Over the years, I changed my philosophy as far as spending money is concerned. Today, I think that it makes sense to invest money, but it wasn’t always like this…
Over the years, I changed my philosophy as far as spending money is concerned. Today, I think that it makes sense to invest money, but it wasn’t always like this…
Welcome to my income diary. If you wonder how do websites make money and how to make money with a website, you may find my reports useful.
I release reports on my online income every month. In 2017, I am projected to make $15k on online income.
I’ve received many e-mails concerning this matter. Most people ask me “What can I do to start a side online business?” or “What can I do to make a few hundred bucks at the end of the month”? First, know that I offer consulting services for this, on 1:1 consultations. Either way, let me hash out a general recipe here:
0) Choose a niche. Many people choose niches based on keyword search. I highly recommend people to blog about what they are passionate about instead. If you add value, any niche will work out for you.
1) Set up a website. I host my website on Bluehost, which I highly recommend. For one, its cheap, two is highly reliable. If you are interested in starting a blog of your own, I created a tutorial here, to help you start off.
2) Blog. A lot. You may have noticed that I’ve posted twice in the month, on specific months when I started From cents to Retirement. Doesn’t work. It won’t tie people in, it won’t please search engines and your blog will rapidly be forgotten. Note that I am not saying “publish crap”. Do not, if you expect to have loyal fans and grow. But do not forget to publish.
3) Promote your blog. A big part of having your blog out there for people to see is through high-quality posts – eventually, people will share. Promoting your blog will not only get it out there faster but deeper. Promoting your blog can be very hard, but its necessary.
4) Monetize. Adsense is an option. I like Amazon a lot. If you offer consultancy services, as I do, you need to show you can do it yourself first, but clients will pop up eventually.
Bluehost : $0 (vs $0 in April)
Affiliate marketing : $72.60 (vs $55.50 in April)
My book : $99.94 (vs $21.21 in April)
Consultancy fees : $0* (vs $1050 in April)
Google adsense : $0 (vs $0 in April – I removed all ads from the blog)
Paid surveys : $0 (vs $0 in April)
Total : $172.50
Disclaimer: the BlueHost and the Amazon links are affiliate links, which means that I get commissions if you buy products or services through them. The amounts reported above are before any fees, taxes or expenses. I can’t say exactly how much I will net from this.
As for consultancy fees: I haven’t consulted this month, at least not more than the hours I had already sold. I received a ton of new requests, but my time was so limited that I didn’t accept any yet. I will consult big time during June for sure! I already secured some contracts. In the next two months, I hope to surpass the $2000 mark on consulting alone.
Note that although I am committed to release my income diary and help those who want to know how to make money with a blog, if they and blogging for money, my primarily focus is not to make money with the blog, but create a very valuable platform that people love.
I didn’t have any expenses with the blog this month.
I am happy with the direction the blog is taking, and I prefer to have 25k warm viewers than 100k cold viewers. That being said, I still want to achieve 100k viewers until the end of the year! We are obviously talking about a nasty piece of work (especially without redirecting cold traffic as I’ve done before), but I am confident I will achieve it.
I have been focused on increasing the website’s authority, high-quality referrals and growing my social media accounts. I am happy with the progress in May: the domain authority boosted from 24 to 32 and the page authority raised from 37 to 43! As I anticipated, I both went up and I think that until July/August I will experience even further increases. 🙂 Again, I hope that Google recognizes my serious effort here, and boosts my ranks soon!
Although I didn’t have many guest posts published in May, my traffic did grow slightly. In June, should I manage to have 15 guest posts published, I think that I will grow definitely to something around 30k views. I am still waiting to be featured on a major site.
and the number of sessions:
For the second consecutive month, more sessions, more users, and more page views!
My Alexa rank is still good, and I am actually over the idea that there will be a big penalty for “losing” the December stats. I also noticed a big increase of my Portuguese audience, which I am glad to see.
This month my Facebook page grew by 203 likes to a total of 804 likes, which compares really well against last month (71 likes), and represents an increase of more than 25%. As I said last month, I had a few tricks I could use to grow my Facebook page and these seem to work beautifully. Next month, I will go all in with this trick and hopefully grow beyond 1000 likes. I won’t hit 25k likes until the end of the year, which was my goal, but I think that I can still reach 5k without ads.
As I said before, I am not keeping track of Pinterest, and I will hire a VA to take care of it for me.
The subscriber count grew from 1029 to 1091, wich means an increase of about 6%. I didn’t grow as much as I expected because although I wrote many guest posts, most of them weren’t published yet. I am still convinced that the goal of reaching 6000 subscribers until the end of the year is achievable because I have a few tricks that I will use, and I still expect to be featured on major sites.
