Younger People Not Owning Homes

Home Ownership is Fleeting

Millennials are less likely to claim home ownership by age 30 than baby boomers at the same age. A report by the Standford Center on Longevity that 48% of Baby Boomers owned homes by thirty versus 36% of Millennials.

A huge factor that plays into this figure is the number of unmarried Millennials – 55% of married Millennials own homes while only 19% of single Millennials do. The average age of marriage is rising – where in the 1950’s and 60’s the average age was 20, now the average age is 27.4 and rising according to the US Census Bureau historical marital status tables.

Other factors are increased housing costs, high student debt, and need for some workers to relocate.

Who Benefits?

The largest beneficiary, in my view, of lower home ownership is the landlord or corporation who rents out their home or apartment. As home ownership decreases, you’ll see the rise of more publicly traded REITS which take investor money, plop down new apartment units, and pay a share of the profits to their investors while driving away private investors through economy of scale price reductions. Private investors can employ a strategy involving buying, rehab/renovating, renting, and then refinancing to chain purchase multiple investment properties. As competition between private and public investors increases, the prices for properties goes up – further distancing potential first time home buyers. As long as there is a strong rental demand, the potential for cashflow means investors may buy in bulk.

Who Suffers?

Renters who pay more in rent than they otherwise would pay on a mortgage gain no principal ownership in their residence. While they may forgo having to fix home appliances and heating/plumbing they will gain nothing when they leave. Home owners with typical 30 year loans will have principal invested into their home and may be fortunate enough to have their house sell for more than it was purchased for. Historically house price appreciation is the norm, especially for homes in good locations. Depreciation of the house structure is usually offset by the appreciation of land value that the house sits on.

Renters are also at the whims of the landlord or property management company as to when their rents will go up. When I first started working my rent started at $880 in Atlanta and it went up to $1000 by the time I left 3 years later. This was not because they had improved the property – in fact the property slowly got worse. The reason they could increase rent is because demand was up – population growth and an influx of new younger workers means more people looking for rent. It is simply business.

What Should Younger People Do?

First off, everyone should choose what they want to do with their own lives. I can’t dictate that someone should study engineering rather than political science as much as I can force you to like the color orange more than brown. However, as this website aims to help people get a higher return on their money I would 100% encourage younger people to buy a home rather than rent one. I would ask them to take advantage of the historically low interest rates and get a low interest rate mortgage which limits how much the bank can increase interest rates. Pay a mortgage of equivalent value to what they’re paying in rent and look to save money and buy a rental property. Take advantage of the fact that your peers are renting and rent to them instead of from them.



Ally Financial

Ally Bank itself gives 2.1% interest rate on an online savings account, and 2.5% on annual CDs. Ally Financial Stocks pay out 68 cents per year on a $31.9 stock. Which is also 2.1%! What investing in the stock gives you, on the other hand, to increase your potential as interest rates start to rise. This isn’t a get rich quick stock, but with a 8.92 forward P/E ratio it’s a pretty good bargain that pays dividends. With Ally’s amazing interest rates for consumers, it’s only a matter of time before others start abandoning the brick and mortar banks which pay a measly 0.1% to 0.4% interest rate on their savings accounts. I bought Ally Financial and hold it as a nice dividend earning investment at $31.90 per share.

Ally Financial is divided into 5 areas:

  • Banking
  • Auto Finance
  • Home Loans
  • Invest – Self directed and managed investment products
  • Corporate Finance

ALLY 3 year chart



Google Search trend on term “ally savings bank” over time

How to Avoid Capital Gains Tax on Your Residence

Selling Your House for a Profit? You May Qualify for an Exclusion on Capital Gains Tax

A lot of people have a false assumption they have to pay capital gains tax on their house if they make a profit on it. According to the IRS (as of January 5th, 2019), you may exclude up to $250,000 dollars of gain if you file single or up to $500,000 if you file joint with your spouse, as long as you meet their criteria which I will mention later.

That means if you buy, for example, a $250,000 house and sell it for $750,000 you can keep that gain in your pocket as long as you file joint with your spouse.

Now let’s get to the important part, the criteria.

IRS Section 121 Exclusion Criteria

You must have used the house as your main house for two of the past five years before the sale. That doesn’t mean you need to have owned it for five years, it just means you must have used it as your main home for two of the past five years before the sale date of the property.

It logically follows that you generally could not have claimed this exclusion on a different property less than two years prior to the sale date. <See IRS Publication 523>

This general rule does not apply to certain situations including government assignments (military, intelligence, etc) and they can extend that five year window out further to ten years.

How does the IRS determine your “main” home?

