Real Estate

Landlords grow rich in their sleep without working, risking, or economizing." ~ John Stuart Mill

When I was young, my father always encouraged me to invest in real estate.  He had two approaches:  buildings to rent; and land to hold for appreciation.  He especially liked the tax benefits.  Back then, real estate paper passive losses, due to depreciation, could be used to offset all other income, including wages, without limitation.   So the typical strategy was to cash flow neutral before taxes, and be cash flow positive after claiming depreciation deduction.   In addition, gains from the depreciated basis were taxed at long term capital gains rates, if the property was held more than one year.

Based on my recollection, my dad on average made some profit on rental properties, mainly through depreciation deductions and having renters pay the mortgage.  His best investment in rental property was through a partnership with other real estate investors.  His second best was his personal home.   He made significant profits on buying investment land and reselling years later, but these involved some luck in picking a good location for future development.

Other than co-owning one rental property with my father, I didn't invest in real estate other than owning a home.

Nowadays, owning investment real estate is no longer as lucrative.  First, the tax code has changed, eliminating the deduction of passive losses (due to depreciation) for most landlords who are above an income threshold.  Also, depreciation recapture is now taxed at ordinary income tax rates, with a cap of 25%. 

As for buying investment land, the best opportunities are often long ago purchased, with remaining plots requiring long wait times, perhaps a lifetime, for significant profit since growth has slowed.

In addition, rental real estate does involve work, or the hiring of a property management company.  There is also more risk nowadays, as the coronavirus pandemic as caused some renters to not pay rent, or in the case of Airbnb property owners, cancel reservations.

I became an accidental real estate investor when my parents passed away, inheriting some investment land and a 1/3 interesting in a commercial rental property.  Fortunately, the rental property's mortgage is paid off and is positive cash flow before taxes.   We also pay a property manager to do the work.   The investment land is in a good location, and the property taxes are low since it is vacant land.   So the cost of keeping the property is very low.

Even with these favorable conditions, my goal is to sell my interest in both properties and not pass the properties to my heirs.  Even though the properties are doing well as investments, they have a lot of complexities that require action from an owner, which I believe my heirs would have not interest in doing. 

For me, if I own real estate after selling these properties, it will be only through publicly traded REITs (real estate investment trusts).   REITs offer many of the benefits of owning real estate, but remove all the work, risks and headaches of actually owning property. 

For more on Crossing Generations, check back every  Thursday for a new segment.

This is not financial, investment nor real estate advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Not Chasing the Market

The S&P is up 31% from its March 23 closing low.  April is on track for the best month since 1974.   Some stocks are hitting new highs.

I'm not chasing this market.  I'm taking the opportunity to sell into the rally and take some profits.

To me, the rally isn't sustainable.

• The S&P index is being driving by 5 stocks, Amazon, Google, Microsoft, Facebook and Apple, that account for 21% of the index movement.
• About 80% of S&P stocks are down over 20% from their 52 week high.
• Fundamentals still show stocks to be "expensive."
• Economic recover from lockdown won't be fast.
• COVID-19 may have a second spike with reopening or in the fall.

At this point, the downside risk is greater than the upside rewards, much greater.   For now, I'm being conservative and reducing my exposure to equities.

I expect another deeper decline later, and will wait before putting significant funds back into the market.

For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Margin of Safety Recalibration

When I retired at 49 in 2007, we had about 2 years of of expenses in cash in taxable savings as a  margin of safety.   The rest could be invested.   Then came the Great Recession.   Our investments declined significantly.  It was tight to live on the 2 years of cash we had and pay all our expenses, which included a mortgage that was our largest expense.  So we sold some of our investments, at a  significant loss, to pay off the mortgage and reduce our annual expenses.   It was an eye opening experience.  In hindsight, it was a blessing to have a bear market early in our retirement.  We learned a lot about a sufficient margin of safety.

Fast forward to 2020.   We moved to keeping 4-5 years of cash in our taxable accounts, and kept our debt at zero.   When the market moved sharply down this time, we had a significant margin of safety to ride out the decline.   Much less financial anxiety that 2008.

