How are your investments doing?

[MossRoad]

Sell it all and move to the sunset coast of Lk Michigan.

https://www.realtor.com/realestateandhomes-search/Traverse-City_MI/with_waterfront?psafe_param=1&cid=sem_7219905398_20002066221_155431587506_787568742645:G:s&s_kwcid=AL!15120!3!787568742645!!!g!!&gclsrc=aw.ds&gad_source=1&gad_campaignid=20002066221&gbraid=0AAAAAD6NRB9l-dSGiB3wPEbSwn9H1eFgC&gclid=CjwKCAiA4KfLBhB0EiwAUY7GAe9EDsokyaw7-3eAErPHHdYh82UCiw3AHP0ARfOg5sYNaGQLIx8DyxoC5oAQAvD_BwE

 

[CH4Ohio]

Most wealthy people never have real income. They take loans against an equity position and live off loans to themselves. Most time the dividends replace the money taken out and the principle continues to grow.

We all do it and so do politicians. They won't fix it because it would hurt them and their donors.

It avoids a lot of tax burden.

So help me understand please.

If it’s a “loan” then it wouldn’t be a distribution. Right? But you would be required to pay back the loan. You couldn’t just loan yourself money and then forgive the debt. Could you?? I don’t understand how you repay the loan.

Looks like I’ll have to take required distributions in excess of what I’ll really need. But would like to understand how to leverage this loan idea against other assets that aren’t tax-deferred.

I must be dense. How does it work??

Thx.

 

[ultrarunner]

Sell it all and move to the sunset coast of Lk Michigan.

https://www.realtor.com/realestateandhomes-search/Traverse-City_MI/with_waterfront?psafe_param=1&cid=sem_7219905398_20002066221_155431587506_787568742645:G:s&s_kwcid=AL!15120!3!787568742645!!!g!!&gclsrc=aw.ds&gad_source=1&gad_campaignid=20002066221&gbraid=0AAAAAD6NRB9l-dSGiB3wPEbSwn9H1eFgC&gclid=CjwKCAiA4KfLBhB0EiwAUY7GAe9EDsokyaw7-3eAErPHHdYh82UCiw3AHP0ARfOg5sYNaGQLIx8DyxoC5oAQAvD_BwE

Funny how many Michigan expats I come across… born and raised and some graduated from Medical school there… they all like California… warts and all.

 

[MossRoad]

Funny how many Michigan expats I come across… born and raised and some graduated from Medical school there… they all like California… warts and all.

Maybe they didn't like the cold. I do.

 

[ultrarunner]

Maybe they didn't like the cold. I do.

The ice was a factor but also wanted the California lifestyle… professionals… MD, Engineer and medical equipment and pharmacy reps…

 

[RayIN]

Maybe they didn't like the cold. I do.

I see you got a "dusting" of snow. I'm 300 miles south of you and can see some snow but the ground is not covered.

 

[ponytug]

So help me understand please.

If it’s a “loan” then it wouldn’t be a distribution. Right? But you would be required to pay back the loan. You couldn’t just loan yourself money and then forgive the debt. Could you?? I don’t understand how you repay the loan.

Looks like I’ll have to take required distributions in excess of what I’ll really need. But would like to understand how to leverage this loan idea against other assets that aren’t tax-deferred.

I must be dense. How does it work??

Thx.

I will let @Snobdds give you his view, but there a couple of strategies. One if you have an asset that you would like to preserve (house, art, highly appreciated investments), you can take a loan out against it and after you die the loan is settled by the estate, after capital gains have been reset by the estate (to whatever degree they are eligible). Two, you want to preserve some existing asset that is performing well, e.g. a business or stock, if you take a loan against that asset that is less than the appreciation or income of the asset, you can then use those funds for purchasing other assets, or paying yourself.

Lots of wrinkles, but some combination of avoiding, or deferring taxes, and using the interest on loans for investment as ways to reduce the taxes on the investment returns plus leverage.

When interest rates are low, e.g. up to a few years ago, one could make quite a bit off of the difference between loan costs and asset appreciation. In times like the '80s, it is harder, but still doable. A friend had a well known actress come into his loan office asking for a loan on her multimillion dollar penthouse as a way of generating tax deductions for her, and diversifying her assets.

Lots of links on the web; investopedia might be a good place to start.

All the best,

Peter

 

[ultrarunner]

Seen this on large commercial properties…

Say the owner paid a million for a property 35 years ago and has a steady tenant.

That equity is pulled tax free and Rent paid is used to service the debt…

I know a million dollar property that secured a 12 million GE Capital loan 20 years later based on the NNN income stream.

 

[two_bit_score]

… transitioning to commercial and industrial…

These have their own problems… a friend can’t sell his property because it’s next to a defunct dry cleaners… decades of solvents have tainted the soil…

I found out that in Texas certain non-profits can purchase a property flagged by TCEQ and get a grant to pay for the clean up.

 

[MossRoad]

The ice was a factor but also wanted the California lifestyle… professionals… MD, Engineer and medical equipment and pharmacy reps…

There's a huge demand for engineers and a large medical equipment industry near us. I have to say, this is one area where it's hard to not be working. Pretty fortunate. Not too sure about Michigan west coast, though.

 

[MossRoad]

I see you got a "dusting" of snow. I'm 300 miles south of you and can see some snow but the ground is not covered.

Yeah, about 16", but it was light and fluffy.

 

[MossRoad]

Yeah, about 16", but it was light and fluffy.

View attachment 4809105 View attachment 4809106 View attachment 4809107

The investment in my tractor 25 years ago still seems to be worth it.

 

[Oaktree]

The investment in my tractor 25 years ago still seems to be worth it.

I consider an "investment" as being something that is intended to appreciate in value, and a tractor doesn't qualify for that. That having been said, I sure do appreciate having one...it's a very useful tool, would hate to be without it.

 

[MossRoad]

I consider an "investment" as being something that is intended to appreciate in value, and a tractor doesn't qualify for that. That having been said, I sure do appreciate having one...it's a very useful tool, would hate to be without it.

I see it as it saved me a bunch of money that would have had to been spent hiring jobs out, and my own time as well, which I put value on.

 

[ponytug]

The ROI on my tractor is multiples of most other purchases (stocks, real estate, etc.) for exactly the reasons @MossRoad mentioned, even allowing for my time at billable rates. YMMV.

All the best, Peter

 

[RayIN]

I consider an "investment" as being something that is intended to appreciate in value, and a tractor doesn't qualify for that. That having been said, I sure do appreciate having one...it's a very useful tool, would hate to be without it.

Well, it depends. Today my tractor w/FEL is selling for $2k more that what I paid, plus the IRA from which I withdrew the money 16 months ago, has recovered the withdrawal plus $2K more. So my depreciating asset has worked out fine IMO.
Yes an investment is normally an appreciating asset. Mossroad is right to include his time, experience and knowledge as an asset to the tractor purchase. Again IMO.

 

[MossRoad]

The ROI on my tractor is multiples of most other purchases (stocks, real estate, etc.) for exactly the reasons @MossRoad mentioned, even allowing for my time at billable rates. YMMV.

All the best, Peter

I work for root beer.

 

[riptides]

I sold a Kubota 5 years ago for what I purchased it for 10 years prior to sale.

 

[MossRoad]

Crazy. Can't rent it cheaper.

 

[etpm]

I checked today and my investments are up 3% since Jan first. I'm sure that's gonna change.
Eric