So Close

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Mr. PFL and I apparently had the highest offer on the duplex, but the sellers went with a different offer due to financing. I spent almost the whole second quarter of Super Bowl 50 texting with the seller’s agent about becoming “pre-approved” in order for them to accept our offer. I did my best to explain that, due to our purchase through our LLC, we can’t be “pre-approved” like a traditional residential buyer. The big banks aren’t even interested in talking about a loan and our local bank treats this as a commercial transaction. The local bank wants a signed purchase contract and information about 2-3 years of profit/loss on the investment property before investigating loan terms. The seller’s agent did not even provide me with the current rent on the one unit that is occupied, so I am not surprised they went a different way.

Mr. PFL and I did see the vacant unit on Saturday afternoon. The location was perfect, but the unit needed some updating. It was small (probably 850 square feet). We could definitely envision ourselves at this property and realized just how much downsizing would be necessary.

Overall, this has been an interesting learning experience. It looks like cash will be king if we want to stay in the neighborhood. We’ll need to get creative to make that happen.

Raining: In My Car!

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While I can’t imagine making a car payment ever again, I have to grudgingly admit that my car is getting old. This week, I’ve sprung a leak!

Yep. Raining inside. While I assume it is getting in from the seam between the windshield and the roof, it is hard to tell exactly where the breach might be due to all of the rust spots. Oh, and the crack in the windshield from the polar vortex two winters ago might be having an impact.

I did just get the oil changed and the only thing that needed to be replaced was a brake light. But, I think indoor rain = my car is officially a beater. Let this serve as a reminder that you can’t judge someone’s net worth by the car they drive. Unless they are a teen girl driving a 1985 Ford Conversion Van to high school in the mid-90’s (cough, cough, that was me): she broke.

One Heck of a Week

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Last Thursday, I picked up the trash surrounding the new dumpster: maggots. I cleaned up human feces this Wednesday: better than maggots. We heard the Rolling Stones live in concert on Saturday night from outside the venue: frugal. I met with my new “boss,” the mortgage broker I’ll be working with, and finished my last real estate class: forward-progress. The appraisal finally came back on the Condo so we can swap-out the current HELOC for a larger credit line and lower interest rate: $350,000 (that’s $12,000 more than estimated in our Net Worth).

For the record: I still haven’t received a letter from the City regarding the dumpster.

You Can’t Win Them All

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I took a detour on the way to the office this morning. It was reported, yesterday, that two vacant homes had fires on the same block as the duplex we own (“other rental unit” on Net Worth Tracker). Thankfully, those houses were across the street, so the duplex seems fine. We are in the midst of selling the duplex on a land contract for $29,675 over 5 years. We are just under a year into it. Basically, the duplex is still in the name of our real estate LLC, but the buyers are paying off the purchase price, plus interest. When they finish paying, we give them the deed. They also pay the real estate taxes, insurance, and for any maintenance issues or repairs. If they stop paying, I can take back the property, either through an eviction or a foreclosure, depending on how much they have paid.

The duplex is our first investment property that we bought for $13,900 in cash in the summer of 2010. It was a REO property listed on HomePath. Someone had completed most of a rehab, so it was almost ready for tenants. I used public records to look at all of the houses around it; this property was sandwiched between two homes that were part of a $200,000 purchase of about 10 properties by one investor (which I assumed meant he would do his best to take care of his investment). The block looked like it had hit rock bottom, and could only go up. I had always been a clean and respectful tenant, and expected everyone acted that way. I was very wrong.

I’d have to look back at the tax returns to be sure, but I think we always at least broke even on this property. There’s no way we would have made any profit if we had a mortgage payment. I’m not sure how many stoves and fridges we’ve gone through due to defects and stealing. The house on one side has already been torn down and the one on the other side is on the chopping block as well.

Ultimately, I’m glad to be getting rid of this property. The lessons learned and confidence gained has been invaluable. But it isn’t fun to think your house might have burned down.

Extreme Early Retirement

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Looks like retiring early is becoming a “thing” now. And here I thought we were so special. 😉 I found this extended article on how to retire in your 30’s. It is definitely worth a read, and has the stories of several other bloggers that are already living paycheck-free.

