November was an amazing month from a savings rate perspective. Mainly because of the 4 week payment period in combination with the final payment of Mr. CF previous employer. Because of this we actually had a record month when looking at income. Our expenses were generally in line with the normal numbers, but there is one notable exception: transportation. More on that later (no, we did not have an accident or major maintenance issue, fortunately).

A brief overview for November:

  • Incomes from both Mr and Mrs CF were exceptional: 3 pay checks and a massive expense claim hitting the accounts. Seriously stoked!
  • Income (principal and interest payments) from crowdfunding loans is now exceeding €165/month, but we have put investments in this system on hold for now. So payments should be steady going forward (more details on why we stopped later this month in a post on Crowdfunding);
  • Transportation was ridiculous this month, but is mainly driven by an investment. How can you have an investment in transport I hear you think, well let’s put it this way. Mr. CF bought a tricycle for adults, curious? You got to wait for later this months to hear the story and see the calculations on why this is an investment and not really an expense. Sorry for the cliff-hanger ;-);
  • Living expenses were relatively low this month, no quarterly insurance bills or any other taxes this month;
  • Groceries & grooming a well below average at around €250, not totally sure why (albeit we did clean out the fridge completely and got a 3 weeks supply in apples from the yard, but this cannot have been causing such a low month);
  • Pretty much all social events were free, or virtually free. So nothing to report here (but we are looking forward to having a holiday again, job shifts, moving house, and bad timing with work has prevented us from taking a family holiday this year….gearing up to make plans for next year!);
  • Costs for day-care and kid related expenses where normal (~€1020, including benefits).
  • Nothing special to report in the “Other” section either.

For those curious how we calculate our savings rate, please see this page for more details.

The saving rate for November ended up being well above average, despite the large purchase on the transportation front . We ended the month with a nice savings rate of 62,3%. See below for the usual graphs.

Considering the projected income and expenses for December (another record month on the income front expected, even better than this record month), we should be able to close out the year with an yearly savings rate of above 60% (we are now at 60.3%, see bar on the far left in the plot below), that is seriously awesome!

201611-savings-rates

The expense breakdown looks like this:

201611-expenses

How was  your November? Did you also have such a good much as we did? Of was there something else that affected your savings rate. Let us know!

As promised in the post on our Real Estate investments, we will be posting monthly “Real Estate Reports” going forward which will be showing all the good, the bad and the ugly. Considering this is the first post, we will have to provide you guys and gals with a bit of an explanation on the numbers.

To understand the numbers, you got to keep the following in mind:

  • We purchased our last three rental units in one purchase back in July, it took a bit of time to get things organized and we also had friends stay in the units for a bit in August.
  • The commercial workshop was already rented out in July, pretty much as soon as we moved in.
  • Next, we successfully found tenants whom moved in both in early and mid-September in the two vacant. We paid a fair amount of commission for this service by the property management firm we hired, but in return can add these investments in Box 3 for tax purposes (for us is a far more financially efficient setup than self-management, which has to be reported in Box 1).
  • We had very little expenses to date, other than some minor paint work, clean-up work and an initial assessment to be able to determine the appropriate monthly rental fees. More expenses will come in December and early next year once the boilers are serviced and mechanical ventilation is installed in both units. Some repairs are required for the roof of the workshop and painting is required at a few spots, all to be carried out next year too.
  • During the time the units were empty, we had to pay for the hook-ups for water, gas and electricity.
  • Insurance fees are normally paid every quarter, but due to some updates and re-assessment of the property values, we had several extra expenses and also some refunds from the insurance company.
  • We also liquidated our real estate business, which we held for a while when we were living abroad. This allowed for some tax advantages, but considering we are now living in the Netherlands again, this benefit disappeared and it made financial sense to move the properties to us privately and in Box 3 for tax purposes (instead of Box 2). You therefore see a jump in income from October to November, this is solely due to the two extra units providing income directly to us, rather then to the business.

As of November we thus have the maximum rental income possible for the 5 units.

This first plot provides and overview of the expenses, rental incomes (gross) and net rental income since July of this year. The negative net incomes in July and August are a result of the costs for the mortgage, utilities, insurance and rental price assessments, while not having any rental income at that time. Please do note that we book the rental income/expenses for the month they apply, just to keep the numbers stable (payment/transfer dates often shift around month end).

