How to buy a Corvette C7 for $10,000!

Strange blog post for a guy who is supposedly into minimalism, you might think. I'd agree. Call this a piece of whimsy.

First, you need $10k. Earn this.

Go to the USA and buy, in the state of your choice, a house for $40,000 that will rent for $700-800 per month. Use the 2% and 50% rules - in order to cashflow $100 per "door", a property should rent for roughly 2% of its purchase price a month; and you can assume 50% will be eaten up by (non-financing) costs - property tax, management fees, repairs, vacancies, and the like. The 2% is probably high, as it is designed for multi-unit properties, and mortgage rates are low, historically speaking.

With a 30 year mortgage at 4%, the monthly payment will be about $150, so at a rent of $700 you will get $200 cash a month! Remember that this is income and must be reported, and tax paid on it. Tax must also be paid on the "repayment to capital" part of the mortgage payment. If you are lucky, you will laugh at the 50% rule and find a sensible, solid tenant who will stay in your property for 5 years while fixing the small problems themselves.

Anyway, let's assume after taxes you are taking $150 a month.

So how do you convert $1800 a year into a shiny new Corvette? The C7 has only just been unveiled (and it is a beautiful car). It'd barely be enough to cover loan payments for 3 months!

Firstly, don't buy it here in Canada. The base model is $60k here, but only $50k in the States. Crazy, considering the US and CAD$ are at par.

Secondly, well, you're saving up, right? You have your $1800 a year. Invest it in two low cost ETFs - 70% VTI (if you are American), XIC.TO (Canadian), or VUKE.L (British); and 30% XBB.TO (Canada), VGOV.L (British), or BND (US). Put the bond money into some kind of tax shelter; the stocks not being sheltered is less of an issue, as home-domiciled companies tend to have tax breaks associated with them.

This is a really basic "couch potato" investing strategy.

I know, I know, you want your Corvette. Well... stick the kettle on, make a nice cuppa.

Every few months, take your rent and use it to rebalance back to the same percentage split - 70/30 - of stocks vs bonds. So, if bonds are doing well, you buy more stocks; and vice versa. It forces you to buy low, which increases returns over time.

Wait.

Normally the Couch Potato strategy is used for retirement purposes, or early retirement if you're smart. But as I said - this is whimsy!

Ok, after about 4 years, you should have:

1. A nice house, worth maybe 10 or 20% more than you paid for it.
2. A nice increase on the money you've put in to the stock and bond markets.
3. A much lower mortgage than when you started.

Even better, the $50,000 Corvette has depreciated nicely, to about $25,000!

So, sell the house for $50k, less the remaining mortgage of $27,000 = $23,000; plus $8500 from your savings. Total: $31,500.

If you wait just one more year, you'd have enough for the Corvette and still have enough over to do it all again.

So, ladies and gentlemen, that is how you buy a Corvette for $10,000. Personally, I'd just let the money grow, and retire early by repeating many times.