Goals for 2013 Review

by FI Fighter on December 24, 2013

in Goals

2013, the Year of the Grind, is nearing completion and there are just a few more days left. I still have about a week of work left before I pack my bags and depart for Maui! I’m not going to try and hide it, I’m super excited for my trip and can’t wait to get some much deserved R&R. :) Overall, I will say that 2013 has been a fantastic year!

Let’ see if we were able to meet our goals for this year:

Goals

1) Acquire Rental Property #2

SUCCESS! This goal was realized at the end of February. At the beginning of 2013, I had a strong desire to acquire one additional property. Little did I know then that this year would be the year I decided to go “all in” with real estate investing. I didn’t stop at just Rental Property #2, and went on to acquire:

Rental Property #3 in July

Rental Property #4 in November

I am currently under contract to purchase:

Rental Property #5 in January of 2014

What can I say? I’ve been bit my the REI bug, and am placing my bets on these investments to make my dream of early financial independence a reality (sooner than later).

2) Passive Income of $1000/month

FAIL! If you take the above goal statement as is, I did not succeed… Total cash flow for 2013 came in at $11,478.73. This computes to $956.56/month, just short of the above stated goal… However, this goal wasn’t defined very clearly…

Instead of it meaning $1000/month in cash flow for 2013, the original goal should have been stated to mean $1000/month in forward looking cash flow at the conclusion of 2013. That was my original intention…

If we look at this goal from the point-of-view of forward looking cash flow:

SUCCESS! At the conclusion of 2012, my passive income streams were producing $777/month (including retirement accounts). Going into 2013, I had high hopes of getting to $1000/month (excluding retirement accounts). At the time this goal was set, I was anticipating Rental Property #1 generating $400/month in cash flow. I speculated that if I was lucky enough to win Rental Property #2, that investment would generate an additional $400/month. The remaining $200/month would have come from my dividend portfolio. At $2400/year, this would have required a dividend portfolio valued at $60,000, yielding 4% annually.

As we conclude 2013, the passive income streams (excluding retirement accounts) are generating $1573.87/month. This figure does not include the cash flow from Rental Property #4, which should be around $300/month.

Rental Property #1 produced $409/month this year, which was inline with expectations. Rental Property #2 generated $246.63/month, well below the anticipated $400/month target ($75/month lost in repairs). The saving grace was Rental Property #3, which brought in an impressive haul of $917.31/month. Rental Property #3 alone almost single-handedly made this goal possible!

When projected out over a full year, Rental Property #3 should cash flow $11,008.08/year, which is outstanding since I only put in about $40,000 in downpayment funds. This is a 27.5% cash-on-cash return… Over the long-term, if this property can produce 1/2 that return (CAPEX, maintenance, vacancy are inevitable), I’d be extremely happy. Remember, I was only expecting $2400/year with a dividend portfolio of $60,000

3) Max out Roth IRA for 2012 = $5000

SUCCESS! I funded the 2012 Roth IRA back in March, or April, right before the IRS deadline. Going forward, I don’t anticipate contributing any more funds to my Roth IRA. I am working diligently to build up my early FI portfolio, since I am now expecting to retire at 30.

4) Max out 401k for 2013 = $17,500

FAIL!  I stopped 401k contributions back in June. I only got to $5000 or so this year. Around March/April timeframe, I started researching into out-of-state real estate investing, and knew in May that it would be a viable investment platform. Around June, I knew that I wanted to win Rental Property #3, so decided to stop funding the 401k so that I could rapidly save up more cash. It’s only been a few months, but the cash flow of Rental Property #3 has been insane, so I’m pleased with the decision.

Don’t get me wrong, the 401k is an excellent investment, since it provides tax shelter. Further, if your employer provides free matching, it becomes almost a no-brainer to invest in one…

For my own situation, and short timeframe to early FI, I’ve decided to stop investing in my 401k. I have no plans on contributing any additional funds. My current strategy is to just sit back and allow the $100,000 portfolio time to compound until I’m 59 1/2. Sure, I could make an attempt to withdraw the funds sooner (SEPP), but I look at the 401k as a backup plan. If I execute my early FI gameplan successfully, I won’t EVER need the 401k or Roth IRA. My retirement accounts are safety nets, nothing more…

5) 80% Savings Rate Average for Each Month

SEMI-SUCCESS! On some months, I am hitting 80% savings ratio… but like the passive income goal, this goal was not clearly stated! Does 80% savings rate include cash flow? Or does it simply mean 80% savings of earned income alone? If I include the cash flow, I am easily hitting this target every month. If I only account savings as a ratio over my earned income, then I am occasionally able to hit this target.

