December 2016 Cheesy Index

If you have been reading our posts on the December 2016 savings rate, real estate and dividends, it probably is not a surprise that also the Cheesy Index had a good month/year. With lots of extra income in December, favourable exchange rates and solid passive income streams, the Cheesy Index was propelled to a record high in December last year.

As you can see below, the index hit a solid 57.4%. Considering we started the year with 47.5% (note that we did have a correction in the Cheesy Index to account for a more favourable taxation than anticipated), this means we went up a staggering 9.9%. To put this in perspective, at this rate it would take us only 10 years in total to become FI. That is seriously quick! Albeit not ExtremeEarlyRetirement.com quick….

Cheesy Index History and Forecast

But let’s not get ahead of ourselves here. There were many factors, including exchange rates and market conditions, that could still negatively affect our Cheesy Index in 2017 and therefore our ability to become FI. That being said, our portfolio is primarily driving by passive income and cash-flow. Fluctuations in the Cheesy Index don’t necessarily have an impact on our ability to become FI.

For 2017, we have a new target set based on our re-forecasted progress curve to become FI. As you can see below, the target for year end 2017 is 64.4%, or a 7% increase of the Cheesy Index compared to the close of 2016. We might underestimate the progress, but  you never know if we actually will get this long awaited market correction in 2017 and what other events may occur this year. We are currently scheduled to become FI somewhere in 2023. That is about 1.5 years ahead of the original planning we calculated back in 2014, when we got started on the whole FIRE thing.

Do you also have an index or net worth figure that you target? If so, how well did you do in 2016? What is your forecast new number for 2017? In any case, best of luck!

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Hey Folks, hope you are having a wonderful day!

Today’s post is reviewing how our little blog has been doing in 2016, expect a full disclosure!

2016 Blog Statistics

As you can see below, we almost it hit 15.000 unique visitors last year, who did just over 57.000 visits and generated over 133.500 page views. That is amazing! What’s even more amazing is that you guys stayed for an average of about 275 seconds (!) per visit, guess the posts must be interesting enough to stick around. That is a very big compliment to us and we sincerely appreciate that, so thank you all very much for the support! At least now we have the feeling that we are not doing this just for ourselves, but hopefully are helping a few others on the way. That really makes all the effort worthwhile 🙂

Some other random statistics:

  • Total number of posts to date: 88
  • Total number of comments to date: 1067 (just under half are ours)

The best and … our personal best?

What did you like best in 2016? This was a bit of a surprise…..

  1. A post on (an ultimately failed!) running challenge with ATL – 2503 views (completely non-financial post…)
  2. Our year-end dividend update for 2015 – 2283 views (yes, let’s talk money!)
  3. Where we travelled – 1071 views (another completely non-financial post, is this a hint?)

Pages that were most appreciated are (no real surprises here):

  1. Our Blogroll – 3370 views
  2. Our Cheesy Index – 1875 views
  3. The About Us – 1606 views

From our end, the posts that we liked most (primarily because of the underlying research/calculations and associated new insights):

  1. How much money to do you need to FIRE in this cheesy country – 691
  2. What is the optimum amount of money to have in a mortgage? – 367
  3. Am I mad? – 285

Ad Update

We do have some advertisement up on our blog (we know, they are annoying…sorry) to try to cover expenses (with a promise to remove them when we do). This is not yet a success, but you have already been helping quite a lot. The total income for 2016 is €54.24. But considering that costs are €86 per year, we are still a bit short. Hopefully 2017 will change that.

Thank you all again for lots of fun, comments, new ideas and feedback! We hope to see you many times again this year.

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December 2016 Dividend Update

Another (dividend) year has come to a close, and what a year it was! We were able to pretty much reinvest all cash from sales of ETF’s. These were part of a company pension package, we did not like it and decided to sell at their highs in 2015 and start to manage ourselves. We also used some cash from our home sale to sink into (primarily) dividend stocks.

