A way too big loan?

As I mentioned in my previous post Great news, I took a rather big mortgage of €160,000 to pay off my apartment.

As a matter of fact, I could have paid cash for my apartment without a loan. So why didn’t I go down that route?

Return of stocks > cost of intrest on loan

My intrest rate is 1,89% fixed. Add up the accompanied costs of acquiring a loan and my total yearly intrest rate (costs included) should be around 2,20 – 2,30%.

However, it is not that hard to achieve yearly around 6-7% in the stock market. If you put in some more work, it can even go higher. So, given the high margin of safety, the choice was easily made. This way I can keep all my money in the stock market and keep collecting dividends.

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The money I receive from my parents, will mostly go into the apartment for furniture, machines, painting… I expect to still have some cash left after that. Problem is that I had to promise not to buy stocks with the money from my family (they are quite opposed to the stock market, unfortunately). That cash can be put in a savings account to pay for apartment expenses while I can keep transferring my wage minus the mortgage in the stock market.

Another option would be to buy a second property and I will probably walk down this aisle if the current tax laws stay applicable. I would look for a studio/apartment up to €140,000 and rent it out.  This would be a combined effort of paying an amount cash and getting another loan. The rent should cover the loan. This way I can optimize my tax form. I would like to achieve this by age 25.

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Advertenties

Dividend Report Aug + Sept ’17

Another 2 months passed by so it’s time for a dividend income report!

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August:

Government bond: €235
National Grid: €61,19
Novo Nordisk: €25,65
General Mills: $20,99
Hormel Foods: $4,55
Verizon Comm: $13,74

= €321,84 + $39,28 = €355,13

September:

Unilever PLC: €26,59
Resilux: €326 (capital reduction, not a real dividend!)
Royal Dutch Shell: €47,27
Imperial Brands: €15,41
British American Tobacco: €13,49
Pfizer: $2,86
Grainger Inc.: $15,23
IBM: $8,03
Johnson&Johnson: $6,00
Gilead Sciences: $20,11
HBSC PLC: $43,89
LyondellBasell: $40,95

= €428,76 + $137,07  = €544,92

The used conversion was 1,18$/€.

September got a huge boost from the capital reduction of Resilux, which was tax-free. It were 2 good months and October looks promising too.

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Great news!!!

After a couple weeks of absence, I’ve finally something big to announce. Get your seatbelt on.

Since 2 years I have been following the real estate market to get to know the price setting and market conditions. I did this in order to find a decent, payable property to live in when I graduate. As soon as I graduate, I will probably work at the military airport in Brussels and because commute is not possible (very time/money consuming), I wanted to buy my own place to stay.

So, after starting the final year at the academy, I accelerated the pace. At first I found an apartment near Brussels at a reasonable price with a commercial ground floor to rent out. There were 2 major problems: the commercial space needed BIG renovations and because of a new shopping center, people were abandoning the commercial places in the neighbourhood and there were at least 15! places for rent. No opportunity lost here.

On the other hand, I had been keeping an eye on some kind of social project but there were only a couple of selling days. Here comes the interesting part. It concerns a new apartment block which should be finished by summer 2019. The apartments are located at Laken (Brussels) and are 3 kilometers away from the Atomium and The Great Market/Commercial City Centre. No complaints about location.

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It receives major subsidies from the government and enjoys a beneficial rate of 6% VAT instead of 21% VAT which makes quite a difference. The only negative point: I have to put this apartment as my place of residence for 20 years. There were some other regulations like an income limit at the time of buying, first property, blablabla… but I fulfilled the entree preconditions. After 20 years, there are no more regulations and I’m free to sell the place and pocket the subsidies. I expect the housing prices to raise over a period of 20 years so the worth of the subsidies will raise as well.

After some further research, I decided that the pro’s outweighed the contra’s so I signed my contract to buy the place! It’s a very spacious 2-bedroom apartment with 115 square meters of living space (1,250 square feet) and a 10 square meters terrace (110sqfeet). It’s visible on the image.

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Let’s talk numbers. All numbers are a pretty correct estimation, it might vary a couple of hundred euros due to costs hard to estimate.