For now, it looks like we may have over prepared, as economies are coming out of lockdown in the next month.   However, I still plan to maintain a 4-5 year margin of safety, for the next bear market or economic downturn.

For more on  The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial, saving nor retirement advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Stimulus Check is in the Mail

Since I filed a 2018 tax return and our refund was direct deposited, I expected to be one of the first recipients of the COVID-19 stimulus check.   Imagine my surprise when I checked the Get My Payment feature on irs.gov and found out that we qualified for a stimulus payment but the IRS did not have our direct deposit information.

Rather than wait for a paper check, I decided to fill out the form for providing the IRS with our direct deposit.  Then I checked the Get My Payment feature every day afterwards.    It's been 11 days since I submitted the information and I received notice that our stimulus payment will be deposited in the next week. 

So the check, electronically speaking, is in the mail.  We'll see if arrives as stated or if I need to follow up. 

For more on New Beginnings, check back Sundays for a new segment.

This is not financial nor tax advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Breakout on May 1

Our state is targeting to come out of lockdown on May 1 by slowly allowing businesses to reopen.  While I have no objections to the imposed lockdown, I am ready to start moving back to some semblance of pre-lockdown.

Here are my short term specific plans:

• Get a haircut.   May 1 is two weeks after my normal timing.  
• Get a routine blood test, which I have delayed.
• Have our air conditioning serviced, which was allowed during the lockdown.
• Get a routine eye exam.
• Get a tooth filling for our son.

Here is what I am going to wait to do:

• Eat out at a restaurant.   To me this is still risky since restaurants are not used to sanitizing.
• Use health club equipment.  I was cautious before COVID-19.
• Group gatherings with neighbors and friends.  Will probably wait a while.  
• Amusement parks, trampoline parks, etc.  Will wait a while.

If no spike happens after the reopen, I will likely be more adventuresome in my activities.

For more on New Beginnings, check back  Sundays for a new segment.

This is not financial nor health advice advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Rules for COVID-19

The following was found in Facebook by a cousin of a friend, so readers may have already seen it.

The Rules For COVID19:

1. Basically, you can't leave the house for any reason, but if you have to, then you can.

2. Masks are useless, but maybe you have to wear one, it can save you, it is useless, but maybe it is mandatory as well.

3. Stores are closed, except those that are open.

4. You should not go to hospitals unless you have to go there. Same applies to doctors, you should only go there in case of emergency, provided you are not too sick.

5. This virus is deadly but still not too scary, except that sometimes it actually leads to a global disaster.

6. Gloves won't help, but they can still help.

7. Everyone needs to stay HOME, but it's important to GO OUT.

8. There is no shortage of groceries in the supermarket, but there are many things missing when you go there in the evening, but not in the morning. Sometimes.

9. The virus has no effect on children except those it affects.

10. Animals are not affected, but there is still a cat that tested positive in Belgium in February when no one had been tested, plus a few tigers here and there…

11. You will have many symptoms when you are sick, but you can also get sick without symptoms, have symptoms without being sick, or be contagious without having symptoms. Oh, my God.

12. In order not to get sick, you have to eat well and exercise, but eat whatever you have on hand and it's better not to go out, well, but no…

13. It's better to get some fresh air, but you get looked at very wrong when you get some fresh air, and most importantly, you don't go to parks or walk. But don’t sit down, except that you can do that now if you are old, but not for too long or if you are pregnant (but not too old).

14. You can't go to retirement homes, but you have to take care of the elderly and bring food and medication.

15. If you are sick, you can't go out, but you can go to the pharmacy.

16. You can get restaurant food delivered to the house, which may have been prepared by people who didn't wear masks or gloves. But you have to have your groceries decontaminated outside for 3 hours. Pizza too?

17. Every disturbing article or disturbing interview starts with " I don't want to trigger panic, but…"

18. You can't see your older mother or grandmother, but you can take a taxi and meet an older taxi driver.

19. You can walk around with a friend but not with your family if they don't live under the same roof.

20. You are safe if you maintain the appropriate social distance, but you can’t go out with friends or strangers at the safe social distance.

21. The virus remains active on different surfaces for two hours, no, four, no, six, no, we didn't say hours, maybe days? But it takes a damp environment. Oh no, not necessarily.