We reinvested the cash gradually over the course of one year, as we needed time to research and select stocks we think should help us in the long run. Albeit we made some mistakes and corrections, the portfolio we have now will remain and be slowly expanded in 2017.

For December 2016 we got just over €642 in dividends, which included a nice one-off bonus dividend from Evertz Technologies (ET). This (bonus) dividend was DRIP-ed and added 12 more shares to this holding. Nice! Purchases for the month included some 50 shares of AH (Ahold).

The usual breakdowns are provided below for your entertainment and curiosity:

The Dividend Portfolio

Our portfolio includes 45 companies with a total of 10307 shares and looks something like this:

The Sector Allocation

And if you breakdown by sector, it looks as follows (seems pretty diversified, but there is a bit more work to be done):

The total dividends received in 2016 was a very nice €5.591. Let’s see if we can increase that for 2017 ;-).

How was your Devember and the whole of 2016 from a dividend perspective? Were you pleased with the results?

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Savings Rate December 2016

December, and for that matter the whole of 2016, was fantastic from a savings rate perspective. We had a record month from the income side of things, and an average month in terms of expenses. This is a recipe for a winner. We ended up at a Savings Rate of 75.9% for December!

The summary for December is as follows:

  • Incomes from Mr .CF (one sign-on bonus and one pay check), Mrs. CF (two pay checks) and an expense claim hit the checking account. Life was very good!;
  • Income (principal and interest payments) from crowdfunding loans is now exceeding €180/month, this is a high as it is going to get and will stay this way for the coming 2-3 years (“hopefully”, see post on crowdfunding on details);
  • Transportation was just above normal due to the many family trips and that fact that we are now using our own car again to get to work, in short the current expenses are likely the new normal for the coming year;
  • Living expenses were below average this month, no surprises like unexpected maintenance and no property taxes or similar expenses either. This is the way we like it;
  • Groceries & grooming hit a record high in December, mainly because we did some massive shopping. Normally we take the bikes for the grocery trips, but this time we actually drove the car to the grocery store (we do this once every one-two months). To be honest, we actually needed to go elsewhere and were driving by the grocery store on the way back, talk about efficient use of the car :-). We used the opportunity to stock up on necessities;
  • Pretty much all social events were free, or virtually free. So again nothing interesting to report here. Had great fun with the various Christmas lunch and dinners, plus enjoyed some family time together over the holiday break. Most expenses associated with social activities are actually included in the groceries category this time around;
  • Costs for day-care and kid related expenses below normal as the benefits for 2017 have increased and the first payment arrived in December. Daycare will now “only” set us back about €955 per month for 4 days per week. But there are obviously also some other costs in this Kid category, such as cloths, toys, etc.; and,
  • The “Other” category was higher this month as Mrs. CF needed some new work clothing and a new jacket (she really got her money’s worth out of the old one).

The Overviews

For the year we actually did really good , if you don’t mind us saying. We ended the year with a overall savings rate of well over 60%. See below for the details (YTD totals on the left side):

2016 Savings Rate

2016 Savings Rate

The expense breakdown looks like this:

For 2017 we are not expecting such a high yearly savings rate, as we have some reno works still pending (as well as a bill for work done in 2016). Furthermore, we did not go on a holiday in 2016 due to job changes and moving to our new house. We do plan to go once, maybe even twice in 2017, so set aside a larger budget for this. We hope to still keep it above 50%.

Did  you do OK in December too? Was it also because of extra income, or were you able to limit the holiday expenses (or both!)?

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HAPPY NEW YEAR! Team CF wishes you and your family great prosperity and health through frugal living and good investing.

Now, on to business. In this case the business or Real Estate. We will first look at the month of December 2016 to see what happened with our properties, next we will take a short look at the forecast for 2017 and expected developments regarding income and expenses.

