。我的投资策略还是保守的，每次至少10％的首付。现在总的贷款 是八十万，是我们收入的四倍。如加上其他的房租收入，贷款只有三倍。 Debt/Asset ratio 也控制在50％左右，就是说美国中国房价明天一起跌去一半，也 不要紧。
但leverage确实是用光了，第一不能refinance了，因为我们现在的利率很好。第二 ，大房子收益很差，小房子太辛苦了，担心管不过来。未来几年的行情很难说，盘 面大了，保本最重要。 也就是说，我们家遇到的谷米家遇到的同样问题，增长的瓶颈问题。如果不开拓新 的投资渠道的话，十年后的我们家的资产将只有250万左右，离一千万还很远。也许 太太十五年后可退休，我可还得再奋斗20年，才会有一千万,那是也五十多了，没什 么意义。
春节时候，我用各种模型反复比较，除非是用特别大的leverage,比如零首付，凭着 20万的收入，是很难达到一千万的，要想用稳健的方式，10％的首付，固定的现金 流以备不测的话，按历史平均回报，最多可以达到500万。这和我在弯曲的观察非常 一致。在这里生活20年，头脑清醒善于经营的家庭最多也就400～500万了。
过去六年里，我的现金总是很低。要想达到1千万，又要规避过度风险，只有一个办 法，就是增加自己固定的现金流。 我家每年现金净存款是五万。 过去，我们每年 基本上可以用它leverage 30万的 Asset,如果每年现金净存款可以提高到20万的话 ，每年的就可以leverage 120万的Asset，十年1200万。如果十年房价回报是80％到 100％的话. 加上现有的120万，十年以后应该可以赚到1千万。
帐算好了，几个问题要一一解决。
1）如何把每年的净存款提高到20万。 没什么好办法，趁自己还年轻，改行作金融 ，两年前改行的兄弟们，现在一年的收入已经到20～30万了。 争取趁这两年房事平 稳，赶紧改行。 三年后争取把净存款提高到每年15～20万。
2）房子多了的管理问题，我觉的弯曲最大的优势就是房子贵。房子贵，所以2000万 的Asset也就是30～40套公寓。在其他地方，上百套公寓肯定管不过来。 公寓数超 过五个的时候，我就成立自己的管理公司，雇人来管。弯曲的另一个优势是有便宜 的labor. 不会英语的中国人管管房子，1500/month 就可以请到。 房子吗，我只租 给中国人，所以语言不会有问题。
3）入市时机。 我打算房价涨起来以后再开始买。房子要么不涨，一旦开涨，会持 续很多年。 错过头里的10％的涨幅根本无所谓。现在的首要任务是积累现金。 手 上有现金，未来又有大笔的固定的现金流作保证的话，就可以leverage很大的 Asset. 过去六年，扩张太快，现金一直在一二万的样子。这几年停一下，三年以后 ，我手上的现金应该在20～25万左右。
4）Cash flow. 很多人抱怨弯曲找不到positve cash flow的房子。那要看你怎么算 了。如果是interest only的话，不是不可能。头几年会slight negative cash flow. 35万的apartment可以租1200～1500/month,在Rent control 的区域，25万的 apartment可以租1200/month。我不怕rent control,因为我只租中国人，他们过几 年就自己买房了。 在中国，interest only 的话，很多地方现在就可以做到 positive cash flow. 不过中国的房子不敢多买，有两三套就够了。未来三年cash flow的状况会有所显著改善，rent会上调15～20％左右。
5）风险。如果房价不长，持续下滑，我压根没有风险，因为我不会入市。十年后的 资产在300万到400万之间。 如果房价涨了一年又连跌十年，诱我入市，也没关系， 因为有强大的现金流保证，我就长期持有，等待下一个革命高潮。实事上，房价下 滑两年涨了一年又连跌十年，这种事情在任何一个国家从未发生过。我担心的是， 房价今年又开始一路猛涨，那我的计划就落空了。只能持币寻找其他的机会了。
6）如果象很多人预计的那样，房价这两三年持平，未来看好，房价重复加州过去的 四次cycle的话。我可就发了。 因为我的全部计划就是按这个准备的。下一个cycle 结束的时候，我45岁前资产肯定会超过1千万。那是我就把他们逐步全卖了，买个 S&PIndex, 慢慢用。 人生花不了那么多钱，再多也是无意义。
如意算盘打了一圈，各位见笑了。是不是有点象大跃进时，毛主席说“粮食太多吃不 完，怎么办？”的口气？ 这里的大师很多，千万资产的就好几个。欢迎砸砖，也请 前辈多赐教。人生要作的事情很多，不光是发财。但理财是人生要做的诸多事中必 不可少的一件，如同娶妻生子一样。相对埋头苦干而言，理财劳神不多，回报丰厚 。
But looks doable!
