People confuse two things: investment on house and investment on education. These are two different things.
It is true in general that for relatively expensive neighborhood, the school is relatively better in USA. As the public schools money is from property taxes.
Bayarea is a special case due to California Proposition 13. The current housing price is exceptional high. The recently homeowners pay high housing price and high property tax, but the real tax
collected city wise is not really high due to california proprosition 13. Comparing to the public schools on east coast, it doesn't have that much money at all.
Like what I have explained in another blog, the motivated students accounts for the goodness of the public schools, not the teachers in bayarea.
http://xiaoqinsiliconvalley.blogspot.com/2013/12/how-to-select-
People definitely can get better reward for the housing investment from the view of the money, but not for the education.
Some kids are just good as long as the environment is not destructive. However, it doesn't mean they really develop their full potential.
There is an inspiring book related to education:
https://www.amazon.com/dp/0874775728?tag=piasblo-20&camp=0&creative=0&
linkCode=as4&creativeASIN=0874775728&adid=1WXNBRBZY0Q60YHR416T&
Monday, December 30, 2013
Monday, December 23, 2013
Icebreaker: keep you warm in the winter
As it becomes colder, I was looking for nice legging made of wool. I tried a few stores like Nordstrom, macys, but none carries wool legging. Then I did a search on amazon and found this product: icebreaker everyday legging that is made of marino wool 100%. I ordered it immediately after reading those reviews. When I got them and tried on, I don't want to get off it. It is so comfortable and light. After having it, I start to wear more skirts and dresses in winter as this legging keeps me warm all the time. Really love it. It depends the weather. If it is really cold, using the 250 one. If it is cool, using the 150 one. If it is in between, 200 is a good choice.
I did a little search online. It is a good brand that carries marino wool products mostly. It offers kids clothing too. I ever tried to buy marino wool clothes for our son as he doesn't seem to like multiple layers. It has a great kid section too.
I found a local store on santana row and had a visit. It doesn't carry everyday which is the cheapest line. I asked the sales if it has annual sale or something like that. He said only on black Friday or off the season it has some sales. Later I found out that REI carries some icebreaker stuff too. When it is on sale or there is a promotion from REI, it is a good time to stock some for the next year for the kid.
I did a little search online. It is a good brand that carries marino wool products mostly. It offers kids clothing too. I ever tried to buy marino wool clothes for our son as he doesn't seem to like multiple layers. It has a great kid section too.
I found a local store on santana row and had a visit. It doesn't carry everyday which is the cheapest line. I asked the sales if it has annual sale or something like that. He said only on black Friday or off the season it has some sales. Later I found out that REI carries some icebreaker stuff too. When it is on sale or there is a promotion from REI, it is a good time to stock some for the next year for the kid.
Sunday, December 22, 2013
Review bayarea housing and public schools
As a first time buyer, it is worthwhile to read some books considering how much time one needs to work to pay off the house:
http://alturl.com/kd5kv。
Doesn't matter which agent you talked to, the top school districts on the list are:
Mission San Jose in Fremont, Monta Visa in Cupertino, Gunn Hign and Palo Alto high in Palo Alto.
But mine is a little different:
Palo Alto high, Los Altos, Homestead high, Laurelwood district, then Irvington district.
If money is not the problem, Palo Alto high district is nice and not too far to most of companies.
For the same price in Los Altos, one may have a bigger house, similar commute as in Palo Alto. People may argue that the Los Altos school is not as good as schools in Palo Alto. It is true today, but it is changing. After google co-founder Sergey moved to this area, it spends more money in the community to foster the education systems. You can see the news to find more details: http://www.mercurynews.com/education/ci_24730190/mini-exploratorium-opens-los-altos and http://blogs.kqed.org/mindshift/2013/12/how-one-hour-of-code-can-launch-an-entire-computer-science-program/. It has very good potential.
Homestead high in 94087 area is very convenient for commute, easy access to freeway and caltrain. The school is becoming better and better. It is very close to target, and wholefood. There are a few parks in the area.
Same for Laurelwood district, it is just so convenient both for working people and old people. It has a lot of preschools and after schools in the area. Both the elementary school and middle school are in walking distance. One can easily walk to chinese grocery store, korean store, indian store, safeway. Millinkin is around the area too. Once Millinkin becomes a neighborhood school, Peterson middle school will jump to better, same to the high school.
