It seems that the US does stop for 4th July celebrations for about a week or two … go figure! But, just when I was beginning to think that the 7MITs feel that they have enough to go on without our help, Jeff pops up with this interesting post … for all of you with real-estate and/or stocks in your future, what’s the huge breakthrough that Jeff has discovered?! It’s right here in his post …

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As a quick recap…

• My life purpose is to “Lead and develop leaders.”
• My number is 10 Million on 1/1/19
• My current Net Worth is $672,290
• My annual required compound growth rate is ~ 30% +/- a couple %.  I’m finding this number is fluctuating a bit, but seems to average out to right around 30%.
• My selected growth engine is real estate investment and individual stocks

According to Masterson’s Table I should be able to generate ~ 30% with my growth engine.  Over the past couple weeks I’ve been researching both elements of my motor to determine whether I believe Masterson’s results.

What follows are my predictions, guestimates and silly wild a$$ guesses as to what I might be able to expect in annual returns and its affects on my number.

Now I make no claims as to the accuracy of these results.  Remember, it’s product of my research online and work with a calculator.  I welcome all comments and corrections.

Real Estate: In this first round I only considered residential real estate.  I need to repeat this exercise for commercial real estate and hope this post will generate some discussion in that regard.

In my analysis, I initially considered my returns as a percentage of the property value.  Then it dawned on me that my actual growth should be determined by how much of my own skin I have in the game.  In other words my returns are a function of the down payment I put into the property.

I assumed I would be buying properties in the $150K range with 20% down (i.e. $30K).  I planned for a 30 year loan at 6% and positive cash flow with an anticipated holding period of 10 years.  Tax benefits and purchase discounts (e.g. good deals, foreclosures and tax liens) were NOT considered.  I view them as icing on the cake.

Bottom line for me: the business fundamentals of the property must be sound before I lick the icing.

10% is nothing to sneeze at, but when you compare the returns to the amount of money I’d potentially be investing (the down payment), it quickly becomes apparent why real estate investing can be so attractive.

Individual Stocks: When it comes to stock investing, I’m going to stick to the value investing principles made famous by investors such as Warren Buffet and laid out in books like Phil Town’s “Rule #1″.  I will be doing my stock analysis centered on the requirement to make 15-20%.  Also many of the stocks I anticipate investing in will likely pay dividends on the order of 3-5%.  Putting the two together, I think I can possibly gain 18-25% annually with this approach.

Revving the Engine: Simple math here throws out a potential annual return of 68-75%.  Wow!  That’s basically double what Masterson came up with.  I’m not claiming Masterson is wrong, but if I were writing a book, I’d probably low ball the results a bit hoping that most folks would see better than published results.  I’m hopeful that was his approach.

Pulling My Little Red Wagon: If I hook up my growth engine to my little red wagon, I can begin to see how achievable my number really is.  Here I projected my current net worth ($672K) out to where I think it will be on 1/1/10 based upon my recent growth rates, then started running the math on an annual basis at 68% growth.

This of course assumes my entire net worth is fed into the engine.  I can tell you right now, I don’t have the intestinal fortitude to pump it all straight into the machine.  Although it would mean reaching my number in about half the time I’d planned.  That’s a plus!

Another way to look at the numbers is to ask the question, “How much of my net worth do I need to feed the growth engine in order to hit $10M by 1/1/19?”  The answer to that question is 49%.  I can live with that.

My profile then begins to look like:

Conclusions: I can most likely use a combination of real estate and stock investment to reach $10M by 1/1/19.  I should anticipate returns on the order of 30-68% and be ready to commit between 49%-100% of my net worth to this investment strategy.

What do you think of my analysis?

Can You Find Your Number on Craigslist?

As I prepare for my entry in to MM201, I’m finding that my game plan is changing.  My original play book was aimed at achieving an annual compound growth rate of 38%.  However, in my previous post, I noted that recent increases in my net worth have reduced that requirement to just under 30% (29.28% to be exact).

