July 6, 2016

Reaping Dividends: June 2016 report

June 2016 brokerage update: our year to date net dividends hit $221!Philosophically speaking

Building up a portfolio that throws off anything like real income in annual dividend income is challenging. We need a lot more capital invested.

To add to that challenge, as I shared at the Jolly Ledger recently, I have some rules.

  • I’m a long position investor, otherwise known as buy and hold.
  • It cannot be built on blood money. Companies need to conduct their businesses in a way that would make me want to work for them. Disclaimer: I aim to invest in ethical companies as far as is practicable – I’m not an expert and don’t have an army of researchers at my fingertips to confirm that all my choices are good but I’m doing my best.
  • I won’t invest in tobacco or gun companies. Even though I do not disapprove of gun ownership in principle, the way this country is unduly influenced by the NRA and gun lobby isn’t acceptable. There’s a difference between short term mistakes and long term wrongdoing or simply being harmful and the gun lobby has long ago crossed over to the dark side.

I wouldn’t feel comfortable working for any of those companies as a direct employee, no matter how nice a salary I could pull down, so I’m not sure how I’d justify owning it in my portfolio. It’s much like how it doesn’t make sense to me that the University of California system was holding stock in the prison system in their portfolio.

And now, the updates!

June 2016 brokerage update: our year to date net dividends hit $221Year to Date Dividends: $231.00, Fees: $9.90, Net: $221.10

My brokerage is TradeKing, I’ve been very happy with their low fees and service.

The first half of 2016 has been all kinds of volatile. The recent Brexit Leave vote made for an extra bad week globally. I wish I’d moved sooner but I was mesmerized by all the bad news and watching the stocks plummet. I can’t decide if it’s worth sharing specifics of my portfolio or if that’s a bad thing, so for now, I’m going to be general. Let me know if you think it does or doesn’t have value to you as a reader. I’m not recommending stocks, mind you, and don’t want to give that impression.

  • My Financial Services Stock #1 dropped more than 10% from my previous purchase price so I bought more. Reminder: dollar cost averaging is a good thing. I have confidence in the company in the long-term and this lowers my average purchase price by $5 per share.
  • In a departure from my usual strategy, I picked up an automaker stock. There was a time I wouldn’t have touched an auto stock, like an airline stock, but this was a spontaneous Buy based on the company’s recent moves to be more flexible with their suppliers, and moving with the times on technology. This surprised PiC, and honestly me too, but I thought I’d see what comes of it in 2 years. We’ll see if my instincts pan out or if the Brexit vote tanked that experiment.

Income Replacement

For perspective, I like to think of the dividends investing project in terms of how much of our income it can replace, or how much of our fixed expenses it can cover.

At a whopping $221.10, this year’s dividends can pay 20% of one month’s mortgage.

:: How do you invest? Have you peered at your portfolio this quarter?

If you liked this post and found value in it, I’d appreciate your pins and shares.

*Part of Financially Savvy Saturdays on brokeGIRLrich, Disease Called Debt and Little House in the Valley

March 21, 2016

Being a landlord: HOA violations and other nuisances

Landlord adventures in paperwork and maintenance “Business as usual”, since LB was born and we got new tenants into the property, has been quiet. Once a month the rent comes in. Once a quarter, I send the tenants the sewer bill and the property manager, let’s call them “Lou”, collects that.

Unfortunately, did I mention this?  Things don’t always go smoothly in money matters and this is no exception.

The current tenants pay on time and don’t have a lot of needs. They’ve requested a few minor repairs and those issues have been addressed pretty quickly.  But they have a problem with complying with a relatively minor HOA policy about clearing their curb on a weekly basis as required. It’s not that they object to complying, they simply didn’t comply on time for several weeks in a row.

They’re good tenants so far as I can tell, so I hated dinging them for something like that but the HOA is a huge stickler and sent a violation notice every time it happened. After three violations, the HOA proceeded to start fining for the violations, even though the tenants had been informed and were doing their best. The fines were $100 per occurrence!

It’s more than a little alarming to get a bill for $100 per week, with a grand total of $600, when the fines start. It’s a lot alarming that the latest bill is up to $1500. Lou assures me that they’re working on it which means that they’re confirming the lack of violations each week for the HOA and after several weeks of “clean” behavior, the fines will be removed.

