My main goal* was to build an investment and cash portfolio of $1,120,000* ($1,000,000 to retire on and $120,000 to pay off the house) in 1500 days**, starting from 1/1/2013 and ending in February of 2017. I made my goal in 2016, my 1500 Days are over, and I’ve left my job. In the interest of openness, I’ll continue to share my numbers.
Trailer Park Post-Mortem
And, the trailer park is… Gone! We closed on the sale back in January and just received our final payment. Let’s look at the juicy numbers.
Initial Investment (1/2017): $170,000
- 8/2019: $1,211.92
- 10/2019: $16,135.42
- 1/2021: $319,230.87 (sale)
- 4/2021: $16,135 (final payout from reserves)
Over 4 years, we made $179,445.65. ($349,445.65 minus our investment of $170,000). The extended internal rate of return (XIRR) suffered because we made most of the money at the end.
Questions and Answers
Were you happy with the investment?
I compare all returns against the S&P 500.
- S&P 500 with dividend reinvestment: The index increased 79.6% and we would have ended up with $305,320.
- Trailer park: $349,445
Even though the S&P 500 did exceptionally well, returning 15.765%, the trailer park still won. Put a check in the win column!
And the other partners did even better. We took a lower share of the profits because our role was completely passive. This is how the arrangement had to be since the rules of a self-directed solo 401(k) prohibited Mindy and me from being actively involved.
This investment cash flowed very poorly. You made all of your money from the sale! Please explain.
When we bought the park, it was in very poor condition. There were tenants who had not paid in years, a tenant who was a fraudulent prostitute on Craigslist, abandoned units, and empty lots. We spent the first 3 years (2017-2019) cleaning the place up. We demolished the units that were beyond repair. We fixed up others. We bought more units to fill the empty lots. We put almost every dime we made back into the property. 2020 was the year we really expected the property to cash flow. And then:
Had we not sold, we would have started seeing real cash flow in 2021.
Why did you sell?
- Real estate prices are frothy and trailer parks are especially hot. We received an offer that we couldn’t refuse.
- The older I get, the more I value simplicity. Almost all new money goes to index funds which aren’t flashy but are passive, simple, and deadly effective.
I probably wouldn’t invest in something like this again, but this was a good experience:
- We beat the returns of the market.
- We made the world a little better. We took a run-down property and invested in it. The park is now a better place for the inhabitants and still provides affordable living in an expensive part of the world.
Mindy and I put all of the proceeds from the sale into VTSAX. For the first time in our lives, VTSAX and its ETF counterpart, VTI are now the biggest holdings in our portfolio (see a complete listing of investments here):
March was a great month. Our net worth started the month at $3,642,156 and ended at $3,826,009 for a gain of $183,853.
2021 (as of 3/31/2021)
- Days elapsed: 90
- Net worth gains: $306,263
Since the Start (1/1/2013)
- Days elapsed: 3011
- Net worth gains: $3,089,966
Return To Normal
After 13 months of a pandemic, the death of my father, and being isolated from many of our human companions, life feels like it’s returning to normal. Last Friday, we saw friends that we had not seen in over a year. We’re still proceeding with caution, but the world is opening back up again.
At the same time, I’m wrapping up our remodeling projects. Soon, I’ll put away the tools and start cranking out the miles on the bike.
Normal will have never felt so good.
*My goal wasn’t to have $1,120,000 at the end of 1500 days, but at any time before the day count was up. Why? It all goes back to the 4% Rule. Remember that our little friend, Mr. 4%, is nothing more than the most conservative safe withdrawal rate. Since my investment portfolio now sits at $1,550,000, I can spend about $62,000 in my first year of retirement.
**My original goal was $1,000,000 and no debt, I later raised the goal by $120,000 to $1,120,000 because I will have debt in the form of a mortgage and I firmly believe in not paying it off (LOOK at the MONEY I’m MAKING!). My compromise was to have enough money put away to cover the mortgage at the time of retirement.
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Thanks for the update on the Elevated Living Estates investment! It’s great that things worked out well for you and for the tenants — in the back of my brain I guess I was concerned it might get bulldozed and developed or something. Well played all around!
It was gorgeous here yesterday so my wife and I took the dog for an extended walk and finally, finally hashed out our respective thoughts on FIRE. Turns out she’s perfectly content — and her employer would be fine with this — to drop to 20 hours a week. It’d keep her mind sharp, maintain fully employer-paid health insurance, and generate 75% of our living expenses. She still thinks she’s getting the better end of the deal if I then put in my notice to spend my time with house upkeep, yardwork, errands, and cooking (which I enjoy and already do anyway). The plan is to spend Januarys in Mexico and Julys in Europe; we can probably pull this trigger in four years or so. It’s getting really real.
Mr. 1500 Days says
20 hours a week AND get health insurance AND 75% of living expenses?!?? That’s AWESOME! Mexico and Europe sound awesome! Nice work!
freddy smidlap says
well done on getting out of that trailer park AND a sweet profit. i see you went for the basement fridge with the ice dispenser. i am the dedicated ice maker unclogger at my mother in law’s place when we visit every few months. good idea to put the tools away and give the projects a little rest. there will be another winter coming in 6 months.
