April 2024 Portfolio Update
Saturday 4th May 2024
This is 40!
I started my FIRE journey aged 33. In early April, I turned 40. It looks like I didn’t make it as one of those FIRE people who got to say I retired in their 30’s, but I am at good odds to make it in my 40’s - and all going well, my early 40’s.
The period from 2014 - 2024 has been an unbelievable decade for our family. We bought our first house around my 30th birthday and we started our FIRE journey when I was 33. 2024 is our 7th year of pursuing FIRE and I can honestly say that it’s been an unbelievable journey so far - looking back, I am glad to have embraced the FIRE concept and even though at the time I felt I had started late being 33, in truth it was the perfect time for us to start getting serious about our finances.
First comes FI, then comes RE
I have been thinking recently about the difference between financial independence and early retirement. It is often said that “early retirement” is a myth, and there is truth in that - most people who hit some sort of FI don’t end up retiring in the traditional sense and I am no different. I definitely am looking forward to giving up full time work, and adopting work on a casual basis on my own terms however.
It has made me think a lot recently about the fact that FI is quite a different thing to RE. The “early retirement” aspect seems to get the most media attention, however it is the FI which is the real thing we are looking for. The trouble with the FI side, is that just because you hit your FI number, doesn’t mean you automatically qualify for RE. This has been a big realisation for myself recently. Even with a portfolio over €500k, we have no ability to produce income from our portfolio without selling some of our properties, which we don’t want to do just yet. As a result, we are frantically trying to pay down the mortgages on our investment properties to allow us to start producing positive cashflow.
And this is happening at a steady pace. We are on track to pay off our first mortgage in early 2025 at our current rate. This would start to give around €18,000 of cashflow from our investment properties, which is definitely a good start.
I then start to think that perhaps it doesn’t matter. Just grow a big portfolio number and let the rest work itself out. Does it really matter if we have to sell a property or two to withdraw from our portfolio as long as we keep our withdrawal within the safe limits (4%).
The Limerick property market has been booming recently and the truth is, if the current market prices continue to rise, no amount of rental income is going to really make a difference to our overall success. With four rental properties, all with current mortgages, we are experiencing the power of leverage. I am due to revalue our properties in June, so I expect to see a big jump in the overall valuation of those properties, which is going to have a positive impact on the portfolio.
I am then further inspired by an article from 2012 by Go Curry Cracker. I would recommend everyone who is pursuing FIRE read this article. Here is a very quick summary of the points raised:
- In 96% of cases, a retiring adopting the 4% rule will end up with a portfolio value that is the same or more than when they started. In most cases, the portfolio value will be significantly more than what they started with after 30 years.
- In almost all cases, the first 10 years will determine the likelihood of your portfolio succeeding or not.
- With some flexibility on working causally or reducing your expenses (and planning), your chances of success are virtually 100%, especially when accounting for a state pension.
Short of a major financial disaster, it is now very likely that the longest time to FI for us, is within 2 and a half years from now (November 2026). This is how long it will take us to pay off three mortgages on our investment properties and start living off 100% rental income.
However, it is equally very likely that I don’t need to wait that long. Take a scenario that the portfolio hits €750k. Why not simply aim to withdraw 4% a year from that point, take down €30k a year from the portfolio and work a little in retirement to make up the difference. Eventually our mortgage will be paid and the state pension will kick in and retirement will happen naturally. This isn’t a new idea, in fact I first mentioned this way back in my March 2022 update.
How long will it take before the portfolio hits €750k? Based on current monthly contributions, we are likely only talking 18 months away - about 345 workdays!
Then there is always the scenario that I jump before then. Perhaps after the first mortgage is paid off in around 9 months time. With the €18,000 a year cash flow, I could easily adopt Barista FIRE based on this, while waiting for the portfolio to continue to grow in the background.
The real motivation
What is interesting, is that the closer I get to FIRE, the more I look at the real reasons behind all of what I am doing. I have spoken often of my desire and motivations for trying to achieve FIRE - and fundamentally nothing has really changed. I am more excited about the prospect of FI than I am of RE. My big goal is to hit FI within 10 years of starting - and is my main motivation for writing about my journey. I want to let people know that this is possible in Ireland - even with high cost of living and with a crazily high tax system. I am also inspired by an article that Mr Money Mustache wrote in 2011 titled: What Does “Early Retirement” Mean Anyway? He finishes the article by saying:
“It’s kind of obvious that there are lots of benefits to early retirement. But we’re not just dreaming here, and we’re not making wimpy attempts at ‘early’ like age 50 or 55. What I advocate is putting the pedal to the metal and getting there in 7-10 years.”
