My Entry into Real Estate Investing

I have teased in the past about my experiences with Real Estate Investing.  This has played a large role in my financial life and seems to be the topic about which most readers send questions.  This post is my attempt to give background and details of what led to my first real estate investment. 

As a child, we rented our home and that is all that I knew.  My first eye opening moment came when my older sister got married and began looking for her first home.  Her and her husband found a modest 3-bedroom, 1-bathroom Ranch in a good neighborhood.  The house had a nice yard and was perfect for their new family.  However, what caught my attention were the financials.  They were able to only put 3% down and their mortgage payments came to approximately $1500 per month.  At the time I was living with my parents but several of my friends were renting apartments or renting homes with roommates.  On average they were each paying between $500 and $800 per month.  I quickly realized that if I were to buy a house and recruit two fiends to live with me, I could minimize or even eliminate my own housings costs.  This idea seemed like a no-brainer and I quickly followed up the realization by doing… NOTHING.  I simply acknowledged it as a smart idea but didn’t take action.  

Fast forward a few years and I moved to the Midwest.  I bought a home and did not consider getting roommates or house-hacking in any way.  I bought the biggest house that I could afford and started on my path of “adulting.”  However, I stayed engaged with our Realtor who helped us find our home.  She was a real estate investor and I had shared with her my interest in this topic.  I picked her brain at every opportunity and would often call her to take me to see potential investment properties.  After many of these jaunts, I called her one day with a property to view.  She quickly responded with a “NO.”  I was shocked.  I asked, “what do you mean, NO?”  She said that she didn’t believe I was ever going to buy an investment property and that I simply enjoyed looking at them.  This was a punch in the gut, and I had to analyze my behavior and realize that she was right.  I was looking but not taking any action.  I was over-analyzing ever potential deal to the point of analysis-paralysis.  

With this realization in the back of my mind, I was visiting a friend’s parents in a nearby city.  They lived on a quaint private road that led to a large lake.  The houses were cute little bungalows.  Their parents lived at the end of the street and on the way to their driveway, we encountered a small house with a for sale sign in the front yard.  Our friend’s mom was involved in real estate and during conversation we quickly asked her thoughts on the house we passed.  She gave us some background that the owner moved into assisted living and her two young sons stayed behind.  They let bills get behind and eventually the bank foreclosed on the property.  We had her make a few phone calls and we learned that the house had an asking price of $35,000.  I looked at my friend and snorted at that price.  At the time both he and I were driving cars that cost more than that amount.  We sort of shrugged and said, “wanna be landlords?”  We agreed to investigate it.  We decided that I would handle the financing and I quickly called a friend who was a mortgage broker.  The approval process moved very quickly, and we were all set to close on our first investment property.  As the days leading up to the scheduled closing approached, I was chasing the bank to get us the final documentation and confirm that we were on track to close.  This was a frustrating experience as their follow up was not what I was used to.  Finally, the night before closing, I was panic-calling every contact I had at the bank.  I finally connected with someone in underwriting and they flippantly informed me that the bank decided not to fund the transaction.  This had never once come up in discussion that this was even a possibility, so I was completely caught off guard.  When I pressed, I learned that the deal was so small that there was very limited upside for the bank, and they viewed the deal as being too risky for their tastes.  This was a very large bank that I had done business with for several years, so this line of thinking came as a shock to me.  (NOTE:  What I did not know at the time was that this was in 2008 and the real estate market was in a severe bubble that was on the brink of popping.)  

I had a decision to make.  Do I back out of the deal and lose the money I had put down or do I figure out a way to push through?  With my previous realtors’ words bouncing around my head, I decided to push through.  I had a Home Equity Line of Credit on my home and decided to use that to purchase the rental property in full.  I had to be careful since that line of credit was how I planned on funding the necessary repairs on the house as well.  My quick calculations showed that I would be able to cover both, but just barely.

