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FIRE Progress: After Tracking Every Dollar for 18 Months

A year has passed since my first post about tracking expenses. It was hard at times, especially at the beginning of COVID lockdown in March 2020 where the stock market tanked for a few weeks. It was difficult to see my “networth” plummet 40% all in one night. In this year, I’ve continued tracking my expenses on google sheet (click here to get a template) and learned a couple of lessons from tracking my expenses.

1. I changed from habitually eating out everyday to eating out only once a week and KEPT this habit.

It has been a year since I have limited my dining-out-habit, so I don’t quite remember what it was like when I ate out almost every single day anymore. I now have a budget of $150 a month for restaurant bills. I would like to reduce it down to under $100 in the next 6 months. But it is nice to eat out on Saturday after cutting two lawns with Mr. Code Junkie. Saturdays become more of an exciting ritual of hard labor followed by our favorite food.

I originally started by making my favorite coffee drink at home (lavender latte with oat milk). Then, I stopped drinking coffee altogether because it affected my sleep & appetite. Slowly, I started realizing alcohol also affects my sleep & next morning’s energy. So I quit drinking as well. I still enjoy going to coffee shops or bars with friends, but I would have some seltzer water instead.

I realized it was hard for me to change a habit (or almost an obsession, like coffee and chocolate), but it was REALLY hard only for the first 3-5 times I say “no” to that habit/obsession. The more I say no every time the option presents itself (like friends asking me to go to coffee, or walking by the chocolate aisle in a shop), the easier it is next time to control my cravings & dependencies on the habit/obsession.  

2. Reflect on the money spent and evaluate whether it was worth it

Having tracked every single expense, I was able to go back at the end of the year to see what I’ve spent my money on for the whole year. I found that I bought some stupid stuff this past year: reserved a van for Vegas (I really thought we could pull off living the Van-Life ) and ended up not using it, bought a work-out program and only used maybe once, bought more garden seeds than i can plant. Admitting making mistakes is part of the journey. It is also helpful for me to make better decisions in the future.

3. Budget for Incidentals (on top of emergency funds)

There are some expenses I did not budget for. In 2020, I had some health issues that ran up the medical bills. Even though I saved money for emergencies, I realized that these incidentals were not emergencies. There should always be a budgeted item for incidentals (whether it’s medical last year or home improvement this year). Since then, I have adjusted my budget to include about $3,000 – $5,000 incidentals a year. This has also been added to my retirement calculation so that I will have enough money in retirement if something breaks.

4. Able to make bigger decisions about finances (e.g., buying an investment property)

Earlier this year, I bought my very own first rental property because I had saved up enough portfolio to justify taking out a portion of it as down payment for a rental house. I wouldn’t have been able to confidently pull the trigger had I not track all my income & expenses to know I have the capacity. Here’s a short video on how to calculate rental property investments from my favorite real estate podcast. 

5. Having more meaningful money conversations with friends and family

Some of my friends are very supportive of my FIRE plans, but others think it’s a bit luxurious to be able to think retirement in general (let alone in 5 years). Regardless, sometimes we talk about prices of vaccums and rice cookers, sometimes we talk about buying/selling houses, and I can see from their point of view a lot better now. I can see both ways, one way of wanting to spend money and buying the best thing, and another way of saving money and finding alternative solutions to the problem. For example, you can buy a $150 rice cooker, or you could just use a pot to make rice. Same goes for coffee!

6. Having a constraint (budget) makes you more creative

Earlier this year, I had to furnish the tiny barn after spending a lot of money on the construction already. So I was trying to find creative ways to furnish it. I found these two chairs from our neighbor’s lawn for free while walking my dog, and I carried them both home (looking like a weirdo). They were two very old wooden chairs and one of them was a little unstable, but I Youtube’ed how to refurbish old chairs. I repaired, spray painted, and re-upholstered them with Riflepaper fabric. 

Another example – I had some leftover wall paint from renovating the barn. I really wanted to use them to paint the cabinets in my rental house, but I realized that the finish for these paint were eggshell (they are not shiny & smooth) and that might make the cabinets hard to clean. Instead of buying new paint, I found some polyurethane to apply to the top of the cabinets to give them a shinny & smooth protective coat. They came out great and I saved some $$$. Here’s a before & after photo for your enjoyment!

7. I enjoy the things I purchase more

Because I realized that every dollar I spent is earned with my own time, I am more careful with spending. I am spending less on things I love to buy but do not bring me as much joy: clothing, entertainment, drinks, candles, fancy arts & crafts tools, and decorations. The only  thing I bought relating to arts & crafts were some watercolor trays (with colors) and cold-pressed paper which brought me a lot of joy to learn how to do watercolor.

8. Getting closer to financial freedom

As I sent my friend hillsandhigher off to her retirement in Italy this July, I am truly envious! Although, fairly speaking my friend has been saving up for years for this moment and seeing her success makes me feel that it is possible to retire early.  I am making small but steady progresses here and there: renting out the barn, the house, and becoming a real estate agent. I’ve been watching my networth grow after recovering from the ecnomic down caused by COVID and steadily climbing. It encourages me to work harder towards my financial independence.

