Friday, March 20, 2015

Our first rental property

There are many different ways to invest your money, such as stocks, bonds, CDs, real estate, and more.  Currently, all of our investments are in index funds following the Boglehead 3 fund portfolio.  We’ve kept our asset allocation pretty simple over the last few years.  90% of our investments are in stock index funds (70% invested in domestic stocks and 30% invested in international stocks).  10% of our investments are in bond index funds. 

Rental property investing is something that I have always been interested in.  The wealthiest people and families I know made their wealth not from being doctors, lawyers, or accountants, but from real estate.  Two of my favorite bloggers, Mr. Money Mustache and Retire by 40 both have rental properties as a part of their retirement income stream.  This year, we are going to try our hand at rental property investing as a way to diversify our investments and income streams.

I have a few friends and colleagues who do real estate investing on the side.  One of my best friends has been investing in real estate properties for the last few years.  He is a buy-and-hold investor who owns multiple properties and makes money on the side from rental income, property appreciation, and tax deductions.  I went to him for help and consultation with getting started in real estate investing.  He has kindly given me a lot of tips and advice about getting into rental property investing.  The other day he said to me: “Imagine if you owned 10 paid off rental properties each providing $2,000 a month of cashflow… that’s $20,000 worth of income each month.  You’ll never need to work a regular job with that kind of income!”

Choosing the right property
Once we had the funds necessary for a down payment, we worked with a few recommended agents to vet out potential properties.  Real estate opportunities in Southern California are very limited, with high prices in the most desirable areas.  While you can buy sizeable homes for under $100,000 in various parts of the U.S. such as Ohio, Georgia, Illinois, or Florida - this same amount of money may not even amount to a down payment on a much smaller home in various popular cities around Southern California.  One absolute when it came to looking for a rental property was that it had to be within a reasonable driving distance of our home; we wanted to manage our own property.

We looked into several surrounding cities for potential cashflow positive properties.  We used sites such as to give us an idea of potential rental income as well as comparable prices for other recently sold properties.  Then we calculated all investment expenses such as mortgage, insurance, and property taxes.  We also determined the capitalization rate (“cap rate”) of every property that we were interested in.  The cap rate is the rate of return based on the expected income the property will generate. 

The cap rate is calculated by dividing the yearly income (after expenses) of a property by the total value of the property.

Cap Rate = (Yearly Income) / (Total Value)

The higher the cap rate, the better the annual return on your investment property.  More desirable locations will have a lower cap rate.  Looking at the cap rate is a quick “rule of thumb” way of comparing multiple opportunities.  In our local housing market, a cap rate greater than 5.0% is considered good.  In other less desirable neighborhoods, you might find properties with a cap rate greater than 10%.

Example:  Let’s say you are comparing two properties that are both on the market for $500,000, and Property A produces $25,000 income per year and Property B produces $50,000 income per year.

Property A cap rate: $25,000 / $500,000 = 5%
Property B cap rate: $50,000 / $500,000 = 10%

While determining a property’s cap rate is a good starting point to quickly evaluate multiple listings, other factors such as location and potential for future growth are also important.  What if Property A needs some maintenance and remodeling to make it a more profitable?  Also, what if Property B is in a location losing popularity?

Sunday, March 15, 2015

What is financial freedom?

This retired couple looks happy, but I don't want to wait this long before reaching financial freedom.  Picture taken from LearnVest
I often write about financial freedom.  It’s the goal we’ve been working so hard to reach.  But what is it?  For me, financial freedom is the point where one can generate enough passive income to cover all living expenses, with no obligation to work at a particular job to secure a specific paycheck. 

When you achieve financial freedom, you are now free to live a life on your terms.  You no longer need a steady paycheck to pay for your living expenses. You can now travel and live in far away places.    Traveling at old age is not going to be as fun as traveling now.  You can now explore other opportunities, try new hobbies, start new businesses, or work on side projects.  Financial freedom gives you a new world of options.   

In our quest for financial freedom, we have moved beyond a paycheck-to-paycheck existence and into a lifestyle of abundant saving and investing.  Mr. Money Mustache has taught us that being frugal is actually badass and that spending less money on consumer products can actually pay off with a more rewarding life. 

Having a high savings rate has made us feel rich, and has eliminated our financial stress.  But feeling rich is not just about the numbers in your bank account.  It’s about having a rich attitude towards life.  It’s about being healthy with minimal stress.  It’s about looking around at the gluttony of mass-produced consumer products and realizing that you already have everything you could want or need.  For me, feeling rich is about being happy, having enough, and being surrounded by loved ones.

How much money should you save?

Friday, March 6, 2015

Our experience at the Okinawa Churaumi Aquarium

When I first heard about the Okinawa Aquarium, I knew that it was a place I would some day visit.  Thanks to Chase Ultimate Rewards points, we were able to fly to Okinawa for free.  Prior to 2005, this aquarium was the largest one in the world (now that title goes to the Georgia Aquarium) and for a while, the only aquarium that kept whale sharks in captivity. 

 “Chura” in Okinawan dialect means “beautiful” and there is absolutely no doubt that the Okinawa Churaumi Aquarium is the most gorgeous aquarium that we have had the chance to visit.  The aquarium has 77 exhibition tanks, 80 species of coral, and thousands of different fish species. 

