Drive to 5



I have a goal for 2014 to increase my annual dividend income in my taxable accounts to $500/year.  This is my “Drive to 5” goal.  I measure my progress by looking at the forward projections for my dividend income, rather than the money I have actually received.  If I meet or exceed my Drive to 5 goal, at the end of 2015, I will have received more than $500 in dividend income.

Why $500?  I don’t know.  I probably should have chosen $600, because my average monthly dividend would be $50/month, which is easier to remember than $41.66/month.  I couldn’t think of a good rhyme for “_______ to 6”.

How do I plan to achieve my goal?  Any ‘windfall’ income that I receive will be invested in my Drive to 5; each month, I invest approximately $200 in a few dividend paying stocks.  Lastly, I will simply have to dedicate some of my regular income to the Drive.

To figure out how much money I will need for all of 2014, I assume an average dividend of 5%,  which means I will need to invest approximately $8230 for the year.  That is a really good chunk of change and a lofty goal, but with careful planning and smart purchases, I think it’s a doable goal.  Most of my dividend paying stocks are in DRIP type accounts, meaning all dividends get reinvested into the stock, generally at no cost to me.  This helps reduce (slightly) how much I need to invest.

I entered 2014 with forward dividend income of $82.55/year.  By the end of January 2014, that figure had grown to $88.54 through the purchase of some additional Intel stock.  I still have to make up $411.46 to hit my 5.

My current Drive portfolio includes: GE, INTC, HSY, KMI, O, ARCP.

Please note: I am long all positions mentioned in this post.

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).


Life of a Landlord – Part 1

Frozen Pipe


You never really know how residents will react when something goes awry in one of your properties.  This morning, I received a panicked phone call from a resident in one of my duplexes.  A pipe had frozen and there was no water in their unit.

There is not too much to do to fix a frozen pipe except to either try to thaw the pipe or wait for the pipe to thaw.  Obviously once the pipe has thawed, you need to be ready in case there is a pipe burst.  I advised my residents to move a space heater into the basement and call if there is a problem as it warms up.  Well, about two hours after that phone call, I got another phone call: “Hey, uhh, I got a swimming pool in my basement.”

The first thought through my head was: man, that didn’t take long to thaw.  Thought number 2: this is going to cost a TON; thought 3: I’m going to have to run down and fix the pipes this evening…there goes my Friday night call a local plumber and get this taken care of immediately.  I also asked a contractor friend of mine to take 12 gallons of water (six gallons per unit) to the duplex until this got resolved.

I called RotoRooter to see if they handled burst pipes.  Luckily, they do handle these issues and they try to ensure a less than 24-hour turn around.  The pipe burst at about 3pm, RotoRooter was called at about 3.45 and by 5.30pm they were on site working on the pipe.  By 7pm I had received a phone call that the problem had been addressed.

There were three bursts, two in a pipe and one that broke the back side of the water meter.  I now have a new water meter, some new pipe and (hopefully) a happy resident.

Through the course of this, I learned that the water had actually been frozen for a full 24 hours before anyone decided to call me.  No idea why no one decided to call.  I asked what they had been doing for water for the previous 24 hours (figuring they had purchased bottled water).  The reply: Melting snow on the stove.  I told both residents to call as soon as there is a problem like this in the future and not wait 24 hours.

Anyway, for 18 months as a landlord and one issue like this, not too bad.

Goals, Updates and Changes for 2014



Just as everything in life is a work in progress, so too is this blog.  Having read through many of my previous posts, I realize most of the posts are more academic (aka: dry).  In 2013, I tried to write within the self imposed bounds of “Real Estate Investment”.  Life is more colorful than simple real estate investment, so in 2014 this blog shall morph into a more colorful tale of my (and my family’s) journey to financial independence (FI).  I also have more to say than just real estate investment, just ask my brothers (and probably my parents).

To kick things off, I’ve set my goals for 2014.

2014 Goals:
HBS Real Estate-
1) Add an additional $1,000/month in cash flow (forward looking cash flow)
2) Purchase a minimum of 3 additional rental properties
3) Use unique financing on at least one property (eg. Owner financing, 0% down, etc)
4) Leverage at least an additional $200,000
5) Identify a headquarters for HBS to move the business out of my garage.

