The One In Which I Buy A Second Tesla

In August of last year, I gave up on my dream of buying a Tesla using passive income and just bought one using a loan. I explained all the reasons why in this post, but to sum up, there were just too many negatives in waiting to get enough passive income.

Now it's time to replace my wife's car and we opted to get her a Model 3. With this purchase, I'm likely not going to post daily details of the buying process like I did the first time around. I expect the process will be fairly similar, so I'll only post when things are different than they were before.

We've decided on getting a red Model 3 with the dual motor long range battery option. That gives us the same range as the Performance version (310 miles), albeit with a slower 0 - 60 time. But my wife isn't going to be drag racing any time soon (I hope), so we're fine saving the $11,000 extra the Performance version costs. I did want the dual motor version. I've got dual motors in my Model S and it made a big difference in the recent snowy weather we had. I also think it makes sense to buy the biggest battery you can. You never know when that extra capacity will come in handy. Look at it this way: if a gas car came with a 5 gallon gas tank or a 12 gallon tank, would you ever opt for the smaller one?

We did get the Enhanced Autopilot, which is a $5,000 option. After using it during my daily commute and during our cross-country road trip, I can't imagine owning a Tesla without this.

My wife also opted for the black interior, which is standard, and the red paint, a $2,500 option.

Funny story about the color. The Model 3 comes in five colors: black, silver, blue, white, and red. Black is standard and no additional charge. Silver and blue are an extra $1,500. White is $2,000 and red is $2,500. My wife doesn't like white or blue, so those were out. (Sadly. I really like the blue and wanted my car to be that color. Alas, she liked the silver and she won on that decision, but it was ultimately the catalyst for buying the car at the time, so I can't complain.) She didn't want silver for her car because that would be the same color as mine. That left black or red.

Black tends to show dirt really bad. My mom had a black car when I was growing up and I remember having to wash it all the time. On the other hand, we were worried about red attracting police and generating more tickets. That, it turns out, is an urban myth.

My wife couldn't decide between the two colors, so on our recent trip to Las Vegas she decided to let random chance determine her choice. She played roulette. If black came up, she'd get black. If red, she'd get red. Well, she played two spins and black came up both times. However, she ended up not sticking to her rules and decided to get red after all.

Things Are Different From Last Time

Right off the bat, there are two things that are different in the buying process this time around: The federal income tax credit has been cut in half to $3,750 and the loan interest rate has gone up to 3.75%.

When I purchased my Model S, the income tax credit was more than the total interest I would pay over the life of my loan, meaning I was borrowing money for free. Things aren't quite so rosy this time around. I'm putting down about 25%, so my loan amount will be roughly $44,100. On a 72 month loan at 3.75%, I'll pay $5,216 in interest charges over the life of the loan. Subtracting the $3,750 tax credit means the true cost to me of borrowing money is $1,466.

The good news is I can still get my total interest cost down to under the tax credit amount. The monthly payment for the above loan is $685. I am currently saving $967 each month towards this car. If I apply that entire amount to my loan, which I will, my total interest paid drops to $3,552 and my loan will be paid off in four years instead of six. If I do this, the federal tax credit will more than cover my interest costs, just like it did with my car.

So, just like with my Model S, even though I am taking out a loan, the cost of borrowing money for me will be zero.

I may be able to eke some more savings out of this. I am currently paying extra on my Model S loan. That loan has a current balance of $95,365 and I'm paying 1.74% interest. The loan for the Model 3 will be $44,100 at 3.75%. I'll need to run the numbers to determine where I save the most money by making extra payments - the higher balance, lower interest loan or the lower balance, higher interest one. I'll wait until we've actually taken possession of the car and everything is finalized before making that calculation.

I did notice what appeared to be a price discrepancy on the website. The price was shown in two different locations and they were not the same:

I downloaded the actual purchase agreement and it turns out the difference is due to destination and documentation fees.

I Didn't Forget The Tax This Time

This time around, I also remembered to reserve enough cash to pay sales tax on the purchase. When I bought the Model S, I assumed the tax would be included in the loan, but it was not. This left me scrambling for some extra funds.

Another change in the buying process is you can now enter a dollar amount for your down payment. Back when I bought the Model S, you could only enter a percentage of the purchase price. This is a welcome change.

Home Prep

I will be purchasing a second high powered wall charger. I could probably get by with the one I have, as I got the longer cord and it will easily reach both cars in the garage. However, that will make charging a pain in the ass because we'd have to remember to move the plug from one car to the other. I suppose we could charge one car one day and the other the next, which might not be too bad, but still.

