Milestone Reached: Student Loan and Medical Debt paid Off!

Things have been slow and steady lately.  I've been focusing on paying off debt while I work on things around the house.  This month I finally made the last payment on my student loan and medical debts.  This is a huge accomplishment.  Saving me about 300 bucks a month!

I will now focus on paying off "Victorian House 1."  Luckily this has the lowest balance and highest interest rate.  I plan on having this done by mid 2015.  Whats exciting here is my passive income by then will outweigh my bills and I could retire if I choose.

As it stands, 89% of my monthly expenses are covered by passive investing activities.  This is a very good situation to be in my late 20s.

I appreciate everyone's support with this blog, and want to the everyone for following up on my comments that I throw on other blogs =P.  The online savvy investor community has been a great motivator for me, and a great way for me to engage other people with the common interest of being financially independent.  Most folks I run into on a daily basis don't have the same financial goals.

Trouble with adding to the Real Estate Portfolio.

I am interested in adding an additional Rental property to the portfolio.  This time though, I am wanting to to make a cash-only deal.  I figured this would be as simple as refinancing my victorian house 1 (since it has the lowest balance and highest interest rate) and pulling cash out to throw down on the new property.

Here is the problem, TEXAS.  When it comes down to it, the state of Texas is looking out for its homeowners to keep them from going over there heads in mortgage debt.  With this, I found out I cannot take a second or a home equity line of credit on an investment property.  I supposedly will get the 'evil eye' when I acquire a 4th mortgage too.  So at this point my hands are tied.

Before I found this out I looked into getting a mortgage for the property. I learned that with Obama's new 'predatory lending' laws, any house I try to purchase under $60,000 will be considered a predatory loan because the banks $4,000 origination fees will be above the 5% loan amount threshold....

The local housing market here has homes dropping in price for the short term, making entry points more desirable for the long term.  I have a few options here:  One would be to continue saving away and waiting until I have the funds readily available.  The second option would be to open up an unsecured line of credit.  The third option would be to wait and continue driving down my various debts.

I'm thinking too that a 4th option would be to diversify my real estate portfolio by getting a rental property in a different town or even state... but I do like having my properties near by in case of emergency repairs etc.

What are your thoughts?  What would you do in my situation?  Imagine having 15k cash onhand, one investment mortgage of ~30k, and about 15k in the stock market.



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.

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.
 

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.

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.

"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.

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.

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

Cons
-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.