2016-11-re-overview

A more detailed breakdown of the rental income (gross) in November is provided here:

 2016-11-re-income

All costs incurred in November are shown here:

 2016-11-re-expenses

Note that all these incomes and expenses do not include any reservations for future large maintenance such as kitchen replacements, bathroom remodels, etc. These will ultimately show up as very large expenses and could easily wipe out rental income for several months.

Do you have rental units, if so, how did they do this month?

 

 

 

 

Have you every realized that we as humans are extremely good at not solving the core problem (i.e. the root cause), but rather stick a Band-Aid on it? What make this really bad is that we do this with almost everything! A couple of random examples (feel free to add a couple more in the comments section):

  • More and more people are distracted in traffic by mobile devices, so let’s make an app for that. Really? Why not just shut it off or ignore the phone when you are behind the wheel.
  • You’re suffering from high blood pressure, let’s take some medication for that. Really? Why not stop eating products with added salt (which is pretty much anything processed), meats (which stiffens arteries in the hours after consuming), eat more greens and beans and work out more? The previous few items are actually proven to be a lot more effective and much better for your overall health.band-aid
  • You are having a piece of month left at the end of your money. Take out a loan or pay with a credit card! Really? Why not cut back on expenses, make a budget, evaluate your life priorities, find ways to earn more, etc.
  • I need to clean my yard, of all the leaves that have fallen recently, with an obnoxiously loud leaf blower. Really? Why not get a rake and get a bit of exercise and not annoy your neighbours.
  • I need a bigger house, because I cannot fit all my stuff and toys in it. Really? Why not sell/donate/recycle all the things you don’t use, clean up the place and enjoy the same place for many more years to come.
  • I need to buy X, X and X on black Friday because it’s on sale, Really? If you actually need it, you would have bought it before and would be using it already. If you do have time, and have done  your (price) research (and could not find it used or at your local thrift store), black Friday might be an okay time to buy (assuming the item actually is cheaper).
  • I don’t like where my country is going, let’s elect an “interesting” real estate businessman for president, really? Well, you see where this is going 🙂
  • Etc., etc., etc.

But why do we do this? Because it is the path of least resistance, it takes very little effort. If you actually want to solve the problem you have to work hard, be dedicated, be informed, want to improve and, most of all, are willing to change. Without the aforementioned you will just go for the quick fix, which in reality does not solve the problem, it masks the problem and often makes it even worse.

We are obviously not immune for this, and we keep reminding ourselves not to fall into the convenience trap. For example, instead of buying a second-hand compressor and accessories to inflate car tires, we used the bicycle pump to inflate our car tires to the optimum pressure (potential savings €50). This obviously takes more effort and time, but you get a bit of a workout and savings in return.

Moral of the story, take the long hard road, it will make you happier and improve your life!

 

As noted by Amber Tree Leaves earlier this week, we are planning another FIRED-UP meeting in early 2017. Considering the success of the last one (see some posts/comments here, here and here), we are really looking forward to continue with these meetups (improving/expanding them as we go along).join-our-meetup

We had already send out a doodle to those people whom attended last time to gain some insights on the level of enthusiasm and propose some new ideas. It turns out that a lot of people are in for a re-run. The plan this time around, as noted by ATL earlier, is to meet up in Antwerp (Belgium). But we can now also confirm that it will be done on 4 February 2017.

We are in the process of arranging a small meeting room in a bar or other facility (we will be charging a minor fee for this, but should be no more than €5 pp), to have the opportunity to have speakers/do presentations. Plan is to meet around lunch hour and continue until (late) in the evening. Detailed plans will follow and will be communicated to those attending the meeting.

privacy-meetupHow about you, are you interested? Do you want to do a presentation of something you have learned, or think is important to share with like-minded folks? Do you have any other ideas for the meeting? If so, please leave us of ATL a message or comment. We are very much looking forward to you inputs!

We (Mr. and Mrs. CF) just finished our discussions and thoughts on how to calculate our Savings Rate going forward (and correct some older results). The outcome of how we calculate our Savings Rate is added in this new page on our blog, it may explain a few things you are wondering about, and perhaps could help you too with determining your Savings Rates.