Personal Goals:
1) Finish the wood stove room (the picture was taken before my daughter was born…she’s well past 1 year old now)
2) Get master bedroom finished to drywall stage (with new floors)
3) Enter, run and finish a marathron
4) Bike to work at least 160 days this year (that’s 66% of the year)
5) Increase passive cash flow (excluding Real Estate Investment) to $500/year (forward looking cash flow)
6) Invest a minimum of $100/month into my daughter’s stock fund
7) Repay my daughter what we owe her (used to pay for the roof that goes over her bedroom)
8) Invest all unplanned or ‘windfall’ income (eg. Bonuses at work, tax refund, etc.)

Just as I had no idea how to rewire an entire house, I have no idea how I will accomplish some of these goals, but I’ll figure it out.

A Lesson from the Past (#2)

As much as young whipper snappers like to think they are smarter, faster, better prepared, have it all figured out, etc, etc etc, history really does repeat itself.  The older you get, the less you feel like a young whipper snapper and that’s probably for the best.  Every time I think I have something unique figured out, I stumble across wisdom like this:

“…Others are less kind.  They say America’s economy is falling apart.  Big labor has lost its ability to protect the rank and file.  Japan and Korea are changing the way we think and work, and the British-style Fleet Street hype has taken over TV and most of the press.  Huge numbers of college students struggle to read and write.  They graduate without having learned to think or decide.  Product quality is an impossible dream in many industries, and the focus on current earnings per share plagues even the most farsighted planners.  All that’s left, it seems, is to work hard and make money.”

If I had left in the original first sentence to this quote, which reads “Some say America is changing from a smokestack to a service economy,” the quote would have shown it’s age.  With a few minor tweaks that quote is apt for life today.  Reread the quote but substitute “China” for “Japan and Korea”, and while I actually had to look up what “British-style Fleet Street” means, my local NPR station does play a variety of BBC type broadcasts throughout the day.

Just as history repeats itself, I’ve got a whipper snapper at home.

Whipper Snapper feet


PS.  The above quote is from “Cashing in on the American Dream”, written by Paul Terhorst.  Copyright: 1988

Using an APOD

An Annual Property Operating Data sheet (APOD) is a very important tool to use before you buy a rental property, while you own the property and even when you sell the property.  At its most basic, an APOD is simply a worksheet to calculate your potential profit or loss.  With minor tweaks to a basic APOD, you can have a powerful tool available at your fingertips.

As the name suggests, an APOD details the annual costs required to own the rental property.  Some APODs factor in lost rent due to vacancy, costs for repairs, costs for improvements, utilities, etc.  Typically, when I ask my real estate agent for an APOD, I receive either hand written chicken scratch from the current owner, or a worksheet that seems to show the house in quite a rosy light.  When I receive these “Income and Expense” statements, I usually ignore their bottom line and plug and chug in my spreadsheet.

I developed an APOD that is conservative, meaning the APOD exaggerates the downside risk, effectively taking a worst-case-scenario snapshot of the property.  I developed this because I want to ensure that I will make money when I purchase a rental property.  I don’t have cash to burn owning a property that doesn’t throw off cash at the end of the month.  To be conservative, I slice almost 30% off of the gross rent each month (detailed below).

Here is a snapshot of my APOD:


We’ll start working through each column:

The first column is rather easy, it’s simply current information about the building.  I always include the address for the building.  I do this for a few reasons.  First, it is simply a record of a property I reviewed.  Secondly, I now have one additional point of data for calculating my local rents.  Lastly, keeping the address allows me to follow up on the house or building if it goes off the market.

After the address, is the current information on the asking price, current rent, taxes and insurance.  All of these figures are then used to determine potential profit from the rental.  The ‘Month to Close’ allows you to remember when you purchased the building to calculate your first partial year’s gross income.  I prefer to have each rent recorded rather than only a gross rent for the building.  This allows me to determine if certain units are under market rent.  Again, I can also compare the rent of the new building to my rentals to determine if I am over or under charging.

