Creating a Passive Income Symbiote

dollar bills

One of my favorite websites is the fantastic Mr. Money Moustache (MMM).  This website and the book Early Retirement Extreme (ERE) by Jacob Lund Fisker caught my attention a few years ago and the concept of financial independence has been stuck in my head ever since.  There are a number of great podcasts, books, and articles, on the topic and the “FIRE” movement (financial independence / early retirement) has grown into a semi-mainstream concept.

The biggest lesson I took from MMM and ERE is the impact that a person’s savings rate has on the ability to grow wealth.  The flip side to the savings rate is the consumption rate – together they equal 100% of earnings.  The money you earn is either spent and disbursed to another party via consumption – the pizza place, daycare, car payments, etc. – or it is kept and accrued in your accounts – savings, investment account, real estate, etc.

The impact of the consumption / savings rate is laid out most excellently in this post from MMM:

The Shockingly Simple Math Behind Early Retirement

I decided to take a stab at making a simple calculation along the same lines – using a few basic inputs to see the time required to create a “Passive Income Symbiote”.  The goal is to create a passive stream of income equivalent to gross earnings – to entirely replace wage earnings with passive income.  If you can live on what you currently earn then it’s easy to imagine living on that same amount, but with all of your time free to use as desired.  I chose the word symbiote with the idea that the goal is to have the Passive Income Symbiote be the “host” and the person becomes the “parasite”, living on the efforts of the host.

The basic elements for the calculation (spreadsheet attached, feel free to use and share if you like) are:

  • Income / earnings – how much you make
  • Consumption rate – how much of your earnings you spend
  • Return on investments – what you earn on your savings
  • Earnings increase – if you expect an annual raise, how much it is
  • Earnings increase spent – how much of any earnings increase you spend (also known as lifestyle inflation)

Many of these factors are hard to change or controlled by outside forces – bosses, annual evaluations, how the stock market performs – the spending / saving ratio is the factor easiest to quickly adjust.  It’s also the factor that has the most impact on the time required to fully fund a PI Symbiote.  I’ve included some suggested ranges for items like return on investments and annual earnings increase.  There’s a relative limit on some items and I’ve tried to based the suggested ranges on my perception of those general limits. (You might get a 100% raise at your job but it’s more likely to be a moderate increase of 3-5%, for example.)

Good luck on your journey and creating your own pet Symbiote. Cheers!

Screenshot of sample Symbiote calculation
a journey of a thousand miles starts with a shaky bridge

Download Excel Below:

Out and About – Recent Podcast Interviews on Short-Term Rentals

I was recently included on two podcast I regularly listen to, both on the topic of short-term rentals.  I have been using platforms like Airbnb for about 8 years to welcome people to San Diego and have had a great experience.  As with many other cities around the globe, San Diego has been debating the proper place for short-term rentals (rentals of less than 30 days or a calendar month) in recent years.  I’ve become involved in that political debate locally and follow the issue broadly as well.

The Voice of San Diego podcast is a great resource if you’re interested in local issues and longer interviews with people that make an impact here.  I was part of a four person panel discussing potential new rules for short-term rentals in San Diego.  The podcast was held shortly before a full City Council hearing on the topic which was expected to result in new rules for the city.  Instead, the all day hearing resulted in nothing new and the issue remains up in the air.

Check out the Voice of San Diego podcast on short-term rentals here:

I was also recently on Get Paid for Your Pad – a podcast focused on short-term rentals with news and interviews of hosts from around the world.  This show is a great resource if you are a current host, considering hosting, or just interested in the topic.  Host Jasper Ribbens, from The Netherlands, does a great job of including perspectives from hosts from different cities and nations and covering a wide variety of news items from technology to new rules that impact the short-term rental industry.

You can find my interview with Jasper here:

EP212: The Power of Under-Promising and Over-Delivering

Hope you enjoy the podcasts and if you’d like to connect about short-term rentals in San Diego or elsewhere please reach out anytime.  Cheers!

