Not as tough as it looks

Road-rash from some seriously aggressive sandpaper!

Road-rash from some seriously aggressive sandpaper!


PrePreScript: This was going to be an entirely different post, which you’ll be able to find at later this week, but I figured this is more real estate related.

PreScript: My entire philosophy on life is simple but I’m not a good enough to contain it in 500 words.  Maybe one day I will spend the 10k words to flesh out my philosophy.

I’ve been pondering my future: what to do with my MBA?  Today, I listened to a podcast where the host interviewed Ben Hewitt, a Vermont homesteader and philosopher/thinker (the podcast is long, but worth the 1.5 hours, IMO).  I was struck by the choice Ben made to live a deliberate life, on his terms, which has allowed him to thoroughly enjoy life.  While Ben has enjoyed his life, he admits there are difficult times.

Yet he enjoys life.

This brings me to real estate.  Many people actively avoid hard work but there is enjoyment in physical work as mentioned on Invisible Office Hour’s first podcast.  On Invisible Office Hour’s cast, one of the hosts discusses building a wall at his house and how pleasurable the project was.


Flooring edger

I find similar satisfaction in the physical labor I conduct on my rental properties.  Today was no different.  Eighteen hours of work punctuated by one hour for breakfast and an hour and a half for dinner/hanging with my daughter.  Yes, some of the time was spent writing, but at least ten of those hours were spent doing physical labor.

Looks like a droid to me.

Looks like a droid to me.


Flooring sander

Flooring sander

There is comfort knowing who will be putting money into your IRA/401k, etc, but there is real satisfaction watching progress – the transformation of an ugly caterpillar into the monarch.

Before and After (from right to left)

Before and After (from right to left)

I don’t know where I will end up, where I will be working or who I will become.  I want to continue being satisfied.  Do I have to sacrifice comfort?  I don’t know.

It may be difficult, but it’s not as tough as it looks.


More pictures from today (the power was off…)

Project updates

An angel investor gave me a sizable chunk of change to take to the upcoming tax sale; I decided to celebrate by stopping in to Starbucks for a grande chai.  My angel investor not only gave me money to invest, but he also offered to help in any way in the future.

I misunderstood the definition of ‘busy as a bee’, until this past month.  Because a family unexpectedly moved out, my time has been spent either working on HBS (usually during daylight hours), 2-hrs of family life daily (usually dinner and after dinner story time – Wilson Podpie the Pileated Woodpecker anyone?), and 3+ hours of school work between the hours of 8.30pm and 11pm and again from 5am until 8am.  The beautiful weekends have helped keep everything perspective.

In addition to the kitchen renovation, our recent purchase is being reconstructed.  The demolition is mostly complete and new parts are being added.

Kitchen pictures:

IMG_20150919_171839697 IMG_20150920_140129032 IMG_20150920_174520155_HDR IMG_20150920_140143718_HDR IMG_20150912_160113023

Contractor Rehab (footer for the new wall):


Another quick update – sort of unrelated to REI

I’m still working on my B-school application.  GMAT books no longer decorate my kitchen table.  I’m no longer pondering “if X = y*sin(xy)+tan(z), What is the value of C?”**  It took my brain about two days to fully recover from the GMAT exam that I took on Saturday.  PSU’s average is 645, I scored a 660 (I’m slightly better than average mom!)  I’m now recovered and pounding the keyboard, writing my essays.

Everything is due Friday.  I’m trying to wrap everything up by tomorrow (Thursday), just so that in case I miss something, I’ve got 24 hours to correct any oversight.

The flip is SLOWLY moving forward.  The carpeting is ordered (measurements on June 2), basement is mostly clean, yard has been trimmed back (Thanks Rick!), and I should be able to start painting trim on Friday night (I’ll have a 6-pack of a really good IPA if anyone wants to join me).

Other than that, I fixed a sink drain and hose bib this past weekend.  The home owner had ‘repaired’ the drain with packing tape (!).  The hose bib was a crazy amalgamation of CPVC, galvanized, copper and one black iron coupling.  Yes, it was a mess.  All those various types of pipe were found in a 1′ run of pipe.  I cut that mess out and took the wuss’s way out: I used Shark Bites for my ball valve and female FTP connector.  So much for my nice MAP gas torch.