December 2016 – Real Estate Report

December was fortunately unexciting (mostly). All properties were rented out and all rents were received on time, distribution is as follows:

Expenses this month were higher due to the interest payment on a personal family loan (as of 2017 this will be paid monthly). Other expenses such as mortgage costs and property management fees were normal. We had some negative expenses (i.e. a refund) on the insurance side. This was the result of a new assessment on the value of one of our properties. No maintenance costs for this month, but we had the heating systems serviced for two units. Bills are expected for January and will come in higher than planned due to placement of carbon monoxide sensors (€35 each) and issues with fine-tuning during boiler maintenance…..small setback.

At the end of the day, December and 2016 as a whole looked like this:

For 2016 we had about €9400 income, €6400 expenses and a net profit of €3000. Not bad for a year in which we really got going on the real estate side.

2017 Forecast

For 2017 the forecast is as follows:

  • €35.000 rental income (don’t expect empty units this year, buy you never know!)
  • €19.000 expenses (includes €9000 for large scale external maintenance for two units)
  • €16.000 net income = about 7% net yield (before taxes)

The large maintenance for the two units was expected and we have been saving up for it as well. These two units are old (1910-ish) and the outside paint work will be removed and replaced with stucco. This way the units will have lower maintenance going forward (no more masonry or paint work required in the next 10-20 year, depending on the quality of work). Windows frames will also be repainted. After this final large reno work, these two units are in tip-top conditions and should need very little work over the next decades.

We also found that the moisture issues (migrating through the outside wall), as discovered in one of the new units last year, is worse then expected. We are getting a contractor in next week to have a look. We have made some reservations for this one too. But this is the large unknown for 2017.

Stay tuned!

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Yes, yes, I did not do it again……. I was so close to spend two shares of RDSA, but the Force is strong in this one 😉

It might finally be another frugal New Years Eve this time around.

Although I’m a bit early: Happy New Year!

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Please prepare for a completely non-financial, non-educational, non-frugal, non-useful but hopefully still entertaining exercise about cars. I (Mr. CF) still like cars, albeit have not been focusing on them as much as I used to (i.e. since starting with the journey to FI). I still like watching programs like Top Gear, Fifth gear and the likes, but have started to realize that the dream of owning a small little sports car is more expensive than I would like. Unless we win the lottery (which we don’t play), I’m very doubtful that I will ever own a sports car (small or fancy). But I may solve this by renting one, one of these days. The experience is likely worth the money for a petrol head like me.

What cars have you driven?

After having some work done on my company car that I’m current driving, I got a temporary loaner car. Because apparently the previous user had smoked in the car, it smelled horrible. So I requested another loaner. Then I realized I had just been driving 3 different cars in the span of just 3 days, which got me thinking about the number of cars I have personally driven since getting my driver’s license in 2001 (hint, I was well past 18 year of age before I got my license. Got something to do with a good public transport system, high cost of driving/owning a car and being a student). I therefore began to make a list in my mind, but this got a lot longer than I was anticipating.

So I had to write it down (and I probably still missed a few):

  • BMW 335ibmw-7-serie-740i-2008
  • BMW 740 (shown)
  • BMW X5
  • Cadillac STS
  • Citroen ZX 1.8
  • Chevrolet Impala
  • Chevrolet Tahoe
  • Daihatsu Materia
  • Dodge Avenger
  • Dodge RAM 1500 dodge-ram-3500
  • Dodge RAM 3500 (shown)
  • Fiat Cinquecento
  • Ford Ka
  • Ford Fiesta
  • Ford Focus
  • Ford Focus SVT
  • Ford Focus Station wagon
  • Ford F150
  • Ford Taurus
  • Ford Suburban
  • GMC Sierra
  • GMC Yukon
  • GMC 1500
  • Iveco Daily (ok, this technically is a van and the longest one at that series, parking was fun!)
  • Jeep Patriotlancia_thesis
  • Lancia Thesis (shown)
  • Mercedes C220 (car in which I learned to drive and passed the driving test)
  • Mitsubishi ASX
  • Mitsubishi Lancer
  • Nissan Micra
  • Opel Astra station wagon
  • Opel Insignia
  • Renault 5 Alpine
  • Renault Twizzy (not sure if you can actually call this a car)
  • Seat Ibizasubaru-wrx
  • Seat Leon Station wagon FR
  • Smart for two
  • Subaru Impreza WRX (shown)
  • Suzuki SX4
  • Toyota Yaris
  • Toyota Previa
  • Toyota Prius Plus (or Prius V in North America)
  • Toyota Tundra
  • Toyota RAV4
  • Volvo S40
  • Volvo V502006_volvo_s60_r_base
  • Volvo S60
  • Volvo S60R (shown)
  • Volvo S80

