Investment showdown -- beyond the Roth, SDP, & TSP

[nsplayr]

I just sent an email via their secure contact once you log in to your account. Took like 6 weeks to get it "approved" but supposedly it's always approved for active mil. Some buddies have the cards that carry a $400 yearly fee and it gets waived just the same. They claim it's under the SCRA; I'm not sure how or why that applies but I'll take it.

Edited February 13, 2013 by nsplayr

[OregonHerc]

I just sent an email via their secure contact once you log in to your account. Took like 6 weeks to get it "approved" but supposedly it's always approved for active mil. Some buddies have the cards that carry a $400 yearly fee and it gets waived just the same. They claim it's under the SCRA but I'm not sure how or why that applies but I'll take it.

I'll give it a try. Thanks!

[JS]

+1...got this card about 4 months ago and it's been great so far. It's annoying that the cash back isn't just automatically applied to my statement and it takes over a month to get your money from the previous month but whatever...quibbling when I'm getting 6% on groceries. $300 in the bank per year on groceries alone (5% more than I was getting on my last card), plus the annual fees on all AMEX cards are waived for active duty mil.

Also love my target redcard...to me it's really the best deal because you get 5% off directly at the register when you swipe. No ifs, ands, buts, or waiting, just 5% off, I go online and click "pay balance" from my checking account. Honestly could not be easier.

Like you said, if you're disciplined there is absolutely no reason not to use the various kinds of credit wisely.

No annual fee for the Blue Amex if you are military? Wish I new that 3 years ago. So much for being smart with my credit cards.

Along the lines of automatic discounts - I usually "swipe" my military ID into thin air at the checkout of Lowes and Home Depot and get an automatic 10% off. Not questions asked (except for about 5 years ago when HD said it was only on Veterans Day or some crap. Got the discount every time since).

[nsplayr]

No annual fee for the Blue Amex if you are military? Wish I new that 3 years ago. So much for being smart with my credit cards.

Might be worth asking them to recoup those fees. Here's (in part) what they told me:

...we've credited your account for any applicable fees and previously billed interest if applicable, which you'll see reflected on an upcoming billing statement(s). Additionally, we have waived the following fees on the account for the duration of your active military duty: annual membership fees, overlimit fees, late payment fees, returned payment fees, statement copy request fees

I had already been charged my first $75 and just recently got it refunded...it's possible they would refund 3 years of fees in the same way. Dibs on a beer if this saves you $225! It did take about 2 months and 2 follow-up emails through the secure message center but well worth $75 per year for the rest of my career.

Edited February 13, 2013 by nsplayr

[Gravedigger]

I had Blue Sky preferred for two years, called them about 6 months ago to tell them I was active duty and they automatically refunded all fees ever charged on the card. Annual fees, foreign transaction, ATM fees, etc. I was just hoping to get the fees waived for the future, the $300 credit was a nice surprise.

[uhhello]

Might be worth asking them to recoup those fees. Here's (in part) what they told me:

I had already been charged my first $75 and just recently got it refunded...it's possible they would refund 3 years of fees in the same way. Dibs on a beer if this saves you $225! It did take about 2 months and 2 follow-up emails through the secure message center but well worth $75 per year for the rest of my career.

Thanks for the tip. Message submitted.

[go_cubbies22]

Looking for some advice. We are stationed at Elmo renting a house with about 14 months on our DEROS. We currently own a house at a prior base that we are renting out, max both of our Roths, and max the TSP.

We are looking at buying a house as our primary residence for the next 12-14 months and then keeping it as an investment property. The city of Anchorage just released a housing market analysis that predicts an increased demand for housing in the next 20 years. The rental market is ridiculous here, houses usually get rented within a day or two, sometimes hours, of being on the market. We could easily get a house that would rent for $3-400 over our mortgage. One downside is that we would be using the VA loan for a second time so it comes with a funding fee of 3.3%. That would be an additional ~$10K rolled into the loan. My thinking is that we would make that back within a year or two considering the extra money above the mortgage and principal paid. Also, we would then be maxed out on our VA eligibility so any future purchases would require a down payment (not necessarily a bad thing).

Am I missing anything that should influence my decision? Do you guys think this is a good or bad idea? All advice/opinions are appreciated. Thanks.

[Day Man]

talk to this guy...people seem to have good luck with him...

Hi everybody, I wanted to post my direct phone line on here in case you preferred to reach us that way. I've been getting several PM's with VA related questions, but I know sometimes a phone conversation is preferred.