But it was quick.

In about ten minutes, I had shut off the water, removed the bad pipe, installed the new pipe and turned the water back on.  The expense for the Shark Bite connections are totally worth it.  Had I used typical solder connections, I would have been there for at least thirty minutes.

Back to writing essays…


**Not a real question on the GMAT


The flip’s landing on it’s feet

Assuming you’ve been following the progress on my flip, you know that I started off with high hopes, which were quickly squashed by my first contractor, only to be revived by my second contractor.  The second contractor is awesome.  He has totally taken charge of this project; he calls daily with updates, asks questions, provides intelligent feedback and works incredibly quickly.  In less than one week, he had finished gutting what needed to be gutted, removed broken radiators, located new radiators (and had them delivered), rewired all the rooms that needed to be rewired, reframed what needed to be reframed and replumbed most of what needed to be replumbed.  I was blown away (in a good way this time).  He’s actually taking time off this week to finish another job, but I suspect it’s to allow me to catch up to him.

Assuming he comes in around the budget numbers, he’s my go to guy for my next project (yes, there is one on the horizon).

My contractor gave me some budget numbers: $1.50/sf for tile, $150/bath fan & light and approximately $500 for electrical odds and ends.  I was able to locate some tile for $0.50/sf, a bath fan & light for $20 and I had some 12/2 wire and other electrical odds and ends available.  My goal is to shave approximately $1,000 off the budget.

Some other finds:

From Left to right, top to bottom: Some additional tile for $1.00/sf from the local Habitat ReStore; Prefinished hardwood for $0.40/sf from ReStore; Both toilets from ReStore for $1.00 and $53.00 respectively; More tile for $1.00/sf; and a pocket door kit.

The pocket door kit is a story unto itself.  If you notice, there is a sticker on the door kit for $65, but on the rail above it is listed at $74.  When we brought it up to the counter to be purchased, it rang into the register at $74.  I asked the cashier to double check it and she replied (nicely) “I sell what the SKU is”.  I (nicely) replied “I pay what it says to pay, which is $65”.  She (nicely) agreed and took $9 off of our final bill for ‘customer satisfaction’.  I don’t think I’m becoming a cheap skate, but I realize that too many times in life I allow money to be ‘lost’, such as on this door.

Analysis of a Flip

I recently started on an ambitious (for me) project.  I decided to reach out to some family friends and see if they wanted to partner on a house flip.  Essentially, we would buy a run down house, fix it up nicely and return it to market, making money by selling for more than we put into it.  The family friends put up the money (up to $50,000) and HBS will put in the head-scratching, project management stressing work.  I then decided to partner my share with my brother-in-law, who has much better carpentry skills than I do.  He’ll keep the project moving from a technical stand point.

My initial analysis is as follows:

Purchase Price: $23,000
Kitchen Cabinets: $1,725
Counter Tops: $6,480
Appliances: $1,350
Electrical Repairs: $1,000
1st Floor Refinish: $3,600
2nd Floor Carpeting: $1,500
Bathroom Update: $1,500
Painting: $750
Heating System: $1,000
Labor: $6,720
Contingency: $2,563

Total Investment: $53,188

Estimated sales price (conservative, ie. low): $72,590
Potential Profit: $19,403 before taxes, holding costs and closing costs
Holding Costs: -$2,150
Closing C0sts: -5,978
Net Profit: $11,275

With a 50/25/25 split, the investors stand to make $5,637.50 and my brother-in-law and I each stand to make $2,818.75.  While it’s not a HUGE payday, I think we will actually do better than that so long as I really drive hard to meet my improvement budget.

Before Pictures:

How I saved $200 on my CSA membership

Credit Card Cash Back


I generally despise credit cards.  They are financial quicksand.  No matter how quickly you think you can pay them back, there is that ever present sucking sound as those damn cards continue to suck hard earned cash out of your bank account.  The sales pitch is always “Hey, we’ll give you 2% back on everything you spend!”  The card companies know that they’ll give 2% so long as they have you at 20% APR, or an eighteen point spread!  Eighteen points cash-on-cash is crazy.  I am generally willing to invest for 15% cash on cash return.

