Bob Dockendorff is a financial planner with Claro Advisors, a fee-based Registered Investment Advisor in Boston, MA. Bob started his career as a tax attorney with Ernst & Young in 2010 and then moved to The Colony Group, a large private wealth management firm based in Boston, MA. At The Colony Group, Bob built and serviced financial and investment plans for high-net worth individuals and families, and also provided tax planning and preparation services, as well as estate planning strategies. Additionally, his focused on the implementation of investment, estate, and tax planning tailored to the specific goals of diverse clients.
At Claro, Bob focuses on delivering comprehensive financial planning and investment services to young families and individuals planning for retirement. He is a big believer in low cost index funds, closing the behavior gap, and achieving large financial goals by taking small, manageable steps in the right direction. He helps his clients achieve their financial goals through careful analysis and the development of long term plans that encourage consistent, achievable actions.
Bob graduated from the University of Vermont in 2006 with a degree in Philosophy, and has also obtained a law degree from Suffolk University Law School, as well as an LL.M. in Taxation from Boston University Law School. He holds a Series 65 licenses, and the Life and Health.
Outside of work, Bob enjoys golf and going to the beach with his wife, Caitlin, and two sons, Charlie and Tommy.
BA, Philosophy, University of Vermont
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Investment advisory services offered through Claro Advisors, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission ("SEC"). Claro does not provide tax, accounting, or legal advice to clients. Custody services and other brokerage services provided to clients of Claro Advisors, LLC are offered by Fidelity Brokerage Services LLC, Member NYSE/SIPC.
It sounds like you have a lot going on even with this new inheritance, so you should seek a full service firm. This is a firm that will:
- Start with a big conversation about your financial life, where it is, and where you want it to go
- Provide advice and accountabilty on things like your household cash flow, savings rates, work benefits, and any other area of finance that you have questions
- Provide guidance at each financial transition of your life (new jobs, lost jobs, college, marriage, retirement, medicare, social security, estate planning)
- Invest your capital to give you the best chance of meeting those goals
Stay away from "investment only" shops that claim to have the latest and greatest market-beating investments. The best firms in the industry use a disciplined, standardized investment approach to seek superior risk adjusted returns over the long term. For that service, along with all the financial planning I described above, will charge an annual fee of about 1% of your account size.
Plenty of firms out there will be happy to help you, and they don't necessairly need to be in your geographical area. If you find someone online, give them a call because many good advisors work remotely with clients outside of an occasional face to face meeting.
Minimal holding appraoches are an excellent solution for many folks. Nearly all of the management (rebalancing, tax loss selling, tactical moves) are pushed off to a prfoessional and all asset clases are held within one or two funds. Otherwise you might start engaging in mutual fund "horsepicking", incur trading costs through rebalancing, etc. I really like this low maintenance approach.
Depending on what you want there are so many options. For ETFs, both Blackrock and iShares have good, low cost names that give worldwide equity exposure for a few basis points. You could pair one of those with an actively managed "core plus" bond fund that has the majority of holdings in investment grade bonds, with smaller allocations to high yield, floating rate, etc. Doubleline and PIMCO have good solutions there, along with many others.
Unfortunately I can't give out specific ticker symbols, but for a well funded retirement a simple holding appraoch might look like this.
- All world equity ETF - 50% (one holding)
- Core Plus Bond Mutual Fund - 35% (one holding)
- 15% - two or three holdings giving exposure to uncorreleated assets (Real estate, Commodities, Etc.)
Sounds like you're on the right track.
Without knowing specifics on this property, the market, or your other investment opportunities, I tend to think that you should take the money out of the property now in the form of profit and dedicate those funds to other investments or for a rainy day. In paying down the loan balance you are putting your cash back into this investment and not diversifying away from it. 4.5% debt due in eight years doesn't sound so bad in the world of commercial loans for a cashflowing property.
The best case scenario with healthy real estate is that your down payment is the total amount of YOUR cash invested. From that point on, all expenses are covered by the tenant and you recover your investment through cash flow, appreciation and debt paydown (all paid by rents).
While the balloon might seem daunting, so long as you have solid tenant cash flow it shouldn't be an issue to refinance the property when the balloon comes due. Either way, it sounds like you have options and there's no perfect answer here. Perhaps hedge your bet with paying a little extra, socking some away, and investing some elsewhere hopefully above a 4.5% annual return.
This will depend on your individual circumstances. If the Roth conversion puts you into a tax liability position (what you owe the government exceeds what you have paid in for this year), then you might need to make a quarterly payment. If the conversion income keeps you in a refund position, you wouldn't need ot make a payment.
So whether you need to make a quarterly payment depends on how much you've already paid into the government this year based on withholdings, prior year refunds carried forward, and other payments made for the tax year that your Roth conversion affects.
Also, there is way to be "safe harbored" so that you don't have to worry about quarterly payments. For the federal government, you are safe harbored if you have paid in 100% of your prior year tax, or 90% of your current year actual tax.
In short, talk to a CPA!
You need to distinguish between repairs and capital improvements. The work that qualifies as a "repair" can be expensed in the year paid, where "improvement" must be capitalized and depreciated. For example, the cost of a new roof would be depreciated over a term of years. It sounds like you will have a mix of both.
Capital improvements are added to the basis of your property and any amount that was taken as depreciated will be taken out of basis through depreciation recapture. For example, if you spent $30k on a roof in 2018, but took a $1,500 depreciation expense for 2018 related to the roof, your 2019 sale would include a $30k addition to basis, less the $1,500 depreciation deduction for a net addition to basis of $28,500 on the sale (not including all other depreciation related to the property).
|Additions to Basis (Capital Improvements)||$30,000|
|Total Cumulative Depreciation on Property (Including Roof)||-$10,000|
|Depreciation Gain (25% tax)||$10,000||$2,500|
|Capital Gain (0%, 15% or 20% tax)||$70,000||$0 - $14,000|
|Total Federal Tax||$16,500|
When you sell, you have to "recapture" all depreciation expense at 25% fed rate
I would strongly recommend developing a good relationship with an eager CPA that understands these things and stays on top of them for you. That way you can focus on finding great RE deals.