9. No-buy days

I now try to schedule no-spend days where I don’t buy anything. I find it an easy hobby to just log onto Amazon and buy something small, like a $10 charger, a $50 blender, or a nice little alarm clock! When Mr. Code Junkie took a business trip for a few days, I decided to not buy anything (including groceries) and see what I can make out of things I have at home. I discovered so much food in plain sight that I did not eat before! I am planning on implementing this in the next 12 months of FIRE journey.

10. Buy less, use less, waste less

Sounds more like a “Live, Love, Laugh” banner. 

Buy less: I strive to be a minimalist, mainly because clutter stresses me out. There are some side benefits for being a minimalist. When I started gathering things I don’t need around the house, I know I should not by stuff I don’t truly NEED because I will be donating them 3 months down the line. I try to save items I want to buy for at least a month and see if I actually need it before purchasing. However, this does not apply for things like: AC filters. You really should change your filters every 3 months!

The other day, we were having 4th of July cook out with greyhound parents, and for some reason we were talking about what temperature we leave our AC on. The AC for our house is always set around 78, if we turn it on at all. I grew up without AC so it is not as difficult to sit in the heat.  One of the greyhound parents K said they leave their AC on 72 during the day and 68 at night because they like to sleep in the cool. When I said I only turn it on occassionally and it stays at 78, our friends were all shocked. Although, after hearing this, K’s bf would not allow her to turn the AC lower than 77, to save their utility bills. Sorry K… Alas, sometimes it is wonderful to have AC, especially after you cut grass on a hot day!

What are some of your discoveries, tricks, and tips on tracking expenses and living frugally?

Why We Sleep by Matthew Walker

  • How much I’d Recommend: 8/10
  • Date finished: 6/30/21
  • Why We Sleep, recommend borrowing from your local library

It’s a pretty enjoyable book, but you know that feeling when you have a bad cough and look up on WebMD and try to self diagnose and you feel like you have cancer? That’s kind of how I feel about reading this book. It feels like if you miss one night of sleep, hell, just a few hours of the sleep, you might as well just end right there because your brain will not recover completely ever again, you will have hyper tension, which leads to heart disease and cardiac arrest, you might get depression, schizophrenia, and just die from lack of sleep.

Other than that, it’s a pretty easy read. Here’s some notes from the book.

  • If sleep does not serve an absolutely vital function, then it is the biggest mistake the evolutionary process has ever made.
  • We sleep for a rich litany of functions, plural – an abundant constellation of nighttime benefits that service both our brains and our bodies.
  • Two main factors that determine when you want to sleep: 1 circadian rhythm (internal clock), 2 Melatonin (chemical sleep pressure)
  • Circadian rhythm is not precisely 24 hours but slightly longer.(24 hours and 15 minutes)
  • Sunlight methodically reset our inaccurate internal timepiece, even during an overcasting day.
  • It controls timed preference of eating and drinking, moods and emotions, amount of urine, core body temperature, metabolic rate, release of hormones.
  • Suprachiasmatic nucleus – samples light inside your eyes to reset the 24 hour cycle.
  • Morning larks and night owls are not “by choice”. Usually it’s genetically determined. 40% of people are early larks, 30% night owls, and another 30% lie somewhere in between with a slight leaning toward eveningness.
  • Melatonin: there is a significant sleep placebo effect – the most reliable effect in all of pharmacology. Over the counter melatonin is not regulated by FDA and can be 83% less than that claimed on the label, to 478% more than stated.
  • It feels harder to acclimate to a new time zone when traveling eastward than when flying westward. It’s easier for you to stay up a little longer (stretch your internal day) than to going to bed early (shorten your internal day). Ability to learn reduces and short term memory loss due to frequent time-zone travel
  • While you are awake, you produce adenosine. Caffeine can occupy the receptors of adenosine to make you feel that you are not sleepy. Caffeine peaks at 30 minutes after drinking, half-life is 5-7 hours.
  • Circadian rhythm and sleep-pressure do not sync up with each other. They are two separate systems that are ignorant of each other.
  • If you feel sleepy mid-morning, you are likely not getting enough sleep, or the quality of your sleep is insufficient.
  • Am I getting enough sleep?
    • After waking up in the morning, can you fall back asleep at 10 or 11 am? if so, you are not getting sufficient sleep quantity and/or quality
    • Can you function optimally without caffeine before noon? If no, then you are most likely self-medicating your state of chronic sleep deprivation.
  • What you experience during deep NREM sleep is one of the most epic displays of neural collaboration that we know of. Though an astonishing act of self-organization, many thousands of brain cells have all decided to unite and “sing” or fire, in time. It is a highly active, meticulously coordinated state of cerebral unity.
  • We do not dream in deep NREM sleep, nor do we keep explicit track of time. It is a near state of nocturnal cerebral meditation (different from brainwave activity of waking meditative states).
  • The brain paralyzes the body so the mind can dream safely.
  • Both NREM and REM sleep are equally important. When sleep deprived, the brain will attempt to get NREM sleep first, but in subsequent nights, the brain will get more REM sleeps. But none of this would ever “gain” back the sleep you lost.
  • Birds and aquatic mammals can sleep with one side of the brain at a time, leaving another side of the brain alert or conducting life-preserving tasks.
  • Humans sleep a little lighter in one side of their brain when they are in new environment to ensure safety.
  • REM sleep require both halves of the brain to be equally asleep.

