Dec 082014

Assets are there for one purpose and one purpose only – utility. They are there to provide income, to provide shelter, to provide for life. An asset un-maintained is an opportunity wasted.

An often overlooked asset is earnings ability. Stepping off the corporate treadmill is a choice that could drastically affect this asset, a conscious choice to trade the income for a better quality of life?

The real question at the moment is how best to utilise the “salary” asset. A second rental house? There is risk – risk of debt but more so, risk of not feeling the ability to step out. But maybe, if managed correctly, if purchased well below resale value, if “guaranteed” rental income covers the bond, then just maybe it’s a risk worth taking at this stage?

Lets see if they accept a ridiculously low offer….!? Is this a con?

Our strategy of dealing with this has evolved over the years into 2 basic areas: i) limiting Our spend & ii) developing self-sufficiency. We’re not in the same league as extreme preppers but can certainly see value in some of their philosophies.

The big question for me is how to still further decrease our dependancy on the system? There are risks everywhere but I feel the risk of economic bank failure greater than corrupt politics. To have all ones eggs in the markets is perhaps too risky at this point in world history?

To be honest, we have achieved some measure of success in isolating ourselves. The bike is a good example, a tool that buys me time in this horrendous traffic. As with all things though, it isn’t without risk. It’s just simply that, for me, the risk is worth taking for the added time freedom it brings me. and by careful riding I’m feeling the risk reduced and manageable.

On the financial front I currently have the luxury of the “earnings asset”. I’m wary of using it to it’s full extent by going into more debt for another rental. The top three perceived risks being i] more debt will restrict my freedom; ii] don’t have the heart for tenant hassles & iii] dont want to continue my coupling to the Shitty of Joburg. But, as with the bike risk there are ways of mitigating, reducing to acceptable levels, the risk.

Not all debt is bad, especially for a rental. If we stick to the plan, buy low, keep the rnovation costs low, we’ll have an asset we can either sell if life turns too hard or that will give us an inflation linked income, decoupled from the financial markets and the banking world. In addition, if S gets her way, our anchor tenant will be quite reliable because she controls it. Plus, B’s future digs are sorted. There are some negatives but the longer-term advantagae seem to far outweigh all else.

Maybe another rental house is not such a bad proposition? It’s just a pity that it seems so contrary to the plan to ditch Jhb and head for the ocean !? It does however provide some positive options, that of keeping the current earnings potential [both S and myself] and providing B some sort of ongoing step into life.

By all means, plan, but don’t behave as if the plan is set in stone. Agility is key.

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