November 2023 Portfolio Update
Tuesday 5th December 2023
The 24 Day Mini-Retirement
I am excited to announce that in December I am looking to take a sort of mini-retirement. It is largely accidental - with us buying our fourth investment property this year, I had to take the tough decision to delay taking some days off work over the summer in exchange for working through and earning a little more. It is one of the downsides of being a contractor sometimes - you are only paid for the days you work. As a result, I had a heap of days I needed to take off, so I have managed to push them all out until December.
As a result, I will be taking 24 days off from the 9th of December with the aim of doing nothing out of the ordinary except not working! It is going to be a mini-retirement in a way, to see how I handle not having to turn on my computer every morning.
What Happened to My Cash?
If you have been looking at my portfolio over the last couple of months, you might be asking yourself “why is Michael carrying no emergency cash”. This one is a little bit complicated to explain in writing, but basically, I have been pushing as much money into our fourth investment property as possible as I “owe” my company some money as part of the deal.
You see, one of the great advantages of having a professional services company is that cashflow is king. Let me explain what a typical transaction looks like for me:
Let’s say I invoice an Irish based client for €1,000. My invoice will look as follows:
€1,000 + VAT = €1,230
So, first off, when I invoice €1,000, I have to charge VAT. When the invoice is paid, I immediately collect €230 extra. This money is saved into a “VAT category” as part of my cashflow report and saved up over a six month period (my VAT is only due in July and January).
Of the other €1,000, I break it down as follows:
€200 into a category to save for corporation tax.
€400 saved as cash as part of my FI portfolio.
€400 kept aside to cover my wages and any expenses of the business.
You can pretty quickly see that of a typical €1,230 payment I receive, I am able to keep €830 of it (at least in the short term). And while all but €400 is saved long term, the other €430 is saved up and “rested in my account” (for those who love Father Ted) until such a time that it needs to be paid to Revenue.
This may not seem like much, but over a course of a few months, this can add up pretty quickly. This neat little cashflow trick allowed me to consistently have a pretty massive balance in my business account, even though technically the money was assigned to go somewhere else.
The point of all of this is that when it came to putting together a deposit for an investment property, it wasn’t difficult for me to show a pretty big balance sitting in my business account. However, I was never foolish enough to think this money was mine. On the one hand, the mortgage lender was happy with me, but I knew that at some point the money was going to need to be paid to Revenue - albeit some of it might be sitting for 6-12 months until it has to be transferred out of the account.
As a result, while my FI cash seems really low right now, behind the scenes my FI portfolio cash is being put back into the other categories for VAT and Revenue. It is a sneaky little cashflow trick that basically allowed me to continually look for investment properties over an 18 month period.
I have a little over €25,000 still to pay back which I “borrowed” as part of the deposit for our fourth investment property. Our cashflow is solid however and we are inline to pay back the full amount to my company over the next 3-4 months. You should expect to see the property part of my portfolio continue to get larger as this is paid back.
Once that is done, the amount of cash in my FI portfolio will start to build up again and I will look to start paying down the mortgages from there.
The lesson here - one can get clever with money if they wish too. For the last six years or so, I have assigned every euro I have into some sort of category to be allocated somewhere, and it’s a lovely thing to do. It gives me such a sense of control over my money - and with some careful budgeting, allows me to “borrow” against myself in the event I need to ultilise some of that money for something else - provided it can be paid back in time before it is needed elsewhere!
Again, always proceed with caution with this. The last thing we want is to get to a situation where we leave ourselves short to pay Revenue - but with clever money management, it is possible to leverage one’s money and take advantage of cashflow.
November 2023 Portfolio Report
November was a great month for the portfolio with a massive €17k jump on last month. The FI snowball that I have created is really starting to build momentum now.
This was largely thanks to a nice rebound in my Stock portfolio, as well as another solid month with our investment properties.
We needed to put a new power shower in on our second investment property in November. We also had to do some plumbing work on our fourth investment property, which I am yet to receive the invoice for yet (it will likely be paid in December and so expect to see a smaller rental profit in December).
I heard recently that property as an investment is “passive enough”. There is definitely some truth in this. Property can be hard work at times, and trying to find two plumbers in November (the busiest time of the year for plumbers) is not fun! But thankfully, I was able to and all was sorted.
Being a landlord to four properties and looking after our own, means that we are 5x more likely for something to go wrong than if we just owned our own home. As a result, things breaking and needing to get trades people simply become part of the investment. I don’t mind the cost so much - after all, any expenses are deductible against the income - but sometimes it can be hard being put under pressure to find people, and having to give up time to make sure any issues are resolved.
And this is why I quite like the term “passive enough”. It is exactly that. November is a busy time for landlords as the weather gets colder, heating systems tend to break or struggle to come back on after the summer. But, once all is resolved, the hope is to get some time before something comes up again - which there will no doubt - and being there to solve it is all part of the fun.
Next month I will be looking to provide an updated valuation on one of our properties, give a bit of a summary of how long it will take to pay off three of our mortgages, as well as give an update on my “10 Years to Retirement” goal.
There is also a very small chance with a new valuation on one of our properties that we may hit our €500k by 40 goal next month - so let’s wait and see what December brings. Being at €485k now, we are so close now to hitting the goal - and potentially a couple of months ahead of schedule.
| Portfolio Summary (as at 30th November 2023) | |
|---|---|
| Opening Balance | €468,076.66 |
| New Contributions | €5,000.00 |
| Portfolio Growth | €12,138.41 |
| Closing Balance | €485,215.07 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €9,019.82 |
| Real Estate Income | €3,118.59 |
| Total Growth | €12,138.41 |
| % Return | 2.57% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 30th November 2023) | ||
|---|---|---|
| Equities (Stocks) | €147,232.90 | 30.34% |
| Real Estate | €337,618.46 | 69.58% |
| Cash | €363.71 | 0.07% |
| Total | €485,215.07 | 100.00% |
2023 Year to Date Returns
Here is a summary of my year to date returns for 2023.
| 2023 Year to Date Growth Report | |
|---|---|
| Opening Balance | €342,734.85 |
| New Contributions | €80,422.00 |
| Equities Capital Gains + Dividends | €20,179.10 |
| Real Estate Capital Gains + Rental Income | €41,879.12 |
| Closing Balance | €485,215.07 |
| Portfolio Return | €62,058.22 |
| % Return | 14.67% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2023 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €336,867.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €88,318.52 |
| Equities Capital Gains + Dividends | €22,673.29 |
| Other** | -€3,864.73 |
| Closing Balance | €485,215.07 |
| Portfolio Return | €107,127.08 |
* 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.