So, when the time came, I purchased the house for $25,000.  We then worked very hard to get the property rehabbed and ready to rent out.  As first-time real estate investors we may have over-improved a house that we projected as a rental but most of the repairs and improvements were necessary.  The overall bill on repairs and improvements came to approximately $30,000.  We had been carrying the house during the rehab period and incurred costs there as well but for the sake of easy math, I consider my all-in costs to be $55,000.  At that point, I reengaged with a lender and we agreed to a mortgage of $55,000.  This was well below market value and presented a situation where the bank no longer felt the property was a risk.  Upon closing, we received all our initial funding back and were able to rent the property quickly for a monthly amount that paid the mortgage and other necessary costs while leaving just a little extra as a cushion.  

I have now owned that property for over 10 years, and I have learned quite a few lessons.  Based on this transaction, I have learned that I need to leave myself a larger cushion in my calculations.  I did not account for vacancies and other normal costs that creep up on any property.  The real estate market in that city has been stagnant during this time and the home’s value has decreased somewhat, limiting our options and exit strategies.  It is regularly rented but there always seem to be things that pop up that skew the financials into negative territory.  Another lesson learned is that I am not best suited to manage a rental property from a distance.  This house is approximately 2 hours away from my home and this does not allow for fast reaction times when self-managing.  I have since added a property manager for this property and that has further eroded the financials.  

Overall, I would consider this investment as a negative.  However, at the time, it stoked my interest in real estate investing so even though it was a bad experience, I did not allow it to sour me on the idea.  The low investment cost also allowed me to make mistakes and learn lessons at a reduced cost.  At present, this house is rented and running fairly smoothly.  I would still love to unload this house and continue to watch the market closely to determine the right exit strategy.  The main reason I would like to unload this is that I am at a point where I am trying to simplify my holdings and this property does not fit the overall investment strategy that I would like for my future.

As several readers has specifically asked for stories about my real estate investing, I am sure there will be many questions in response to this post.  Feel free to leave them in the comments and I will do my best to get those answers to you.

What I am consuming… (March 2019)

Here is the latest installment of my discussion on the various media items I am consuming.  Some of you might note that my last entry in this series came in January.  Yes, I missed a month on this.  I have a few series that I have been writing about that have a monthly component and that just doesn’t leave much room to include everything that I want to write about unless I start to publish more frequently.  This is something I am strongly considering but since I am currently working full time and raising two very busy children and managing my rental real estate investments, I will proceed with caution on any ideas to increase my publishing schedule.  So, for now, please accept my apology for missing a month in this series.  

What am I reading?

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Last installment I mentioned that I have been enjoying Fiction more than usual lately.  I have become engrossed in the John Rain series of books.  I am still enjoying this character and this series.  However, in the past month I have also been reading non-fiction again as well.  The non-fiction book that I have enjoyed the most in the past month was Belichick:  The Making of the Greatest Football Coach of All Time by Ian O’Connor.  I really enjoyed this book.  It details Belichick’s journey as an over-achieving prep football player through his path as an unknown assistant coach.  There is quite a bit of discussion about this relationship with Bill Parcells and the success that they had together and then their ultimate break-up and Belichick’s roller coaster ride as the head coach of the Cleveland Browns and then his path to resurrect his career after that perceived failure.  I think this book had a little bit of everything.  As a sports fan, I enjoyed the peek behind the NFL coaching curtain.  I found that the book worked just as well for someone who is interested in business and management.  

What am I listening to?

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I have found that my podcast list is quite long and perhaps needs to be trimmed a bit.  With this in mind, I have paid much attention to what I am listening to and ensuring that I find value in each podcast that I commit my time to.  There are quite a few podcasts that I am no longer enjoying for various reasons and I have begun to pare my list down.  One podcast that I have reviewed and decided to keep on my list is The Money Nerds hosted by Whitney Hansen.  This is a pretty light and easy listening podcast on the topic of personal finance.  There is typically a mid-week podcast of anywhere from 30 minutes to one hour followed up by a Friday entry called “Five Tip Friday” which is a short-form episode that gives 5 tips on a specific topic for the week.  Whitney Hansen has tremendous energy and that is contagious.  She does not try to promote herself as a guru or expert in the space, but simply discusses her journey in becoming more responsible with her finances.  She explores most of the standard fare in this space—spending, saving, investing, side hustles, etc.—but she does so in a very approachable way.  I come away from each episode feeling more like I was having a conversation with a friend rather than feeling like I was sitting in a classroom being lectured to.  I think it is worth a listen, especially for folks on the beginning of their journey.

