The first investment I make every month is my 401K through my full-time employer. My employer offers a maximum of a 5% / 4% match on 401K and I max out up to that match before investing in other, better investments.
My current 401K balance sits at $16,194.26 with a 24.76% return on the year.
The way my current 401K is divided is as following:
40% Charles Schwab S&P 500 Index
20% Vanguard Growth and Income
15% Vanguard Equity Income
15% Vanguard Midcap Index
10% Vanguard International Explorer
The next investment I make after my automatic 401K through my employer is I max out my Roth IRA.
My Roth IRA has $35,902.51 in it.
The portfolio breakdown is as follows:
15.45 shares of AAPL
4 shares of AMZN
2 shares of BA
25.54 shares of BUFTX (sold now that I can without commission fees)
1.02 shares of DIS
10.54 shares of DTD
12 shares of FB
4 shares of GOOG
33 shares of MU
60 shares of NOSIX
6.18 shares of STZ
11.42 shares of VOO
26.53 shares of VOOG
After my Roth IRA is paid, I max out my wife’s Roth IRA. Her Roth currently sits at $6,771.25.
The portfolio breakdown is:
4 shares of ADBE
8 shares of DIS
4 shares of FB
1 share of GOOG
4 shares of VOO
5 shares of VOOG
The next thing I do in my regular investments is I dollar cost average a $650 monthly investment in my Vanguard Index funds.
368.67 shares of VIGAX for a total of $34,846.97
I plan to use these funds on a future real estate acquisition, which will be a personal home for my family and my current home will be turned into a rental property.
I additionally have a stock investing account through Robinhood which currently sits at $32,079.88 with a total return of 42.95% on the year.
The portfolio breakdown is as follows:
28 shares of AAPL
40 shares of MU
11 shares of BA
23 shares of FB
26 shares of STZ
6 shares of NVDA
17 shares of LYB
1 share of ZNGA
8 shares of V
8 shares of LRCX
9 shares of DIS
In addition to these paper investments, I keep a 3 month reserve of cash funds in an online savings account for emergencies.
Now for real estate investments, we currently have two homes. The first we are currently living in, but will become a rental within the next year when we purchase our next home. The second is a luxury AirBnB home in Fort Lauderdale, FL.
My current home was purchased for $305,000 in 2016 with a 5% down payment (around $15,000 down) and another $5,000 or so in closing costs. The home value is currently estimated by my lender at $355,000 (not including new floors and impact windows I installed for approximately $25,000). The current estimated equity in my home by my lender is $83,934. We will soon be turning this into a rental property, which should cash flow somewhere between $200 - $600 per month after expenses - which is a wide range, but I haven’t researched enough to narrow this number down to a realistic level.
The AirBnB home was purchased for $650,000 in 2018 with a 25% down payment (around $162,500 down) and another $18,000 or so in closing costs. I have a partner on this deal, I put down 25% of the upfront costs and he put down 75% of the upfront costs, after which I would have 40% equity and he would have 60% equity, since my wife and I manage the property, conducted the renovations and purchase / built the furniture for the home.
To prepare the home for short term rental, we had to spend $19,000 in renovations and repairs and another $20,000 on furniture, bringing our upfront investment to approximately $220,000.
On the year, we have actually lost about $7,000 in cash flow having to pay a mortgage payment ($3,850) in January 2019 as we renovated the property and we had to cover two partial mortgage payment in June and November, as we had too high of vacancy. Unfortunately, when I did my initial research I was looking at vacancy rates in high season in South Florida (late October - early April) and was not aware of the seasonality for hotels / short term rentals. I estimated about 60% occupancy on the home, but we have only been achieving about 48% which is why we have not been cash flowing on the property as of yet. My original goal was to give the property 2-3 years to see if it works and if not, we can always flip the home based on our renovations and appreciation.
A CMA (Comparative Market Analysis) in the area shows the following:
$686,500 (sold Nov. 2019), higher details than our property, but smaller yard, worse neighborhood
$637,000 (sold Oct. 2019), less nice, much smaller yard
$850,000 (sold Dec. 2019), bigger home (extra BR and 1/2 BA), but smaller yard & worse location (subtract $75,000 for BR & BA in CMA)
$741,500 (sold Nov. 2018) , similar home (finer details), smaller home and yard
$660,000 (sold Oct. 2018), not as nice, much smaller yard
CMA - $700,000
Redfin Estimate - $675,551
Zillow Estimate - $663,396
According to these estimates the property has increased somewhere between $13,000 - $50,000 since we purchased it a year ago, or an average of about $30,000. This covers the $7,000 in cash flow losses, but would not justify a sale in consideration of closing costs. If the property maintains this appreciation against cash flow losses, we would likely break even just holding the property for three years before flipping, but for a profitable exchange for the cash outlay we put down (at least 6%), we would need to hold the property for at least 6 years. Perhaps our vacancy rates will rise this upcoming year after some price fine-tuning, it’s an experiment and we will see where it leads.
Estimated equity in the home is around $190,000 and as 40% owner, I’m looking at about $76,000 tied up currently in the property.
Therefore I have a total of about $160,000 in net worth tied up into two properties, around $58,000 in retirement accounts, $67,000 in liquid index and stock accounts and another $40,000 or so currently in cash, putting my current net worth around $325,000. According to the 4% rule, once our primary home is paid off we will be living off around $35,000 per year at today’s rate of exchange, which means we need around $900,000 to draw from. A safe net worth target for financial independence for my wife and I would be around $1.5 million.