That’s great for a couple of reasons

1. My number (10 Million by 1/1/19) just became more achievable.
2. I can take a step down on the risk ladder and still have a reasonable shot at achieving my goal.

As Adrian pointed out in a post over at 7million7years.com about Masterson’s Table

1. Real Estate and Stocks can produce an annual compound growth rate of 30%
2. Real Estate, Stocks and a small business can get you to 45% annually.

When I needed 38%, I was planning to take aim at the 45% growth engine to ensure I hit my goal  Higher returns tend to require greater risk and I was going to assume some to get where I wanted to go.  That extra risk is not necessary right now, so I’m going to put my business plans on hold and focus on REI and individual stocks.

In an attempt to jump start my progress (and to have a little fun) I placed two ads on Craigslist.  Who knows, maybe I’ll find my Number on Craigslist.

Wanted: Value Stocks for Long Term Investment

Seeking Value Stocks for investment opportunities in companies that possess consumer monopolies and a demonstrated history of strong financials.  Each company’s leadership must be passionate about the enterprise, care about its employees, provide value to it’s customers and keep the best interest of shareholders in mind.  Serious recommendations only, new risky start ups need not apply.

Wanted: Good Real Estate Cheap!

Seeking Good Real Estate Cheap.  Must be move in ready in good school districts.  Must be worthy of high quality tenants who want to fork over loads of cash in exchange for a roof over their head.  Commercial real estate offerings will be considered on a case by case basis, but must come with tenants already in place.

I’m relieved that my growth rate doesn’t force me to own a business right now to continue making scheduled progress toward my number.   As much as I want to start my own business, I suffer from two hold backs.  The first is I am not in a position to devote the time necessary to pursue any business plans because of my military commitment.  The second is that like Ryan, I’m struggling with settling on “The Big Idea.”

It’s not that I don’t want to lead my own company…quite the contrary.  I really do.  My life’s purpose is to “Lead and Develop Leaders.”  Owning, running, and leading my own business would pack a double punch.  Progress toward the number and an early fulfillment of my life’s purpose.

I’m fortunate that  in the military, I have a job that requires me to Lead and Develop Leaders…and I’m getting paid to do it at the same time.

To this point in our experiment we’ve been saying that we need to achieve our number so that we can retire and start living our life’s purpose.

I’m finding myself in a unique situation where I’m nowhere near my number, yet I’m fulfilling and living my life’s purpose already.

Does anyone see a problem with this?  I do.

Leaving the comfort zone…

Jeff has made great progress, but he’s still at the stage where adding a single rental foreclosure can increase his Net Worth by 67%; over the next 18 months he will probably need to maintain that growth rate … another $400k in equity over the next 18 months should do it, then $800k after that. Easy, huh?!

If not, where to from here for Jeff? Any suggestions?

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MM101 is my comfort zone. I was pretty successful in the 101 zone before I made acquaintances with Adrian. With his ideas (I like to call them “the rules”) added to my current bag of tricks, I expect to have continued success in this realm with a better understanding of the mechanics of MM101.

When I started this experiment I concluded that my number was 10 million in 10 years (by Jan 2019).

At that point my net worth was $383K and I needed a 38% annual compound growth rate to make it to 10 big ones in 10 years. To achieve that growth I’ve been planning to make use of stocks, real estate and business ownership. That should cause me to overshoot my goal (hopefully).

Since determining my number, I have made some positive progression.

The foreclosure home I purchased in February has given my net worth a nice shot in the arm. As of May 2009, I’m sitting at $642K and have surpassed my minimum required growth for this year.

Comparing the $642K with the $383K tells me I’ve had a 67% increase since December. That amounts to 1.75 years of progress toward my number. Almost two years worth of work in six months is fine by me.