These days I'm not the person that will complete the mortgage loan for you, but I can answer general questions, and then if it makes sense for you I can put you in contact with one of our loan officers assigned to the base ops channel!

Here's my number: 913-383-6442

Here's my email: dstevens@nbofkc.com

[Keydet]

plus the annual fees on all AMEX cards are waived for active duty mil.

+1...I've had a AmEx green card for a while, but heard about the fee waiver in the squadron bar a in January and I immediately inquired when I got home. I upgraded my Green card to Platinum and got all the fees waived ($450/yr) until I get out of the military. I merely asked about the fees being waived for active duty military under the Servicemember's Civil Relief Act and the dude crosschecked it with his supervisor and sent me on my way in five minutes. I just got a letter in the mail about three weeks after I got my new card stating all the fee waivers and such they credited to me. Awesome stuff.

Now when I call AmEx about anything I go straight to English speaking, America-based agents, 24/7 service. When I had the Green card they were still nice and helpful, but the language barrier sometimes annoyed me.

Edited February 28, 2013 by Keydet

[HU&W]

Looking for some advice. We are stationed at Elmo renting a house with about 14 months on our DEROS. We currently own a house at a prior base that we are renting out, max both of our Roths, and max the TSP.

We are looking at buying a house as our primary residence for the next 12-14 months and then keeping it as an investment property. The city of Anchorage just released a housing market analysis that predicts an increased demand for housing in the next 20 years. The rental market is ridiculous here, houses usually get rented within a day or two, sometimes hours, of being on the market. We could easily get a house that would rent for $3-400 over our mortgage. One downside is that we would be using the VA loan for a second time so it comes with a funding fee of 3.3%. That would be an additional ~$10K rolled into the loan. My thinking is that we would make that back within a year or two considering the extra money above the mortgage and principal paid. Also, we would then be maxed out on our VA eligibility so any future purchases would require a down payment (not necessarily a bad thing).

Am I missing anything that should influence my decision? Do you guys think this is a good or bad idea? All advice/opinions are appreciated. Thanks.

We just did a second VA. The amount of the purchase was around $12K above our remaining entitlement, so we had to pay that out of pocket. Since that ended up meeting some threshold, 5% I think, the 3.3% funding fee was significantly reduced. I don't remember the details, and I don't have the paperwork with me to look it up, but it saved me a few thousand dollars in closing costs.

[go_cubbies22]

talk to this guy...people seem to have good luck with him...

Actually working with Jeff Palmer from NBoKC on this already. Have done two refinances with them on our rental property. Ended up getting money back at closing on both refis. Great people, highly recommend.

[JS]

Looking for some advice. We are stationed at Elmo renting a house with about 14 months on our DEROS. We currently own a house at a prior base that we are renting out, max both of our Roths, and max the TSP.

We are looking at buying a house as our primary residence for the next 12-14 months and then keeping it as an investment property. The city of Anchorage just released a housing market analysis that predicts an increased demand for housing in the next 20 years. The rental market is ridiculous here, houses usually get rented within a day or two, sometimes hours, of being on the market. We could easily get a house that would rent for $3-400 over our mortgage. One downside is that we would be using the VA loan for a second time so it comes with a funding fee of 3.3%. That would be an additional ~$10K rolled into the loan. My thinking is that we would make that back within a year or two considering the extra money above the mortgage and principal paid. Also, we would then be maxed out on our VA eligibility so any future purchases would require a down payment (not necessarily a bad thing).

Am I missing anything that should influence my decision? Do you guys think this is a good or bad idea? All advice/opinions are appreciated. Thanks.

I actually just refinanced my house, so here are some thoughts:

For me (Reserve), the biggest question was how long I thought I would be here. Depending on a litany of factors - family size, possible other jobs, etc - I think we won't be here much longer than like 5 years. But we could easily be here for another 10. Either way, I was not going to go with a 30-year fixed because you are just paying a higher rate knowing with full certainty that you won't be in the house for 30 years (and the 30-year terms are essentially wiped out when you sell).

With that in mind, we did a 7-ARM (not VA), with negative points. The negative points raised the interest rate a tad, but basically reduced the $4K in closing costs down to nothing. With no points, the "breakeven" point for this loan when comparing it to other loans was around 7 years. By doing negative points, we basically moved the breakeven point closer to like 5 years - again, sort of hedging that we won't be here much longer than that.

