End of April Summary

All Debts (including home mortgage):  319.5K.  Liquid Assets: 302.5K.  Debts – Liquid Assets = 17K.

That metric has fallen from 75K in December to 17K now, which is a change of 57K.  This change is mostly coming from bonus income and stock appreciation.   I don’t expect this number to go down much more until August/September.

At some point I need to start making decisions on how/when to make some of our larger spending purchases.   A bunch of home purchases coming up.   Windows and doors.  10-15K for doors (we have a whole entire wall of doors that need replacing, but may go with windows on one side instead).   Maybe 10K for rear windows.    New appliances, or new kitchen (7500 for appliances, another 10-20K if we do a full redo).    And then there is the roof thing, probably about 30K, possibly more.

I want to do our closets, but since I will providing the labor, that will be less than 2K.   Probably some exterior carpentry and paining, and possibly interior painting.  10K.  These things really add up.   This is really an advertisement against home ownership.   All the different costs associated with this could easily add up to 100K over the next 5-10 years.   Easily 10-20K  a year in expenses which is crazy.   On top of a mortgage and real estate taxes (that don’t provide me any tax benefit anymore).   Of course I will have an asset that will be able to clear 700,000 dollars, but at a total expense of nearly 1 million (100-200K of home owners expenses like windows, roofs, etc, 200K of interest on loan and the actual purchase price of the house).

Make home ownership look like a  bad choice, however would easily spend the same amount or more over 30 years for a rental and then have no residual value at the end of it.     So home ownership for the win, even though it sucks to outlay some large amounts at once for repairs etc.

When comparing rents, I think our house rents for about 3000 a month, so that is a million dollars over 30 years with nothing to show for it.   Plus rents will increase (and 3000 is a conservative number).   Also our house could potentially appreciate (or depreciate).   Either way, you spend about the same amount over the same period… but at the end of a mortgage you can sell your house so you will likely recover somewhere between 50% to 150% of what you spent .  Renting you end up with zero.   At 50% return (say I spend a million and return 500K when I sell),  you can look at prices of rents and see if there is anything that might save you over the long run, but there is likely to a compromise and  add some uncertainty.   In other words, to make things work you would need to spend less than 500K over a 30 year period on rent.   Even to rent a 1 br apartment for 30 years you end up spending more.

So houses… a necessary evil.   Probably the best you can do is buy a house that requires the least amount of upkeep (I’m thinking townhouses in the long run).  Condos have the instability of condo fees …. which often can equal rent payments over the long run if not run correctly.    Also areas where taxes are lower and/or appreciation potential is higher make it a more attractive investment.


New metric numbers and Fundrise


So first, new low on my metric.  -25,228 (Net invested Assets – All Debt).  Making a slight change to the metric by making it ‘Net Invested Assets’, because I moved some of my investments to a less liquid investment (real estate eReit with Fundrise).   It’s fairly minimal, less than 2% of my portfolio,  but still seems appropriate for me to  track via this measure.

So about that FundRise eREIT.   My biggest concern going back to last year was being able to move money out of it when needed.  The nature of the real estate investment is that it locks up money for longer period, but with better predicted returns.   The answer to this is,  I can’t be putting huge amounts in this investment, this is for money that really needs to be marked as 5 years or more.    My horizon for anything I put in to this investment is 5+, and is really about 12 years.

As I thought about this more, and read quite a bit more I saw a post by the CEO talking about how they would handle the next down turn.   He said basically your money will be locked up for a year when the next ‘crisis’ happens.  That makes a lot of sense.   I am treating this  investment as if I were doing the property research, buying the property, rehabbing and selling it.  At least from the perspective, that is how the money is going to be tied up.  IF you think about scaling it, it gets nearly impossible to return investment to your investors if everyone comes knocking when the next crisis hits

The only part is of this model is you have to trust, which is a little harder without face to face meeting (especially when that doesn’t scale well when your investments are small).  So a little blind trust here… But on the flip side.   I don’t need to buy the property, rehab and rent or sell it, I pay a fee to do that.    Plus there are economies of scale at work around letting a pro company do that (there own contractors, real estate agents, etc), that should more than make up the fees that investors pay.    I believe there model makes them well incentivized to do well and be stable on the projects that they pick.