At that start of this experiment, I needed to see better than 3.16% growth each month to stay on track. I’ve been hitting monthly numbers in the 4, 5, and 6%’s for the last several. A reassessment of my required growth rate tells me (assuming I’m doing the math correctly) that from this point forward I need to continue to compound at approximately 29% annually (or 2.44% monthly).

Now all I need to do is hook up to Josh’s rocket and I’ll be done by next week.

A 29% growth rate probably means I need to reassess whether to start a business or not. If memory serves me correctly (I couldn’t find Adrian’s post on the topic to confirm), 29% now puts me in a category that can be achieved by stocks and real estate alone, without the need for a separate business. This could minimize some of my risk exposure and require less of my personal time to accomplish.

This bothers me a bit, because I have been pretty excited about “making it big” on my own in an aviation related business. But if you don’t have to, it begins to beg the question, “why should you?” And it makes me think that I really need to have my business ideas clear and my personal reasons for moving forward on this one clear. My military commitment means that I have a good three years or so to think this one through, because I don’t have the luxury of chucking my day job in order to pursue a wild business dream.

Since unbridled pursuit of a business is not possible (nor really necessary) for the time being I’ll be focusing mostly on stocks and real estate for my growth engine.

Speaking of real estate, I’ve got another room I need to paint….

I owe, I owe, So It’s Off to Work I Go….

Another great post title

It appears that all things Jeff-related are on a sky-high trajectory; but, when it comes to debt and liabilities is that a good thing: when is ‘good debt’ too much debt? I’m keen to hear your thoughts – as, I’m sure, is Jeff …

Jeff’s post also shows how far our expectations have changed when we consider 8% ‘expensive’ debt – and, compared to today’s rates, it is!

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…well, that’s not the only reason.

I’ve never been a big debtor.  At least not in terms of credit card debt nor in terms of total numbers of creditors that I owe money to.

Presently I have three liabilities which I’ve discussed at length here on 7m7y.

Home: $500,861 at 5.5% with 29 yrs and 11 months to go. 

Rental Property: $235,380 at 5.375% with 25 yrs left to go.

Short term bridge loan (secured by one of my vehicles): $17,650 @ 8% with four years and 11 months left to go.

Total debts: $754,802  Ok, so maybe that is a lot of debt.  I just don’t consider it bad debt.

My plans are to continue to pay only the minimums on the home and rental mortgages.  I do not intend to pay either down early, although I’ve been very intrigued by some of the equity accelerator programs I’ve seen advertised recently.  But I digress and that flies in the face of Adrian’s advice.

As for the short term bridge loan, I do intend to tackle that one in short order.  That loan was necessary to force my recent home purchase through.  The property was a foreclosure and required more cash than I had on hand in a rapid manner.  This loan will be paid in full no later than May 2009 at which point I’ll be back to only having debt that is associated with real estate.

I think I’ve left the best to last (no offense to the other MITs) … Diane says that she is in a ‘rent free’ situation … but, there’s no such thing as a ‘free lunch’ from purely financial perspective … and, even though this post is primarily about housing I am also interested in exploring the 401k ‘draw down’ … these are some of the financial issues that I hope to explore with Diane through this – and, future – posts …In the meantime, I would be interested to see what questions and advice Diane gets from the 7m7y Community …

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Adrian’s challenge this month is to compare our “present state” against his theories and see where we fall and how we can mimic what he did, which is to align ourselves within the two rules of 25% and 20%.

I’m in an interesting state – once again doing something that doesn’t really fall into a real category.

• Theoretically I have no income, but truthfully I’m living on deferred income from my years working – money I put into a 401k to get 50% matching on 8%, 100% vested, which was a really good return.  Even with 10% penalty, the matching was a good deal.
• I’m not living in the house I own, and pay no rent/mortgage payment for where I am living.

