2019 Goal: Business Quadrant

2019 feels like a continuation of 2018 in many ways. I learned how to play bass guitar and want to continue improving. I also worked on Majordomo and will continue to do so.

Even though I have a goal for Majordomo, it doesn't feel right to publish it here (in the same way I don't post my HP goals because I'm not the sole owner). Instead, I'll focus on personal items and Furlo Family Homes.

Although I didn't have a specific goal for Furlo Family Homes last year, the focus, in retrospect, was automation and removing tasks from my plate. It wasn't an altruistic "let's get more efficient," but more "I don't have time and something needs to change."

Here are some of the changes I made:

1. I transitioned the rent payment system to be through Cozy. I previously offered 2 additional payment methods.
2. I switched the accounting system to be in Quickbooks. I started in 2017, but 2018 was the first full year of exclusive use. Versus a spreadsheet, this saved me at least 20 hours this year. I do miss my custom reports, but not enough to spend the time re-creating them.
3. I tracked all my miles using TripLog. Not only am I capturing each mile, but it also takes less time.
4. I completely turned the application and screening process upside down, saving 9 hours of work on each turnover. This was a big deal!
5. I hired a virtual assistant to help with back-office tasks like tracking payments, handling maintenance requests, and resident turn-over tasks.
6. Right before the end of the year, I turned the new-resident onboarding process into an online course. Not only does it save me an hour on each new resident, but it also creates a better experience.

Again, in retrospect, that's a lot!

CASHFLOW Quadrant

I've also been re-reading a book called "Rich Dad's CASHFLOW Quadrant" by Robert Kiyosaki, and it's doing a great job of challenging me to think bigger. For a little bit of context, here are the four quadrants:

Kiyosaki proposes that true financial freedom comes from getting your income, or at least enough income to cover your living expenses, from the B and I quadrants.

What's the difference between an S and a B? According to Kiyosaki:

"Those who are true B’s can leave their business for a year or more and return to find their business more profitable and running better than when they left it. In a true S type of business, if the S left for a year or more, chances are there would be no business left to return to. So what causes the difference? Saying it simply, an S owns a job; a B owns a system and then hires competent people to operate the system. Or put another way, in many cases, the S is the system. That is why they can’t leave. (p. 34)"

At the beginning of last year, Furlo Family Homes (FFH) was solidly in the S quadrant. Today, it's straddling the S and B, which is great, but... I think you can see where my goal is heading for the year.

The other quadrant of interest is the I quadrant, which has 5 levels:

1. Spend all that you earn. No investing happens.
2. Savers. The most common example is people who put their money the Bond market.
3. I'm-Too-Busy. Likely a 401(k) and IRAs where you let other people manage your money.
4. I'm-a-Professional: The DIYer. "If they invest in real estate, the do-it-yourselfer will find, fix, and manage their own properties. (p. 105)" That sounds familiar...
5. The Capitalist: Uses other people's money, and usually invests with a team.

I'm a level 4, which isn't bad, but I got a glimpse of being a level 5 investor with the apartment building, and it is more exciting.

I want to point out that you can retire at levels 3 and 4, not just 5. Many people, especially advocates of FIRE (Financial Independence Retire Early) typically focus on level 3 investments with 401(k) matching, IRAs and index funds. A lot of them do it as E or S. So it can be done, if you spend less than you earn and invest. If you have money (15%-50% of your income) and little time/interest in learning about investing, index funds might be perfect for you.

And finally, the Bible says work is good. Perhaps my favorite example is right in the beginning with Adam: "The LORD God took the man and put him in the garden of Eden to work it and keep it. (Genesis 2:15 ESV)" After Adam and Eve sinned, work became toil, but the work itself is a good part of creation. We are stewards of our stuff, our families, and this planet. So it's good to work hard and take care of what's been given to you, no matter what quadrant you do it in.

So the only way to retire isn't through the B and I-5 quadrants. If you're an employee (E) and investing (I-3) 15-50% of your income for retirement, you're doing it right.

2019 Goal: Business Quadrant

I like the clarity of focusing on ONE Thing. So I'm going to do that again. I also like the idea of solving a problem. It allows you to not have all the answers day one but gets you thinking about how to solve it and acting upon it, so you're headed in a purposeful direction.

My goal, my problem to solve, is to make Furlo Family Homes a true business, one that I could leave for a year or more and return to find it running better than when I left it. I don't think I'll entirely move it to a B-Business by the end of the year, but I want to continue the process I started out of necessity last year and have a clear roadmap by the end of the year. There are a few sub-problems I'll need to solve:

• I need someone local who I trust to meet residents and open doors.
• I need to change my mindset to stop saying "I". FFH needs to find a trusted local person who can meet residents and open doors.
• Currently, I personally do 90% of the maintenance, how can that switch to 0%?
• How can FFH afford these changes? Related, how can FFH improve its operating margins?
• Following the recommendations from E-Myth, business roles/responsibilities/tasks, the entire system (!), needs to be documented and followed. What's the best way to record this? We have an internal wiki, but perhaps there's a better solution?
• I'd like FFH to grow this year. It currently owns 16 units. I want that number to be 45 (given some per unit profit assumptions). What's a consistent way to buy and hold rentals? This likely requires becoming a level 5 investor. How do I make that transition?
• Does hiring a full-service property management company make sense? What are FFH's core competencies and differentiating factors?
• Plus, a few more questions I haven't thought of yet.

For a single goal, this feels like a lot, but it'll be good for me, my family, and FFH's current residents.

A Transparent Look At Our Investment Property's Performance

When buying an investment property, I "run the numbers" to see what type of return I can expect. I make a bunch of researched assumptions, plug them into a spreadsheet and it pops back a bevy of numbers. Based on those numbers, we decided to buy or pass.

Jessi cares about one number: the pre-tax profit. She wants to make sure a property is cash flow positive each month. I definitely care about cash flow, and also the total return on our investment (ROI) since that's what we compare to other investments, like the stock market.

Since I recently completed our final accounting for the tax year, I thought it would be fun to look back and see how we're doing. I also know it's super helpful for others to see real live results. So, gird yourself for a bunch of numbers!

Cash Flow Analysis

Let's start with the cash flow analysis. We currently own 4 properties: LYN is the apartments. COL & JAC are duplexes. FIR is a house we converted into a rental half way through last year.

The line Jessi cares about is the 3rd line. Good news! Each of them are positive, even FIR (The money to fix up FIR is in the "Cash Invested" line).

We target $100/month/unit (line 5) and we're hitting it on the stable properties. I expect FIR to jump up around that level next year as well.

