Tuesday, December 24, 2013

Milestone Reached: $100,000 Lifetime Rent

I want to start this post off by saying MERRY CHRISTMAS to all visitors of this site, and a simple "thank you" for the support I have been given.

This month was great for me on many levels.  I have successfully received over $100,000 of rental income.  When I purchased my first property in 2006 I didn't foresee myself being a landlord.  I really just bought the cheapest house I could find to suit my budget.  When I was making $13.05/hr, my budget of course was tiny.  This paid off in the long run because eventually it lead to greater cash flows.

After working construction and learning how to manage rentals, I knew real estate investing was something I could have success with.  I managed to keep my overhead down by performing my own repairs and upgrades, while increasing my net income through a property manager.  This formula has worked out well for me so far.

At this point I have 2 options for the future of my rental property portfolio.  #1 I can either pay my mortgages off and improve my balance sheet.  Or #2 I can throw down money on a down payment for a 4th property.  Right now I'm leaning toward option #1.  I found that once my properties are paid off I would reach FI and wouldn't need to worry about finding another job, ever.  It would be a great feeling to know that all of my bills could be paid for by my rental income alone.

Once all mortgages are paid off I will begin investing into real estate and dividend stocks equally.  Though stocks offer much less cash flow than real estate; they are less risky and provide much more stable forms of income.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Tuesday, October 29, 2013

Last Minute October Update

These past few months have been very busy for me.  I changed career paths with my company, removing my need to travel.   Being back at home full time has made it difficult to make posts, but at least for the moment I am caught up on everything I have been behind on at home.

The markets have been continuously hitting all-time highs, making it tough to find value with good companies.  I shifted a good portion of my NSC holdings toward PSEC.  I purchased NSC about a year ago for about 60$ per share, and the shares I sold a week ago went for 84$.  NSC is a great company, and can go much higher, but at these levels the PE is reaching 16 and the yield is falling below 2.5%.  I figure I would take some profits off the table and invest elsewhere.  PSEC has been a very stable investment for me, paying dividends monthly and offering great diversity to my dividend portfolio.

Now for the numbers behind my progress.  Rent on one property increased 50$ per month.  This increased my rental cashflow by 8%!   Average monthly dividends now sits at 136$, which is a great increase since my last dividend post in mid-june where I hit 100$!  What does all this mean?  63% of my monthly expenses are now covered by passive investing activities.

The future:  I am still on track to paying off my student loan by March 2014.  And look forward to hitting 200$ average monthly dividends by the middle of the year.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Friday, August 16, 2013

Milestone Reached: 80% Debt

When I graduated high school and was first in the driver seat of my own financial situation, I figured debt was always just a fact of life and we all had to learn to deal with it.  I understood the general rule of 'spend less than you make and you'll be okay.'  But emergencies always popped up and I didn't understand how to let my money work for me.  This was the basic formula behind my financial disaster.

During 2010, I found myself drowning in a financial mess.  Debt was always piling up, and in fact maxed out by the end of the year.  I knew something had to change and fast.  After doing some research online to help me, I discovered Dave Ramsey and began listening to his show and reading his work, I was fascinated and instantly hooked.  As part of a New Year's resolution, I wanted to begin tracking my finances closer (to the penny in fact!) at least every month, to make sure I was going in the right direction.

In January 2011 I had a net-worth of $-531.06.  At first I couldn't believe it!  But after looking at the big debt figures and the smaller asset figures, it all began to make sense.  Every month since then I have been tracking my finances and have never given up on that resolution!

I just updated "My Big Financial Picture" page and found the current debt level was below 80% of my original peak debt levels.  This is great news!  Since January 2011, I have gotten rid of over 20% of my debt!  And let me tell you, it feels great.

Without the power of compounding, I should be debt-free about 10 years from now.  Being in my mid-30s, I would still have plenty of time to build my assets and continue working if I want.  I stress the "want" part because once I'm completely debt-free, I will have 3 rental houses (paid for) that will more than cover my expenses.

But WITH the power of compounding, I'm projecting myself to be debt-free in under 6 years.  To make sure this happens, I will continue monitoring my financial situation and celebrate my successes.