I am withdrawing about $5000 in cash per month.  Allowing a 10% penalty and 30% taxes means that my income is about $8340 per month before taxes.  Subtracting taxes leaves $5838 net income per month.  25% of that is $1451 which exceeds my monthly mortgage payments.  I prefer to use $5000 as my net, allowing some for the 10% penalty, and because it is “golden,” also to reduce that number by subtracting a monthly obligation to support my children (another $1000).  Using $5005 as my net gives a 25% allowance of $1251 for rent/mortgage; using   $4000 allows only $1000.

I have 2 monthly mortgage payments which equal 100% financing.  I got a conventional 30-year 80% loan at 6.375% and a fixed 20% loan at about 8% that comes in 10 years, as a balloon loan.  It was pretty much a no-money-down deal (except for closing costs).  The 80% mortgage requires an escrow account.  Even with that added to both mortgages, the total is less than $1251.  It exceeds the $1000 threshold (using a $4000 net income.)

I’m not living in that house anymore.  I rent it.  The rent does not cover both mortgages.  If I had paid 20% down, it would cover the 80% mortgage, without the escrow for insurance and property taxes.  It comes short with them added.  I bought the house 3 years ago (Jan 2006).

Based on my net worth in Nov 2008, and the 20% equity rule, I should have no more than $3609 equity in my house.  Currently I have $1,202.  So I am below 20% on that.

So, let’s look at this from different angles:

• Using either net income ($5005 or $4000), I am paying less than 25% ($1251-1000) on my mortgages, depending how you count property taxes and insurance.  If we look only at the house I am currently living in (not renting), I am paying zero, but I am not building equity here either.
• Using active income, I am exceeding and breaking all rules, yes?  Unless you use “where I live.”

So, I guess I am okay on these rules, but need to look at my situation a little bit different.

• Particularly, should I pay off the 20% balloon loan now so that the rent is a positive cash flow related to the remaining (80%) mortgage (not counting the property taxes and insurance)?
• Or should I continue to “go with the flow” of an 8% loan with tax-deductible interest and use the money for other investments?

The last is what I’m thinking, but since I have gone a bit unconventional on the mortgages, it’s a negative cash flow (I still need to add money to cover the mortgage payments each month).  This reminds me of how different RE investors go with .8% or 1% of a purchase price in determining rent.  Perhaps that has to do with how much cash they have invested in the property?  A different topic (“for another post”), Adrian would say I think (smile, behind dark glasses and a hat).

Housing Situation

Photo credit: patchworkpottery

It’s only three posts in, and we have already covered a lot of ground on the subject of houses and housing … you should also be able to see that this blog is unusual; it’s like an iceberg: only 10% can be seen ‘above the ground’ (i.e. in the post, itself) … 90% of the value is ‘hidden’ in the comments below the water line. So, do yourself a favor, go back and read the posts over the last few days and scroll down to the comments …

When you’re done reading, add one of your own!

Now, our intrepid hounds have tracked Mark down to one of his secret global locations (Mark: will you let us in on the secret … and, send the requisite photos??!), to find that he is the poster-child for the 20% Equity and 25% Income rules … both now, and planned.

What do you think? Does Mark get an elephant stamp?

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The real estate market has been on the news a lot; be it housing starts, mortgage rates, foreclosure rates, refinancing activity and so forth. While at the macro level it seems like it is affecting everyone, we should zoom in on our own situation to assess where we are at in the current situation. Using some numbers from networthiq.

Basic numbers:

Current home value (according to zillow): $140,000 (Range: $133,000 – $152,000)

Current mortgage: $109,600 ($92,600 first mortgage and $17,000 HELOC).

Current mortgage payment: $515.39 (first mortgage) + $216 (HELOC) + $100 (Taxes) + $146 (HOA dues) = $977.39 (I’m including taxes and HOA dues).

% of after tax income per month: 15.6% (($977.39 / $6241) x 100)  using 70% of gross income.

20% Rule

Now let’s look at the details for the 20% rule:

The current equity for the home is $140,000 – $92,600 – $17,000 = $30,400

This approximately (($30,400 / $181,900) x 100) = 16.7%

20% Rule – check.