I did not do the VA loan for my primary or the refinance due to the funding fee being so high. Even when they "roll the closing costs/funding fees" into the loan, that is still cold, hard cash that you are parting ways with - never to recoup again. Our first loan, a traditional, had the closing costs rolled into the loan because we didn't have a down payment. It has taken many years, plus my having to write a check for about $15K the other day to bring our current equity level down to the 80% required not to have to pay PMI (of course, PMI is not a factor with VA loans, but you are paying that penalty in the form of the funding fee instead - again, calculate a breakeven point between the two if you can).

Even though you will recoup the $10K in a few months, that is still $10K of real money that flows from your wealth in to the pocket of another, without adding to your equity or principal in any way shape or form. Ultimately, that is the cost of doing business with mortgages, so to speak, but I just tried to find a different way to optimize my numbers. If you have the funds to put down 20% down-payment, I have found that the traditional rates (minus PMI, because you have 80% LTV) is a much better deal than paying these horrendous funding fees - especially if you are not going to hold onto the loan for a very long term.

Sorry to muddy the waters, but you asked if there were other things that should influence your decision. I researched the shit out of this thing, and one of my best friends was a mortgage broker for years. He agrees with my line of thinking. The biggest and most important variable is to try and make an educated guess as to how long you will keep the property/loan. I know it is a lot of guesswork, but a very educated guess will help you optimize your cost structure. The amount of time spent in the loan heavily influences which path you should take:

(assuming you don't have a down-payment of 20%):

-If you know for a fact that you will keep the property for 30 years or more, get a traditional 30-year fixed (VA), and pay the shit out of as many points as they will allow (rolling into the closing costs if needed). This will move your break even point several years down the road - like 10 or 12 - but every year after that you will be laughing all the way to the bank.

- If you think you will keep the property for more like 10 years, look into a 10-year ARM, or the 5/5 ARM that PenFed currently has a deal going on, with no points. I am not sure if you can do ARMS with VA loans, but you can definitely just pay PMI in lieu of having your 20% down.

- If this is a relatively short term thing, get a 5 or 7 year ARM, and use negative points to keep closing costs down. This will bring your breakeven point much closer to like 2 or 3 years. The downside is that for every year after like 3 or 4 years that you have the property, you will be kicking yourself because you have a slightly higher rate than had you now taken negative points. Whatever you do, don't take on the line of thinking "I will just refinance again if I decide to stay longer and have them roll the new closing costs into the loan." That thinking will again have you piss down the drain another $5K of closing costs, and your principal will somehow, magically not reduce at the speed you were expecting it to.

I was hell bent on avoiding paying PMI, paying the VA funding fee, or paying the inherent penalties associated with an FHA loan due to not having 20% equity. That's why I robbed my savings account (and had to forgo planned investments in the TSP) for the $15K to put down on my refinance. The way I look at it, any extra dough you have to put into the loan (at closing or monthly) due to not having 20% is just money pissed away. It is not helping your equity or wealth, it is just going into the pockets of the lenders and private mortgage insurance underwriters. My thinking in writing the $15K check was that instead of that money going to someone else's pocket, it would be "invested" and stored in the walls, ceiling, and foundation of my house to be taken out at a later date. And with those $15K of dollars temporarily stored in the walls of my house, I was able to avoid pissing away almost $80/month, or $1000/year of necessary PMI. To me, that's like a 7% return on my "investment" that I will be able to cash out on when I sell the house (assuming level housing prices, etc).

Sorry for the long answer, but you do have to try and balance the factors of how long you will stay, funding fees, PMI costs, down payments, length of the loan, points/closing costs, and a few other things. Just wanted to give you my 2 cents on some of those variables.

[matmacwc]

Wasn't it ARMs that got us into this mess? Good luck, hope you sell, or you will regret it.

Www.daveramsey.com

Edited March 1, 2013 by matmacwc

[MilitaryToFinance]

Wasn't it ARMs that got us into this mess? Good luck, hope you sell, or you will regret it.

Www.daveramsey.com

Dave Ramsey is only good for people who don't understand money and got themselves buried in debt and can't get out. His methods aren't good for growing long-term wealth. No ARMs did not get us into this mess. People buying houses they couldn't afford with mortgage terms they couldn't understand got us into this mess. Adjustable rate mortgages are actually a great tool for those who understand exactly what they are getting into. Read the fine print, know what your interest rate is allowed to reset to and how often. Make sure you can afford that payment as well. If you are using the ARM because you can't afford the final payment rate then you are wrong. If you are using it because you can afford the loan either way but want to take advantage of the lower rate in the near term that is why they exist.

