My main goal* was to build an investment and cash portfolio of $1,120,000* 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.
Our portfolio moved up $119,622 in January.
$50,000 of this was accounted for by my annual update of our home’s value. The other $69,622 was because of investment portfolio appreciation.
Home: Up $50,000
We almost didn’t buy our home. We had just moved out of a neighborhood that we hated, so were leery of buying another house in an unfamiliar city. We had moved to Colorado from the Midwest and were planning on moving back.
Our plans changed after we found a home that was a good live-in flip candidate. After the home was fixed up, we’d rent or sell it if we didn’t like the neighborhood and wanted to move on.
We bought the home for $175,000. It was a dump, so we threw $100,000 and a whole lot of time (too much time) into rehabbing it. During the same period, real estate went bonkers in our neighborhood.
In 2014, a home similar in size to ours and also in poor condition came on the market for $440,000. I thought that it was ridiculously overpriced. $300,000 was reasonable, but then it sold for $375,000 anyway. The new owner fixed it up and listed it in 2017 for $600,000. I thought that price was crazy too, but then it sold for $580,000.
The $580,000 home is slightly larger than ours and has a bigger lot, but we have 4 bedrooms. Mr. $580,000 has 3. Also, all of our space is above grade while some of the this home’s space is below grade. I don’t think our home is worth as much as Mr. $580,000, but it’s close.
And 2017 was another good year for real estate in our neck of the woods. The average sales price of a single-family home went up 11.6%. This isn’t sustainable, but I’ll take it while it lasts.
I had previously valued our home at $500,000, but based on the Mr. $580,000 comparable and Boulder County appreciation, I’m bumping it up to $550,000. This may be conservative, but I’d rather err on the low side of the valuation.
After all of this, you may think we’re big proponents of home ownership. I’m not. I think it’s silly when I see recent college graduates rushing out to buy a home because they think it’s a good investment. If you really want to own, house-hack a multi-family or find a live-in flip. Creative strategies can make the numbers work.
If I was young and just out of school and I couldn’t afford a multi-family or make a house hack work, I’d find the cheapest room or basement to live in close to work.
Right now, you may be thinking this:
Dude, you own a house!
To that, I’d reply with:
I prefer to think of myself as a very long-term flipper. We have about $275,000 invested in the home, so could sell it for double what it’s worth after less than 5 years. Forced equity takes work and sweat (and a lot of profanity), but a live-in flip can be a great way to make a lot of tax-free money. I don’t want to stay in our neighborhood longer than 10 more years. After we sell, we may never own again.
Stock Market Madness: Up $69,622
January was one of the best months for my investments. A frothy stock market pushed my holdings to new highs. At the start of the month, my investment portfolio was $1,527,701 and about half of it is in stocks. The other half is real estate including private loans, syndication deals and a trailer park. Since the real estate deals take a long time to ramp up (only $1,600 of income in January), almost all of the $69,622 in appreciation was due to the stock market.
Numbers like this are amazing to consider in the perspective of time. My first real job back in 1998 paid about $37,000 per year. Twenty years later, January’s appreciation of $70,000 is about the same amount that I would have earned for putting in 2 years (or 4,000 hours) of stressful labor.
But Is It A Trap?
Since the end of January, the stock market has taken some interesting turns. And by interesting, I mean down!
Before the end of January, the markets rocketed up, up, up for a long time. And in the near term, it won’t end well. Stability breeds instability.
Over the long term, it won’t matter because the trajectory is up. This is because of underlying factors such as increases in productivity and population growth.
Since I won’t need to get at most of my money for 10 years or longer, little market farts are slightly annoying, but nothing more. Keep a little cash on hand to ride over the rough spots and don’t let little corrections bother you for even another minute.
Performance Update: January
January was fantastic:
2018 (as of 2/1/2018)
- Days elapsed: 31
- Portfolio gains: $69,622 (including 401(k) contributions**** of $4,108)
- Net worth gains: $119,622 (portfolio + home appreciation of $50,000)
Since the start (1/1/2013)
- Days elapsed: 1856
- Investment portfolio and cash: $1,597,322
- Gains since 1/1/2013: $1,011,279
- Needed to quit work ($1,120,000 in investments): Mission accomplished!
- Net worth: $2,112,323 which includes:
Money doesn’t mean a thing if you don’t have your health. My first big goal of the year is to run a half-marathon on 3/31 in Portland. I’m not a runner and I’m not an athlete, so this challenge is especially difficult. This will most likely be the first and last half-marathon I ever participate in.
Since I started training on 12/19, I’ve put in 86 miles. I still don’t enjoy running and probably never will, but my weight is below 160 and my resting heart rate is about 62. While I still have some fat to lose, I haven’t been this healthy in years.
One More Thing: Greece!
I’ve been invited to speak at Chautauqua later this year! I couldn’t be more thrilled for this opportunity. If you like to talk about any of the following:
- the current state of nuclear fusion
- home remodeling (especially live-in flips)
- electric autonomous aircraft
- winter sports
- cognitive biases
- artificial intelligence
- Admiral Ackbar
This is for you! Join us. This is going to be awesome.
*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. So, if I were to quit my job now, I could spend about $60,000 in my first year of retirement. I’d stick way that number too because market valuations are ambitious. And I just don’t need to spend $60,000 per year.
**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. My compromise is to have enough money put away to cover the mortgage at the time of retirement. So, to retire today, I would need about $1,120,000.
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****My 401(k) contributions include my own, Mrs. 15oo’s, and the contributions from my corporation. Self-employment with a solo 401(k) is a very powerful savings tool. I should have done this years ago.
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