Blog - Lazy Man and Money

Time to Buckle Down and Get Back to Work

September 6, 2019 by Lazy Man 3 Comments

I started writing this a couple of days ago, but between being sick and the annual Fincon conference I didn’t get it together to post. Hopefully, I’ll be better by next week and can live up the title.

I recently wrote about my wife practicing early retirement. We went straight from that to a family vacation/road trip to NYC and Hershey, PA. It’s our attempt to squeeze all the fun we can.

The sad part is that no matter how much we do, I can’t help focusing on the things we didn’t do. We didn’t get to Thomas Land this year. We didn’t get to the local “Fools’ Rules” regatta. The event requires entrants to build a vessel out of non-marine items in two hours, and sail it to complete the course. It sounds so awesome, but the timing has never worked out for us. I bought baseball gloves for the kids and haven’t gotten in a single game of catch.

I know I shouldn’t focus on the things that we didn’t do. I’m probably breaking a cardinal rule of blogging by not depicting everything in the most optimistic way. My optimistic and pessimistic sides are often at war with each other. In this case, I can keep my pessimistic side in check by going back to my pictures of the summer and all the things we did do. That’s when I start to realize that we did 80-90% of what we wanted and the other 10-20% were outliers.

For the last couple of weeks, we’ve been spending, spending, and spending some more. We don’t budget, but instead focus our spending mindfully. It has always worked well for us in the past. However, it seems that when you aren’t mindful it doesn’t work. Who knew ;-)?

It’s not like I bought a jet ski, or a Patriots’ jet ski, or a Patriots’ jet ski autographed by Tom Brady. My wife hasn’t done the Broadway equivalent of that (which I suppose would involve Lin-Manuel Miranda), either. It’s been a lot of small things, mostly restaurants lunches and dinners.

However, it’s time to heed the immortal words of Daniel Tiger, “That was fun but now it’s done.”

It feels like a rubber band snapping back after you stretched it too far. The kids are back to school tomorrow. The personal finance blogger conference (FinCon) is tomorrow. I literally hug the kids and send them off, and then drive straight to the airport for D.C. I haven’t even packed yet.

I know some friends who travel often and it’s easy for them. I rarely travel. I am extremely anxious about everything. Did I forget [X] or [Y]? I always make sure that I have phone chargers. That calms me.

In any event, it’s time to focus on being productive outside of “family fun” activities. I have a list of more than 50 blog posts that I want to write. Sometimes, I feel like I’ve written everything that can be written about personal finance in 13+ years. However, there’s always more to write. In my case, I can rewrite my old articles 4 or 5 times until they become coherent – LOL.

I’ve got a lot of other non-blogging work to do. My fantastic tenants of 5 years bought their dream home. Another tenant has bounced yet another check (she’s been good at recovering, but it is concerning.) I’m 99% of the way into a new business partnership. I will write more about that in the future, but since they read the blog, I’ll have to run all the language by them first. It is very, very boring stuff, so even though I’ll be vague, you wouldn’t want the details anyway… trust me.

I’ll be back from FinCon around the 9th. I’ll have much deeper posts about personal finance. The first will likely be a monthly alternative income report for August. These have been a little formulaic in the past, but it will be interesting to see how extreme spending and vacation (less blogging and no dog sitting), work together. It sounds like a disaster, but I think our focus on personal finance will pay off.

The Basics of REIT Investing for Passive Income

August 28, 2019 by Lazy Man 5 Comments

It’s been a little while between posts. I’ve been on a short family vacation/road trip. We brought the kids to New York City for a day before moving on to Hershey Park. We’re trying to squeeze every last drop of fun of summer before school starts. It’s been nice to put down the laptop and be blissfully ignorant of whatever is going on in the chicken sandwich wars. However, I’ve been fortunate enough to have a guest post from sureDividend on two of my favorite topics – REITs and passive income. I plan to be back next week with an article (and maybe one before that), before taking another break for the FINCON financial blogger conference.