If one wants to save money and sacrifice for a little commute, Irvington is a better choice. The house price is much cheaper and the school district becomes better. It has bart station too.
http://alturl.com/kd5kv。
Doesn't matter which agent you talked to, the top school districts on the list are:
Mission San Jose in Fremont, Monta Visa in Cupertino, Gunn Hign and Palo Alto high in Palo Alto.
But mine is a little different:
Palo Alto high, Los Altos, Homestead high, Laurelwood district, then Irvington district.
If money is not the problem, Palo Alto high district is nice and not too far to most of companies.
For the same price in Los Altos, one may have a bigger house, similar commute as in Palo Alto. People may argue that the Los Altos school is not as good as schools in Palo Alto. It is true today, but it is changing. After google co-founder Sergey moved to this area, it spends more money in the community to foster the education systems. You can see the news to find more details: http://www.mercurynews.com/education/ci_24730190/mini-exploratorium-opens-los-altos and http://blogs.kqed.org/mindshift/2013/12/how-one-hour-of-code-can-launch-an-entire-computer-science-program/. It has very good potential.
Homestead high in 94087 area is very convenient for commute, easy access to freeway and caltrain. The school is becoming better and better. It is very close to target, and wholefood. There are a few parks in the area.
Same for Laurelwood district, it is just so convenient both for working people and old people. It has a lot of preschools and after schools in the area. Both the elementary school and middle school are in walking distance. One can easily walk to chinese grocery store, korean store, indian store, safeway. Millinkin is around the area too. Once Millinkin becomes a neighborhood school, Peterson middle school will jump to better, same to the high school.
If one wants to save money and sacrifice for a little commute, Irvington is a better choice. The house price is much cheaper and the school district becomes better. It has bart station too.
How to select school for kids
Education is important for everyone. As parents, we all want to give the children the best education we can provide. In United States, it has a strange education system that the rich neighborhood has better schools. The schools' budges come from the local towns' property taxes. The towns with more expensive houses have more money, have more teachers, and better facilities. But don't be fooled by that. Some schools are better not because their teachers are better or teaching methods are better. They just have more motivated students.
There are two factors that have important impacts on kids:
1. The ratio of teacher to student and the teaching method. The nicer neighborhood have more money, so public schools there have the luxury to give higher salary or hire more teachers. It may have higher ratio of teacher to student too. Private schools in general have even more money comparing to public schools, so it has even better teacher to student ratio. Most public schools have a fixed curriculum and don't have much flexibility to fit individual needs. Private schools are designed for special purposes. Some emphasizes on arts, some pay more attention to science, some do more field trips, etc. One can put the kid in a special school to fit the kid's personality and interest. Teaching methods in private schools varies too. Some are really structured classroom teaching, some may use democratic teaching method.
2. The peers in school. If most of the kids do homework on time, love reading, study hard, it affects the envirnment of the school. This explains why the high correlation the of percentage of asians in school and the outcome scores. Even without putting a teacher there, they are just good kids. Kids like to do what their friends do, and are motivated by their friends too just like adults.
While selecting schools for my kid, I want him to have more fun and enjoy life as much as he can. Either he can get into ivory or not is not that important. As I remember clearly, how bored I was when I was in the classroom. My precious time was wasted for not much good. Harker looks attractive to us, as it offers 60 clubs instead of a few that most public schools have. The kids must find something interesting I hope :P. Also I talked to a few students who had studied there. They said they really enjoyed as they had a lot of activities to do. Remember the kids have a lot of energy and they need to burn them to get a sound sleep at night. Otherwise, they may be funky. One nice comment I got from a parent that if the kid forgets to turn in the homework, the teacher will notify the parent the next day. In public school, it is quite different. One of my colleagues' kid went to Monta Visa. She got to know that her kid got ZERO point on all his homework on Chemistry at the end of the semester. It is too late to make up anything. The kid failed on that class and he was sophomore already. Due to that, he could not get into 4 year college at all. Also he could not major in Chemistry, Biology, and anything prepared for medical school. It was so sad.