What am I watching?

Lately, I have found myself attracted to stand-up comedy specials.  This began when my daughter introduced me to John Mulaney.  We enjoyed his specials as a family, and this led me to search for other stand-ups that were family friendly.  Lately we have watched various specials from comedians such as Jim Gaffigan and Kevin James.  This has led to some fun family time.  I have always enjoyed stand-up specials with one of my favorites being Bill Burr.  I have also re-watched several of his specials, but this is when we have time for adult-only viewing as his material and language is not what I would consider appropriate for my children.  If you have not given a stand-up special a chance before, or haven’t done so in a while, I highly encourage it.  I have found that in this era of video on demand, there are many more outlets competing for content and as such, there are many more opportunities for comics to put out specials.  

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What are you consuming these days?  I am always curious to hear what others are reading, listening to or watching.  It gives me great ideas on things to add to my future consumption list.  Let me know in the comments!

Should You Pay Off Your Mortgage?

A quick trip through the personal finance universe will lead to many contradictory articles discussing whether you should pay off your mortgage early.  Some argue that you cannot be truly financially independent if you still have a large debt hanging over your head.  Others argue that the low interest rates coupled with tax write-offs built in to carrying a mortgage have their own benefits that outweigh having one last debt.  I am not interested in joining the argument on one side or the other.  All I can do it discuss my own intentions and desires.  My feelings on personal finance are that there are no hard and fast rules that can be applied to everyone equally.  It is called “personal” finance for a reason.  Each person much come to their own conclusions as to what is the best option for them.

Over the past few years, I have vigorously attacked consumer debts that I had accumulated before taking control of my finances.  I started by paying off high-interest credit card debt as quickly as I could.  I then turned my attention to a car loan and took care of that much more quickly than I expected.  

Each time I set my sights on tackling a new debt, I approached it in a similar fashion.  I reviewed my current budget to determine the amount that I could apply to this debt.  Using that information, I crafted a payoff plan.  Then I fought any urges to stray from that plan.  Additionally, I looked for any additional monies in the budget or monies I could make outside of my normal budget and applied that to the debt as well.  I found that this activity was somewhat addictive and took on a momentum all its own and the result in each case was the ability to pay off each debt ahead of the planned schedule.

At present, the only debt I have left is housing debt.  This includes my primary mortgage and a home equity line of credit (HELOC).  I have started to attack the HELOC first in the manner described above.  I have found that this time around, the momentum is slow to come.  I have made the scheduled payments each month but when it has come to additional monies, I have not been applying those to this debt as regularly as I had with the credit cards or car loan.  When I have been able to come up with additional money, I have diverted it to my taxable investment account.  I am not sure why I have made these decisions, but I must guess that it is psychology at play.  Psychology similar to the arguments mentioned in the opening to this article.  Perhaps subconsciously I have had this argument as to which is more important or the better use to money.  This realization has led me to seek out information on this topic and brought my own decision making to the forefront of my consciousness.  It has forced to me ask myself where I fall on the “To Pay or not To Pay” spectrum.

As I mentioned, I am currently carrying two housing debts.  While they are against the same property, I consider them as separate and am attacking them as such.  My current plan is to pay off the HELOC first.  During the accelerated payoff period, I will pay my normal monthly mortgage payment on my primary note.  Just to feel like I am doing more, I have added an additional $100 to my monthly payment each of the past 3 months to apply to principal.  It is not a large amount but it is also one that doesn’t bust my budget so I hope to continue that additional payment until the time when I can turn all my attention to this note.