I’m only paying around €204,500 for my apartment and parking spot. (This is almost peanuts).

My subsidies and low-level VAT come in for around €108,000. This is already deducted from my buying price. It’s crazy how cheap I got this place considering it’s completely new. Thanks to the subsidies! There will come in some costs like solicitor and loan costs so this will reduce my net worth a little bit. I might do some small adaptations to the standard settings of the apartment like changing the floor or sanitary so I expect the costs to go up. However, these will also add value to the apartment so it’s not money down the drain.

I expect the apartment to be worth between €315,000-€325,000 when it’s finished. I’ll have to buy some furniture too off course. I plan to install a bar into my living room because let’s face it, it’s awesome.

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Some other great news: my parents are giving me a gift of €75,000 to help me fund the place. This might be a matter of moral trouble to some people, but I look at this rationally. Being the only child, inheritance taxes are gonna be a living hell. This means it’s better to already pass something to lower the taxable amount. If you have to choose between yourself and the government, it’s pretty easy ain’t it? 

Another great thing: my aunt (no kids, no husband) decided to give me €10,000 once the place is built so I can buy my furniture. Thank you auntie! Same explanation as above.

I went to the bank to ask for a loan and got a pretty decent deal. I’m getting €160,000 on a 20-year timeframe at a fixed intrest rate of 1,89%. This implies a monthly payment of +-€800.

This means I’ll easily be able to keep my money invested in stocks, yay! This was a conditione sine qua non. I was ready to transfer a little amount but because my intrest rate is so damn low, I’ll just keep killing it buying stocks. As long as my stock returns are higher than my intrest payments, there’s no fucking problem. Thanks for the cheap money!

Getting a loan way bigger than necessary means I’ll have plenty of cash available. I will put this in another future post.

The subsidies (€108,000) and the family gifts (€85,000) will skyrocket my net worth way over €300K. 

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Net Worth Update: Q2 ’17

A long overdue net worth update upcoming!

Let’s first feed you some numbers:

As you can see, my portfolio and other funds are listed. My net worth has been increasing considerably last year. See the graph below.

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We see a whopping 40%! increase in net worth. I would sign for that percentage for all the upcoming years…

This means I’m well on my way to reach my Goals of 2017.

Concerning my Financial goals by age 25: I’m at 55,76% of my net worth goal of €250K.

How’s your NW developping?

 

New buys Q2 ’17

Brace yourselves, new positions incoming!
The new additions to the portfolio which were made during Q2!

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1) Scandinavian Tobacco Group: 170 shares. Cost basis: €2,488 . This is a Danish, rather small tobacco company which focuses on high quality, pipe tobacco. It’s no mass production but more for a middle- to high class public who know how to appreciate a good tobacco product.

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2) AB Inbev: additional 50 sharesCost basis: €5,366. I racked in some nice profits from a bold short put. I decided to reinvest them mostly in the company.

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3) Euronav: 100 additional shares, cost basis: €712. An oil tanker company of whom I had bought 100 shares when I started investing but they went downhill after the oil price drop. The company trades at around 25% discount to their book value and the management is doing good things, in my opinion. When the oil market starts to rebound, they will profit.

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4) 300 Ahold Delhaize Turbo’s @ stoploss 15,1Cost basis: €1,296. I bought them right before the Amazon-Whole Foods take-over which proves again that markets can’t be timed. This was a bold move to play on a temporary undervaluation and to rack in some quick profits. I couldn’t believe my own eyes when the stock took a deep dive after the Amazon news. This position will be closed when it rebounds. I need the money for other purposes, see later on. However I still think that Ahold is worth at least €20 a share, patience will reward.

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5) Bpost SA: 90 sharesCost basis: €2,065. This is comparable to UPS or another post/parcel delivery service. They are a Belgian dividend cash-cow and trade at very fair multiples.

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6) Resilux: 20 shares for a grand total of €3,042. This is a Belgian small-cap company that produces PET-forms for the consumer industry. They are quite small and therefore not influenced by big funds or investment companies, which I like very much. Attractive valuations and a family owned business. Buy tip! If I would have more cash, I’d for sure buy extra shares of them! In the next months they will distribute €16,30 per share in cash to the shareholders, tax free.