There are two factors that have important impacts on kids:
1. The ratio of teacher to student and the teaching method. The nicer neighborhood have more money, so public schools there have the luxury to give higher salary or hire more teachers. It may have higher ratio of teacher to student too. Private schools in general have even more money comparing to public schools, so it has even better teacher to student ratio. Most public schools have a fixed curriculum and don't have much flexibility to fit individual needs. Private schools are designed for special purposes. Some emphasizes on arts, some pay more attention to science, some do more field trips, etc. One can put the kid in a special school to fit the kid's personality and interest. Teaching methods in private schools varies too. Some are really structured classroom teaching, some may use democratic teaching method.
2. The peers in school. If most of the kids do homework on time, love reading, study hard, it affects the envirnment of the school. This explains why the high correlation the of percentage of asians in school and the outcome scores. Even without putting a teacher there, they are just good kids. Kids like to do what their friends do, and are motivated by their friends too just like adults.
While selecting schools for my kid, I want him to have more fun and enjoy life as much as he can. Either he can get into ivory or not is not that important. As I remember clearly, how bored I was when I was in the classroom. My precious time was wasted for not much good. Harker looks attractive to us, as it offers 60 clubs instead of a few that most public schools have. The kids must find something interesting I hope :P. Also I talked to a few students who had studied there. They said they really enjoyed as they had a lot of activities to do. Remember the kids have a lot of energy and they need to burn them to get a sound sleep at night. Otherwise, they may be funky. One nice comment I got from a parent that if the kid forgets to turn in the homework, the teacher will notify the parent the next day. In public school, it is quite different. One of my colleagues' kid went to Monta Visa. She got to know that her kid got ZERO point on all his homework on Chemistry at the end of the semester. It is too late to make up anything. The kid failed on that class and he was sophomore already. Due to that, he could not get into 4 year college at all. Also he could not major in Chemistry, Biology, and anything prepared for medical school. It was so sad.
New Year Resolution: Being healthy and joining a fitness club!!!
At the end of year, it is time to set up the next year's plans or goals. Most people put the health at low priority. It is just so wrong! Remember, it is you that is the most important in your life. After some researching and trying, I just decided to join the Decathlon club to get into fit and be more healthier.
Being healthier is priceless!
I always feel relaxed and regain energy after visiting Decathlon Club. Decathlon club is the first club I used in bay area. I joined it back in 2007. Those time, I went there mostly for zumba classes. It has a terrific zumba class teacher that no one can be on her right in all zumba classes I have been too. I always love the indoor Jacuzzi, sauna room, and stream room too.
I had been to other fitness center in between, like 24 fitness and YMCA. They are really not in the same category as Decathlon at all. Recently I started swimming and were looking for a nice swimming pool. So I revisited Decathlon again. It built a new lap swimming pool and a kids' swimming pool. I just fell in love with it right away. At the current weather, one still feels nice in the water as it sets at 82 degrees. It feels terrific inside the water! Not cold at all, just freshness! After long time being in the water, one also can bath in the outdoor Jacuzzi. It is really like being at a resort, blue clear sky, nice cool water.
Being healthier is priceless!
I always feel relaxed and regain energy after visiting Decathlon Club. Decathlon club is the first club I used in bay area. I joined it back in 2007. Those time, I went there mostly for zumba classes. It has a terrific zumba class teacher that no one can be on her right in all zumba classes I have been too. I always love the indoor Jacuzzi, sauna room, and stream room too.
I had been to other fitness center in between, like 24 fitness and YMCA. They are really not in the same category as Decathlon at all. Recently I started swimming and were looking for a nice swimming pool. So I revisited Decathlon again. It built a new lap swimming pool and a kids' swimming pool. I just fell in love with it right away. At the current weather, one still feels nice in the water as it sets at 82 degrees. It feels terrific inside the water! Not cold at all, just freshness! After long time being in the water, one also can bath in the outdoor Jacuzzi. It is really like being at a resort, blue clear sky, nice cool water.
Tuesday, November 26, 2013
How to select the health insurance plan
As I run a lot of errands for my father-in-law while he was in hospital, I got to understand the big differences between insurances.