The final line (total ROI) is what I care about most. I expected COL to be at 52%, and we're easily beating that. JAC, however, I expected to be at 16% and it's slightly below that level. I knew it wouldn't be as high as the others because of the large down payment, but this is a little concerning. I was planning to re-paint in the near future, but now I'm starting to wonder if we can afford it.

(Side note: The cash invested in LYN shows $53K. That includes a $50K personal loan. The property is paying off that loan, so it's really $3K invested. That puts the total ROI at ~900%, and increases the TTL total ROI to ~60%.)

Overall, I'm happy with the results.

Classic Property Ratios

This isn't the only way investors look at properties. There are some classic ratios used:

The goal is a Gross Rent Multiplier (GRM) lower than 8.3. Technically my numbers are actual rents instead of scheduled rent (what you're supposed to get at 100% occupancy), but my vacancy rates are low enough it shouldn't matter. I don't personally rely on this number much, but I know others look at it. It confirms that JAC isn't our best investment (but not horrible).

In my opinion, a capitalization rate (Cap Rate) of at least 5-6% is. We're doing slightly better - that's good.

The 1% rule states that your rents should be at least 1% of your purchase price. We knew JAC was slightly below, but the others continue to above this threshold. This is another measure Jessi cares about when doing an initial evaluation.

The 50% rule is that no more than 50% of your revenue should go towards your mortgage. This is actually my first time verifying if we're actually hitting that. For both COL and FIR we did minimum down payments, so I'm not surprised that they're above 50%.

Appreciation

When we buy, we assume zero appreciation. We want the investment to be a solid one even if the market doesn't change. Never buy a property "because it'll go up in value". That's speculating, not investing and creating value (and why I'm disillusioned by the stock market). Still, it doesn't stop me from taking a peak. :)

There's two ways to evaluate the value of an investment property: look at comparative sales, and by an income approach (properties tend to sell at a consistent multiple of their rent). I used Zillow's Zestimate for the comparative sales. My income approach is conservative: take the monthly rent and divide by 1% (the inverse of the 1% rule).

Apparently Zillow doesn't feel comfortable making a guess on the value of a commercial building... The first ROI is comparing 2016 to 2015 (Y/Y). The next two lines are looking at the lifetime (LT) increase since purchase. At the very least, it's nice to know that I could sell the properties for a profit if I need to.

Fun to look at. If anything, it tells me it's OK to move forward with cash-out refinance of LYN. I should not attempt a refinance on any of the others at this time.

Final Thoughts

Am I making a killing? No. But I'm beating the stock market (36% vs S&P @ 9.5% and Dow Jones @ 13.4%). (OK. LYN is pretty good and COL isn't bad either.) Having said that, I spent more time managing the properties than managing my 401K, so there is a trade off. Of course, that's one of the things I like about rentals: there's an opportunity for me to add direct value to my investments, and that's what helped me get a 36% return last year. Plus, I actually enjoy working with tenants and doing maintenance. So it's win-win-win.

As for my next steps, I would like to buy another multi-family property (or two!) this year. Through some research last year, I learned that there are a lot of older folks who bought 1-3 duplexes 20-30 years ago for supplemental income. Lots of them own the properties free and clear (or with very small mortgages), are doing a lot of the managing and maintenance themselves, and have rents way too low for the area. I now have the proven experience of buying and successfully managing multi-family properties that I think I can help these folks fully retire. The plan will be to buy these duplexes at their current value, and then fix them up and raise rents to market rates (and then refinance to pull the invested cash out). This is exactly the same thing I did with LYN. You can see above that that's a winning strategy.

I'll probably be able to buy one property on my own. But I'm also interested in finding people with some cash to help fund deals through the refinance. I hear there's people with at least $25K that would like to outperform the stock market. It would be cool to help current owners retire, help improve homes in the city, and help others earn a better return on their money. So I'll be exploring that avenue later this year.

A Credit Card In Motion Tends to Stay in Motion

(Image: One of my new toys tools for getting work done. Being able to easily put in finish nails is really ,really nice. Being able to powerfully blow air around is really nice too.)

According to TeacherTech.Rice.edu, Newton's 1st law of physics states:

"An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force. This law is often called "the law of inertia". This means that there is a natural tendency of objects to keep on doing what they're doing. All objects resist changes in their state of motion. In the absence of an unbalanced force, an object in motion will maintain this state of motion."

Pretty profound and clearly had a massive impact on our understanding of physics. I also think it goes beyond just objects and is just as true with human behavior. In physics it's called inertia, but with behavior its called habits. This make intuitive sense: we keep doing what we're doing unless something external stops us. And even when something tries to change us, we fight it.

But this last week I noticed the law of inertia in my life in a different way: how I spend money.

Normally I'm pretty frugal on my personal spending. Some would kindly point out I'm probably too cheap. Normally that's true. I regularly go an entire week without spending any money (I pay off our credit cards weekly, so I know when it's still a zero balance). What's strange is that it actually feels weird to pay for something after holding a "streak" that long of not pulling out your card.

However, this last month has been different. With the apartment project underway I've been regularly spending money. And since there are 11 units, most of my spending has had an extra "0" behind it. I'm fine with the expenses because I have a very clear path of how I'm going to earn it back, but I'm still spending money regularly.

But the most interesting part is that I've noticed I'm ALSO spending more money on personal items. Since I track my spending, I can clearly see I'm outside my normal levels. Even factoring for planned expenses, like new iPhones, our spending is 25% higher than normal. Yikes!

Digging deeper, a majority of that is food related. Not surprisingly, when we get busy we tend to eat out more. It also don't help that lately I'm working across the street from a pizza parlor that seems to purposefully pipe in fresh cooked pizza smells into my window around 4pm. Yum! But I've also noticed we have a couple more gadgets hanging around the house.

For each new gadget I have a really good reason for why we bought it, but combined they add up to a significant amount of extra spending. Lots of these items we've wanted for a while (new washer/dryer, new thermostat, new phones, plus a few more), but we've held off. Now all of the sudden we're buying everything. Is it just the timing of when things break? Partially. But mostly it's because we're in the spending mode, and so it's easy to break down and buy the item: "A credit card in motion tends to stay in motion."

How to Break the Cycle
Ideally I'd make the decision to go on a spending fast. I would literally leave my cards at home for 3 days and stop spending money. Ideally. Unfortunately, that's not an option when you're in the middle of a large rehab project. Just leaving my personal cards at home wouldn't help because the act of spending money is still occurring. Another option is to go to cash only for personal spending, which will also slow it down.