A photo from a recent bike ride along Sunset Cliffs. #SDlove

Prop 13 On My Block

Property taxes are typically described as a wealth tax – they are taxes levied on assets held rather than transactional taxes like income taxes (applied to wages as earned) or sales taxes (applied to goods when purchased).  Property taxes are applied to the same property each year.

Back in 1978 Proposition 13 was passed in California to place a limit on property tax increases.  Per Wikipedia, Section 1. (a) of Proposition 13:  “The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.”

Proposition 13 also placed some rules on how the value of a property is assessed or re-assessed.  Again, per Wikipedia: “Proposition 13 declared property taxes were to be assessed their 1975 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year. A reassessment of the property tax can only be made a) when the property ownership changes or b) there is construction done.”

I was curious about the impact of Prop 13 on property taxes in San Diego after seeing some listings on Redfin and Zillow that had astoundingly low property taxes.  For example, the Banker’s Hill property shown below, currently for sale for $1,697,955, carries an annual property tax levy of $136.97.  That effective tax rate of .008% is far below the 1% established under Proposition 13.

I decided to take a look at the property values and property taxes on my block in North Park.  The houses are all pretty similar (outside of one empty lot that was purchased by a local church and razed for a small and scarcely used parking lot).  Below are the property values (per Zillow Zestimate) and property taxes paid (per San Diego County Treasurer website).  I’ve listed all the properties on both sides of the street but removed the addresses for privacy reasons.

Summary of property value estimates and property taxes on a block in North Park

Despite the homes on the block having pretty similar property values the amount of taxes paid and effective tax rate vary quite a bit.  I found it interesting to see the differences in a very small area of town summarized together.

Short-Term Rentals in San Diego – Economic Impact Analysis Report (Oct 2017)

Last month a press conference was held to release a study done on the economic impact of short-term rentals in San Diego for HomeAway / Expedia by Xpera Group.  The report follows a similar study commissioned by Airbnb and done by National University in October 2015.  Both full reports are included on this post for anyone interested in this issue.

A few highlights from the new study:

  • Total of $500M of impact in City of San Diego ($300M direct spending, $200 induced and indirect spending)
  • 3,00 jobs in City of San Diego
  • Transient Occupancy Tax (TOT or “hotel tax”) estimated to be $19M or more in 2017, a 200% increase over 2015 when the TOT from short-term rentals total $9.6M
  • In 2016, City of San Diego TOT was $202.8M of which $15.6M was from short-term rentals, a 7.7% share.
  • “Short term lodging guests tend to be much younger than hotel guests and have a higher percentage of females than hotels.”
  • Short-term guests typically stay longer than hotel guests, “roughly half of short term lodging room nights coming from trips of seven days or longer”
  • 7,436 total short-term lodging listings in City of San Diego, estimated (as of June 2017).  11,530 estimated for San Diego County.
  • In 2016 San Diego County had 30.4 million visitors, 17.4 million overnight visitors.  That would be an average of 47,671 overnight guests per night in the County.

The short-term rental issue continues to be a hot topic in San Diego and a good explainer for the current status can be found here on Voice of San Diego (from Nov 1, 2017).  A full City Council hearing is expected to be held on December 12 although a recent hearing was cancelled on short notice in October so we’ll see how the December hearing plays out.

a photo of my Airbnb listing in North Park
Short-term rentals in SD – Economic Impact Analysis – Xpera Group – October 2017
Short-term rentals in SD – Economic Impact Analysis – National University – Oct 2015

Vacant Units in San Diego – Estimated Using Vancouver as Example

I’ve been thinking about vacant housing units in San Diego for some time and recently was reading about the issue in Vancouver, Canada.  The data provided was much more thorough than anything I found locally so I wanted to use it to estimate what the numbers might be in San Diego.  Following is my take and links to the underlying information from Vancouver.  If you have information on this topic I’d love to connect or hear your input.