Note: If this is a UFUO (Unique Fixer Upper Opportunity), then input your calculated rents (see: Calculating Your Rent).  Remember, if you purchase a UFUO, your first year’s numbers will generally look horrible because you are incurring costs while you are fixing the place (Watch for the post: Repair vs. Improvement).

The taxes and insurance are usually available on the MLS listing.  If not, ask your real estate agent for this information.  Note: It is good to verify the tax information by calling the municipality.

You do not need to include the information about the building’s size, zoning, heating system, etc.  I do just to remember how the building is set up.  I am usually leery of private wells and septic systems (many other people have no problems with them…it’s one less cost for me to consider).  I also try to keep away from oil heating systems, unless it is possible to upgrade to gas or high efficiency electric.

In the ‘Loan Information’ section, you should input your Purchase Price, Term for the loan, and the rate.  Typically banks will require 25% down for a non-owner occupied investment property.  Seldom will a bank lend if you have less than the 25%…but sometimes they do.  The second property I purchased, I was able to negotiate for only 15% down, which helped my cash flow significantly.

Let’s move to the Operating Expenses:

This column is relatively self-explanatory.    Under the “Administrative” heading are your ‘overhead’ items.  If you are smart and willing to put in a little work, there should be very few costs while you only own a few buildings.

I do not have a property manager yet, but if I did, all of her/his payroll information would be located under the “Property Management” heading.  You could include yourself as an ‘employee’ under the property management heading.  Monthly, you would be able to take the cash allocated under that heading.  I don’t do this because I am trying to expand my business, so I am reinvesting all of my profits.  This rate is also 10% of gross rent (part of the 30% off the top I mentioned earlier)

Under “Maintenance”, the ‘unexpected maintenance’ is a self-calculating cell.  I arbitrarily chose a value of 10% of the property gross cash flow (the second 10% off the top).  I assume this is what is going to randomly break and will have to be repaired (This is also part of my downside risk assessment).  Once my repair reserves are adequate to cover most random expenses (roof repairs, boiler repairs, etc), I will pare back the repair reserves and add that to my profits.

The “Services” heading lists typical services that may have to be paid.  I normally pay for trash because it is a fixed monthly cost.  If you have other services or utilities, you would want to include a brief description.

For “Utilities”, I included the typical utilities for our area.  I never include phone or cable in my rent, but maybe you want to do so.  There are two free spaces for other utilities at the bottom of that page.

HA!  Now we are at the fun part.  The Income/Payments column is a LOT of fun to look through.  Our first stop is the Income.  This is where we see the gross rent for the property.  Some properties may have coin-op laundry, vending machines, etc.  The monthly income from those other sources would be included as Other Income.

When my bank evaluates a loan, they assume a 5% vacancy rate.  In order to be conservative, I assume a 10% rate (the third 10% off the top).  If you manage your property properly, this vacancy rate may be as low as 0% (which is additional profit).

The ‘Net Annual Income’ is the total potential income less the vacancy.

Next step is to subtract the loan payment.  I break out both a 15% down and 25% down, just to give you an idea of what is possible (normal commercial loans are 25% down, but sometimes banks will give you 85% LTV).  For most loans, especially if you are purchasing through a corporation of some sort, focus on the 25% number.

Taxes and insurance are the annual taxes and insurance (probably more expensive than you thought!).

The IRS allows you to assume that your asset (rental property) will be worth nothing after 27.5 years of ownership.  This is called ‘depreciation’.  The IRS allows you to deduct 3.636% of the initial value of the building, not the land, which you purchased.  This accounting happens at tax time.  Depreciation is considered a ‘loss’ to your business, reducing your taxes at the end of the year.  It’s not quite cash flow to your bottom line, but significantly helps to reduce the profit on your taxes.  Just remember that depreciation gets ADDED to an eventual sale of the building (the tax man giveth and taketh).

Now, let’s step to the last column, “Cash Flow”.

In the Cash Flow column, we account for all the income and payments to determine what our profit or loss is for the property.  Again, I have split out the 15% and 25% down payments.  The ‘Annual Income’ is the vacancy adjusted income.  The loan, taxes and insurance are rather firm numbers.  It’s tough to get the bank or the township to reduce your loan or tax payments.