My hope is that simply identifying the inertia will slow me down some. I'm also looking for triggers that make my "spendy sense" tingle. If I know that pizza smells are going to start wafting my way at 4pm, I should eat some nuts at 3:30 to reduce my hunger a little bit. It might also look like making formal shopping a list ahead of time and agreeing with Jessi that we'll stick to the list (we do that for food, but that needs to be done for Home Depot as well). When we see something we "must" have, we'll add it to the list of the next shopping trip. When the next shopping trip comes, we can decided if it's still something we must have.

The point is to change something, to put an "unbalanced force" in a different direction. I know eventually this project will end and my spending inertia will slow down naturally. Since I still have at least another month of this project, my goal will be to start getting my personal spending under control earlier.

Finally, if I worked for Mint, it would be fascinating to look at the data and see if large purchases are followed by a temporary bump in unrelated spending. Am I weird, or does Netwon's first law expand to spending as well?

Downtown Albany Apartments

Today begins a new chapter in our life.

In 1930 this apartment building was built in downtown Albany by a lady named Grace Burnap. She named it the Burnap Apartments. She passed away and the property passed on to her husband, Frank, and son, Willis. The Burnaps sold it to the Logsdons in 1943 and the name changed to the Logsdon Apartments. Since then the property has known many owners and most recently is called the Lyon Apartments after the street it sits on.

Starting today, 84 years after it was built, this building has new owners: us.

Like any 84 year old building, this one is in need of some TLC which is exactly what we're going to provide. It's going to be a huge effort, but it'll be worth it to bring these 11 units up to par. Our goal is to provide affordable, clean, and safe housing. This fits in line with our goal of loving people, providing homes for them, and improving the Albany community. Many people we talked to knew about the building and are excited to see the reputation improved.

Here are some of the crazier projects we're going to do in the next couple of months:

We have a water leak. Thankfully the wall has already been removed for us.

We also have mold...

All of the bathrooms are "classic" looking. They need to be cleaned REALLY well.

This kitchen will be re-done. Notice how the counter hangs over a little bit on the drawers below rendering them useless? IKEA to the rescue!

And then there's items like this.

There was a water leak. It's been fix, but the damage has not. That's half good news, at first we thought the water leak was still ongoing.

The basement actually offers a very interesting opportunity to add value. We're thinking about adding a laundry center after we finish the main floor rehab.

I'm still trying to figure out how someone breaks only the outside pane. Especially when it faces an office building.

Common questions we get asked:

Q: How many units?
A: 11 units. 6 studios. 5 single bedrooms.

Q: How can we afford this?
A: Well... not having kids helps (unfortunately). So does both people working. Most importably, it's spending significantly less than we earn. Being ready to jump on opportunities like this is one of the reasons we bought a small fixer-upper, and haven't fixed it up yet. Funny story: our neighbor asked me yesterday when we were going to fix up our home. I told her in about 5 years. She was shocked we would wait that long.

Q: How can you stand dealing with tenants?
A: We do five things to make it enjoyable for everyone.
1) We screen really well and find great people. See this BiggerPockets post on how to do it.
2) We communicate frequently with each of our residents.
3) We treat each resident with respect. Notice the subtle language... we call the people in our rentals residents, not tenants.
4) We provide a welcome package including quirks about the property, a list of contact numbers for utilities and service providers, and a couple move in items like paper towels and soap. This starts us off with a positive relationship.
5) We build systems to automate the process - i.e. they pay rent online - to reduce the amount of time we spend actively managing, and make it easier on them.

Q: How will we have time to make all the repairs?
A: We won't. We're hiring a couple people from a temporary agency to work for a couple months on the rehab. I'll be there to answer questions, work evenings and weekends, but they'll do 80% of the work. We're also open to friends coming over to get sweaty with us. :)

Q:What are we planning on doing with it?
A: The building is in need of some major rehab. During that time we won't have anybody living in the building. Once it's fixed, we'll re-rent it. The first phase of repairs will involve lots of paint, flooring, caulk, drywall, a couple new kitchens, and at least one new window. Then we'll turn our attention to the outside next spring.

Q: Can we see inside?
A: Definitely! Give us a call. Chances are we'll already by over there working.

Q: What about your 2014 goals?
A: Yeah... Clearly I spent more than $2,000 this year... That officially happened Thursday when I paid the closing costs. I think I'm okay with that.

Q: How do you feel?
A: We're excited! We're nervous (I couldn't sleep last night)! We're still excited! Ask us again in two months...we will probably say tired.

Are Gas Prices Rising?

One of the perks of being an analyst is that you tend to collect data for the fun of it... Because you never know when you might need to do a quick analysis. In this particular case, the opportunity presented itself when my mom shared a CNBC article about the inflation of food and gas costs.

Food prices + gas prices = Stressed consumers

"It's official—summer is here. But as Americans hit the road and fire up their grills, they've noticed that they're paying more for almost everything this year. And it's making some change their spending habits."

The article talks about food prices rising, and then talks about gas prices.

"If it's not tough enough at the grocery store, there's also plenty of pain at the pump. The national average for a gallon of regular gasoline is now up to $3.68, according to AAA. That's up 14 cents from the same time a year ago, a jump of roughly 4 percent.  

Retail gas prices are rising as crude oil prices rise due to tensions in global hot spots like Russia, Ukraine and Iraq. Brent crude, the international benchmark, has risen almost 6 percent in the last three months, while West Texas Intermediate, the domestic product, is up about 5 percent in the same period."

Like I said, being an analyst and tracking data has it's perks because it means I can check these stats against my personal experience. Here's a chart of actual gas prices I actually paid over the last couple of years:

Clearly gas prices are rising in recent months like the article claims, but is it getting to concerning levels yet?

Nope.

The same time last year, I was paying almost the same price on average at the same gas station (4 cents or 0.7% higher today). From a stats perspective, I consider that the same price.

There is also clearly a seasonal spike every summer, and this last winter was actually CHEAPER than last winter's prices. So we should be thankful for the savings earlier this year and shouldn't be surprised to see prices rising.

Now, could there be a rubber-band effect where lower winter prices cause summer prices to jump higher to make up for the corporate company's winter loss in revenue? Definitely. If anything, I would plan on that.

That and move to Oregon because their gas prices are apparently better than other places in the country (that sentence is for you Mom).

The other thing you can do is start changing your habits. Interestingly, the article paints this as a bad thing (you have to sacrifice and spend less). I disagree. You should always aim to spend less. If this is the reason you needed to start eating less and riding your bike on small errands. Excellent! That will have good consequences on your health and wallet despite the inflation "problem".