In the meantime, let me know if this information is useful to you in the comment section down below.
Your biggest fan,
Ben Davis
Again, a net worth decrease. Guess what… RP#3 is still sucking up cash!
The renovation works are now over, but I had two last bills to pay. One (of €1900) is still carrying over to June, so I expect another net worth decrease next month. However, all units rehabbed in RP#3 are already rented out, so it will take 2-4 months to recover the almost €30k I had to put in to make it appealing for tenants. I’ve run the numbers again, and I am confident that I will have the money I spent remodeling the property completely back in 4 years. This is good, because the property itself cost me more or less the same, thus making it an 8-year deal (although I plan to keep this property forever, as I said last month). Still fine with me, given the entire potential of the property.
I couldn’t rent out the last unit of RP#3 that is good enough to rent. I hope to rent it out during June.
This was the last month of my tenants in RP#1, and I will move there this month (unlike what I said last month, I will, in fact, move there because the contract I secured on a rental for myself didn’t go through). As I said, my idea is still to sell it, but I will move there because I think it will take me about 3-6 months to sell it. My idea is still to put €35k to work and throw €10k into P2P lending.
The rental income for May was €1225, which is the highest I’ve achieved in my lifetime, as I said last month. Next month RP#1 won’t be rented, so I’ll collect €1195 in rents. Hopefully, I’ll rent another unit in RP#3 soon and bring the rental income close to €1500.
My online income for May wasn’t that good, as I invested way less time consulting than in previous months. I will comment on this in the online income report/income diary.
My Real Estate business is gaining continuing traction and I am very happy with the direction it is taking. I will report on it next month.
May’s goals were not achieved because I changed my strategy in the first week of the month, but I am happy with the month. Overall, it was a great month!
Just because I failed every goal, it doesn’t mean that I didn’t like this month. In fact, this was one of the most productive months in 2017!
Next month, my goals are:
The environment at work is still great and I like what I am doing. However, it is indeed requiring way more time than I expected at first.
Ben
As you know, I am putting considerable effort into building dofollow links for my blog. However, most link building strategies are risky and can end up destroying the authority of one’s site, and therefore our chances to rank. Thus, after many weeks of intense researching, I decided I had to write a post on legitimate link building strategies because I learned a great deal about this topic.
Before you proceed, be advised that the list below is time-consuming and will not grant you backlinks in a few seconds. I decided to collect strategies that require hard work but deliver the best results because that is what I am interested in. I will progressively update this list with more strategies – each update will have at least 10 ideas (last update: May 31st, 2017).
Without further due, here’s what I came up with…
…just like this one! I found this to be one of the best way to collect backlinks if you do it right. SEO today is all about user experience. And people want to have insanable actionable content, that fully satisfies their need for information. You want to kill any search that may lead to your site. What you absolutely do not want is people to find your site on Google and return to the same search, because you could not satisfy them.
“101 lists” are awesome because they provide the readers with so much information that it is not likely that they return to the same search. Yes, they do require a lot of work, but I advised in the beginning of the post that these strategies do require work. At the same time, it is easier to reach a high word count this way, which will probably make you look good before search engines.
Although “101 lists” can be pretty actionable, articles that are written to be extremely actionable are another great way to earn backlinks. Have a look at posts that are called “[X] you can do right now” and see how much they get shared – this will provide you with an idea for how much they are linked to.
My favorite way to build some very valuable, very relevant links.
My suggestion is to guest post on blogs in the same niche. I am in the Early Retirement topic, and I feel that I know the most important blogs in the niche, so I can pitch a guest post directly. If you don’t know them, look around and build a list of your own. I have done this.
If you want to do this faster, you can access platforms like Blogger Link Up and My Blog Guest, where you can find bloggers to pitch guest posts. If you are interested in writing a guest post for me, check out my guidelines before you e-mail me. Note that many bloggers are tired of being pitched guest posts, as this tactic has been pounded, so you must make your pitch stand out. What I appreciate in my own case is that the prospective guest poster knows my blog and what it is all about, and offers a topic based on that.
I always advise aiming blogs that are selective when it comes to accepting guest posts and have some domain and page authority. You can also check the trust flow, but you should keep your expectations realistic.
Some sources have reported that Google will take action on “large scale guest blogging” eventually, so make sure you don’t fall into the bad patterns: write good and unique content, have other outbound links in the article and two to your own site, have at least one internal link and change your bio often. If you plan to use guest posting as one long-term strategy to build backlinks, make good pitches, don’t create predictable patterns, and show that you know which blog you are writing to.