I did set a goal for 2019 of reducing my balance of the HELOC by a certain amount.  After reviewing my progress in last week’s article, I realized that only two months into the new year I have nearly hit this goal.  Obviously, my goal was not aggressive enough.  So as of today, I am adding a “stretch goal” component to that item.  I had previously said that my goal for 2019 was to get the balance of that debt under $30,000.  Now that I have almost reached that amount, I will now attempt to get that balance under $20,000 by years end.  This may be a little too aggressive but after veering too conservatively originally, I will try to push myself in the other direction.  With 10 months remaining in 2019, this works out to a net reduction of approximately $1000 per month.  I believe I have achieved this without any dramatic changes to my budget and without any negative impact on my current savings and investing plans.

With that goal being attacked, I will then attempt to pay the debt in full by the end of 2020.  At that point, I will turn my attention to my primary mortgage.  I have a strong desire to retire “early” but at present I don’t know what that looks like.  When I started on this path, I superficially threw out the target of 10 years.  That was 2 years ago.  I have not yet figured out exactly if that is the date I should be targeting.  I have not fully worked out the financial or emotional details of that type of decision.  But at this point in time, I can safely say that my current plan is to pay off all debts—including my mortgage—before I pull the trigger on retirement.  

I fully understand the arguments on both sides of this discussion.  I believe each have merit.  But for my personal situation and based on my personal mental make-up, I think the comfort of knowing that I am debt free will far outweigh any additional financial gains I can make by keeping a management debt load and using that money for alternative investments.

Where do you fall on this spectrum?  Will you pay off your mortgage sooner rather than later?  I would love to hear from you.

2019 Goals- Two Month Check-Up

In order to keep myself accountable, I will continue to perform a monthly check-up on my published goals for 2019.  Now that February has come and gone, it is time for the next review.  Here is where I stand, for better or for worse.

  1. 1. Keep Weight under 235 (see above for incremental goals):

I broke this goal down in the first few months of the year to make it slightly more achievable.  My goal was to get my weight down to 240 by end of January, then down further to under 235 by end of February.  From that point, it is my goal to maintain that weight level for the rest of the year.  Unfortunately, I have failed in this goal so far.  I was close to hitting the January milestone but have not come close in February.  In fact, I have slipped slightly.  As of this morning I tipped the scales at 243.  I continue to exercise regularly and drink plenty of water.  However, my eating habits have slipped tremendously.  I have blamed this on the number of snacks and junk food available at the office but to be perfectly honest, those things have always been present.  I have just done a poor job with the willpower to say no to these items.  I need to buckle down further and get back to the habits that allowed me to drop almost 50 pounds previously.

  1. 2. Max my 401K contributions:

Based on my current withdrawal percentage, I am on track to max out my 401K again this year.  The allowable amount was increased in 2019 to $19,000 from last year’s $18,500.  Even with this increase, my percentage will max this out at some point in the 4th quarter of 2019.

  1. 3. Fully Fund Wife’s ROTH IRA (Stretch Goal:  Fully Fund my ROTH IRA as well):

The primary goal of maxing out my wife’s ROTH IRA has been completed.  In January I met with my financial planner and we discussed and then executed this move.  The reason we moved forward with my wife’s and not mine is because we are unsure if we are eligible to contribute to ROTH accounts.  Since my wife only has a ROTH account and not a traditional IRA, we are able to fund a newly set up traditional IRA for her and then do what is called a back-door ROTH conversion.  Since I have a traditional IRA as well as a ROTH, a similar move would be more complicated since we would only be able to move a portion of the traditional monies over in the back-door conversion and if that needed to be reversed for any reason, it could get quite complicated.  I am meeting with my accountant this week to review taxes for 2018 and one thing I will be anxious to learn is whether I can contribute to the ROTH.

