Archives for December 2017

New Tax Bill: Pay State and Property Taxes By End of 2017

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taxpaidThe new tax bill that takes effect in 2018 raises the standard deduction and caps certain itemized deductions. Therefore, if you will itemize your deduction in 2017, you may want to grab whatever you can this year to get the full value of those deductions. (This assumes you are not subject to AMT.) Here’s a brief summary of your options.

  • State and Local Income Taxes. You can’t prepay 2018 state taxes in 2017. However, you should pay all your 2017 taxes in 2017. Specifically, if you make estimated quarterly tax payments, you should makes your 4th Quarter state/local payment by December 31, 2017 rather than wait until the deadline which is usually close to the federal deadline of January 18, 2018.
  • Property Taxes. You can’t prepay 2018 property taxes in 2017. However, if you have property taxes based on 2017 assessments (partial or whole), you should make those payments by December 31, 2017. Basically, have you received a bill already? Pay it now. Some counties are actually trying to make things easier for you. See these NYT and WaPo articles for details. Things can get complicated if you usually pay via mortgage escrow.
  • Charitable contributions. On a related note, you may want to make your charitable contributions by the end of 2017, as you may not be able to deduct your donations if you will fall under the standard deduction in 2018.

More: IRS Advisory, NY Times, National Law Review

qara.info Portfolio Asset Allocation, 2017 Year-End Update

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Here is a year-end update on my investment portfolio holdings for 2017. This is my last-minute checkup in case I need to rebalance to make another other tax-related moves. This includes tax-deferred 401k/403b/IRAs and taxable brokerage holdings, but excludes things like our primary home, cash reserves, and a few other side investments. The goal of this portfolio is to create enough income to cover our regular household expenses.

Actual Asset Allocation and Holdings

I use both Personal Capital and a custom Google Spreadsheet to track my investment holdings. The Personal Capital financial tracking app (my review, join free here) automatically logs into my accounts, tracks my balances, calculates my performance, and gives me a rough asset allocation. I still use my custom Rebalancing Spreadsheet (instructions, download free here) in order to see exactly where I need to direct new investments to rebalance back towards my target asset allocation.

Here is my portfolio performance for the year and rough asset allocation (real estate is under alternatives), according to Personal Capital:

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Here is my more specific asset allocation, according to my custom spreadsheet:

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Stock Holdings
Vanguard Total Stock Market Fund (VTI, VTSMX, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VGTSX, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
WisdomTree Emerging Markets SmallCap Dividend ETF (DGS)
Vanguard Small Value ETF (VBR)
Vanguard Emerging Markets ETF (VWO)
Vanguard REIT Index Fund (VNQ, VGSIX, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt Fund (VMLTX, VMLUX)
Vanguard Intermediate-Term Tax-Exempt Fund (VWITX, VWIUX)
Vanguard High-Yield Tax-Exempt Fund (VWAHX, VWALX)
Vanguard Inflation-Protected Securities Fund (VIPSX, VAIPX)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
U.S. Savings Bonds (Series I)

Target Asset Allocation. Our overall goal is to include asset classes that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I don’t hold commodities futures or gold (or bitcoin) as they don’t provide any income and I don’t believe they’ll outpace inflation significantly. I also try to imagine each asset class doing poorly for a long time, and only hold the ones where I think I can maintain faith.

Stocks Breakdown

  • 38% US Total Market
  • 7% US Small-Cap Value
  • 38% International Total Market
  • 7% Emerging Markets
  • 10% US Real Estate (REIT)

Bonds Breakdown

  • 50% High-quality, Intermediate-Term Bonds
  • 50% US Treasury Inflation-Protected Bonds

I have settled into a long-term target ratio is 67% stocks and 33% bonds (2:1 ratio) within our investment strategy of buy, hold, and rebalance. With a self-managed, simple portfolio of low-cost funds, we minimize management fees, commissions, and income taxes.

Performance, details, and commentary. According to Personal Capital, my portfolio has gained 15.08% overall in 2017 (with a few days left to go). In the same time period, the S&P 500 has gained 19.73% (excludes dividends) and the US Aggregate bond index has gained 3.53%. For the first time in a while, my sizable allocation to developed international and emerging markets stocks has boosted my overall return.