How should we sleep: 1) mono phase – sleep once a day for 8 hours 2) biphase- sleep sleep the regular 8 hours but take a 20-40 min nap during mid afternoon.

  • Myth: Early 17 – 18 century Western Europe had a new way of sleeping: two long bouts of sleep separated by several hours of wakefulness. There is no anthropological reasons to do this, suggesting it is not the natural, evolutionarily programmed form of human sleep. It is rather a cultural phenomenon popularized with Western European migration. No biological rhythm of brain activity, neurochemical activity, or metabolically activity that would hint at a human desire to wake up for several hours in the middle of the night.

humans are special when it comes to sleep:

  • We have 20-25% REM sleep when primates usually have 9%
  • We sleep 8 hours when other primates sleep 10-15.
  • we sleep laying flat (exclusive terrestrial sleepers) while other primates prefer sleeping on branches or in nests
  • Extra REM sleep allows 1) our degree of sociocultural complexity and 2) our cognitive intelligence

What may at first blush have seemed like a modest asset awarded by REM sleep to a single individual is, I believe, one of the most valuable commodities ensuring the survival and dominance of our species as a collective.

  • Drinking while pregnant is not recommended because alcohol (even 2 glasses of wine) will disturb baby’s REM sleep which prevents baby’s brain development. Drinking while nursing is also not recommended for the same reason.
  • Teenagers’ sleep have more NREM to help them mature their frontal lobe and aid their transition into early adulthood. Young children’s circadian rhythm makes them sleep earlier at night (and more) and rise earlier than their parents while adolescents’ circadian rhythm makes them stay up at night, and rise later than the parents.
  • Adults lose their deep sleep (NREM) as they age. Their sleep become more fragmented (waking up at night) mostly due to medication and weakened bladder. Senior adults circadian timing regresses, leading to earlier and earlier bedtimes.
  • Sleeping (NREM) helps slowly upload all your information absorbed during the day into your memory, salvage those that appeared to have been lost soon after learning. Naps make your memory better.
  • Sleep (NREM) also help us forget – we have yet to harness this power to battle trauma, drug addiction, and substance abuse.
  • A pianist would practice a piece for many times and cannot play it perfectly, but after she goes to sleep, and next morning she wakes up, can simply play it perfectly. Sleep helps our motor skills so simply “learn offline.” Similarly, chromic lack of sleep increase sports injuries in adolescent athletes.

The Tyranny of More

Since I got my real estate agent license, I have been paying more attention to houses around me. This Sunday I went for a run and saw these two houses side by side. One on the left is probably 5 bedrooms with 6 bathrooms, a two-car garage, and a pool in the back, while the one on the right is probably a 2 bedroom 1 bath with no garage. (After researching, I actually found the one on the left was built after tearing down two houses and combine two regular lots into one.)

It seems that we all have agreed that more is better, without further consideration.

The real estate market has risen to a new record high in 2021. Many people changing their minds to buy new construction instead of existing houses. Who doesn’t like everything new, new paint, custom cabinets, a fresh coat of paint, and spotless countertops? People would go $100,000 or more in debt to buy a new construction than to fix up an older home that’s smaller.

Newly constructed houses are getting bigger and grander. A nuclear family of 4 suddenly needs 5 bedrooms (one for each person, a couple of guest bedrooms, and a library), preferably with a pool, two-car garages, and 6 bathrooms. This need for more space also became more exacerbated post-COVID-19 lockdown. People seem to want designated space in their homes for offices as well.

US-wide, homes built in the last 6 years are 74% larger than those built in the 1910s, an increase of a little over 1,000 square feet. The average new home in America, be it a condo or house, now spreads over 2,430 square feet. It is also important to note that households have been getting smaller over the same period parallel to the rise in living space. In 2015, the average number of people in a household is 2.58, compared to 4.54 in 1910. This means that today the average individual living in a newly built home in the US enjoy 211% more living space than their grandparents did, 957 square feet in total.

https://www.propertyshark.com/Real-Estate-Reports/2016/09/08/the-growth-of-urban-american-homes-in-the-last-100-years/

“More” is preventing us to have a close community.

Since the pandemic, a large portion of my friends started working from home. Many of them felt lonely. I volunteer at Crisis Textline and “isolation,” “relationship,” and “loneliness” have increased noticeably since 2020, no doubt largely influenced by the lockdown and restrictions. Despite human’s desire and biological needs to be together as a community, our desire for “more” is stopping us from having a true community.