The reason we had some discussions is because of our latest Real Estate venture. We have successfully rented out the two units and commercial workshop in our new property to some lovely people. All associated funds are coming in and are going out of our checking account. Because it’s one property, expenses for mortgage, maintenance and operating costs are shared between our personal use and our Real Estate venture. These can sometimes be hard to split, but we decided to give it a go anyways.

What does this have to do with our Savings Rate? Well, because we were not sure how everything was going to work out we added everything into our Savings Rate calculations (incomes and expenses). Now that we have completed our review of the assessed values of the properties (i.e. the “WOZ waarde” and the “Marktwaarde Taxaties”), we now have decided how to split the expenses like mortgage interest, insurance and maintenance. This is very important as it will affect how we will submit our taxes for 2016.

We have now completely pulled out and split the investment income and expenses related to real estate from our personal Saving Rate calculations. The corrected version, with changes starting from July 2016, is shown in the new overview below. If you are curious about the changes, you can also look at the one originally prepared for the Saving Rate October 2016 post. However, it pretty much boils down to the fact that we actually have had a slightly higher YTD Savings Rate than initially thought. Now that is always very good news! This actually also makes sense, as we moved to a smaller house as of July and anticipated our housing cost to go down. The data is now somewhat distorted because of the moving costs, refund of the rental deposit (see low rate in July and peak in August) and initial maintenance/decorating costs, but we might be able to achieve a 60% Savings Rate next year because of downsizing our home (fingers crossed).

201610-2-savings-rates

Going forward, we will use the (in our opinion) correct personal Savings Rate. But as a bonus we will also start reporting our monthly Real Estate income and expenses (for those of you whom are interested in this investment opportunity). More details to follow in December.

Austria - CastleTeam CF is continuously discussing investment strategies, preferences and making compromises in all the final investments. Mr. CF prefers stocks combined with some crowdfunding, Mrs. CF favours real estate. It should then also be unsurprising that we have a very diverse portfolio, and we own real estate as part of it. But how did we get started? What did we do to get where we are today? And what is the return on our real estate? This is what today’s post is all about.

The beginnings

We got started in 2014 with our first properties after Mrs CF walked by an duplex and got excited. She pulled out the good old excel spreadsheet and started to make various calculations. We got quotes from contractors for renovations and found that the property could make an, for us reasonable, return on investment. Next the bidding and negotiation began. To our surprise we actually agreed upon the sales price that ended up at about 75% of the asking price (yes, the properly needed a lot of renovations!). Next, we renovated the place extensively (with the use of a local contractor) and about 4 months after purchase, we had both units rented to solid tenants (one through a property management firm, one to family whom had helped with the financing and renovations).

The financing of the properties was done utilizing the value in our existing home at the time, supplemented with family loans (yes, with proper contracts in place and interest rates according to market conditions).

How did we got all this money? Well, before we found the path to FIRE, we were not sure what to do with our money (we had bad experiences with investing and were not properly informed about index funds or dividend stocks), so we aggressively paid off our own house. This came in very handy once we realized that we were better off investing than paying down the house. We had a HELOC (Home Equity Line Of Credit) at that time, which allowed every euro (dollar, actually) to be pulled out against the governing variable market interest rate. In short, we were able to purchase the house in cash and used remaining cash and loans for the renovations.

GermanyFast forward to 2016, with the investment strategy to become FI firmly in mind, we searched for a property that could be split in multiple units or already consisted of multiple properties (e.g. duplex, triplex or more) to live in ourselves but also rent out the other unit or units (we had sold our previous home and were renting at this time).

We ended up finding a former B&B that suited our criteria. This property provides us with a sizable upper unit (~125m2) for ourselves and two smaller units (~40-45m2) that could be rented out. It also has a large workshop (~65m2) which could be rented out commercially (with an option to transform into an additional living unit after renovations/modifications). We financed this property with a regular mortgage, which we would be able to pay for on one salary (albeit that would have been a bit of a struggle).

What to expect financially?

To make a long story short, we currently own 5 rentable units, and one unit for our own use, in just about two years’ time. Two units are almost paid for (just a personal loan remaining), three are financed using a regular mortgage. An overview of their value, rental income, yield (gross and net), etc. is provided below.

