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    #16
    Originally posted by ~bs View Post
    If a renter truly has trouble meeting rent, the best option is always to try to work things out with the landlord.
    Certainly, but at the end of the day, it's the landlord who is eating those costs when the tenants can't or won't pay.

    Anyway, back to income investing ideas, of which there really isn't anything we don't already know about.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

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      #17
      Originally posted by disneysteve View Post

      Certainly, but at the end of the day, it's the landlord who is eating those costs when the tenants can't or won't pay.

      Anyway, back to income investing ideas, of which there really isn't anything we don't already know about.
      Actually, unless the renter is truly bankrupt, it will be the renter that eats the costs in the long run once their wages are garnished or bank account seized. It'll just be a real pain in the ass for the landlord.

      Comment


        #18
        Originally posted by kork13 View Post
        Not surprised, and makes sense.

        Utility companies tend to be good for dividends. Verizon/AT&T, power companies (ex: Southern Company), that sort. The stock price will be variable, but over time the dividends themselves generally continue fairly strong. I don't currently do it myself, but if I were seeking stock dividends, I'd probably go there first.
        This is where my thinking went as well - utilities and comms companies. Did a quick screen at Vanguard and VEIPX was at the top of the list. Appears to have a >3% SEC yield and reasonable expenses.

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          #19
          Originally posted by srblanco7 View Post

          This is where my thinking went as well - utilities and comms companies. Did a quick screen at Vanguard and VEIPX was at the top of the list. Appears to have a >3% SEC yield and reasonable expenses.
          Like everything else in a recession, company dividends aren't guaranteed. Plenty of sectors previously paid good dividends and were axed. energy sector, financials, hospitality, some defense, etc etc. There's risk in everything. Utilities could possibly be put under pressure if households have trouble paying their bills. It's a capital intensive industry that relies on heavy debt. Any issues with cash flow and the dividend gets cut quickly. Comms have similar challenges as utilities.

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            #20
            Chasing dividends is great as long as you understand the risk involved. My MIL is the same way. She has $2M in a 50/50 portfolio and doesn't want to spend down the principal. Seems a lot of people have this mindset. So she looks for dividends instead of growth. Dividend investing is stupid, BTW. The risk adjusted returns are lower than growth investing, but people do it because they see the dividends as income and selling any equities/bonds as sacrilege. You do realize when a stock pays a 4% dividend, the stock price drops 4%, right? And GE was a great dividend payer. I could go on, but sometimes it's like pounding my head against a wall. If you are going to chase yields via stock dividends, at least diversify beyond one or two stocks and buy a dividend chasing mutual fund or ETF. At least if one or two companies tank or stop their dividends, you can still get some money. Heck, the yield on SPY is 1.95%, which would be much better to hold than individual stocks for yield.

            And I find it ludicrous that someone would recommend real estate investing for a 90 y.o.

            To answer your question, though, I am going nowhere for yield. Total stock, total bond, total international index funds yield enough for my growth strategy. If I were chasing yields, I'd have to rewrite my investment policy statement.

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              #21
              Originally posted by corn18 View Post
              Chasing dividends is great as long as you understand the risk involved. My MIL is the same way. She has $2M in a 50/50 portfolio and doesn't want to spend down the principal. Seems a lot of people have this mindset. So she looks for dividends instead of growth.
              It's really an age-old method for funding retirement. People have done that for decades. My dad died almost 30 years ago and he was doing it when he was around. A lot of retirees build their nest egg around getting those regular checks. It's passive and automatic. Having to pick and choose which stocks to sell when you need money is very different, although in today's environment where commissions have largely disappeared I suppose it makes more sense. Years ago, though, selling a few shares of stock to pay your bills also meant paying a $50 commission every time you did that. And then there's the tax headache of calculating cost basis on each lot of shares that you've sold.

              And I find it ludicrous that someone would recommend real estate investing for a 90 y.o.
              I know TexasHusker did that for his mom but he's in the real estate business so it made more sense. She paid for the property and he did all of the work and management with her getting the monthly income. That's not at all my situation.