  1. 4. Read at least 24 Books & Listen to at least 24 audio books:

This goal is very much ahead of schedule.  In the first 2 months of the year I have read 8 books and listened to 9 audio books.  I have found my interest in reading to be increased lately and have found myself grabbing a book in the evenings rather than reaching for the TV remote.  If this pace can continue, I will shatter my stated reading/listening goals.  I think a big reason for the increased interest in reading is simply that I have found things I am quite interested in.  This has come in the form of both Fiction and Non-Fiction books.  On the Fiction front, I was recommended a new series of books by a friend and constant reader, Pete (shout out Pete!).  I gave the series a shot and really liked the first book.  I quickly read the second book in the series and I currently have the third book checked out of the library and will begin that as soon as I complete the book I am reading.  As for Non-Fiction, two bloggers that I enjoy have recently released books.  I was bombarded with information on each since they went on what seemed like EVERY podcast I listen to promoting their books.  Regardless, I gave each a try and found them to be very interesting and quick reads.  The first was Financial Freedom by Grant Sabatier, author of the blog and the second is Work Optional by Tanja Hester, author of  I have enjoyed each of these and found the writers to be very approachable and easy-to-read. 

  1. 5. Re-read “The Millionaire Fastlane” by MJ DeMarco & “Set for Life” by Scott Trench:

I have still not picked up either of these books for a re-read yet.  I have each sitting on my night stand and will work them into the mix soon.

  1. 6. Get Vanguard Taxable Investment Account over $55k

At present, my Vanguard account has a total value of $48,479.39.  I continue with my automatic bi-weekly investments.  Additionally, I have been using various apps to make a little extra money on the side.  I discuss this in more detail below, but I mention it here because I have set each up to pay out in PayPal gift cards.  Once I receive the award, I transfer the money from PayPal into my checking account and then immediately send that money to my taxable investment account.  This adds a little extra to my investment account each month on top of the regular transfers.  Based on the current balance, I feel confident that I will hit my goal.  

  1. 7. Pay Credit Cards in full each month:

Thus far, I have paid all credit cards in full each month of 2019.

  1. 8. Get HELOC Balance under $30K:

The current balance on my HELOC is: $30,176.39.  I am super close to meeting my goal and we are only two months into the year.  Perhaps my target was not very aggressive, but it was based on the previous pace that I was paying this debt down.  However, by tracking this as a 2019 goal, I have put more focus on this item, and I have been able to “find” extra money to pay on this account.  This goal list has had a strong impact in this area in more than one way.  By tracking my goals so closely, I have put focus on my credit card spending.  I have been able to keep that in check as of late.  Since fewer of my dollars were going to pay off credit card debt each month, I have been able to divert those extra dollars to paying extra on my HELOC.  I will continue to attack this debt and my even go as far as revising this debt goal to keep myself pushing on this.

  1. 9. Continue to Blog weekly:

So far, I have maintained a weekly publishing schedule.  Last month, I mentioned possibly writing more often.  I continue to consider this option.  This post is an example of a few items that I had committed to produce monthly.  Since I have been writing posts about my media consumption monthly along with updates on my goals and finances, that does leave much time for other types of posts in a weekly publishing schedule.  My work and family schedules are quite busy so I am unsure if I can commit to a more frequent publishing schedule, but it is something that I am considering.  Let me know if you would like to see more posts.  

  1. 10. Earn additional $100 per month in income through various side hustles:

Last month I mentioned my use of the website  Mentioning it here led me to double down on my efforts to fully utilize this site.  I also learned through a friend that there are other similar sites.  I have since tried a few and found one that I have enjoyed.  It is called  I find I am able to use this in the same way as SwagBucks.  I open each of these up and can review videos, etc. while I watch television or do other mindless tasks.  It can be time consuming if it is something that you sit and focus on but by doing it in the background while doing other tasks, I find that it is quite easy to accumulate points.  As I mentioned above, I have set up these sites to pay out in PayPal gift cards which I then send to my investment account.

 For February, I was able to make a total of $338.72 from various sources, including the above.  Here is a breakdown of the ways I was able to do this.

  •  $50
  •  $25
  • Sell Books at Half Price Books:  $6.40
  • Sell Used Items:  $50
  • Fantasy Football winnings:  $207.32