25% Income Rule

Based on the 25% Income Rule:

I’m currently spending about 15.6% of my net income on mortgage, taxes, and HOA dues.

25% Income Rule – check.

But wait, the 20% Rule and 25% Income Rule is a general rule of thumb. What if the number is significantly below the threshold? Are we not investing enough in our primary residence? Are we missing out on tax breaks on the mortgage interest?

Some of these questions got me thinking and I’m currently in the market to upgrade my current residence and convert my existing home to a rental. It is definitely a great time to buy, if you can afford it. Mortgage rates are at multi-year low and housing prices are declining. It is a buyer’s market.

As for my current residence, I don’t foresee it being a good rental because it does not cash flow with the high HOA dues and the HELOC payments. I dont’ think I will get rid of the HELOC since it is at 2.25%.  The main reason for me to keep it as a rental is to ride out of the current market and sell it later when the housing market picks up again.

Let’s run some numbers for the upgrade:

Home value according to zillow: $210,000 ($190,000 – $220,000). I believe I can get a $210,000 market value home at $200,000 given the current market. Not a lot of discount but I’m not looking at foreclosures or HUD homes since I want to live in it for about 3-5 years and upgrade again.

Current home value: $210,000 (purchase value at $200,000)

Current mortgage: $180,000 (after $20,000 down payment)

Current mortgage: $1,216.82 (PITI)

% of after tax income per month: 19.5% (($1,216.82 / $6241) x 100)

Great! This is still within the 25% Income Rule. How about the 20% Rule?

The current equity for the home is $210,000 – $180,000 = $30,000

This approximately (($30,000 / $186,900) x 100) = 16.1% (Assuming equity gain at $10,000 – $5,000 closing cost). The rental is now an income producing asset (if we consider taxes and depreciation).

Nice. Let’s hope I find a good one.

Mark is traveling again – where?

Straight To The Point…

No pictures of jets, Jeff? Straight down to business? So, THAT’S how it’s gonna be is it … ?

In the post, Jeff is flaunting his violations of both Rules, what are we gonna do about it??!

Seriously, Jeff has a plan and a strategy and I would be interested in hearing comments from any of our readers, including the 7MITs, of course … but, also the ‘silent majority’.

C’mon, we all have homes, so we all have something to learn/offer here …

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As most you already know I’m closing in rapidly on “closing” on a new home.  Rather than answer Adrian’s questions by using my current home in Virginia as the frame of reference (it’s soon to be a rental business), I’m going to do a little guestimating and use my future home in Boston as the basis for my answers.

1. What is your home’s current value?

The appraiser hasn’t visited the home yet, so I’m going to use the low estimate from Zillow.com as my answer: $698,860

2. What is your current mortgage?

$502,650

3. What is your current monthly mortgage payment – both as $ and as a % of your ‘usual’ after-tax income?

$3600 / 37%

4. How does your current setup fit within the 20% Rule and the 25% Income Rule?

Vs. the 25% Income Rule: At 37% I’m clearly in violation of this recommendation.

Vs. the 20% Rule: With the new home in the mix, my Networth is now approximately $509,210.  The equity I have in the home is roughly 698K-502K = $196K.

196K/509K = 38% so I am violating the 20% equity/net worth rule as well.

5. What – if anything – do you plan to do about it, if you currently break either/both of these rules?

The main reason I’m in violation of the rules is that I’m making a speculative play for appreciation on this property based upon two factors.  The first being my belief that we are at or near a low point in the real estate market and the second being that I was able to purchase the property at an additional discount because it’s a foreclosure.

At this point I don’t plan to do anything to adjust my situation with regards to the 20% rule.  I’m stretching myself to get into this house and I’m not ready (nor able) to stretch some more by doing a cash-out refi to get under the 20% rule (a cash-out refi will raise the monthly mortgage payment).

I’m trying hard to fix things in relation to the 25% Income Rule.  That’s what my Making Money 201 strategies are all about.  Click baby click!