That’s a total of approximately 47 48 49 different cars (added the Fiat based on a comment below), which sounds like a lot. But this is actually only just over 3 different cars per year for the last 15 years.

Unremarkable?

Most of these cars are quite unremarkable (horrible even) except for a few:

  • The Lancia Thesis might not sound as exotic (or look the parts for that matter) as a Ferrari or Porsche, but this particular car was a bit special. It was the first ever delivered to the Netherlands (of only 67 total that first year!) and equipped with every available option. It may actually have been more rare than some fancier cars like the Porsche 911.
  • The BMW7 series is a master piece, great car for extremely comfortable cruising. I drove this car when I was hustling during my student days as a private chauffeur. Never forget the moment when I drove up to a McDonalds and walked in there in my blue suit. Still remember the looks on people’s faces……how can that young guy afford such a car…it was priceless.
  • During the same side hustles as noted above, I had the opportunity to drive the Volvo S60R. Fun car for sure, especially if the client allows you to pull up at the lights at full throttle and directly fly up the highway at 120km/h (plus). You should have seen the smile on my face 😉

Notable mentions of cars I did not drive personally but experienced from the front passenger seats:

  • Audi S42008-dodge-charger
  • Dodge Charger SRT8 (shown)

If you have not had enough about cars yet, we can recommend the following:

http://www.financieelonafhankelijkblog.nl/gratis-koken-tijdens-autorijden/

(in Dutch, for some creative car cooking).

http://www.mrmoneymustache.com/2016/09/12/reader-case-study-young-man-saved-from-jeep-suicide/  (for some good old financial car bashing).

This one is really special, it made my cry and smile at the same time…..

https://divnomics.com/2016/11/12/we-traded-in-our-car-update/

 

How about you? What cars have you driven? Any cool cars? Have you ever rented a sport car for a day of fun? If so, was it worth it?

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It’s have been a great year and we are happy and proud that we could share it with you! Christmas is upon as and we will be enjoying a couple of nice days with fiends and family, good food, laughter, joy and relaxation. We hope you do too!

Marry Christmas!

We hope to see you again after boxing day.

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November was amazing for the Cheesy Index as it rose to a record 55.5%. So far this year, the Cheesy Index went up 8%. I’m speechless, that is really good progress. But why? For November it was mainly due to Mr. Trump (did not see that one coming), more favourable exchange rates and two pay checks for Mr. CF (due to the 4 week pay periods).

With another good month anticipated for December (“13th month” payment for Mrs. CF, no major expenses anticipated, sign on bonus coming in due to the career switch), we might actually get close to the 58% mark. That would be seriously amazing if that were to happen. More to follow in 2017!

We hope you had as much benefit from Mr. Market as we did! How was your month, did you also increase your net worth by quite a bit? Let us know!

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This grown man has bought himself a tricycle (with the blessing of Mrs. CF!) .… what on earth was I thinking? Anyhow, it looks like this (yes, the flames make it go faster ;-):

What is it?

It’s nothing more than a recumbent tricycle/bicycle with cover to reduce air resistance, called a velomobile. The one shown above is a very basic model made of aluminium. As you can imagine, fancier models (see image below) are also available with better aerodynamics and lower weights (e.g. some consist of carbon fibre). Prices range from as low as €1.000 for used older models, to as much as €12.000 for new carbon fibre models with electronic support systems (to help with inclines slopes and get up to speed faster).

How fast are they?