My Passive Income Pyramid

Real estate is a highly popular method of investing for passive income, and for good reason. It has proven to be one of the most reliable long-term investments capable of delivering consistent, sustainable, and inflation-resistant cash flow.

However, it has the main drawback of potentially requiring extensive hands-on management and the hassles that come with being a landlord, which prevent it from being a truly passive investment. Additionally, real estate often requires considerable capital just to purchase your first investment, making it a cost-prohibitive investment for beginning investors.

However, for those looking for true passivity, a less cost-prohibitive, and/or a potentially even more lucrative and lower risk means of investing in real estate, publicly traded real estate investment trusts (or REITs for short) offer investors a compelling alternative. REITs are also attractive for their high dividend yields.

Why Real Estate?

Investopedia defines REITs as real estate portfolios that receive income from a variety of properties and then distribute at least 90% of that taxable income to investors in the form of dividends. Additionally, the REIT itself qualifies as a pass-through entity which means that it does not have to pay any corporate income taxes and most, if not all, of its dividends qualify for a 20% tax write-off after the latest tax reform bill.

Real estate is a tangible asset that provides clear value to its user. Additionally, the nature of its value is limited, necessary, and flexible – giving it remarkable durability and stability in value and making it extremely unlikely to become worthless over time unless it is grossly mismanaged and overleveraged.

Furthermore, real estate often generates cash flow through a variety of means. This means that it can be repurposed to fit whichever business is in demand at the time.

Finally, its finite supply makes it inflation-resistant. While the fiat currencies of the world continue their inevitable march towards zero, the amount of available land actually declines as the population increases. This has resulted in the value of real estate, on average, growing in a direct positive correlation to the rates of inflation and population growth over time.

This aspect of real estate is extremely valuable for early retirees as it leads to cash flow growing in line with consumer prices over time, making it a great way to ensure stable buying power to fund a retirement lifestyle.

These positive qualities are also supported by the data, as commercial real estate scores as the best possible risk-adjusted investment over long periods of time.

Why REITs?

As previously mentioned, while real estate investors enjoy many advantages that often lead to stellar long-term results, real estate still has some drawbacks as a passive income source. In fact, some would argue that it is not really passive income at all. Being a landlord necessitates going through the sometimes arduous and stressful process of finding good tenants, completing the necessary legal work, performing routine maintenance and occasional repairs or hiring contractors, and keeping your tenants accountable to paying their rent on time.

Furthermore, if you ever need to liquidate your investment, preparing, listing, and ultimately selling your property can be a costly, time-consuming, and stressful endeavor. If you have to liquidate it quickly, you will quite possibly have to settle for far less than market value to attract an immediate cash buyer.

Of course, you can always hire a property manager to mitigate many of these stresses, but the costs associated with that will eat heavily into your cash flow and total returns. Additionally, there is the personal liability of getting financing and making mortgage payments if you do not buy your property with all cash as well as the potential for a costly law suit from tenants. In all, these costs could make owning physical real estate a much less appealing long-term investment compared to alternatives.

Finally, there is substantial concentration risk. Unless you are a multimillionaire who can afford to purchase a large empire of rental properties, you will be focusing much of your wealth on a concentrated selection of assets. If that real estate market turns south, or a couple of your properties suffer from prolonged vacancies and/or bad tenants, your investment returns will be significantly harmed.

In contrast, REITs provide investors with all the benefits of traditional real estate investing without the aforementioned downsides. Instead of dealing with the dreaded “triple Ts” (tenants, toilets, and trash) of landlording, shareholders in a publicly traded REIT can kick back and relax, knowing that a professional management team is caring for their real estate portfolio 24/7. This makes REITs a truly passive investment.

Furthermore, publicly traded REITs are very liquid investments. With a simple click of a mouse (and without costly transaction fees), investors can buy and sell shares of a REIT at the current market price. This means that if an emergency strikes or some other reason arises that causes investors to want to liquidate their real estate investments quickly, REIT investors can get out immediately if they need to.