That’s little consolation while I see the fines skyrocket. This is the part I hate about going through third parties. As much as I like that having Lou lets me stay hands off, the part of me that manages money and the household particulars chafes at not being hands on so I can fight the charges if shenanigans occur. The bills are in my name!

So that sucks. But the whole point of the manager is to deal with stuff like this.

Basic appliance repairs eat into a slim profit margin

I have a home warranty which covers the repair and replacement of appliances. We’ve called them out to take care of three plumbing problems and 2 appliance replacements. Their timely responses keep the tenant happy and a good tenant is worth keeping happy IMO. Though, what the hell is going on with the plumbing??

The $75 per call out fee is steep in contrast but DIY isn’t an option for this property. I was only breaking even in the first seven months on routine costs (mortgage, property tax, and insurance). We had to get new tenants and raise the rent to bring in enough to have a little extra left over to cover the irregular expenses.

We’d need to raise the rent another $100 to have anything like “profit”. Unlike the “pay yourself first” mantra in regular employment, the leftover money each month after subtracting regular expenses goes into savings. It’s the buffer against the inevitable repairs and maintenance, not money I take out of the business. This is conservative but other than my initial down payment stake, the goal is for the unit to break even overall first. Only after costs are covered, thus preventing any need to dip into personal funds, do I consider that leftover cash mine. The long term goal is for this property to generate some rental income and appreciate in value over time.

Read more of our experience with real estate investing!

*Part of Financially Savvy Saturdays on brokeGIRLrich, Disease Called Debt and From Cost to Coast*

January 25, 2016

Reaping Dividends: 2015 year-end update

My brokerage account is held at TradeKing. Referral Bonus: Open an account, fund with $3,000 and place 3 trades within 90 days, we both get $50!

TK 2015 end

  • The market went up, down, up again, and down again. It would have been nervewracking if I looked at anything but my earnings which trickle in 9 months of the year.
  • Nothing exciting in the latter half of 2015 on the dividends front: no stocks splits or  special dividends.
  • I did buy shares of AXP too early. It’d been on my Buy list for months and  should have waited for it to drop to my original price point but I had a brain blip and forgot they’d just ended their partnership with CostCo which was big income for them. Whoops.
  • Long term: If my buy was a mistake, I may eat it in a tax-loss harvest move, but it’s way too soon to be worrying about that. For now, I’ll revel in the highest annual earnings to date and see if we can’t double or triple that in 2016.

Other Reaping Dividends posts:

Reaping Dividends: Stock split and half-yearly update

Reaping Dividends: slow and steady

September 14, 2015

Real Estate Investing: principles, maintenance, and budgeting

Linda made a good point about how some landlords, slumlords, use their rental properties to generate tax losses to offset their gains in other areas of their net worth.

Call me foolish but I’m not ok with that idea. Even if I’m going to have to pay more in taxes each year because I’m showing a profit on paper, I’d rather find some other way to even out that tax bill than to let my property where actual humans live go to shambles. I’ve been on the other end of that stick and it sucks.

Even though some of the rundown at the other house is due to Dad’s inability to keep up with all the house maintenance, a lot of it is long term stuff that the owner of the property should be tending.

Chatting to a long time homeowner friend, she’d expect most of the wear and tear to be paid for by the homeowner / LL: carpet, paint, drapery. That was an interesting thought. While I’m willing to budget for it, as a renter, we never had a refresh or cleaning of anything of these things that we didn’t pay for under normal wear and tear. We’re not going to vacuum for the renter but we will do a carpet cleaning between renters and replace it if need be in say, 20 years? That’s the normal life span of good carpet, I think.

I provide and maintain all the major appliances, which isn’t actually a normal thing in my experience renting in California, but it is for the rental area. Would you also expect that other stuff as well?

My current plan is to save all the income from at least the first five years to pay for expected major repairs and unexpected anything else that’s not covered by the warranty.

Read more of our experience with real estate investing!

July 22, 2015

Reaping Dividends: Stock split and half-yearly update

My brokerage account is held at TradeKing. Referral Bonus: Open an account, fund with $3,000 and place 3 trades within 90 days, we both get $50!