Just like those scary credit cards that Dave Ramsey tells you are the spawn of satan. Well used debt is actually a very strong tool to utilize. You shouldn't be afraid to do things just because somebody else got themselves screwed by not understanding what they agreed to. Using leverage appropriately will lead to a much higher net worth in the end than being so terrified of debt you won't ever invest in your future.

[Champ Kind]

Yawn...

[Butters]

Yawn...

Figured that would would make you yawn, since you do not understand money. Go back to counting the cash in your mattress and I will fly back to Vegas on my free miles ticket and buy some blow with my credit card cash rewards.

[JS]

Wasn't it ARMs that got us into this mess? Good luck, hope you sell, or you will regret it.

Www.daveramsey.com

No, it was "interest only" loans, sub-prime loans, and people just generally biting off more than they can chew with the expectations that property values will always increase that actually got us into this trouble. Interest only loans are particularly bad - sort of the mortgage version of making the minimum payment on a credit card and never chipping away at the principal.

After my 7 year ARM is up, the max the rate can go up is like 4 points - and that is only if Prime is soaring (i.e. total market recovery, inflation and the next internet/housing bubble on the rise.) The ironic thing is that even if the worse case transpires for me - we decide to stay for more than 7 years, the economy is booming and rates soar, and we can't refinance due to shitty credit - our rate can only go to about what it was before we refinanced. And after paying it down for 7 years, the math works out so that our new, worse-case scenario payment would actually be less than what we were paying before the refinance. These worse-case payment amounts were all spelled out in my Truth-in-lending disclosure, plain as day.

Also, the 5/5 ARM that Penfed has is pretty awesome. They cover most of the closing costs, and it can only adjust by 2 points in 5 years, and then another 2 points 5 years after that. Again, worse case scenario, in 10 years you wind up paying the rates that you paid in 2008 or so, which was when I had my original loan.

So if you are saying that I will regret saving $600/month for 7 years ($50K total, for those bad at math), and then possibly, worse-case going back to my old monthly payments, you are one of those who doesn't understand money or high-school math, and you are a prime candidate for Ramsey's junk. Besides, I know that I am not going to be here for 30 years, so if I bought a 30-year loan, I am throwing away the closing costs the moment I sell or refinance.

Mapplby is dead right. I have said time and again, Ramsey's shit is for those who truly don't understand money or numbers. His prescriptions and strategies will lose you wealth over the years - and lots of it. Making people think that investments and capitalism (oh, I am sorry, if you are on the receiving end of someone else's capital investment, it is known by its evil name - debt) is always bad, is just ludicrous. Telling people not to take out the max amount of money at 2.5% with a 30 year term so you can invest it and gain 5-10% is complete and total financial idiocracy, by definition and by the numbers. All because of his scare tactics that "all debt is bad." Absolutely crazy. I wish my bank would let me load up on another $200K of that evil debt at today's mortgage rates with a 30-year lock in. I could make a killing with that money - especially 10-15 years down the road when rates go up. Borrowing at 3% on a mortgage today is basically like free money, due to the effects of inflation.

But at the end of the day, why the fuck would someone lock themselves into a financial product for 30 years, knowing full well that they won't be in that house for 30 years, and thus enjoying the benefits of the 30 year lock in???? By definition, if you know you are only going to be using a financial product for, say, no more than 10 years, why would you buy a product, appropriately labelled, with "30 year" in the title? The higher rates you are paying by not going with a 7 or 10 year loan is just Dave Ramsey-type money - pissed away as a penalty for those who don't understand math.

Edited March 3, 2013 by JS

[ThreeHoler]

Don't let that IRA get over $3 mil or you might lose your "retirement" tax-advantaged status.

https://money.msn.com/retirement-plan/latest.aspx?post=b4e0b5f5-683c-48d5-b6aa-c5e3d5f039c7

The president's budget plan, expected to be introduced next week, would ban anything above $3 million in individual retirement accounts, Bloomberg reports. Because those accounts get some key tax breaks, capping them would generate about $9 billion in revenue for Uncle Sam over the next 10 years.

[matmacwc]

Because I'm guard and not moving......

Don't let that IRA get over $3 mil or you might lose your "retirement" tax-advantaged status.

https://money.msn.com/retirement-plan/latest.aspx?post=b4e0b5f5-683c-48d5-b6aa-c5e3d5f039c7

It won't pass, BO doesn't know what he is doing, he will kill the economy more, but he may be trying to do that.

Edited April 6, 2013 by matmacwc

[Skitzo]

You've gotta be shitting me. By the time I retire 3 million will be chump change.