I already had the major electrical work of getting a new electrical panel and 100 amp circuit installed done, so I won't need to pay those costs again. I will need to spend about $500 on a second wall charger plus whatever the electrician charges to hook it up. This nice thing about the wall chargers is they can be connected together in a load balancing configuration. This allows two chargers to share the same 100 amp circuit.

One thing I am completely ignoring in these calculations is the trade-in value of my wife's car. She has a 2010 Prius with 138,000 miles on it. Honestly, it has several scratches in the paint and it's not in the best of condition. I'm planning on getting about $1,000 for it, but I'm doing my calculations assuming I get nothing. I checked the Kelly Blue Book value and, even for a car in fair condition (their lowest rating), they say it's still worth between $3,500 and $5,300. Whatever I get for it will just be icing on the cake.

Wow! While in the process of writing this post, Tesla came back with a trade-in offer of $4,750! That's kinda crazy (but I'll take it). When I traded in my old car for the Model S, I had to take at least 10 photos of the outside and inside of the car, tire treads, etc. before they valued it. I had to do none of that this time around.

I called Tesla and asked about this. I was told if the value of the purchased car is under $60,000, they don't make you do all the photos on the trade in. When you pick up your car, they just do a cursory check to make sure the car functions. Either way, I think their offers on trade-ins are really fair.

One thing I am really surprised at: we placed our order on February 19 and Tesla said we could expect the car to be delivered in February! That's only 9 days max! We'll see if that holds true.

My wife has yet to decide on a name for her car... Any suggestions?

Tesla Winter Performance And Wheel Repair Photos

Snow Days!

On the first weekend in February, the Seattle area got hit with the biggest snowstorm they've had since I moved here last year - 8 to 10 inches. Granted, that's not much compared to what the East coast gets, but it's pretty rare for this area. School was cancelled for three days and I worked from home all week instead of just two days,

The snow itself wasn't bad. It was the icy roads that caused the problems. It was particularly bad around our house. We live near the top of a mountain with curvy roads leading down into town. Evergreen trees overhang much of the road, meaning sunlight doesn't reach the pavement to melt the ice. Driving is quite treacherous in some spots.

On the third day of staying at home, the snow appeared to be lessening and I attempted to go in to the office. I only made it about 3 miles, before deciding to not risk it and head back home. I posted a couple of the dashcam videos to my YouTube channel.

Spoiler alert: These are the most boring YouTube videos you will ever see.

This video shows just one of the hills I have to go down (and up) to leave my house. There is another way I can get into town, but that has more downhill curves, so I figured this was the safer route. In this clip, you can see one car (a Jeep Wrangler) stopped on the side of the road. I'm not sure if he tried to make it up the hill and couldn't or what. The car in front of me was a Jeep Cherokee and I waited to make sure he could get up the other side. I figured if he could, I could too.



The second clip gives you an idea of the conditions I was driving in. It was at this point, I decided to turn around and head back home. Towards the end of the clip, you can see the snow being blown along the ground, which gives you an idea of the wind.




This last clip is me going back down the dip I just went through. It's only about 4 minutes after the first video and you can see in that short time, a van has spun out and gotten stuck. I'm not sure if the car in front of the van also got stuck or had stopped to help the driver of the van.




All in all, I actually felt pretty safe. The Model S is heavy and only slipped slightly once, as I passed the van in the last video. I had my foot lightly on the brakes. As soon as I felt my tires slipping, I took my foot off the brake and let the regenerative braking do all the slowing for me.

Ice Tests

Because I grew up in Southern California and lived many years in Arizona, I'm pretty inexperienced with driving in the snow, so I was going very slow and being extra cautious. The next day, the street in front of my house had a solid ice patch about 100 feet long. There was no one around and it was a straight stretch of road, so I decided to see how the computerized car handled on ice.

I drove slowly onto the ice patch and then stomped on the accelerator for about a half a second. I felt the wheels start to slip, then the computer kicked in and limited power, causing the slipping to stop. The car felt under control at all times.

I then did the opposite test - I drove onto the ice and braked hard. The ABS engaged and I felt the pedal pulse under my foot as the car came to a smooth stop without sliding. This experience wasn't that new to me, as I have experienced ABS in action on other cars.

The car handled really well on ice. Now, I was going in a straight line, so the chances of me spinning out of control were pretty slim. Still, it was good to get a little bit of experience of the car's traction control systems in action.