6. What are your plans for your first home (if you currently rent) or your next upgrade (if you currently own)?

Do I have to think about buying another home already?  I’m so burned out on Mortgage lenders and Realtors, I can’t stand it.

If I must…the next home that I plan to occupy will likely not be much of an upgrade relative to the one I’m purchasing.  Size-wise, this new home in Boston is more than four people need, so if I buy a follow-on home to occupy, it will be because my family moves again.

A move away from Boston will likely result in a sale of this new property.  I believe the mortgage payment is/will remain in excess of local rents for a few years.  I’m not interested in running a negative cash flow rental property unless there is a really good reason that I should maintain ownership of the property.  If that be the case, then I am mentally prepared to operate the property at a loss and consider the negative cash flow as an investment.

I’m projecting the sale of the Boston property could yield 150-400K in profits depending upon what the real estate market decides to do over the next three years.  My fingers are crossed, but I’m in positive territory either way.  I’ve often heard that in real estate, you make your profit when you buy.

With a sale, I would take the resultant profits and put some of it into a new home and some of it into down payments for several rental properties.  I’m planning to split the profits 50/50 between a new home and several investment properties.

7. What questions/issues/opportunities, if any, that you would like to explore further do the above questions bring up?

I find the 20% Rule and the 25% Income Rule interesting book ends to one’s approach to affording a home and how much equity to have in it as you manage money.  On one hand you shouldn’t have too much of your net worth tied up in the equity of your home (20% Rule) and on the other you shouldn’t be using too much of your after tax income to pay your mortgage (25% Income Rule).

I’m going to caveat my next comment with the fact that I’m speaking off the top of my head and have not run the numbers in detail.

To me these these two rules work against each other.  Strictly abiding by the 25% Income Rule limits your ability to adjust your situation relative to the 20% Rule, and religiously following the 20% Rule in some situations could force you to grossly violate the 25% Income Rule.

If faced with this dilemma, should you knowing violate one rule to satisfy the other?   If so, which one should you sacrifice first?  I think violating the 25% Income Rule could be the greater danger.  Where is the balance point?

Of course, this is coming from a guy who is knowingly violating both rules. 

Connecting the dots

Photo credit: turtlemom4bacon

Aside from finding the quality of graphics on this site is definitely on the improve Mark has provided a great summary of the steps (and the reasons why) of this ‘grand experiment’ for new readers, even before we get to his table. Thanks, Mark!

It looks like Mark has no shortage of areas to dig into … how to turn this into his growth engine: any ideas? 

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All seven of us came a long way back in 2008 in this grand experiment. Now in 2009, it is time to look at what we have done before and plan ahead for this journey. For this post, we are aligning the previous exercises with this current one to find our growth engine.

We started off with the lengthy but necessary Life Purpose exercise. For this particular exercise, I found out that money has little to do with my life’s purpose but it does affect my ability to realize it.

We then attempted to quantify our life’s purpose by creating a spreadsheet and filling up our Lee’s List. This helps revise our Number and date and determine our Required Annual Compound Growth Rate.  At 40%, I’ll need to invest in real estate, stocks and small businesses.

Although we now have a destination, time and areas that we should be looking into, the scope is still fairly large. Let’s see how the latest exercise can help us.

Here is my table for this exercise:

Items in 4 columns

The common recurring theme in this exercise for me is that traveling or planning vacations and attending or organizing events or parties appear in all 4 columns.

I must admit, I love to travel but I’m limited by vacation time and ability to finance my travels. Right now, it is definitely heavy on the SPEND, ABILITY and DO column. How can I turned this into a future EARN item?

There are a lot of ideas – writing travel guides (books, blogs, etc); be a travel agent; be a tour guide; travel photographer; be a commercial pilot; etc. The closest thing I’ve done that is related to travel industry is being a trainee maintenance  aircraft engineer for a commercial airline. That did not work out for me. I think it has to be combined with other items like e-commerce or teaching for it to be more profitable. Let’s brainstorm for ideas.