As for the guidelines to write guest posts, I came up with a few, after researching this subject for a looonnnng time:
This quarter, I’ve set the goal to write 50 guest posts. I will also write a comprehensive article on the results of this.
There are various recipes out there to find places to guest post, including this one suggested by Neil Patel. I personally suggest contacting the bloggers in your niche you know offhand, provided that their DA is above your own. I do agree with Neil Patel on some other aspects, including good practices on guest posting.
Did you have a look at my books list? With such an extensive list of books, I am sure that there are not many awesome books on personal finance that are not covered there. This makes this page highly susceptible to be linked to. Bloggers looking to provide their users with the best information will likely link to these extensive resource lists because they want to link to as much information as possible.
People tend to prefer a source that contains everything that there is to know about that topic, other than a group of them. Also, just like I am doing with this post, keep it to date and refine it as time goes by. If a few things become deprecated, this will lower your chances to be linked to.
There are a lot of myths and misconceptions in virtually every industry out there. Chances are there are some in your own. Make sure everyone knows about it. This type of posts tends to get very viral, especially if you promote them correctly.
Create your own directory about the blogs in your niche. For instance, on personal finance and early retirement, J Money put together this ultra extensive list, with almost 1000 blogs. Not sure how many links it has, but I am sure it has been linked a lot!
If you create your own, make sure you list your own site. From what I’ve been able to see, the longer the list, the higher the chances to be linked!
A site with an identity is something that people tend to trust in. And trust is absolutely needed if you want people to link to your site. Have a look at the biggest blogs out there and how they have their story so clear and so upfront.
I post reports on my online income. Some reports were shared and linked to. However, the majority of links I’ve obtained came from extensive lists (remember tip #4) of online reports.
It doesn’t have to be about money… just report something that can easily grip some attention and be linked to from large resource lists.
Have you read the roundup I’ve made with top bloggers in the Early Retirement niche? This has granted me a few backlinks (and a lot of traffic), as many other bloggers linked to it. It is just a monumental piece of information. I brought the best of the best to talk about a topic that is the essence of my blog. Other bloggers interested in Early Retirement may obviously link to this article, as it provides a lot of information!
Do the same. Go out there and invite the top bloggers in your niche for a roundup. It takes a lot of work, but it can be highly beneficial! Here’s a simple recipe that I’ve used successfully:
Another tough task, but a very profitable one! Infographics are among the most shareable and linkable posts out there. They are also well seen by search engines with the latest algorithms, thus providing some additional exposure.
This is the sixth interview of my interview series, where I interview bloggers blogging about Early Retirement, Personal Finance, and related topics. I have published my first book recently, and I am writing my second book, which will be on what I learned interviewing millionaires. As you can see, I love interviewing people.
This time, I bring you my fellow Canadian Be Smart Rich from Be Smart Rich.com. I hope you enjoy it.
Hi everyone, I run a personal finance blog BeSmartRich. I was born in Seoul, South Korea and moved to Canada alone about 10 years ago with my life savings when I was in the early 20’s. I was a high school graduate, had zero English skills and just got out of South Korean military.
(I used to live in that APC (Armored Personal Carrier) for 2 years)
Similar to other immigrants, I worked anywhere as long as it paid me something. I made less than minimum wage ($7/hour) for a while but I was glad to save up money to get a proper education. I have been always good with numbers so I decided to major in accounting and studied my ass off just to survive through university. Luckily, I got a job offer from an accounting firm that changed my life. I earned CPA in 2013. This is my 7th year of my career in Canada.
Toronto, Canada but I am originally from South Korea. I traveled to Vancouver first when I was 23 and I loved it so I decided to stay in Canada. I moved to Halifax (my second hometown) to do my university then came to Toronto when I was around 30. I got my Canadian citizen 1.5 years ago. Big changes so far and I am still loving it.
I am married to a beautiful wife that I met here in Canada about 3 years ago and have a monstrous greyhound that eats like a horse.
For more, check out About Me.
[Ben: your picture is definitely one of the best pictures I’ve had in my interview series. Awesome! And you’re a lucky dude, you’ve got a gorgeous wife! I also love the fact that you came all the way from Korea and you worked hard and became Canadian. Props to you.]
I am an accountant. Currently working as Controller of a fintech startup company. The company has many challenges but is growing at 200-300% every year. Until the company becomes one of the major companies in Canada, I won’t stop. 🙂 The work is stressful but at the same time quite exciting and enjoyable. Never a dull moment and that’s how I like it.
