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Passive Income Update (September)


Here is the monthly update to my passive income. I monitor both my net worth and my passive income each month as a gauge on my progress towards my savings goals and financial independence. Where net worth gives an overall total the passive income gives a level of investing efficiency of my assets.

Below is a rundown of the sources of my passive income. I also carry some debts so the interest on these is also counted to give a fair net value of my income.

Assets

Real Estate

The rental property is going well and still renting for £500-a-month gross. I have some costs associated with this which amount to about 20% of the gross rent. I pay a letting agent 10% plus VAT for managing the property which amounts to £60-a-month. On top of this the apartment is in a building which has a service charge or factoring of £16-a-month, this has recently increased from £14-a-month. My landlord insurance is £190-a-year and landlord registration is the equivalent of £20-a-year (£60 for three years). Gas safety and electrical appliance safety testing is £126-a-year.

Total income £4,751

Peer-to-Peer Lending

In the retail loan sector I continue to withdraw repayments. The remaining money which still amounts to around £12,000 yields approximately 4.5% in total which is stable compared to last month. In general rates have been falling and this is an area I am looking at reducing my exposure to.

On the other hand I also invest in a property development crowd funding venture. Returns here are 8% which is good and the payout track record is also impressive. This is an area I would like to invest more, however projects are quickly filled these days and I envision rates will ultimately decrease to balance the demand from investors of funding these projects. Personally if rates fell below 7% I would consider the risks to be too great to be worth investing in. At present I have £2,500 invested here with some loans due to be repaid in the coming months.

Total income: £741

Cash Savings

The majority of my savings are held in a Thai savings account (I live and work in Thailand). I currently have just over 150,000 Baht in it (just over £3,400) which earns a reasonable 2.5% interest rate.

Total income: £88

Stocks

I have almost £18,000 of my net worth invested in stocks through my pension funds. The fund in these do not pay out dividends and simply accumulate (or lose in fees which I fear is probably more accurate) the dividend income from these investments. Outside of the pensions I have a very small tracker fund which pays a 2.58% dividend.

Total income: £6

Liabilities

Unsecured Personal Loan

I took out a £15,000 5 year personal loan in 2016 to help fund the purchase of my buy-to-let property. The interest rate on this is fixed at 3.7% (by comparison the yield on the buy-to-let is about 8% after costs). The balance on this loan is currently just over£10,500 meaning the annual interest payments amount to £390-a-year. I also get cash back of £12-a-year on this.

Total income: -£378

Credit Cards

I continue to pay down these. I now have one balance at just over £2,000 at 4.95% interest. It is my priority to pay this down as money placed here is effectively earning 4.95% tax free and risk free. This will be paid off pretty quickly given new money saved each month, plus repayments from my peer to peer lending and also rental payments from my property means I have a fairly healthy cash flow situation.

Total income: -£102

Putting it together

So from the above you can see the total income from assets comes in at £5,586 which again is a fall from last month (mainly due to withdrawals from the peer to peer lending platform. Good news is that interest on debts is down by over £100-a-year to £480-a-year which is the equivalent of a 3.8% interest rate which I consider reasonable. Putting these together gives a net passive income of £5,106 which on an asset base of about £89,000 gives an income yield of about 5.7%.

In the last 12 months my passive income has increased from £4,840 to £5,106 which is about a 5.5% increase. Again compared to last month these gains have mainly come from paying down debts as opposed to new investments earning income which will continue to be the theme over the next few months.

My current living expenses are £10,098-a-year (slightly less than last month) so my passive income amounts to just over 50% of this putting me now beyond the half way point to financial independence.

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