Well, I’m flirting with the devil.  We received an invitation in the mail to get a new credit card with a $200 signing bonus.  We needed to spend $500 within the first three months of having the card and we would receive 20,000 points, which is redeemable for $200.

I signed on the dotted line.  I knew we needed to purchase our CSA share for the summer.  For those of you that don’t know, CSA stands for Community Supported Agriculture.  We essentially prepay a farmer to produce our produce for a set period of time.  It is sort of an insurance policy for farmers.  They have their cash up front, so regardless of the year, they know they won’t lose the farm in the winter.

At the beginning of this year, we set a budget for all of 2014.  We knew we were going to purchase a CSA share this year, so I knew how much to set aside on a monthly basis so we were ready for the purchase.  Well, the credit card offer came along, and the ‘early bird special’ came for the CSA, a perfect match for the 2014 frugal budget.

I paid the $750 for the CSA (Yes, it’s a LOT of veggies…but it’s still expensive).  After paying for the CSA, I destroyed the card, so I can’t use it for anything else.  I was a little nervous waiting for the 20,000 points to post to my account as no communication from the Chase card services mentioned anything about the points except the initial teaser.  Well, we received our statement today and I actually eagerly opened the envelope and found…20,000 points applied to  my account, redeemable for $200.

The $200 will be applied to the CSA payment, for a net-out-of-pocket of $550 for the CSA.  Not too bad.

Abundance Thinking vs. Scarcity Thinking

Cash from bike

Abundant or Scarce?

My work (day job) has been rough for the past 18 months or so.  The business experienced some growing pains, resulting in several layoffs, a pay freeze and a pay cut.  Originally, I was living with a Scarcity Mentality…”Well, if he makes an additional $500/year, that’s $500 less that I can make”.  I was fearful of not being able to do what I want to do in life.  When most of the upheaval began at work, I decided that I could either be bitter (which I was for a while), or I could take work for what it was (a good job) and design my life to be what I want it to be.  The only way to do so was through Abundance Thinking.

I always reminded myself of when my wife and I were first married.  We made about $15/hour, combined income, and we felt like we were living like a king and queen.  I always wondered how it was possible to feel that good, while not making much money.  Part of it was because we were newly-weds and it’s very easy to practice Abundance Thinking when everything is new and exciting in life, but part of it was simply because life is abundant if you’re willing to watch and listen.

For years, my parents would discuss an ‘abundant mentality’.  As a kid, I never really understood what they meant by an “Abundance Mentality”.  I then read about Abudance Thinking vs. Scarcity Thinking in Stephen Covey’s “7 Habits of Highly Effective People”, and still the concept failed to sink into my thick skull.  Finally, after my wife and I decided to really take charge of our finances did the concept of Abundance Thinking finally catch hold.

In Stephen Covey’s book, 7 Habits, he defines the Scarcity Mentality and Abundance Mentality as follows:

“Most people are deeply scripted in what I call the Scarcity Mentality.  They see life as having only so much, as though there were only one pie out there, and if someone were to get a big piece of the pie, it would mean less for everybody else.  The Scarcity Mentality is the zero-sum paradigm of life.  People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production.  They also have a very hard time being genuinely happy for the success of other people.

“The Abundance Mentality, on the other hand, flows out of a deep inner sense of personal worth and security.  It is the paradigm that there is plenty out there and enough to spare for everybody.  It results in sharing of prestige, of recognition, of profits, of decision making.  It opens possibilities, options, alternatives and creativity.”

I have found that by practicing Abundance Thinking, my wife and I are more content with our lives and we are actually enjoying life more now while spending significantly less.  Don’t get me wrong, there are still many things we want to do that we are unable to afford currently, but with our new Abundance Mentality, none of our goals feel like pipe dreams any longer.

My wife hates budgets (I find them kind of fun, just difficult to stick to).  In order to make our budget more fun, my wife created a “Frugal Fun Calendar“.  The calendar is full of either free, or very low cost activities/items that we can do/purchase each month.  We didn’t know what to put in the calendar and we actually stressed about not having enough to do in a month.  We settled on about 18 different activities for each month.  We thought it wasn’t going to be enough.