Operating expenses may be a flexible payment.  One of the easier ways to reduce the operating expenses is to evaluate the energy consumption of the property.  The addition of energy conservation, renewable energy installations or energy efficient equipment, may significantly reduce the operating expenses.

The number everyone is interested to see is the ‘Monthly Cash Flow’.  This is your potential profit.  I have found that some investors insist on purchasing properties with monthly profits north of $500.  I have found that I am happy with properties yielding $100 – $300 per month (per unit).  I have friends ask me why I bother purchasing those properties when I could go on vacation or fix my own house (or buy the flat screen, new couch, new car, new…head over to Mr. Money Mustache for his take on this ‘new’ junk).  My typical response is “Do you want to give me $100 per month for the next 10 years?”  They usually say “no.”  Well, these properties ARE giving me that $100 per month, generally without complaint!

When I am going to make an offer on a property, I note a few items on the APOD.  First, I check to make sure the monthly cash flow is greater than $100 per unit.  This $100 is totally arbitrary; you could have said it had to be “1 beelllion doolars.”  Because the APOD automatically calculates these ratios, I adjust my purchase price (which is my offer) to get to the $100/unit threshold.  This offer is then my ‘highest and best’ offer.  Unless the building is in terrible condition, or otherwise warrants a lower price, I usually simply offer my ‘highest and best’ offer and let the chips fall where they may.

The next section calculates the required closing costs.  This helps me pull the necessary money together for any of these deals.  With the example above, you can see the significant difference between the 15% and 25% down payments.

Assuming the property passes the $100 minimum threshold, I then look to the ratios section.  Looking at the “Ratios” section, we’ll see the effect a larger down payment has on our money’s velocity, because we are unable to leverage our cash as much as if we had only used the 15%.

I want to make sure that my cash-on-cash return is greater than 15%.  This means that you will have all your cash back after 6 2/3 years.  It also means that for each $1 I invest, in 365 days, I will have $1.15.  This is also double the average return of the stock market for the past 80 or so years.  Now, the initial cash-on-cash rate may be low because the current owner is renting the building at lower than market rates.  If this is the case, evaluate the building first with the current rents, and then with your new proposed rents.  See how it stacks up.  To get your building to the new rents, there will probably be some friction with existing tenants and you will probably have to find some new tenants.  You don’t want to pay to own a rental property.

For my local market, a good rule of thumb for the actual value of a property is to assume five times net income.  This is only a rough guide, but does help me during negotiations or when I refinance.

The APOD is THE tool I use when I am evaluating a potential property.  Don’t force the APOD to show positive results.  If the property is not beneficial, you don’t want to buy it.  Period.  No one has enough money to throw at a poor property.  Think Tom Hanks in the Money Pit!

I have a few tweaks to make to my APOD.  Once I have those made, the APOD will be available to purchase on this website.  Stay tuned!

One Thing per Day

As I get older, I begin to better understand my parents (maybe we all do).  I find that the rules my parents had while I was growing up are generally good rules, although some rules need slight tweaking!

My dad has a rule that I heard at least once a month: “One thing at a time”.  As a kid, I heard the words he was speaking, but didn’t understand what he was saying.  I normally try to get everything done at once, which causes headaches for myself and usually a few others.  Since I’ve been working on UFUO #2, I’ve begun to learn the wisdom of my dad’s words.

Just like any good system though, I’ve tweaked the saying to better fit my life.  I have a day job that occupies at least 40 hours per week.  At the same time, I am trying to build my real estate portfolio while not giving myself a headache (and not working 100+ hours per week).  So, I tweaked my dad’s rule to the following: “One thing per day”.

For me, one thing can be as simple as one phone call or one email.  “One thing per day” may seem trivial, but I’m amazed at how much can get accomplished if you stick to it.  My Realtor remarked that I must work 24/7 to get everything accomplished.  I told her my rule and that a long slow burn will accomplish a lot more than getting burned out early on.

Real estate investing is a long term game, so “One thing per day” is a perfect rule to follow.