[Ben: pretty impressive you emigrated to Canada with no English Skills and you’re working for a company that has the potential to become of the major companies in the country…]
I just wanted to I want to encourage hard working people to study, work smartly, save, being frugal and invest wisely for better future. Think about it. I was poor, had no family member living nearby, my language skills were terrible and was a high school graduate making less than minimum wage. I worked very hard with smart plans and I am quite different now as compared to who I was 10 years ago. I am nobody compared to all the successful people who sold their companies for billions but I want to share all the tips that I know with people regarding how a regular person just like me has a dream to be a millionaire and getting closer every day and people can do it as well.
Blogging is only one of few ways to reflect my thoughts. I love sharing aspect as well. I am happy to inspire people and educate them how to invest and get them focused in building their nest eggs. All they need was to be exposed to great blogs so that they can follow suit if makes senses.
I want to help anyone who reads and enjoys my blog to be more responsible for their own financial destiny. It really starts from looking in the mirror and tracking your family’s net worth and realizing where they are at and where they will be. Setting up goals and reach one goal at a time.
[Ben: we see things pretty much similarly. I wish you the best success blogging. I love your story and your blog.]
I have been through a bit with my life and I realized whenever I go through a rough time, only thing (other than my family and close friends) that saved me to get through was money in the bank. I learned importance of saving very early and started working ever since I was 11 years old. I used to be a newspaper delivery man, gas station assistant, convenient store cashier, dish washer, bakery assistant, flyer handout man, buffet and various restaurants server, computer store assistant etc… I saved every single penny from the work and all the saving from the jobs was used in university education in Canada. It was very worth it.
I did not really think about financial independence until I ran into some personal finance blogs. The blogs changed the way I think about money. I opened my direct investing account in September 2014 rather than putting money in mutual funds immediately after the encounter of the blogs and started tracking my net worth. It has been longer than 2.5 years and things are going pretty well.
Thanks to the inspiring personal financial bloggers, my average annual return is at 9% and total return since September 2014 is 25.69%. TSX (Toronto Stock Exchange) stayed flat during the same period.
About a year ago I reached $200,000 from $2,000.
[Ben: I am not sure what I like the most: your hustle and your saving mentality or your progress and gains from your investments. I am a very goal-driven dude myself.]
My conservative prediction is before 45. That is 10 years from now. Considering my salary growth, my wife’s financial help from her job starting in about 1 year and improving investing skills, I may be able to reach the financial freedom even before 42-43. I will retire when my expenses are covered by non-work related passive incomes.
[Ben: I checked your portfolio and I actually think you could do it before you’re 40, if you took advantage of geographic arbitrage.]
We love travelling and we will travel around the world for about a year. After that we will travel at least 4-6 countries per year until we mark all countries in the world in the world map. There are so many better things to do than working 9-6 everyday for the rest of our lives. My family will travel at least once a month or two. I will probably join a band playing the guitar and focus on enjoying the life to the fullest. I always wanted to have lots of kids because my wife and I do not have any family in Canada so as long as my boss (I mean my wife) is ok, then we will try our best.
[Ben: If you stop by Portugal, please do let me know! I am happy to know that your wife is running things at home. ;-)]
I like buying stocks among all investments. Several reasons. Firstly, I can do all fundamental analyses myself due to my accounting background. Second of all, I always loved the concept of owning great companies. Lastly, I believe that the world has been and will be moving forward not backward due to nature of humans’ desire for wanting better things. Companies are at front to take advantages of technological advancements.
I like investing in super high quality companies. I used to mimic Ben Graham’s value investing so I had been buying so-called severely undervalued companies that are going through troubles with chance of survival and turnaround. However, I realized more and more through experience and readings (thanks to Charlie Munger and Phillip Fisher) that quality matters the most.
I do not mind owning a house but the Toronto housing markets are quite crazy now so I will wait until correction comes and things settle.
Dupont analysis. I wrote an article about how Warren Buffett analyze stocks.
Buffett also loves Dupont analysis. My second favorite is free cash flow analysis. No matter under any circumstance, cash flow is the king.
[Ben: Interesting. I wonder what you think of the metrics I use.]
I have been to most of major cities and travel destinations in Canada – Vancouver, Toronto, Calgary, Halifax, St John’s Cabot Trail, Rocky Mountain, Niagara Falls etc… and been to some American cities such as Seattle, New York, Boston etc… I used to be an auditor working with an accounting firm so anytime I had to be on business trip, I took extra days off to sightseeing. It was great.
