All Forum Posts by: Kevin McGuire

@Anish Tolia Agree. Taxes have to come from somewhere especially now given massive debt. So the question is, which dials should the government turn to what effect? Middle and lower middle class have been decimated over the years.

I’m Canadian although a U.S. resident 10 years now. My investment real estate is in Canada, save for a modest vacation rental in the U.S., I can’t vote, so I don’t have a “dog in this race”. I will likely expand my portfolio here though.

I’m not sure why some investments are subject to capital gains when others are not. That always smells of special interests and lobbyists to me, so perhaps the case can be made that they’d be taking a more harmonized approach to taxation.

In Canada when I sell my investment properties I’ll pay capital gains (hopefully!), blah blah blah. That was the deal when I bought the properties so I’m ok with it. I wouldn’t be so ok with it if I had planned to do the equivalent of a 1031 and later found out I couldn’t. That seems at the least unfair, but is likely going to be material to folks business models, I’m guessing in particular for fix and flip’ers. What would be more fair would be to change the rule for new acquisitions so you can factor it going in. Would this change my real estate investment plans here? Doubt it.

There was a comment in this thread about your primary residence, and here I think the Canadian system is interesting: you don’t pay capital gains on the sale of although you also don’t get to deduct interest charges along the way. Given that for most people their primary residence is their largest financial asset, it protects “the future you” from a big tax hit, possibly at a time in your life where you can least afford it, say when you need to downsize.

@Joshua Adewuyi I agree that’s it’s extremely difficult to predict the outcome given the unprecedented factors at play, and I also agree it’s incorrect to compare this to 2018. 2018 had two unique components to it: higher and higher risk loans were given out, and the financial industry committed fraud by misrepresenting that risk, exposing the global financial industry that in many cases were unaware of the true underlying risk of the products they had bought. The market can’t price in what it can’t see. What’s difficult for me to get my head around today is the combined impact of widespread unemployment with trillions of extra dollars sloshing around, and low interest rates propping up valuations. On the positive side, it’s a great time to lock in a fixed rate mortgage, and I trust the long term intrinsic value of real estate more than I do stocks. Best to price in extra vacancy reserves though.

@Jesse Bowie your question is so broad that nobody is going to be able to answer it. You need to analyze the deal by plugging in the costs and with a sense of the potential rent for such a place. There are tons of resources available, here and in books, which will help you.

56, my current age :)

I left my W2 job in January and have been enjoying a break from the high tech marathon. I may never go back, or do something else, undecided, but I have complete flexibility in the decision process which I am thankful for.

@Kenny Hsu How will you know when it’s the right time?

@Russell Brazil said it well. Really, it’s all about risk adjusted return, and while as folks often talk about better returns OOS, they tend to undervalue the risk. At the same time, I like the adage of “Live where you want and invest where it makes sense” and that’s what I’ve done: I live in Seattle but my rental portfolio is in Ottawa, Canada. I liked it better than my local market and know it because I lived there for most of my life, plus I have trusted local contacts for real estate agent and property manager. In that sense my risk was lower investing OOS because of my knowledge of the market and trusted team. All the properties I bought site unseen. You need that level of confidence and trust with your team to buy OOS.

@Maximo Jacobo If you’re only parking your money for a few months then two things: (1) you want something with high liquidity so you can enact your plans with least friction, and (2) the rates don’t really matter that much (unless it’s a sizable amount of cash), you should do the math on the interest income but I think you’ll find it’s just noise. I personally have about $35k sitting in a high yield account because I’m undecided what to do with it and have gone through a similar process you are :)

@Maximo Jacobo I’m guessing we all are looking forward to a time which is less chaotic, sigh, we’re truly in unprecedented times. Which makes it doubly hard to take action. I think you have a good strategy in mind. Whereas I used to be focused on returns, I’m now thinking more about risk management (likely a combination of age and being Canadian :) ). Having more cushion to mitigate risk is a wise move. And house hacking is a great move since it further reduces your risk of renters unable to pay.

@Maximo Jacobo The problem with waiting is that's it's unclear how we'll know when to make the move. I've seen the stats on how for the stock market a big risk is being out of the market so I personally have given up any attempts at market timing. I just don't know, and I distrust anyone who says they do. Rather, I try to be methodical with no sudden moves since they tend to be emotionally motivated. If you like REI and you can find an investment that meets your criteria, you have sufficient reserves to manage risk (repairs, vacancy), it cash flows after reserves so you're not reliant on funding it out of your primary income, then what do you believe you gain by waiting? It's a long term play.

@Benjamin A Ersing I also do both because they serve different purposes in my investment strategy. Factors I consider are risk adjusted returns and liquidity, also a form of risk. Specifically, while I really like the risk adjusted return of REI over stocks, it's a highly illiquid investment (selling requires effort, time and cost) so I don't want to ever be completely reliant on it. Another factor is granularity: it's easy to sell 10% of my stock portfolio but it's hard to sell 10% of a real estate portfolio; in the future when I need access to the money it'll be easier to withdraw from the IRA. Finally, REI and stocks are slightly uncorrelated so holding both allows flexibility in which I draw from when. I've not figured out the net returns of one versus the other because as above I don't view them as equivalent investments.