If you go back to many of my previous articles, especially from 2021, most of my writing was about looking to retire at age 55. As I found ways to increase my income, particularly as I moved to contracting and working multiple projects, I was able to increase my income dramatically enough that the ability to hit FI in my early 40’s became possible. MMM is a big believer that it is possible to retire within 10 years if we push ourselves hard enough - and while it isn’t always easy, this has been a big motivator for me to keep pushing on.
I know that every month of contributions is going to make a big difference. If you don’t believe me, try something next time you play with a compound interest calculator. Look at the impact of €1,000 on a 60 year time frame at 4% interest. The €1,000 will be worth over €10,000 in 60 years time. Take a 5% return, and the return will be a little under €20,000.
This is the power of having money work for you and is why I have been pushing myself to continue making contributions. I am on the home stretch, and am closer than ever before, but we are now counting my time to FI in months, rather than years! I hope you are enjoying the journey as much as I am!
April 2024 Portfolio Update
April saw a reverse in the upward trend of stocks. This wasn’t entirely surprising, but certainly broke a big momentum in the portfolio. Our rental properties had a solid month.
We are currently replacing a boiler in one of our rental properties and this won’t be cheap! The plan is to capitalise the cost of this into the portfolio rather than treat this cost as an expense. Anything that increases the energy rating of a property will have a positive impact on the overall valuation, so we need to account for that. It is funny actually, as this is the second boiler I have installed with the same plumber. I get a sense that he doesn’t always understand why I bother with a new boiler when renting a property. From my side, I am happy to invest in something that will increase the overall valuation of the property, while making a tenant happier about having a more efficient boiler, and from my side - having a more reliable boiler that doesn’t need to be repaired every few months! The more low maintenance I can make our rental properties, the better for everyone involved!
It will impact our ability to drive money into paying down our mortgages, so it might push back our dates slightly on that front - but we will just roll with the punches. We made an additional payment of €10,000 onto our smallest mortgage in April, with that balance now sitting at around €77,000. This is the mortgage we are hoping to clear by early 2025, with us making regular extra payments of between €8,000 - €10,000 per month ideally.
Let's take a look at the numbers:
| Portfolio Summary (as at 30th April 2024) | |
|---|---|
| Opening Balance | €539,573.22 |
| New Contributions | €7,500.00 |
| Portfolio Growth | €-834.09 |
| Closing Balance | €546,239.13 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €-4,064.38 |
| Real Estate Income | €3,222.85 |
| Interest on Cash Savings | €7.44 |
| Total Growth | €-834.09 |
| % Return | -0.15% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 30th April 2024) | ||
|---|---|---|
| Equities (Stocks) | €165,979.87 | 30.39% |
| Real Estate | €376,558.98 | 68.94% |
| Cash | €3,700.28 | 0.68% |
| Total | €546,239.13 | 100.00% |
2024 Year to Date Returns
Here is a summary of my year to date returns for 2024.
| 2024 Year to Date Growth Report | |
|---|---|
| Opening Balance | €498,900.39 |
| New Contributions | €26,000.00 |
| Equities Capital Gains + Dividends | €12,703.99 |
| Real Estate Capital Gains + Rental Income | €8,613.30 |
| Interest on Cash Savings | €21.45 |
| Closing Balance | €546,239.13 |
| Portfolio Return | €21,338.74 |
| % Return | 4.07% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2024 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €367,867.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €99,753.43 |
| Equities Capital Gains + Dividends | €41,240.99 |
| Interest on Cash Savings | €21.45 |
| Other** | -€3,864.73 |
| Closing Balance | €546,239.13 |
| Portfolio Return | €137,151.14 |
* In 2020, some of the new contributions came in the form of an equity release, as we turned our primary residence into a buy to let and purchased a new home to live.
** In 2018 & 2019 I made several bad investments in peer to peer lending, forex trading and unregulated investments, which resulted in losses overall.