GO, BayFamily!
You can use higher leverage to get higher return without that 20K. But I want to play on safe side and keep leverage within factor of 4, and keep what I have already.
contribution and growth, plus some luck on energy and emergying market stocks
if everyone just care about money, there are no money to earn. Someone has to have bigger embition, such as save the world.
We should all resepect them.
I can safely hold them now, but both to time the market and sell?
if you have cash on hand, you have power.
am i right?
because all leverage used up, sell or not to sell. 84Wan is the maximum debt I want to handle
by this way, can your company 401k trade stock ?
How much do you spend for your own family each year?
你这身家性命，就赌在美国经济上了。
像楼主这样想法做法的，楼主不是第一个，也不会是最后一个。我当初还是认真劝过朋友的。
没事，我悲哀我的，你们大干你们的。
祝大家发财！
不是存心8卦. 多知道些经验教训对这里的朋友会有帮助的.
人生本是一场梦, 无论保守还是激进的投资,打工还是自己做生意,都要祈求经济不要垮.
只是当年也曾经有过那样的梦想，而且觉得触手可及
是我自己这两天情绪有点不佳，说的话让人扫兴，这里跟大家说声“对不起”。
别这么说. 没什么扫兴的. 多听听一些冷静的声音对我们有好处. 谢谢你.
if you max your 401k which is 30K for you&your wife, then only 20K for tax? it seems too low?
Maybe your rental property de-appreciation is in action to reduce your tax rate?
I just filed the 2006 return. total tax 22.3K
Someone please confirm/correct.
you should trig AMT, you cannot deduct your all cost, you both should be use W2 income.
maybe you have some special rule to do it, I want to learn
it is too high,
never higher than 20%. in first three year 8% every year, and later 15% return, very easy
mortgage interest is less than your half, income is same as you, I trig AMT, how can you just trig a little AMT, I think that you still have special rule.
that is wrong. The 10 times growth rate is because of 30K contribution a year. The return is only 10% a year.
How can I grow 1M to 100M, if I only contribute 30K a year?
The match is 6K a year, 12k for both of us. I also have 30K at the starting point. I also contributed Roth in the first two years when my income is low.
no secret, no extra luck.
Move your family to a low cost area with healthy growh potential, then you can re-start your leverage game to take advantage of the first pot of gold you earned in the high cost area. With 80% Loan to value ratio, think about how much your 1200K equity can borrow: 6000K. Total 7200K you can deploy in a low-cost area, think about how many low-cost houses you can buy...
I studied those rich people in real estate:
1) Developer, then you can stay locally.
2) Go across the US to best use his equity for sequential leverage.
Other than 1) or 2), I can't think of anyother way in real estate for you to grow from 1200K to 10M quickly. Of course, you can let inflation and time to grow your Bay area properties to 10M in 10-20 years, but that's not really making money, that's simply getting even with inflation.
your total contribution of 210k were spread across 7 years not a lump sum at 2000/1.
that means ~20% invest return and assume the same rate/contribution, you'll get your 10m in another 17 years - only 7 years later than your plan :)
my averaged return follows well with SP index. Never higher than 15%. you forget to include company match when calculate return. My average return is only 10%, take another 30 years to reach 10M.
Smart man. You are right. That is exactly what I thought. But I will not move. I will join in you in IBank and increase my leverage capbility.
Will you help me out in finding a job in IBank? if it is Ok, I will QQH you
is because the family reason. Once you have a family, it is a a burden and you can not move as easy as single.
However, that is what all about life. You can not get everything.
没有任何其它的信念或追求
什么来钱就干什么
但愿你进不了IB，我的投资不会被你管理
N年的经验才有20W一年.
I assume you are a software programmer because you are in Silicon Valley :-)
To get into IBank, there are too possible places, 1) Hedge funds in San Francisco, that I am not familiar, I am not sure how well they pay people. 2) You need to come to NYC or Greenwich, Connecticut, the so called Finance Valley. Nowhere else can you may more money than NYC/Greenwich, not in Silicon Valley (unless you are working Google, or next Google). Relocation to NYC is hard.
There are other consideration. Although you can make more in NYC than in Bay area, you may probably make 200K+ total comp after you earn at least 2 years experience, but initially, you may not. Nobody is gonna offer you 200K just because you can code C++, you need to know Fixed Income, FX, Commodity or Prop Trading.
