Today's Focus

Current Goal: Eliminate Mortgage on Rental Property

January 1, 2019: $59,592
October 19, 2019: $55,780

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Friday, September 13

Meet my NEXT Financial Goal

The plan to overhaul and streamline my finances is well underway.  Now that my student loans have been paid I will focus on paying the mortgage on my rental property.  Only one of the rental properties has a mortgage, and the interest rate is 5.125%. 

$103,000 in 2009?  Sold!


Deal of the Decade

Be fearful when others are greedy and greedy when others are fearful.  Warren Buffett







This is an exciting rental property for me for several reasons, and it is a reminder about how important it is to have some dry powder tucked away to take advantage of a deal.

  1. It was 2009.  The real estate market was in crisis.  D.R. Horton decided to stop development in this neighborhood due to slow sales.  The surrounding area was growing pretty fast, the fundamentals were good, but the builder wanted out.  This house was among the last spec homes built in the neighborhood, and contracts had fallen through with three previous buyers because financing was so hard to obtain during the housing crisis.  The price for this house was cut drastically.  Basically a fire sale.  I was able to buy it and add some nice interior upgrades for $103,000.  This is a 3 bedroom, 2 bath house.  To put it into perspective, I bought this exact model in a different neighborhood with fewer upgrades a year earlier for $28,000 more.
  2. Now that the market has recovered, so has the area.  Another builder stepped in to buy the empty lots and is completing the build-out of the neighborhood.  A fancy grocery store and shopping center opened less than a mile away.  An apartment complex at the entrance to the neighborhood was recently purchased, and upgrades by the new owner have allowed for 20% higher rents at that complex.  Within a couple miles, dozens of retail stores and restaurants have opened.
  3. After I bought the house I listed it for rent with a management company.  I immediately received an offer from a tenant but the tenant asked for a discount on the rent.  I figured I would make up the amount I was discounting by getting a tenant in the house right away, so I pulled the trigger.  Ten years later, the same tenant still lives in the house.
I am giddy every time I think about this - I've never had a tenant stick around for 10+ years.  I've steadily increased the rent, and while I still charge less than what I could get, there's huge value in keeping the same tenant (no turn costs, no vacancy costs, just a reliable rent check that is deposited into my account on time every single month).  The current rent is twice what my mortgage costs, so I'm comfortable with what I'm getting.

Time to Nix That Mortgage

With an interest rate of 5.125%, paying off the mortgage on this house is my next goal.  Today, I made a $2,000 extra payment.  I really like the feeling I get by reducing debt.  But more importantly, based on the current state of the real estate and stock markets, I sincerely feel this is the best use of my funds.  Real estate is expensive once again, and when there is a deal it is quickly bid up by professional investors with greater resources than me.  And the stock market is also pricey, especially considering we are due for a recession.  In addition to using cash flow to pay off this mortgage I am considering using some of the cash in my brokerage account.  

Paying off this mortgage offers a guaranteed 5% annual return.  That's a solid accomplishment.  Nothing to brag about, but certainly better under current market conditions.

Wednesday, September 4

My Frugal Miser - August Expenses: $17,229


August continued the trend of gluttonous spending.  Fortunately most of the spending was for our businesses, specifically the Airbnb.  I signed a contract for new siding and impact windows.  I made the first payment in August, with more to come once installation begins in October.  There were also some expenses related to my meeting job.  We signed up for a meeting in Nashville in September and I booked the hotel and flights last month.

Then there's our personal expenses.  First, the good:  I sold the two Madonna tickets for a solid profit.  I used a small part of the profit to buy two replacement tickets for one of her Miami concerts.  I also paid off my student loans completely, a $3,790 expense.  The Sonata has over 195,000 miles now.  Last month I bought two new tires and had a minor repair done.  It's almost time to start looking at replacing the car.  The not so good include our spending on food.  We took two short vacations and ate out a lot.  There's really no excuse for how much I spend on food.  We just need to be more frugal.  In Personal Care, I bought a TENS device that is supposed to help with pain.  I've been having a lot of foot pain and since we are doing several meetings in the coming weeks I want to try everything I can to alleviate it.

August Business Spending:  $13,800
August Personal Spending:  $3,429

August Expenses:  $17,229

$658 Auto (service, gas, insurance, AAA, etc.)
$0 Bank Fees
$347 Clothing/ Personal Care
($4,520) Fun (vacations movies, gambling, alcohol, concert tickets) income this month
$773 Food
$426 Health & Dental
$1,422 Household/Mortgage Payment/Home Repair
$0 Interest Expense
$3,790 Miscellaneous (Student loan overpayment)
$244 Taxes includes quarterly tax payments
$31 App Jobs Expenses (tolls, car washes, etc.)
$1,202 Unreimbursed Employee Expenses
$23 Reimbursed Employee Expenses income this month
$204 Utilities
$1,141  Rental Property Expenses
$11,404 AirBNB Expenses

Monday, September 2

My Frugal Miser - August Income: $8,723

There was a noticeable drop in my August income.  The biggest decline was in Airbnb bookings.  We had 11 vacant days last month.  I will have to more aggressively mark down rates if I want to keep the house occupied during slower times. 

I worked two meetings last month.  We took a couple of small trips during the month as Amazon was also slow.  See the trend?  August was slow!

August Income: $8,723

$60 Mystery Shopping
$1,367 Meeting Jobs
$108 Gig Apps (Rideshare, Scooter Charging, etc.)
$872 Amazon Deliveries
$4,040 Rental Income
$1,976 Airbnb Income
$66 Interest Income
$235 Other Sources

Investment Accounts Change in Value:  $8,437

August continued the trend of steady investment gains.  Even more impressive, much of my portfolio is in ultra-safe CDs.