              To answer your question, though, I am going nowhere for yield. Total stock, total bond, total international index funds yield enough for my growth strategy. If I were chasing yields, I'd have to rewrite my investment policy statement.
              I totally understand that as we are in the same situation. We're still investing for growth, not income, but there will come a day when that will shift. We'll need our investments to start throwing off a steady income stream. It is true that our growth investments like mutual funds do generate income in the form of capital gains but they aren't predictable where dividends, generally speaking, are (although as noted they can go up or down or be cut entirely).
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #22
                Originally posted by corn18 View Post
                Chasing dividends is great as long as you understand the risk involved. My MIL is the same way. She has $2M in a 50/50 portfolio and doesn't want to spend down the principal. Seems a lot of people have this mindset. So she looks for dividends instead of growth. Dividend investing is stupid, BTW. The risk adjusted returns are lower than growth investing, but people do it because they see the dividends as income and selling any equities/bonds as sacrilege. You do realize when a stock pays a 4% dividend, the stock price drops 4%, right? And GE was a great dividend payer. I could go on, but sometimes it's like pounding my head against a wall. If you are going to chase yields via stock dividends, at least diversify beyond one or two stocks and buy a dividend chasing mutual fund or ETF. At least if one or two companies tank or stop their dividends, you can still get some money. Heck, the yield on SPY is 1.95%, which would be much better to hold than individual stocks for yield.

                And I find it ludicrous that someone would recommend real estate investing for a 90 y.o.

                To answer your question, though, I am going nowhere for yield. Total stock, total bond, total international index funds yield enough for my growth strategy. If I were chasing yields, I'd have to rewrite my investment policy statement.
                yeah... I used to invest for higher flying dividends, not really understanding the complete dynamic. Don't get me wrong, I dont mind some investment yield, but high flying dividend stocks are high flying for a reason. Chances are the dividends might be very risky or unsustainable. AT&T currently yields 7%, pretty good right? But then consider the stocks been relatively flat for decades because most of the earnings went towards paying dividend. Other companies share prices decline over time because the dividends they pay out is more than their current earnings. I would agree that probably better to simply rely on an mutual fund dividend yield of 1.5 - 2.5% unless your focus is really on needing a social security type payment monthly.
                Last edited by ~bs; 07-12-2020, 05:53 AM.

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                  #23
                  Originally posted by disneysteve View Post
                  It's really an age-old method for funding retirement. People have done that for decades. My dad died almost 30 years ago and he was doing it when he was around. A lot of retirees build their nest egg around getting those regular checks. It's passive and automatic. Having to pick and choose which stocks to sell when you need money is very different, although in today's environment where commissions have largely disappeared I suppose it makes more sense. Years ago, though, selling a few shares of stock to pay your bills also meant paying a $50 commission every time you did that. And then there's the tax headache of calculating cost basis on each lot of shares that you've sold.


                  I know TexasHusker did that for his mom but he's in the real estate business so it made more sense. She paid for the property and he did all of the work and management with her getting the monthly income. That's not at all my situation.


                  I totally understand that as we are in the same situation. We're still investing for growth, not income, but there will come a day when that will shift. We'll need our investments to start throwing off a steady income stream. It is true that our growth investments like mutual funds do generate income in the form of capital gains but they aren't predictable where dividends, generally speaking, are (although as noted they can go up or down or be cut entirely).
                  The issue is in the mind of the investor. You can generate the same income by selling stocks. There are myriad studies that clearly show that holding stocks and selling them for income always comes out ahead vs. living off dividends. And the other issue is folks work for years longer so they can live off the dividends vs. retiring now and living off their portfolio (which also has dividends, BTW). If your intent is to leave all your money to your kids, then by all means, live off the dividends. I just don't see the point of it other than the false security of a "paycheck". Change your mindset and you'll come out ahead. I honestly think my MIL will cut her spending before she sells any of her $2M portfolio. That is just crazy. SELL SOMETHING!

                  Comment


                    #24
                    Originally posted by corn18 View Post

                    The issue is in the mind of the investor. You can generate the same income by selling stocks. There are myriad studies that clearly show that holding stocks and selling them for income always comes out ahead vs. living off dividends. And the other issue is folks work for years longer so they can live off the dividends vs. retiring now and living off their portfolio (which also has dividends, BTW). If your intent is to leave all your money to your kids, then by all means, live off the dividends. I just don't see the point of it other than the false security of a "paycheck". Change your mindset and you'll come out ahead. I honestly think my MIL will cut her spending before she sells any of her $2M portfolio. That is just crazy. SELL SOMETHING!
                    All depends on one's outlook and preference. If someone was focused on leaving the most for their kids, they would likely focus on the higher growth stocks with lower dividends since those grow at a much faster pace than stable high dividend stocks. Additionally, once someone passes away, the stock basis "steps up" at time of death, so they could sell the shares if they wanted to and not have taxable gain.

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                      #25
                      Originally posted by disneysteve View Post

                      I was talking with my friend and CPA the other day. He and his wife own a number of rental properties (I'm not sure how many but it's not just one or two). He was telling me how they got screwed by COVID. They had a non-paying tenant and were in the process of starting the eviction process back in March but before they were able to finalize it, the government froze any evictions. Now it's July and this tenant hasn't paid rent since late 2019 and they can't do a thing about it.