My stock/bond split is currently at 70% stocks/30% bonds due to the continued stock bull market. I continue to invest new money on a monthly basis in order to maintain the target ratios. Once a quarter, I also reinvest any accumulated dividends and interest. I don’t use automatic dividend reinvestment. This way, I can usually avoid creating any taxable transactions unless markets are really volatile.

For both simplicity and cost reasons, I am no longer buying DES/DGS and will be phasing them out whenever there are tax-loss harvesting opportunities. New money is going into the more “vanilla” Vanguard versions: Vanguard Small Value ETF (VBR) and Vanguard Emerging Markets ETF (VWO).

I’m still somewhat underweight in TIPS and REITs mostly due to limited tax-deferred space as I don’t want to hold them in a taxable account. My taxable muni bonds are split roughly evenly between the three Vanguard muni funds with an average duration of 4.5 years. I may start switching back to US Treasuries if my income tax rate changes signficantly.

529 Plans Will Allow Private School K-12 Tax-Free Withdrawals

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529Starting in 2018, qualified educational expenses for 529 plans will include up to $10,000 a year in tuition and expenses for primary and secondary school expenses (public, private, or religious). Previously, you could only use it towards qualified college expenses. There were also some related changes to ABLE accounts for individuals with special needs – listed here.

Put simply, you can now pay for up to $10k a year of private K-12 school through a 529 plan. If this impacts you, you may consider making a 529 contribution now before December 31st, 2017 as you are allowed annual contributions of $14,000 per person ($28,000 per couple) while still avoiding gift taxes. You would then be able to make contributions in both 2017 and 2018.

Front-loading a 529 early and with a lot of money. The NY Times lays out a scenario where a wealthy family puts in $200,000 at birth (not sure why they use this amount as it would exceed annual gift tax limits even with front-loading) and then uses the money to pay for K-12 private school. This could theoretically save a wealthy family $30,000 in taxes.

If you have that kind of money, it may be worthwhile to explore front-loading, but be careful as their example assumes a reliable 6% return every single year. In the real world, investment returns can be quite volatile, and if you make a $10,000 withdrawal every year, you run the risk of depleting your account entirely before college. Other possible options are to start funding a 529 even before your child’s birth to start accumulating those future tax-free capital gains.

Using the 529 as a just-in-time passthrough. Around 30 states offer a in-state tax benefit on 529 plans. If you are paying for a private school anyway, you may be able to save some money by simply using the 529 as a passthrough account. Contribute to 529, grab the tax benefit, and then immediately withdraw (starting in 2018) to pay for K-12 tuition. Some states like Montana and Wisconsin specifically disallow this in-and-out practice, but most do not (although they could start).

Things can still change. This Reuters article points out that states may change their own laws in response. They could add minimum holding periods, cap their deductions, or add income restrictions. I am also curious as to what, if any public school “expenses” are technically eligible.

Personally, I don’t think this will change my 529 usage plans significantly. My state does not offer a tax benefit, so there is little benefit to the passthrough option. Maybe if short-term rates go up high someday and you can earn 5% in a bank account, it might become worth the effort to park some money in there temporarily. The other primary benefit is federal tax-free investment gains, and it takes a while for that compounding action to accumulate. If I get lucky and my balance gets really big, I could perhaps see taking some money out before college if they end up in private high school. Realistically though, I doubt my balances will greatly exceed four years of college tuition (times three kids!).

Blue Cash Preferred from American Express Review: 6% Cash Back on Groceries

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The Blue Cash Preferred® Card from American Express is a cash back rewards card with a unique feature that still hasn’t been copied by competitors: 6% cash back at US stand-alone supermarkets on up to $6,000 per year in purchases. If you spend $65 a week at supermarkets, that alone will earn you over $200 a year in rewards. Highlights:

  • $200 statement credit after $1,000 in purchases within the first 3 months.
  • 6% cash back at US stand-alone supermarkets up to $6,000 per year in purchases (then 1%).
  • 3% cash back on gasoline at at US stand-alone gas stations
  • 3% cash back at select major US department stores
  • 1% cash back on all other purchases.
  • Intro 0% APR for 12 months on purchases and balance transfers, then a variable rate, currently 14.74% to 25.74%.
  • $95 annual fee.
  • Terms apply.