For me, this is the time of year I start riding my bike all time time: the weather is nice, the days are longer, and gas prices are higher. Combine that with the fact that I live in a place where gas prices apparently don't get as high as other places (and I don't even have to pump my own gas!), and I'll be saving significantly this summer.

Setting Intentional Goals to Reach Big Results

Here's quick update just to share that we paid off another student loan this month! Only 2 more to go! Yes, that's even after taking a vacation to Florida.

Since we're still living off the high of that trip, we decided to skip the fun month and go straight to the next loan. I'm definitely starting to smell the barn too. :)

The next loan is just over $10,000. Assuming we don't get anything back for a tax return it'll take us until July to pay off that loan. Last year's tax return was large enough to fund our down payment on our house (Tax benefits are one of the many perks of a side business), so I'm fairly certain we'll get something back which will bump up our payoff date by a month or two.

Then we'll just have the big one left, which is currently $26,500. That'll take us a full year to pay off if nothing changes. Of course, something always changes...

We set out to pay off all our loans in 5 years... and now we'll finish in 3.5 years. That's what happens when you become INTENTIONAL about something. You put in a LOT of FOCUSED work, but the results are FASTER, BIGGER and BETTER than you ever imagined. That's the Slight Edge principle.

If you have something you want to accomplish. Write it down as a goal, along with a plan on how to accomplish it. By becoming intentional about it, you'll make progress and the results will be better than you imagined. It might not feel like much at first, but it'll add up over time.

When we started, we could only afford $202 extra each month. 5 months later, we "found" an extra $85 to pile on. Then another $63, $3, $15, and $185. Then we drastically changed our living situation and added $477 to the pile! None of those sound huge, but they add up to $1,030 a month. We couldn't jump straight to that amount. When we got a pay raise at wok or earned money from a side gig, it went on the pile. When we saved on electricity by turning down the heat & wearing sweatshirts, it went on the pile. We did it by taking little steps and making little intentional decisions every month. You can do the same thing with your goal.

Again, I encourage you to write down your goal and start down the path of accomplishing it. Start with what you can reasonably give. Then watch over time as you find ways to do even more than you thought possible.

Image: wikipedia.org

Homemade Lara Bars

I know, I know my blog posts are spotty at best. But alas, here I am.

I was inspired recently so I wanted to share a food discovery.

I love Lara bars. Yes, love is the right word to describe how I feel about this food. They are convenient, all natural, filling, granola-bar alternatives that are simple and delicious.

The only downside is that they are usually $1 per bar which if you're eating 1 per day (ok, let's be honest I've been known to have 2 or even 3 on the particularly busy day) that adds up! Everytime I had a bar I read the ingredients and loved that I recognized everything on the list...things like dates, peanuts, cashews, dried cranberries. And I often thought to myself...I could make that.

So, I tried it. We had some mixed nuts in the pantry as well as some sunflower seeds, pumpkin seeds, flax seeds, dried cranberries, banana chips, and walnuts. I picked up some dried dates from Winco and threw them all in the blender. After things were nicly chopped I pressed the mixture into a dish and put it in the fridge to harden. After a few hours I sliced them into bars wrapped them in baking paper and viola!

I decided to see if I would actually save money by making my own bars. Here is what I found out:

Let's break down the costs:

Lara Bars: $1 per bar

If on average I eat 7 bars a week (that's low balling it) that would come out to ~$28 per month.

To make my homemade fruit and nut bars (I by no means want to rip-off the Lara Bar name) I spent about $9.50 which made me 15 bars. So dividing $9.50/15 I get $.63. Wow! $.63 cents per bar! So, doing the monthly math if I have 7 bars a week that would come out to ~$18.

Homemade bars: $.63 per bar about ~$18 per month.

Thats over an additional weeks worth of bars at the $1 per bar price in savings!

The savings are amazing and here's another upside. I can choose exactly what flavors I want and can mix in healthy add-ins like flax meal and wheat bran. Here are some of the recipes I came up with:




Carribean Island Getaway
1 C dried dates
1/2 C island dried fruit mix (pineapple, cranberries, mango, bananas)
1/2 C dried coconut flakes (no sugar added)
1 T pumpkin seeds
1 T flax meal
1 T wheat bran

Gone Nutty
1 C dried dates
1 T each: peanuts, sunflower seeds, pumpkin seeds, walnuts, almonds
1 T flax meal
1 T wheat bran

Peanut Butter Cookie
1 C dried dates
3/4 C peanuts
2 T flax meal
2 T wheat bran






For each recipe... Chop finely in a blender or food processor. Press into a dish or pan. Let chill for 2 hours. Slice into bars and enjoy!

Hopefully you are also inspired to try this healthy, on-the-go snack!

Jessi

P.S. If you google homemade Lara Bar recipes you get a ton more recipes...I am going to try some of these out next time!

Income and Expense Analysis

I was once again reviewing our finances for the year and wanted to share my findings. I know for me, I struggle to find information on what's "normal" to be spending... or maybe "not normal" in our case. So hopefully this helps shed some light on what one other family is doing.

For starters, we track everything using Mint.com and then I copy everything over to a spreadsheet once a month. I like detailed spreadsheets, but if you're not into that, Mint will show you what you need to know to make smart decisions. That's what Jessi looks at along with these charts once a month with me.

Monthly Income & Expenses
This first chart is the same as I showed last year, with one difference I'll explain in a bit. The lighter lines are from 2012 for comparison. The blue lines are the cumulative net income. So, in a month where our income was high and our expenses were low, the blue line would go up, and that's the starting place of the following month.

The one change I made this year was to treat our real estate finances as a separate entity. We even have a separate bank account now that all of that activity is done from. Then whatever the net income was for that property, I added it to our income as a single line. So in May and July we did a bunch of repairs and the "income" from that property was actually negative because we spent more than we collected in rent that month.

Also included is the down payment and closing cost of our new home and student loan payments.

The goal is to get the blue line just above zero which means we put all our extra money towards paying off loans. As you can see, we had to dip into our savings to pay for the repairs we did. We had savings from previous years, so it was OK. Then in October Jessi got sick and I paid all the doctor bills in November from our Emergency fund. You can kind of see why my goal this year is to not have any large expenses.

Spending Distribution
Here's a new view I created. I wanted to see how we were spending our money and I wanted something in between the detailed line items and the top line.