Having a bigger house and more possessions makes us more isolated than ever. When was the last time you asked to borrow something from your neighbor? If you were missing something at home, is your first thought going to the store to purchase it or to borrow it from friends? Mine is the former. Having financial independence, not relying on people is taught to me as great traits of survival. Yet, we humans are designed to want to be needed, and be in a community, supporting each other. 

Since COVID, I have met friends who also have greyhounds and we now swap dog-sitting when one of us is out of town. Not only does it save so much money, but we started doing other things together like having game nights, and going to play pickleball together. I have never had friends who are in the “love to hang out” category (my friend types are usually either “we wear the same pants” or “I don’t want to hang out with you after work”). Not having a lot actually made me a better friend because I can ask for favors and return favors when my friends need me. Should I have had everything, and not needing anyone or any help, it would’ve been a much lonelier existence. 

In Mark Manson’s article “1,273 People Share Their Best Life Lessons from 2020,” he mentioned that the #1 lesson was “You Only Really Know Who You Are When Everything Is Taken From You.” Really, life is too short and we spend a lot of time worrying about getting “more” stuff: bigger houses, better cars, more clothes, more money, more friends, more success, more power. We never stopped to ask, do we actually need all those things? If those were taken away from us, what would we do? 

If you are considering buying a bigger house, perhaps reconsider; buy a smaller size house and use that extra money to do something else. 

What should we do with having “more” things?

  1. consider what is “enough” for you, in all aspects of life. Do I really need that new pair of running shoes, a new candle, a new iPad, a new GoPro, and a new fancy environmentally-friendly ziplock bag? Do I need to move to a more crowded city for a higher paying job but end up saving less? Do I need more money, status, power, and satisfaction?
  2. challenge yourself to have less, owning less, wanting less, and see what you can do. For example: what would happen if you didn’t have electricity for a night? What would happen if you lived out of one room of the house for a day? 
  3. redefine what is “enough.” Maybe it’s a smaller house, maybe it’s an apartment, maybe it’s a 4 bedroom instead of 5, maybe it’s to move back with your folks for a while and that’s totally ok! Actually, I miss having my mom do my laundry… a lot…, and my dad’s cooking.
  4. be surprised by the result! and understand what is truly essential to you. Free yourself from the so-called “must-haves.”

You will find that you can live with a lot less, consume a lot less, and be calm and content. And if you decided not to, at least it is a well-thought-out decision instead of a mind-numbing, knee-jerking reaction to the gigantic swinging capitalistic hammer.

How to Stay in Love by James Sexton

  • How much I’d Recommend: 9/10
  • Date finished: 5/27/21
  • How to Stay in Love, Recommend borrowing from your local library

Main Ideas:

  • Hit send now: If you are unsatisfied/angry/pissed/upset/annoyed with your spouse on some specific thing they did, communicate immediately. Don’t wait. Write an email and send now. 

Justice deferred, they say, is justice denied. . . Hit Send Now is meant to combat or neutralize the natural inclination of so many of us to not express the true nature of what we are feeling. And – no small bonus – it makes you feel much more as if you are living in the moment, becauso you are expressing yourself in the moment.

  • You can be right or you can be happy: Shoot for resolution rather than full satisfaction. Stop worrying about being right.
  • Expectation vs. reality: Admit to yourself how much time you have to devote to the goals you are trying to achieve as a parent or partner, and what you are doing with that time. Be honest about the aspects of partnership and/or parenting that you enjoy and the ones that you loathe.
  • Tight grips and loose arms: It’s scary to let go of your spouse. It’s scary to let go of illusions about your marriage, marriage in general, or even yourself. . . Perhaps by letting go, you’ll find yourself establishing a much stronger grip.
  • Reading minds and accepting appearances: Your partner can’t hear what you don’t say, and vice versa. Ignorance is rarely bliss for long. If you care enough about your relationship to want to keep it, be sure you are checking in with your partner on a regular basis. No one is good at mind reading. There is no such thing.
  • Pretend you are not married: appreciating the things you take for granted that your spouse does for you.
  • Did you spend more time shopping for your car or for your spouse?: Our grandparents didn’t lease cars. They bought a car and drove it as long as they could. They took care of it and they appreciated the fact that their car was reliable. They did what they needed to keep the car healthy in the long run. What if you can only pick a car for the rest of your life? Would you change the criteria of what kind of car you want? 

If you want permanance, don’t stand in front of people and recite marriage vows. Go to a tattoo parlor.

  • Prime your spouse to do things you like: i.e. have sex on vacation so he will take more vacations.
  • Remind yourself from time to time that the only rules defining marriage, as an institution, are those that we as a culture have made.
  • Think about divorce.
  • Know that a marriage can end without the marriage itself ending.
  • One of the pillars of marriage is sex. Be honest with yourself, and with your spouse as to what you want.
  • Sometimes the bad guys win. The only thing more expensive than a good divorce lawyer is a bad one.
  • Divide and conquer: everybody should do something about everything, and neither of you should do everything about anything. Don’t relinquish the control of being independent. Always know a little bit of everything you need to be on your own.

I bet you’ll be surprised at how much your spouse does. What would you miss if they were suddently gone from your life or from the home you share together? Perhaps some imagining of that loss, while we still have what we have, is in order.