22. The virus stays in the air - well no, or yes, maybe, especially in a closed room, in one hour a sick person can infect ten, so if it falls, all our children were already infected at school before it was closed. But remember, if you stay at the recommended social distance, however in certain circumstances you should maintain a greater distance, which, studies show, the virus can travel further, maybe.

23. We count the number of deaths but we don't know how many people are infected as we have only tested so far those who were "almost dead" to find out if that's what they will die of…

24. We have no treatment, except that there may be one that apparently is not dangerous unless you take too much (which is the case with all medications).

25. We should stay locked up until the virus disappears, but it will only disappear if we achieve collective immunity, so when it circulates… but we must no longer be locked up for that?

LOL


For more on Reflections and Musings, check back Saturdays for a new segment.

This is not financial, medical nor COVID-19 advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

The Silver Linings from Lockdown

The Coronavirus lockdown  has been a challenging event.  After all, we're all used our freedom to go where we choose and whenever we want.  However, there have been multiple benefits from stay-at-home orders.

• Healthier eating.   We are eating all of our meals at home.  Typically, our kids would have school lunches five days a week, and sneak in snack food during school days.  We would also eat out occasionally.  Now, they are eating fresh prepared foods for most of their meals.  Mainly, because fresh produce is usually not out of stock at groceries during the lockdown.  Yes, we do eat some processed foods also, but probably still  probably overall healthier than prior to the lockdown.
• Schooling exposure.  Our schools have been closed since mid March, which all classes converted to distance learning.  For our 9th grader, she has be able to do it on her own.  However, for our 1st grader, my spouse has been very involved.  So we have been able to better see what our son is learning and is having trouble learning.   
• DIY project progress.  Since people are at home more, I feel more pressure to take care of a few DIY home project repairs.   Being ever the procrastinator, I already have most of the parts and just need to do them.
• Decluttering.  We are pack rats, keeping old toys, old books, old clothes and stuff.   In addition, we have inherited some more stuff with the passing of our parents.  Since we're home most of the time, we are motivated to clear out some of the clutter.
• More and better family time.  We're with each other 24/7.   We eat all our meals together, do projects around the house together, hike in nearby parks together, and watch TV together.  It's like being on vacation, but at home, instead of a hotel room. 
• Less chauffeuring.  Previously, we were constantly driving the kids to sports, music lessons, and extracurricular activities.   All are either canceled or done via the Internet.
• Better air quality.  Although not an issue in our area, air pollution has significantly declined due to less plane and car travel.

Our slow emergence from lockdown is expected to begin May 1, 2020.   While I am looking forward to regaining previous freedoms, I will miss many of the benefits experienced during lockdwon.

For more on Reaping the Rewards check back  Fridays  for a new segment.

This is not financial or lockdown advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Investing - What I Would Tell My 20 Year Old Self

If I only knew then, what I know now. ~ old adage

Here are some investing tips I wish I had known when I was younger:

• Time in the market is more important than market timing.   Invest early, invest consistently, and invest regularly throughout one's life.  If there is interest in "market timing," increase the amount of regular contributions when the market is going down.
• For most people, investing in the total market index will give better results than investing in individual stocks.   The total market eventually goes up over time and never goes to zero.   Individual stocks don't always go up and can go to zero.  However, investing in indvidual stocks is more exciting, and concentration on the "right" individual stocks can result in signficant wealth.  An allocation of 10-20% to individual stocks will usually provide sufficient excitement and bragging rights.
• Investing in individual stocks is hard work.  Gambling in individual stocks takes little work.  Hard work does not guarantee making money nor not losing money.  Gambling sometimes leads to big gains, but more often leads to losses.   Most buyers of  individual stocks end up somewhere in between investing and gambling.   
• The most important decisions to make when buying an individual stock:  Which stock.  What price to buy.  What price to sell.  Develop your own system and adjust as needed.  People that claim to know the answer don't really know.  Otherwise, they would be extremely wealthy instead of managing your money or selling you a newsletter.

Good luck to all during the COVID-19 market correction/bear market.

For more on Crossing Generations, check back  Thursdays  for a new segment.

