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).


Michael Rottersman said...

Love the blog--wish you would continue. It would be even more interesting if you chronicled the DGI and the life of a landlord.

Pay off my rentals said...

Hmmm. That would be interesting, Michael. I hadn't thought about the unique point of view of chronicling them both. Many are either/or when it comes to these two styles of passive investing.
I'm intrigued... Thanks for the comment!

All About Interest said...

What an incredible achievement! Good for you in sticking to your plan. Even better, your third rental will be paid off sooner than you thought. I agree with the poster above that you should chronicle all of your passive income investments. As you know, I am invested in both as well. I look forward to hopefully seeing your stock purchases as well.

Take care

Brent @ AAI

Pay off my rentals said...

Thanks so much for that! I'll certainly give it some serious thought.

I appreciate the encouragement you give by both word and example. I really respect the doers out there and you're certainly one of them.

Take care!

Investing Early said...

Agree with the folks who commented above. Would love to see monthly updates on how rentals have been doing and any stock purchases/dividends paid. Not that I'm a nosy person, but it sure is motivating seeing how normal people can accomplish big goals, one month at a time.
as of now I am still on track to pay off one of my rentals by this coming fall 2015, very excited.

Pay off my rentals said...

Outstanding, IE!

You will be so pleased to receive that extra "dividend" in the form of Payment and Interest each month. As to continuing to blog, I'm pondering the possibilities.

I'm getting ready to take advantage of some beaten down energy and mining with their healthy dividends in our ROTH IRA's. Just waiting to see where oil will bottom out. But this is a great time to have some cash available.

Take care!

Steve said...

I've loved following your posts. Great encouragement.

Pay off my rentals said...

Thanks, Steve!
Knowing that I've encouraged others toward debt payoff is the biggest reward I could hope for.

I'm glad you came out of the shadows to say so.

Take care!

No Nonsense Landlord said...

Keep the faith! It's a great accomplishment to get each one paid off.

Pay off my rentals said...

Thanks, Eric

You're right! It is a great accomplishment and I've no regrets whatsoever. I look forward to paying off the last one while at the same time I diversify and am now having fun building another income stream with the dividend growth portfolio. Keep up the great work over there with the great No Nonsense advise.

Brandon Jacobson said...

Good morning. I run a personal finance blog for military members. I'm in the military myself. A lot of military members buy and rent houses out and this blog would be beneficial to my readers. I would like to blogroll as many personal finance bloggers as I can. My readers enjoy personal finance blogs a lot and I would like to offer them links to blogs. If you're interested please let me know.

Brandon Jacobson

Pay off my rentals said...

Welcome, Brandon!

Of course you can add me to your blog roll. We get a lot of those requests. I hope we can be of help to anyone trying to improve their financial acumen.

Glad to have you.

Anonymous said...

What a great goal and good luck!

Roger Perry said...

Thanks for the great information. It is very useful and informative.
Roger Perry