This article from the Vancouver Sun from February 2017 lays out some good information about vacant housing units in that city, which in recent years has been often in the news for quickly rising housing prices.  Included is the following:

  • The figures from “2016 show there were 25,502 unoccupied or empty housing units in the City of Vancouver” (below graph from article shows the growth in this number from 1986 to 2016, a period during which Vancouver real estate prices skyrocketed)
  • This figure is for the City of Vancouver, not the region, and represents 8.2 per cent of total housing units
  • Per City of Vancouver, there were 309,418 total dwelling units in the municipality as of 2016.  This total supports the above calculations (309,418 x 8.2% yields 25,372 or roughly the same amount as show in bullet one)

In response to the high housing prices in Vancouver, the city levied a 1% property tax surcharge on vacant units to push owners to add the units to the housing supply for renters or other owners.

I’ve been trying to find vacant number estimates or similar studies in San Diego and have asked various reporters, housing industry experts, random Twitter users, and other avenues to seek this information.  The answers I have received have been all anecdotal but mostly consistent – there are a lot of Downtown condos and probably a fair share of other units that are mostly vacant but it’s hard to ballpark the percentage.

Vancouver is a relatively similar city to San Diego, located on the west coast of North America and with high housing prices and demand.  Below are some basic demographic and economic factors – San Diego is larger but in the same ballpark, a large regional hub in a developed country.

  • Media income – Vancouver metro = $53,759 (2016 median family income converted to US dollars), San Diego metro (2015 median household income) = $64,309
  • Poplulation (metro) – Vancouver = 2.3M, San Diego = 3.3M
  • Poplation (city) – Vancouver = 647,520, San Diego = 1.4M
  • Housing units (city) – Vancouver = 309,418, San Diego = 526,663 (1/1/2015)

Since I can’t find a good local estimate for vacant units I thought Vancouver would be a reasonable estimate, or at least a starting point for conversation and hopefully the SD City Council, EDC, Chamber of Commerce, or other party could commission a study to quantify this aspect of housing stock in San Diego.  (I would guess the amount would be higher in San Diego than Vancouver given the long history as a vacation destination, the warmer weather, and the presence of large population centers nearby – Los Angeles, Phoenix, Las Vegas, etc.)

The above San Diego housing unit number from SANDAG estimates the number of vacant units in San Diego at 27,386 (based on provided vacancy rate of 5.2%)

The SANDAG numbers may best reflect the number of vacant units, but it’s worth looking at a portion of the above referenced Vancouver Sun article which notes that the private study produced a vacancy rate more than double existing city estimates.

“The census numbers of unoccupied units are more than double an estimate released by city hall last year because a completely different set of criteria and data were used.

Assessing the extent of empty or underused homes can differ depending on “your measurement tools,” said Yan.

While the census might count a greater number of folks who are, say, on extended vacation during the census period, the city’s estimate was criticized for likely missing the number of units used for only short, seasonal periods, perhaps one or two months in the summer, but then are left vacant for the rest of the year.”

So, based on SANDAG’s vacancy rate of 5.2% we would have 27,386 vacant units in San Diego.  Using the Vancouver vacancy rate of 8.2% would estimate 43,186 vacant units here.  And if we thought that the government estimates are off by half due to sampling methodology, as they were in Vancouver, we could use a rate of 10.4%, yielding 54,773 vacant units in San Diego.

Given the large impact that property tax rules in California can have on homes held for long periods (Prop 13 being most prominent) I would think the vacancy number in San Diego would be at the high end of the above numbers, probably 50,000 or higher, maybe much higher.  Prop 13, over time, can result in incredibly low property tax burdens for long-time owners.  Prop 13 allows properties like the amazing home below, currently for sale for $1.7M, to pay a total of $136.97 in total taxes a year – a rate of .008% rather than the approx 1.05%, $17,850 a year, if taxes were applied on market value at existing property tax rates.  When holding costs are essentially nothing, there’s greatly decreased incentive to sell and little cost to holding an empty property.  It’s probably a large part of the reason the house across the street from me in desirable North Park, which is worth around $750k, has sat completely empty for the 4 years I’ve been in the neighborhood.

amazing home, amazingly low taxes (shout out Prop 13 & Drake)