Finally, REITs offer investors much less risk than physical real estate. A single REIT share in some cases can be purchased for a few dollars, providing a stark contrast to the thousands of dollars’ worth of equity typically needed to purchase a piece of physical real estate. This enables even small dollar investors to diversify broadly across a large number of different REITs. Additionally, each individual REIT typically holds dozens, hundreds, or even thousands of different individual properties, often across multiple cities, regions, and even countries. This gives REIT investors an enormous diversification advantage over their real estate landlord peers as their cash flow tends to be much more stable and secure against market, tenant, and vacancy risks.

A final advantage of investing in REITs is that over long periods of time they have proven to offer superior average returns than investing in individual properties by a score of 11% per year to 7% per year (source).

While this outcome may sound surprising at first, it’s very much expected and even normal. There are real economic reasons why REITs outperform and why this outperformance is expected to continue. First is because REITs generally experience faster growth rates than individual property investments. This is due to the fact that REITs have better access to low-cost capital and enjoy professional management and economies of scale. Second, private investors have a tendency to take on far too much leverage and are lulled into a false sense of security during prosperous times. REITs, meanwhile, take a longer-term, full-cycle approach to investing and typically maintain a responsible “happy medium” level of leverage. This enhances long-term returns without putting them at excessive risk of suffering permanent loss or even bankruptcy in an economic downturn.

Final Thoughts

Real estate has proven to be a great way to build long term wealth and a steady and growing stream of passive income. With access to publicly traded REITs, every investor can begin building wealth and an entirely passive income stream today. In fact, many investors would be better served over the long term by investing solely in REITs instead of physical real estate.

Despite this, many investors lack the proper mentality to invest in publicly traded securities as they will panic at the first sign of extreme market volatility and sell their REIT shares at a loss. Other investors prefer to have as much control as possible over their investments and therefore also prefer to invest in physical real estate. For those that can handle the volatility and prefer total passivity to their income-generating investments, however, REITs are the ideal passive income generating investment.

This article discussed REITs to fill out the top of your Passive Income Pyramid. To see our favorite dividend growth stocks today, start your free trial of The Sure Dividend Newsletter.

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An Improptu Early Retirement

August 22, 2019 by Lazy Man 2 Comments

I haven’t been writing much this week because my wife made the decision to take a break from work. It was a sudden decision, but a great one. There’s a narrow window when she doesn’t have students or health plan surveys. Summer moves quick here in Rhode Island… if you blink you’ll miss it.

My wife is having a lot of fun I want to be a part of it… but only a bit. I want to be around, but I also want to give her space. So far it’s working out well.

We’ve put a good amount into the local restaurant economy. It’s certainly not financially ideal, but it’s good for us now.

I’ve often wondered what it would be like if my wife really retired. I could never imagine her doing nothing… it’s just not her personality. Though this week has been different. She’s enjoying reading a book by the ocean. And why not enjoy that?

This is interesting… in a very good way. I’m learning more about what I want out of “retirement”, but also what she might want. And it might all change tomorrow, because, as we say in our house, “There are no rules.” (That’s usually about vacation time. We certainly have rules as the kids can attest to. We just question the value of each rule.)

This is a small sample size. If someone tried to assess my views about things after a couple of days, I’d say they are nuts. But a small sample size is better than no data at all, right?

So I learned a couple of things this week. One of them is that retirement can get expensive IF we continue to feed the local restaurant economy. (We can also game the system due to numerous deals for locals.) The other is that you can (should?!?!) make things up as you go along.

As much as I like to think I can predict the future, no one (even me) knows what tomorrow may bring. And sometimes it’s great to know that you don’t know.

What’s one thing that you didn’t know about retirement? Let me know in the comments.