My favorite was Cabot Trail, Cape Breton, Nova Scotia – Driving beautifully paved shoreline for an hour was unbelievably fun. Not to mention so many beautiful beaches around the shore. I went there with my girlfriend (my wife now) and our best friends couple.
Start early. I mean really early. I would have been a millionaire by now if I started when I was 18. That’s quite alright though because it is never too late to start.
[Ben: So agreed!]
I love the online income updates. It is really honest and detailed. Hard to find any other bloggers showing honest advices that work. Great job!
[Ben: Thanks buddy!]
Living frugally is probably the number one thing to look at for those who want to retire early. We already know the formula: earn well, live frugally (aka save as much as you can) and invest wisely. Write down a plan and follow it no matter what. But what about the details of frugal living? How to get through them, become financially independent and still live happily?
While some things are difficult to envision, try to look out for examples. This family of 4 lives on $14k a year. This family lived a year on extreme frugality. If they can do it, you can do it too!
In this post, I’ll tell you that living frugally actually means and how I do it.
If you stop to think about them, our culture is geared towards spending money. We are constantly bombarded with ads that prompt us to buy. We end up buying a lot of things by impulse, not because we really want them or need them.
I’ve decided to do it differently. I spend money on what I need the most, or what leaves me truly happy. You have to ask yourself the same question: what does leave you truly happy: a new car, a new smartphone, new clothes very season or being able to retire early? I am not saying that the latter is the right choice, I am simply saying that it is what I want. In the following, let me share some tips:
As I wrote last week, I am moving to a very small condo in one of my multi-unit properties. I think I haven’t shown my car yet, so here is it:
Although a beautiful, reliable VW from 1999, it only cost me €3000. My family was quite surprised when I bought “such an old car” for “someone with a PhD and a large salary”. Guess what, I could not regret it less. I absolutely love my car. 🙂
This car serves me extremely well. First, it is a classic over here. Second, it is super reliable. Third, it has a huge trunk and can take up to 5 people. No other car would make out my happiness, really. Well, to be fully honest, a brand new Mercedes A45 would probably make me a little bit happier, but it would cost me €27000 more. €27000 is what I need to live comfortably for 2,5 years, so choosing between these cars having in mind that the Passat will allow me to retire at least 2,5 years before is a no brainer, even from the happiness point of view.
Pretty simple – I never ever throw away food. I plan every meal accordingly and I buy food for them – not more, and rarely less.
I’ve been less of a coupon freak. Back in the day, I use to literally go through every coupon magazine and collect tons of coupons, filter them out, and spend them or change them for money. I was a coupon machine. Today, my time is way more valuable than that. If you have spare time and you get bored easily, do search for coupons, they can save you a lot of money.
Today, I still chase coupons and try to take advantage of sales, but I am not a coupon freak anymore. I think that the time I would invest into finding coupons is way better invested in my online and Real Estate businesses and this blog. Plus, having a growing blog does leave me happier than saving a few bucks at the supermarket.
Pretty difficult to deal with, I gotta be honest. My family does not understand why I want to be so frugal. If you hold a PhD and your family think you have a large salary, they won’t understand why you don’t want to go out for lunch or take advantage of Black Fridays. My family knows that I have CFS but they don’t really know I want to retire in my 30s. Plus, they don’t have a very frugal background, so frugality is not something they are really used to.
This is the hardest part of saving. I use to give my relatives and friends pretty generous gifts, and ever since I started to work on my early retirement, I changed that. It is not exactly like I give them crappy presents now, but I try to go for something cheap that either they really need or looks expensive. For women, I tend to give flowers more often.
Let me know about you – how do you save and what tricks do you use?
The first question that everyone who wants to retire early should make. It is also one of the first questions that I analyze with my clients… How much square footage (or square meters, if you’re European) do you really need?
I’ll try to answer it from a not so explored angle…
Most people fantasize about a huge home (and a nice car). This is in fact what trapps them into a mortgage that they need to work their entire lifes to pay off.
However, if you are asking yourself how much square footage you need, you’ve probably arrived at the conclusion that a small home is a smart decision…
So, this month I moved to my new home. My net worth is about a quarter of a million dollars, but as always, I like to look at spending money based on the amount of happiness it brings me. If having lunch out will boost my happiness on that particular day, you bet I am going to go grab that 10 buck lunch!
This follows my philosophy that you should spend your money based on the amount of happiness it will bring you. ALWAYS make that question before spending any money. “Do I really want to drink an espresso right now, or is this rather an impulse buy?” “Does having lunch out today will make me happier and more productive?” “What will make me happier? A big home and a big mortgage or financial comfort and a passive check in my mailbox?”