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7) Norcros PLC: 1,750 shares for a total of €3,536. The Company offers mixer showers and accessories; tile and stone adhesives; taps, bathroom accessories and valves; bathroom furnishings; ceramic wall and floor tiles; kitchen sinks; tile adhesives, pourable floor coverings and tiling tools through its United Kingdom and South Africa business. (source: google finance, it was pretty accurate). They are a small firm with a high cashflow and small market cap. There are some questions about their pension deficit but after some homework it was proven to be a non-issue. They are pretty undervalued and have the capability to expand in the future.

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8) LyondellBasell NV: 30 additional shares, cost basis: €2,235. This NYSE traded company stays an unpopular chemical company and is just unloved by Wall Street. It is however interesting for European investors because we don’t pay US or NL taxes on dividends. It has a troubled history concerning their bankruptcy in 2010, but those worries are part of the past and I think they are a very profitable business with capable management and good investors (Leo Blavatnik).

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9) General Mills: 72 shares, cost basis: €3,670. This is a $30 billion U.S. consumer foods company which raised many childs and adults. I like their Haagen-Dasz ice cream way too much!

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10) Gilead Sciences: 15 additional shares, cost basis €890. Mostly a dollar-cost averaging operation. This starts to become a pretty big position but I’m confident they will put their war chest to good use. Patience will pay off.

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11) W.W. Grainger: 13 additional shares, cost basis: €1,995. Part of dollar-cost averaging but a very solid MRO-company. Dividend growth history of more than 46! years. You just gotta love it!

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12) Cisco Systems, 40 shares. Cost basis: €1,150. The market is a bit skeptic but they have plenty, plenty of cash oversea which will come back eventually. Trump, tax holiday? 😉 Almost every human being is affected by Cisco products, even if not in a direct relationship. Might buy more if an opportunity represents itself.

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13) Altria Group: 18 additional shares, cost basis €1,030. After some new government regulations, the market became afraid and sold off the shares. I scooped them up at a nice discount. They also own 10% of AB Inbev.

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14) Hormel Foods Corp.: 45 shares, cost basis: €1,407. Very well managed, family-owned business in the consumer industry, meat processing to be more exact. Ultra low debt and a long dividend growth history.

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15) Pfizer: 15 shares. Cost basis: €445. Small position, how cute! Normally I don’t tend to initiate these small positions but it was better to spend the cash and transaction costs of only $5 were super low.

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16) Symphony International Holdings Ltd.: 5,500 shares. Cost basis: €3,963. Another big, new position. This holding operates in Asia and has many assets. They are investing in companies in particularly high-growth sectors; primarily healthcare, hospitality, lifestyle and branded real estate which will benefit from the rising disposable incomes of Asia’s increasing, and increasingly aspirational, population (source: corporate website). They trade at around $0,85 but their NAV is approximately $1,28. Their director recently bought 2 million shares himself and I think the discount to their NAV will narrow down a lot. Plus, it is a nice geographic diversification for my overall portfolio which yields a very decent 5% net in dividends.

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This was a massive investment quarter. But, there’s a catch.

Recently I found 3 investment opportunities: Resilux, Norcros PLC and Symphony International Holdings. I was too short on cash to make a decent investment in all 3 of them so I created a construction. I sold my entire stake of 80 shares in AB Inbev and 100 shares of Ageas. As I don’t wanted to sell them, I immediately bought 1 call option on each of them at a very low premium (loss of less than 1%). To buy the 100 shares of AB Inbev and 100 shares of Ageas, I only need €10,400 in cash because the premiums are already paid. I expect to complete these buys as soon as halfway November because I already have €2,900 in cash. This means a remaining cash deficit of €7,400.

After that, the cash balance will practically be reduced to zero. I don’t feel comfortable having almost no cash so after this construction I will save up some cash for opportunities.

I hope you enjoyed my new buys and additions to the portfolio! I’m curious to see the dividends next year.

Did you go on a shopping spree lately?

Positions sold Q2 ’17

Hey everyone, time for some portfolio changes!