This obviously depends on the model, the rider and the course. But to give you some indications, the model shown above should be able to make speeds up to 40km/h (25mph) possible for short stretches. With average speeds around the 25-30km/h mark depending on the route (personally will aim for 27km/h for now).

The more fancy models with trained riders have been known to be doing speeds of well over 100km/h (65mph) during races. The record is currently set at over 85mph (138km/h)!! That’s insane for a human-powered vehicle.

But why?!

I can almost hear you think, well, the answer for us is primarily two-fold. And perhaps unsurprisingly consists of:

  • Economics; and,
  • Health.

But there were various other considerations as well, all will be reviewed below.

Economics

Ok, so here are the numbers:

  • Purchase cost: €1500 (pretty good deal, bought it used in Belgium)
  • Expected residual value: €1000 (this is conservative as these velomobiles keep their value well)
  • Missed opportunity cost: €105 (assuming 7% ROI on purchase price)
  • Maintenance: €50 (not sure what yet, but you never know, there is always something)
  • Ferry crossing: €0.91 per roundtrip (have to cross a big river to get to work)

First year (worst case) yearly expenses: €655 + ferry costs

  • Estimated cost of using the car (excluding road tax and including increased maintenance and partial depreciation, as we would have had the car anyways, even when not using for commuting to work): €0.18/km
  • Normal car commute: 84km (roundtrip, bicycle route is significantly shorter due to a ferry crossing at about 54km)

Cost per day traveling to work by car: €15.12

Number of trips needed to break even: 46 trips = exactly one trip per week for the first year (I actually have 6 weeks of paid time off per year = 46 working weeks per year).

Now here is the kicker, I’m being partial compensated for costs of the car. I’m going to get €0.12/km for my normal commute: €10.08/day (this is not taxed!), but this is irrespective of what form of transportation I use. Plus I received a sign-on bonus to further compensate the costs of commuting. This was part of the negotiation for the new job, as I would no longer get a company car.

The compensation works out to also be about €0.12/km after taxes (based on using the car 46 weeks per year, 5 days per week, 84km per day). In short, the compensation (€0.24/km after taxes) already completely covers the operating costs of the car, and potentially a bit more (depends on the amount of maintenance required).

Now, the actual savings are a bit harder to calculate, as it will become a complicated calculation with many variables including depreciation (car and velomobile), maintenance (car and velomobile), number of trips by car/velomobile, etc. Many of which we don’t know at this stage.

But based on our best guess, and an average of 1.5 trips per week with the velomobile, the total “savings” should hoover around the €1700. For the record, this consist of elimination of the car expenses (€0.18/km) + compensation (€0.24/km) = €0.42/km “income”. Subtracted are the various velomobile/ferry expenses. This is quite a bit of money and will motivate me to get my butt legs moving in the tricycle.

Health (and Time Management)

Since Miss CF came along the time available to work out is limited. Trying to squeeze in a workout between work, commuting, household chores, spending time with Miss CF and Mrs. CF, blogging, etc. is difficult. So when replacing my normal (somewhat useless) car commute to work by cycling to work, I kill two birds with one tricycle: better health and optimize use of available time.

Considering the commute is just under 27km one-way, it takes about an hour to get to work (including ferry crossing). Add about 15 min in changing and showering, the total duration is about 1,25 hours per trip or 2,5 hours per day. The normal commute is about 1.5 hours (under normal conditions, one big traffic jam and it can stretch to 1,75-2,0 hours), so the additional time is normally 1 hour. However, as I don’t have to work around rush-hour and traffic/traffic jam restrictions (i.e. not having to get to work before 7:00 and leaving before 16:00 in my case), I can make my day more efficient and the 1 extra hour actually does not have a whole 1 hour impact on the day. But still provides 2 extra hours of workouts (and indirect overall health improvements), now that’s a clear win.