Tuesday, August 6, 2013

"Assault on Wall Street" From an Investor's Point of View

Recently I had the opportunity to watch "Assault on Wall Street" for its great action.  This was a great film for entertainment, but in reality, an even greater film from an Investing perspective.  Without giving away any of the plot, I wanted to highlight some mistakes the main character made that reinforced what I have recently learn through investing.

Lack of Diversification: 

 The main character had his entire 401k in a single fund.  This fund tanked and he suffered big time, because he had no diversification.  If he had his money spread out amongst other things the effects really wouldn't have been as devastating, even in the peak of 2008.  Why was he invested like this?  Because he let his Broker handle his funds for him.  Which leads me to point number 2.

Use of a Broker: 

The main character used a broker, and a bad broker to make things worse.  I once heard Dave Ramsey say that 'Brokers are no good because they are "broker" than you are,' or something to that effect.  I find truth here.  If they were so good at managing money, they would have all of their money invested in the best ways possible and wouldn't care for silly commissions and bonuses etc.

Importance of good Health insurance: 

This guy's insurance was terrible and had a spending cap.  Long story short~ his family finances were wrecked because of this.  Yes maybe you can have a lower premium and have a higher deductible, which is fine.  But be sure to read the 'fine print' and know what you are paying for.

ARM's are bad. 

What will the interest rate be in the future?  Only a few people truly know- which makes this a losing game.  If you must have a mortgage on the house be sure its a fixed rate (with no penalty for pre-payment).  This way there will be no surprises with your monthly payments and you know exactly what is going on with the details of the loan.

Got nothing?  Smokers will still smoke.

I know this is just a movie.  But when I see the main character smoking cigarettes after completely losing everything and having no money, I believe any smoker would still find a way to do the same.  This would be a plus for MO, PM or LO etc.

Chaos everywhere?  Guns may be the only valuable thing.
In the film the main character is forced out of his house and the only thing he grabs are his guns.  I see truth here too.  If your world 'goes off a cliff' and everyone is in a panic, I can't see precious metals having any value.  Items that satisfy a personal need would have value during desperate times (tradeskills would be important too).  People would barter and get things they need.

If you haven't watched "Assault on Wall Street" I would recommend it.  Aside from all the action, you may pick up on the same ideas that I had, and the investor inside of you, could find even more.  Have you seen it?  What do you think?

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Wednesday, July 24, 2013

Lending Activities

Before my current job, I was a loan officer for a cash lending chain.  I liked helping families out by generating loans for those who really needed them.  I also liked the business model of the company and liked the fact that it was a true alternative to the local banks, who always control the wealth. 

The job itself was very risky.  We would hear neighboring branches getting robbed at gun-point and I would sit at my desk wondering if we would be next....  I also had to go to people's houses that were behind on payments to 'remind' them or collect cash payments.  After the second gun got pulled on me ~ I quit.  I couldn't justify the risk. 

The business however, still flourished.  Even with 6-9% default rates the company I worked for was generating cash hand over fist, and is still in operation today.  I always wanted to run my own loans company but knew it would be nearly impossible with all the hoops to jump through with licensing and legal details etc.  I discovered the idea of "Peer Lending" late last year and thought I could make it work after all.

The problem ~ is I live in Texas, which does not allow me to engage in sites such as Lending Club etc.  Recently I found a way around this through trading notes on a secondary platform.  I like the idea of taking banks out of the picture letting investors directly lend to customers.  One thing I like is all investments are split up into 25$ increments and given out to different loans helping investors 'diversify' a bit so one default will not ruin a portfolio.  I am always looking for new income streams and figure I would give this a shot with 100$ seed investment to see how it plays out.  Like with all investments, I never just dive right into something.  For tax implications and just seeing how the system works, I figure this would be enough to get me going with 4 notes.  The average monthly payments will be added to the "My Big Financial Picture" Page.

-Decent promising returns
-Relatively low default rates
-Low capital required to start.

-One default on 4 notes will kill all likely returns
-No liquidity (loans are up to 5 years so cash is locked-in unless notes are re-sold on the secondary platform)
-Tax implications???

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Sunday, June 9, 2013

Milestone Reached: $100+/ Month in Dividends

I just updated My Big Financial Picture page and noticed I am now enjoying $106 per month in average dividends.  This is great because I started my dividend investing activities last February and am already at this point!   Regardless of the impact Mr. Market has on my stock prices I will still receive dividend payments.