While he stayed in hospital for a week and we were there 24/7, we just got the chance to talk to the doctors for 2 or 3 times shortly. We didn't see any written diagnosis at all. The hospital just called us 4 hours ahead to discharge. The insurance company ordered the hospital to discharged him at midnight and moved him to a rehab center. There were no phone numbers/emails or any form that we can communicate with the doctors at all. For one month now, we still could not get a copy of all CT/Xrays or medical record at all even after we have submitted all the required paperwork.
At the rehab center, the doctor only sees him every other week. Still no phone numbers and emails. We are like walking in the dark and don't know what to expect and what have happened.
Comparing my experiences with my doctors, it is really a nightmare.
I usually can see any doctor on the same day or the other day if my issue is very urgent. If I am travelling, I just email my doctors and get responses right away. They call back immediately and fax/email me all the information I need. I can access all my medical records online since 2006 and compare the difference of the results easily. I am not an expert about how to select health insurance. But I think the following tips are really helpful and important:
1. Never buy the cheapest one or just buy what your friends buy. Do the research and know what you need. See if the doctors you see or like are in the network. The hospitals you use or may use is in the network. Personally I really love Palo Alto medical foundation. It has great doctors, good tools to browse records and communicate with the doctors.
2. Do the simple calculation about how much one pays for the regular checkup, and most importantly the worst case scenario. Don't let the 80% or 90% coverage fool you. The more meaningful part is the out of pocket' maximum, and deductibles.
3. The rule of thump: never use a HMO. It is just evil. For my father-in-law's case, the good doctors we know are all out of his insurance network. We don't mind to pay a visit of a doctor. The insurance would not pay a penny for any drugs/service that is ordered by a out-of-network doctor. It is just so evil.
Remember, networking is very important. If you find a great doctor, you are in his/her doctors' network. My family doctor referred me to a PT. She is great. I have chronicle backpain, stomach pain and have seen different doctors. After the first treatment from Carol from OrthoSport, my pain went away and I had the first sound sleep for years. Bowen's pediatrician was introduced by my OB and she is very detail oriented. For any questions/problems that a new mom has, she will explain or provide a solution.
While he stayed in hospital for a week and we were there 24/7, we just got the chance to talk to the doctors for 2 or 3 times shortly. We didn't see any written diagnosis at all. The hospital just called us 4 hours ahead to discharge. The insurance company ordered the hospital to discharged him at midnight and moved him to a rehab center. There were no phone numbers/emails or any form that we can communicate with the doctors at all. For one month now, we still could not get a copy of all CT/Xrays or medical record at all even after we have submitted all the required paperwork.
At the rehab center, the doctor only sees him every other week. Still no phone numbers and emails. We are like walking in the dark and don't know what to expect and what have happened.
Comparing my experiences with my doctors, it is really a nightmare.
I usually can see any doctor on the same day or the other day if my issue is very urgent. If I am travelling, I just email my doctors and get responses right away. They call back immediately and fax/email me all the information I need. I can access all my medical records online since 2006 and compare the difference of the results easily. I am not an expert about how to select health insurance. But I think the following tips are really helpful and important:
1. Never buy the cheapest one or just buy what your friends buy. Do the research and know what you need. See if the doctors you see or like are in the network. The hospitals you use or may use is in the network. Personally I really love Palo Alto medical foundation. It has great doctors, good tools to browse records and communicate with the doctors.
2. Do the simple calculation about how much one pays for the regular checkup, and most importantly the worst case scenario. Don't let the 80% or 90% coverage fool you. The more meaningful part is the out of pocket' maximum, and deductibles.
3. The rule of thump: never use a HMO. It is just evil. For my father-in-law's case, the good doctors we know are all out of his insurance network. We don't mind to pay a visit of a doctor. The insurance would not pay a penny for any drugs/service that is ordered by a out-of-network doctor. It is just so evil.
Remember, networking is very important. If you find a great doctor, you are in his/her doctors' network. My family doctor referred me to a PT. She is great. I have chronicle backpain, stomach pain and have seen different doctors. After the first treatment from Carol from OrthoSport, my pain went away and I had the first sound sleep for years. Bowen's pediatrician was introduced by my OB and she is very detail oriented. For any questions/problems that a new mom has, she will explain or provide a solution.