Other Considerations

Besides the economical and health reasons, there are a few other considerations that led to the purchase of the velomobile. These were, in no particular order, the following:

  • Traffic: no more traffic jams, awesome!!
  • Safety: having three wheels makes you a lot more stable on semi wet and slippery roads. Which means I would have more days out of the year that I can use my regular road bicycle to get to work
  • Storage space: I can actually take some stuff with me like clean clothes, shoes, food without needed a heavy backpack like I need now on the racing bicycle.
  • Speed: a velomobile should go a bit faster on the longer distances than a regular road bike (note “should”, still need to prove this is the case). Despite having more weight to move (a velomobile is about 20-25kg heavier than a road bike), the Cd resistance value is so much lower that overall you can achieve higher average speeds (caveat here is that this applies on stretches that have few traffic lights and/or other area that you need to slow down).
  • Weather: I hate cycling in rain and wind, but this should make that a bit more manageable and enjoyable.
  • Environment: replacing the trips normally done with the car is obviously a good thing
  • Band-Aids: completely in line with a post of a while back. This way of commuting takes effort and makes me, us and the planet a bit better. So it’s worth the extra work.

Resources

For those of you whom are interested in further information, you can check out the following websites.

Quick overview of the Alleweder velomobile (one of the most successful production models of any velomobiles to date at about 500 units):

http://alleweder.jp-web.de/index.php?page=introduction&lang=en

Largest producers in the Netherlands (in Dutch, also includes some model overviews)

http://www.velomobiel.nl/

http://www.alligt.nl/

For those in the USA and Canada:

http://www.velocityvelos.com/

http://velomobiles.ca/index.html

How about you, what did or do you do to make your commute more efficient. Is this tricycle something for you too?

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“Wisdom comes with age” is an commonly used phrase, which is absolutely true for most things. You have to live life, make mistakes and learn from them to get better at everything you do. The older you are, the more mistakes you have a made, the more lessons you have learned and the old-fartmore wisdom you have gathered (generally speaking anyways, some people never learn and some are way ahead of the curve). But that means that for most people the aha-moment for financial independence comes a bit later in life (or not at all!). This is also true for us, Team CF (credits go to Mrs. CF for pointing us in the right direction). We had a relatively late start, but fortunately still have time to catch up.

A short while back during a meetup with other FIRE enthusiasts, we met the young fellow behind the blog https://whendoyouretire.wordpress.com/. This guy has managed to have a net worth of over €100.000 by the age of 21! The most impressive part is that he managed all this without an inheritance, amazing job, super income or other (lucky) shortcuts. He is just frugal, works hard, lives life and invests, life can be simple some times.

Besides being a really great guy, he is also one of the very few that is way ahead of the wisdom vs age curve. During the meetup most at the dinner table expressed the frustration that they did not know about FI at his age and all were kind of jealous (including me). But hindsight is 20-20 as they say (i.e. you old-fart-2-jpgwould get a 100% success rate if you could do it again) and you should look forward not backwards. WDYR if you read this, we sincerely hope that you will be successful in becoming FI by a (very) young age, and hope to meet you again in the future.

For all of us that missed the boat at an early age (or are about to), there is this think called the internet. It will provide you with a world of information on everything (personal) finance. The great thing about the internet (well the content on it anyways) is that it allows you to learn from mistakes made by others. The only thing you need to do is be open to new ideas and suggestions. Once you can do that, a new world will open up full of opportunity, F-you money, lots of free time and peace of mind.

So do yourself a favour, get ahead of the curve, get the wisdom before you age 😉

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Crowdfunding with Geldvoorelkaar.nl

As part of our diversified portfolio we currently also invest into crowdfunding projects. The platform we selected is “Geldvoorelkaar” (GVE). (Note: this is not an endorsement or affiliate link, all is available in Dutch only. Below are a few more options presented for your consideration!). The main reason for choosing this platform is that they are one of the biggest players with a well-managed site, approved by the AFM (Financial Authority of the Netherlands), have clear conditions and information. You can invest with as little as €100 and a generally have good selection of project available. They tend to fill up very quickly, so there is definitely a great demand for this type of investments.Crowdfunding

Another reason for choosing this particular platform is that they appear to have very stringent selection criteria for projects. Based on a post on their website (see here, Dutch only) only about 1 in 15 are actually published on their site (numbers based on commencement since 2011). We like this, as it shows the project have been evaluated properly and the risks are assessed, qualified and quantified. This allows you and me to make a more educated risk based decision before investing. They use several external parties to provide a third party assessment, which they include when the project is published.