The main thrust of the article, in my opinion, is that you need to change your values in order to have an extreme early retirement. I disagree. I think there are many people out there that already have the values that could lead to an early retirement, myself and Mr. PFL among them. I mean, Mr. PFL maxed out his 401(k) contributions since Day 1 of his first post-college job. I still drive my 2003 Toyota Corolla. Most Americans don’t do these things. I think it is important to realize that these values can lead to an extreme early retirement, which I don’t think I fully appreciated. I do now. And I’m grateful that I didn’t realize how much we “sacrificed” to get here.

Is My Car an Asset?

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There is no right answer to the question: is my car an asset? The internet debates this topic endlessly. Personally, Mr. PFL and I haven’t included our vehicles in our net worth calculations. If we ever have car loans again, I imagine we will add in the car as an asset until the loan is paid off, and then probably remove it. Thankfully, any potential value in our cars is such a small percentage of our overall net worth that it doesn’t really make a difference at this point.

With all of that said, I’d like to take this opportunity to thank the brand new 2003 Toyota Corolla I purchased, with help from my dad, on Memorial Day Weekend 2002. The 2003 model was totally revamped from the old 90’s style Corollas. I was adamant that I buy the Toyota Corolla. At that time, Toyota was a very reliable car manufacturer; the Corollas were safe and fuel efficient; I was living more than 800 miles from my parents; and I had driven a string of beaters up to that point (1981 Chevy Impala, 1985 Ford Conversion Van, 1994(?) Ford Taurus, 1989(?) Mazda 626) and they weren’t reliable at all.

The purchase price of my new Corolla was in the neighborhood of $15,000; my dad made a small down payment and I financed $14,000. I made monthly car payments until June 2007 (I honestly don’t remember what my car payment was, but I remember it was less than $300/month, and probably about $270). There have been, of course, some issues along the way. Overall, though, this has been a great car.

The guys at the oil change place, which have been providing high mileage oil for about 100,000 miles, have told me for years that my car could hit 200,000 miles. Just last night, I cracked a milestone, and snapped a picture of it while stopped at a red light:

Don’t worry about that check-engine light; it has been on continuously since about 100,000 miles. Some sensor doesn’t work. A rough estimate from Kelley Blue Book, calling it “fair” condition (I do have a cracked windshield, am missing hubcaps, and have some dents/scratches, on top of that sensor issue, squeaking brakes and an interior that shows its age) puts the value somewhere between $2,000-$3,000. Not bad for a non-asset.

I hope this car continues to last. I can’t imagine having a car payment again (it has been almost 8 years for me, after all). I’d guess that we’d just pay for a car the next time we need one, but it all depends. I cannot imagine we’d choose a car that would require us to make an average monthly car payment, especially after learning that new cars are averaging a $471 monthly car payment and used cars are averaging a $355 monthly car payment.

I hope my Corolla will hold out long enough for my next car to be driver-less. Or a Tesla* becomes more affordable. Or maybe we live somewhere that a vehicle isn’t needed for anything. That’d probably be best.

*Mr. PFL owns shares of Tesla.

Hawaii-Bound Through Downsizing?

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I, through our real estate LLC, made an offer on a single-family home about five miles from where we currently live, in the same city. It all started when I was getting my hair done last Tuesday. My stylist and his partner purchased a duplex back in December and it is just a couple of blocks from this new potential property. When I’m in the salon, we love talking about real estate and small-business ownership. I’m so proud of my stylist for purchasing a duplex for his first property. We’ve discussed, at length, the benefits of owning and renting real estate. So, last week, he was telling me about this great little house that is for sale in his new neighborhood. We looked it up online. I sent an email request to the seller’s agent (I have two real estate agents that I use, but thought I’d try no agent this time). I met the seller’s agent at the property on Thursday afternoon. Mr. PFL and I drove by on Saturday evening so he could get a feel for the neighborhood and location. And, today, I emailed a cash offer of $60,000 on a list price of $110,000. We’ll see what they say.