Tracking your spending and last-minute holiday shopping. Every December, I use this card to buy gift cards at a standalone grocery to use up the annual limit and get 6% back. My local Safeway has an entire wall of options, but I usually go with Amazon, Apple iTunes, or Starbucks. You can easily track how much you’ve spent on groceries on your online account. Just go to “Statements & Activity” > Chart logo (Graph and Filter your Transactions), and then click on “Merchandise and Supplies”. Adjust dates as necessary. Screenshot:

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Supermarkets details. “US stand-alone supermarkets” means that superstores, convenience stores and warehouse clubs are not considered supermarkets. This means no Super Wal-Mart, no Super Target, no Costco. Examples of merchants that count (and this is not a complete list!) are Safeway, Meijer, Vons, Whole Foods, Winn-Dixie, and online supermarkets such as FreshDirect.

Gasoline details. “US stand-alone gas stations” means that superstores, supermarkets, and warehouse clubs that sell gasoline are not considered gas stations. This means no Target, no Costco, no Sam’s Club. Examples of merchants that count (and this is not a complete list!) are Exxon, Mobil, Hess, Shell, Gulf, Murphy USA, Murphy Express.

Major US Department stores details. These are the only stores that qualify:

• Bealls
• Belk
• Bloomingdale’s
• Bon Ton Stores
• Boscov’s
• Century 21 Department Stores
• Dillard’s
• J.C. Penney (JCP)
• Kohl’s
• Lord & Taylor
• Macy’s
• Neiman Marcus
• Nordstrom
• Saks Fifth Avenue
• Sears
• Stein Mart

Annual fee. The card has a $95 annual fee, so you’ll want to utilize that 6% cash back on groceries to maximize your value. If you spend the max cap of $500 a month at supermarkets, at 6% back that would net you $360 cash back in a year vs. $60 at 1% cash back. Note that simply spending $31 per week at supermarkets at 6% cash back will result in over $95 Reward Dollars per year to cover the annual fee.

If you don’t like the idea of paying an annual fee, the Blue Cash Everyday Card from American Express offers 3% at U.S. supermarkets on up to $6,000 per year in purchases with no annual fee. It currently offers a $150 statement credit after you spend $1,000 in purchases on your new Card within the first 3 months. You can also learn more about this card and apply online at CardRatings.com.

Cash back is officially given in the form of Reward Dollars that can be redeemed as a statement credit, gift cards, and merchandise. Statement credit are as good as cash, so I would just stick with that.

Bottom line. The Blue Cash Preferred Card from American Express has the key feature of 6% cash back at US supermarkets (on up to $6,000 per year in purchases, then 1%) along with 3% cash back at gas stations and select major department stores. I treat this card like one of my 5% cash back cards, except there are no rotating categories or activation to worry about. Supermarket purchases go straight on this card all year long. Then in December, I use up the rest of the $6,000 annual spending limit on gift cards for holiday presents.

Infographic: 529 State Tax Deduction Value Comparison Map 2017

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Amongst the many things to consider at years-end is a contribution to a 529 college savings account. (I just made my contribution for kid #3.) In addition to the federal tax-free growth towards qualified college expenses, more than 30 out of 50 states offer some level of tax deductions for 529 contributions. Some require you to contribute to the official in-state plan, while others let you contribute to any plan.

SavingForCollege.com offers a visual comparison of these state tax benefits in the following infographic. They assume a couple filing jointly with a $100,000 taxable income and contributing $100/month for each of two children. The darker the blue, the bigger the benefit.

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This may not apply exactly to your situation, but it can still provide you a quick take as to whether you should investigate further. They do have a calculator that churns out specific numbers, but unfortunately you must pay for a premium subscription. Here are some related posts:

Last-Minute Gifts: Amazon Gift Card Discounts including Starbucks, Whole Foods, Boston Market, Hotels.com, Free Holiday Tins, Etc.

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Look for Amazon to offer up lots of discounted gift cards and/or bonus stuff with gift cards for procrastinators, most guaranteed to arrive by Christmas. Click, click, done. Some of these deals are good enough for self-gifting.

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Up to 20% off Various Retailer Gift Cards. These go in and out of stock and the retailers vary. They had Whole Foods but that sold out quickly (may go in and out, waitlist was available for me). Right now I see Boston Market, Coldstone, Hotels.com, and Famous Footwear.