Some other things to consider, you are currently allowed to invest up to €80.000 per person in crowdfunding with GVE. There are no limitations in the number of projects you are allowed to invest into (albeit with the minimum of €100 per project, you will max out at a theoretical 800 projects, without re-investments that is.)

A total of 1077 projects were published on GVE up to mid-2016, totalling €88M, that is quite a bit of money. They must be doing something good, right?

How does it work?

The idea is as follows, you loan a certain amount of money to a project of your liking via the crowdfunding platform. The project owner will pay it back within a certain period of time (roughly between about 12 and 120 months, most are however around the 48-60 month period), via the platform. You get a fixed payment each month, which consists of a principal payment and interest. You can compare this with your mortgage payment, but in this case you are performing the role of the bank.How Crowdfunding works

Interest percentage range from about 5.0% to 9.0% for the majority of the projects. Interest percentage is subject to the classification of the project and in combination with what the project owner is willing to pay. The crowdfunding platform also charges you fees depending on the duration of the project (e.g. 0.3% per year of the loan value, paid upfront at commencement of the project, but is reimbursed if the project defaults).

There are also a couple of other options, these include:

  • a hybrid options that have a 6 to 12 month interest payment only (paid per quarter), after which the normal repayment process starts (so principal and interest payments);
  • There are also projects that return the principal completely at the end of the project (usually after 6 to 18 months), with quarterly interest payments during the project period;
  • The latest and newest option is to invest in project and are able to convert your principal into shares of the new company. The longer you wait, the cheaper the shares are to convert your principal into. The idea is that you start to receive dividends when the company start making money and/or sell you share after a few years for the value at that time (usually book value).

Our Project Selection Criteria

We use two main criteria when investing:

  • the Graydon PD percentage (Probability of Default in year 1) needs to be below 1%; and,
  • The CreditSafe score needs to be above 50 points, this is a measure how financially healthy the company is (e.g. how well they are able to repay the loan).

Other criteria we use as based on some more subjective assessments (e.g. do we like the project, do we see a market for it, etc.) and is there is personal backing of the loans (in case of payment issues, you may be able to recover some of the loan).

Our Current Investments

When I started to write this post (a couple weeks back), we had about €10.000 invested in about 33 projects at the time. Based on year 1, we had a net yield of 7.4% (after payments of GVE fees) and no defaults! Mr.CF was happy and positive.

On the day I wanted to upload the post to the website I had a message from GVE. One particular project failed and the owner had applied for bankruptcy. In short, this is a write off and there goes the 7.4% yield out the door. Based on these initial losses, the yield has already dropped to 7.0%. Still not bad, but one or two more defaults and Mr. CF will start to cry and wonder why this was a good idea in the first place.

Defaults

How often do these defaults actually happen? Based on historical data (Dutch Only) this happens commonly between 20-24 months of the project and in about 5% of the cases (i.e. out of the 930 projects, 45 have been suspended based on numbers by GVE). Note that this should be an under estimate of the total percentage considering many of these project are still running and can still default!

Another blogger (Dutch only) whom has been using crowdfunding projects a lot longer then we have, got higher default percentages (potentially around 10%), pretty much whipping out a large portion of the envisaged yield. However, it is all in the numbers and a detailed assessment is required to find actual yield upon completion of a larger set of projects. Time will tell.

The above examples also prove that this type of investing is certainly not without risks, despite risk managment from two sides (GVE and you).

