Lending Club Experiment: Done

I think 1/18 is the date I purchased 200 notes through Lending Club in 2015, so today is as good a day as any to pull the plug on that experiment.  Lending Club is not a bad investment in my experience.  And with my roughly 6% return over 2015, LC seems like it was a better investment last year than the stock market.  So here are a few reasons why I am 86ing this investment now:

  1. I could use the cash flow for my new investment project (my house)
  2. LC interest is taxed as ordinary income whether you reinvest it or withdraw it
  3. I am not that good at LC

A little background on LC: LC is a peer-to-peer lending company in which I invested $5000 about a year ago.  This bought me 200 $25 “notes” or loans to individual borrowers.  200 is the minimum investment LC advises to be adequately diversified against risk of borrower default.

The notes are all 36- or 60-month, and the payments made by the borrowers each month are divided among the $25 note-holders.  So after the first month or so, I started receiving $50-60 in interest each month.  I had set up “auto-invest” which automatically picks up a new $25 note as soon as your account has $25 in it.  Since I was getting on average $55 each month, my account would automatically add two new notes, with a few dollars left over.

So where does my Lending Club account stand after a year?

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Lending Club snapshot one year out

Basically this snapshot is saying I have probably made $311.46 in interest on my $5000 investment as of today, after adjusting down from $593.94 to account for prior (and likely future) late payments and charge-offs.  The snapshot calls the adjusted ROI 7.72%, but after tax it will be more like 6%.  The snapshot also shows that I have 301 notes, up 101 from my original 200 note investment.  That’s pretty crazy, that my little nest egg generated 50% additional notes in just one year.  So why did I wind up with only 6% ROI, compared to the 8% and 10% tales I have heard from other financial independence and investment enthusiasts?

I am probably not that good at Lending Club.

You will notice I had 7 charge-offs in the one year; I am guessing that is a little above average!  Most charge-offs happen immediately as a scam and mine appear to be no different, so this has cost me just about $175 in losses against my interest earnings.  Without setbacks like charge-offs and missed payments, my true interest earnings of $594 would have achieved a remarkable 12% ROI (or a very decent 8.5% after taxes).

Avoiding charge-offs is the name of the game with p2p lending.  But unfortunately I have neither the time nor the inclination to weed out “bad bets” with the filtering tools LC provides.  I trusted LC’s fairly rigorous screening system to provide moderate protection.  And part of this experiment was to participate in an economy in which less-than-stellar bets would also have a chance to enjoy wiping out debt or paying medical bills.  So while it has been interesting, this is probably not a good long-term fit for me at this pre-financial independence point of my life.

Overall I guess you could say that even an extremely risk-tolerant, and yet carefree and spacey investor like myself could fetch a 6% ROI with LC while paying no attention whatsoever.  That’s not so bad.

But I will still “pull the plug” today.  Even divestment is not so dramatic with LC.  I will just click a button that says “Pause Auto-invest” and $50-60 will stream into my bank account each month rather than into a couple of new notes, until all the remaining notes have been paid off or charged off (but I seriously hope the former).  You can only sell notes on a sad secondary market within LC, so I will just stick it out and enjoy the cash flow.  It will help with my antique house renovation: where the wallpaper is holding the wall together, so it must stay.

Does this post make anyone want to get your LC on, or off?  Or buy an old house?

 

Can’t overlook these assets!

Fixing up a fixer-upper is like peeling an onion… you just cry until it’s over and hope you don’t cut yourself before you’re done.  Am I right??

I had written previously about the kitchen sink in my fixer-upper, asking what folks think it might be worth.

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The sink

Turns out I almost seriously overlooked this asset!

I originally assumed I would need to beg $50 for this, or even pay to have it hauled off.  But this assumption proves that even in the most soul-crushing, bone-tiring, anxiety-ridden times of home renovation, it pays to make more coffee and do a little extra curricular homework.

Far from my view of this sink as a chippy, impractical, oversized pile of metal, there are many out there who are actually looking for a vintage drainboard sink.  And dual drainboards are better than a single drainboard on one side!  Many sinks out on the vintage drainboard sink market don’t even have the metal cabinet base!  My item here appears to be some kind of a collectible with an inherent value.  But what is the value?