Energy Efficiency for Landlords – A lighting example

[I don’t have a snappy picture for this post, but please read on]

Why do we invest?  Generally, we invest because we feel that our money is better spent purchasing an asset than spent on a night out.  We want the money we invest in an asset to be worth more at some point in the future.  When we are evaluating different properties to purchase, what is one way to evaluate dissimilar properties?  We can use the cap rate.

Cap rate is calculated by dividing the Net Operating Income (NOI) by the cost of the asset (Value).  Cap rate = NOI / Value.  I won’t go into the specifics here, but this equation is useful to investors.  We can rearrange the Cap Rate equation to determine the value of our asset   If we solve the equation for Value, we get Value = NOI / Cap Rate.  The new equation tells us that there are a two ways to change the value of your asset: 1) An increase in NOI or 2) a decrease in Cap Rate.

For a given property, I generally assume the cap rate remains the same, meaning the only way I can influence the value of an asset is by addressing the NOI.  NOI is simple to increase: Increase rent and/or decrease operating expenses.

To illustrate this point, here is a quick example before we jump into the introduction to Energy Efficiency (EE).

I purchased UFUO #2 for $40,000.  Half the building was rented and rent was $485/month and included the entire water bill as well as trash (water is separately metered).  Trash is $30/month (for both sides) and water runs anywhere from $100 – $140/month.  Let’s say it’s an average of $120/month.  This was a mismanaged investment.  The local trend has been to no longer include water with the rent.  In addition, rent had not been increased for 5 years, the rent was about 30% below local market rates.

Calculating NOI ($485 – $120 – $30 = $335/month) = $4,020/year
Our Cap Rate is then: $4,020 / $40,000 = 10.05%

I immediately increased the rent and shifted the water/sewer bill to the tenants.  Again, assuming the Cap Rate remains the same, the new value is:

NOI(new) = ($515 – $30 = $485/month) = $5,820/yr
If we now calculate for Value, we get Value = $5,820 / 10.05% = $58,000, an increase of 45%.

We’ve reviewed an extreme example of how your NOI affects the value of your building.  Our example above is relatively basic economics (increase rent and decrease operating expenses = higher valuation).  I want to introduce you to how energy efficiency improvements to your buildings can lead to increased valuations.

Suppose you own a building and have common spaces in which you pay all the utilities.  Next suppose that common space has four light fixtures with four T-12 fluorescent light bulbs (called lamps).  Lets further assume those lights are required to be on 24/7.  We can easily calculate how much those lights cost to operate: 4 lamps x 4 fixtures x 40 watts per ballast = 640 watts per hour.  At 24 hours per day, 365 days per year, at a cost of $0.10/kilowatt (inclusive of all taxes, transmission, etc.), we arrive at a total cost of $560/year to operate those lights.

In order to improve the energy efficiency, the old T12’s can be reduced to newer T8 lamps and ballasts.  In addition to reducing the size of the lamp, you are generally able to “delamp”, meaning reduce the total number of lamps present while maintaining the same amount of available light.  Newer T8’s consume between 28 and 32 watts per ballast.  We’ll use the average 30 watts for our calculations.

If we swap the lamps and improve the ballasts and delamp (two T12’s for one T8), our potential savings would be: 640 watts –  (2 lamps x 4 fixtures x 30 watts per ballast) = 400 watts saved per hour.  This is a savings of $350 per year.  Using the Value equation above, we arrive at an increase in the building’s value of $3,480 because of the reduction in operating expenses.  $350/year may not seem like much; at my day job, we have been working with a client and were able to identify $800,000 in energy efficiency measures…imagine what those savings do to the value of your building! (there is approximately 1M square feet under roof)

The last thing to consider when making any improvement to an investment property is the installed cost.  Using some rough numbers, the total cost for the install for our example above should be: 4 x $15 (ballast replacements), 8 x $4 (T8 lamps), 4 x $55 (Electrician’s hourly rate) = $312 installed.  Obviously, markup, electrician’s rates, taxes, etc. will vary slightly, but it is not a significant cost (it really should only take a qualified electrician 30 minutes per fixture, not one hour above).

