Monday, March 14, 2016

Paid Off My Rentals! Goal Achieved! FI Declared!

PAID OFF MY RENTALS!

The title says it all.  Earlier today I took a wad of $100's (43 of them to be exact) and visited my local mortgage company.  I walked in the door, handed over $4,279.22 and in so doing paid off the final rental house.  I am now officially debt free (aside from a fixed interest credit card loan I arbitraged for a higher tax refund).  Just over three years of blood, sweat and tears...Okay, I exaggerate a little.  But as you can imagine, it wasn't easy by any stretch of the imagination.

In doing so, however, there was no drumroll, no trumpet blast marking the occasion.  I never even got a "congratulations!" from the mortgage office secretary who handled what would prove to be my last mortgage related transaction from the bank.  But it's okay.  I know what I accomplished with my three plus years of sacrifices and determination.  My laser focus hit the bulls-eye.  I'm proud of the accomplishment and no anticlimactic secretary is gonna take that away.  No, sir!

GOAL ACHIEVED!

I beat the stated goal of paying off 3 rental mortgages totaling $177,650 in 42 months by three-and-a-half months.  I now have an additional $1,476.46 in my pocket each month.  That is now added to the previous passive income and it is enough to declare myself... 

FI!

I now work because I want to.  I don't have to keep a job to pay my bills.  My passive income can take care of us now.  I'm not rich.  Don't even have a savings account.  But I currently have enough passive income to live comfortably.  With all my volunteer work, I'll be busier than ever--doing the things I want to do.  Ahhhh!  Gotta admit...it's a great feeling.  And yet it, for all the hype, it feels just a bit anti-climactic at the same time.  Weird.  Must be a combination of having blogged about this eventuality for the past three years and just not having had enough time to let it all sink in.  I don't know.  I'm sure I'll gradually feel the reality instead of the theory sink in.

WHAT NOW???

That's easy.  I've been wanting to build up a diversified, dividend growth portfolio for some time now.  I've learned a lot about myself over the years and one lesson I've learned well is that I don't have the discipline to ride out the ups and downs of the stock market while I have debt hanging over my head.  Now that the debt's gone and my monthly financial needs are cared for outside of the stock market, I can comfortably ride out the volatility while collecting dividends which grow faster than the rate of inflation.  I still have a business bringing in a fair amount of income.  Income that will now flow to our dividend growth portfolio so that we can diversify into another passive income stream.  Sounds like great fun and a personal challenge to boot!

CONCLUSION...or...is it?  A few final observations about getting out of debt.

Don't know.  Maybe I'll write an occasional post describing how I'm meeting the above challenges.  Either way, this is THE blog post I've been waiting more than three years to write.  I hope that my posts will encourage others pursuing FI and debt-free living.  Getting out of debt is not easy.  Getting into debt is about the easiest thing to do in our consumer-oriented society.  It's like walking downhill, whereas getting out of debt is just the opposite.  Uphill all the way.  Exhausting.  Daunting.  Excruciating at times.  It tests your resolve each and every month.  I just kept remembering that time passes.  I needed to do my part and time would take care of the rest.  And, true enough, here I am.  It is done.  Previous posts layout my method of staying motivated.   If  you want or need motivation, just go back to the beginning - January 1, 2013 and read forward.  The story technically goes back further than that and the debt deeper than $173k. I was actually closer to $300k at one point.  I started with my personal residence and then just kept paying off houses one by one letting the snowball effect help me along the way. 

MY REQUEST OF YOU

Share your stories here.  I'd love to read them.  I was motivated by one particular blogger who had accomplished that same goal of paying off and blogging about his monthly progress.  Help others by sharing the good, bad and ugly of it all.  Just writing and sharing will help you stay the course.  Blog for accountability.  It helps.

Here's wishing the best to all!  Keep up the fight.  It's worth the sacrifice.

END!

16 comments:

heidi said...

Congratulations! :)

Pay off my rentals said...

Thank you, Heidi.

dbmystinkbug said...

Congratulations on reaching your goal. I love goal-setting in general, and to accomplish a rather lofty goal such as yours, requiring financial discipline and dedication over a fairly lengthy period, has got to be an incredibly satisfying feeling. I have a few mortgages myself, and have set a goal to pay them off within seven years. I think I could do it earlier than that but I want to spread out my risk a bit and diversify into some other investments as well. But your blog has been inspiring reading and I thank you for sharing your experience.

Pay off my rentals said...

That sounds like a sound plan, dbmystinkbug. Strengthening your personal balance sheet by eliminating debt and saving/investing is a can't lose scenario.

As you mentioned, it is very satisfying to have reached such a lofty goal. I could have given up so many time along the way, but I found blogging to be a big help in sticking to my goal. That additional accountability (even from people to whom you are not accountable) seem to add extra impetus.

As you've no doubt appreciated, at this stage in life and considering our family goals, we just absolutely wanted to de-leverage. Now we too are diversifying and investing in equities. It's fun and stimulating to see that all of the dividend income is icing on the cake and none of it will go toward debt servicing going forward.

Stop back and share your progress from time to time.

Cheers!

D said...

Curtis,

Congratulations on hitting you original goals of paying off your rentals. And congratulations on becoming financially independent.

