If I had a Million Dollars...
Apparently I'd invest it in healing centers and wellness communities.
What a long trip it's been! About 5 years ago we decided we didn't want to rely on the stock market for our retirement... We'd watched 20k in money grow over the previous 10 years to a whopping 20k. Note, this was just the money we were putting in... we also have 401k and work retirements, but we're not confident they're doing much better. Since then, our little 20k nestegg had grown to 30k in 2008... at which point it lost 10k and returned to the original sum we'd invested back in the mid 90s. Pretty pathetic, and certainly not something we wanted to bet our future on. So what to do with our investment money -- not that we had much.
[NOTE: if you're offended when people talk openly about money or sex, you may not want to read my blog. You definitely won't want to read this post, because I am about to do some very transparent reflection on our fiscal journey over the past few years. It's so easy to compare ourselves to others, yet we often are comparing ourselves to a projection that others put on -- or more usually that we put on them. I think there is real value in sharing honestly what we've come through or are going through -- to shed light on our covert lives so we see each other more authentically. I'm all about de-mystifying the human experience and making it real. Otherwise, we hold ourselves up to unrealistic standards that don't serve us... make us crazy. ]
Well... all the substantial money we'd ever gained was frankly a gift from our growing real estate market. We bought a house for 98k in 1991 (nice place, with 5 acres and a pond) and sold it 4 years later for 186k. We bought it from my dad's friend. We got our down payment off a visa cash advance and he carried the loan at 10%. We refi'd that the next year to a very low (4.5%) variable that stated to ratchet up 3 years later. We added a deck and finished off a room for about 20k total over that time, so we had a nice sum when we sold it to help us move into town.
We paid off 50k in school loans and put the rest into a small house in inner NE Portland - cost about 78k... it was a wreck (but all cosmetic), so we cleaned it up and replaced the kitchen for about 12k, then sold it 18 months later for 120k. At the time we bought the place, we were 'downsizing'... simplifying our life to live more frugally... small place and few needs meant less work and more joy in life. My boss just laughed and said we'd be buying a quarter million dollar house within two years. How'd he know! Sure enough, we gave up the simple life and bought a place close to Nicole's work for 200k. It was our dream place; we were going to raise our kids there. We'd be there 20 years at least.... 10 years later...
But I'm jumping ahead. 7 years later, it seemed obvious to us that real estate gave a better return than the stock market. While our 20k hadn't moved, we'd seen our real estate essentially pay for itself. And so we were going to become real estate investors (and ultimately developers, though we didn't know it at the time.) By 2004, our place was maybe worth 350k and we owed 120k on it (we had put down 80k when we bought it). So we took out a second and bought a duplex for 165k with 30k down. We tried to sell it to my brother just to get him started in real estate, but after living there awhile he passed on that opportunity.
That Fall, we bought a wellness center for 430k.... I did a lot of math on that one... but ultimately it came down to whether I thought the place could carry itself. I didn't see how we could lose money (I hadn't done enough math), as long as the income stayed steady or grew. We put 100k down and got a loan for the rest. Rents would cover the payment. It had such great energy that I really hadn't realized how ugly it was! After a month of looking at it, something had to be done. The therapists convinced me to add a workshop space, and I also added 3 therapy offices (and another waiting room) to pay the amortization of the new addition. While I was at it, I renovated all the bathrooms, the kitchen and carpeted and painted the whole place. Another 200k later we had almost doubled the size of the building and completely renovated it. What I learned: if you can increase square footage at a good price, you bring the total "cost of acquisition" down... and thereby raise your return per square foot. What started out as a 3,000sf building for 420k ended up being a 5,000sf building for 600k. That was a much better price overall, and therefore easier to pay off. The other thing I learned was that a healing center needs to feel sacred... to be a healing space in itself. Therapists agreed, and when I was done, I went from having 6 therapists to having 20 in only a few months. Thankfully, we started actually making money!
The following year, we swapped our duplex (and the last of our home equity - after two refis) into another wellness center property... this one a $1.5M project. I learned a lot on that one too! I brought investors (mostly good friends from our swing dance community), renters (another wellness center in town) and a commercial building (with 200k in renovations) together to form a viable project. Sometimes, it felt nearly overwhelming getting all those renovations done in 6 weeks, but I hardly had time to think about that. My proudest moment was when we lost the bridge funding (because of some unscrupulous bank dealing) and I had to rally our investor friends to raise $800k in less than a week. We did it and saved the project.
