2015 Financial Review Archives - Lazy Man and Money

My 2015 Finances Reviewed: Real Estate

January 11, 2016 by Lazy Man 5 Comments

[This is the second part of My 2015 Financial Year in Review. You can read more of my financial picture at that link as I publish more articles.]

If you read my year in investing, you may have come away a bit depressed. (Or maybe you enjoyed a little schadenfreude.) Whatever you felt, get ready for a second dose of the same.

In the past I’ve written in more detail about our Real Estate “Empire”, and we added to it shortly after that.

The quick story is that we have three condos aside from the house we live in. My wife and I each bought condos (before we met) near the height of the market (around 2003). We got married and a job opportunity moved us to California with them both under water. The only solution was to become reluctant landlords. Refinancing them to low 15-year rates (thanks Double HARP!) and using renter’s money to buy equity has worked wonders over the last nearly 10 years.

In 2013, we did the ultimate in dollar cost averaging purchase. We bought another condo unit in the community my wife bought into a decade before. She paid around $140K for her original one… we paid $95K for this new one. And yes, today they are probably worth between 115K and 120K each.

So far everything looks like it’s going towards a nice happy ending right? I hope so, but what we experienced in 2015 was far from happy.

The thing with real estate is that they require maintenance. The condo that I bought in 2004 needed a new heating/cooling HVAC unit. It was still on the original equipment… now over 40 years old. The property manager said that I might be the last unit with the original equipment. When I got the complaint that it wasn’t working this summer, there was no way around avoiding the expense. My bank account was soon nearly $9000 lighter. That would have been easier to take if I didn’t have to replace nearly every appliance in the unit earlier in the year.

A few months later I found that the place needed new windows and sliding glass doors. That was another few thousand dollars. I should be thankful that it is a small apartment without too many windows.

We’ll get to the blogging update in a bit. For now, let’s just say that blogging money doesn’t cover 5-figure bills well.

This was followed up with another HVAC failure. This time it was the property we bought in 2013. Fortunately, it was just the cooling unit, so it only cost us around $4000.

None of this was a surprise. When you have original equipment in places that are 30-40 years old, the cost is expected. In hindsight, we should have had a separate fund specifically for real estate maintenance. Instead we used our emergency fund. I suppose it doesn’t really matter which pool of money it comes from, they are essentially the same thing. Maybe I’d feel better about the expenses if I saw the money come out of accounts that it was earmarked for all along.

There were quite a few months that between this and other surprise expenses, we were writing four-figure checks each month. The only question was what number the check started with.

However, much like the year review in investing, there’s a silver lining at the end of the story. We ended up paying down $18,000 in debt between all the properties (which includes our primary residence). It would have been $38,000 of debt paid down, but we added $22,000 in debt when we got a HELOC to buy solar panels. This is one of those cases where I’m fine to adding “good” debt as it will save us money over the long haul.

Many people in real estate focus on properties that are positive cash flow (they make more money that they cost this month). This can make a lot of sense, but I don’t believe it is everything. I’m fine with losing a little money each month as we quickly build equity. In about 12 years all the properties will be paid for and I estimate they’ll bring in about $35,000 a year after taxes and maintenance expenses. That’s a great income stream to have in retirement.

If you were to draw up a plan for how to invest in real estate on a white board, it would look nothing like what we’ve done. At the same time, sometimes you can make some lemons into delicious lemonade.

My 2015 Finances Reviewed: Stock Investing

January 11, 2016 by Lazy Man 1 Comment

[This is the first part of My 2015 Financial Year in Review. You can read more of my financial picture at that link as I publish more articles.]

My year of investing is best summed up by a line in this article:

“Twitter looks a lot like oil.”

If you’ve followed Twitter or oil prices you’d know that investing in them has made a dumpster fire look good.

Twitter – In May 2014 I bought Twitter stock. I sold some at a profit, but held onto some shares expecting Twitter to become a $50 billion company. It proceeded to drop and throughout the year I have dollar cost averaged, most recently in late December buying at around $22 a share. If it can turn it around just a bit, as it has in the past, I should make a nice little profit. In the meantime – dumpster fire.