Obviously, I want to make as much money on things going out the door as I want to save money on things coming in the door.  The obvious options to me are:

Craigslist (local option)*

  • Pros: easy/free to post an ad; the buyer hauls the sink away; “quick” cash; I can walk away and feel like I made good money
  • Cons: local forums fetch lower prices due to locality of customers

eBay (fancier remote option)

  • Pros: I can probably fetch a better price here than Craigslist due to larger audience
  • Cons: need to deal with shipping, and remove shipping cost from my price to be competitive; buyer could be dissatisfied with quality and have a case to return sink

*There are other local options like a local brick&mortar antique store, which I discounted because it would have the same low price ceiling as Craigslist and I would need to deal with dealers.

So what are the price ranges for these two options?

Craigslist: based on ads for similar sinks for $995, $300, and $1500, adjusted for size and quality/cleanliness of the sinks, I think I could reasonably post an ad for $800 and expect about $600.  Hey I might not get anything like that, but based on other ads I don’t think this is outrageous.

eBay: found similar sinks listed for $300, $900, and $1000, but these have not sold yet so these are only partial data points.  However my sink is in considerably better shape than all of these, so I would be comfortable putting up an ad for $1200 and see what happens.  I would need to talk to USPS/UPS about shipping costs, which might impact my asking price.  If shipping is more than, say, $300, that would tip the scale back toward Craigslist.

http://www.historichouseparts.com: for reference I checked this famous restoration site and found a couple similar sinks that have already sold for $875 and a whopping $1800 (and check out how ugly that one is).  Most of the vintage sinks on this site did not have the cabinet base, and these were in the $300-$500 range.  Most sink basins were not in great shape by admission (not re-finished), which was reassuring.  It turns out HHP is located in Rochester, NY and operates locally only, so this is not an option for me.  But it is good to see what a professional dealer thinks these are worth.

Bottom line: due to my extreme distaste for dealing with shipping, I think I will put this up on Craigslist first to see what hassle-free price I can get.  If that does not work, I will try eBay. My mom, an antique dealer, attributes price mainly to “luck.”  Thanks Mom!

(PS my mom helped me with my price estimates, not just her ‘luck’ comment.):)

Sweat equity: extra perspiration!

This is what really sweaty sweat equity looks like.  Spoiler alert: it’s not that interesting!  It’s hard to get good photos when everything is getting dusty, your phone is hidden away for protection, and you are wearing gloves.  The flooring guy asked why I am taking up all the carpet myself.  The best reply I could come up with is because I’m cheap.

Here are the dark ages of carpet, the first hour I owned this house, before I promptly ripped up all the first floor carpet that afternoon.

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Already brighter even with the pile of carpet.  This is the same afternoon if you can believe it.  This is a different view of the first room shown above.

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That streaky stuff is dried and pasty former carpet padding, which is why I was talking to a flooring guy.  Everything I have done so far has been basically free, but the floors will need professional intervention next.

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Some portraits of yours truly.  I snagged these coveralls for $37 at Cabelas.  I already owned the sweet hat and respirator mask.  I might just go as a house renovator for Halloween.

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Bathroom progress.  I can’t believe they carpeted a bathroom.

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More carpet mysteries.  Under the *kitchen carpet* was… yet another carpet.  AND some tile under the 2nd carpet, not shown.  And then more hardwood under that.  Salvageability TBD.  And don’t get me started on the mindset of a person who would glue tiles to perfectly good hardwood.  PS the bathroom also had tile between the wood and carpet.

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The Stairway to Heaven… the heaven of not having to work on the stairway anymore.

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Consistent with the prevailing theme, I did not get a “finished” picture because I jumped for joy and immediately started drinking beer as soon as this was done.  I calculated that it took me about 30 min to strip a single stair, but after 3 stairs my arms would go all jiggly and I could not do anything else for the rest of the day.  So in effect, stripping 3 stairs took me a whole day.  And there are 12 stairs, as every single flooring guy pointed out in his respective quote.  I now see why they charge extra.  Stairs are terrible.