Cold Weather Battery Life

I typically charge my car every day or two, so I don't worry too much about battery drain due to really cold weather. However, last weekend, we took a weekend trip to Las Vegas and I was a little concerned about how much energy the car would lose while it was parked outside in freezing weather at the airport. The Seattle area had just had 2 weeks of unusually heavy snow and sub-freezing temperatures and I was worried there might be more snow and freezing rain while we were gone.

I did some Googling to see what other owners have experienced while parking in cold weather and found this article on Teslarati. The owner parked his Model S at the airport for two and a half days at an average temperature of 16 degrees Fahrenheit. He lost about 2.3% of rated range per day - roughly 14 miles total.

Based on that, I figured I would be OK leaving my car at the airport for 4 days. Using his recommendation of 3% loss per day, as opposed to Tesla's 1% per day recommendation, I figured I would lose 12% of my charge while out of town. To be safe, before I left for the airport, I charged to 100%.

When I arrived at the airport, my battery was at 79% and the temperature was 38 degrees F. The article linked to above mentioned putting the car into energy saving mode to help conserve power. I looked for this option on my car, but couldn't find it. A quick check of the owner's manual told me that, while this used to be an option on early versions of the Model S, the functionality has now been automated, so there was no longer an option for users to enable or disable it. (On a side note, I love that the owner's manual is electronic and can be searched from the display screen.)

We left Thursday afternoon and returned Monday afternoon. Here are the high and low temperatures while we were away:

Day	High (°F)	Low (°F)
Thursday		37
Friday	46	35
Saturday	44	33
Sunday	44	32
Monday	44

When I returned, my battery was at 74%. That 5% loss represents roughly 15 miles of rated range lost over almost exactly 4 days. That is more in line with Tesla's 1% per day guideline than the 2.3% the Teslarati article author experienced. Granted, the temperatures for my test were about 15 degrees warmer than he experienced, but all in all, I was happy the loss was less than I expected.

Just like my cross-country road trip eliminated any last vestiges of range anxiety, this test eliminated my fear of losing charge while parked out in the cold.

Wheel Repair

As I mentioned before, I had some curb rash on one of my tires repaired. I'm really pleased with the results. I can't even tell where the work was done!

Before 1

Before 2

After 1

After 2

I spoke with the person who made the repairs and he said they first grind down and buff out any damage to the metal of the wheel. He said not enough metal is removed to affect the wheel's balance and my particular mark was so slight, barely any metal was removed. Then they mix matching paint, apply it and feather it in with the rest of the wheel, then dry it. They actually get the exact color from Tesla, so the match is perfect.

Now I just have to keep from hitting another curb!

Investing For Monthly Income: Dividend Aristocrats And Kings

Photo by Cristina Gottardi

Why I Closed My Self-Directed Roth IRA

Many years ago, I started a self-directed Roth IRA so that I could use my IRA funds to invest in real estate, mainly as a hard money lender. My partner has been having a hard time finding good deals lately, due to the low interest rates. When I started, we could charge borrowers 12%, which is a pretty sweet return. The last couple of years have seen that drop down to 6%. Now that interest rates are rising, we’re back at about 8%, but it’s still not close to what I used to be able to earn.

Besides the lack of deals, the second reason I’m exiting from this is the account fees are pretty steep. The IRA custodian assesses a yearly fee of around $375. I started out with $35,000 years ago and that fee was about one and a half month’s income at 12%. Over time, the account has grown to roughly $70,000 and at 8%, that fee is now less than 1 month’s income. However, deals have been fairly hard to come by over the past year, so there were many months where I wasn’t generating any income.

I also felt like the custodian was, shall we say, not the best. I mean, they are a legit company and everything they did was legal, but they just weren’t very technologically savvy. Their website kinda sucked. It just had the feel of a really small, understaffed company to me, even though they are not. I didn’t feel very comfortable using them now that the account value had doubled.

So I opted to close the account and roll the funds into my Roth IRA at Schwab and invest in the stock market.

(As a side note, I started the self-directed IRA with $35,000 and I ended up with slightly more than double that in 8.73 years. According to this calculator, that works out to an annualized ROI of 8.26%. When I started it, I had hoped to earn around 10% - 12%, as that's what I was getting at the time. Still, this was a Roth IRA, so the returns are tax free and, according to this calculator, that's equivalent to an after-tax return of 11.0%. My returns could have been better, but I was not invested in anything for the last 9 to 12 months I had the account.)

Now that the rollover process has been completed, I’ve got $70,000 ready to invest in the stock market. The big question is how to invest it.