Friday, November 22, 2013
Wild rice is not real rice
While shopping at Wholefood, I saw this wild rice thing. I bought one pound as it is really expansive, like $10 per pound. I mixed the wild rice with the regular rice and it is really yummy. It has a light vegetable aroma. I did some research to see how different wild rice comparing the regular rice we have all the time. Wild rice belongs to semi-aquatic grass, not in the rice category at all. Surprisingly, it has more nutritions then regular rice. One cup of cooked wild rice provides 15% or more of the daily value of 15% of zinc and over 20% of manganese. It is also high in protein and the amino acid lysine. It is a good substitute of rice for pregnant women or rice porridge for little kids. We are so addicted to wild rice, finally we found a good deal on amazon that is $4 per pound in stead of $10 per pound in wholefood.
Wednesday, November 20, 2013
CS academic research
While reading Haystack Blog about difference between academic research and industry research. There are a few important missing points. I assume Haystack hasn't worked in industry or modern industry.
1. The politics in academia and industry is very different. To apply grant, one needs to play some politics to get huge grant, but that is mostly the professors' job. For most graduate students, they are still idealists and like to do research to fullfill their dreams or develop their full potentials. Graduate students love challenges and like to solve open problems. But in the industry, one could not take that high risk at all. In academia, the research can go for over years. That could not happen in industry. In some companies, it usually takes one year or even just half year to get one's project either launched or cancelled. Few people have the leverage to take few years to develop a project. It is just like facebook motto: done is better than perfect.
2. A lot of professors who gave up tenure and joined industry is mostly because of $$$. If they can get paid half million or one million a year, I guess they would be very reluctant to give up the tenure. A few of my fellow classmates bought houses over 1 million, but the professors in our graduate school seldom have houses with value over 1 million and some of them are MIT graduates. This leads me to think the fundemental problem is the structure of education system. We don't value teachers and professors enough.
3. I do agree with Haystack that during the faculty summits in the industry, it should be the professors to do the demo and presentations, and people from industry can try to connect/apply the research results to the real products.
Here is Haystack's original blog:
http://haystack.csail.mit.edu/blog/2013/08/26/can-academics-make-a-difference-in-cs-research/
1. The politics in academia and industry is very different. To apply grant, one needs to play some politics to get huge grant, but that is mostly the professors' job. For most graduate students, they are still idealists and like to do research to fullfill their dreams or develop their full potentials. Graduate students love challenges and like to solve open problems. But in the industry, one could not take that high risk at all. In academia, the research can go for over years. That could not happen in industry. In some companies, it usually takes one year or even just half year to get one's project either launched or cancelled. Few people have the leverage to take few years to develop a project. It is just like facebook motto: done is better than perfect.
2. A lot of professors who gave up tenure and joined industry is mostly because of $$$. If they can get paid half million or one million a year, I guess they would be very reluctant to give up the tenure. A few of my fellow classmates bought houses over 1 million, but the professors in our graduate school seldom have houses with value over 1 million and some of them are MIT graduates. This leads me to think the fundemental problem is the structure of education system. We don't value teachers and professors enough.
3. I do agree with Haystack that during the faculty summits in the industry, it should be the professors to do the demo and presentations, and people from industry can try to connect/apply the research results to the real products.
Here is Haystack's original blog:
http://haystack.csail.mit.edu/blog/2013/08/26/can-academics-make-a-difference-in-cs-research/
Tuesday, November 19, 2013
Learning letters and abacus by 2
Facial and Eye Sauna
As winter comes, it becomes so dry. My eye starts itching due to the dryness. It goes so uncomfortable, and I went to see a doctor to inspect my eyes. The doctor suggested to use the steam from a cup of hot water to moisturize my eyes. When I got home, I realized that I have a better tool for the eye sauna. I bought a facial sauna system a few years back, and have put it in the storage for a while. This facial sauna system generates gentle steams for both face and eyes. After trying it for a few days, my eyes feel much better. Comparing any facial message, it is much cheaper. One also saves the time to drive to the facial place, as it is very convenient to use at home to relax.
