Here’s the first of our updates on our personal assets, income and savings. Our big news for July? We bought a new home with cash!
So here we are in July 2021…we’ve pulled it off!
When we decided to sell up in Brisbane move to Tasmania in mid 2020 we had one thing on our mind. Financial freedom. We cooked up a plan during the lockdowns of 2020 to pimp our home with some clever DIY renovations and sell up. Our aim was to take our profit and our savings and buy a house for cash.
It’s a strategy called geo-arbitrage and you can use it to bring forward your financial freedom date, just like we have.
We worked out that Tasmania was a viable option for us to pull off some crafty geo-arbitrage. Tassie also provided the sustainable living, self-reliant lifestyle we were after. We wanted no neighbours, a spectacular view and some room to grow food. Most of all, we wanted to lower our living costs.
After three months of careful searching, we’ve pulled it off!
How geographic arbitrage smashed our housing costs
In many cases homes are not assets (an asset puts money in your pocket at the end of the month). This is generally dependent on the type and cost of housing. When we moved to Tasmania we wanted to buy a home that we could count as an asset. Let me explain how we’ve found exactly that.
Our cost of housing in Tasmania will be around $3500 per year.
Here’s the breakdown.
|Typical housing costs
|Our new home
|$0 – owned outright
|$0 – two tanks and pumped creek water
|$0 – Septic
|$0 – pumped grey water system
|$1900 – grid but soon to have solar PV
|Heat / cooling
|$800 – daytime from solar + wood heater
The way we’ve wrangled it, as long as our home appreciates in value by >$3500 per year, we can count it as an asset. We figure that’s likely given the strapping pace of inflation, at least in the near term. We also calculated our Brisbane housing costs by way of comparison. Here’s what that looks like:
|Heat / cooling
What this means for us is that we have to make $23,000 less in income each year to live in Tassie. And that’s just housing costs. It’s not living costs.
Geo-arbitrage is an underrated weapon in the arsenal of any financial freedom seeker because you can use it to cut one of your biggest living costs – housing.
Our net worth
As at July 2021, our net worth is north of $1.5M. Just goes to show you don’t need millions to be financially free! You just need to kick ass crafty about it. 🙂
Our good debt position
Our net worth is calculated after debt is deducted.
We hold (indirectly) good debt on our investment properties. I say indirectly because we have company and trust structures in place. So the debt is not on our personal balance sheet. These mortgages are paid by other people, through the property investment and management company we run. These investment properties are assets not liabilities because they put money in our pocket each week as you’ll see when we get to “Income’ down below.
Our bad debt
We have zero bad debt at the end of each month (bad debt takes money out of your pocket). That’s right. Zero. The only bad debt we carry is credit card debt, which is cleared in an auto sweep of the card. Every. Single. Month.
We do use our credit card to give us free stuff. We direct all of our expenses through the credit card to earn cash rewards, which we use to buy groceries. So far this year we’ve earned roughly 77,000 points or $350 worth of free food.
Credit cards can make you money if you use them the right way.
Our July income
About half our income this month was rental income. We worked 4 to 5 hours a week for this income. We’re still keen to save and invest so we had earned income in July as well. Our capital gains is mostly from shares we own. We also had a small bit of income from cryptocurrency. Our profit income covers things we like to do on the side – retail arbitrage (reselling), cash rewards, and other online income. We’re working on diversifying our income streams further in the medium term.
Our July savings rate
Our next asset investment?
A solar PV system.
We’re still a bit too heavy in cash so we are looking for new investments. (Cash is trash). We’ll likely buy a solar power system, which we expect will produce an ROI of 23% year-on-year, with a payback of 4.25 years. Not a bad outcome.
We’re also busy building digital assets that will pay us an income in the future. More about that later….