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Get $5 Amazon promo credit if you buy $50 in Starbucks gift cards. Applies to digital gift cards only. Use promo code COFFEE. You should see details under “Special offers and product promotions”.

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Free Snowflake Gift Tin with Amazon Gift Card. Make your gift card stand out and feel more substantial with a free tin. Also available in Snowman tin, Santa tin, Holiday Pop-Up box, and red ornament tin.

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Free Limited Edition Gund Teddy Bear with Amazon Gift Card. Posted about this earlier, looks like the minimum is still $100 for now.

I’ll keep updating this post as I’m sure Amazon will roll out some more deals later.

MMB Ultimate Interest Rate Chaser Calculator

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calc150Thinking about moving your cash to a different bank account with a higher interest rate? It’s been a while, but the short-term rates on online savings accounts are going up. Don’t get paid nothing by your megabank. Use this handy calculator to find out how much more money you could earn by switching, which you then can weigh against the time and effort required.

qara.info Ultimate Rate Chaser Calculator

How much money are you going to move? (no commas) $
Enter the interest rate (APR) currently being earned:   %
Enter the new interest rate (APR):   %
How many days of lost interest will you have?   day(s)
The approximate number of days you must keep your money at the new rate to break even money-wise is:   days
Assuming the rate difference remains the same,
in 1 month you’ll have earned an extra (estimated):
  
After 6 months, you’ll have earned an extra (estimated):   

Notes

  1. This calculator is based on a rate-chasing breakeven time formula developed previously which takes into account the “days of lost interest”, or the time in between transfers where the money is not earning interest in either account.
  2. Although you will get a very similar answer either way (especially for low interest rates), note that it asks for APR, not APY. I also made a APY to APR calculator if you only have APY and want to be exact.
  3. Usually, there can be between 0-3 days of lost interest when going from one bank to another. This depends on the policies of either bank and also which bank initiates the transfer. This value can significantly affect the break-even time.
  4. The 6-month value (182 days) isn’t simply 6 times the 1-month value (30 days), as the calculator takes into account the time needed first to “break-even”.
  5. Another factor to consider is how likely the current rate difference will persist. Interest rates on savings accounts can change at any time, whereas certificates offer a fixed rate over the guaranteed period.

Last updated 12/14/17.

Gyft Promo Code: $5 off $50 Lowe’s Gift Gard

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gyft0Gyft just sent me an e-mail that you can get $5 off a $50 Lowe’s gift card with promo code holiDIY, good for existing customers. Offer ends 12/25/17 at 11:59pm ET or while supplies last. The terms say that the promo code can be redeemed 5 times per household/account while supplies last. So technically this could be $25 off $250 in Lowe’s gift cards.

You could stack this promo with this 11% off Lowe’s mail-in rebate (may need to scroll down to 2nd page). This rebate offer is only valid at specific Lowe’s locations (scroll down to last page).

Here are some other gift card deals from Gyft:

  • Get $5 off a $40 Chef’d Gift Card with promo code CHEFHAT. Offer ends 12/31/17 at 11:59pm ET or while supplies last. Promo code can be redeemed 2 times per household/account while supplies last.
  • Buy a $25 Domino’s Gift Card and get an extra $5 card with promo code PIECEFUL. Offer ends 12/31/17 at 11:59pm ET or while supplies last. Promo code can be redeemed 2 times per household/account while supplies last.

Good News: Here’s How the World Has Improved Over the Past 25 and 50 Years

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Bad news seems to come at us from all angles, but sometimes we need to step back and point out the good news. Here is a chart of how the the worldwide level of hunger, poverty, illiteracy, child poverty, and pollution has fallen over the last 25 years. Via @dinapomeranz and @johanknorberg.

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Here are some specific stats comparing changes in the last 50 years (1966 to 2016). Via HumanProgress.org. These are worldwide numbers. See specific numbers for your own country and age at Your Life in Numbers.

  • In 1966, average life expectancy was only 56 years. Today it’s 72. That’s an increase of 29 percent.
  • Out of every 1,000 infants born, 113 died before their first birthday. Today, only 32 die. That’s a reduction of 72 percent.
  • Median income per person rose from around $6,000 to around $16,000, or by 167 percent – and that’s adjusted for inflation and purchasing power.
  • The food supply rose from about 2,300 calories per person per day to over 2,800 calories, an increase of 22 percent, thus reducing hunger.
  • The length of schooling that a person could typically expect to receive was 3.9 years. Today, it’s 8.4 years – a 115 percent increase.
  • The world has become less authoritarian, with the level of democracy rising from -0.97 to 4.23 on a scale from -10 to 10. That’s an improvement of 5.2 points.

