Financial Independence Update- April 2020 (Buying My First House!)

Sometimes life comes at you really fast. Since graduating, I’ve set some very specific goals and put plans in place to achieve them. Since reaching semi-retirement in 2018 and financial independence last year, my goals have been focused around visiting and exploring new parts of the world. Since our big trip to Central and South America this year was derailed due to Coronavirus, things have really been up in the air. We have basically just been sitting around waiting for the past two months, hoping we’d be able to salvage some portion of the end of our trip. That started to look less and less likely with each passing week, which led me to pass time looking at real estate.

I’ve written in the past about my plans to invest in real estate in the future, but for the past five years we’ve been traveling so much domestically and internationally that it really hasn’t been feasible. With our travels on hold, now seemed like as good a time as any. I was mostly looking for an investment property, but Whitney and I were also eager to find a place that could serve as our home base together especially since we sold our fifth wheel earlier this year.

In the middle of April we happened to find a place that was perfect for us, that also had short and long term rental potential in the future. This was exactly what I was looking for! We decided to make a low cash offer on the property, knowing that the real estate market has taken a hit due to COVID-19. After some negotiation, we agreed on a price and closed on the property in less than a week! It was a whirlwind and I was really on the fence about paying cash for a property with mortgage rates so low, but I think it was worth it (this will be the focus of a future article).

The majority of April was spent packing, moving, and settling into our new place!

Income

Income in April from the websites (FifthWheelPT and Travel Therapy Mentor), was surprisingly high. This was mostly residual income from bonuses earned earlier in the year, with very little new revenue generated during April. This was great for this month, but will be tough later in the year once everything owed to us has been paid out. Income generated currently is down about 80-90% compared to January and February of this year. This is very discouraging, but since I’m well past FI at this point, all of the income is just icing on the cake anyway which makes it much more tolerable.

Expenses

It turns out that buying a house is very expensive… Who knew? Between the purchase price, closing costs, property taxes, furniture, decorations, and utilities it was an extremely expensive month for me. Whitney and I have tried to be as frugal as possible throughout this process, but there was no getting around some of the expenses. Luckily after paying cash for this place, my recurring monthly expenses will be decreased significantly in the future, which will be wonderful!

Investments

I’ve kept almost all of my money out of the market for now and am just waiting to see what happens once states begin to open back up from the lockdowns. Since I got out early, I’m still well ahead of where I would be financially if I’d bought and held throughout the downturn. I have no idea what will happen with the equity market in the short term, but I think the virus and lockdowns will have a big impact on earnings and therefore prices for years to come. From a risk to reward perspective, I’m happy to stay on the sidelines and watch for now. This could very well end up being a bad decision, but we’ll see what happens. The S&P had a wonderful month in April up almost 13%! I’d be lying if I said it didn’t feel weird not being in the market for those kinds of gains.

My net worth was boosted by the “investment” in the house this month. Based on comps in the area and estimates on the price, I got it for about 8% less than fair market value, due in large part to the cash offer and ability to close quickly.

Financial Independence Progress

My net worth increased by about 6.4% in April. This actually puts my net worth at a level higher than it was in February 2020, despite the big loses in March. This is in large part due to the decently high income in April combined with purchasing the home at lower than market value. That leaves my yearly expenses at 3.4% of my current total net assets.

Next Month

In May, we’re working on home projects to get everything how we want it here. We’re continuing to cancel more flights and AirBnB stays from our planned 5-months throughout Latin America, as it becomes more and more clear international travel probably isn’t going to be possible for at least a couple more months. I’m expecting income and expenses to both be significantly less in May than in April. I’ll be keeping an eye on the stock market, but right now I plan to stay out for for the foreseeable future no matter what happens with prices until things in the economy start to get back to some shade of normal.

Until next month. Stay safe and healthy! 

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