I couldn’t capture why it is so hard to strip stairs in the photos.  But it has to do with stripping tack strip from vertical surfaces while balancing on stairs with little leverage, followed by carefully pulling stapled padding out without ripping it.  You avoid ripping by basically rolling it over and pushing it over on itself (if you just pull up, the woolen padding will pull away from the staples and make a hole, and you risk having powdered rubber padding flying everywhere).  And you have to do this while pressing your hands on the business end of the staples, because if you did it right the staples came out with the woolen padding.  It’s basically just terrible.

And finally… some oddities.

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That pale stuff in the upper left corner is some sort of linoleum paper designed to look like hardwood.  Stapled to actual hardwood.  Don’t ask me.  I don’t know.  And the small black dots represent thousands of staples still left in the floor which I had to pull out with needle-nose pliers one by one.

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This is one of two phones left in the house, both rotary, both from a time when Hudson was apparently part of the 617 area code.  I am not sure yet whether they are quaint or creepy.

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So that’s what I’ve got for now; I would estimate that my friends and I have put at least 60 man-hours into reno.  If you were counting, this could be estimated to be worth about $4K.  But I won’t count, since I have not been tracking and because I would basically be doing useless stuff with my time like reading Facebook otherwise.

The Dump: my new favorite place

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Several people have made the “joke” (really just the unfriendly, unhelpful, not funny at all comment) that as a new homeowner, “everything will cost more than I think.”  I really can’t stand this kind of remark.  It is like when people pass you in the hall at work and say “having fun yet??”  There is no dignified response to this.  It is just not cool yo.

And I get stressed out when people suggest that something will cost more than I have planned.  Actual high costs of things do not stress me out, but people projecting a higher cost for something that has not happened yet drives me up the wall.  Because I do not like people telling me what to do or acting like they know more than I!

But in one case at least, I surpassed my own super-cheap expectations of frugality.  The heavenly oasis of spending much less than you thought to eliminate horrible problems from your life?  The town dump of course.

Picture it: Tuesday this week, 2:30.  My buddy and I arrive at the dump in his huge, beat-up old pickup, only to become absorbed into a sea of even larger hunter green waste management trucks doing (apparently their usual) Tuesday afternoon business.  Dumping tons (literally) of smelly trash.  But we made our way up the line with predictable New England efficiency, and unloaded half of my houses’s carpet in 11 minutes flat.

Not only that: it cost pennies at the base $35 for this load of trash.  I assumed that the dump’s pricing of $100/ton meant $100 for up to one ton.  But $35 is the cost for up to one ton, which we did not remotely approach at 380#.  And we filled the truck exactly to the brim, just a hair short of having to tie things down to prevent hazardous droppage in the road.  So this entire activity was completely efficient and cheap.

Bottom Line

With the $18 or so I spent on pizza fixins for Pizza Payback Party with my friend, my costs came to $53 for this effort.  Since I assumed $150, this is pretty great.  Also, the dump is a great place to unload up to 1999 lbs of anything non-hazardous/non-electrical without even needing a town sticker (in my town anyway) for $35.  I’m sure this won’t be the last time.

How much do you think it costs to dispose of carpet?

So I bought the Chocolate Cake house (yay!).

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Then I got the keys, went inside, and started ripping out all the carpeting.  And I learned that carpet is quite large!!!

pile of carpet

(This is just two rooms of carpeting.  Every single room, including the bathroom, has carpet.)

At first I thought I could cut up the carpet into handy 2′ x 2′ squares, shove them in my car, and head down to the town dump claiming it is totally normal trash, nothing to see here.  But with all this I realized once again that I was naive and sadly mistaken.

So I am plunged back into the usual algorithm for taking care of problems frugally:

  1. Would anyone want to buy this item off me?
  2. What is the next cheapest option?  Is it reasonable?
  3. What’s the next option?  And how much would I be willing to spend? (It is interesting to set a limit in advance, to stave off the madness and to see whether your expectations align with reality at all)

Well, I think it is pretty obvious that no one wants to buy this aged, faded, stained carpeting and carpet padding off me.