You Should Consider Buying an Amazon Fire HD 10

August 19, 2019 by Lazy Man 14 Comments

This is a re-run from last year, but the extremely rare deal for a $100 Fire HD 10 is available once again (for Prime members). I love it even more than when I wrote this original review that I bought two more.

Readers may (and should) be skeptical about my view in this article. Amazon has a commission program and content producers (i.e. me) make some extra cash by reviewing their products if people decide to buy them. Even if I try my best not to be biased, there’s an element of human nature that it isn’t easy to suppress.

With that disclaimer aside, I genuinely like Amazon’s products and services. However, I think the Amazon Fire HD 10 is in another class of value and I wanted to explain why.

Let’s rewind a few weeks.

I sheepishly said to my wife, “There’s a deal on the Amazon Fire, and I think we should get one.” I received the dagger eyes as expected. “How many tablets do you need? You don’t even use them. What are you going to do with the other three we have?”

The truth stings. It stings real bad.

We have a Nexus 7 from 2014. I also bought an Amazon Fire 7″ tablet back in 2014. I also bought a NuVision Windows tablet for $60 on a deal.

These were all great deals at the time, but every tablet was a compromise:

That Nexus 7 is still our best Android tablet… and we are in the Android ecosystem. I’d love to find a quality 10″ one for a similar price. You’d think in 4 years the technology would advance to that level, but it hasn’t.

The NuVision Windows tablet is like walking your pet sloth throw a pile of sludge in the wintertime. It’s terrible. I think the only redeeming value is that I was able to grab some free music off MicroSoft’s Music service before they shut down. I need to have a Windows 10 device and that’s the only thing that worked.

Our old Amazon Fire is good for watching videos, but non-expandable 8GB isn’t a lot of media and doesn’t have the best resolution. It’s old technology and it was a bargain at the time. I looked to see what I could sell it for now and could maybe get $25-30. That gives you an idea of the quality of this tablet.

Enter the Amazon Fire HD 10… Amazon’s best tablet. It came out last year, so there is that aspect of it being old technology, too. However, a 10-inch, full HD (1920 x 1080) tablet is very different from the tablets above. In any case, a flagship 2017 tablet is going to be better than a 2014 bargain tablet. Maybe Amazon’s top tablet can’t be considered a true flagship, but maybe it is just a notch below.

My secret reason for wanting the Amazon Fire HD 10 is the Scratch Jr. application for our kids. It doesn’t run on a PC and I think it is the best way to get started with it. I tried to introduce the kids to it on our old Fire tablet, but it didn’t go well. They slogged through it with a very cramped display. They got quickly bored of fighting with it. I’m hoping this will work better.

The biggest problem is that the Amazon Fire tablet is locked into Amazon’s world. There are pluses and minuses with that. For example, this “unlocked” all the old books I’ve had over saved or bought really cheaply over the years. I always had access to them, but I was never going to seriously read them on my phone or my PC. I realize that I’m explaining why a bazillion people read eBooks, but this is a new-ish discovery for me.

The other big thing is free new books and media. I was able to set up my library’s Hoopla and Overdrive applications to borrow easily. There’s next-level cool about borrowing a book for free without leaving your couch.

It’s also the perfect device for watching Netflix or Amazon Prime. Those work extremely easily, but I was thinking about adding more complex stuff like Plex to access my DVR media. It’s almost like having an extra television around.

The downside is that it is also stuck in Amazon world. Not all of the Android applications are immediately available (though there are hacks to get them). I haven’t even set up a way to check my email on it. I want to learn to make it more of a family device with different accounts. I want to figure out how to get rid of the lock screen as well. I want the kids to be able to use it and not have me needing to unlock it for them. I could teach them the unlock code, which might be easier in the long run.

Last November, I had declared the Amazon Fire HD 10 an exceptional value at $100. Now, I can say from my own personal experience I’ve gotten over $100 worth of value.