                      Also, apparently the government issued a rule that tenants could apply their security deposit to the rent and then have 6 months after the state of emergency ends to pay it back (I think that's what he said). So now a bunch of tenants are taking advantage of that and asking their deposits to be applied to their rent so he's out that money, too, and has to hope that they pay it back.

                      I realize this is an unprecedented situation, but it does show how things can go wrong that you never expect.
                      Was on a rant about this recently. I have a tenant on month 2 of non-payment. Won't respond to my calls or texts. Moratorium on evictions has ended here but the court isn't doing hearings so basically instead of the normal 8 day window for a hearing, I got scheduled 6 weeks out - TBD if the courts actually reopen for hearings by then. In the meantime, there's literally nothing I can do about it. Property brings in $1,450/mo so it's kind of a big hit. Fortunately, none of my rental income is used for living expenses so aside from having to cover the mortgage ($700/mo) out of my rental savings, it hasn't been too hard on me. Regardless, I do find the whole situation ridiculous. While I sympathize with people who have lost their jobs, I think its preposterous that property owners have to eat the cost and losses and cannot do anything to reclaim their rental in order to start generating income again. It's a bit representative of the economy as a whole isn't it? Middle class loses again.

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                        #26
                        Originally posted by ~bs View Post

                        Actually, unless the renter is truly bankrupt, it will be the renter that eats the costs in the long run once their wages are garnished or bank account seized. It'll just be a real pain in the ass for the landlord.
                        Is this a process you've actually been through? I've won several money judgements against former tenants and have never seen a dime of any of it. The likelihood of getting paid, in my experience, is next to 0.

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                          #27
                          Originally posted by riverwed070707 View Post

                          Is this a process you've actually been through? I've won several money judgements against former tenants and have never seen a dime of any of it. The likelihood of getting paid, in my experience, is next to 0.
                          I know other people that have and got some judgement. It REALLY depends on the state and how favorable they are towards tenants. As we've seen in this crisis, the government tends to lean towards protecting tenants over landlords.

                          The main deterrent, which I'm not sure tenants even consider up front, is the hit to the credit report and the fact that no landlords will rent to them unless they were dumb enough not to pull a report.

                          In a normal situation without the crisis, they'd evict after 1-2 months, keep the security deposit, then simply rent out to someone else. The main effect of the crisis is having to keep a non paying tenant months longer than normal. Of course it will cost the landlord thousands, but in the grand scheme of things, small potatoes as I outlined in my other post. Being a landlord is like investing in the stockmarket, yes you may have short term losses, but in the long term of 10, 20 30 years, you are way out ahead. There's a lot worse situations to be in. I'd hate to be a commercial landlord. I'd hate to be a landlord in a bust/boom area such as college towns.
                          .
                          I actually lost my tenant earlier on in this crisis, but picked up a new one at $300/month more. I feel bad for the original tenants, as they were long term tenants paying WAY below market rates. Should they decide to move out again, I doubt they'll find as favorable rates. I believe they moved back with the parents to save money.

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                            #28
                            Originally posted by riverwed070707 View Post

                            Was on a rant about this recently. I have a tenant on month 2 of non-payment. Won't respond to my calls or texts. Moratorium on evictions has ended here but the court isn't doing hearings so basically instead of the normal 8 day window for a hearing, I got scheduled 6 weeks out - TBD if the courts actually reopen for hearings by then. In the meantime, there's literally nothing I can do about it. Property brings in $1,450/mo so it's kind of a big hit. Fortunately, none of my rental income is used for living expenses so aside from having to cover the mortgage ($700/mo) out of my rental savings, it hasn't been too hard on me. Regardless, I do find the whole situation ridiculous. While I sympathize with people who have lost their jobs, I think its preposterous that property owners have to eat the cost and losses and cannot do anything to reclaim their rental in order to start generating income again. It's a bit representative of the economy as a whole isn't it? Middle class loses again.
                            The issue is that the government protected one side of the equation without protecting the other. My opinion is that the government should have also provided an equal amount of relief on the other side of the equation. MANY times, government intervention doesn't have the intended effect. Because of the $600 unemployment stimulus plus the $1200 personal stimulus, people are well able to pay rent. If your tenant is less than ethical, they will attempt to take advantage. Basically what's going to happen is youre going to have to file eviction as soon as you're able to and try to retain the security deposit. Then proceed against the tenant in small claims court.

                            At that point, you should move on. This is a once in a life time event (we hope) and a rental property is a long term play. If/when you get to the point where the mortgage is paid off, things become A LOT easier.

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