By this point in 2008 we owed 450k on our house (rent, insurance, taxes and utilities came to about 4k/mo), and the housing market was starting to tank. We also owed about 425k on our first Wellness Center -- had to take out an extra 100k on that to cover the renovations there. Note that we only owed 425k on a building we had sunk 600k into because much of that debt was in our house. On the plus side, the building was worth somewhere between 8-900k (based on what's called a cap rate analysis) and more than paying for itself. The second building (really two commercial properties because we had separated off a lot when we encumbered the building) was worth 1.7M (1.2M on the building and 500k on the lot) and we owned 45% of that. All told, our personal commercial holdings were around 1.2M, and our house was a wash (and possibly about to become a liability). We didn't know what 2009 would bring (and we had already discussed selling it the year before to move to a quieter street), so we put it on the market and sold it before the election (I figured they'd stop propping up the economy as soon as the incumbents were back in office). Our debt was cut in half, our living expenses went from 4k/mo to 1.5k/mo and our cash flow went up!
In all these endeavors, it has often felt like the universe moved through me... like I was just a vessel for cool things to happen - a conduit for a lot of energy. In less than 4 years, we had gone from having about 220k in net worth to having 1.2M, basically adding a Million Bucks to our asset column. For her part, my partner has been holding down the fort making sure the kids are taken care of and bringing home our 'living money' while I've been gone a lot of 12-18 hour days over the past few years. No wonder there are days where my body feels whacked! No wonder. Nicole is finally able to have a break now... going down to working 3 days a week. And while my work has slowed way down, it hasn't stopped either... there is much to do just to manage the places now that the renovations are complete. I think I need to give myself permission to slow down a bit... catch my breath... reconnect with living -- make food, write poetry, play guitar. watch a show; I still remember those things. And most of all play with my kids before they are grown. Most of all, play with my kids...
Added in 2017: I guess that was my answer... if I had a million dollars, I'd play with my kids! :-)
What a long trip it's been! About 5 years ago we decided we didn't want to rely on the stock market for our retirement... We'd watched 20k in money grow over the previous 10 years to a whopping 20k. Note, this was just the money we were putting in... we also have 401k and work retirements, but we're not confident they're doing much better. Since then, our little 20k nestegg had grown to 30k in 2008... at which point it lost 10k and returned to the original sum we'd invested back in the mid 90s. Pretty pathetic, and certainly not something we wanted to bet our future on. So what to do with our investment money -- not that we had much.
[NOTE: if you're offended when people talk openly about money or sex, you may not want to read my blog. You definitely won't want to read this post, because I am about to do some very transparent reflection on our fiscal journey over the past few years. It's so easy to compare ourselves to others, yet we often are comparing ourselves to a projection that others put on -- or more usually that we put on them. I think there is real value in sharing honestly what we've come through or are going through -- to shed light on our covert lives so we see each other more authentically. I'm all about de-mystifying the human experience and making it real. Otherwise, we hold ourselves up to unrealistic standards that don't serve us... make us crazy. ]
Well... all the substantial money we'd ever gained was frankly a gift from our growing real estate market. We bought a house for 98k in 1991 (nice place, with 5 acres and a pond) and sold it 4 years later for 186k. We bought it from my dad's friend. We got our down payment off a visa cash advance and he carried the loan at 10%. We refi'd that the next year to a very low (4.5%) variable that stated to ratchet up 3 years later. We added a deck and finished off a room for about 20k total over that time, so we had a nice sum when we sold it to help us move into town.
We paid off 50k in school loans and put the rest into a small house in inner NE Portland - cost about 78k... it was a wreck (but all cosmetic), so we cleaned it up and replaced the kitchen for about 12k, then sold it 18 months later for 120k. At the time we bought the place, we were 'downsizing'... simplifying our life to live more frugally... small place and few needs meant less work and more joy in life. My boss just laughed and said we'd be buying a quarter million dollar house within two years. How'd he know! Sure enough, we gave up the simple life and bought a place close to Nicole's work for 200k. It was our dream place; we were going to raise our kids there. We'd be there 20 years at least.... 10 years later...
