Tuesday, December 9, 2014

Accomplishment and Celebration

Two years later and two houses paid off!
The converging lines are the third rental and the total debt of the three together.
They now have become one and the same.

It has been accomplished.  Another one bites the dust.

Two years and two rental houses paid off.  That's what a plan, determination and time can achieve when these three ingredients come together.  Take away any one of those three basic ingredients and the debt reduction effort will either be at best, severely hampered, or, at worst, fail.

When I laid out this plan two years ago, it was a lofty one:  In true snowball fashion, the plan was to add $3,400 to my monthly mortgage payments (nearly every spare cent we had available) and pay off three rental houses in in 42 months.  The plan was carefully and thoughtfully laid out.  I had run the numbers using payoff calculators and had squeezed our household budget to make room for the fat monthly payments that would be required month after month, year after year to reach the goal.  Now, the second ingredient--Die-hard determination over a period of time--was necessary.  You well know that everyone starts off determined to achieve their goals, but maintaining that determination over a long period of time is where the rubber meets the pavement.  Debt reduction is a lot like running a marathon:  The starting gun sees 100% success rate while the finish line awaits those who were truly determined to finish even if they must cross that finish line limping and puking their guts out. 

Jan 1, 2013 (Beginning Bal)                             December, 2014              Amount Paid Off
House #1 - $70,908                                         House #1 - $63,163                      $  7,745
House #2 - $57,619                                         House #2 - $ 0                              $57,619
House #3 - $49,123                                         House #3 - $ 0                              $49,123
-----------------------------                                    -----------------------------               -----------------------------
Total:       $177,650                                                          $63,163                   $114,487 (-64.44%)

As for the third and final ingredient (time), well as you can see from the chart above, in twenty four months we have paid off two houses totaling $114,487 of mortgage debt.  That's an average of $4,770 per month!  The snowball kept getting larger and larger.  That's the way it works.  What a fun way to play in the snow ;-)

Of course, our determination was tested all along the way.  There were several adjustments and a fair amount of second-guessing.  Like most, we had months when life got in the way and the additional payments had to be temporarily placed on hold; Not the least of which was a loved one getting diagnosed with Cancer (all is well and in full remission), shoulder surgeries (as in three of them), and then trying to balance out this austere plan with some reasonable enjoyment of life (Our trip to London, Ireland and other vacations).  On the flipside, however, there were those wonderful months when unexpected bonuses were applied in large amounts toward the debt.  It was absolutely thrilling to see balances precipitously drop resulting in interest monies saved.  For example, when possible, we would add any windfalls like bonus distributions or extra monies earned to pay off the balances even more quickly.  On two occasions we were able to make 15k payments.  On one occasion, 10k. and several other 6k to 8k payments on three other occasions.  These massive additional payments really grew the snowball and became encouraging, tangible evidence that we could reach our goals.  In the end, however, it was time that did its job and here we are two years later with two of the three houses completely paid off and the additional available passive income from those rentals just adds more snow to our massive snowball. We now have nearly $1,000.00 per month of additional income that now no longer goes to the bank.  It comes to us like a sweet dividend every month.

Speaking of dividends... A change in direction

As of January 1st. we are changing direction.  Our company is building a new office and it will include a couple of apartments where the owners can live.  This build out is being financed by the company and it means that we will be selling our modest 900 sq. ft. two bedroom house this Spring. 

Then what?  We can use the proceeds from the sale of our house to pay off the remaining rental house in full.  As a result, we finally get to do something we've really, really been wanting to do for years:  Create a Dividend Growth portfolio as an additional passive income stream.  I've mentioned my love for dividend stocks here on several occasions over the past two years, but I was determined to stay the course toward complete, absolute and unequivocal debt-free living by paying off the three remaining mortgages and converting them into income streams.  The payoff of that final mortgage will also mean an additional $553.88 in monthly income and the complete realization of our stated goal:  Pay off $177,650 in mortgage debt and add $1,476.46 to our monthly passive income stream.  The additional $1,476.46 of capital along with the monies we've been directing toward the mortgages can now be redirected toward building our dividend growth equities portfolio.  How cool is that?  Compounding at it's best as our little investment dollars work full-time to make more little investment dollars.  Now that's worthy of a celebration!

If you've ever needed convincing about the merits and superiority of DGI (Dividend Growth Investing) vs. the 4% rule, here are a couple of articles for you to read.  I think it's well worth your time and they convinced me that DGI blows the sacred "4% withdrawal rate" out of the water:

If you've been regularly reading this blog or are here for the first time, I hope it proves as encouraging for you to read as it has been for me to post my ups and downs of real-life debt pay down.  Since there are a million bloggers telling the world about their dividend portfolio efforts, I don't have any inclination to blog about my efforts going forward.  It's been interesting and fun.  I've never run any adds on this blog or tried to sell anyone anything.  The true motive behind this Pay off my rentals blog has always been to help keep myself accountable while encouraging others along the way.  I sincerely hope the latter has been as successful as the former.  My intention is to keep it online and accessible as it costs me nothing.  I'll even check in from time to time to address any comments you may leave.

Best wishes to all of you working hard to pay off debt and build a passive income stream(s).