• 100% = our take home pay this year (the investment properties net income were included as income).
• Loans = Student loans and car loan
• Mortgage = The property we live in. The investment property mortgage payments are separate (embedded in income). When we lived in the duplex I split the mortgage in half.
• Utilities = electricity + garbage + water + gas + mobile phones (yeah, iPhone = utility)
• Food = groceries + eating out
• Cars = gas + maintenance + insurance
• Home = home repairs (and down payment/closing costs) + personal care items + health & fitness + Vinnie expenses
• Fun = shopping + entertainment + travel

Hopefully you can tell what our priority is. Once our loans are paid off, that'll convert to savings/investing. Also, as a general rule you want your housing mortgage/rent to be no higher than 33% and hopefully below 25%; we're killing it in that category. Our food category seems a little high though. Well... I know it's a little high because we spent $1,500 more this year than last year... mostly eating out. Knowing this will help me stick with my health goals this year.

I'll be honest, "Home" is kind of a catch-all category. I would call them "semi-optional" expenses. Buying a place was a large part of that category. Finally, not included here are taxes and my 401K contributions. First, they happen before it gets imported into Mint, so I can't track it easily. Second, I don't have much control over my taxes and I can't really do anything with my 401K balance for a while.

Spending Over Time
The last thing I wanted to look at were some specific spending categories. There are ones that we have some control over and try to keep low. Yes, I realize I cut off the top of the chart, I did that so I could see the other lines.

Like I talked about earlier, our spending on food is too high. It looks like the middle of the year is where it got out of hand. It also appears to coincide with our home purchase / fixing the duplex / Vegas trip. So, the underlying issue is that when we get too busy, we opt to eat out more often. We'll need to be more conscious of this going forward. Home spending spiked when we bought our place and again at the end of the year when I fixed a bunch of things. Utilities... look at the steady growth rate... I suppose it's normal to grow in the colder months, but December was $230 higher than January! We'll definitely need to keep an eye on this one.

Finally, the Fun spending really seems to spike when we buy plane tickets (May & October), or Disney World tickets (November). Though, the general trend for Fun seems to also be growing. This is another one I'll be watching closely.

Bottom line
If I was grading myself, I would probably give us a B. We did good on our loans and mortgage. We blew it on eating out and can probably make some cuts we don't care about in the fun category. The utilities one can probably be curbed by paying more attention to our heating habits (ie, not letting it get too roasty). I feel pretty good about the Home, Giving & Cars categories. Getting an A next year will require us to not have any large expenses in 2014 and keeping our Food, Fun categories lower.

The Debt Snowball Begins To Avalanche

It's time for another celebration as I just sent off the last check (via Bill Pay) on another loan. I think it'll be fun to see how we're doing.

We started this journey 2 years ago. At the time, we had $78,000 in debt (excluding real estate investments). and we were ready for all of it to be gone. Including our car loan, the minimums totaled $996 and all we could add at the time was an extra $200. It wasn't a ton, but it was enough for us. Then about every 6 months, we would kick in another $1,000 from accumulated savings. My calculations showed it would take us 5 years to pay it all back at this rate. We were OK with that because we knew we could increase that amount over time.

When I got a raise, all of it went towards paying back the loans. When we increased the rent on a unit, the increase went towards paying back the loans. When we moved to a smaller place, we put the difference towards the loans.

In 2 years, we've managed to get our debt down to $44,000... not as fast as some of the Dave Ramsay callers I hear, but good enough for us. That means we've paid $38,000 in payments $34,000 of which was to principle. Because of how snowballing works, more and more goes towards principle over time, and that means we're now on a 4 year track. Woohoo!

In those 2 years we also increased our extra payments by $767 per month, and by snowballing our old payments, we're now doing an extra $1,345 each month (with an extra $1,000 every 6 months or so, as savings allow).

In those 2 years, we've learned some things. Here they are:

Lesson #1
Start where you can. We could only do an extra $200 at first. That's OK. It's important to just get started. The same is true for saving for retirement: just start. Then next year, you can re-evaluate and add more.

Lesson #2
When making extra payments, it really adds up because 100% of it goes towards principle. So even though it may not seem like much at first, it has a huge impact. This is especially true at the beginning of a loan when a majority of your payment goes towards interest.

Lesson #2.5
People get caught in questions about the order: Biggest balance first? Largest Interest rate first? Type of loan first? So many choices! I would argue it doesn't matter. Just pick one. The BIGGEST determination of how fast you pay off our loans is the amount EXTRA you pay. Instead of spending time figuring out the optimal order, spend that time figuring out how to pay just a little extra.

Lesson #3
Make sure to celebrate your small wins. You can brag about it on your blog to show off how awesome you are. Or, like we're also doing, take a trip to Disney World. In January, we're going for a long weekend. Since it's off-season, we saved money on our plane tickets. We're also staying with friends (and running in a 10K race with them... the "official" reason for going), and used my sister's employee/intern discount for park tickets. As such, we were able to keep the cost under $1,345 for the two of us. Celebrating milestones keeps you excited during a very long process.

Lesson #4
Once you see the fruits of paying off your loans, use that excitement to find other ways to add to the pile. It might be cutting back on something that you don't really use, or finding a side job/gig and putting 100% of your earnings there.

Lesson #5
You can pay off your loans with crazy intensity, but you don't have to. In this time, we managed to also buy a car, another investment property and a new home. Though, you'll notice that each of these purchases were designed to improve our monthly cash flow. Despite that, I'm thinking about setting a 2014 goal of not making any large purchases, or doing any large renovations.

So there you go. If you're lucky enough to get a raise/bonus this year, think about kicking off your journey of getting out of debt before spending it on a new iPad Air.

How To Finance Commercial Real Estate

I was recently doing some research for a real estate investor's club meeting on how to fund commercial real estate and had trouble finding this information online. So... Here it is as of August 2013.

Let's say you want to buy an apartment complex larger than 4 units (that was one of the properties we practiced analyzing as a group). Those, whether it's 5 or 500 are considered commercial real estate. That means you need to get a commercial loan. When you go to a business-based bank, like Citizens Bank, here's what they'll tell you. Again... this is all subject to change, but these should work as general lending rules.

• First, the downpayment minimum is 30%! That could come from the seller (or anyone really) as long as they're willing to take 2nd position to the main loan.
• Second you can only get a loan for 20-25 years.
• That loan will probably have an variable rate, which can adjust every 3-5 years.
• Your personal credit score, though looked at, doesn't matter as much. If you're buying with a bunch of investors as an LLC then the majority owners would have to guarantee the loan payment.
• Instead, they'll look critically at the income and expenses of the property. The income must be at least 1.24 (call it one and a quarter) of all expenses, including all debt repayment.
• Closing costs will be the fairly standard loan fee: 1% of mortgage. Plus the fairly standard 4% of the purchase price for title insurance. Plus recording fees of course, but those are minimal.
• Often times, since these are larger properties with considerably more risk, the lender will want to do an environment impact report to make sure nothing comes up.
• That's it. Gather your funds and paperwork and you can buy a commercial property.