The second reason I jumped on the pricing is that I figured, in the worst case, it is a decent digital photo frame. I’m still looking for the perfect app for that, but it is something that I appreciated out of my old HP Touchpad. I’ve been obsessed with Kallax “cubbie” shelving from Ikea lately, and I think a digital photo frame in there would be great when the tablet isn’t actively being used.

I think it’s not bad for being part book reader, library, television, digital photo frame, and a kids’ supplemental education device. I’m sure that people paying much more than $300 for an iPad can say the same thing and a lot more. I personally like spending less money whenever possible and this works for me.

For latest pricing click here.

One Solution to Planning College Expenses?

August 16, 2019 by Lazy Man 5 Comments

Nearly three years ago, I wrote, College Planning is Impossible (But Do It Anyway!). At the time My kids were just 2 and 3. The idea behind the article is that college costs vary so much, that there’s no easy way to plan for them.

If you want to be aggressive you could save a ton of money in a 529 Plan. That’s assuming you have a ton of money… which most people don’t. The downside to that (other than the lack of a ton of money) is that if you put too much in, you have to deal with penalties or other creative uses for 529 plans. Perhaps the best thing to do is just let the kids have the remainder for their kids… or maybe some schooling down the line.

Essentially, if you overshoot the 529 savings, your money is trapped. That’s not a terrible problem to have, but it’s less than optimal. You may even think that you are planning it well, but what if Jack/Jane gets a scholarship/grant or goes to a public school making the costs very different than what you planned?

College has just too many variables and you can’t plan for them…

… except we did. And I swear it was completely by accident.

Before I get to that I’d like to cover some ways to cover college expenses. Not all will be applicable to all families or students. There’s a lot of tools in the tool box and we hope utilize them all.

Covering College Costs

I focused on 529 plans above, because that’s the traditional savings vehicle for 529 plans. Sorry Mr. Coverdell… I have you, but you are mostly obsolete. Like Smelly Cat, it is not your fault. One of the reasons I got a Coverdell was that it could cover private school costs before college, but 529 Plans can do that now, thanks to the recent changes in the tax law.

How could one cover college expenses? Here are a few ideas:

529 Plans – That’s obvious one. It’s a great vehicle to saving money

Schoralships/Grants – It would be nice to get these. Some schools may give more than others, so our plan is probably to apply to a lot of schools?

Pay off adminssions – Just making sure you are paying attention. This certainly wouldn’t save you money. You might end up in the news… and not in a good way.

Student Loans – The old standby. It’s a big problem nowadays, so hopefully we can keep this down.

GI Bill – My wife’s military service gives benefits that we can split between the kids. I realize that not many people may have this option.

AP credit – If you can test out of a few classes, you can get some credit without having to pay for it.

Community College – Most community colleges are cheaper than traditional public and private universities. It may be possible to take some basic pre-requisits for cheaply and then transfer.

I feel that it is like having multiple income streams. The hope is that through some combination of the above (with minimal loans) paying for college won’t be impossible.

But we have one secret weapon that’s not listed above. We have rental properties. The mortgages will be paid off around the time the kids start college.

This means that we’ll likely have some $35,000 or so (after expenses) each year. Is it enough to cover college costs in 11-12 years? Who knows, but it will certainly help. The benefit of this accidental plan is that we don’t have to think about whether we are saving enough or too much in a 529 plan. If there’s extra money left over, that’s just living expenses.

So how might you be able to plan this more intentionally? Unfortunately, you’d need have the money for a good downpayment around when the children are born. Then with a 15-year mortgage, the timing should be right. Of course, it’s not great being a landlord while raising newborns. OF course if you have the money for a downpayment, you put it in a 529 plan and mabye expect it to quadruple (assuming 8% annual returns) by the time the child is in college. I think prefer the real estate plan, because it is more flexible.

I’m not saying you can do it too. Like my 6 year old’s new catchphrase, “Nope, not at all.” However, it is something that you may want to explore.