Of Aristocrats and Kings

One of the financial blogs I follow, Wallet Hacks, recently had a post about building a monthly income portfolio. In other words, build a portfolio that recevies dividend income every month. This isn't a new idea and I've heard of many other investors that have done the same thing, but my recent lump sum transfer into my IRA meant I could jump start this strategy with a big chunk of change instead of building it up from zero.

Most companies pay dividends quarterly, although some, mostly REITS, pay monthly. The goal of this type of portfolio then, is to own stocks so that their quarterly dividend payout dates are staggered. Have some that pay out during the first month of the quarter, some the second month of the quarter, and some the third month of the quarter. This way, you have income coming in every month. As a real estate investor at heart, I’m really big on cash flow and this concept appeals to me.

The question becomes which stocks should you buy? Because you will (theoretically) be relying on these dividends for monthly income when you are retired, you want companies that will be around for the long haul and will not reduce or cancel their dividend. Luckily, there is a name for these companies: Dividend Aristocrats.

A Dividend Aristocrat is a company that has had a history of at least 25 years of increasing dividends. Twenty five years is a long time, so these companies tend to be fairly well established and will likely be around for years to come. (Although age is not a guarantee of a profitable company. Just look at Sears.) These are stable companies that have a history not only of continuing to pay, but of also increasing their dividends. This is important over the long term because inflation will eat away at the value of the payments if they do not increase over time.

Dividend Aristocrats is not a term that financial bloggers dreamed up. The list is actually compiled and tracked by Standard & Poors.

But if you want even more security, there is a subset of the Dividend Aristocrats that are even more impressive – the Dividend Kings. These companies have a record of not twenty five, but fifty years of continuous dividend increases! That’s pretty damn impressive. These are stocks you can buy and hold forever and never think about again.

My Choices

I selected three to five companies from the list of Dividend Kings that distribute dividends in the first, second, and third months of each quarter. Below is my list, with my final choices in yellow. The last two entries in the list, the Vanguard and Schwab index funds, I already own and I’ve listed when they pay out dividends as well. I should also note that I already own shares of Coca-Cola, another Dividend King.

First Month

One thing you’ll notice is I didn’t just go for the company with the highest dividend yield. Rather, I choose the companies based on my thoughts about them and my existing portfolio positions. For example, Federal Realty Investment (FRT) Is a real estate investment trust (REIT) has the highest dividend yield in the bunch, as is common for REITS, but I passed on it. Why? My portfolio already contains a large position in Realty Income (O), which is also a real estate trust. As an added bonus, Realty Income already pays dividends each month.

(On a side note, a Roth IRA is a great place to hold shares of REITs. Due to their unique legal structure, REITs are not taxed at the corporate level, which lets them return more money to investors in the form of dividends, but the trade off is their dividends are taxed as regular income to the recipient instead of at the lower qualified dividend tax rate. Regular income is subject to the highest income tax rate, so by holding shares and receiving dividends in a Roth IRA, where the distributions are tax free, you’ve changed the dividend income from being taxed the highest rate to not being taxed at all!)

That leaves a choice between Cincinnati Financial Corp (CINF) and Genuine Parts Co (GPC). GPC is a company that is a distributor of replacement parts of autos and industrial equipment, office products, and electrical materials. They own the NAPA brand of auto parts. Although they have a higher yield than CINF, I ruled them out because I can see there may be pressure on the auto parts industry years from now. Electric cars have very few parts to wear out and the ones that do will likely not be serviceable by consumers. Granted, gas vehicles will continue to dominate the roads for years and years and GPC is involved in other industries than just automotive, but I just feel like this is a shrinking industry.

The only choice left is Cincinnati Finanical Corp. They are a property and casualty insurance company. Insurance is something that people will always need and, being a shareholder of Berkshire Hathaway, I’m very familiar with insurance float and how insurance companies use this “borrowed” money to invest and generate income. Now there will be times when natural disasters strike and that will cause short term hits on income and / or company reserves, but that’s the nature of the business. In short, I like their industry and the company in particular.

Second Month

Three choices here: Colgate-Palmolive (CL), Hormel Foods (HRL), and Lowes (LOW).

I rejected Colgate-Palmolive because of millennials. (Why not blame something else on them?) Consumer trends change and brands that have been around forever, such as Colgate and Irish Spring, are seeing sales declines as consumers' tastes shift away from huge corporate brands and focus on locally crafted, boutique brands. I don’t think Colgate-Palmolive, or Proctor & Gamble, or any other of these huge old-school conglomerates will be going out of business anytime soon. Rather, they will adapt to changing tastes, either by spinning off their own boutique brands or buying up existing ones. However, it takes a while for companies this large to react, and that may result in losses that could put pressure on dividend payouts.

