Quick summary on what’s happening in July 2018:
- Sold one of our rental property. We purchased the house around 4.5 years ago for $485,000. We sold it for $805,000, all cash, 14-day closing!
- Add more investments to RealtyShares, increasing the total investment to $75,000
- Started tracking passive income progress towards FI
FI Progress: July 2018
We caught the end tail of the real estate selling frenzy in Seattle’s area. We didn’t get as many offers as last year (2 offers vs. 8), but all we needed was 1 solid offer. We were able to pocket over $250k after repair and closing costs. The real estate around Seattle area seemed to cool down a bit now towards August. Our realtor kept saying that we were lucky to be able to sell so quickly. Houses are selling longer and bids seemed to slow a bit.
My intuition tells me to rebalance our portfolio to lighten up on (physical) RE investment to more stocks, bonds, and cash. All of the signs seem to point to RE getting soften up and started to look like 2007 all over. The plan is to park some cash in CD and increase my position in Bonds (10-20% of portfolio). When an opportunity come, we would like to be in the position of buying (e.g. RE in discounted price). Thus, reserving some cash.
Financial Independence Progress: July 2018
I opened a CD account with CIT Bank. They are offering 1-year term CD at 2.5% currently. I’ve been reading about CD investment strategy at Financial Samurai website. Sam has some good points about not over leveraging in investment, especially with a downturn market seems to be looming.
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I increased my investment in RealtyShares to $75,000 total using some of the proceed of the selling of our rental property. I invested on various commercial property with potential of 8-12% annual cash-on-cash return and 18-20% IRR on exit strategy (e.g. when the developer sells the investment).
The idea is to start building a real RE-backed passive income. Physical real estate is not truly passive in my opinion, even with a property manager in place. You still need to manage the property manager, pay bills, dealing with tenant issues that goes beyond the property manager, etc. Since we want to be location independent when we retire, we want to be able to manage our portfolio anywhere in the world with just an internet connection.
I use Personal Capital (highly recommended free app / website) to keep track of my investment and cash. Once you link all of your online accounts to Personal Capital, your progress is tracked here automatically. Use my referral link here to get $20 from Personal Capital once you link a qualified investment account to your new account.
As for Real Estate Equity, Personal Capital gets the market value from Zillow, thus it tends to be off. It’s best to get the value from your local real estate professional based on comparable sold properties.
Saving Progress: July 2018
Our saving goal for 2018 is $90,000. Read this article on how I allocate these money in various tax-optimized investment vehicles. We are exceeding our target so far. I think I’m going to start set the goal to save $100,000 annually and have a stretch goal to put remaining / additional money to start paying off our mortgages. There will be temptations throughout the year to overspend on vacation and shopping, but posting this monthly helps us to be discipline.
We are almost hitting our saving target for the year. I think we will be able to exceed that $100k saving stretch-goal for the year.
We live a simple, frugal live. But we’re still far from being minimalist. There are areas in our life that can still be optimized, but at the same time, keeping my family happy makes me happy! So there are checks and balances. You spend on things that matter to you. You don’t even spend a dime on things that matter to other people (but not to you).
Just about every other colleagues I have at work drive a Tesla nowadays (the questions resolve around what type do you have or if you do “ludicrous” mode. Huh?) We’re pretty content with our 2012 Honda CRV. But Aloha Jim is yearning for a minivan. Read the I want to be a soccer dad in 7 years or less article for the motivation behind it. We will be shopping around for a minivan early next year once the lease on our Nissan Leaf expires.
Saving Progress: July 2018
If we keep saving $100k annually and invest that money in the market, we should hit the next million within 5 years, then we’ll go from there.
Passive Income Progress: July 2018
What’s new this month? We’re starting to track our passive income progress. Our target is to be able to generate $6,000/month passive income. On early retirement, the plan is to have a fully paid house in the outskirt of Seattle. I think $72,000/year is sufficient to fund our lifestyle if we don’t have a mortgage (and don’t overbuy our future primary residence).
It’s still a long way to go to $6k/mo. We still have a rental (physical) RE that’s cashflowing $399/month. We shall see if the investment we made through RealtyShares and PeerStreet starts to pay dividend within a couple of months. We increased our portfolio balance in Vanguard (currently consists of VTSAX and VBTLX). That should start generating more dividend shortly.
Alternative income is money generated from this blog (affiliate marketing, ads). It doesn’t pay much yet. But it’s an entry point for me to start venturing into online businesses. Once I have more free time, I’ll start looking more into various online business ventures, either starting from scratch, buy existing e-commerce business or iPhone games, or anything that can be run from a laptop. After I’m done with my corporate gig, I’m sure I’ll still do a technology-related projects. But I want to do it in my own term (4 hour per day, 3 days per week). And it needs to be something fun that I’m willing to do for free.
Since we plan to retire on 2025, this is not a sprint. But it is not a marathon either. It’s super easy to be a consumer in America. But delay gratification is the key to early retirement. You get to pick and choose what you want to save now and spend later. It’s a good idea to measure your progress against your goal periodically and be flexible to make adjustment in order to stay on the course when life throws a curve ball.