  • It’s easy to express commitment to a principle; it’s tougher, and more important, to ask yourself whether your actions demonstrate that commitment.
  • Don’t lie. Or if you are going to lie, don’t lie to yourself. It’s far better, on and off any witness stand, to be painfully honest with yourself about what you’ve done, what you could be doing, and what you sometimes failed to do.
  • There’s no such thing as a perfect parent, so don’t make yourself crazy.
  • Know yourself: One of the most important traits that the strong possess, from what I see, is knowing their weaknesses. Being able to do that for yourself is a virtue.

My professional experience gets me to the same place, if from the back end: I’m in the business of weaponizing intimacy, to dissolve marriages. Those who are in love and want to keep it that way should try to see the ability to weaponize intimacy not as a threat, but as proof of its power. Not just for ammunition on the witness stand. Power that can be used for good.

  • Make the holes you dig shallow because the deep ones are hard to climb out of.
  • Identify the subject – don’t drag old laundry out
  • Don’t start something that has no end – Don’t argue with him about how much better it would be if he were taller.
  • Write a letter to your partner. List at least five things they do that you appreciate. Tell them a few things they do that upset you. Tell them what you are craving but not getting from them. Tell them a few things you are getting and are incredibly grateful for. Tell them a story from your shared history, in as much detail as you can, that you remember fondly. Maybe write a mini-chronicle of your marriage. It’s been said that the unexamined life is not worth living. My experience has taught me that the unexamined marriage is not sustainable. 
  • Use a “yours” and “mine” accounts: 1. preventing ignorance while maintaining privacy, 2. creates opportunities for autonomy, 3. it can easily be converted into a legally binding system. 
  • When is the last time you and your spouse discussed what it specifically means to be “happy” and how you each define that term? When was the last time you discussed, in specific terms, what a “satisfying” sex life is for each of you? These should be conversations you look forward to! They’re about being happy and about fucking, for fuck’s sake!
  • Sometimes it’s nor worth trying to save something, because the saving requires you to be miserable. It’s not worth doing CPR on a dead body. If it’s dead, bury it. But if it’s not dead. . . let’s not bury it.
  • I hear you. I hear your frustration. I get it.
  • Hate can eat away at you at least as much as it eats away at the object of your hate.
  • It’s hard to end things; it’s hard to keep things together.

#14 How Much Does it Cost To Build A Tiny House?

I spent a total of $38,458 on renovating this tiny barn. The total cost since I decided to convert the barn into a dwelling is $31,070. By adding A/C to this barn, the square footage can officially count towards part of the house for resale value (conservatively about $60,000; $150 / sqft). Here are the details of the expenses:

  • Demo & framing $9,471: garage door, 2nd floor, adding frame support, including $4,700 materials
  • Plumbing $9,950: adding a separate sewer line, concrete work, bathroom, toilet, kitchen sink, hot water heater
  • New roof: $4,000
  • Siding: $3,388
  • Furnishing $3,023: Kitchen cabinets, countertop, microwave, fridge, couch, table, chairs, backsplash, internet extender, smart lock, electric stove, bowls & silverware, coffee mugs, water boiler, shower curtain, curtains.
  • Electricity $1,800: digging an electricity line, wiring the entire barn, installing a fan, various can lights, outside light.
  • Miscellaneous construction $1,853: trim, railing, ladder, concrete leveler, insulation batting, windows
  • Insulation $1,497: wall insulation batting (R-13), roof insulation open cell foam (R-39)
  • Flooring $1,230: Luxury Vinyl Plank for about 400 square feet (about $3 a sqft after taxes)
  • Mini Split $1,198: Pioneer + smart device + installation fee (we hired a professional AC guy to vacuum-seal it $270)
  • Renting a dumpster $445
  • Paint $528: Benjamin Moore, totally worth it.
  • Permit $275 ($200 refundable)

Things I could have saved:

  1. I probably could have saved more on furnishing the place if I was patient enough to wait through Facebook Marketplace and am willing to pick up bulky items. Even though most of the items around my area seem very mid-west and outdated on Facebook, once in a while, someone who has similar minimalist taste posts a piece of furniture on Facebook. I got my mirror through Facebook for $25 which was well worth it. 
  2. Paint: I went with Benjamin Moore paint and it costed a lot more than if I had gone with Behr. I was priming and painting white onto drywall (as opposed to painting over a previous, darker color), so in retrospect, a cheaper paint probably would have been the same. But I absolutely loved the experience painting in Ben Moore. The paint doesn’t smell horrible, and two coats are more than enough. The paint cured wonderfully against the primer. It is hard to go back to Behr products again… I thought maybe it was just because I paid more money and felt the satisfaction but I found on reddit others have had similar experiences with a mid-range-priced paint. So I could have saved some money for it, but if I were to do it all over again, I’d probably still go with the more expensive paint.

Things I may have to pay for in order to build another tiny house:

  1. concrete slab – this was existing so I didn’t have to pay for it.
  2. barn structure – even though I practically redid the structure, it may have cost me a couple thousand more if I have to build the structure from scratch.