Think about life as a game, where characters have those fancy “happiness bars” on top of their heads. Something like this:
OK, these are what I am talking about. Imagine those next to you. You’re in the game now – you’re the main character and you’re trying to maximize your happiness. If you look to the other side, you’ll see a number, that is your money. Now go out there and try to get the best case scenario: spending as less money as possible, you want to maximize your happiness bar. Note that in this game you don’t have to impress people you don’t like. Stop now. Ask yourself. What is my perfect home now?
Chances are you’ll say you don’t need a big home because there is a sqft where your happiness levels actually start to decrease. Instead, you’ll trade a few square feet for a few (a few != many) other things, including a nice chesterfield where you can relax and a fast internet connection to read From Cents To Retirement or any other nice site out there (although you know that this is the best). You’ll probably buy plants or something that connects you to nature because we are naturally connected to nature. Or maybe you’re a city guy and nature doesn’t turn you on. Maybe an espresso machine and a shelf of books (this is sooo Ben Davis).
The bottom line is that if you ask these questions to yourself, you’ll find a reasonable limit where more sqft don’t translate into more happiness. Fortunately, downsizing has been considered more and more a weapon to early retirement. For instance, this family sold their house for £130,000 and bought a £24,000 boat, where they live permanently in. And I bet they are happier!
Have a look at the property I chose to live in (which is actually one of the units of my 6-plex), since the beginning of the month:
This unit is about 500 ft². Yes, that’s it. It has a small kitchen, a room, a living room and a small bathroom. I will live alone, so that is more than enough for me.
Would my happiness bar increase a lot if I moved to a much bigger home? Probably not. Would yours?
May sound obvious but this is the number one mistake I’ve seen from real estate investors. Many people buy properties because they look like a bargain to them. Yes, but what if it doesn’t rent out? The very first thing that I recommend my investors to do is to make sure they are considering properties with a high likelihood of being rented out.
Mistake number two. I’ve seen so many investors buying properties without inspections because “they looked OK” and suffered from that. First, chances are that the repairs may end up costing A LOT more than you imagined. In some cases, they can cost more than the actual property (especially if there is something wrong with the foundation). Second, you can actually get real numbers to put a proforma together and decide whether the deal makes sense.
Do not get caught off guard!
Mistake number three. I just published an article on tracking your expenses. So many investors fail at keeping track of their expenses because “they pay for them with their checking accounts”. I do that myself, but it doesn’t mean that we should not track those expenses. The main reason to track expenses has to do with knowing your numbers. If you don’t know whether you’re making money on your property, how should you expect to scale your business?
A fundamental part of a good REI business. Knowing multiple contractors means that your flips won’t ever stop, you’ll always have somebody to inspect a home you gotta close fast, and so on.
I typically ask for a few quotes on each renovation I do. This allows me to have the best of the best deals. It also happens that one specific contractor may charge you more on a specific location (because they are located far from that location). Always keep a bunch of contractors in your contact list!
This is an awesome idea because Real Estate companies charge a lot to rent out your homes. I like to grow my own platforms to advertise my homes and cut down on fees.
I personally like Facebook a lot. Create a page, and invite your friends to like it and invite their friends to like it too. Run a few contests and ads, if need be. My Facebook pages for my Real Estate properties have a total of 5000 likes. It has been a successful way to generate leads and get prospective tenants to visit and rent out my properties.
Facebook is yet another way to do it. You can use Craigslist (be aware that there are many Craigslist rental scams, so don’t take it personally if people don’t trust your ad right away) or even grow your own e-mail list. The latter has been very effective for a very good friend of mine, but I haven’t tapped into that yet.
This one you should discuss with a lawyer and this is by no means legal advice. For risk management reasons you should consider setting up a limited liability company to hold your real estate investments.
There are a gazillion reasons why you could be sued. If you protect your personal assets (creating an LLC to hold your rental properties). If you are sued, you’ll at most lose your investment, but your other assets stay out of reach.
This is really how the best deals are done. If you know and become friends with many real estate agents, you should expect to be offered a lot of deals before they reach the public (if you show them you are a recurrent, serious buyer).
I’ve written before on intelligent remodeling, i.e. ways that you have to maximize your remodeling value, but keep your costs low. I am fortunate I got to stay at marvelous hotels throughout the world, due to traveling a lot in work. This allowed me to see many renovations and get a lot of ideas from these places, which I use to this day.