The Dividend Investing portfolio will continuously have smaller deposits, while large chunks get chipped away from my debt.

Tuesday, April 23, 2013

Change in Networth: Were you down because you weren't a millionaire?

As I logged into google finance I saw an article by the Washington Post titled: Change In Worth by Household Category.  It basically shows how household's net worth values have changed from 2009 to 2011 for the worst (aside from the top net worth group of 1/2 million +).

I don't know about you, but I was definitely in the bottom category of "negative to zero" net worth.  Although I don't have the numbers to back it up, I don't think my net worth was decreasing like the average household.  This highlights the importance of keeping track of your financial health to gauge how you are doing over time.  The first month I documented my net worth was in Jan 2011, I had -$531.06.

Until that time, I figured I was doing pretty good.  I had a couple rental properties and have always watched my spending, but debt was piling up and I realized I was under-water.  I can assure you, that January 2011 was the only month I have had a negative net worth since tracking it.

I personally believe net worth for most households is directly tied to the home itself.  And the only ones who actually engage in diversification are the higher net worth households.  Which may explain why they are the only category that saw a gain from 2009-2011 after the housing crisis.

How did you do from 2009-2011?  If you don't know, you should begin tracking your net worth today.  If you don't like spreadsheets you can log into mint.com and it will do it for you for free.  Its great!

Sunday, April 14, 2013

Pay off the Mortgage or Invest in the Market?

What do I do with excess capital?  Pay off the mortgage or invest in Mr. Market.  I have heard many arguments to this question.  Why pay on a 5% (or less) loan when I am making 10+ % in this bull market?  Seems like the choice should be clear, but its not!  When I look amortization schedules, I notice the interest is front-loaded in the loans, meaning the first few years it seems like all of my payments are pure interest.... 

 If my payment is 550 for the month and 400 went to cover the interest, then that 5% loan I signed up for seems to me like a 72% interest loan...

When I was driving home from work, I listened to John Pollock on the radio (financial tax strategy specialist).  He discussed a concept called "Cash Flow Equivalent Return,"  which I thought was brilliant.  To put this idea in words, he made an example:

"Let’s imagine a mortgage with $100,000 in principal, and a $1000 monthly payment.  If I won $100,000 in the lottery, and paid off the house, I’d save $1000 each month.  The big question is this – if I put that $100,000 in the market instead of paying off the mortgage, what kind of rate of return would I need in order to get that same $1000 per month benefit in my cash flow?  Said another way, what’s the Cash Flow Equivalent Return that I need to break even?  I’d need to make $12,000 a year from my $100,000, a 12% return."

The example above highlights the importance of paying off debts, which is something I have been working on diligently.  In my personal case, my rental income will more than cover my families expenses if I was debt free, so this also catalyzes my debt repayment efforts!

My Big Financial Picture

I created a new tab up top Titled: My Big Financial Picture.  This is something I will update monthly as I update my Net Worth spreadsheets on the side. 

I started developing my own REIR strategy to help me make better financial decisions in life.  The E stands for "Eliminate Debt."  My debt level is something I always monitor and try to reduce every chance I get.  Last year I spent $9519.16 in interest.  This may or may not sound like a lot to you... But when I look at how little I make from my current day job this 9k+ is huge to me!

Dave Ramsey says the "Pinnacle" of your financial life is the point where your passive income surpasses your expenses.  This is the ultimate point where you can quit your job and let your passive activities pay your bills for you.  I always track my passive income versus my expenses to see how I have been trending over time.  On my new tab I track it 2 ways because my rental expenses seem to throw things off when figuring this out.

Saturday, April 6, 2013

The end of monthly updates, but the beginning for good change!

It is already April 6th and I have not had the chance to make a regular monthly update of my average dividend income.  From this point forward the information for will be found on the dividend investing portfolio tab.  The charts I have been posting always paint a clear picture on the direction of the portfolio, that sometimes words cannot describe.

A lot of people I follow have tabs that display share information that I enjoy.  In the near future I will be implementing something along these lines on my blog.  This will give me the chance to focus more on REIR and real estate posts.  I admit I get caught up in dividend investing aspects of my overall portfolio because of its simplicity, but it really is just a small part of my portfolio and my understanding of investments in general.