Another 4-column item has to do with events or parties. I’m quite social and have organized events and parties  for myself and a few non-profit organizations. I haven’t done it for profit yet or organized any large scale event like a week long conference. I did attend a few good conferences and it is quite a logistic feat to pull everything together. Can I learn to be an event organizer? It does allow the ability to travel too since conferences are held in various cities.

Items in 3 columns

Let’s not overlook items that appear in 3 columns.  This includes investing, problem solving, and learning/teaching.

Again, this leads to a lot of ideas. I’m particularly fond of finding investing ideas be it in stocks, real estate or potential businesses. Problem solving is very general and could be applied to the various activities that we discussed. I enjoy learning new things a lot and sometimes find myself explaining new ideas that I’ve read about. I did think about being an academic and one point but since both my parents were teachers, I thought I should try something different. Something that I did not attempt hard enough is to combine investing with planning, organizing, and problem solving. This is the area I want to focus the most. I should be planning and organizing more investment related activities instead of vacation and events.

I think we got what we wanted out of this exercise for me.  It does give me focus on what needs to be done to align myself with my required growth engine, achieving my number and hopefully fulfiling my Life’s Purpose.

Clicking My Way Into Making Money 201

While we wait for the other 6 MITs to follow Diane’s lead, with her excellent post based on my Finding Your Growth Engine exercise, Jeff – our newest Millionaire … in Training! – welcomes us into 2009 with some insight into his own money-making plans …

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Making Money 201 is all about focusing efforts on increasing your income so that you can build wealth and make some headway on achieving your Number.

Being in the military affords me a nice and steady income (which I’m thankful for these days) but it doesn’t give me much of a chance to earn more by working harder or smarter so that I can earn that big promotion at work.  Nor can I focus on growth opportunities for the organization to improve profitability and earn more through profit sharing or bonuses.  This means I need to find an alternative, separate from the military to pursue new profits for my family.

But what should that be?

My required annual compound growth rate is approximately 38% to reach my Number.  I expect to use stock and real estate investments as well as some type of small business to make that happen.  I have more detailed plans for stocks and real estate that I’ll share another time, but today I’m going to focus on my options for a small business.

Ideally, whatever I pursue should be as passive as possible.  I’m not afraid of hard work, but my time is my most precious asset.  The more income streams I can generate that require little or no time/effort to maintain, the more wealth I can produce as an individual.  I think of this as leveraging my time.

Another reason I’m chasing passive income streams at this point in my life is that being in the military is a full time job that doesn’t leave me much room to head off in my own direction.  If I find the perfect business opportunity, I’m not at liberty to “quit” when I decide.  Therefore, my efforts need to fit with my present situation and service obligation.

My final reason for chasing passive income is that I have some big dreams I want to pursue on a full time basis as soon as possible.  Yes, I understand the point of our exercise is to achieve the Number so we can retire and fulfill our life purpose stuff.  But I think I can get on with it sooner than 10 years from now if I can generate sustainable passive income streams to live off of.

Currently my passive income efforts revolve around:

- Real Estate investment – One of my 2008 goals was to begin investing in real estate other than my primary home.  However, the Navy changed my real estate investment efforts and that goal with orders to Boston, MA.  I’m going to be managing the Navy’s recruiting efforts in New England.  Drop me a line if you want to join up.  Because of this change in plans I’ve had to defer my goal just a bit, but will still be a real estate investor very soon, I’m just going in through the back door.  I have renters lined up for my VA Beach home and am closing on a house in Boston at the end of January.  The Va Beach home is renting with positive (and passive) cash flow and the Boston house is a foreclosure that I’m picking up for $200K below market. 

- An Internet approach – As I mentioned above, I need a business that I can fit into my military career.  The Internet is everywhere.  It never sleeps and my online activities can be tailored to my schedule.  I can devote some time over lunch, during my commute on the train, or even while on travel and in the evenings at home.  Thus the title of this post, I’m trying to click my way into increasing my income.