There are many forces behind these trends, but perhaps it will inspire people to keep trying to improve their world or to support others financially who are dedicating their lives to improve the world.

progressbookJohan Norberg wrote Progress: Ten Reasons to Look Forward to the Future, which was a 2017 Book of the Year for The Economist and the Observer. I haven’t read it, but it seems like a well-researched book with hard evidence on why we should be more optimistic.

Our world seems to be collapsing. The daily news cycle reports the deterioration: divisive politics across the Western world, racism, poverty, war, inequality, hunger. While politicians, journalists and activists from all sides talk about the damage done, Johan Norberg offers an illuminating and heartening analysis of just how far we have come in tackling the greatest problems facing humanity. In the face of fear-mongering, darkness and division, the facts are unequivocal: the golden age is now.

Emerging Markets ETF Comparison: Vanguard, iShares Core, and Schwab

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

The Vanguard Blog has an article Is price everything for ETFs? that reminds us that while low costs may be the most important factor in ETF selection, it is not the only factor. When there are multiple ETFs covering similar asset classes, the DIY investor should dig a bit deeper to get the complete picture.

For example, here is a comparison chart of the Vanguard Emerging Markets ETF (VWO), iShares Core MSCI Emerging Markets ETF (IEMG), and the Schwab Emerging Markets Equity ETF (SCHE). If you compare only with expense ratio, they are all pretty much the same with Schwab being the cheapest by a thin margin.

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What’s actually inside? Underneath the ETF wrapper, you’ll see that VWO holds a larger number of companies and the average market cap is smaller at $15 billion. This means that Vanguard’s ETF holds many more of the smaller companies, if that additional diversification interests you. iShares still holds South Korean stocks, whereas Vanguard and Schwab has South Korea as a developed market.

Trade commissions. Transaction costs affect your personal return. You can trade Vanguard ETFs for free with an account direct at Vanguard.com. You can trade Schwab ETFs for free with an account direct at Schwab.com. iShares doesn’t have their own self-directed brokerage arm, but you can trade many iShares ETFs for free at Fidelity.com. You could also go through a broker that offers free trades on everything like Robinhood (no minimum) or Merrill Edge ($50,000+ in assets).

Average bid/ask spread. In addition to commissions, there is also a buy/sell gap where you can lose money. This is less important for gradual buy-and-hold investors, but you still want this gap to be as small as possible. The article doesn’t share this information, but you can look it up at sites like ETF.com, where the respective 45-day historical bid/ask spreads were VWO (0.02%), IEMG (0.02%), and SCHE (0.04%). Schwab has the lowest assets under management and lowest daily volume, making their bid/ask spread wider by a thin margin.

Wyndham Rewards Visa Card: 45,000 Point Bonus (Worth 3 Free Hotel Nights)

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(Offer is now expired.)

This Wyndham Rewards Visa Card special link (annual fee version) is currently offering a limited-time sign-up bonus of 45,000 Wyndham Rewards points. This is enough points to be redeemed for 3 award nights at nearly any Wyndham property with no blackout dates. (The standard offer is usually 30,000 points.) You earn 30,000 bonus points after your first purchase, an additional 15,000 bonus points after $2,000 in purchases within the first 90 days of account opening. There is a $75 annual fee that is not waived. Here are the other card highlights:

  • Earn 5 points per $1 spent on eligible purchases for every participating hotel stay, Wyndham Vacation Rental North America properties, and on-property spend and maintenance fees at Wyndham timeshare properties.
  • Earn 2 points per $1 spent on eligible gas, utility and grocery store purchases (excluding Target® and Walmart®).
  • Earn 1 point per $1 spent on purchases everywhere else, (excluding Wyndham timeshare downpayments).
  • Automatic upgrade to Wyndham Rewards Platinum status (early check-in, 3,000 annual points bonus, Avis/Budget rental car upgrades).
  • Earn 6,000 bonus points annually after your account anniversary every year. (Together with Platinum status, that is a total of 9,000 annual bonus points.)
  • No foreign transaction fees

In 2015, Wyndham Rewards changed to a simple, flat redemption schedule. A “Go Free” award is 15,000 points for a free night (per bedroom) at any all particpating properties under the Wyndham umbrella. This includes over 7,000 hotels worldwide – from Days Inn motels to Wyndham Grand hotels. Award covers room rate and taxes. This includes rooms at their top-tier hotels and all-inclusive resorts. You simply need to find a “standard” room that is available, as there are no blackout dates. The alternative is their “Go Fast” award (Cash + Points option) which can also be a good value.