Not long ago, I was featured on Home and Beauty, and I decided to explore their page. Boy, I got so many ideas from that! If you understand that intelligent remodeling is the key to maximize value and minimize cost, you’ll immediately understand why this is so important.
The philosophy I use to run my Real Estate business is to create a lot of value. I want people to come to my homes and be astonished by the remodeling I do and the rents I ask for. I try to create as much value as I can (that is my philosophy in business, really). However, there is a limit where you start selling yourself short. Do not do that! Charge reasonably, slightly below-market rents for high-quality homes, but don’t decrease rent just to get a tenant!
I thought that every real estate investor out there was tracking rental property expenses the same way. Until, one of my clients who bought a property two months ago, confessed me something surprising: he paid for the renovation of the property from his personal account and didn’t record any of the expenses. We had a session last week and I wanted to run some numbers. Turns out he didn’t have any idea of how much money he spent. Please, if you are a real estate investor, please use a better way to track rental property expenses!
If you are investing in real estate, you must know your numbers. Otherwise, it is tough to say whether you’re making money or not! This is a problem if you want to replicate the deals. You gotta know your numbers!
OK, so if you thought I was going to propose you to use some expensive software for real estate investors, you’re mistaken. 🙂 Frugality is still a must at From Cents to Retirement…
Here’s what I do:
The main advantages of doing this, include:
Again, I’ll stress this: if you record your transactions whenever they take place this process becomes much easier. I’ve found it very stressful to try to remember all the expenses – plus if I didn’t, I’d get frustrated.
So, the spreadsheet you should be using should capture ALL your expenses, and then aggregate everything in a very readable way. In particular:
You can do a spreadsheet yourself, or download one from a reputable Real Estate site. I recommend the following ones:
In particular, I like the second one, from Fast business plan:
Not only it describes the macro and micro information, as it also gives you an awesome monthly view:
(the images were taken from Fastbusinessplan.com)
Either way, test all of them and choose the one that helps you the most. If you’re looking for a Real Estate pro forma, have a look at this one.
I am pleased to bring you a guest post by a blogger who is an expert on the stock market, Ten Factorial Rocks. I follow a free cash flow model (which roughly means that I need to see extra cash at the end of the month) but this may not be ideal for every one of you. Take it away TFR…
In acquiring an education, we graduate through various stages, from primary school, middle school, high school and then, to college and graduate school. Life and personal finance are the same way as well. We mature through every experience that prepares us to take on higher order challenges and improve our ‘qualifications’, ultimately leading to financial independence.
In this article, I will be talking about one such ‘higher order’ topic in investing. It assumes that the readers have mastered the basics of personal finance. Like spending less than they earn (primary school), having a 3-6 month emergency fund (middle school), have no debt or have manageable cash flow/debt ratio (high school), and have invested in or believe in cash flow generating (or) appreciating assets like stocks or investment real estate for their long-term future (college level).
There are excellent resources available about the long-term benefits of investing in equities and specifically, equity index funds. Separately, there are resources available about dividend investing that a DIY investor can pursue. I wrote a detailed investing series comparing Dividends vs. Index because nobody truly compared the two investing philosophies from multiple perspectives without the bias of a blind advocate of the method they believe in.
Just like we can choose from multiple majors in college, in ‘higher order’ investing, we can take multiple paths to a secure retirement. One way is investment real estate, which Ben Davis believes in, and another way is equities that I believe in. If you choose the equities path, it becomes necessary to have the lowest costs of investment, in other words, invest efficiently. Even within low-cost equity investment universe, we can choose either very low cost index funds (some as low as 0.05% for US total market funds, and below 0.3% for international index funds) or create a diversified portfolio of higher quality stocks across multiple sectors that pay periodic (and often increasing) dividends.
It is the last point where there are divergent points of view. There are no absolute right or wrong answers once you reach this stage of personal finance – it’s like deciding which graduate school to select. You are already a winner and way ahead of millions of people in the journey to financial independence.
If you are a dividend investor with investment portfolio of $250,000 or more who makes, say, 20 trades a year, low trading costs will actually make your annual investment expenses lower than passive index investors. This is because index fund fees of 0.1% on $250K is still $250 per year, which is equivalent to 31 trades at $8/trade! These days, trading costs have declined so much it most online brokerages offer $2-5 per trade, or even less. On the other hand, the index fund fees in absolute dollars will only increase as your account size grows each year.
