How Wellrounded Investor’s Portfolio Has Gradually Turned Into Rental Property Investment?

When I created this website, I created my logo for a “Well Rounded Investor”, I felt that it should contains these 9 ways:

1. Mind/spirit (religion)
2. Health
3. Peer to Peer Lending
4. Housing (Rental Property Investment)
5. Family/Friend
6. Growth Stocks (doesn’t pay dividend, but has potential to growth)
7. Dividend Stocks (REITs or dividend stock paying >3%)
8. Bond and Low Risk Investment
9. Dividend Growth Stock (stocks paying ~1% with low dividend payout ratio, has potential to grow)

 

Yes, the 9 ways that I would invest my time and my commitment to be well rounded. However, at one point I had my stock investment totaling ~ $600K, but it bring home very little “passive income”. I subconsciously identify that if I would dedicate $300K into a rental investment, I would add a substantial amount of income. I didn’t know what I did, until it hit me, I knew it all along from my businesses class in college, all the books and articles that I’ve read, there was one piece that talked about: Pareto’s Principle or the 20-80 Rule.

History of the 80-20 Rule

The 80-20 rule was first proposed by Italian economist Vilfredo Pareto in 1906. Pareto found that 20% of Italians owned 80% of the land. This distribution of wealth observation has since expanded to use in other fields.

Dr. Joseph Juran was a quality control expert in the 1930s and 1940s in the United States who used the principle in his work. He found that the 20% of defects in production could be found to cause 80% of problems later on. He identified this phenomena as the “vital few and trivial many.”

The Pareto principle follows a mathematical power law distribution. The principle’s use has since expanded to other areas in business. For example, in sales, it is said that 20% of customers are responsible for 80% of sales. Thus, it makes sense to focus on those 20% of customers. The 80-20 rule has many different applications, including finance.

So, with this type of knowledge in the background, I guess, I turn my portfolio from dividend investing into rental investment without knowing that I was applying the Pareto’s Principle. (Tricky professor that ingrained the knowledge into my mind?!!.) I identified that I only need to dedicate 20% of my work hours into rental property, and I could bring home 80% of my income. So, I should just focus on that. Here is the break down:

If my total work hour/year: (52 weeks – 6 weeks of vacation = 46 weeks . And I spend 8 weeks renovating, showing, signing contract, repair  = 17% of my total work week). And the my take home income from my job, and take home income from all of rentals is 1:3 ratio = 33% : 66%. It’s not quite 20-80, but close.

Now, you can apply the same principle for blogging, if people likes to click on the “about” page, maybe you’d focus on that.

That is also the reason why most bloggers will drop out, and focus on the “job” that actually bring home the “dough”. Say, people would spend tons of time blogging to no ends, citing a few successful bloggers that can bring home 6-figures income. LOL 🙂 I guess, unless, you’re confident with your writing or have interest story to share, most blogs would just die out.

My focus on this blog is like an outlet for me. I “meet” people online, follow people story, they share their money story, and I feel like I can learn from them. It’s a cool way for me to rambling about my difficult days of landlording, frustration about the stock market, even complaint about my main job.

So back to my 9 ways that I invest to be “well rounded”:

• Mind/spirit (religion)___________________My faith is strong, I pray almost everyday
• Health ______________________I exercise when I can, but lacking lately due to time invest in rental property. The weather should clear up, and I should have more free time now that I don’t have much urgent work to do.
• Peer to Peer Lending ____________ I cut this out altogether, as peer-to-peer lending is higher risk
• Housing (Rental Property Investment) _______is doubling my take home income from my day-job.
• Family/Friend _______________ I’ll spend a week with my sister traveling, I’ll come home to visit for my mom’s memorial day, and I try to call my dad and my sibling more frequently.
  • I’m talking to my husband regarding to moving my mother-in-law into the mother-in-law suit (or one of the triplex, rent-free, but she doesn’t want to.
  • The situation is pretty dire in my mind, as my husband stays with her 3-7 days/week. He did most of the chores – clean, laundry, shop for food, dump her commode bowl, shop for medication, take her to all doctor appointment.
  • She fell several times in a month, bruises on her back. On occasions, she’d call my husband at work because she couldn’t get up on her own.
  • What left is my mother-in-law being cooped up in the apartment. With no interaction with any other people, no socialization, terrible neighbors with aggressive dogs, and throwing trash into her yards, complaint about her, etc. Things start breaking down in the apartment and outside of the apartment.
  • She’s struggling paying her medical bills, food bills, household bills (my husband is paying her food as “rent” money for the room he stays to take care of her :P, and occasionally gives her $5K when her savings go down.
  • Why don’t we move into her apartment? The apartment has very bad feng-shui. It’s situated on the **cul-de-sac (the end of the road), so when you open the front door, you’d see cars coming at you (hence, my mother-in-law is super anxious. My husband was too, when I first met him). On top of that, there are 2 buildings that have the pointy roof, pointing directly at her building. As the result, 2 years after they move in, my farther-in-law died of heart attach, my mother-in-law has never been healthy, my husband got broken wrist, mono, and UC (basically pooping blood 1 month every single year for 23 years, before he met me and have been in remission.) I will never move into this apartment. 
  • What I’m truly concern is her congestive heart failure, she’s probably going to need to get admitted every few months for work-up. She’s starting to have dementia (Sundown Syndrome) She needs more care than just what my husband is providing. What I’m proposing:
    • Move into our house, as she doesn’t have a first floor bathroom, she can’t walk very well let alone all the way upstairs.
    • Get a helper through Medicare (she got one and that person came and boss my mother in law around, so she sworn off). If this helper came to my house, if she tries to pull some of that, she’d be out immediately
    • She’d be close to my husband and I, so whenever she needs help, we’ll be there, instead of my husband driving 30 minutes in fear, something had happened.
    • She’s confused now, and called my husband on the phone. I know she’s confused but the one thing she’s clear is my husband will be at her beg and call, so it only makes sense that she’s moving in.
  • The decision is not up to me, it’s up to my husband and my mother-in-law to make. She knows she needs help, but refuses. I offered more than once. The last time, they turn aggressive, accusing me of several other things, so I’m now in the wounded and back-off mode. I’d just sit back and watch my husband’s health getting worse moving back to his mom’s apartment. I guess, I’ll pick up the pieces when they are depleted.
  • I’m wondering if she loves him that much, why not choose to be with him rather clinging on “independence” when she’s actually dependence. 
  • The same question asking for me why I don’t move in? I guess, if I moved in, I’d get sick too. The first rule of taking care of other people is taking care of yourself first. I’ll do just that.
  • I spent a tons of time thinking about my mother-in-law situation, talking about it, but the result is very little. I’m proposing the 20-80 approach:
    • Put furniture into the mother-in-law suit, when my mother-in-law is back from the hospital, tell her she temporary be here until she gets better. If she’s still miserable, she’d probably go home, if she gets better care here, and happier, getting more sun, more mobile, then she stay. That way, there is no “forcing”. She’d give up 20% of her “independence = her house, she’d still cook and prepare her own meals”, she’d get 80% more time with my husband. LOL :), maybe extra time with me as bonus, or 80% better care.

 

• Growth Stocks  ____ I exit out of BABA stock and other stocks that don’t pay dividend. No estimated time that I’d jump back in.
• Dividend Stocks (REITs or dividend stock paying >3%) – have about $9K invested
• Bond and Low Risk Investment ____ Very little in my 401K in Bonds, 99.99% in stocks and REITs
• Dividend Growth Stock ______ I sold DIS, BAC to fund my rental property. These are actually my favorite stocks. When BAC tanked, it was responsible for 80% of my loses. When it was profit, it was 80% of my overall gain from last year. I might jump back in when the time is right.

Do you subconsciously use the 20-80 Principle? How have you apply the Principle on your every day life or the way you invest?

 

**Cul-de-sac house, the way that it’s situated, cars and trucks would run into these house a lot more frequently than any other house.

You can do something to help with the feng-shui, but my mother in law lives in a very strick association, and she refuses to believe the house is badluck, or bad science, then there is no help.