In any case, I’m starting to care less and less about saving money since I now believe that the true path to wealth lies in offensive firepower. In other words, clipping coupons and pinching pennies no longer make any discernible difference in my investing goals. So, I’m going to focus less and less on saving. In my mind, living frugally is already second nature, so I know that I won’t veer off the road. I don’t need to budget either.

Let’s focus on the big picture, instead! I’m going to continue do my best to meet my investment goals… By year’s end, if I’m successful, I’ll even treat myself to a vacation. I do believe it’s entirely possible to enjoy today while saving for a better tomorrow.

So, bring on the road trips! :)

Recap

2013 was a very successful investing year. I was worried this past year was going to be difficult, as I had anticipated work stress being at an all time high. Luckily, I was able to push through it and not completely burn out in the process (although I’m getting very close).

Investing was challenging, at times, especially since I started out-of-state investing for the first time. Now that I own properties in the Bay Area, Chicago, and Indianapolis, I feel more comfortable as a real estate investor. I’ve been through the acquisition process a few times, and each time I make it a point to learn something new. Up to now, I’ve been completely focused on using conventional lending, but in the future, I may explore other options, such as hard money lending.

Most importantly, I was able to achieve my end of 2013 forward looking passive income target of $1000/month. I haven’t set my 2014 goals yet, but I’m going to aim pretty high! I want to challenge myself to increase the cash flow as much as possible. Going into 2014, the three rental properties are projected to bring in $1573.87/month. By the end of 2014, the new cash flow target will be…

 

Were you successful in meeting your 2013 goals? What did you learn? What areas do you need to improve on?

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{ 12 comments… read them below or add one }

crgmdyNo Gravatar December 24, 2013 at 8:42 pm

Congrats on the excellent year!

Reply

FI FighterNo Gravatar December 25, 2013 at 10:10 am

crgmdy,

Thanks and Merry Christmas to you!

Reply

Fast WeeklyNo Gravatar December 24, 2013 at 9:40 pm

Congrats FI! You may feel that the year was a “semi success” but I’m here to remind you that you learned, saved, and invested. Now if only you could scale back your work hours a little…haha. Given my early retirement goals, I’m not investing in a 401k or traditional IRA either. It’s just a Roth and Taxable accounts for me and my wife. Enjoy Maui and Merry Christmas!
-Bryan

Reply

FI FighterNo Gravatar December 25, 2013 at 10:11 am

Bryan,

As always, thanks for the support and encouragement! Yes, I’m going to try my best to scale down on the work hours as I get closer and closer to the end game.

Wishing you and your family a very Merry Christmas!

All the best!

Reply

Done by FortyNo Gravatar December 25, 2013 at 11:07 am

That’s some great success this year. Do you feel the tax benefits of a 401k might make it an attractive option after you hit your passive income goals, while you still have the option of the work-offered 401k?

Reply

FI FighterNo Gravatar December 28, 2013 at 11:54 am

Done by Forty,

Thanks! Yes, definitely it might make sense to re-invest back into a 401k at a later date for the tax shelter. Once I achieve my passive income goals, I’ll have to reassess the situation… it’s a bit too early to say for certain right now.

Cheers!

Reply

The First Million is the HardestNo Gravatar December 27, 2013 at 11:47 am

Congrats on the great year. The only reason you “failed” any goals is because your priorities changed! Hope you have continued success building your REI empire in 2014 :)

Reply

FI FighterNo Gravatar December 28, 2013 at 11:54 am

Jay,

Thanks! Best of luck to you in 2014 as well!

Reply

MartinNo Gravatar December 27, 2013 at 2:55 pm

congrats on your results. Very impressive!

Reply

FI FighterNo Gravatar December 28, 2013 at 11:54 am

Martin,

Thanks, as always for the great support!

Happy New Year!

Reply

JC @ Passive-Income-PursuitNo Gravatar December 28, 2013 at 10:44 am

Looks to me like a great year! You beat your passive income goal by over 50% which is pretty amazing. I still contribute to my 401k but just to get the match. A 100% return on your money, even if it’s locked up for a long time can’t be beat. Plus, like you, the plan is to only use the 401k as backup, and preferably just let it grow until I’m forced to withdraw and then just will it away. Enjoy Maui and have a happy new year! 2014 is going to be huge!

Reply

FI FighterNo Gravatar December 28, 2013 at 11:57 am

JC,

Thanks! 2013 was indeed a great year to us investors. Just like you, I simply view the 401k as a safety net, so I’m not trying to overthink it too much. I just want to leave it alone and let it grow… if things work out as planned, I could also see myself just donating it away later… we are very much alike in our investment strategies!

I’m eagerly awaiting 2014! Best of luck to you, I’m sure you’ll continue to make tremendous progress.

Happy New Year!

Reply

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