I actually have more in a traditional REIT than I do in the eREIT.   The return on the eREIT should be a couple points higher than what I get on the traditional REIT( if it’s not, it should at least be in line).   If it underperforms it just becomes a small less liquid underperforming asset that makes up less than 5% of my portfolio … that is the worst case scenario.   Best case is 9-10% average annual return over the next 10 years.


Main metric down to -37K, and bid ask meanderings


My main metric of total debt – subtract liquid/invested assets is down to 37K.   It really should measure -37K, as it should turn positive in the next 12 month!

The other metric mortgage debt – liquid/invested is down to -15K.   This is fantastic.

There are other expenses coming, mostly home stuff and vacation.   There is 10K coming mid month, and another extra 7K coming.   If expenses stay about where they are, I would expect the first number to hit between -27K to -24K by early May.    Then to go up during summer with a fairly big bump in the August/September time frame.

Looking back on my projection from November 2017 (below), I’ve already exceed the liquid goal at 285K for the year.  I am putting in a risk metric of a 15% decline in the portfolio which would put us way off the mark at about 240K with a 17 month recovery.   This is the key here… stay the course when that happens and don’t get down when things move against you.   A 17 month recovery isn’t so bad, especially at it presents buying opportunities.


Month or EOY Liquid Mortgage
April 184533 337790 -153257
Nov 212046 323107 -111061
2017 210564 321441 -110877
2018 240162 301000 -60838
2019 272866 279808 -6942
2020 308943 257751 51192
2021 341647 234825 106822

What else.  I continue to move my portfolio around like I’ve described in previous posts.   so far so good, gains have been steady, buying has slowed on stocks.   I’ve sold some company stock recently.   I worry a little about the bond concentration.  I’m about 80% of the portfolio purchased, however that number will go down as I shift out some other stuff and move more cash towards this portfolio.  Specifically I’m trying to move out of my closed end foreign bond fund given it’s volatility and low trading volume.   It’s recovered enough so the loss is minimal and will help offset some of my taxable gains.

An interesting observation as I try to trade this low volume fund.  I can see the bid ask spread move as I move my ask, and I see algorithms that are clearly moving similar shares in parallel.   I also can see as I move down, the bid sometimes moves up (But rarely down), since I have the lowest ask.   It does work like real bargaining without the person in front of you.   I see what that bid is, I see the spread between the ask.  I can lower a bit if I want to see if they will come up a little.  I also see how me lowering the bid effects other sellers (do they come down to match.

At this exact moment I could come down 10 cents and sell, but that would cost me 200 bucks.  I’ve basically hit my point where I think it works for my portfolio.   I wonder what will happen with that 10 cent spread today.




Bond down day — buying in more

Bonds are down, and given my heavily influenced bond portfolio I am buying today.   Portfolio is down a quarter percent today but bonds are down roughly 2%.   I am now to 80% funded on most of my bond funds.   However I have more cash headed to this portfolio so I have to keep executing.

It is really nice that I can do this slowly without incurring trading charges via my fidelity funds.  It makes for a really good stable account without having the worry about the transaction fees eating in to it (which could easily be a couple hunderd dollars at this point given I buy in small chunks).

I am only at 58% in my stock funds, and still think there will be a pull back to enter, but I do buy little chunks here and there on down days and when I’m buying lots of bonds.

So right now my account is only 17% in cash, but I have ~15% of the portfolio in funds that no longer fit my strategy that I have been holding.   So that leaves me at about 68% of the way to being vested in my strategy.    I should probably just bite the bullet and make the changes to get there in the next month.   It probably is more logical to just do it, and then adjust if there is a market pull back.