2016-09-rei

To explain the various columns in a bit more detail, let’s review each one:

  • Property Market Value – the value of the property if it would be sold on the current market, for units 3-5 it is the value of what we paid for it in mid-2016;
  • Mortgage/Loan – value of the mortgage or (private) loan on the property/unit;
  • Asset Value – the Market Value minus Mortgage/loan value;
  • Gross Rental Income – Income based on 12 months’ income per year at the gross rental price (i.e. before management fees/expenses);
  • Yearly expenses – all reoccurring expenses such as property management fees, insurance, property tax, sewage/waste disposal fees, etc.;
  • Yield (Gross) – Gross Rental Income minus Yearly Expenses (value and percentage based on Asset Value);
  • Reservations and Maintenance – All units are well maintained (or newly renovated) and reservations for the coming years are primarily for paint works, replacements for fridges, dish washers, heating units, etc. The reservations also include a risk allowances for unexpected expenses (damage), temporary vacancies (i.e. no tenants) and other unforeseen scenarios (e.g. water damage). We use percentages of between 2-3% of the Property value for combined maintenance and reservations; and,
  • Yield (Net) – Yield (Gross) minus Reservations and Maintenance (Absolute Value and the percentage based on Asset Value).

RE 04As you can see the net yields are pretty healthy, even if the reservations/maintenance is under estimated we should likely still get yields in the order of 5-6% before taxes. The Gross yields are actually really good, which is what is helping us a lot. The main reason for that is that the reservations will likely not be required until a couple of years from now. This allows this cash-flow to be reinvested in other assets, thereby allowing the financial snowball to keep going faster and grow (read: “compounding interest”). However, we do need to increase our financial buffer to accomodate unexpected costs associated with issues in our Real Estate.

Where to start?

Some recommendations/ideas to consider when you want to invest into Real Estate:

  • Start small, smaller units generally have higher yields than larger/more expensive properties and are easier to finance;
  • Look for areas that have good rental markets (e.g. in or near larger cities, or smaller towns that provide a good social environment where younger folks want to stay) and do your homework;
  • Make sure you are cash-flow positive as soon as possible after you purchase the property;
  • Using mortgages or loans as leverage allows you to need fewer of your own assets, thereby increasing the yield on your invested assets (but this does coincide with higher risks!);
  • Look for properties that are, or can be, split into multiply units. For these properties, you generally pay less per unit and thereby increase your yield on your investments; and,
  • Put effort (or funds) into tenant selection. This is one of the best risk management tools you have in Real Estate investing (plus added benefits of Box 3 Taxes). Also treat your selected tenant well and with respect, in return they tend to also take care of your property for you (this is also our personal experience).

Happy House Hunting!

As noted in September, the Cheesy Index got a bit of an overhaul to accomodate new knowledge about Dutch taxes. Because of this new information, we appeared to have signifcantly underestimated our Cheesy Index. Fortunatly, nothing new this month, so we continue the slow but steady increase going forward. The Cheesy Index up to October 2016 is estimated at 53.9%.

We have been looking at the projected income, expenses and other items (including Mr. Market potentially not liking Mr. Trump for the remainder of the year), but we might still be able to hit 55% by the end of the year. But we do need Mr. Market to not do any really crazy stuff. Fingers crossed on that one 😉

201610-ci

Did you also see your overall porfolio increase in October? We sure hope you did!

October was a relatively steady month on the dividend front. We purchased some UNA (100 shares, in two batches of 50 shares to profit from the steady drop in stock price) this month and got lots of free money. October yielded a very respectable €545 in dividends. This is a YOY return of about 298%. But as noted last months, this is mainly due to a large amount of cash that we reinvested over the last 16 months and not “organic” dividend growth. Albeit we are very curious to see what that is going to look like. Yield this year (to date), based on book value, is about 3.45%. With two more months to go, we should end up just over 4.1%.

   20161101-monthly-dividend

We currently own a total of 43 stocks and our portfolio looks like this:

 20161101-dividend-overview

When you dump everything into a pie chart, based on the sectors the shares represent, you find the below overview:

 20161101-dividend-stock-by-sector

We still have some work to be done, as we still need to purchase more stocks to shift the sector allocations, but that is a plan in development.

A new month, a new Saving Rate overview! We’ve now already closed the 10th month of 2016. Time flies when your having fun! I’m actually secretly very curious how the total finances for 2016 are going to look. But let’s not get ahead of myself here.

