From: camgere@earthlink.net
Newsgroups: misc.invest.financial-plan
Subject: Re: How do you think I could earn a 2% monthly ROI
Date: Wed, 9 May 2007 04:00:18 -0500
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On May 8, 10:37 am, Will Trice  wrote:
> camg...@earthlink.net wrote:
> > On May 8, 2:07 am, DarkProtoman  wrote:
>
> >>Hi! I'm a physician, and I'm trying to earn a 2% monthly ROI.
> > A 20% annual Return On Equity in Real Estate is no big deal.  If you
> > put down 20%, break even cash flow and have a leverage of 5 and get a
> > 4% appreciation you are there.  
>
> First, 20% doesn't get to the OP's goal.  Second, you make it sound a
> lot easier than it is.  Third, this rate of return is only sustainable
> if you continually refinance and keep your leverage (and risk) high,
> otherwise your return drops rapidly over time.
>
> -Will

All good points.  My mistake, I should have put the appreciation at
4.8%.  Anything
upto 6.5% appreciation is reasonable (33% return on downpayment).
Yes, it does
take work and isn't "easy".  I'm impressed by your point about
sustainability.  The first
year return doesn't compound automatically and does drop off.  Unless
you continually
leverage as you state.  Many people miss that.

The OPs real problem is his tax bracket.  As if 33% federal isn't bad
enough, he's in the 35% bracket.
If he uses his income to make mortgage payments the interest is
deductible, even if he has massive negative cash
flow (that's the reason for the Real Estate Professional status).  So
if interest payments now
which would otherwise be taxed at 35% federal this year turn into long
term capital gains tax deferred  for
10 or 15 years, that is a big win.

Back in the good old Clinton days I was in the 38.6% federal
(marginal) bracket, 9.3% (CA) state tax
and 2% (or so) Medicare tax bracket (again on the the last dollar I
earned).  Yes, that's a hair under 50%.
Unless I buy something and pay 7.75% state sales tax :)   Don't even
ask if I bought a gallon
of gas with additional taxes. In real estate you can set your taxable
income to be about whatever you want depending on how much deductible
interest you pay and depreciation you take.
His large income and low expenses really make this planning feasible.
Good work.  Employees
don't have that luxury.  CPAs and spreadsheets are your friends.

Again, all good points.