This means you need a TON of capital to buy a property though. The specific one I was analyzing met all the criteria if I had enough money for a downpayment and closing costs. Well... except that I don't have $200,000 to invest... So I guess I don't meet all the criteria! I did officially find out that not having enough money is the #1 reason why people don't qualify. No kidding!

Now, if the seller was willing to take back a 2nd for the down payment, and even though it would still have positive cash-flow, the rent-to-expense ratio would become less than 1.24 in this case and I wouldn't be able to finance the rest of the purchase. Bummer. But... if the right property came along that still met the criteria, it would be totally cool. Good luck finding that deal on the MLS.

It could also work, in theory, with a group of investors adding up to the $200,000 minimum down. Of course, I don't exactly know how to find people with lots of cash waiting to be invested... Plus, I'd have to have a very clear exist strategy, somehow prove my credibility, and put in a ton of work... but it could be worth it. I know some people do this full-time with larger properties where the scale makes it worth the effort. They find deals, find investors, property managers and get part of the equity for pulling it all together. I actually would like to learn more about this style of investing.

Anyways, that's what it takes to finance a commercial property. It's way out of my league today, but still fun to think about.

Building Sweat Equity

I've been a bit of a recluse lately. I'm not hanging out with friends and not writing regularly. I even had trouble finding time to host the Furlo Bros Tech Podcast with my brother.

It's not that I've been slothful. Quite the opposite! When we bought our home, it also meant that I needed to fix up our duplex unit to rent out. We're doing all the work ourselves, so it's taking up all my free time (sweat equity!). I'm not done yet, but I wanted to share some photos of what I've been up to and what's planned.

The first step was to remove the carpet from everywhere. What a thankless job! There were a bazillion staples holding it down! I did recruit Jessi to help some, that for that I am REALLY thankful.

We did reveal some hardwood in the living room, but it's in horrible shape. Fixing that is a project for another, much later time. Instead, we're going to cover half of it with a floating floor and the rest with carpet. That'll create a dinning area in this large space.

Next, we discovered some problem areas with the subfloor in one of the bedrooms.

That's been ripped up and new plywood has been put down. It's much more solid now.

I also tore a hole in our utility room.

Previously it was covered up by a piece of wood. A very ugly piece of wood. Even worse, when you walked by it, you could feel a draft. Here's the template I made of the hole:

Right now I have the sheet rock cut and ready to be installed. I also added a mini-access panel so I can get to the plumbing in the future if need. My access panel will look MUCH better than a piece of wood slapped up onto a wall.

And now for the big project. The kitchen.

I know you remember my sander fight. Well, I'm back for round two. Here's what it looked like when I started:

It's hard to see, but the counter top is starting to pull up from water damage. So we're replacing the counter. Because the sink is in the corner, it means I can't buy a pre-made piece. So we're making them ourselves, and they look awesome!

Here's a wall in the kitchen:

Soon, that wall will have the refrigerator, and a nice cabinet right next to it. Here it is in progress:

The drill, the massive drill, it sitting on it. You see, my dad came up last weekend to help build it. We got really far, but had a slight accident with the table saw that required a few hours at the hospital. So, my dad is driving up again this weekend so we can finish.

Here's another feature of the kitchen in progress:

We're making a chop block for part of the counter. We priced them out, and decided it would be cheaper to make our own out of oak flooring. We're also using the oak for the trim to pull everything together. ALL of the brand new countertops will cost less than $250 when it's done (sweat equity!).

Here's a teaser of what the new counter looks like on the new cabinet.

It's been awesome to have my dad's help. Not only does he have awesome tools we can use, add an extra set of hands, provide his expertise with creative solutions, but it's just been fun to hangout and work together. It's times like this I wished I lived closer to family. I really appreciate all of his help (and don't worry, the doctor thinks his finger will heal mostly normal).

Many more projects remain. For example, we're going to replace this window because it doesn't actually shut. Let's just say I followed MMM's advice and wore long underwear all winter. We taught a finance class this January and everyone laughed at me. Laugh if you want, but I saved money on heating, and now I get to write off this expense and increase my rent.

We're also going to clean, paint, and re-caulk everything.

It's a ton of physical work, but that's the point. We're building sweat equity into this unit. That'll increase the rent and lower our maintenance in the future. It'll take about 18 months to pay for these repairs from increased rent. After that, it's all positive ROI. And really, we've been saving part of our other unit's rent for 3 years to pay for this, so we won't feel it in our monthly budget - it's already paid for.

Jessi was talking with some friends at work about remodels they're doing. In some cases, they're spending over DOUBLE what we are on just a bathroom because of the labor costs. For their own home that won't pay them back! I'm fairly certain if I paid someone to do all this work, it would be 10 times the cost. Instead, I get to keep my money and invest it further. That's building sweat equity.

Four Principles of Money Management

Jessi & I are once again teaching a finance class. This last week we hit upon a topic that I think is SUPER important. I told our students that if this lesson is the only one they remember, I consider the entire class a success.

In this lesson, we cover four basic money management principles. These principles set the foundation for anything you want to accomplish. Here they are:

1. Spend less than you earn
2. Avoid the use of debt
3. Build an emergency fund
4. Set long-term goals

In the class we shared ideas for each principle:

1) Spend less than you earn
Make a meal plan, watch fewer movies, shop around for better service prices (phone, cable, insurance, etc), ride your bike to work. There are literally hundreds of ideas to save money, just to a web search if you need ideas.

2) Avoid the use of debt
Remove credit cards from your wallet, pay with cash, set spending limits where you have to check with your spouse if it's above, use the service optoutprescreen.com to opt out of receiving credit card solicitations by mail (learn more).

3) Build an emergency fund
Start with a small weekly/monthly amount that automatically gets transferred ($10? $30? $100?!). Set a starter goal of $1,000 - this will get you through most 1-time emergencies. Define what "an emergency" actually is.

4) Set long-term goals
Pay off student/car/home loans, save up to pay cash for a used car, save to buy a cabin/boat/home, retirement. I like this one because it's always inspiring!