  • US Postal Service Address
  • Federal and State Tax Return Address
  • Drivers License Address

They may also consider other information including:

  • Where you work
  • Where you bank


  • You can not have acquired the property through a 1031 exchange. <See Investopedia for more information about 1031 exchanges>
  • You cannot be subject to expatriate tax. This is a tax on US citizens renouncing their citizenship.

Partial Exclusion

The IRS allows for partial exclusion under the following circumstances:

  • Work related moves
    • New work location more than 50 miles further from home
  • Health related moves
    • Move to take care of relative
    • Move based on doctor recommendation
  • Unforeseeable events
    • Disaster
    • Deaths
      • Of owner(s)
    • Birth of Two or more children
    • Home Destruction
    • Act of Terrorism on Property

Other Things to Remember

Even though this is a great exclusion written in the tax code, it could change! Make sure to double check the rules when you do end up selling your house for profit. Also, keep in mind that some of your closing costs in buying the property can go into the cost basis for the house – keep those records! Lastly, make sure to report the sale to the IRS – even though you may qualify for a complete exclusion.

Wallstreet Enters Single Family Housing Market… Again

Single family American home


REITS are Eating Homes

“The American dream no longer includes homeownership,” said Jordan Kavana, chief executive of Transcendent Investment Management LLC. Transcendent Investment Management is buying up rental homes, and expects Americans to transition into all being renters to drive profits for his and other similar companies.

This type of corporate incursion into housing was popular back in 2013 when houses were dirt cheap, but it’s starting to ramp up yet again. A few publicly traded companies involved in this type of business include Blackstone (BX), and American Homes 4 Rent (AMH). American Homes 4 Rent has been the largest player in the single family homes arena until Blackstone and Starwood properties merge their operations to join Blackstone’s existing single family division Invitation Homes (INVH). The merger will see Invitation Homes landlord almost 100,000 single family homes spread across the United States.

The Giants are Coming

These massive REITs may be part of some of your 401k mutual funds already, and are driving up prices for single families and potentially forcing them to buy more expensive homes. This is not unexpected due to the historically low interest rate the US still supports – and the benefits that come with scaling up operations. My problem with this is that by investing in these REITs you could be inadvertently encouraging Wall Street investors to drive up home prices around you putting the younger generation at more risk of lifelong homelessness (you get what I’m saying).

Traditionally most REITs focused on multifamily apartment buildings, we shall see how this foray into single family housing impacts the US economy for years to come. For millennials, this does not bode well for their home ownership prospects. I would prefer to be an owner of my own residential property than invest in these types of REITs, and if anything I would stick to multi-family apartment focus REITs as they should yield better returns. For more information on REITs and how to make money on real estate, check out my real estate page.

Trade Stocks Commission Free with Robinhood

It used to be 9.95 per trade, then 8, and now 4.95. Commissions can add up and suck the profitability out of your stock portfolio, especially if you want to make multiple trades per year or had in mind to trade in smaller batches of shares.

Robinhood has leveled the playing field with $0 commissions on trades. You can check out Robinhood at from your smartphone to sign up. You can also ask someone who already has Robinhood to give you a referral link and you both will receive a free share (usually of a cheap stock).

I personally like using Robinhood the most for option trades, where commissions really eat into my profitability especially if the options only cost under $100. The tools to research are missing from Robinhood so you will have to find some other tool to do your stock research before trading. Regarding the tools I like Fidelity and Charles Schwab better.

Good luck!

Activision Blizzard (ATVI) is a Good Buy

What’s Going On?

Activision Blizzard came out with their Q1 2018 earning reports exceeding estimates by over 10%. Despite Fortnite and PUBG claiming much gaming market share over that same period, it appears it hasn’t pushed people into abandoning their World of Warcraft subscriptions or uninstalling Call of Duty.

I’ve been a long time holder of this company, and do not plan on selling anytime soon. Even though the dividend rate is on the low side (34 cents this past quarter), their revenue climbed over 13% for the same quarter last year.

Potential trades:

Write (Sell) put option for June 22 at $70.5 dollars per share at $2.00 per option. As long as ATVI does not go below $68.5 by June 22, 2018 you will be better off for it. If the price goes below that point then you will be forced to buy shares at that price, which I still think is a good thing long term. Otherwise, I’d put this stock on a watchlist and buy long if the shares go under $69. With the volatile stock market of the past few months this will probably happen and give you a nice discount on a great company.

Current trading price of ATVI: $71.66

Other Thoughts

While EA Games is also a profitable company which looks good on paper, as a gamer myself I’d have to say that EA has thrown many gamers under the bus with their pay as you go, or pay for item strategy. It’s hard to imagine the frustration seeing items for sale in a game after you’ve already paid between $60 to $80 for a AAA game. EA Games helped create the in-game content purchase model, which unfortunately has spilt to other developers.