Friday, March 1, 2013

Dividend Investing - Month 12

With a new month starting, I get the chance to see how the new average monthly dividend is coming along.  It looks like the portfolio is now averaging $63.27 monthly!  Compared to month 11, I'm noting an 11.56% increase! 

Since new purchases occur in $500 intervals, the $63.27 will really help make it easier for me to accumulate the capital needed for future purchases. 

The increase in the dividend was the result of WMT increasing their dividend by 20%, and my switch from UHT to PER

One thing I never mentioned on my post about the stock switch is the fact that an initial $500 investment grew over the last year and now results in about $100 annual dividend payment.  PER may be a risky oil play for many individual investors, but when I factor in my yield on cost with the original UHT investment, I'm getting over 20% for my money now.

Wednesday, February 13, 2013


This morning I initiated a quick trade.  UHT was sold for 55.80 per share, the realized gain plus initial investment was then rolled into additional shares of PER.

UHT is basically a healthcare REIT that focuses on hospitals and medical facilities.  UHT has been significantly overvalued in my opinion.  I first got the shares at the beginning of 2012 for 42$ and had a yield just shy of 6%.  Now, a year later the company has not changed at all really.  Small dividend increases with little to no growth in sight.

I made this trade for a couple reasons.  The first is the fact that RSO, being the aggressive REIT that it is, already occupies a good portion of my portfolio.  I wanted to start cutting back on REITs to prepare for interest rate hikes in the years to come.

The other reason for the trade is PER has been my biggest loser of the portfolio so far, and I felt like now is a good time to cost-average down my shares (even though I just missed the ex-div date - lol).  PER is a royalty trust in the Permian Basin by parent company Sandridge Energy.  The parent company is poorly ran in my opinion, and its other 2 royalty trusts, SDR and SDT have too much natural gas production at this time to generate profits.  The trust expires in March 2031.

Friday, February 1, 2013

Dividend Investing - Month 11

The first of the month managed to sneak up on me.  Lets see, the new average monthly dividend is now 56.56!  Compared to last month's calculation, this is an increase of  13.46%.  Simply amazing!  There are a few factors which contributed to the huge dividend increase this month.

The sale of ABT freed up some capital to work with, so I opened a small position with NRP.  NRP has been stomped on since Obama's re-election night.  Democrats hate coal, and due to the mild winter we've experienced so far coal use has declined.  When following the conference call from NSC's earnings report, they have been hauling less coal as well.  The share price has been down 25% since I have been following it and I believe it was attractively valued at the time of purchase, even considering the risk.

UHT announced an 8.7% dividend increase.  Dividend increases are always good.  The only problem I have had with UHT so far is it has been a slow-growth dividend, and after purchasing this last year at 42$/share I have never found a re-entry point to cost-average down my shares.

 The last big factor for the dividend increase was the DRIP of RSO's dividend.   Although I feel RSO is my riskiest position in my portfolio, it has offered me the greatest return so far.  The company is solid, and I don't need to monitor the business model as much as I do the interest rates.  Even though this REIT has the best spread in its class, it will still take a big hit when rates rise up.  I'm projecting late 2014 to mid 2015 until this happens.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Wednesday, January 2, 2013

Dividend Investing - Month 10

Another wild month with the markets!   Times have been tough with the 'fiscal cliff' dragging on without a solution.  Politicians stepped it up and temporarily struck a deal today, sending the DOW up over 300 points.  I say temporary because in 2 months a deal must be made regarding the country's debt ceiling and its spending...
Politics aside, Abbot Labs has just completed its split with Abbvie.  It will be interesting to see how this plays out.  70% of Abbvie's income is generated by its main drug Humira, whos patents run out in a couple years....  It also appears Abbvies dividend may be a much higher than that of ABT...

$49.85 is the new average monthly dividend!  I look forward to breaking 50 dollars a month to kick off 2013!  From the prior month, a 1.4% increase was experienced with the dividend.

Disclaimer: I am not a financial planner, advisor, or accountant. The financial actions mentioned were only suited for my own risk tolerance, strategy, and ideas. Copying another's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.