A couple over-arching ideas:

• All four are tightly integrated. You can only reach your goals by spending less than you earn and avoiding debt. You can only build an emergency fund if you spend less than you earn. You'll decide to save money when you're working towards a goal. See? They all support each other. If one gets off quilter, the others will also suffer.

• When making changes, treat them like experiments: "Let's not eat out for a whole month as an experiment. If we hate it, no big deal." Make sure to set them for reasonable amounts of time - most often only a month or two. By treating it as an experiment, you'll be more willing to try something that's uncomfortable at first.

So there you go. These are pretty basic, and if you master these it will change your financial future in profound ways.

Image: TheSimpleDollar.com

Is Being Debt Free Financial Insanity?

I saw a tweet recently by Robert Kiyosaki and wanted to comment on it. Here's the tweet:

Being debt free is financial insanity. GOOD debt is the key to wealth building.
— Robert Kiyosaki (@theRealKiyosaki) January 19, 2013

My first reaction: If being debt free is financial insanity, what about someone who has BAD debt? OK. OK. That isn't fair. I realize he only had 140 characters and wanted to grab people's attention. If he had more than 140 characters, here's what I think he would say.

Of course BAD debt is... well... bad. We should strive as much as possible to get out of BAD debt. That's a given. Yes, doing that is much harder than saying it, but this isn't even the purpose of his tweet.

Kiyosaki is claiming that if you want to build wealth, being debt free won't do it (it's insane). I get the impression this is a dig towards Dave Ramsey who really pushes for people to become debt free.

In the end, balance is key.

First, you must spend less than you earn to build any sort of wealth. BUT, you can't spend so little that you're miserable. Start here: experiment by changing one of your regular habits: make coffee at home, switch to a smaller cable package, or ride your bike to work.

Second, you should strive to pay off BAD debt. BUT, you don't want to neglect having an emergency fund and potentially put yourself in a worse situation when life happens. Start here: tackle high interest credit cards. Then roll that payment to other debt. If you have a lot of debt, it's OK if it takes a few years to pay it all off.

Third, you should invest in assets and leverage those assets with debt. BUT, you should not leverage yourself to the point that you can't make payments when life happens and the assets don't produce as much as you want. Start here: stock market index funds are great because you buy companies that have GOOD debt (excluding a handful of tech stocks that have no debt), and are managing that debt well. You're personally debt free, and take advantage of organizations that have GOOD debt.

Will that build wealth super fast? No, but it'll work over the time of your career. The best way to speed up the process is to figure out how to improve the world and start doing that. That might be in the form of a side business, or increased responsibilities at your primary job. Either way, if you make the world better, you will be rewarded. Instead of increasing your standard of living, you can buy more assets and build wealth faster.

Being debt free isn't insane. It's a safe and proven path to building wealth. Though, it does take longer than leveraging yourself and it may mean you never get to drive fancy cars or go on exotic vacations.

Using GOOD debt within reason, also builds wealth. Though it does mean you'll have to actively manage something/someone and is riskier if you don't have the skills/time to do a good job.

What we do

Our current strategy is to spend less than we earn and use the extra money to get out of all our consumer debt (including student loans) as soon as possible. Then we'll focus on buying assets that are leveraged with debt (I like actively managing our assets). Then we'll let those assets pay their own debt down. Eventually, it'll make sense to pay off our GOOD debt too. That point in time will be when our assets, if they were debt free, will be able to sustain our standard of living. Technically, we won't be maximizing our potential wealth, but we're trying to find a balance between building wealth fast and risk.

UPDATE
I had a friend make a comment on Facebook I thought worth sharing:
"I think it would be helpful to specify that Good debt is debt that allows you to make more money by utilizing it's power in situations where you would others wise have no power to purchase said capital. Like buying a multi-unit property, where you don't have the capital to purchase it outright but make the Good debt work for you!"

Image: bfpublishing.com

Personal Finance Reporting

I wanted to dive a little deeper into one of my 2012 goals: Spending Less in 2012 than in 2011. I spent some time putting this together and I'd like to share it.

First, I track everything using Mint.com. I link all my accounts (except one loan company who doesn't want to play nice). Mint automatically pulls all my transactions in and adds labels. I find the labels are correct 90% of the time, so I go through my transactions twice a month just to make sure they're right. Mint also has a budget section which I use for all of our expected expenses. That way if something is wrong, I'll know about it (for example, once the garbage company didn't charge me and I got it resolved before it was a messy issue). I also get alerts when there's high spending or I get a fee (which seems to happen too often) so I can take care of it right away.

If you're not signed up for Mint, stop reading and sign up. Knowing how you're spending your money is a powerful way (the only way?) to get control of your finances. For most people, that will be enough.

And then there are people like me.

Once a month I take all the aggregated spending information from Mint and put it into my own spreadsheet. Personally, I use something similar to what Robert Kiyosaki uses in his game Cash Flow. It just makes intuitive sense to me. Here's what one of the character sheets looks like:

It's pretty easy. Income on top, expenses on the bottom. Subtract the 2 to get your monthly cash flow. Then you list your Assets and Liabilities. The difference between those 2 is your net worth. Hopefully that one goes up over time. Clearly, this example is very simplified.

I use Mint's labels for my expenses (plus a couple of my own labels I made). I also have 2 columns for using cash (well... checking/debit) and credit. Here's what it looks like (Yes, I changed every single number - I wish it actually looked like this).

I also have a statement from the previous year so I can compare how I did. I also have one that gives me year-to-date totals so I can see how I'm tracking.

Of course, Jessi sees this and freaks out. So I made a summary chart for her. Yes, I purposely removed the axis, but the lines are real. The faded lines are 2011. As you'll see, at the end of 2011, our cumulative net income dropped below the zero line. We didn't spend less than we earned. Hence my goal to spend less in 2012.

Jessi can look at this and instantly know how we did. A couple interesting points (in my opinion):

• Our spending is pretty low, except for a few months where we have BIG expenses. May was the Prius, October was the Jackson property. The only reason September was high was because of inspections and appraisals.
• There are a couple times during the year when our income peaks. One is during tax time (we spent so much last year, it was unusually high in March this year. Another is at the end when HP is doling out bonuses. The spike in August is when I sold the truck.
• Had we not bought the Jackson property, we would have stayed above zero the entire year. We'll see if we can make that happen this year. :)
• I love charts like this. I could stare at it for hours. I need to make more of these this year!

So that's how I do the reporting on our personal finances. That's how I know, to the penny, what the differences in spending are from year to year. You don't need to get this detailed - Mint already does a lot - but you sure learn a lot if you get this detailed.