[SurelySerious]

You've gotta be shitting me. By the time I retire 3 million will be chump change.

He doesn't need an IRA, so it's immaterial to him.

[Archa3opt3ryx]

+1...I've had a AmEx green card for a while, but heard about the fee waiver in the squadron bar a in January and I immediately inquired when I got home. I upgraded my Green card to Platinum and got all the fees waived ($450/yr) until I get out of the military. I merely asked about the fees being waived for active duty military under the Servicemember's Civil Relief Act and the dude crosschecked it with his supervisor and sent me on my way in five minutes. I just got a letter in the mail about three weeks after I got my new card stating all the fee waivers and such they credited to me. Awesome stuff.

Now when I call AmEx about anything I go straight to English speaking, America-based agents, 24/7 service. When I had the Green card they were still nice and helpful, but the language barrier sometimes annoyed me.

I currently have the Blue Cash Preferred card...any reason I should switch to the Platinum card? Honestly, the Blue Cash Preferred card seems like a better deal, considering I'm getting 6% on groceries and 3% on gas (by far my two biggest expenses). There's a few travel-related benefits that come with the Platinum card, but other than that I can't find any reason to switch...

Anyone know if there's a bank that will waive fees for a Visa card? I always carry a Visa card with my AmEx, since there's always a few places that don't take AmEx.

[flyusaf83]

Looking for some insight from anyone who has bought and rented out homes when they PCS'ed. We bought a house a year ago when we moved to our present location. We bought the home with the intent of renting it out when we leave here. In addition to allocating 15% of my income to Roth TSP, we pay more than double our mortgage payment every month. Anyway, we plan on paying this home off in ~4 years from now.

I'd like to do the same thing, depending on location and market, when we PCS again in 2 years. At that point, we'll still have the mortgage on the home we live in now, which will be a rental at that point. Here's where I have questions. Will we be able to get a decent mortgage when we already have one on another property (even though we'll have considerable equitity at that point)? Also, are there any tax considerations when we are renting out the home and have another mortgage? TIA.

Oh, and I know that I'm asking for investment advise on an internet board for pilots. I'll take the grain of salt. No need to call me out.

Edited April 14, 2013 by flyusaf83

[AnimalMother]

Looking for some insight from anyone who has bought and rented out homes when they PCS'ed. We bought a house a year ago when we moved to our present location. We bought the home with the intent of renting it out when we leave here. In addition to allocating 15% of my income to Roth TSP, we pay more than double our mortgage payment every month. Anyway, we plan on paying this home off in ~4 years from now.

I'd like to do the same thing, depending on location and market, when we PCS again in 2 years. At that point, we'll still have the mortgage on the home we live in now, which will be a rental at that point. Here's where I have questions. Will we be able to get a decent mortgage when we already have one on another property (even though we'll have considerable equitity at that point)? Also, are there any tax considerations when we are renting out the home and have another mortgage? TIA.

Oh, and I know that I'm asking for investment advise on an internet board for pilots. I'll take the grain of salt. No need to call me out.

So why are you paying double on your mortgage payments on property that your renter will pay off for you? At 3-4% interest, and ~5-10% inflation, I'm in absolutely no rush to pay the bank back. A second mortgage should be easy, tons of guys have 2 or 3. Take the extra cash and use it for a down payment, or top quality scotch. Just don't use USAA.

As for tax questions, a tax attorney is probably your best bet and definitely worth the few bucks (don't go cheap and use a regular tax accountant, that can bite you). I do my own taxes but I make most of it up as I go along, probably not the best route for most people.

[flyusaf83]

So why are you paying double on your mortgage payments on property that your renter will pay off for you? At 3-4% interest, and ~5-10% inflation, I'm in absolutely no rush to pay the bank back. A second mortgage should be easy, tons of guys have 2 or 3. Take the extra cash and use it for a down payment, or top quality scotch. Just don't use USAA.

First off, I hate debt - whatever the form or justification. The appeal of owning an investment property outright with no mortgage is just too appealing to me. Even though I'm only paying about 3% interest, I'd rather not be paying 3% interest. We still are able to make extra mortgage payments and save some cash for a down payment on our next home. And no, I'm not using USAA and don't plan on it - at least for a mortgage. I love their basic checking/banking, but have heard they are lousy for mortgages/home insurance.

I'm glad that I can get a mortgage on a seperate home, but what about the rate? Will I still be able to get a good rate, or will the fact that I owe on another home hurt the rate I can get?