Oil – In December of 2014, I ask whether it was Time to Start Buying Oil? I used awesome logic for ticker USO, like, “You have the opportunity to buy a stock for $21 that was $39 back in June.” Well as I write this in late December, USO is having a 50% off sale and you can buy it for less than $11. Yes, I’ve dollar cost averaged on this as well. I’d love to test, “Buy low and sell high”, but I’ll need a high cycle at some point.

Those are two very small examples that highlight my ability to catch fallen knives by the blade. I’m not worried though. I don’t see Twitter or oil going out business any time soon.

Those two stakes really are a very, very small minority of my investing overall. I have the vast majority of my money in diversified ETFs from Vanguard such as their Total Market Index (VTI). Most people will look at the S&P 500 and conclude that the stock market was fairly neutral for most people. VTI did just a tiny bit worst than the S&P… that was good.

I’m a big fan of diversifying my holdings. It’s one of the reasons why I was buying oil on the cheap. I really believe in diversifying by buying holding foreign indexes. My reasoning is that if the United States becomes a dumpster fire, my income is going to suffer, at least my investments abroad may lift me up.

I think it’s a great theory. In practice, the rest of the world was a dumpster fire. I’ve divided my foreign holdings into three areas: Vanguard ex-US ETF (VEU), Vanguard Emerging Markets (VWO), and iShares MSCI Frontier 100 ETF (FM). I put about 45% in VEU, 45% in VWO, and 10% into FM. The idea is hope to capitalize on some of the emerging market growth. The frontier market is mostly for a little fun, it’s probably 1% of my total portfolio. As it turned out, VEU was down 9%, with the emerging markets and frontier markets each down 18%.

Add it all up and that foreign part of my portfolio is down around 14% for the year.

That sounds like a lot of doom and gloom, but I at least had Google, Facebook, and Microsoft stock picks balancing it out a bit. That’s not nearly enough lipstick for me to make this pig look good.

What helps make the pig look good is realizing that I hold relative bargains that have the potential for upside in the future. I’m not quite 40, so I’ve got a lot of years to hold on. Please excuse my mixed metaphor, but maybe a prince will come kiss this pig into a princess.

P.S. I realized that I labeled this stock investing and then proceeded to write about oil, a commodity. Since my oil investment is in a stock ETF, it seemed like the best term to coverage what’s in my brokerage fund. I don’t have significant bonds at this stage as I’m aiming for more aggressive growth in these retirement accounts.

My 2015 Financial Year in Review

January 20, 2016 by Lazy Man 2 Comments

I thought about reviewing my 2015 finances at the end of the year, but I decided against it. I didn’t want it to get lost in the shuffle of all the other year-end reviews. Plus if you were anything like me, you were focused on the holidays. I didn’t have time to read too many article, much less in-depth ones covering a whole year.

Finally, I want to publish what I feel are my best articles when people are mostly likely around to read it. Now is a great time, because you can learn from my mistakes and have a terrific 2016, right?

I started to write this and realized that I had a ginormous amount to say on each area. It didn’t make a lot of sense to put it all in one article and lull you to sleep, so I divided it into a few different areas that I’ll cover over the next couple of weeks. (If you find this stuff boring, don’t worry, I’ll be working in other content as well.)

Here are the areas, I’m covering:

The first of the series will be posted in a few hours. I will update this post and link to the articles as they go live.

I’ve written most of the articles already and they have a common theme. They all start out with a challenging situation. In fact, the news on almost all fronts looks very bad. However, if you can make it to the end, you’ll find that overall each area has positives that may even outweigh the negatives.

It may sound trite to suggest that everyone should review their last financial year, but they really sound. If I didn’t have a personal finance blog, I doubt I would have sat down and wrote it out. I learned a lot by taking the time to put it on ~~paper~~ screen. I’m also a lot more optimistic on where my finances are going now that I’ve blasted through most of the challenges.