Is It Worth Buying A Manufactured Home?

In December Jessi and I considered buying a manufactured home to live in. It would be a temporary home that would enable us to shovel more cash at our student loans. The price was listed at $30,000 which meant we could potentially save a bunch of money due to small payments. We ultimately decided not to pursue that specific deal, but I learned a lot about manufactured homes in the process.


What Is A Manufactured Home?
A picture is worth a thousand words. Here's a classic one:

A couple things to note in this picture:

• See the vertical paneling around the bottom? That's called a skirt. Almost all of them have this. Sometimes it's brick, but 99% of the time it's wood. That's the crawl space. It's like having an above-ground pool.
• Notice how close all the other homes are? This is also fairly typical. Often developers will build a bunch inside a "park" and then people rent spaces (think of it as an HOA - more on this later). I know this picture is in a park because of the address: "H35". That's the unit number.
• They tend be smaller in size, though they do make "double wides" which are two halves put together (see the top picture).
• See the other home to the right? Notice they're adding a section. Yep, they can be expanded just like any other home.
• Not shown here is a carport or garage. Garages aren't as common, but they can be added.
• Finally, the shape is often a rectangle. That's because they need to fit on a truck trailer and cruise down the highway. Perhaps you've passed one of those "wide loads" before.

Manufactured homes are also called mobile homes, but I would argue that after 1976, they stopped being mobile homes. You see, in 1976 manufactured homes became HUD-approved. That means they have to be built with the same standard quality as stick-built homes. Today, manufactured homes are only mobile in the sense that they're moved after they're constructed. Before 1976, they were the cheap trailers often depicted in movies. That "cheap" stigma still remains. But today, sitting inside of one, you wouldn't be able to tell that it's manufactured. I'll go deeper into this in the Appreciation section.



Modular
Can you tell this is a modular home?

Yeah, me neither. Here's a picture of one being put together:

Unlike manufactured homes, these are designed to look like a classic stick-built home. A foundation is built in place, and the the modules of the building are set on top. These have all the benefits of manufactured homes (more later), and few of the detractors... Except price, these actually tend to be the most expensive of all the options.


Stick-Built Homes
This is the type of house most of us live in. These homes are built on-site. Another thousand words:

So, manufactured homes are like boxed-up versions of stick-built homes. They have all the components of a regular home, but tend to be smaller and have a fairly standard look. Modular homes are the tweaner: They're made to look like stick-built homes, but are constructed off-site at a manufacturing plant.


Do Manufactured Homes Appreciate In Value?
Since we were planning on buying short-term, I actually cared about this question (normally I don't care since I focus on cash-flow and holding long-term). It turns out the answer is complicated.

As I stated earlier, homes built after 1976 have to follow all the same standards as stick-built homes. So the initial quality is just as good, if not better than stick built homes. Here are some of the benefits:

Benefits Of A Manufactured Home

• The buildings are manufactured inside, in a moisture/temperature/machine controlled environment. This often produces better quality - also a perk of modular homes.
• They're designed to travel at 55mph down a freeway. So all the braces are stronger and everything is tightly integrated.
• When buying new, you can literally design you're home by walking through examples and piecing together all the components.
• Plus, when buying new, you get a warrantee where the manufacturer will fix anything and everything. From what I learned, this is a pretty awesome perk.

Wow! That's sounds great! So what's up with the "complicated" answer and the pervasive thought that they're not as high quality?

Manufactured Homes Are Cheaper
Part of the stigma is that the homes are cheaper. Surely something that costs $30,000 can't be as high quality as something that costs $300,000. Maybe...

• First, the buildings are smaller. Less material = less cost.
• They're made assembly-style. You don't have to hire an appraiser, or draw up plans. The only added cost is transportation. Standardization = less cost.
• If you buy in a park, you're not buying land. No land = less cost.

Here's the bottom line: IF you buy a manufactured home after 1976, it was at least in compliance when it was built. If you're like Jessi and I, having a smaller place is preferred. IF the dwelling was maintained properly, it will appreciate in value along with the rest of the market. If homes go up 5%, your manufactured home will go up 5% too. But 5% of $30K is only $1,500 which seems like nothing compared to $15,000 for the $300K home.

Furthermore, people tend to buy manufactured homes because they can't afford stick-built homes. As a result, they also tend to not be able to afford proper maintenance once the warrantee ends. So, IF you don't maintain the dwelling, the value will depreciate, fast. Stick-built fixer-upper homes can get away with selling at a decent price because of the land - it appreciates because no more is being made. As Lex Luther would say, "It's all about the land, Superman."


Can You Get a Home Loan For Manufactured Homes?
IF you buy the land in addition to a manufactured home, you can get a home loan. If you're buying in a park, you cannot. Instead, you need to get something similar to a car loan. It'll feel like qualifying for a home loan, but it'll be a different type of loan. Not all lenders deal with manufactured loans. We had to find someone special for our deal.

Obviously, banks like lending on new manufactured homes, and become more strict with used homes. If it's new, you can get a 20-year loan. As the home gets older, the length of the loan gets shorter - all the way down to 5 years. After the dwelling is older than 20 years old, the bank will not lend on it (the place we looked at, turned 21 this January).

So the price might be cheap, but the terms of the loan might make it such that you're still paying a hefty payment (though you will pay it off faster, so that's nice).

Manufactured Parks
I specifically wanted to call out manufactured parks since most of the ones I see are in parks. Think of these parks as closed-gate communities with an HOA (home owners association) you pay rent to. The difference is that it's a single owner of the land you're paying to. That rent includes a space and could also include water, garbage, and lawn care. Lots of times they also have age restrictions, like 55+ communities, and pet restrictions. In the Corvallis-Albany area rents are in the $400 to $500 range, with regular annual increases. If you're going to have a loan the entire time living there, it might actually cost you more cash each month relative to just renting.


Final Thoughts
My goal was to buy a cheap place, live in it while we paid off our student loans and then re-sell it to re-coup my equity. So over the entire time, my only cost would be interest, taxes and utilities. Once I learned about the park rent and that they're difficult to re-sell because of the financing barriers, I became less interested. Especially since we don't have a ton of cash right now since it's going towards student loans, so I can't afford to pay $30K up front.

If we were going to stay for the long-term (30+ years) and I had the cash, I would definitely look into buying one. Ideally, I'd like to find something that includes land for a garden and our dog. I mean, if I'm going to be paying an extra $400, it might as well be towards a mortgage. Then, I wouldn't care about appreciation/depreciation because that's not the reason why I bought it.