Overall, my budget was about at the start of the project $25,000 and I spent $31,000. I have underestimated how much furnishing would cost. All those $100 trips to Home Depot and Walmart adds up!

I am planning on duplicating this process sometime in the near future (after the price of lumber & other construction materials come down a bit). 

 

How I Bought My First Real Estate Investment Property

Photo by Scott Webb on Unsplash

I bought a house yesterday.

If you want the TLDR, you can just jump down to the reflection part at the end.

I’ve been looking at houses for a while. I listen to real estate investing podcasts like BiggerPockets, The Tom Ferry Podcast, ChooseFI, etc. I go through phases of loving them and getting frustrated with them, and loving them again.

I read a couple of books on real estate:

  • Cheap Houses by The Homestead Craftsman – This really opened my mind to how to buy houses. There is no one way of buying houses and you don’t always need an agent.
  • The Millionaire Real Estate Agent by Gary Keller – there are some good points in this book but I don’t love it.
  • Building Wealth One House at a Time by John Schaub – When I first read this book, I wasn’t super impressed. But looking back, this guy had a lot of great points and it’s probably the most rounded book I’ve read.

My criteria for the first investment:

  1. 3 bedroom 2 baths (at least 2 bathrooms for resale value)
  2. In a decent upcoming neighborhood
  3. In the 150k – 250k range
  4. In Bentonville, AR

Some preferred qualities: 1) no major renovations, 2) have more expensive houses surrounding it, 3) fenced-in yard.

Bentonville’s real estate market has been crazy since the Pandemic started in March 2020, and it gradually became crazier and crazier. Currently, the houses in the 150k-250k range sell within the day it lists on MLS. Multiple offers would come in, and people fight over houses going 50K above asking and appraisal prices. Listening to Tom Ferry’s podcast, I realize that the entire U.S. real estate market is like that.

I have seen so many houses coming onto the market that I thought “this could work,” and in the blink of an eye it’s under contract, off the market, no longer available. So when my friend Hills&Higher told me this listing from Nextdoor, I picked up the phone and called that seller number right away, but I wasn’t hopeful at all. It was Easter Sunday and I asked if I could see the house today or tomorrow (Monday). He said, how about Monday at 4 pm. I thought maybe he was delaying the appointment because he already had enough interest from the property and wasn’t keen on meeting up.

Regardless, I checked out the neighborhood on google maps and also saw the 4 only photos he uploaded to Zillow. It is not an exciting house, which is exactly what I am looking for. I realized after the fact that most of the time, deals are inside the not-so-exciting listings, the mediocre mundane ones. 

The house fits ALL the criteria I was looking for:

  • It was 3 bedroom 2 baths
  • It was listed under 200k
  • It was in a very nice neighborhood where surrounding houses are twice as expensive
  • It was in Bentonville
  • Has a fenced-in yard
  • Does not have a pool

I knew if I didn’t present an offer to the seller that Monday afternoon, I would definitely lose this house. I know the house is priced under market value. Based on the comparable homes I ran, the appraisal would most likely be around $173k. I called my loan officer and asked for two different pre-qualification letters for the two scenarios in my head. One is that there is moderate interest in the house, I would offer 185k, and one is this is my BEST offer 200k if there are a LOT of interests. I also tried to draft a contract before going to this showing (which I would recommend people do, a generic one if you can, and just leave the amount blank). I wasn’t able to figure out the contract in time, but I printed out my pre-qualification and drove to the showing.

The seller was super friendly. We got to talking about life, work, dating in Arkansas, swapped ridiculous stories about work. It felt like that he trusted me enough and I asked how much he wanted to sell the house for. He said, well, there’s moderate interest in the house, and people offered more than the asking price for it. Knowing the market, I know he wasn’t lying. So without saying a number, I asked him, what would be the number that would seal the deal today. I was shocked by my own boldness. I don’t really know why I wasn’t more nervous. I just knew at that point if I asked, the worst I would get is a counter-question (like maybe he’d say, well how much can you offer?). And to my surprise, he just gave me a straight answer, 180k. I said DEAL. 

We continue to have some more conversations about what it is like living here, the neighbors, and he told me his favorite spot of the house is this one-bedroom and kitchen because the sunlight hit that part of the house first in the morning. I realized I was lucky because unknown to myself at the time, I just achieved the winning bit of getting a deal, to get the seller to like me.