I am looking forward to observing the next step of your journey!

Dividend Growth Investor

REIGuy said...

Congratulations! I just completed my journey in paying off my rentals last week. For the first time since age 15, I'm debt free. My journey was very similar to yours with similar timeframes. I had 5 rentals and paid off around the same amount of debt.

Hopefully your cashflow from the rentals is now consistent enough to feel be financially secure. I know that repairs and vacancies mean that I'm not quite comfortable, yet. I actually managed to go the first four months of the year with no distributions from my rentals as I upgraded a rental and had a long vacancy while it was being upgraded. I think adding a few more rentals will help. :)


Austin Clark said...

Would you mind sharing the excel spread sheet you have for your mortgages ?

No Nonsense Landlord said...

I quit my job to live on my rental income. I also paid off mortgages, like yourself. 252K+ paid off in only ~2 years.

I still have three mortgages to go, but they are less than 10% of my gross rents.

Pay off my rentals said...

NNL,

You've done an outstanding job. Great feeling of security and freedom.
Keep up the great work and thanks for stopping by on occasion.

Best wishes!

Desert Rat said...

Congratulations on reaching your goal. I recently joined your club 18 months ago. I bought my first rental house in 1996 and my 9th one in 2004. I did like you and threw as much $ at the principal of one of them as I could. I paid off the first one in 2008, and that got the snowball rolling (and growing). With that extra income, I was able to pay off 4 others with brute force between 2008 and 2016. After enjoying 10 years of appreciation, I sold 2 of them in 2013/2015, and cleared enough to pay off the last 2... 7 places paid off in 8 years. And when I got laid off my job in early 2015.... I couldn't have cared less. Best of luck to you in the future!

cadenjacoby said...
This comment has been removed by a blog administrator.
Mike Paulson said...

Hey! Great job, love your blog!

Let us know what you're up to nowadays living the FI life. Is it all that you expected? :)

Cleo C said...

Congratulations ! What aer your new financial life?
For a whil I decided to not pay the mortgage, but I am not sure if is a good or not decision ...

No Nonsense Landlord said...

Congratulations!! I have 3 more left, with one almost paid off. I should only have two left at the end of September.

FI is great!!

Unknown said...

Now that it's been almost a few years since paying off the debt, do you have any regrets using your cash/liquidity to pay mortgage debt?

Pay off my rentals said...

Hi there.

That's a fair question and a good one. Here we are three years later, the stock market went wild and I probably not as well off financially as I could have been if I had pumped all those extra principle payments into the stock market...maybe. Here's a couple of things to consider:

1. Hindsight is 20/20: If we could know what the future holds regarding our income, health, stock market returns, etc., we'd all be rich. Unfortunately, we just don't have the option of knowing. With the benefit of hindsight, I can tell you that no one imagined the way the market came roaring back from the depths of despair to become one of the greatest Bull Markets of all time. On the other hand, things could have gone really bad for the economy (still can, likely will at some point), or I could have had some personal financial upheaval, or heaven forbid, both occurring simultaneously. Yikes!!!

2. What do you want/need to feel secure? I wanted the peace of mind of knowing that if everything goes South then I'd be OK. I needed peace of mind. Remember, the whole reason for paying off the rental mortgages sooner was to be sleep at night and confidently weather all types of potential financial storms and not live the horrors and consequences of a 2008 economic meltdown.

3. I tried to benefit from the lessons of history: The problem for most people is that when the economy roars ahead, rather than use the opportunity to beef up their personal balance sheet, they get over-confident and spend more, take on lots of debt and live beyond their means. Then, when the economy goes into recession (which it eventually always does) they are trapped. It's a vicious cycle we've seen repeated many times. I pulled a contrarian move. I paid down (ultimately paid off) my debts and strengthened my personal balance sheet while the economy strengthened.

Remember, too, that as Ben Franklin put it: "A penny saved is a penny earned". My return on investment was more that 5% as a result of paying off the mortgages early and saving on interest expenses.

4. Know thyself: I learned over the years that my wiring simply didn't allow me to be a good equities investor while I carried large amounts of debt on the balance sheet. I panicked too easily and moved in and out of stocks scared to death of loosing any monies (even on paper) and regretting that I had not used those funds to pay off debt. Simply put, I admit that I had to pay off my debt to be a better equities investor. You may be wired differently and therefore more comfortable riding out the crazy ups and downs of the market while carrying debt. Not me. I did what I needed to do to work within my personal limitations, strengths and weaknesses.

5. Where are we now? Now, I am in a position to weather any financial downturn with confidence. I have layers of financial security. Income from my business. Income from my mortgage-free rentals (I've since bought another rental house for cash.) For the past three years I've maxed out my wife's and my IRA accounts and an HSA account which provides dividend income (However, for now the dividends drip into more shares as I'm too young to start my distributions.) So, getting back to the heart of your question: Do I regret my decision to pay off my mortgages vs. invest the funds? I've looked back several times and in order to see just how I feel in retrospect. The honest answer is that while I'd love to have several hundred thousand of dollars in dividend paying equities that I don't have now, I absolutely love even more being out of mortgage debt. Everything I do just feels better, more solid and the lack of anxiety about money and debt is priceless!