I am a strong believer in indexing as a strategy to build assets, that is, if you are in accumulation stage of life. You can continue to be an index investor for life, there is nothing wrong with that approach. However, if you are willing to understand how indexes are constructed, you will realize that a vanilla index fund, while it is diverse in terms of number of holdings, can expose you to more sectoral risks than you realize or are willing to tolerate. For example, S&P 500 index fund has 21% allocation to Information Technology sector and nearly 15% to Financials sector. These are sectors that do well when the economy is growing but have sharper declines during recessions than other sectors, like Utilities, for example. Utilities are only 3.2% of S&P 500 and they generally lag during raging bull markets but shine during declining markets due to their relative safety. Utilities and Health care, along with some REITs (not all), are considered ‘defensive’ sectors.
Collectively, all the market sectors, based on marked-weighted capitalizations, give total market volatility. This volatility is defined by the term beta. It can range from a low of zero (no volatility) to any number based on how volatile a stock’s price movement is. Cash has beta of zero, because its value is completely independent of the market.
By definition, since all volatility is calculated relative to the broader market, the S&P 500 index has a beta of 1.0. So, if your stock portfolio has a beta of 0.9, you should have 10% less volatility than S&P 500. Similarly, if your stock portfolio has a beta of 1.2, you are likely to experience 20% more volatility than the index. According to Modern Portfolio Theory, it doesn’t matter if the 0.9 beta is achieved by owning slightly less volatile stocks or by owning a portfolio of 90% S&P index and 10% cash (which has a beta of 0). The latter portfolio also has a weighted average beta of 0.9, and thus, theoretically, no different than the former portfolio of 100% stocks having a portfolio beta of 0.9.
But the reality that many investors face is different.
Stocks are the best asset class to own in the long run to achieve the highest possible return – on this, there is no dispute. But once you build a sizable portfolio, your focus may shift from wanting to bear the full market volatility. Also, you may choose to allocate different weightages to sectors. For example, you could decide to own dividend paying stocks across sectors such that you have say, 15% allocation to Utilities and a correspondingly lower allocation to Financials and Technology than what S&P 500 has. Doing so will cause your portfolio volatility (beta) to be 0.8-0.9 range, that is, 10-20% less volatile than the market. Similarly, you may choose to select high quality dividend paying stocks across the sectors in such a proportion to give you a dividend yield that roughly corresponds to your withdrawal rate. If you wish to live only on dividends, you can construct your investment portfolio of say, $1 million to deliver $35,000 in annual dividends. In this example, you can engineer your dividend portfolio to deliver a 3.5% starting portfolio yield, with an expected annual dividend growth rate of 5%. This takes care of both your current spending needs with a cushion for inflationary adjustments in the future.
Dividend investing is just a subset of equity investing, and it is not a different asset class that some assume. Dividends are more stable than capital gains, a fact that has been proven over 80 years (Ibbotson study). Also, dividend payers and growers, as a sub-class, have generated better overall returns than the index over the past few decades (Ned Davis Research).
My Dividend Investing vs. Indexing series examines the issue from the vantage point of an individual investor without any of the filters and biases of either camp that has its share of advocates. The individual investor is often a victim of the financial industry. I care about the individual investor because that’s who I am. Hope this series helps you in your thinking about an appropriate investment strategy for your FIRE journey. To understand this topic in greater detail, it would be useful to study my Indexing vs. Dividend Investing Series in detail. They are linked below for easy reference.
Part 1: This sets the background context and frames the debate from the context of passive income.
Part 2: This examines the flexibility of passive income in DGI using three investors in different stages of their lives with different objectives.
Part 3: This evaluates the role of dividend income in total returns regardless of which strategy you like to pursue.
Part 4: Choosing Indexing vs DGI is not an either/or strategy. What makes better sense depends on you and where you are in your investing journey.
Part 5: What about the risk of lagging the index in total returns? We examine this risk of DGI and the impact from both financial and life perspectives.
Part 6: Can you get the best of both indexing and dividend investing? Yes, you can. I share portfolio examples here on how to execute this strategy.
I would appreciate your comments either here or on my website.
BIO: Ten Factorial Rocks (TFR) owner is a 45-year-young corporate manager who values financial independence. Ten Factorial Rocks (TFR) was created to chronicle my journey towards retirement while sharing my learning’s, absurdities and pitfalls along the way towards my search for a more meaningful life. Wall Street finance and stock option riches have one thing in common – they never passed through my life! TFR is not just about financial independence. TFR is also about self-empowerment while getting to financial independence, and our search for a better, meaningful life (of which early retirement is just one milestone). We aim to educate, entertain, share life stories and analyze the oddities of the world around us. TFR – why the strange name?