So I started thinking of the other options, which generally require me to pay.  My friend had mentioned that she rented a dumpster for about $200, which I will admit sounded expensive to me.  So I decided that is the upper limit of what I would pay.  I priced several dumpster rentals to see if I could do better.  But clearly my friend must know something or someone, because the cheapest rental I could find was $274 (it went up to $450 for basic, small dumpsters).  This became my new most expensive option.

Then I called the town dump, into which I was previously going to smuggle squares of carpet disguised as normal consumer trash at $1/bag.  It turns out they take carpeting, and charge $100/ton.  Which prompted me to ask the guy “well how many tons do you think carpet weighs?”  He actually answered “I don’t know, but I doubt you have a ton of carpet.”  The most refreshingly literal description I have heard in a long time.

So dump it is I think!  And I don’t even need to cut up the carpet like I was going to originally.

Only other question is getting it there, and I figured I could borrow my buddy’s truck and take him to a snappy dinner, or rent a truck at Home Depot; both of which probably cost about $50.  My friend turned out to be on board, which wins in the fun category.

So I will see how much carpet actually weighs and costs, but based on the nice dump guy’s evaluation, I would say the best value for getting rid of carpet is about $150 including transportation.

Would you buy a Chocolate Cake House?

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I would.  And I am!  Because when I ask myself “do I want an austere, respectable residence, or one that resembles a confection?” I know the answer.

My idea, as I could not simply go live in a house, is to try to fix this fixer-upper and get out of it at least what I put into it.  Much as I would love to disclose all the juicy details and turn Yay Goodies into a house reno brass tacks blog, I would not want a potential buyer to ever access this information and decide that they want to offer less on Abode a la Mode.

But I will say this: I think I got a decent price for it, about $50K lower than the average purchase price of the other similar houses in this neighborhood over the past 5 years.  As well however: the bones are good but the rest is seriously questionable.  Epic amounts of DIY and professional intervention will transpire.  Here is a taste of what I have planned:

Immediate term (0-3 months out)

  • Rip out all carpets (immediately); open all windows; light fruity candles
  • Gas service installation before winter
  • Install gas washer/dryer combo (sellers took the washer/dryer)
  • Replace all candelabra-style chandeliers with something from the 21st century
  • Add hose extension to faucet on single bathtub in house (seriously how did they wash their hair and rinse shoulders etc.???)
  • Take strange cardboard tiling off of bathroom walls and tub
  • Install dishwasher
  • Start to sort out hardwood flooring

Mid-term (4-6 months out)

  • Add gas heating system
  • Get architect to plan garage addition options (-bay or 2, and single story or two-story with master suite above, depending on cost and zoning regulations)
  • Plan out main house reno options based on most likely addition option
  • Keep working on flooring throughout

Long-ish term (6-9 months out)

  • Get contractor to add attached garage
  • Paint house and addition some exciting new color
  • Move current kitchen sink to new mudroom/laundry room

Longer term (9-12 months out)

  • Update kitchen a little or a lot with backup sink; take down wall to living room maybe
  • Finish updating bathroom based on how much everything else cost

So if you ever wanted to see a real-life house reno in detail, stay tuned.  The nice thing about these updates is that they are modular, and for the most part vary in price directly with time.  I could probably stop at any point and still be in good shape.  The main cost items here of course are the gas conversion and garage addition, but I think gas and garages are highly desirable.

So I guess stick around, and I will show you honestly what a cake can turn into.

The people have spoken: YES PARTY!!

So I asked whether it is pompous to throw yourself a debt-free party.

According to 13 of the 15 people who voted, the answer is no way, definitely party!!!

One bah-humbug voted “pompous,” and one other person voted “other,” which I assume is some cheeky person’s way of pointing out that I left a pointless default vote option in there.  And I have a couple of choice people in mind that this could be.

Anyway, it was interesting for me to see how many people would be into the party idea!  I was glad to see, especially for my friend, that people would be happy to support your financial accomplishment.  I had a feeling that people are essentially very cool.  This is a much better state of things than if I had to eat my hat and accept a sad reality that we are surrounded by bah-humbugs and that bah-humbugism is the de facto norm.

But if that were the case, what would be the point of doing anything difficult?  Why did champagne even get invented?  Hmm??

Throwing oneself a debt-free party: fun or pompous?