Through our first month of the Frugal Fun Calendar, we learned that we have so many options and so many ways to interact as a family that we actually couldn’t do all that we had planned when we started the month.  On Jan 1, we thought we would be bored, with too many days of nothing to do.  But by Jan 31, we had only completed about 3/4 of what we had planned and we felt the days were just packed.  Only by practicing Abundance Thinking have we been able to enjoy all that is available to us locally.

One interesting mental shift that has occurred is that now, rather than simply spend money on something like we used to do, we actually don’t even want to spend the money anymore.  It just doesn’t seem worth it when we have so much to do without spending money.  I used to be a bookaholic and my wife used to chastise me because my mom is the director of a library (although she has a bad book habit as well…).  I used to buy a book once a month or so.

Since we’ve been practicing Abundance Thinking, I’m finding that the library has a HUGE selection, and (as long as I return the books on time), they’re free.  In addition to the town’s library, we have a HUGE University library system that we can access.

Lastly, Abundance Thinking has actually made us happier.  Rather than fretting about what we can’t buy because we don’t have enough money, we are able to slow down and realize how much we have and that we don’t need to buy those other things.  I admit that it helps that we spent every last penny (and then some) in our past life and purchased some really nice clothes, kitchen equipment, etc.  With proper care, those items will last most of our lives and will generally remain stylish.

If you aren’t actively practicing Abundance Thinking, I encourage you to give it a try.  Set a specific time period, say 4 months.  Go cold turkey and force yourself to maintain the Abundance Thinking lifestyle for those four month.  You may have to kick the multiple-Starbuck-per-day habit and make your own coffee.  You may have to make lunch for yourself before work.  Consider walking or biking to work.

If you’re not happier, go back to your old life style, it’s not difficult, but I would bet you may enjoy the Abundance of life more than you think.

2013 Financial Freedom Recap

IMG_20130917_120553_028  Poppy Flower_Small


2013 was a year of hard work and hard play (typical engineering mantra).  In addition to my regular day job, I spent approximately 600 hours working on UFUO#2 and only a few hours working on my personal residence.  In addition, I started this blog (a little bit of work), we took a trip to one of the most beautiful places on earth, St. John, USVI, spent two weeks in Maine, and spent another long weekend in Maine and New Hampshire.  We ran in two half marathons (destroyed my knee in the 2nd half marathon and am still recovering from that), went on numerous hikes with the dogs, learned how to make bread (dough hook on a stand mixer is KEY), STILL haven’t figured out how to make my own wine, and lastly had a mustache for a weekend.

Small Mustache


I was able to purchase two duplexes in 2013, adding to my passive income from real estate, although the 600 hours invested in the one duplex didn’t seem ‘passive’ at times!  Because of the rehab on the duplex, my cash reserves were virtually tapped out, and still I was trying to purchase rental properties locally.  I figured that as I added properties, cash flow would slowly improve, which would add to the cash reserves.

I have determined that that premise isn’t wrong, I just need to stretch out my purchases.  Like bread dough, I need to let my personal dough rise.

At the end of 2013, I had two offers out to sellers: one was for a property to flip and another was for a fully rented duplex.  You can read all about  my offer on the duplex in my “Unique Financing” post.  It was a cool deal, but ultimately a few issues came to the surface and I felt it was best to let that deal sail away.

The other property is a single family home in need of a moderate amount of rehab.  For this property, I have partnered with some family friends.  They put up the cash and I manage the rehab.  For me, this is an awesome deal.  The loan is interest only with the principle being paid back when the property is sold (interest is due monthly; I’ll be posting a detailed write up shortly).

In 2014, I plan to devote significant portions of my take home cash, both passive cash flow as well as ‘earned’ income to the purchase of more assets for additional passive income.  Rather than increase the amount of time it takes me to manage my properties, I plan to work with a turnkey investment firm to locate properties currently under management with low barrier to entry (low down payments) and high cash flow potential.