Considerations and Path Forward

Crowdfunding is a great way to help small companies and social groups start businesses or obtain goals. However, it certainly is not without risks and defaults will quickly whip out your yield. It might not be the best way to invest the money from and ROI point of view. But may provide you with a good feeling that you are helping other people (If you like altruism, you could also donate your time and/or money to charity….)

For now we will put further investments on hold to see how our current portfolio will develop. We have also decided to limit our crowdfunding to no more than about 1-2% of our total portfolio (down from the previous 5%). The primary reason for this is the realization that your ROI upper bound is limited by what you see advertised, but the downsides can be well in negative territory with limited to no chances to recover these loses (albeit a collectoin agency might get some money back, but never the full amount that was owed to you). The main reason is that when a project defaults, you loose your ROI and part of your initial investment. That is a double hit! Now your ROI on the other projects has to first payback the money you lost on the default, before it can start to make you money again on the initial investment value you used.

An Example

A simplified linear example to show the principle (the actual calc is a bit more complicted due to the combined principal and interest payments each month): You invested €1000 in 10 projects (i.e. €100 each) all lasting one year. Your ROI is 8% per year = €80 at year end + all your principle back = €1080. For argement sake one project defaults halfway the year (€40 should still have been repaid to you) with only 50% recovery from the debt collectors (i.e. you will still get €20 back of the €40 owed). In this case, you will end the year with : €1056 (loss of €20 investment and €4 in missed interest). So one default dropped your ROI from 8% down to 5.6%. Still not bad, but if two project default or debt collectors cannot recover prinicple, you might end up with a very low ROI, if not a negative ROI! This is a scary thought, especially as you most likely will see defaults in your portfolio.

At least with ETF’s/shares, in most cases, you have the luxury to wait and see them recover (and perhaps still get dividends in the mean time). This is not an option with crowdfunding: gone = gone! A paper loss almost automatically translates into a real loss. Keep that firmly in mind when investing in crowdfunding.

Our plan is to provide a bi-annual update on how the investments are doing and what our yield looks like. But we are done with investing into crowdfunding for now (the exception might be real estate projects, these are a bit more “stable” and have better investment recovery opportunity and lower risk to default).

Alternative Crowdfunding Sites and Resources

There are also others available in the Netherlands, which include:

http://www.fundwijzer.nl/ (in Dutch only, a nice overview of the many parties and projects available)

https://www.collincrowdfund.nl/ (very similar to GVE, slightly smaller company)

https://www.oneplanetcrowd.com/nl (for sustainable projects)

https://www.leapfunder.com/ (English, primarily for people/companies needing money)

https://massafinanciering.nl/ (also similar to GVE)

and many, many more. The ones above we have not used personally, so cannot comment on how well they do or compare to our personal experience with GVE. If you did, please do let us know what you think!! Always good to have a better understanding of the alternatives available.

Do you invest in crowdfunding? If so, how are your experiences. If not, why?

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Another relatively steady, but good, month on the dividend side of our investments. We purchased some RDSA (100 shares) and AH (150 shares in two batches) in November, plus ongoing DRIPs for about 10 different companies, which added anywhere between 1-4 shares each. We currently own 10.222 share in various companies, that’s quite a lot!

The grand total for November is a very solid €434 in free money. This monthly dividend income is a YOY increase of about 191%. This percentage is going down steadily compared to previous months and will continue to do so going forward due to the slower (re)investment into dividend shares.

20161201-monthly-dividend

As you can see below, we finally bought back RDSA and AH in November as noted earlier, as well as added to our position in UNA. This time we are planning to keep them, potentially adding to the positions in the coming months. After that, we have to start looking into some new posistions. But these have to be European dividend stocks (for diversification and exchange rate reasons), ideas?

We now own shares in a total of 45 different companies, which are:

20161201-dividend-overview

When you allocate the stocks to the various sectors they represent and add them together into a plot, this is what you get (based on Market value as of COB November 30):

20161201-dividend-stock-by-sector

How did you do this month? Better or worse then expected? What did you buy? Did you also get some UNA and AH after the drop in share price over the last month?

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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!

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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?

 

 

 

 

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