But I'm jumping ahead. 7 years later, it seemed obvious to us that real estate gave a better return than the stock market. While our 20k hadn't moved, we'd seen our real estate essentially pay for itself. And so we were going to become real estate investors (and ultimately developers, though we didn't know it at the time.) By 2004, our place was maybe worth 350k and we owed 120k on it (we had put down 80k when we bought it). So we took out a second and bought a duplex for 165k with 30k down. We tried to sell it to my brother just to get him started in real estate, but after living there awhile he passed on that opportunity.
That Fall, we bought a wellness center for 430k.... I did a lot of math on that one... but ultimately it came down to whether I thought the place could carry itself. I didn't see how we could lose money (I hadn't done enough math), as long as the income stayed steady or grew. We put 100k down and got a loan for the rest. Rents would cover the payment. It had such great energy that I really hadn't realized how ugly it was! After a month of looking at it, something had to be done. The therapists convinced me to add a workshop space, and I also added 3 therapy offices (and another waiting room) to pay the amortization of the new addition. While I was at it, I renovated all the bathrooms, the kitchen and carpeted and painted the whole place. Another 200k later we had almost doubled the size of the building and completely renovated it. What I learned: if you can increase square footage at a good price, you bring the total "cost of acquisition" down... and thereby raise your return per square foot. What started out as a 3,000sf building for 420k ended up being a 5,000sf building for 600k. That was a much better price overall, and therefore easier to pay off. The other thing I learned was that a healing center needs to feel sacred... to be a healing space in itself. Therapists agreed, and when I was done, I went from having 6 therapists to having 20 in only a few months. Thankfully, we started actually making money!
The following year, we swapped our duplex (and the last of our home equity - after two refis) into another wellness center property... this one a $1.5M project. I learned a lot on that one too! I brought investors (mostly good friends from our swing dance community), renters (another wellness center in town) and a commercial building (with 200k in renovations) together to form a viable project. Sometimes, it felt nearly overwhelming getting all those renovations done in 6 weeks, but I hardly had time to think about that. My proudest moment was when we lost the bridge funding (because of some unscrupulous bank dealing) and I had to rally our investor friends to raise $800k in less than a week. We did it and saved the project.
By this point in 2008 we owed 450k on our house (rent, insurance, taxes and utilities came to about 4k/mo), and the housing market was starting to tank. We also owed about 425k on our first Wellness Center -- had to take out an extra 100k on that to cover the renovations there. Note that we only owed 425k on a building we had sunk 600k into because much of that debt was in our house. On the plus side, the building was worth somewhere between 8-900k (based on what's called a cap rate analysis) and more than paying for itself. The second building (really two commercial properties because we had separated off a lot when we encumbered the building) was worth 1.7M (1.2M on the building and 500k on the lot) and we owned 45% of that. All told, our personal commercial holdings were around 1.2M, and our house was a wash (and possibly about to become a liability). We didn't know what 2009 would bring (and we had already discussed selling it the year before to move to a quieter street), so we put it on the market and sold it before the election (I figured they'd stop propping up the economy as soon as the incumbents were back in office). Our debt was cut in half, our living expenses went from 4k/mo to 1.5k/mo and our cash flow went up!
In all these endeavors, it has often felt like the universe moved through me... like I was just a vessel for cool things to happen - a conduit for a lot of energy. In less than 4 years, we had gone from having about 220k in net worth to having 1.2M, basically adding a Million Bucks to our asset column. For her part, my partner has been holding down the fort making sure the kids are taken care of and bringing home our 'living money' while I've been gone a lot of 12-18 hour days over the past few years. No wonder there are days where my body feels whacked! No wonder. Nicole is finally able to have a break now... going down to working 3 days a week. And while my work has slowed way down, it hasn't stopped either... there is much to do just to manage the places now that the renovations are complete. I think I need to give myself permission to slow down a bit... catch my breath... reconnect with living -- make food, write poetry, play guitar. watch a show; I still remember those things. And most of all play with my kids before they are grown. Most of all, play with my kids...
Added in 2017: I guess that was my answer... if I had a million dollars, I'd play with my kids! :-)
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