I always love reading blogs about other investors’ investment income. Watching other people’s investment income rise is my second favorite thing (the only thing better is watching MY investment income rise!)
Here is our investment income for April, 2019. This report includes income from dividends, interest, mutual funds, and rental properties.
Overview
April was a good month. I turned 43, which was both surreal and boring. It was surreal because I certainly don’t feel 43 (although I’m not sure what 43 should feel like). I still remember being in high school, meeting a 40-year old, and thinking, “man, that guy is OLD!”. But now I’m 43 and I don’t FEEL old.
And it was boring because 43 is a very “blah” birthday. It’s not 40 or 45 or 50. You’re not really in your early 40’s, but you’re not really in your mid 40’s. It’s just not really a very interesting age at all.
But, although 43 isn’t an interesting number, I’m determined to make 43 an interesting year for me. I’ve been invigorated by posting my goals for 2019 and I’ve been making steady progress towards many of the goals.
And, as usual, April was a light month on the income side. The first month of the quarter always has the lowest passive income, and the difference from the previous month can be jarring.
Dividend & Interest Income
Total dividend income for the month was $2,032.15. This is 1.44% higher than April, 2018, so not much improvement year over year.
Our income was fairly well diversified but we remain a bit too concentrated in oil/energy stocks (about 15% of our dividends this month were from that sector).
In addition to having a great month, we are back on track with our cumulative dividends received for 2019.
The first few months were a bit rough, but we are now a third of the way through the year and we’re up 14% over last year. I’d be awfully happy if we could keep that pace for the whole year.
Rental income
This category includes net income from the 4 rental properties that my wife and I own, plus 50% of the income from 4 rental properties that we own with my mom. This number does not include appreciation of the properties or the decrease in the mortgage balance (those numbers show up in the net worth report).
However, this income is net of all mortgage, tax, and insurance payments. That is, this is a true cash flow report for our rental properties.
April was also a rough month for our rental income. All the properties are rented but we had a roofing repair on one of them. And as anybody who has ever owned property knows, anything to do with a roof is expensive. The good news was that we were still positive for the month, and we netted a total of $799.63.
Our rental income last year was terrible, which makes the numbers this year look even better in comparison. However, if you look at the numbers from 2017 we are actually down a bit.
Total investment income this month
Total (dividend + rental) income = $2,831.78
Our total passive income is up a very satisfying 31% from this time last year. And of course, that’s absent any additional investments or dividend raises we might enjoy this year. I think it’s reasonable to expect to hit $85,000 in total passive income in 2019.
Changes
I made a few changes to our finances in April that will affect our passive income going forward. First, I decided to sell all of our Omega Healthcare Investors (OHI). This was my single largest dividend payer, but I’ve ultimately become a bit too worried about their financial position to feel good about having $100k invested in them. The issue is that their largest tenants seem to be having a lot of financial problems (resulting in an inability to pay OHI the negotiated rent). The fact that this is happening in the best economy in recent memory does not bode well for OHI’s future prospects.
However, I’ve taken the money raised by selling OHI and invested in 2 rental properties in Houston. I expect these two properties to cash flow about $3,000/year, which will at least partially offset the ~$6,400 in OHI dividends that we are losing.
We are still sitting on a mountain of cash that I’m eagerly looking to deploy if/when I find interesting investments at reasonable valuations.
Recap
April was an ok month for our passive income. The dividend income was good, but our rental income was just ok. I’m hoping that the rental income will spike for the rest of the year (due to the new property acquisitions).
I’m already looking forward to more passive income in May!
How did everybody else do with their investment income this month?
Are there any investments out there trading at reasonable valuations that I should be looking at?
I hear you on OHI it’s not just their biggest it’s 4 of their top 10 are struggling. I’ve been wrangling with wether to sell or keep. Good job on the dividend income it keeps climbing and climbing and climbing.
Which stocks do you own which contributed 15% dividend income this month? Thanks.
I’m not sure I understand the question. Are you asking why our dividend income through April is up 15% over last year?
Sorry, I left out some key words there. Which stocks do you own in oil/energy sector which contributed 15% dividend income this month as you mentioned? Are all stocks listed in the table “Dividend & Interest Income”? I asked this question because I worked in this industry and invested heavily in this sector. I am very interested in others’ thoughts in this sector. Appreciated your patience in my question.
Yes, all of the stocks that contribute to our passive income are listed in the “Dividend and Interest Income” section. You’ll have to look back at my previous passive income posts for the year, but I have significant holdings of Exxon and BP, with smaller allocations to Chevron and ConocoPhillips.
Hi, landed on your blog a few days ago and really like your way of structuring your investment approach as well as the way you do the documentation, so thanks for sharing! I am in the trading business for 20+years and try to constantly improve my structure of generating passive income.
I have two comments / questions regarding your strategie:
1. Have you ever thought about using options in your investment process? For getting into a stock you could sell (cash secured) puts which could provide an extra income / a lower entry level. On existing positions you could sell (covered) calls for an extra income / a higher exit level. I am using options with ca 90 days until expiration and being out of the money ca 5%. These strategies could provide extra income of 2-4% p.a. on your stock portfolio without increasing risk.
2. Your overall strategie of putting a large amount of your savings / net worth into the stock market (to a higher degree) and into the real estate market (to a lower degree) did work very well in the past and still works very good today. But what if this perfect scenario of low interest rates and rising asset prices changes in the future? Your setup could be hurt by falling stock and real estate markets. Your passive income through dividends and rents may stay the same or even rise but the net worth of your investments could be lower significantly. Would you stick to your plan nevertheless or do you have any trigger in your mind that would cause you to shift risk out of stocks / real estate into cash or something else? I don´t have a master plan for this but would be interested in your thoughts about it. So again, thanks for sharing!