Summary and reflection on buying my first real estate investment:

  1. Clearly define the search criteria: this may take some time to refine and tweak, but it will come more clearly the more house you see.
  2. Be brave enough to pull the trigger: Put an offer on houses that fit those criteria. Don’t be afraid. If you’ve done the homework, worked out the financial part, you need to trust your gut, trust the system you’ve built on the due diligence you’ve done. You NEED to pull the trigger. 
  3. Know how much you want to offer BEFORE you walk in: You know what the house looks like (sort of, or ballpark it). You know the location. You know the market. Therefore, there is no reason to go in without having a number in your head. 
  4. Let the seller say the price first: Don’t offer up the price you are willing to pay. If I had offered up 185k from the start to see if it was ok, then I would have overpaid.
  5. Play fair: I think this was a hard one for me. The Chinese side of me will always want to haggle. But from living here for so long, I realized that there are prices that don’t matter in the big scheme of things. Could I have bargained him down from 180k? Maybe. But I am taking a big risk in this seller’s market. I need to keep the seller feeling like he’s in control, and that it is his way. Plus, I know 180k is a fair number from the comparable homes sold around there. Ultimately, you don’t want to be known as the shark. The goal of the negotiation is to get your way and have the seller walking away with respect for you that they want to do business with you again and again. 

#2 is probably the hardest one for me. I keep dancing around the pool but never want to jump in. I was too afraid to commit to it. I think you will have to see enough houses and miss the deals you really wanted to have to understand how to pull the trigger next time. I have missed a unique yellow A-frame in Bentonville, a nice rental property 2 minutes away from my house, and 2 other houses walking distance from me so far. But without them, I wouldn’t have those data points to understand what is a good deal and what criteria are my must-haves.

Overall, it was such a flurry of events that happened too quickly. I made the oral offer with the seller 5 minutes after walking through the house. I sent him the contract about 2 hours after seeing the house, after figuring out how to write a contract with the help of my real estate superhero.  The seller signed it that evening.  

We have since closed on the house and are preparing to move in next week!

 

Think Fast and Slow by Daniel Kahneman

  • Date read: April 2021.
  • How strongly I recommend: 8/10.
  • Think Fast and Slow: Recommend borrow from library

This book reminds me a lot of Dan Ariely’s book Predictably Irrational. It is a very thick book. I wish I have more time with it but I have to return it to the library soon. Overall, it was a great mind-opener (as always) to realize how your brain deceives your perception of the world.

Two Systems:

  • He had an impression, but some of his impressions are illusions. This was a pure System 1 response. She reacted to the threat before she recognized it. This is your System 1 talking. Slow down and let your system 2 take control.
  • Attention & Effort: I won’t try to solve this while driving. This is a pupil-dilating task (something that requires deep concentration). It requires mental effort! The law of least effort is operating here. He will think as little as possible. She did not forget about the meeting. She was completely focused on something else when the meeting was set and she just didn’t hear you.
  • Control: She did not have to struggle to stay on task for hours. She was in a state of flow. His ego was depleted after a long day of meetings. So he just turned to standard operating procedures instead of thinking through the problem. Unfortunately, she tends to say the first thing that comes into her mind. She probably also has trouble delaying gratification. Week System 2.
  • Priming: The sight of all these people in uniforms does not prime creativity. The world makes much less sense than you think. THe coherence comes mostly from the way your mind works. They were primed to find flaws, and this is exactly what they found. I made myself smile and I’m actually feeling better!
  • Cognitive ease: Let’s not dismiss their business plan just because the font makes it hard to read. We must be inclined to believe it because it has been repeated so often, but let’s think it through again. Familiarity breeds liking. This is a mere exposure effect. I’m in a very good mood today, and my System 2 is weaker than usual. I should be extra careful.
  • Norms and Causes: When the second applicant also turned out to be an old friend of mine, I wasn’t quite as surprised. Very little repetition is needed for a new experience to feel normal. When we survey the reaction to these products, let’s make sure we don’t focus exclusively on the average. We should consider the entire range of normal reactions. She can’t accept that she was just unlucky; she needs a causal story. She will end up thinking that someone intentionally sabotaged her work.
  • Jumping to conclusions: She knows nothing about this person’s management skills. All she is going by is the halo effect from a good presentation. Let’s decorrelate errors by obtaining separate judgments on the issue before any discussion. We will get more information from independent assessments. They made that big decision on the basis of a good report from one consultant. What you see is all there is. They did not seem to realize how little information they had. They didn’t want more information that might spoil their story. What you see is all there is.
  • Judgment: Evaluating people as attractive or not is a basic assessment. You do that automatically whether or not you want to, and it influences you. There are circuits in the brain that evaluate dominance from the shape of the face. He looks the part for a leadership role.
  • Substitution and heuristics: Do we still remember the question we are trying to answer? Or have we substituted an easier to? The question we face is whether this candidate can succeed. The question we seem to answer is whether she interviews well. Let’s not substitute. He likes the project, so he thinks its costs are low and its benefits are high. Nice example of the affect heuristic.

The One Thing by Gary Keller & Jay Papasan

  • How much I’d Recommend: 4/10
  • Date finished: 2/26/21
  • The One Thing: recommend borrowing from your local library.

I can’t believe the retail price of this book is $24.95. It must be a scam or a joke, perhaps both. This book has no original ideas and the title alone says basically everything there is about the content of the book. Anyhow, if you are still here after all this, read on to my notes from the book.

  • Going small is a simple approach to extraordinary results and it works.
  • The key is over time, one thing at a time.