Here are just a few quick possibilities:

Wyndham points expiration. Note that their system is different in that your points only have a finite lifespan, even if you maintain the required activity. For example, earning points via this credit card will only reset the 18-month inactivity clock. You should get the exact date in your online account page.

Wyndham rewards will expire 48 months after they are first deposited into your account unless your account is canceled sooner due to inactivity. An account is considered inactive if no account activity has taken place over an 18-month period.

Bottom line. The sign-up bonus of 45,000 Wyndham Rewards points can be redeemed for 3 free nights at a variety of locations around the US and even worldwide. Your value will depend on your specific redemption. If I can get $200 value out of each night (including taxes), minus the $75 annual fee, the net bonus value is still over $500. I appreciate the flexibility of this program, in terms of the flat redemption rate, no blackout dates, and the large number of hotels available.

The Real Estate Crowdfunding Capital Stack: Equity vs. Debt

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Before I share more about my real-estate crowdfunding experiments, I wanted to take a quick step back in order to provide better context. Just as ETFs and mutual funds are separated into stocks and bonds, real estate can be separated into two general types of investments:

  • Equity = an ownership interest in the asset.
  • Debt = a loan, typically collateralized by the asset itself or other assets of the equity owner.

In the business world, I could buy a piece of Amazon or Apple and participate in the ups and down of the business value, or I could invest in bonds issued by Amazon or Apple and get a fixed return as long as Amazon and Google keep making their interest payments within the stated period of time.

This is called the “capital stack”. In residential real estate, the stack can be quite simple. There is one homeowner and one mortgage-holder (debt). If they ever sell the house, any proceeds must first go towards the mortgage-holder. Anything left over goes to the homeowners. If the house gets sold for $400,000 and had a $300,000 mortgage, the homeowner would get $100,000. When you see the image below (source), imagine water filling up a container. The bottom layer gets paid first. If there isn’t enough “water”, the next layer doesn’t get paid. If there is excess “water”, that goes to the equity owner. (image source)

recapitalstack1

In commercial real estate, here are the four most common layers of the capital stack: common equity, preferred equity, mezzanine debt, and senior debt. Preferred equity, as its location suggests, is in between common equity and debt in terms of cashflow priority and return upside potential. It has a more senior position to cashflow than common equity, but it still junior to mezzanine and senior debt. Mezzanine debt can be explained as similar to when a homeowner might also take out a “home equity loan” that junior to the first mortgage (and thus usually at a higher interest rate). Both of these intermediate stacks are more complex in terms of how much extra return are you getting for how much extra risk, and thus I tend to avoid them. (image source)

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The expected return of each layer is then adjusted based on its position in the stack. Keep in mind that as your expected return increases, so does the possibility that your actual return is zero or negative. (image source)

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My equity investments. My initial feeling was that publicly-traded REITs do a pretty good job on the equity side. The big REITs hold big apartment complexes, hundreds of public storage facilities, etc. Is there an opportunity for higher returns from smaller properties? Perhaps, but the problem is that it takes years for equity investments to pan out. My plan is to invest another $1,000 into Fundrise eREITs and hold on to them for 5 years as a long-term experiment. As the dividends are paid and the net asset value is updated, I can compare side-by-side with the dividends and net asset value of the low-cost Vanguard REIT ETF (VNQ).

My debt investments. I prefer the idea of providing short-term, 7%-9% loans backed by a hard asset like real estate. This is an area traditional referred to as “hard money loans”. I can’t replicate this type of deal with an ETF or mutual fund. I plan to increase my investment in PeerStreet to roughly $25,000 total as they focus 100% on the debt side and I like their platform so far. I invest only in notes with a term under 12 months, and in the first position (most senior). This remains under my “5% Speculative Portfolio” and will track my returns regularly.

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