October was another good month from a social perspective. We had a blast at the FIRED-UP meeting in Breda with fellow FIRE enthousiasts, which was awesome. Thanks again for everyone that attended, we are planning another one for January 2017, more details to follow this month (so keep an eye out for that).

As to the financial side of October, here is a quick overview:

  • Incomes from both Mr and Mrs CF were normal, and we finally got the long awaited expense claim back;
  • Income (principal and interest payments) from crowdfunding loans is now exceeding €155/month;
  • We received full income from our two new rental properties and the commercial unit, adding a very nice €1400+ to our income (if you think this is nice, wait until you see next month….. details to follow);
  • Living expenses were high this month due to the quarterly payments for insurances and some maintenance related expenses. We also had to pay sewage fees and property taxes that were incorrectly allocated during the sale of property to us (~€80);
  • Groceries & grooming a bit below average at around €338;
  • Transport costs were higher this month due to quarterly road tax (€179), fuel (€55) and insurance expenses;
  • Costs for day-care and kid related expenses where slightly higher (~€1220, including benefits) due to an outstanding day care payment and the costs of the birthday gifts for Miss CF;
  • The cost for the FIRED-UP meeting was €66 and is covered under the leisure section of the budget;
  • Gifts came in at €32 this month (all experiences, no stuff);
  • Finally, we Mr CF bought new winter cycling clothing, which came in at a whopping €205. But it is money well spend as the last two trips were very comfortable and I was not cold at all, a major win here!

The saving rate for October ended up being just below average due to various higher quarterly expenses and some expensive purchases like the cycle clothing. We ended the month with a nice savings rate of 53.1%. See below for the usual graphs. Considering the projected income and expenses, we should be albe to close out the year about 57-58%. That would be seriously nice!

201610-savings-rates

201610-expenses

How did you do this month? Any large expenses, or bonus incomes? Let us know how you did!!

It’s official, Mr. CF is going to do a career switch (sorry, it’s not one yet that revolves around FIRE….)! Where my former career was primarily revolving around project engineering, project management and design management, it will change to cost engineering. The financial side of FIRE is actually starting to rub off on things I want to do in life/work, primarily in the sense that I like to do financial estimating, cash flow reviews, profits, yields, risks and associated analysis.

I’m new to cost engineering, so will be going through a steep learning curve in the coming months but I consider this a very good thing. However, the grass is not always greener on the other side of the fence….let me explain..

I’m a very social person and like people around me for most of the time, I therefore like working in teams. This position is one that you do more on your own with fewer interactions with other parts of the team (which are supposed to provide you with inputs, that you usually only get at the last minute….). I hope that I’m overestimating this impact, but will have to see what happens.

The company is good, but it’s not the best one I have worked for in my career. My new boss seems decent, but I’m a bit sad to have to leave my current boss, who is an amazing guy. The decision to leave was therefore not an easy one (have a good boss makes a difference in a job).

I’m also going back in paid time off (currently have 40 days, will go back to 31 days), which I also will be partially compensated for. However, I rather have more time than money, but this was not negotiable….

The pension plan is also not as good at the one from my current employer, but this should not be a major concern considering we should be FI well before we reach the time that our pension will be paid out (at that time it’s a bonus/back-up income), which currently looks to be at 67 years and  3 months (and climbing).

Financially, it will also have a significant impact on our household budget, both positively and negatively. The main impact comes from losing the company car, so I will be using our own car to get to work (keep in mind that cars are very expensive in the Netherlands). Fortunately, I’m partially financially compensated for this “loss” in conditions from my old job. Furthermore, I’ve decided to bike to work one or two days per week (about 54km/day), which would help lower transport costs, get me in shape and improve my health. Clear win on this one, but the expenses for our own car will go up significantly (fuel, maintenance and depreciation). Based on our calculations, we should be cost neutral or even a bit positive (if maintenance is not too bad). Curious to see what will happen. However, due to the various compensations, different pension plan deductions and a few other incentives, overall income will go up (both absolute and cash-flow wise), even when taking into account the increased transport costs.

The bottom line is that this career switch should get me/us ahead both personally and financially. Which will actually bring us to our FI goal a bit faster and be more satisfactory from a work perspective. In short, I’m very much looking forward to this new challenge.

How about you, did you switch jobs lately? If so, why? Did you do it for the money, or for personal reasons?