This is not financial nor investment advice. Please consult a professional advisor.

Copyright © 2020   Achievement Catalyst, LLC

Avoid FOMO

FOMO = Fear Of Missing Out

With the stock market recent big and fast rebound from March 23 lows, people may be thinking they've missed their opportnunity to buy at low prices.   They may be even worried that they may miss significant gains since the market will continue to rise to new highs.  The result may be panic buying, which will drive the market higher.

Bear market sharp rallies are common and often fail, resulting in going to new lows. 

For now, I am still not buying. 

For more on The Practice of Personal Finance, check back  Wednesdays  for a new segment.

This is not financial nor investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Best Times for Lockdown Shopping

With stay-at-home orders, we only go out to do shopping for groceries and other essential.    The main stores for us are Kroger, Whole Foods, and Costco.

After several shopping trips to each, here is my conclusion for best times (least crowds) and worst times (most crowds, often with lines).

Best Time:

• Within 1 hour of closing.    Stores are generally not crowded.   No lines to enter.  However, shopping has to be quickly and efficiently since stores close promptly or a little ahead of schedule (Costco).

Worst Time

• Midday between 10am-2pm.  Most crowded time.  Lots of families.  Often a line to enter store (Costco). 
• Over 60 time -   I only tried this once at Kroger.   It was very crowded.   Much less crowded after the special shopping hour.  Haven't tried Whole Foods special time yet.

So most of my shopping trips are done about an hour before closing.   

For more on Ideas You Can Use, check back Tuesdays  for a new segment.

This is not financial or shopping advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

How Life is Different

COVID-19 has changed a lot of people's beliefs and perspectives.  Here's how COVID-19 has changed mine:

• Will I ever take a cruise again?  Nah, don't think I'd do one even if it was free.
• Will I let my kids take out a student loan to go to college?   Nope.   
• Will I take a loan to buy a new car?  Don't think so.
• Will I still invest in stocks?   Yes, but only with an amount I can afford to lose.
• Will I hug my spouse and kids more?   Yes, probably at least everyday.
• Will uncertainty be a major factor in my life?  Yes, and probably for the rest of my life.

For more on New Beginnings, check back  Sundays for a new segment.

This is not financial nor lifestyle advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Expect a Big Rally Next Week

COVID-19 health impact appears to be less than worst case and less than anticipated a week ago.  If the trend continues, I expect a sharp rally next week.    Perhaps not sustainable, but maybe enough to enable me to recover most of our losses. 

If the rally happens, I plan to continue selling and taking profits in our peripheral holdings.

For more on Reflections and Musings, check back  Saturdays for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

No Coronavirus Relief Payment - Yet

I checked our bank account a few minutes ago.  We haven't received our Coronavirus relief payment yet.   I will check over the next week and report when we receive it.

For more on Reflections and Musings, check back Saturdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Build an Emergency Fund

As many have learned with COVID-19 shutdowns, having an emergency fund is an important financial strategy.    The emergency fund can cover unexpected expenses such as a car repair or major appliance purchase and even loss of income due to a layoff. 

The typical recommended emergency fund for someone working is three to six months of expenses.   This amount is usually enough to cover an unexpected large expense or loss of a job.  People may find after the COVID-19 experience, longer may even be preferable.

In retirement, we're keeping three to five years of expenses in an emergency fund of cash or invested in CDs, so that we do not need to sell stock investments at low prices due to a downturn as we are experiencing now.   Stock usually recover within three to five years, allowing investments to be sold at favorable prices.

Hopefully, three to five years will be sufficient time for the stock market to recover from COVID-19.

For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

My Take on Coronavirus Survival

Full Disclosure:  I am not a medical professional nor do I have medical training.

I have been following a number of studies, reports, and presentations on COVID-19 status.   My conclusion is that COVID-19 may be fatal for infected individuals that have inflammation pre-existing conditions.

Inflammation conditions already reported include:

• Diabetes
• Heart Disease
• Asthma 

I would add the following:

• Autoimmune diseases
• Rheumatoid Arthritis

Perhaps that's why hydroxychloroquine has worked for some patients.   It's a treatment for an autoimmune disease.

All speculation on my part, but based on the qualitative data that is being reported.

