Photo: Courtesy of Paula Pant
Editor’s note: The original headline, “Why I’m Investing 100 per cent Of My Income And You Should Too” was not the author’s headline nor was this at all the intent of her piece. The headline has been updated to accurately reflect the sentiments of the article.
It’s time for the latest Investing 100 per cent of My Income update – where did my money go last month?
(Note for new readers: Will and I are a couple who have pledged to invest 100 per cent of my 2012 income while living solely on his income. You can read about the pledge here.)
In January and February, I dumped every cent I earned into my Roth IRA and came really freakin’ close to maxing out my $5,000 contribution limit.
(Last month I discussed how on an “accrual” basis I earned more, but on a “cash” basis I’m a couple hundred dollars shy of hitting the $5,000 mark. If you don’t know what those terms mean, you can find out here.)
My plan for the month of March was to finish maxing out my 2012 Roth IRA contribution. I’d “snowball” this savings goal, cross it off the list, and move on to the next item at hand.
But something unexpected happened: I bought a second rental home. I hadn’t planned on buying another house at that moment, but I spotted a deal that was too good to refuse. Will and I had been saving to eventually buy a second home, so we were prepared to pounce on it.
The house needs a ton of repairs. So every cent (and more) that I earned last month went into fixing up the place.
Here’s the breakdown:
- Garage door – $576.73, including installation plus removal/disposal of old door
- Carpet – $1240, including installation plus removal/disposal of old carpet
- Tearing down and rebuilding a 10×12 deck – $375
- Painting the house interior – $900
- Laying vinyl flooring in kitchen/bath – $200
- Repairing laundry valves – $200
- Patching drywall holes and painting garage – $200
- Installing countertops in kitchen and bath – $150
- Patching drywall throughout house – $100
- Removing and re-hanging interior doors – $100
- Sanding and painting kitchen cabinets and bath vanities – $250
- Replace fascia and rotted roof decking – $370
Total: $4,661.73, mostly for labour. The only material included in this figure is the carpet and the new garage door.
In addition, we also bought materials such as paint, primer, caulk, drywall compound, vinyl flooring, decking, cement, roof shingles, screws, nails, and LOTS of wood. I haven’t processed the exact figures – you should see how thick my stack of receipts is! — but I believe this figure comes to roughly $2,000 – $3,000. I’ll post a more precise update once I spend a few hours inputting everything into a giant spreadsheet.
There are still more repairs needed: I need to replace the gutters and water heater, tune up the HVAC, take a few huge loads to the dump (or rent a dumpster), paint the fascia and termite-proof the house.
In short: I need to pour every cent into this house to get it rent-ready. Everything else is on hold.
Why Not Do It Yourself?
Our first rental building – the triplex in terrible condition – taught me that doing-it-yourself costs time. It’s dollar-cheap but time-expensive.
Here’s where we get into a quandary: on one hand, I believe in being frugal with time, not money. On the other hand, it’s tough to part with hard-earned cash.
Our happy medium solution is to do the most expensive things ourselves, like electrical work and plumbing, and to outsource the most time-consuming tasks, like paint and drywall.
As I’ve discovered, collecting quotes from contractors and comparison-shopping for materials like vinyl and carpet eats up about 10 hours per week. Driving to the house to check on the progress eats another 2-5 hours per week.
Of course, that doesn’t compare to the time-cost of doing the actual work ourselves, which could eat away 60 hours a week if we were serious about finishing it quickly so that it can go on the rental market.
The good news is that we bought this house in cash, so I don’t have the stress of needing to make mortgage payments while we repair the house.
The bad news? Lack of a mortgage is a double-edged sword. Without that stress, I’m less motivated to work quickly. I find myself putting off calling contractors for “just one more day,” until those days add up to a week.
Logically, I know that every month this house isn’t rented is costing me hundreds in the form of “opportunity cost,” or lost income potential. But humans are hardwired to be more motivated by losing actual money (money we’ve gone through the trouble of earning) than theoretical money (opportunity cost).
Setting deadlines helps: my goal is to get this house rented by May 1. Creating a reward for myself also helps: as soon as this place is rented, I’m rewarding myself with a flight to Austin, Texas to visit one of my good friends. That gives me the motivation to continue managing this project.
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