2013 by the numbers:

Passive Income from REI: $710/month
“Fee” for Self-Managed Properties: $270/month
Dividend Income: $7/month (1.5 coffees)

Total Passive Income: $987/month


The New Cell Phone Plan

Moto X


As my wife and I continue on our path to Financial Freedom, we wanted find some ways to increase our available income for saving/investing.  To find ways to increase available income for saving/investing, we could focus on either increasing income or reducing expenses.

The easy answer is focus on ‘income’ rather than expenses.  How many times do you ask yourself “How can I make more money!”?  Asking yourself that question misses the obvious question “Why do I need that much more money?”  You should only need money to pay for expenses, not for ‘luxuries’.  Most people forget that expenses are generally flexible and are dictated by our choices while our income is usually outside our personal control.

Yesterday I stumbled across “Choosing the Cheapest Cell Phone Plan is a Headache” on CNN.  The article discusses the big four carriers: Verizon, AT&T, T-Mobile and Sprint.  The article describes the tactics each of the carriers is using to lure clients to use their services.  Verizon lets you get discounted smart phones; AT&T allows all minutes, texts and data to be shared within the family; T-Mobile doesn’t require a signed contract; and Sprint has a Framily Plan, which allows Friends/Family to split a bill and have separate bills mailed to different addresses.

At first, these choices seem great.  Who wouldn’t want to choose lower cost smart phones vs. sharing 10GB of data with your family?  The article assumes you need to have 10GB of data or unlimited texts.  Do we really need all that data?  If you could order a 10lb cheeseburger, is it worth it?

We were paying $140/month for 250 texts, unlimited data and 700 cell phone minutes on Verizon’s network.  That was for two smart phones with upgrades every two years.  I checked my email every 10 minutes, every time I heard a ‘ding’ from my phone.  I knew it was rude to check email while at lunch in Portland, Maine with my wife, but I did it anyway.  The ‘ding’ was addictive.  I never stopped to ask myself if I really needed to get email 24/7.

In late 2013, we decided to go on an aggressive campaign to reduce our expenses in order to increase our income available for saving/investing.  One really expensive item we decided we could change was our phone service.  Did we need to check email while driving at 65mph down the highway to or from work?  When watching an episode of The Office, did I need to know how my investments faired?  Honestly, was my life better because of 24/7 email contact?  (Hint: actually I was a lot more depressed)

After reading this article on Mr. Money Mustache, I decided to pay for the Moto X smart phone on Republic Wireless’s network.  Republic Wireless operates it’s network through free wifi access points when available.  When I’m at home and I make a phone call, my call gets routed for free through my internet.  When I’m at work, the same thing (through my work’s wifi network).  For those times I’m away from wireless networks, Republic Wireless partnered with Sprint and rents space from Sprint’s cell towers.

Sprint coverage isn’t as great as Verizon’s, but does everyone really need to drive an Aston Martin?  I decided that while Verizon’s coverage and network were awesome, I didn’t need to spend $140/month for that service.

My new service gives me data while I’m on a wifi network (there are a TON of free networks around, just look for them…Home Depot, Starbucks, Barnes and Noble, local coffee shops, etc).  I get unlimited talk minutes and unlimited texts on cell networks.  The best part of the new plan: the cost.  Now, instead of having to set aside almost 10% of one of my paychecks, I set aside $12.50 per paycheck (that’s not a typo).  Yes, my wife and I now spend $25/month for our smart phones rather than $140/month.  That’s a savings of $115/month.

I do sacrifice some call quality with the Republic plan, but honestly, for $115/month, or  $1,380/year, the small cut to quality is worth it.  My current investments are returning between 15-20%, so at the low end, that $1,380 will be worth $1,587 next year.  Over 10 years, that $1,380 will become $28,019.  That’s almost 8 months of work for me.  (I do invest in the stock market, however I’m saving for real estate investments right now).  If you were to invest that $1,380 in the stock market, over 10 years, at 7% gain per year, you would have almost $19,000.

Is all that data worth 8 months of work?  I’d rather be home asking my daughter “What noise does the chicken make?”  (Her reply: “bock bock bock”…not bad for a 1 year old, but then again, I’m her dad).