Here is the product sold at amazon:
https://www.amazon.com/dp/B00005A9WP/ref=as_li_ss_til?tag=piasblo-20&camp=0&creative=0&linkCode=as4&creativeASIN=B00005A9WP&adid=19WHD3FNR8D5XTFYJGXG&
Here is the product sold at amazon:
https://www.amazon.com/dp/B00005A9WP/ref=as_li_ss_til?tag=piasblo-20&camp=0&creative=0&linkCode=as4&creativeASIN=B00005A9WP&adid=19WHD3FNR8D5XTFYJGXG&
Monday, November 18, 2013
Good deal from Kiehl's: $20 off $65 Plus free shipping!!!
I really love the following products from Kiehls:
1. Super Multi Corrective Cream: it is a little oily, but work perfectly. The next to it would be the future cream from Shisheido. Comparing the price, it is worthwhile giving it a try:
http://www.kiehls.com/Super-Multi-Corrective-Cream/495,default,pd.html
2. The eye creams work great too. The Avocado cream is more oily then the marine firming one. I use the avocado eye cream at night and the marine firming one during the day.
http://www.kiehls.com/Cryste-Marine-Firming-Eye-Treatment/581,default,pd.html?cgid=face-eye&cm_vc=Search&start=5&q=eyecream
http://www.kiehls.com/Creamy-Eye-Treatment-with-Avocado/3605970236915,default,pd.html?cgid=female-casual-under-60&cm_vc=Search&start=3&q=eyecream
1. Super Multi Corrective Cream: it is a little oily, but work perfectly. The next to it would be the future cream from Shisheido. Comparing the price, it is worthwhile giving it a try:
http://www.kiehls.com/Super-Multi-Corrective-Cream/495,default,pd.html
2. The eye creams work great too. The Avocado cream is more oily then the marine firming one. I use the avocado eye cream at night and the marine firming one during the day.
http://www.kiehls.com/Cryste-Marine-Firming-Eye-Treatment/581,default,pd.html?cgid=face-eye&cm_vc=Search&start=5&q=eyecream
http://www.kiehls.com/Creamy-Eye-Treatment-with-Avocado/3605970236915,default,pd.html?cgid=female-casual-under-60&cm_vc=Search&start=3&q=eyecream
Friday, November 15, 2013
The dilemma of buying a house
Ask youself, what is the purpose of buying the house:
1. For kids’ education.
2. For a better living condition.
3. For a convenient commute.
4. For investment.
If you are the fist time buyer, better read this book:
House buying for dummies.
I will talk about all the cases here.
Assume buying a 1M house, down payment is 20%, 200K.
For the best investment in the past 10 years, buying a house in Palo Alto,
now it is worth 1.6M. With interest rate 4%, the mortgage per month is $3800
. For 10 years, one pays 600K. The rental for this house is around 3000 per
month, comparing with renting vs buying, one pays 40k per year for rent and
400K for 10 years. The agent fee is around 5% including buying and selling.
. Property tax over 10 years is 100K.
Case 1, put down payment 200K, and sell the house at 1.6M and live there,
one gets 300k.
(1.6M – 1M – 100K(property tax) – 100K(agent fee) – ($3800-3000))*12*10
).
As one lives there, for the first earnings 250k from the house, one doesn’
t need to pay tax.
Case 2, put down payment 200K, and sell the house at 1.6M as a rental
property, one gets 300k.
From the money view, it is same as the case 1, but one needs to pay long
term capital gain on the earnings.
Case 3, put 200K in S&P 500, one makes 400K.
One can sell or hold. If sell, pays long term capital gain, but one can sell
when one earns less money and pay at lower tax rate.
.
Case 4, one buying house with cash as a rental property, sell at 1.6M, get
800K.
1.6M - 1M – 100k(agent fee) – 100k(property tax) + 400K (rental income) =
800K.
Case 5, one have 1M put on S&P500, it would have been doubled for the past
10 years. One gets 1M.
Case 6, one have enough money and just pay off the house and live there, it
is not an investment. One just wants to enjoy and live a luxury life.
The thesis here is:
Case 1 is not so bad comparing with case 3, as it leverages on the borrowing
money, paying less income tax, getting into the market earlier. Also, it
provides better living condition for the family and better education for the
kids.
For investing on a rental property, assume the housing price increases still
at 30% for 10 years, to beat the S&P 500 doubles every 10 years, the rental
return should be higher than 5%. If one believes that the increasing rate
of house price is bigger than 30% over 10 years, one can expect a lower
rental return to beat S&P 500.