What the F is Wrong with Ford?

Ford is entering dangerously cheap territory. P/E ratio of 6, dividend ratio of over 5%, and healthy return on equity. Either someone knows something the financials are not telling us, or people are worried they can’t catch up to newer car companies and their technologies. I’ve got an idea for Ford, buy back some shares while your stock price is so cheap. I think the news of releasing the Bronco and Ranger again in the US is a great one, and there is positive news out of China of Ford starting to make EV there through a 50/50 joint venture with Zotye Auto (Chinese company), in addition to it’s existing joint venture Changan Ford. That being said, Ford’s China market is still much lower than GM’s.

I am long Ford with a few Call options expiring in June @ 11.87 / share. I still think Ford will be a better investment at the current price of 11.36 (Jan. 29, 2018) than Tesla at 341.50. Tesla has extreme leadership but I think they have over-promised at this point and due for a correction. I am also long GM which has a favorable P/E ratio of 9.44 and dividend of 3.48%. Tesla currently has no dividend and is not a profitable company.

Making Your Own Volatility Bets – Option Spreads and Straddles

A lot of talk is going on about the VIX, also known as the CBOE Volatility Index. This index will track and correspond to the market’s expectation of 30 day volatility. What does that even mean?

I can show you how to make your own volatility bet by using options for a single company. For example Ford.

Ford is one of those companies that I believe will either prove itself as relevant in the coming years or fade into obscurity.

So I can make a bet that Ford will be either go past 15 dollars or slide down past 8 dollars by January 18th, 2019. For a relatively low bet of just 32 dollars I can make a decent profit if the stock dips below

Option Spread

Ford Spread Profit Chart

Stock Price Strike Price C Strike Price P Option Cost Gain Profit
0 15 8 32.00 800 768.00
1 15 8 32.00 700 668.00
2 15 8 32.00 600 568.00
3 15 8 32.00 500 468.00
4 15 8 32.00 400 368.00
5 15 8 32.00 300 268.00
6 15 8 32.00 200 168.00
7 15 8 32.00 100 68.00
8 15 8 32.00 0 -32.00
9 15 8 32.00 0 -32.00
10 15 8 32.00 0 -32.00
11 15 8 32.00 0 -32.00
12 15 8 32.00 0 -32.00
13 15 8 32.00 0 -32.00
14 15 8 32.00 0 -32.00
15 15 8 32.00 0 -32.00
16 15 8 32.00 100 68.00
17 15 8 32.00 200 168.00
18 15 8 32.00 300 268.00
19 15 8 32.00 400 368.00
20 15 8 32.00 500 468.00
21 15 8 32.00 600 568.00
22 15 8 32.00 700 668.00
23 15 8 32.00 800 768.00
24 15 8 32.00 900 868.00

Another option strategy that makes people feel better about themselves since they will almost always get something back, but costs more, is called a “straddle”. A straddle, in this case with Tesla, is a bet that the stock price deviates from a certain point. In the figure below, a bet is being placed that the price of TESLA will deviate away from $350 per share by January 18, 2018. The price looks big, $10,765 for this particular strategy. But look below and you will see the profit loss chart shows that nears $200 or goes over $430 per share you will start making money again. This particular example I would not trade because the option prices are too high.