Within the first year, not only has the investment paid for itself with the electrical savings, but your investment property is now worth more ($3,480 more in our example).  Not all improvements will have a simple payback of less than one year, but most improvements will easily pay for themselves a couple of times over their useful life with the savings from the operating costs.

Check back for additional energy efficiency improvements for your MF investment.


A Lesson from the Past (#1)

Quarry Climbing

In order to make sure you do not fail at ANYTHING in life, you must study the past.  More specifically, you must study the history of your current pursuit in which you want to succeed.  Studying art history does not help with an environmental engineering degree.

I didn’t understand this when I was studying to become an engineer.  (Note to my parents: Don’t read the next few sentences)  Rather than study the history of my specific engineering specialty, I spent my time studying investment theory (specifically stocks) and rock climbing techniques (I was an avid rock climber).  Needless to say, I struggled through my engineering degree.

Fast forward a few years.  I’ve graduated from college with my engineering degree, quite a few good texts about investing, and too many pairs of climbing shoes.  My current studies now focus on real estate investment.  However, in addition to modern day investment theory, I also study the causes of problems in the past; the Great Depression, Black Tuesday, etc.  Understanding how these events came about and unfolded allows me to forecast the future, to avoid and not repeat the mistakes of the past.

I started to read “How I Turned $1,000 into Three Million in Real Estate — In my Spare Time” by William Nickerson.  In the first chapter, Nickerson has a section titled “Opportunity is Always Knocking”.  While I do struggle with depression at times, I firmly believe that there is an overabundance of opportunity, you only need to look for it (See: Opportunity).

In Nickerson’s “Opportunity” section, I came across the following quotes [edited for length]:
“In every year, in good times or bad, investment opportunities are always knocking, in spite of the pessimists who perennially lament, ‘There is no opportunity today.’ … The chances for success today offer less risk, by far, than those taken by our pioneer settlers and pioneer founders of government and industry. … Like the editors to whom I first submitted the initial chapters of this book, some of my friends now rationalize, ‘Nobody could start today with nothing as you did and build a fortune.  There just isn’t the opportunity in these times.’ … one of our friends summed up the depressing consensus of many, ‘The most you can look forward to is Social Security, and if you’re lucky a small [401k]. … Our economics instructor advised our class, ‘You might as well realize that the time for opportunity is past.  The best you can hope for is to keep a steady job and stay off welfare.  Nobody will ever again be able to build an estate big enough to produce an independent income.'”

How much of what you just read is appropriate today?  Everyone will say the perfect opportunities have already passed us all by.  They are sort of right.  The opportunities for yesterday have passed us by…the opportunities of tomorrow have yet to arrive.

Are you ready for them?

PS. Nickerson’s comment was published in 1959.


UFUO #1.  This is the house that got everything started.

My Realtor and I were touring quite a few shabby single family homes, basements completely filled from floor to ceiling with trash (coffin shaped things filled with dirt…a little freaky), mushrooms growing from the ceiling, etc.  I was getting a little discouraged.  All the properties in my budget were horrible.  Not only would I have to worry about Dracula, but I’d also have to complete extensive renovations, all on a thread-bare shoe string budget.

The day we were touring the homes, was indicating a new listing a few blocks away.  I convinced my agent to show me the house.  Walking through the house, I was excited.  The house needed work (it still needs some work), but beyond some moldy bread, a stained carpet and a lack of good lighting, the house was mostly intact.  As we were standing in the kitchen, my agent turned to me and said “Liam, I think this is the one.”

I agreed.  We submitted an offer the next day.

As with any deal, there were a few bumps along the road, but as a whole, everything came together perfectly.  The house needed a little work: new switches, new outlets, work to bring the panel box up to code, shut-offs and a new water meter, a REAL good cleaning and a few new lights.  I was able to complete all of the work for under $2,500.  I don’t have many before/after pictures, but what I do have are found below.

Two weeks after closing on the property, I had it rented for $825/month.  It was a pretty good deal.  I texted my brother the picture of the keys about 5 minutes after I picked them up (my parents didn’t know about the house yet).