If one has mortgage on the house, it is better the rent can fully cover the mortgage and all the maintenance cost. It will be better that the rental unit brings positive cash flow. When there is an economic crisis, one may lose job and have the tendency to sell the house. Usually it is the worse time to sell the house, as the housing price could be lower than one has paid before. If one sells the house at low, one not only loses the money at the selling point, also loses the opportunity to recover or gain the growth while the market comes back. I have seen this happens to a lot of people. Don't be so greedy. Just borrowing the amount of money at one's comfortable zone. Considering the situation with single income or no income at all. Keep enough savings for 1 or 2 years livings.
Some statics comes from:
http://jeffandsteve.com/market-trends/
https://www.google.com/finance?q=INDEXSP:.INX
http://piaw.blogspot.com/
1. For kids’ education.
2. For a better living condition.
3. For a convenient commute.
4. For investment.
If you are the fist time buyer, better read this book:
House buying for dummies.
I will talk about all the cases here.
Assume buying a 1M house, down payment is 20%, 200K.
For the best investment in the past 10 years, buying a house in Palo Alto,
now it is worth 1.6M. With interest rate 4%, the mortgage per month is $3800
. For 10 years, one pays 600K. The rental for this house is around 3000 per
month, comparing with renting vs buying, one pays 40k per year for rent and
400K for 10 years. The agent fee is around 5% including buying and selling.
. Property tax over 10 years is 100K.
Case 1, put down payment 200K, and sell the house at 1.6M and live there,
one gets 300k.
(1.6M – 1M – 100K(property tax) – 100K(agent fee) – ($3800-3000))*12*10
).
As one lives there, for the first earnings 250k from the house, one doesn’
t need to pay tax.
Case 2, put down payment 200K, and sell the house at 1.6M as a rental
property, one gets 300k.
From the money view, it is same as the case 1, but one needs to pay long
term capital gain on the earnings.
Case 3, put 200K in S&P 500, one makes 400K.
One can sell or hold. If sell, pays long term capital gain, but one can sell
when one earns less money and pay at lower tax rate.
.
Case 4, one buying house with cash as a rental property, sell at 1.6M, get
800K.
1.6M - 1M – 100k(agent fee) – 100k(property tax) + 400K (rental income) =
800K.
Case 5, one have 1M put on S&P500, it would have been doubled for the past
10 years. One gets 1M.
Case 6, one have enough money and just pay off the house and live there, it
is not an investment. One just wants to enjoy and live a luxury life.
The thesis here is:
Case 1 is not so bad comparing with case 3, as it leverages on the borrowing
money, paying less income tax, getting into the market earlier. Also, it
provides better living condition for the family and better education for the
kids.
For investing on a rental property, assume the housing price increases still
at 30% for 10 years, to beat the S&P 500 doubles every 10 years, the rental
return should be higher than 5%. If one believes that the increasing rate
of house price is bigger than 30% over 10 years, one can expect a lower
rental return to beat S&P 500.
If one has mortgage on the house, it is better the rent can fully cover the mortgage and all the maintenance cost. It will be better that the rental unit brings positive cash flow. When there is an economic crisis, one may lose job and have the tendency to sell the house. Usually it is the worse time to sell the house, as the housing price could be lower than one has paid before. If one sells the house at low, one not only loses the money at the selling point, also loses the opportunity to recover or gain the growth while the market comes back. I have seen this happens to a lot of people. Don't be so greedy. Just borrowing the amount of money at one's comfortable zone. Considering the situation with single income or no income at all. Keep enough savings for 1 or 2 years livings.
Some statics comes from:
http://jeffandsteve.com/market-trends/
https://www.google.com/finance?q=INDEXSP:.INX
http://piaw.blogspot.com/
Thursday, November 14, 2013
How does 529 work?
Some questions people always ask about 529:
1. What cost can it be used for?
It can be used for both tuition, rent, and board. But not for the cars:P
2. Does it affect financial aid?
The first wrong conception that most people have is that: if the kids have the 529, they could not get financial aid. The formula to calculate the financial aid includes: parents asset, 529, and income. The income plays more important factor than the others. Usually the 5% of asset is calculated to offset the needs of the financial aid. The 529 is calculated as parents' asset even the title is the kid's name. So it doesn't hurt to have a 529 otherwise the money under 529 is probably in the saving account or other kinds of assets.