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David @ Filled With Money says
What an interesting investment opportunity.. I read about how lucrative trailer parks can be as compared to buying a full blown house. It’s generally a lot less money so less risk and potentially more upside in the form of cash flows.
Interesting story with fraudulent prostitution, I think my neighbor years back was a pimp that I never even noticed…
David @ Filled With Money recently posted…Biggest Goals in Life: 8 Good Goals to Achieve
Glad to trailer park worked out well for you. Probably was a good idea to sell when you had a good opportunity rather than having to deal with any future problems or downturns etc. I also value simplicity and my time more now, and am trying to avoid chasing deals or situations that are too complicated, time consuming or can get out of hand.
So I’m the second Adam to appreciate the Trailer Park investment update? Thanks Mr 1500!
That’s just how we roll!
(There are seven houses on my side of the block. In the ten years I’ve lived here, Adams have moved into two more of them. We are EVERYWHERE.)
I thought this case was especially amusing as I’d asked Mr 1500 if he could provide some more insight on the trailer park sale back when he announced it; when I saw you were ‘First’ to comment I did a double-take at my screen.
Financial Velociraptor says
Back when I was still in high school and University seemed out of reach, I wanted to invest in trailer and rv parks as my retirement plan. I never pulled the trigger.
Nice gain. My latest closed investment returned MINUS 72.6%. I’m still up nicely on the year with lots of small wins that outpace that zinger.
Financial Velociraptor recently posted…Covered call Wells Fargo (WFC)
Why would you not take the money in TESLA and also put that in VTI or similar? In the most recent quarter, the majority of income was from sale of offset credits and Bitcoin. Removing those revenue streams, solar and automotive revenue was -$25,000,000. The share of EV they will sell is shrinking, and their guidance indicated the sale of credits will drop as well as manufacturers increase the number of EVs they sell.
Seems like a risk to me, and the upside doesn’t seem to support that level of investment.
BTW, I like their cars, but have not bought one as I’m primarily concerned about quality issues, and I buy cars based on reliability and quality.
Mr. Tako says
Excellent job on that trailer park Carl! That’s actually a really great return! To double your money in just 4 years of owning it is excellent!
It’s no Tesla of course, but that’s an excellent return all the same. You should be proud! 🙂
Ah, finally an answer on the mobile home / trailer park investment! 🙂
It might not be something you all really want to do, but I know I’d at least be interested in reading a deeper dive on the investment as a whole. What did it take to do the renovations you mentioned, and what the financials look like of doing so? Did you run the numbers on what cash flow might be like if you did the bare minimum vs “upgrading” the property (like it sounds like you did)?
And did you guys sell to another investor in the group or did the group sell the whole property?
Other than that, congrats on the great month! Sounds like you’re getting ready to take advantage of the warm months ahead! We’re off to Florida and Georgia here in a few days for our first flight since the pandemic!
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Mr. 1500 Days says
I’m too lazy to dig up all of the numbers, but the renovations weren’t cheap. Every dollar that came in went back out. We even had to borrow money at one point. The units are cheap, but transporting them is not. The renovations aren’t cheap either. It all turned out OK though.
We sold to another investor unrelated to the initial purchase. Bye-bye ELE (Elevated Living Estates0, hello VTI.
Another great monthly update. I really enjoy reading your summaries. Thanks for writing details from your life.
I am trying to do something similar on my new website. So far, I have written four monthly summaries since the beginning of this year. Check them our if interested: https://www.superbusinessmanager.com/monthly-summary-april-2021/
Mr. 1500 Days says
Nice. I hope you enjoy blogging as much as I have.
And wow, China! Pretty cool.
Charlie @ doginvestor.com says
impressive performance on the park! Does the capital gain on RE get treated the same as equities for you in the US for this deal?
Fully agree with the simplification of investments when you’ve already won the game. You’ll probably get bored and need some more excitement once the pandemic is over, but for now it’s probably better to reduce the number of active investments =)
Mr. 1500 Days says
I had it in a tax-sheltered account (solo- 401k), so no taxes for now.
Congrats on a great ROI Carl! Anyone beating VTSAX over the past four years is my freakin’ hero! Just curious on the details (if you feel willing to share), What was the depreciation recapture hit (I know these were a relative short term hold for you—just a couple of years, if I recall correctly)? Was depreciation recapture inclusive in the final $179k profit stated above? I’ve got some rental units that I’m considering selling in this “up” market cycle bought during the “down” market cycle of 2007-2013. Utilizing a 1031 is an option, but difficult to execute based on available market. I’m considering just taking the cap gains/depreciation (I am not invested in a tax deferred portfolio) hit and investing in other areas (like VTSAX). Like you, my ROI will still be phenomenal, so I can’t complain either way.
Mr. 1500 Days says
Depreciation! We held the investment in a self-directed solo-401(k), so depreciation (and recapture) didn’t apply. Neither does UBIT. If I messed something up here, please let me know! Better you than the IRS!