I think of the internet as a big river money just waiting for me to dip a bucket into.  I am using several approaches to try and scoop my bucket into that river.  Mostly centered around advertising and internet marketing, I’m using several blogs (I have ten right now) to target specific niche markets.  The idea is to drive highly targeted traffic to the niche blogs which contain Google advertisements and related affiliate products.  Traffic = Clicks = Advertising and Sales Revenue.  So far the websites are paying for themselves, and I continue to build content and generate traffic via backlinks and search engine optimization.

I’m also dabbling in running targeted Pay Per Click ads (they are at the top and right side of Google’s Search results) to sell affiliate products.  I paid for an online course to learn some of the in’s and out’s of PPC, but have only lost money so far in this area of Internet Marketing.  I’ve suspended my PPC activities for now because I need all the cash flow I can muster to finalize my real estate deals in the end of January.

For now I’ll just focus on my niche blogs since I’ve got that breaking even.  I’ve heard “stories” of folks on the internet using this approach to make several thousand dollars per month.  I’ve only been at it for three months now and am making whopping $45/month from my ten blogs.  It’s not much, but I see the potential.

The idea is passive income from military retirement (someday), real estate rentals, and internet income so that I can really begin to focus on what I view as my true business opportunity…building an Air Taxi business.

You knew it had to come back to flying at some point didn’t you. 

In the mean time…Click Baby Click!

Start Here

Photo credit: massdistraction

Mark is income ‘rich’ compared to what he needs to spend; now, imagine adding: wife, children, dog, college fund, bigger house (hence, bigger mortgage, bigger land tax), more food, clothes, it’s enough to make you want to stay single …. is that a dream or a financial nightmare?

Looks like we’ll have plenty of RE and finance=type issues to chew over in the coming weeks and months …

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In my last post, I discussed about creating 3 year programs in lieu of a formal MBA program. I’m now ready to venture more into real estate investing, be it in tax lien or investment properties. I did acquire a tax lien a while ago on a small condo and it is now due for redemption. It is time for me to investigate more into this particular property. I will definitely need seek legal advice on this.

I have been thinking about buying another house and convert my current townhouse into a rental. I was looking last year and did put up a few offers but none of them came through. It is a good thing since the real estate market has been declining. Looks like I might be able find better deals in the next few months. However, the area I’m in did not decline as much. It’s time to go hunting!

As you can see, I’m going to start with real estate investing first. How am I able to fund these investments?

Let’s take a look at my current financial health at NetworthIQ.

I’m fortunate enough not to have any consumer debt. I did have a car loan earlier this year but I paid it off using a HELOC which is at a lower rate. The interest is tax deductible too. HELOCs are great now since I did get a very good deal at prime minus 1. This is a very low 3.0% at the moment. Looks like I’m not likely to pay this off very soon. There is still some equity to be tapped to invest but for now, it is better not to incur more debt.

Given my current income, I do live below my means. However, all my income is tied to my current occupation. I would like to add some passive income through rentals or other ventures.

My living expenses are low relative to my income. This does not mean that I live frugally. I spend quite a lot on traveling, going out, parties and on toys. I’m looking forward for a trip to Asia next month! There is definitely a lot of cost cutting opportunities. But I should think about generating more income instead. Right now, I’m thinking about selling a lot of unused toys and items around the house on ebay.

Currently, I’m saving quite a bit. I see only less than 50% of my paycheck after taxes, deductions and retirement contribution. I think this made me spend less than what I earn since I don’t see the money to begin with. I put in 10% into my 401K, ermm 201K and 15% into the ESPP program. The 401K is not very healthy due to the current market conditions. The proceeds from the ESPP program are usually reinvested in stock investments and Roth IRA. Sometimes, I send money home (overseas) and build up my travel allowance.