Transferring to Finance is one way to increase cash flow, but sacrifice is often great too. In NYC, the work load is so high you basically have to sell your soul to the Banks, 12-15 hours a day is common. How would you get extra time to manage properties. Caring for family could be at risk too.
Your tough nut to crack also comes from Bay area's high home price, but low rental income, balanced cash flow is very hard. See, with the same cash I can buy 2 or 3 townhouses, but in Bay area I can only buy 1. This situation is hurting the LEVERAGE equation. It limits your growth. How you solve that problem, I don't know, it's hard, it may not be solvable unless you relocate to low-cost area. Let's look at Donald Trump, he didnot make all his money from NYC although this is where his home is. He has his investment team spread money across the nation, even across the world to stretch the power of LEVERAGE. Donald has lots of investment in low cost areas like Las Vegas, Phoenix and Dallas, TX. If he was confined to NYC, he won't be as rich as he is today. Trying to extend leverage in high price region is impossible. The cash requirement is forbiddenly high...
However, that N year is not as long as you might dread, but also not as short as anyone can jump in to make it tomorrow. Like I said, people sacrifice their life in NYC for 20W, burn-out in 5 years is common.
没有任何其它的信念或追求?! 你对人家了解有多少?
"但愿你进不了IB"?! 你这人心眼也够小够狭隘的.
To tell you the truth, I work in an IB and my personal wealth is way beyond 1 million now. However, I think what I am defferent from this person is that I know I am paid far more than what I am actually worth. So I keep humble and make lots of charitable donations.
I do not care how this guy wants to make money... Actually what makes me uncomfortable is one of his comments "if you can refer me to IB, I can QQH". How much does he know about finance and hedging? Is he a qualified finacaial analyst? He wants to jump in whatever he can and do whatever makes money. Actully I can refer jobs. But will I let this guy in? Probably not.
Only because I share my personal story and you make money through your job.
what a great man you are!
you are always so helpful.
看你的退休帐户就知道你在演义.
S&P2001-2006的回报大约是: -6%, -22%, 38%, 10%, 5%, 15%
你的帐户资产是: 3, 6, 9, 12, 16, 21, 29
你难道把retirement 100%投了现金吗? 回家歇歇吧,
There is nothing wrong in seeking money. When that person is rich, there is nothing wrong for him to donate.
Sharing a story cannot be considered un-humble because from every angle you look at Bayfamily's post, it's a TYPICAL money management quandary a Bay area family is experiencing. I feel deep inside of you, you are thinking "I am richer than this guy, what made him so flashy?" See, you are not a noble man either :-)
what company matching means?
do you know people can invest something other than SP index?
你就扯吧. 02,03 S&P先跌-22%后涨28%, 你老连续两年回报为0%,任何投资策略都无可能和S&P没有correlation, 除非放money market,那两年也的有2%-3%,不会是零.
Let’s assume you don’t invest at all, you maximize your retirement account as you did, and you rent a 4 br house for 2.5k/m, spend another 2.5k/m for other expenses.
Your min annual income: 140k
Your max annual income: 200k+220k = 420k
Your medium annual income: (140+420k)/2 = 280k
Your total income in 6 years: 280k*6=1680k
Your max 401k contribution: 150k
Your taxable income: 1680k-150k=1530k
Your income after tax: 1530k*0.6=918k
Your annual expense: (2.5k+2.5k)*12=60k
Your total expense: 60k*6=360k
Your total saving: 918k-360k=558k
Your total retirement: 292k.
So, in the best age and best location of realty, you are not doing that well than 0-return investment.
How can you be confidence that you will do better in the unknown future?
my max income is only 220K. it was between 200K~220K. Not 200K + 220K, sorry for the mislead
You plan has lots to question.
For all the interests you paid, and for all the inflations will be for next 10 yrs, you are, in essence, make much less net profit than you thought.
10000000........in 2017, would that worth the same $ as today? by that time, you will say you need more than 10000000!
AMT rules out most deductions, e.g. mortgage interests and local taxes. Once triggered, you have to pay at least 28% tax. How could you pay a bit AMT? Nothing else, just want to discuss and learn from you.
if you are only counting on ultra high inflation on RE to reach the goal, your dream will burst sooner than you think.
move to a lower pricing area, invest in lower price range housing, keep positive cash flow, that is the only way to play safe.
Absolutely correct! I am playing Real Estate in safe way, never had headache! of course, somewhere else!