It has been quite the busy month of February as you can tell from my lack of posting. I have been trying to negotiate and restructure a deal with a partner in the commercial building that we own (or rather bank owns). He is the tenant and wanted to construct the building since he was tired of paying rent to someone else. It makes sense on paper, but when the economy struggles then having lower fixed costs make the most sense.
Taking Over the Building
Since I had quite a bit invested in the building, I determined it would be better to suck it up and just take it over entirely than to let things languish like they had for the past several months. I would have ultimately born some of the responsibility anyway so it is better to get it under control now, get in the bankers’ good graces and figure out some more solutions down the road if necessary.
But it will hamper the debt payoff plan. You can read more about that at my newest blog, Shredding Debt. Despite that, I still plan on being aggressive and will see what I can accomplish over the next 3 years. I will know more once the building payments are caught up and I can see what my budget and cash flow will look like the rest of the year.
At least the money that is spent will create some real estate losses and lower my tax bill so the ultimate impact may not be as bad as it could be. Plus I will have 100% control of the asset so that when it is paid off, I will be in great shape. It is just the journey that might be tricky.
Looking Forward to Learning
I do look forward to learning more about the commercial real estate business and making new contacts. I think it will be a great experience that can only help me as I continue to become more involved in real estate. Ultimately, I would like to own more property. It will probably be after the consumer debt is paid off and some more of the kids move out of the house. But having something to do with my time after I retire from my full-time employment will be very good.
Since everyone is doing it, I figure why not review 2012. First, I will start with some goals I made for the year and see what I was able to accomplish.
Smart Financial Goals
Starting with the financial goals, I was not able to eliminate PMI on the rental house (yet). I looked into it during the first part of the year and found out that I would have to have a lot more equity to be able to do so. However, I have started the process of refinancing 5 of my rentals and will be able to eliminate private mortgage insurance with the refi. So, it may work out after all but in 13 months instead of 12. Grade B+
I also had a goal of paying off the business line of credit. This was in fact accomplished during the spring. However, one of the tenants lost the air conditioning in May and I had to put in a whole new unit to the tune of about $4500. Currently, the line of credit is not paid off. Grade C-
I also wanted to get the Discover Card paid off. I paid it off in November, although with other loan proceeds. Nevertheless, the interest rate is much lower. However, I recently got an offer in the mail for zero percent balance transfer with Discover for 6 months with no fees. So I paid a big chunk against another card. While not perfect, it is some progress. Grade B
I also made it a goal to make $30,000 through blogging this year. Not even close. I figure I will make slightly more than last year. Plus I made a profit. But it didn’t happen at all. I won’t give myself an F since I at least made something and didn’t cost myself anything. Grade D-
Smart Personal Goals
I did make some personal goals as well. I wanted to lose weight and get below 200 pounds. It didn’t happen. In fact, I am currently close to the highest I have ever been at 228. When I weighed at the end of the day, I was 229.2, but I had just eaten. This morning I was at 227.4. Obviously a BIG FAIL! This will become another goal this year. I may not hit 200 and won’t even set that as a goal, but I need to see something positive happen. Grade F-
As far as the de-cluttering goes, I did clean my closet. But my room is a mess. Much of it is from my daughter’s room when she moved to the basement. We have a foreign exchange student from China so had to clean out a bedroom and rearrange sleeping quarters on short notice so there is still residual chaos. We will work on it this year. Also, the basement and garage are improved but nowhere near where they should be. Grade C
Popular Posts Now, let’s take a look at the 5 most popular posts for CFM this year:
1. Does One Million Dollars Make You Rich?–This post was in response to someone who won the lottery and was still on food stamps. Now I am not sure that one million before taxes is enough to make one “rich”, but I do think that one million dollars after taxes can be used to create some decent cash flow. At least that is what I would do with it.
2. Warren Buffett, Intel, and Me–This was one of the most popular posts for 2011 as well. I guess when you make it to the first page of Google for people searching “Warren Buffett and Intel” which is what happened for a time, then your post is quite popular. However, now that he has sold his position, it is likely to get less press. I, too, sold out my position in Intel. I made about 7.5% capital gains on my Intel investment that I held for about a year. I also made 4% in dividends during that time. Not bad considering the time frame from late August 2011 to early September 2012. I would consider Intel again.
3. What Would I Do with $50,000–Again this is one of those posts which looks at my thoughts regarding investing and cash flow. Not that I have $50,000 lying around, but if I did, I would be working on getting some cash flow out of it. Currently, I would look at paying off some debt which would free up room in the budget and provide me with a guaranteed return.
4. CFM Celebrating 100 Posts with Cash Giveaway–Who doesn’t love winning cash? No wonder this post ended up being so popular. Unfortunately, earnings during the year didn’t keep up the pace that I would have liked, so I have been unable to conduct another giveaway. Maybe this year will end up being better.
5. Gotta Love Dividend Stocks–Investing and making money are some popular topics. I was making good progress on my dividend stock investing in my retirement account. Too bad that I had to pay some back taxes and cash that out. But now the taxes are paid and there is more room in the budget. Focusing on debt pay down during 2013 will be the plan.
Goals for 2013
I will be making and outlining my goals for 2013 over the next few days. I had hoped to get this post out a day or two sooner, but it didn’t happen. Nevertheless, I enjoyed the holidays so all is good.
Seagate Technology (STX) is one of the stocks that I am holding in my retirement account. I purchased it as part of my focus on dividends since it had a 4% yield at the time. The stock increased in price and I ended up selling it in late June for a 23% annualized profit. But I immediately repurchased it again and instituted my hedging strategy since I still fell like the stock had some decent potential for further gains.
Well this week, STX reported earnings. It seemed at first like investors were going to be disappointed as the stock had opened down over 5% from above $30 per share to the mid-$28 range. But gradually, the stock began to improve and closed right at $30 per share even though the broader market was down for the day.
Why the Strength?
Well in addition to reporting earnings and giving a somewhat disappointing outlook, Seagate announced that they were increasing their dividend from $0.25 per share to $0.32 per share! Assuming that the dividend remains at that level for the next year, the yield on the stock at $30 per share is just over 4.2%. I think that investors may have figured that out and realized that maybe it is worth the investment to get a decent return with the potential for some capital gains.
Now if you are like me, then you can have your dividends and hedge the stock also. Right now, I am sitting on protective puts at $25 and $27 per share with outstanding calls at $28 and $30. My basis for all the shares I own are $27.16. If STX remains above $30 per share for the next eleven trading days, then they will all be called away at an average of $29 giving me a $1.84 profit. Plus I will get the dividend since the ex-dividend day is August 10th.
It is possible that my $28 strike calls could get exercised before then if someone wants to try and capture the dividend. However, they would have to make sure that it is worth it when compared with the price paid for the option and the amount of capital required to exercise. Even so, I would still have a profit at that price.
I was encouraged to see that the dividend seemed to help stabilize the stock and provide a floor for the shares. Of course, it isn’t that surprising since a significant portion of historical stock market return can be attributed to dividends. It only makes sense that stocks of companies that return money to shareholders would be in demand and perform well over time.