I’m not advocating for an empty house tax as Vancouver did, but seeking to get an estimate of vacant units in San Diego to consider a similar or other action.  Being involved in the short-term rental (aka Airbnb) debate here the impact of short-term rentals on housing availability and prices frequently comes up.  It’s undeniable that increased demand has an upward effect on housing prices.  However, short-term rentals produce economic activity for owners, businesses, and the city whereas empty units do none of those things.  Upper estimates of short-term rental units in San Diego are around 15,000 (I would guess it’s around half that number) – likely far dwarfed by empty units in our city.  We would be much better served putting vacant units on the market rather than reducing economic activity, entrepreneurial opportunity, and property rights by greatly restricting short-term rentals.

Grocery Shopping by Bike – Pannier Bags For The Win

I use my bike mostly for function – getting to and from places, shopping, going to dinner, etc.  One of the best purchases I’ve made was getting pannier bags, which make it easy to carry items and more comfortable than using a backpack or handheld bag.  Pannier bags attach to a basic bike rack (front or rear) and are a convenient way to carry goods, or to carry camping supplies if going for a long recreational trip.

A couple of years ago I bought a used set of Avenir pannier bags for $10 a piece.  They have some nice features like:

  • Reflective trim to increase visibility
  • Two bottle holders
  • One large pouch for large items (I’m usually carrying a laptop or papers) with clip straps to secure and expand or shrink height
  • Small zippered pouch for easy access to wallet, keys, etc.
  • Clips to secure bag to bike rack and reduce chances of falling off
  • Waterproof with drawstring tie on opening
One of my set of pannier bags

I went to the grocery store the other day and took some photos to show what a shopping trip by bike looks like.  I sometimes see newspaper articles or comments online about how non-functional it is to buy food items on a bicycle.  I strongly disagree – the parking is usually much easier, it’s cheaper than driving, and with a couple of good bags carrying your items home is a breeze.

Here’s my bike with two pannier bags full of groceries – I didn’t put the chips in the pannier bags for fear of crushing them although there was room in the expanded upper portion if I wanted to use it.

On returning home, I unpacked the bags on our table and took this photo to show the amount of food that can easily fit in a pair of bags.  We were cooking for a get-together so some of the items are in bigger quantities than usual but overall a pretty good idea of an average grocery shopping trip for me by bicycle.

We’re fortunate to live in an area with a number of grocery stores within a mile.  I often walk instead of biking, but often pick up a couple of items in other areas when I’m coming home from work or other activities.  Pannier bags are a great addition to any bike and I highly recommend getting a pair.

Have a great day and hope to see you riding soon!

New Proposal for Short-Term Rentals in San Diego

This morning a number of media outlets are reporting on a new proposal by four San Diego City Councilmembers regarding short-term rentals.  Below is a copy of the memo released that was included in the Voice of San Diego Morning Report today.  I wanted to share as I received a few messages about this today – I haven’t had time to read through yet but with the City Council likely to have a hearing on this issue in October or November it sounds like another option that will be on the table for discussion.

I’ll try to do a summary post in the next day or two but wanted to put up the full document for the meantime.

STR Memo – 9-18-2017

Dream Hoarders – A Great Read For the Top 20%

I recently read Dream Hoarders – How the American Upper Middle Class Is Leaving Everyone Else In The Dust, Why That Is A Problem, And What To Do About It by Richard Reeves of the Brookings Institution.  Despite having a very long and unwieldy title it was a very good read about the “Top 20%” in the United States.  The book calls out unfair advantages that the upper class has carved out for itself and how these advantages have created “mobility stickiness” at the top – if you’re born in the top 20% you’re likely to remain there, more so than your chances of remaining in the bottom 20% if you are born there.

Reeves criticizes practices like legacy admissions at elite universities, college savings plans, nepotistic internship placing practices, the interplay of zoning and access to public goods like schools, and more.  The book is a quick read and very informative.

Below is an example of the sort of information presented in the book.  I really enjoyed the graphic presentation of data throughout, as well as the casual and plainspoken writing style.  It makes the subject matter easier to grasp and relate to.  I also enjoyed Reeves’ perspective as a non-native American – he was born in Britain and frequently refers to that land of dukes, dames, and queens and how his perception of America as a more meritocratic place has been challenged through his research on wealth and social mobility.