The Okinawa Churaumi aquarium is located inside the Ocean Expo Park, a 3 kilometer (1.86 mile) wide area where you can experience Okinawa’s history and culture.  There is a Culture Museum, a Native Okinawan Village, botanical garden, arboretum and a sand beach where you can play and swim in the ocean.  There is no charge to walk through Ocean Expo Park, and it is so large that there is shuttle service you can buy tickets for that take you from one side of the park to the other side.  There are dolphin, manatee and sea turtle exhibits you can view for free.  

The aquarium is made up of 4 different levels, with entrance on the 4F.  Each floor of the aquarium has its own theme that represents the seas around Okinawa:

4F: Invitation to the Great Sea
3F: Journey to a Coral Reef
2F: Journey to the Kuroshio
1F: Journey into the Deep Sea

You start at 4F, where you are greeted by a large whale shark statue and have a chance to get an above ground look down into the open-air Coral Sea and Sea of Tropical Fish tanks.  You start above water at 4F, and then explore the shallow coral reefs at 3F, the main open ocean at 2F, and then journey into the deep sea at 1F.  It’s almost like diving into the ocean yourself as you slowly work your way through the exhibits.  

We enjoyed the easy to walk through design of the aquarium.  It just made sense where to go next. 

I have never seen some of these unique fish species. 

Monday, March 2, 2015

February Side Hustles 2015

The great thing about doing side hustles to generate extra income is that you can hustle on your own terms.  The more hard work, time, and creative effort you put in, the more extra money you can make.  You can hustle as little or as much as you want, whenever you want.  It’s your extra money, and you can choose how you want to spend it.  Instead of focusing on what ideas don’t apply to you, try focusing on different side hustle ideas that you can implement to work for your situation.

Welcome to March, here’s our monthly summary of side income that we have generated in the previous month of February.

Award Travel
On 2.23, I redeemed 22,928 Chase Ultimate Rewards points towards a free round trip flight to Vancouver, Canada worth $286.61.

Cash Back
On 2.10, I received a $95 statement credit on my Citibank American Airlines American Express card.  When I received my annual fee for the card, I called customer service and had them waive it.  This lets me keep the card benefits and credit line for another year. 
On 2.16, my wife received a $10 statement credit from AMEX on her Starwood Preferred Guest credit card from AMEX Offers (Spend $75 on your cell phone bill, get $10 back)
On 2.22, I received a $6 statement credit from AMEX on my Simplycash business credit card
On 2.23, I received a $25 Visa gift card from Staples for a rebate on buying Visa gift cards.
On 2.24, I received a $64.20 cash back direct deposit in my checking account from my Citibank Double Cash credit card
On 2.27, I received a $30 statement credit reimbursement for a wire transfer fee.  I nicely asked the customer service representative to reverse the fee charged to my account and they took care of it for me.

Search and Win
On 2.20, I received a $5 Amazon gift card from Swagbucks
On 2.9, I received a $5 Amazon gift card from Bing
On 2.9, my wife received a $5 Amazon gift card from Bing
On 2.27, I received a $5 Amazon gift card from Bing

Paid surveys
On 2.11, I received a $6 PayPal deposit from PineCone Research
E Rewards Medical
On 2.3, I received a $55 check from E Rewards Medical for a healthcare related survey

Side Job
On 2.9, I received a check for $137.50 from my side job teaching at the local university.
On 2.17, I received a check for $137.50 from my side job teaching at the local university.

Rental Income
On 2.2, I received $600 rental income from our housemate

Monthly Totals:
February was a short and nice productive side hustle month.
We saved $286.61 (after fees) on award travel using our Chase Ultimate Rewards points
We earned $230.20 in cash back
We earned $20 worth of Amazon gift certificates from Search and Win sites
We earned $61 in cash from paid surveys
I earned $275 from my side job teaching students
We earned $600 from rental income from our housemate

All of this totals $1,472.81 from our side hustles for the month of February.  I’m still racking my brain for other lucrative side hustle opportunities.    

Sunday, March 1, 2015

Free round trip flight from Taipei to Los Angeles for my dad

With our baby due in June, my father told me that he wanted to come visit and help us care for our son.  My wife is going to take 6 months leave from work to stay home with our baby.  I have already been approved for 1 month off work to help care for our newborn.  My father has generously offered to come help out for 3 weeks.  The least we could do in return was to cover his travel expenses.  I asked him to provide me with his dates of travel and then booked a free flight for him using my Chase Ultimate Rewards points.

The first thing I did was log into my United airlines account and search for potential flights based on my father’s preferred travel dates.  I found that I could book him a round trip ticket from Taipei, Taiwan (TPE) to Los Angeles, California (LAX) for 70,000 United Airlines miles and $32.50.  I’m glad he doesn’t mind flying economy, because we did not have enough miles to pay for business or first class flights.

My United airlines account only had a little over 1,000 miles, so I needed to transfer 69,000 Chase Ultimate Rewards points into United Airlines miles before booking the flight.  I logged into and then transferred the points over.   

All Ultimate Rewards points transfer 1:1 to any of the Chase airline and hotel partners.   Points must be transferred in increments of 1,000 points.  The points transferred to my United account instantly after I re-logged in. 

After a few clicks, my father’s free round trip flight on EVA Airways from Taipei to Los Angeles was booked.  The total came out to be 70,000 United Airlines miles and $32.50.  If we were to book this flight with cash through United Airlines, it would have cost $1,832.40.  I used to conservatively estimate the value of my award flight redemption at $877 for the cheapest flights.  

Counting fees paid, we saved  $844.50 on the cost of these flights!

Your Chase Ultimate Rewards points aren’t just for your own use; you can use them to book free travel for others.   
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