I always love reading blogs about other investors’ investment income. Watching other people’s passive income rise is my second favorite thing (the only thing better is watching our passive income rise!)
This report includes income from dividends and our rental properties. Although we don’t own any now, if we have other sources of passive income in the future (CDs, bonds, etc.) I’ll include them here as well.
Dividend Income
The equity portion of our portfolio is roughly 50% index funds and 50% individual stocks. The mutual funds are from when I started investing about 20 years ago. At that time I was much more interested in simplicity and a low time commitment so I could focus my time on my career. Over the last few years I converted some of the index funds into individual stocks. Unfortunately, we’ve owned the index funds long enough that selling them would generate a substantial tax burden. As a result, I’ve decided to hold the index funds and direct all new investment money to our stock portfolio. Here’s how our portfolio did last month:
| Ticker | Name | Amount |
| AMP | Ameriprise Financial, Inc. | $178.91 |
| AAPL | Apple Inc. | $54.62 |
| DE | Deere & Company | $168.86 |
| OHI | Omega Healthcare Investors Inc | $568.97 |
| VMMXX | Money Market | $18.99 |
| Loyal 3 | $11.72 | |
| Total | $1,002.07 |
I’m actually surprised that we only have 4 stocks that pay dividends in the second month of each quarter. OHI is currently our largest dividend payer. It currently pays $2,275.88 per year and that doesn’t even include the recent $15,000 addition to this position.
Next month should be better from an income position. I would expect to get around $6k in dividends from our combination of mutual funds and individual stock holdings.
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.
| 4 properties owned 50% | $515.32 |
| 4 properties owned 100% | -$69.54 |
| Total | $445.78 |
This is better than the negative cash flow from last month, but still not great. The properties we own with my mom performed about as well as can be expected, with no additional expenses beyond the mortgage and escrow payments. Three of the other properties are also doing well, with only a minor HVAC repair needed. Unfortunately the last property was vacant for a month and was just rented at the beginning of November (2 year lease). Our property manager takes the first month rent as their fee, so we won’t be seeing the rental income for this property until December.
Total passive income
Dividend + rental income = $1,447.85
Annualized passive income based on last 3 months of income = $32,787.58
This was a mediocre month. Dividends were low and the payment to the property manager really hurt our rental cash flow. However, December is always the best month of the year so I’m eagerly looking forward to running the next report.
My goal at the end of the year is to have projected investment income of $55k-60k based on Q4 numbers.
How did everybody else do with their passive income this month?
8 properties! Wow. Seems like a lot of properties for the amount of income no? Where are these properties based? In SF, a 2/2 should rent for over $4,000 gross.
Absolutely. These were all inexpensive properties purchased between 2011 and 2013. Most are in low-cost areas – Tucson, Memphis, Dallas, etc. Each rents for $1,000 – $1,450/month, which is obviously significantly less than what properties in SF rent for.
When I started looking for real estate investments in 2011 I initially looked at the Central Coast of California, but where I live is roughly on par with the prices in SF. As a result, there was no way to make the properties cash flow positive without putting down an enormous down payment. My estimates were that it would take at least 5 year before rent covered total ownership expenses (mortgage, taxes, insurance, repairs, etc.)
As a result I opted to invest in the Midwest and get immediate cash flow. All of the properties have been cash flow positive from day 1 and total returns (cash flow + appreciation) has been 15-20% ROI/year. I’m guessing properties in the Bay Area have done even better in the same timeframe!
Gotcha. 2011 – 2013 was a GREAT time to buy. Well done. Did you fly out to these plays to check the properties out? If not, how did you know what to buy?
It would have been great if you bought in SF in 2012…. prices are up about 65-70% since on big numbers. Cash flow is great in the Midwest etc. But I really need to see some significant cash flow for me to take the hassle risk.
It’s just so much easier for me now to make online income by writing a new book or finding a new great product for my readers.
Sam
I actually didn’t intend to invest in real estate. I actually prefer to invest in the stock market, as it’s a completely hands-off investment. No tenants, no vacancies to worry about, etc. However, in 2011 housing prices had dropped so much relative to rents that I decided I had to pick up some properties. My Mom lives in Tucson, so we started there – she had said she wanted to start investing in real estate and I didn’t want her to do it on her own (I was worried she’d lose money). So we decided to partner – I’d handle the finances and she’d handle the day-to-day operations. Every time I visited her we’d look at properties and, over the course of 2 years we bought 4 properties.
I haven’t purchased any new properties in the last 3 years because the valuations just aren’t compelling enough. If there’s another big pullback I’d probably look at some local (Santa Barbara) real estate, but otherwise I’ll probably concentrate on my blog, starting my financial planning practice, and other areas to invest my time and money into that have better returns.
How do you decide on out of state properties and mange them? I struggle being on west coast and see how cheap it is in Midwest/south but weary of being out of state
How did you build up such a large brokerage account? Just from savings or active trading or just appreciation. That is quite big for a 40yo
I visited the properties in Tucson. For the other properties I used a variety of online tools combined with an independent property inspector. I purchased these properties through a company that buys, fixes, and flips foreclosures. They they provide property management services as well.
My brokerage was built through savings and appreciation. I started investing at 22 years old, so I’ve had 18 years to build my account up. In addition, I’ve been successful in sales and that’s lead to some very large commission checks. We try to live off my base salary as much as possible, so the commissions are mostly invested.
I’m definitely NOT an active trader.
Hello,
I just found your blog thanks to Financial Samurai. I’m guessing your blog is fairly new and was wondering if it has started to generate any passive income yet. This is the area that most interests me (after real estate.) I will never earn as much as most people I fear, but I have hopes of using blogging and real estate to get me to FI someday.
Thanks for any insight/motivation you can provide.