3. What happens if the kids get scholarship or financial aid?
The financial aid is calculated in the need basis, but it is given in the form of scholarship.
Some people are afraid that if the kid gets the scholarship, the money in 529 gets wasted. It is not true either. Even if the kid gets scholarship, the kid still can draw the money out of 529. For the amount that matches the scholarship part, one pays income tax on the growth part and there is no penalty. Considering the kid’s income is not high, tax rate should be fair. For example, the total cost of tuition fee, living expenses etc is 60k and the scholarship is 40k (30k is for tuition fee waver, 10k as cash). For the first 20k from 529 withdrawn, one doesn’t pay any tax. For the next 40k withdrawn that matches the scholarship, one pays income tax. The kid’s income could be 10k + 40k/2(it depends on the growth of the 529 portfolio, I assume 100% growth here). The tax rate 30k should be much lower than the parents tax rate if parents are both working professionals.
The financial aid is calculated in the need basis, but it is given in the form of scholarship.
Some people are afraid that if the kid gets the scholarship, the money in 529 gets wasted. It is not true either. Even if the kid gets scholarship, the kid still can draw the money out of 529. For the amount that matches the scholarship part, one pays income tax on the growth part and there is no penalty. Considering the kid’s income is not high, tax rate should be fair. For example, the total cost of tuition fee, living expenses etc is 60k and the scholarship is 40k (30k is for tuition fee waver, 10k as cash). For the first 20k from 529 withdrawn, one doesn’t pay any tax. For the next 40k withdrawn that matches the scholarship, one pays income tax. The kid’s income could be 10k + 40k/2(it depends on the growth of the 529 portfolio, I assume 100% growth here). The tax rate 30k should be much lower than the parents tax rate if parents are both working professionals.
Assume one set up a broker account instead of 529. The deposit is 100k and grows to 200k. When one gets money out to pay the kid’s tuition, the tax rate is for the long term capital gains for the growth of 100k. Not just that, if one does reblanace on the account, it could not leverage the compounding effect as a 529 account. So in 10 years, with the same amount of 100K deposit, the outcome in a 529 account could be much higher than a regular trading account. The theory is similar to how the Roth IRA works.
4. Comparing 529 with giving the same amount of money as gifts, what is the benefit?
When the kids have a saving/investment account, the financial aid formula uses 20% of the asset to offset the financial aid needs. For the 529 account, it uses around 5% instead. For the gift giving account, the kids can use to buy luxury stuff and pay anything. For some professors, they may prefer to give money as a gift instead of opening a 529. As some universities pay their employees' children's tuition.
If the account is a 529 account and the kid doesn't have any financial aid or scholarship at all, one pays no tax on 100k at all. It is hard for middle class to get financial aid, and also most college provides loan instead of cash as the financial aids.
If the account is a 529 account and the kid gets FULL scholarship, when withdrawing the money, the kid needs to pay income tax on 100k. The kid’s income is at most of the double of the living cost. As today, it is around 40k. The chance to getting full scholarship is less than 1%.
If one is rich, 529 will never hurt. As inheritance tax rate is very high for over 3M assets. Only if one is very confident that the kids can get full scholarship or financial aid in cash, having a 529 with fair amount of money doesn’t hurt at all.
Harvard and Princeton are very generous to give financial aid, and here is the formular they are using:
Keep in mind that, not all schools are so generous to give cash, instead they are giving a loan what most people would like to stay away from. Even MIT and Berkerley only gives the freshmen cash as needed financial aid. The followings years, the financial aid is in the form of loan or work-study programs.
A great book: Save College:
http://goo.gl/xYDaPz
Some reference:
http://www.savingforcollege.com/intro_to_529s/does-a-529-plan-affect-financial-aid.php
http://www.savingforcollege.com/articles/20100122-5-ways-to-spend-leftover-529-plan-money
http://www.savingforcollege.com/articles/20100122-5-ways-to-spend-leftover-529-plan-money
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