Investing Strategy:

1. I buy what I like.

2. I look for good dividends.

3. Keep costs low.


We had a great blip in February, one of our holdings decided to pay out a special dividend. A second stock split, which didn’t affect anything monetarily, but I get a temporary thrill seeing that we own “more” (only in absolute value but not more proportionally).

Thanks to the special dividend, this is our highest earning year in the way of dividends yet! Over $400. And it’s just all going back into stocks when I make our next purchase. The goal is that someday we’ll can live off the dividends from these holdings, which are just one part of my long-term plan and portfolio.

Reaping Dividends:

Update 1: Slow and Steady

May 4, 2015

Real Estate Investing: Myths and Presumptions

People tend to make assumptions the second they hear that you own rental property and, for those who aren’t knowledgeable, many of those are wrong.

1. You’re rich. (Correlated: You will be rich tomorrow if you just got started today.)
2. You’re always making money, usually hand over fist.
3. It’s easy money, and profitable as hell.
4. Landlords can charge anything they want.

Obviously we’re not rich. Far from it. I certainly intend to be but this is one part of a long term plan to get there, this isn’t the end all be all.

The point is to make money but it’s not easy and not an overnight get rich quick scheme.

There is a risk and a truckload of expenses involved: I took on a mortgage, with all the associated home buying costs like closing costs, realtor fees, inspection and appraisal fees, and a higher interest rate because it’s not an owner occupied property.

And whether or not we have renters (aka income), I’m still responsible for all taxes, damages, repairs, and association or other fees every month. My profit is AFTER I pay all those bills, if anything is left.

Profit margin is dependent on two main factors: fixed expenses and rent. I’d love it if I could engineer a 50% profit margin but the only “control” I have is on the expense side. It’s down to what decisions I make when buying. The price point has to be low enough with a high enough property value so that when the mortgage and all the other costs are added up, they are less than the amount of rent I can charge. And I can only charge what the market will bear. If rents in the neighborhood or region are $1200/month for a 4 bedroom, 2 bath single family home, and I’m trying to charge $1500/month for a comparable property with no distinctive features worth $300 more per month, all because my expenses are $1400/month, guess who’s got 2 thumbs and is SOL?

Or say your expenses are lower and you can still make a small profit charging market rates – if you get hit with multiple repairs, month after month, even small ones, you’re still looking into an ever deepening hole.

You’d better have some slush fund saved to keep covering your expenses during times of vacancy, and any rental income budgeting sheet worth the paper it’s printed on includes a minimum assumed vacancy percentage, because just try crying to your bank about how you can’t pay this month because the rent was paid late or your property stood vacant.

Believe me, they’re just fine and dandy taking the house along with whatever money you’ve already sunk into it if you were fool enough to believe that you didn’t need to pony up more cash out of pocket from time to time.

I didn’t get into this intending to lose money but as an investor you have to know the basic risks you’re running, and yes, losing money is absolutely a real risk.

Read more of our experience with real estate investing!

April 6, 2015

Real Estate Investing: Finding new tenants

Once again, while I’d rather have the money in my pocket, the ability to be completely hands-off with some of the day to day, other than answering emails, has been exactly what we needed.

My hands have been rather full so I’ve only answered emails, or redirected phone calls, but not long after LB’s arrival, the property manager dealt with:

1. the expiration of our old tenant’s lease,
2. checking the property to ensure that clean-up was complete,
3. collecting final rent,
4. getting the previous renters to pay up the utilities they claimed were paid (but weren’t),
5. returning the remaining security deposit once all the outstanding payments were deducted,
6. scheduling all the inspections and servicing of repairs,
7. marketing and showing the place,
8. reviewing applications and running background checks,
9. getting the final lease signed with my approval.

Bonus: we both make a little bit more now that the rent has changed to be more in line with the market rate for equivalent rentals. Not showing a profit yet, of course, but it gets us closer.

Not having to deal with that stuff and a screaming newborn? That’s absolutely worth the percentage off the top. Much like renting is not a waste of money because you’re getting a place to live without financial risk, hiring a property manager was the right choice for us. PiC has zero interest in this whole venture, beyond an academic one, so it’s entirely on me. Having someone deal with the hands-on work of owning a rental has made it possible.

Extra bonus: they organized all the income and expenses that they handled in a statement for me, reducing the amount of time and work I had to put into organizing our tax documents. Whew!

Read more of our experience with real estate investing!

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