Thanks for the comment.
1. I’ve researched using options and I’ve concluded that I’m not interested. For me, the risk/reward doesn’t pencil out. I’m at the point in my life/investing career that I’m not interested in taking on more risk, even for the potential of higher returns. I feel like I’m already “rich” and I’m much more interested in keeping my money than in trying to hit home runs.
The problem with selling puts is that, should the stock drop by more than expected, you’re essentially buying the stock at a premium to the market. If you sell puts at, say, 95% of the current market price and the stock drops by 10% you’re effectively buying the stock at a 5%+ premium.
I would be interested in buying call options to increase the potential upside on a stock that I really feel is underpriced. And, options could be useful if I wanted to put a collar around a stock if I couldn’t sell it for some reason but I wanted to lock in a gain, but otherwise I don’t think I’ll be using options anytime soon.
2. I think if you look at history, the combination of equities and real estate does well through the various market cycles and through various combinations of inflation and growth. There are other specific investments that outperform in certain market conditions (gold does well during inflationary times, for example), but those investments underperform over the long term.
It’s my expectation that I’ll see at least a 20% reduction in our net worth at some point over the next few years. This will likely be due to a correction (or serious bear market) combined with higher interest rates. However, as you said in your comment, I expect that our passive income will stay in the same. To me, this is not a scenario to fear – this is a scenario I’m actively rooting for!
Since I continue to be a net investor, I would be delighted if my passive income is unchanged but asset prices drop, as this allows my reinvestment money to go further and buy more stocks/real estate at lower prices. I might feel otherwise if I was 70 years old, but I”m hoping that my that point we have $300k in passive income (in 2019 dollars) and I won’t care about asset prices.
So, to answer your question – no, I don’t plan on doing anything if/when there’s a correction in some or all of the markets we are invested in. I’m comfortable with our asset allocation and the amount of risk we are taking, and my salary combined with our passive income should give us the ability to weather just about any storm.
Incidentally, this is why we are holding so much cash – so we can aggressively invest when assets go on sale.
Real Estate Questions:
1. Real Estate Selection – I wanted to find out if you are finding your SFH’s with agents you know in the local area or are you using one of the Turnkey Real Estate companies in the area? I own real estate in other states but have never used Turnkey Real Estate companies and wanted to get your opinion on them. You pay extra but the unit is renovated, has tenants, and they manage it for you. Getting all that setup myself in the past has been a real headache for out of state properties.
2. Why SFHs and Not Tri-Plexes Or 4-Plexes? I have owned several SFHs and some are better than others but I am moving more towards multi-family properties since having multiple single family homes can become a management headache and expensive with repairs. 4 tenants under one roof is easier. Wanted to get your opinion on this and why you have focused on SFHs?
3. Syndication Deals – Have you ever thought of investing in a syndication deal with other partners on bigger properties?
4. Commercial Properties – Do you plan on going into any commercial properties? If not, why? The idea of having a NNN lease from a commercial tenant is very attractive. It is a little money machine with not much work. Problem is that it takes a lot of capital to get one of these properties.
5. Real Estate Goal – What is your ultimate goal amount to make passive income each month from real estate?
I like hearing your ideas on these real estate issues. It is hard to find others that really think about real estate investments as a key part of their portfolio to generate passive income for their retirement.
Thanks,
KT
1. We are using turn-key providers. I’ve used two different providers – one of them has been ok (at best) and one of them has been absolutely fantastic. Great service, super fast response time, and the properties are well-managed and consistently rented out.
2. I prefer SFHs over multi-unit as they are more flexible. A multi-unit property like a duplex, triplex, or 4-plex will only be bought by investors, and it will always sell as a multiple of rental (or cap rate). A SFH can be sold to a much larger group of people (individuals as well as investors).
3. I actually have participated in real estate with another investor – 4 of the properties are co-owned with my mother. I’ve never really thought about entering into other investments as part of a syndication/group, as I would need to trust my pattern completely (as I trust my mother). In addition, I’ve never needed to have a partner to purchase any of our real estate properties. However, I could imagine a scenario where I found an investment opportunity that was incredibly interesting, but for some reason I couldn’t participate in the investment on my own (the cost of the property was too high, or there was some restriction on me owning the property). In that case, I would only participate as part of a group if there was sufficiently structural protections (i.e. the money from the investment was deposited to a trusted third party, or the money went to me and I divided it up) to make me feel safe in the investment.
4. I’ve though about investing in commercial properties, but right now it’s outside my circle of competence. I just don’t know enough about how commercial real estate terms work, etc.
5. I don’t necessarily have a goal for what % of our passive income should come from real estate. My expectation is that over time we’ll have various opportunities presented to us – stocks will be cheap, some interesting real estate investment comes up, etc. We’ll act on these opportunities as they present themselves, and our eventual breakdown of income will depend on those opportunities.
Thanks for the follow up.
Turnkey Providers – I have gotten a few referrals from other investors on turnkey providers and was interested in using them.
There are a bunch of them but more of the popular ones I know about are (in no particular order):
1. JasonHartman.com
2. Memphis Invest
3. HomeUnion
4. Roofstock
I have a friend who loves using HomeUnion and I have talked with them some.
Can you tell us which turnkey providers you have used and the one you like more? I know you are not endorsing anyone but since you have 10 properties, your opinion would be another great data point as I am vetting companies.
Thanks, KT
Of the 10 rental properties we own:
– 5 of our properties were purchased and are managed through Memphis Invest and I’ve been very happy with them.
– 4 of our properties we directly purchased ourselves and are managed by my mom.
– 1 of our properties was purchased and managed by another turnkey provider. That company went out of business and our property is managed by another rental management company. They’ve been just ok.
My takeaway is that I’ve been very happy with Memphis Invest.