Option Straddle

Tesla Straddle $350 Profit Chart

Stock Price Strike Price Option Cost Gain Profit
0 350 10,765.00 35000 24,235.00
10 10,765.00 34000 23,235.00
20 10,765.00 33000 22,235.00
30 10,765.00 32000 21,235.00
40 10,765.00 31000 20,235.00
50 10,765.00 30000 19,235.00
60 10,765.00 29000 18,235.00
70 10,765.00 28000 17,235.00
80 10,765.00 27000 16,235.00
90 10,765.00 26000 15,235.00
100 10,765.00 25000 14,235.00
110 10,765.00 24000 13,235.00
120 10,765.00 23000 12,235.00
130 10,765.00 22000 11,235.00
140 10,765.00 21000 10,235.00
150 10,765.00 20000 9,235.00
160 10,765.00 19000 8,235.00
170 10,765.00 18000 7,235.00
180 10,765.00 17000 6,235.00
190 10,765.00 16000 5,235.00
200 10,765.00 15000 4,235.00
210 10,765.00 14000 3,235.00
220 10,765.00 13000 2,235.00
230 10,765.00 12000 1,235.00
240 10,765.00 11000 235.00
250 10,765.00 10000 -765.00
260 10,765.00 9000 -1,765.00
270 10,765.00 8000 -2,765.00
280 10,765.00 7000 -3,765.00
290 10,765.00 6000 -4,765.00
300 10,765.00 5000 -5,765.00
310 10,765.00 4000 -6,765.00
320 10,765.00 3000 -7,765.00
330 10,765.00 2000 -8,765.00
340 10,765.00 1000 -9,765.00
350 10,765.00 0 -10,765.00
360 10,765.00 1000 -9,765.00
370 10,765.00 2000 -8,765.00
380 10,765.00 3000 -7,765.00
390 10,765.00 4000 -6,765.00
400 10,765.00 5000 -5,765.00
410 10,765.00 6000 -4,765.00
420 10,765.00 7000 -3,765.00
430 10,765.00 8000 -2,765.00
440 10,765.00 9000 -1,765.00
450 10,765.00 10000 -765.00
460 10,765.00 11000 235.00
470 10,765.00 12000 1,235.00
480 10,765.00 13000 2,235.00
490 10,765.00 14000 3,235.00
500 10,765.00 15000 4,235.00
510 10,765.00 16000 5,235.00
520 10,765.00 17000 6,235.00
530 10,765.00 18000 7,235.00
540 10,765.00 19000 8,235.00
550 10,765.00 20000 9,235.00
560 10,765.00 21000 10,235.00
570 10,765.00 22000 11,235.00
580 10,765.00 23000 12,235.00
590 10,765.00 24000 13,235.00
600 10,765.00 25000 14,235.00
610 10,765.00 26000 15,235.00
620 10,765.00 27000 16,235.00
630 10,765.00 28000 17,235.00
640 10,765.00 29000 18,235.00
650 10,765.00 30000 19,235.00
660 10,765.00 31000 20,235.00
670 10,765.00 32000 21,235.00
680 10,765.00 33000 22,235.00
690 10,765.00 34000 23,235.00
700 10,765.00 35000 24,235.00

Someone may have told you that in Blackjack insurance is a suckers bet, but if you ever looked into the counting strategy then in certain situations you should take the insurance. Currently I am only buying and writing call options at the time of this article and not utilizing spreads or straddles and have no intention of doing so in the next week or so. While the screenshots above are using market order types I strongly suggest to always trade using the limit order type on all option trades.


Invest in What You Understand

I’ve talked to a lot of co-workers and relatives who have invested heavily in businesses they simply don’t understand. This is a mistake.

You don’t have to know everything there is to know about a company to invest in it, but you should have a general understanding of their products and market. Warren Buffet famously invested in Coca-Cola since 1987 and currently owns around 10% of Coke stocks. He loved this company because of its iconic name, and well known product. He found a company he knew and understood and was able to make sizable returns on his investment. Coke stocks went up from $2.45 per share in 1988 to it’s current price of $47.38, paying good dividends along the way. Walmart, Best Buy, and Kroger are all publicly listed companies that any average Joe can understand.

Walmart 5 year return: 72.5%

Best Buy 5 year return: 490.8%

Kroger 5 year return: 132.7%

If you’re a gamer you know names like Activision Blizzard, responsible for games such as World of Warcraft, Call of Duty, etc. which all have their own cult following. If you bought this company 5 years ago and held it you would return 555% on your investment. Walmart and Kroger are included as examples of companies that have stiff price competition and do not have an “economic moat” such as a company like Activision Blizzard. Best Buy has been a go-to place for electronics and has been well positioned to capture what I call the Apple Tech revolution, not having to deal with rivals that have gone under such as Circuit City and Ultimate Electronics.

Now companies that you don’t understand, stay away from! For example, “exploratory mining companies”, small no-name drug companies, and Greek shipping companies are all stock investor pitfalls that usually end up going bankrupt. This is why for all of my serious investments I make sure the company has at least a 400 million market capitalization. You can certainly play with penny stocks, but I’d never suggest putting any amount you can’t lose into them. It’s my same advise with gambling at a casino.

Now you may be asking, “I knew Circuit City and their products, but those lost money!”. You’re right! Besides knowing the business you also have to do some research on the company’s cash flow and growth. Those are outside the scope of this article, as the “secret sauce” for successful investors is largely dependant on their cash flow figures in comparison with this stocks outstanding and stock price.

Getting the ROI on Rental Properties

Everyone knows that Real Estate is one of the major ways to make income. Like stocks, you have to put money in to get a return which will either be positive or negative. Unlike stocks, it isn’t so simple to figure out how much your return is. Online brokerages like Fidelity, Merrill Edge, and Charles Schwab have nifty graphs and reports that can tell you exactly how well you’re doing over a specified time frame.

If you have considered buying a real estate property, measuring your return is one of the most important factors to identify your successes and failures. I found a great video by which goes through the process in a simple way that will help you manually compute your return on investment. Of course, as you build your real estate portfolio it is important to find a good way to keep all the information together which can be done using a myriad of tools out there.