The six lies between you and success:

  1. Everything matters equally: 80/20 rules, prioritize, say no, do the most important thing.
  2. Multitasking: Don’t do it.
  3. A disciplined life: you already have enough discipline, use powerful habits instead, build a habit at a time
  4. You have unlimited willpower: you don’t. Monitor your willpower use, do the most important thing first.
  5. A balanced life: counterbalance the areas you focus too much on, and… balance your life from period to period.
  6. Big is bad: Think big, think outside the box, don’t ask for permission, don’t fear failure.

Simple task to productivity:

  1. The focus question: what is the one thing?
  2. The success habit: understand and believe your one thing.
  3. The path to great answers: Think big and specific, benchmark and trend for best answer.

Extraordinary result:

  1. Live with purpose: discover your why, absent an answer, pick a direction
  2. Live by priority: backpeddle your 5 year goal to weekly to daily goal.
  3. Live for productivity:block your calendar for your one thing, protect it from peer pressure, outside and inside distractions.
  4. The three commitments:
    1. follow the path of mastery
    2. move from entrepreneurial to purposeful (to break the ceiling of achievement
    3. Take ownership of your outcomes
    4. find the coach

The four thieves of productivity:

  1. Inability to say No
  2. Fear of chaos
  3. Poor health habit
  4. Environment (people around you) doesn’t support your goals

If you feel pretty unsatisfied and a bit confused, this is how the book felt to me even after reading the entire book. All the advice were very generic, and some of them were explained in a more complicated way than it needs to be. Yet, Amazon review is like 4.5 stars… Oh well, hope you learned something useful from my notes and save yourself some time to do something productive.

#13 Ten Things I Learned from Building This Tiny House

After a year of planning, renovation, sweat, and tears, this barn is finally complete! We put it on Airbnb and it’s available for booking now. 

Ten things I learned about building this tiny house almost from scratch:

  1. Have a detailed plan: Plan ahead with a specific layout. I made a 3D model of what it should look like at the beginning of the project to explain to the city inspector what I am trying to achieve.  also helped the contractors to quote me for what needs to be done. If I were to do it again, I would also sketch out where the outlets and lights should be to save time communicating to contractors what needs to be done.
  2. Always interview at least 3 contractors for the same job. Ask them to quote you with line-by-line detail. If they can’t tell you the details, explain what materials to use, or how long it would take, I would not use them no matter how cheap they are.
  3. Don’t cheap out and hire unprofessional contractors. I had a bad experience with a contractor who quoted me very low on an insulation foam spray. I waited for 6 weeks and followed up 20+ times and ended up going with someone else. The second person who charged a reasonable amount was fast, professional, and cleaned up after himself. I should have gone with him in the first place and not cheap out.
  4. Know that there will be hiccups if it is your first time. Everything is solvable under the sun. Someone would have encountered it one way or another. Keep looking, keep asking, keep learning. Don’t give up.
  5. Ask yourself if you really need some of these decorations. Does it have ROI (return on investment)? Can I do without it? Can I make it for cheaper? Ultimately, it is a business, and the numbers ($$$) have to make sense.
  6. Keep track of everything you spent and what you spent so you can estimate better next time.
  7. Ask for help and bring people on the journey. They love to be part of something and feel the achievement. I have a friend who’s helped me out many times when I needed tools or his truck to transport something. Those people are the fairy-god-mothers of my life 🙂 Thank you, Robby!
  8. Having the right tool is VERY important. I am frugal to a fault sometimes. I tried to mix concrete with a power tool + a paint mixer because I didn’t want to purchase another tool to only mix concrete and never use it again. Needless to say, that didn’t go very well. I ended up borrowing my friend’s concrete mixing tool and finished pouring the concrete. 
  9. Be creative and try new things.  I searched up and down Youtube, Pinterest, Instagram on how to install railings, and I never got a good answer from it. Most of what I found were railings for decks, or they are made of metal, or professionally installed (with no details how it was installed). I eventually made a version of the railing first and found it unstable, and then I tried another version that worked better. 
  10. Find friends who have similar hobbies! Finding local friends who have similar hobbies and swap stories and experiences. I didn’t meet friends that are passionate about renovations until towards the end of my renovation. And I am so glad I did because there are so many small tips they gave me that were helpful. Just knowing I am not alone was a big encouragement for me to carry on and finish the tiny house!

Cheers to another project under the belt! 

Check-in Instructions

Arrive at the address. Usually my white Volkswagen is parked in the driveway. You can park on the side of the road in front of the house. The barn is behind the main house. There is a driveway to the left of the house (yellow arrow) that leads to the barn.

The barn in the back.

There is a fence that is latched. Lift the U shape lever and push the gate open. PLEASE CLOSE THIS GATE behind you so my dog does not escape…

There is a path leading to the front door of the barn. Please note the ground is uneven and can be slippery when it’s raining. I try to keep the grass low but they grow like crazy in the spring and summer. 

There is a keypad above the door knobs. The code is in your welcome message. I unlock the door if you arrive during the day time. You will need to use the code if you arrive at night, just for security reasons. 

Feel free to message me if you have any questions or need recommendations on food, what to do, what souvenir to get for friends, etc!