For more on Ideas You Can Use, check back Tuesdays  for a new segment.

This is not financial or medical advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Near Term Rally Strategy

Note:  Corrections have been made due to errors in calculations.   The fact checker's bonus will be eliminated this quarter :-)

I expect the market to rally for a short time since COVID-19 deaths appear to be peaking in the U.S.   My plan is to sell our peripheral holdings into the rally, while maintaining our core holdings.

 I have increased shares in existing positions or added shares in new holding during the downturn. I consider most of these newly acquired shares "peripheral" holdings.   I start trading out of these holdings when the return is about 15% nominally.   I experienced 15% gains in as little as a few hours due to the extreme volatility, but more common is a time period of a few days, if I'm lucking.

Overall, we are still down, but as of the end of March, the loss was only -2.3%  -4.2%, since we have a significant amount of cash, and my company stock, which is our largest single holding,  has only declined about 4% 11% since the beginning of the year. 

There will probably be another decline to lower lows.  I will wait for that to happen before adding significant funds to purchase more stocks.

For more on Strategies and Plans Ideas, check back Mondays  for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

The New Normalcy

One month ago, life was still normal.  There were no restrictions. I was still going skiing.  My kids were in school.  My 7 year old son was attending birthday parties.  We were shopping as usual.   We were connecting with friends.  We were planning summer vacation.

Fast forward to now.   We are under stay at home orders.  Schools are closed and doing online learning.   We're about to start wearing masks in public areas.   Not even thinking about summer vacation.

I expect his to last until May 1, but hope our previous life will return sooner.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial or health  advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Uncertainty is the New Norm

"Tomorrow isn't promised." ~ old adage

I'm spending stay-at-home orders enjoying time with my spouse and kids.   We play games, pracitce sports, do DIY home projects.  Hopefully, the kids will have pleasant memories of these times, versus the anxiety that most adults are having.

We continue to plan for the worst and hope for the best....

For more on  Reflections and Musings, check back  Saturdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

Coronavirus Groundhog Day

We've been under stay at home orders for a couple weeks. 

Everyday is basically the same.

Get up.  Make breakfast.   Check the weather.   Read Coronavirus news.
Decide whether to shop for food and make list.
Get kids to online school.  Clean up.
Read Coronavirus news. 
Make lunch
Get kids outside on nice days.  Ride bikes, play catch, hit basedballs, and kick soccer balls.
Read Coronavirus news.
Watch part of governor's daily corona virus update.
Do shopping or other spring chores around the house.
Read Coronavirus news.
Make dinner and clean up.
Practice music, read, watch TV, do homework.
Get kids to bed.
Read Coronavirus news.
Clean up, relax, go to bed.

Repeat the next day.

For more on   Reflections and Musings, check back Saturdays for a new segment.

This is not financial nor coronavirus stay-at-home advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC

The Power of NO!

For us, a successful retirement has benefited from being able to say NO.

1.  No Debt.   We have no mortgage, no car loan, no outstanding revolving debt.   That has reduced our "required" payments each month.   My only regret is that I didn't pay off our mortgage right after retiring in 2007.  Instead I stayed invested and lost a significant amount of money in 08/09 that could have been used to pay off the mortgage, which we did in 2009.
2. No Living Large.  I drive a 17 year old truck and a 17 year old car, which we are saving for my daughter to learn driving.  My spouse drives an 8 year old car we bought from her mom, when she moved into independent living.  We take one or two vacations a year with the kids.   We have most of our meals at home, eating out a couple times a month.
3. No Supporting Adult Kids.   Both our kids are still under 15, but many of my retired friends are still providing some finanacial support to their kids, even post college graduation.
4. No Exotic Investments.   I have turned down various investments with "higher yields" and stayed with some stocks and mostly CDs and cash equivalents.   Yeah, we didn't beat the market, except for 2020 YTD, but we generally earned enough to cover annual expenses.

Of course, YMMV, but this approach has worked well for us.

For more on Reaping the Rewards, check back Fridays for a new segment.

This is not financial nor retirement advice. Please consult a professional advisor.

Copyright © 2020 Achievement Catalyst, LLC