Now, this offer really isn’t as ridiculous as it might seem at first. The home was built in 1925 and updated sometime in the 1970’s or 1980’s and never again. The electric was probably replaced about the same time. The furnace and air conditioner are newer. The outside looks great, with siding and a newer roof. But, there is wood paneling in most of the rooms. Light blue laminate counter tops. A brick surround, and carpet, in the upstairs bathroom. Basically, every single room needs work and to be updated. The $110,000 list price is totally fair, and probably under market value, if the house had been updated in the last ten years. It might even fetch $125,000 or so. But there is no way it is worth $110,000 in the current condition. It is being marketed as move-in ready, but I wouldn’t even want to advertise for renters in the current state. The house is part of a probate estate, too. Thus, my offer of $60,000.

If we get this house for $60,000, we could spend the next few months fixing it up. I think we are both ready for another renovation project and manual labor can be good for the soul. We can utilize all of our skills, and learn some new ones, like refinishing the wood floors. We could then either sell it, rent it out, or rent it to ourselves. If we decide to live there, we will need to do some serious downsizing, which we want to do anyway. We would also be in a better position to get a roommate in this smaller house than our current one as the main floor has a private bedroom/bath and the second floor has two bedrooms and one bath. We wouldn’t even be on the same floor as our roommate. We’d need to add a bathroom to our current home to have that flexibility. We would also feel better about selling our current home, I think, because we would still have a home, with plenty of storage, and in a neat part of town.

And, this week, at least, Mr. PFL and I are convinced that we can downsize, sell our current house, gets some cash, and then move to Hawaii. So, I’m keeping my fingers crossed that they will accept or make a counter-offer that we can entertain.

UPDATE as of 4:25 p.m.: The lowest price the seller will accept is $100,000, so no deal for now. I’ll keep an eye on it; she might change her mind in a few months.

UPDATE on 3/18/2915: The listing price was reduced to $105,000 yesterday.

House Offer

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We had the showing on our house yesterday. My friend (agent) called last night to relay the oral offer of $500,000. While it is comforting to know that we have appropriately valued our house, this isn’t an offer we are ready to accept, especially because they want to move by the end of March. If they had offered $600,000, it would have been worth a conversation.

2014 Year End Review

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Hello Everyone and Happy New Year!!! May 2015 be as good or better than 2014 for all of you…

As I have mentioned in the past, I am a huge fan of personal finance management software. My personal choice is an application called MoneyDance and I love it. One of the features I love most is the customized reports and detailed graphs that I can create. I have so many customized reports I can break down our finances in dozens of different ways. One of my favorites is taking a look at year end to see how things went.

So, without further ado, here is a look at our 2014. The table below shows a break down of our account balances on 1/1/2014 vs. 1/1/2015 with the gain/loss listed in the right column. I have grouped these into the various assets/liabilities that I track on our Net Worth Tracker page.
Some observations:

  • Nice to see the Pension Plan add $5000 to the kitty. I’ve mentioned it before, but this is a nice little benefit of working for the corporate machine. Now that I have 10 years of service time, my pay credits has increased to 4%. Long story short, this has slowly built up to the point where I now get over $5000 added each year. I can cash this in once I leave either as a lump sum (with higher taxes) or over some period of time (with lower taxes). Let’s worry about that later and for now we’ll just watch it do it’s thing.
  • My Roth IRA has made almost all of it’s gains ($11k) since 10/2 based on my reports. I noticed that when I updated the Net Worth Tracker page today that it was at $58k on 10/2 and now at $70k. This is due to a speculative buy I made on a bio/pharma stock that has returned something like 325%. I bought 650 shares at something like $7 and it took off to over $35. I sold off enough to get back my initial $5k investment and still have 500 shares in my portfolio. Fun times when it works…
  • My Work 401k, which I consider to be the bedrock of our portfolio, is performing quite nicely. I’ve cut back my contributions this year which was EXTREMELY odd for me. I have MAXED my 401k contributions from day ONE. I fell in love with compound math the summer before my first real job and that changed everything (I remember it like yesterday). I was amazed at how much of a difference it made if you started investing at 20 vs. 30 or 40 or, heaven forbid, 50. At that moment I decided I would do all I could to max out my 401k contributions from the start. This year we decided to divert some of that cash to other interests as our 401k is pretty hefty now. Even with that, the total increased nearly $50k which is fantastic in my book.
  • Mrs. PFL did good work with her SEP and Roth IRA’s. We complement the aforementioned “bedrock” with our IRA’s and between the two of us we have a tidy little sum. I let her manage it but we try to make sure it fills in a need such as an International Fund or Small Cap. Just enough to try and keep us diversified.
  • Overall we were able to reduce our debts (credit cards, HELOC, Mortgages) by $30k. We did a bit of repair on our primary house that really prohibited us from knocking this down even more (and why our HELOC increased). I expect in 2015 we should be able to really take a good chunk of this out as it’s our primary focus. We use the rental incomes and any left over cash to knock this down. The one thing about compound math is that it also applies to interest and thus can work against you. Plus I really really really dislike debt (Ala Dave Ramsey).
  • The value of our assets, which is primarily our house and our rental units, can be a bit subjective. I try to update these based on various metrics. For our primary residence we use tax assessments and we review real estate transactions within our area and I tweak it once or twice a year. For the condo, the neighbors sold their unit this year so we have a good baseline for that. The new rental unit is the biggest gainer as we put a lot of time (and 2013 debt) to fix these up and get them rented. Ultimately the goal is to eliminate the debt on these and have them generate monthly income allowing us to truly achieve Paycheck-Free Living!!

So what do you think? Not a bad 2014 if I do say so myself. This is why I am trying to stick it out at my corporate job as long as I can. If we can grease this wheel a little bit more and eliminate our bigger debts, our dream may become true. The nice thing right now is that we are able to do all these cool things (Sugar Bowl, Hawaii) and still make progress.

Account As of: 01/01/2014 As of: 01/01/2015 Gain/Loss
Bank Accounts Total $20,471.06 $18,435.69 ($2,035.37)
Pension Plan $32,411.36 $37,466.43 $5,055.07
Investments - Total $632,741.43 $715,236.79 $82,495.36
E*TRADE Investment $32,805.07 $32,928.74 $123.67
Roth IRA (Mr PFL) $58,832.98 $70,037.96 $11,204.98
ESPP (Mr PFL) $8,878.08 $9,692.91 $814.83
Work 401k (Mr PFL) $392,069.09 $440,856.19 $48,787.10
529 Plan $2,565.06 $2,730.86 $165.80
Roth IRA (Mrs PFL) $34,563.59 $39,789.36 $5,225.77
SEP IRA (Mrs PFL) $59,004.20 $70,326.34 $11,322.14
Precious Metal - Total $11,612.00 $11,408.00 ($204.00)
Assets - Total $894,422.96 $1,001,675.00 $107,252.04
Primary Residence $480,000.00 $500,000.00 $20,000.00
Condo – Rental 1 $331,000.00 $338,000.00 $7,000.00
BD – Rental 2-7 $61,833.00 $126,000.00 $64,167.00
Auto/Misc Assets $8,000.00 $8,000.00 $0.00
Other Rental 8 $13,589.96 $29,675.00 $16,085.04
Credit Cards - Total ($110,780.98) ($109,016.02) $1,764.96
Business Credit Cards ($16,960.11) ($11,034.20) $5,925.91
Personal Credit Cards ($4,965.24) ($4,942.88) $22.36
HELOC Loan ($58,855.63) ($62,486.84) ($3,631.21)
HELOC Loan ($30,000.00) ($30,000.00) $0.00
Loans - Total ($545,256.99) ($518,218.46) $27,038.53
Primary Mortgage ($329,332.36) ($321,183.64) $8,148.72
Condo Mortgage ($99,999.99) ($89,039.57) $10,960.42
Personal Loan ($26,833.28) ($24,195.25) $2,638.03
Student Loan ($89,091.36) ($83,800.00) $5,291.36

Total

$891,597.48

$1,108,113.00

$216,515.52