Hormel is out because they are, for the most part, a meat company. Like Colgate-Palmolive, they are subject to changing consumer tastes and buying patterns. Does anyone (outside of Hawaii that is) still buy Spam? I guess they must, since it's still being made, but I don't know anyone who buys it.

The harmful effects of large scale meat farming on the environment are negative and undeniable. Granted, many articles on this topic seem to be quite alarmist, but the negative consequences to the planet are numerous. Changes will be coming and it remains to be seen how that will affect meat producers.

That leaves Lowes. As a homeowner, I’m quite familiar with their stores. Their industry seems, to me at least, fairly recession-proof. When the economy is booming and people buy new houses, they will head to Lowes to purchase home improvement items. When the economy is tanking, people will stay in their homes longer, which means trips to Lowes to purchase repair parts. People will always need a place to live and stores like Lowes and Home Depot seem to have a fairly stable and dependable business model.

Third Month

Dover Corp (DOV), Emerson Electric (EMR), Johnson & Johnson (JNJ), 3M (MMM), and Stanley Black & Decker (SWK). I’m going to go against my previous reasoning here and invest in Johnson & Johnson, a large, old conglomerate. I’m not too concerned about millennials or changing consumer patterns here because J & J doesn’t just sell consumer products. They also sell pharmaceuticals and medical devices.

The other companies either don’t excite me or I know little about their industries (Dover Corp. - manufacturer of industrial products, Emerson Electric - engineering services, and 3M – all kinds of stuff) or they overlap industries with other stocks I own. (For example, Stanley Black & Decker overlaps somewhat with Lowes). So for diversification reasons, I’m investing in Johnson and Johnson as a medical / health care industry stock.

If I allocate one-third of my $70,000 to each of the above stocks, I’ll have an average monthly income of about $146. Not a bad start. And I figure I’ve got a least 10 years to reinvest dividends before retiring, so that should compound nicely. That $146 is also on top of the $136 I'm already getting each month from my shares of Realty Income.

What do you think? Have you made any similar investing plans?


Note: This article is not advice to buy or sell any stock. Perform your own due diligence.

Net Worth Update: End of January 2019

At the end of each month, I post an update of my net worth, including a brief discussion of any notable events that might have occurred. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of January, 2019
Net Worth: $908,548
Change from last Month: -$2,722

Events Of Note Last Month:

My SQL courses on Udemy generated $78.92 of income. My courses on SkillShare, meanwhile, earned $44.95. I also earned $1.31 in royalties from my real estate ebook. Someone read almost the whole book in November, so that $1.31 represents the maximum amount I can earn from each reader. (At least, the readers who read it for free on their Kindle. I don't remember what I earn from people who actually buy it outright.) I also received $45 from a class action lawsuit settlement and that was sent off to my car loan.

I missed posting my December net worth update, but that was probably just as well since the stock market tanked that month. No need to relive that bloodbath. The good news is the market has rebounded a bit. I'm still down, but not too much.

The process of closing my self-directed IRA and transferring the funds to my regular IRA account finally finished! I started this process back in September! In terms of my Mint net worth snapshot below, this means my Property value dropped by $70,400 and my Investments value went up by that amount. This is just due to the way Mint characterizes manual account entries. I've got an interesting idea on how I'm going to invest that money, but more on that in another post.

Our semiannual trip to Las Vegas is happening later this month. I'm pretty excited about this because the last time we were there, we finally qualified for the top tier of the Cosmopolitan's player's club, which means, among other things, we can now get picked up at the airport by a hotel limo! Well, it might not be an actual limo. They have limos, Lincoln Town Cars, and even a Tesla or two! We got a great deal this time - four free nights (although we're only staying 3), $200 in dining credit, and $425 in free play.

Not much else to report on the financial front. Well, one more thing. My company announced the 2018 bonuses this week and I got a nice $9,000. It's not paid out until later in February though, so it won't be reflected in my numbers until next month. I'm sure I'll lose a good chunk of that to taxes, but I've got plans for whatever is left. More on that later as well.

Net Worth Update

The stock market bounced back from the horror of December, but it hasn't yet regained all its losses. I'm still down $2,722 this month over November.

November 2018

January 2019

If you have any questions or suggestions for topics, please drop me a line in the comments section!