My amazing younger friend recently freed herself totally from debt!  She brought out the big guns and accomplished this in just a few years on a nonprofit salary.  No excuses!

Being also fun, bubbly, and with a healthy appetite for celebration, my friend immediately considered the idea of a debt-free party.  (I may have influenced the idea with my own previous interest in a debt-free party for myself, which did not work out.)  I was all for this idea for my friend.  I think we need more excuses for parties in life!

Then I was disappointed to hear that she went off this idea because some friends thought it sounded “pompous.”

Without influencing the topic much more, I am curious what others think about this.  If we can celebrate other peoples’ engagements, job promotions, graduations, and even birthdays (which are totally arbitrary), how is debt freedom not worth celebrating?  On the other hand, is asking your friends to celebrate your financial accomplishment somehow injurious or insulting to them (especially if they are not there yet)?

So I wanted to put it up to a vote…

In frugal land, the thief saves you money.

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The Android bug game

I’ve taken a hiatus of sorts from writing this blog.  And I thought I would have some profound, captivating topic to start back with, if ever.  But this is the way the cookie crumbled.

Well, I let my phone get stolen in the most hipster way possible: I forgot and left it on my bike outside the library while I was checking out books.  Womp womp…

But all is well because I get to save some money.  See, I had been floating along luxuriously with an elaborate but expensive AT&T plan at $60/month (an outrageous 5 GB of data per month, free texting till the cows come home, etc.).  My contract ended in March, and my intention had always been to switch to Republic Wireless as soon as my AT&T contract ended.  But here I was at the end of July, still luxuriating.

Maybe on some level I was following my natural instinct to put off making a large purchase if possible.  But this is one of those rare cases in which a large purchase would actually allow me to save money.

Here’s how I figure: the traditional major carrier model was to sell you a subsidized smart phone for about $100 as long as you agree to a two-year contract with a monthly service fee of about $60.  Presumably some of the comped cost of the phone is actually hidden in the $60/month fee.  And then if you lose/break your phone within the two years, you’d be on the hook to buy a full price phone (about $600 for a Samsung Galaxy S6) without “upgrade.”  (Put this way, I am starting to see why someone would steal a relatively functional and well cared-for Samsung Galaxy S3.  I assume thieves do not take care of their things.)

On the flip side, you could try to hold out with your phone beyond the minimum 24 months to forestall the next $100 phone purchase.  But the spread out-cost of $4.16/month if you keep your phone for 2 years or $2.77/month if you keep it for, say, 3 years is really negligible compared to the $60/month ongoing plan fee.  No matter what, you are paying at least $60/month over time, and potentially much more if you lose a phone and need to buy another.

Republic Wireless has two modest phone models which use VoIP when within WiFi range.  You must buy one up front, at full price: $130, or $300, respectively.  Then they have a variety of plans from $0/month (WiFi use only) to $40/month (unlimited everything I think).  They assure you that with the VoIP capability and automatic WiFi switching, you will only ever need the $10/month plan max.  But I signed up for $25/month just in case.

Republic’s monthly fees are so low that it does not matter even if you spring for the $300 phone.  When you average out the $300 phone and a $25/month plan over two years, it comes to about $37/month vs. AT&T’s approximately $64/month from above.  If you can keep a Republic phone running for 10 months, your Republic plan will pay off (relative to my $60/month AT&T plan anyway).  Imagine that: maintaining an AT&T plan costs the equivalent of buying a brand new, full price Motorola smart phone every 10 months at Republic.  Now that would be indulgence!

So this turn of events helped me start saving money earlier.  I might have gone on with the old phone another 6 months maybe, but that would have actually cost me $162 (difference in averaged monthly costs * 6 months) for the luxury of not getting cheaper sooner.

Thanks clown!  I will go enjoy my cheaper, state of the art phone now.  You can have my cracked, sweat-soaked AT&T shackle.

UPDATE: I checked out the phones on AT&T’s site out of curiosity, and it looks like now they force customers to finance the entire cost of a new phone, over a required 30-month contract.  Did my eyes deceive me?  That arrangement is totally bogus.

By comparison, my new Republic Moto X has solved a number of my life problems since I took it out of the box 16 hours ago.  And I was asleep for 6 of them.