Illustrative example of graph from book

If you have a chance to pick up this book at your local library or purchase online I’d highly recommend it.  It’s important for those of us in the Top 20% to recognize unfair practices and work to create a more fair playing field for our children and future generations.

I’m sending out these books as part of my “Sharebook” campaign – my personal project to send out books I’ve enjoyed and start a number of book chains to continue them being passed after I first ship them.

If you’re interested in receiving a book you can request one via this simple form.  Takes 30 seconds and you’ll get a free book sometime in the future.


Hostfully Host Spotlight – Our Place in San Diego

I’ve been using custom online guidebooks from Hostfully for about a year to share recommendations and property information with our guests in San Diego.  I really like the platform and functionality, especially the ability to send a PDF, print, or link to the guidebook for easy guest use.

Hostfully recently started a regular series of articles featuring hosts using the platform – the “Hostfully Host Spotlight”  and this week they decided to feature our property in North Park and some favorite recommendations in San Diego.

You can check out the profile article at the below link.  Cheers!

(If you’re an Airbnb or VRBO host in San Diego and interested in Hostfully please feel free to drop me a line and we can chat.)

Hostfully website top banner image

Observatory North Park – Estimated Attendance + Economic Impact

There’s been quite a bit of neighborhood angst in North Park about Observatory North Park – a historic theater in the heart of the neighborhood converted to a concert venue a few years ago.  Recently the City Councilmember for the area hosted a Festivus-style Airing of Grievances about the venue.  I live a couple of blocks from the venue and other than an occasional bit of noise haven’t had any complaints about the venue or patrons.  My thoughts generally align with this piece by Jeff Terich of CityBeat.

I was curious about the overall impact of the venue on the neighborhood in terms of patrons and dollars – how many people are attending concerts and bringing energy, liveliness, and money to North Park.  I live a couple of blocks away and it seems to be quite popular but I hadn’t seen any numbers about the average attendance, etc.  Here’s the response I got from an Observatory representative (received on 8/11/2017) on this topic:

“Our capacity is 550 seated or 1100 standing. We do between 12-25 shows per month with the average of most shows being about 80% sold.”

Let’s do a bit of math to get a monthly estimated total of attendees:

Average capacity: 825 [(550 + 1100)/2]  (assuming half seated shows and half not)

Average shows per month: 18.5 [(12 + 25)/2]

Average attendance per concert: 660 (825 x 80%)

Total attendance per month: 12,210 (660 *18.5)  ———>> In a year that would be an estimated 146,520 attendees.

What does this mean for the larger North Park economy?  As a rough estimate, this infographic from event organizer / platform Eventbrite is what a quick Google search yielded.  It’s a bit dated, from January 2015, but as I don’t currently have a data analyst on staff I’m going to run with it.

Eventbrite Infographic from January 8, 2015 –

Based on the above, the average non-ticket spending (snacks, drinks, transportation) would be $47 per person, in addition to the average $35 ticket. Multiplying the annual attendance by this $47 per person in spending would yield a direct economic impact to North Park of $6,886,440.  A good portion of this, especially the drinks category, may occur inside the Observatory venue or attached West Coast Tavern.  The wide variety of restaurants, cafes, and bars in North Park would also receive some of this money.

Prior to Observatory opening there wasn’t a major concert venue in North Park and I’m glad there is a place where music lovers can attend a wide variety of performances.  (I’m not much of a concert goer myself and haven’t attended a performance at Observatory other than the Christmas program for Jefferson Elementary, for which the venue donated the space and support services.)  I see Observatory as the type of place that most neighborhoods would pay lots of money or tax breaks to attract – a place bringing money, jobs, and attractions.  Hopefully Observatory will continue to listen to neighborhood concerns as well as operating as a top-notch place to enjoy a night out in San Diego.

Observatory North Park with throngs of attendees waiting to enter, taken 7/19/2017.