I’ve been quite active last quarter on the stock market. Normally I don’t tend to be so active, however circumstances and thoughts pushed me towards it.

First of all, I was finally able to sell my Peugeot shares for a small profit of 8% after keeping them for 1,5 years (€135). They were a ‘heritage’ from my first investment days and I was looking forward to put this money elsewhere, more predictable. I don’t like their cars either. The smaller ones really have no comfort for the passengers. I thought I needed new kneecaps after carpooling.

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Secundo, I sold my position of 20 shares in food giant Nestlé SA for a profit of almost 20% in less than 8 months (€230). I sold them shortly after the activist news for 2 reasons. The multiples are getting pretty high and the dividend tax is killing me. 35% Swiss withholding tax and 30% Belgian withholding tax is just too much. These taxes take away more than 1,8% in annual return. Too bad, I liked the company. However, I like money more.

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Next I sold Allergan PLC. I bought them with the prospect of the merger with Pfizer which unfortunately was cancelled. Fundamentals weren’t too clear in my opinion so I decided to sell my small stake and cut losses (luckily enough). This resulted in a loss of €297. Lessons learned.

Fourth and last position I sold was Wal-Mart. I bought them almost 2 years ago when they were on the slaughter bank. I got a 30% profit, being $725 (dividends not included). In my opinion they are slightly overvalued and I do not like the current retail businesses anymore. They are way too competitive and margins are very thin. Almost all retailers are investing big-time in their business and Amazon is another threat to be taken care of. It’s a solid company, but the business is not my cup of tea anymore.

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So far my sold positions... This freed up some cash of course, which was put to work in the weeks/months after.

In a next post I will discuss the rather long buy list with a net worth update!

Note: Normally I do not like to sell stocks of good companies, however this felt justified due to a changed tax regime or business challenges.

Have you ever been forced to sell a company you like because of changing market conditions?

 

Lack of imagination

When I talk to people about the future, they tend to always be average. Most of them want to own a house, have a car and maybe an apartment at the Belgian coast for their old day. Don’t forget a decent pension after a career of 45 years. Then they see their life as succeeded.

Seriously? Is that what you would settle for for the rest of your life? I can’t imagine a life following the herd.

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Think bigger, set goals and achieve them. Truth is, I don’t tell them my real vision on my future. They simply wouldn’t understand or would think I just don’t understand life.
One of the first things that pops into my mind is flying a helicopter or relaxing in Miami enjoying a cocktail. Celebrating New Year at the beach in Sydney or have Christmas in Lapland, home of Santa. Skydiving above the Palm Tree Islands in Dubai or walk on the Great Wall. Maybe work a couple of years in the USA or own a company? The options are endless.

Of course, this comes at a lofty price tag, but isn’t that why people become financially independent? To pursue dreams and lifegoals? This might all sound cocky and big talk but what’s the point in living an average life? It really irritates me how people don’t dream big or set high goals.

Aiming for the stars and landing on the moon isn’t that bad after all. Most people stay on the Earth.

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Without big dreamers, no multinational companies would exist. No man would have put a foot on the Moon or flown a plane. No telephone or electric cars. The world needs people with huge dreams to innovate.

Do you sometimes get irritated by how little people dream?

Dividend Report June-July ’17

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Long time no see, my friends! Exams and 4 straight weeks of work obligations without a laptop decreased my time to investigate the financial markets and keep you updated.

Let’s get it over with and peek at the dividends.

June:

National Grid: €202,22
Unilever: €26,55
RD Shell: €48,59
Imperial Brands: €15,36
WW Grainger: $5,33
Wal-Mart: $11,52
LyondellBasell: $32,76
IBM: $8,02
Johnson&Johnson: $6,00
Gilead Sciences: $20,11

= €292,72 + $83,74 = €365,54

July:

HSBC Holdings: $43,89
Vanguard S&P500 ETF: $9,91
Altria Group: $5,44
Cisco Systems: $6,90
Walt Disney: $6,50

= $72,64 = €63,17

The used conversion was 1,15$/€.

June got a massive boost from a special dividend from National Grid. The energy company decided to sell off a division and distribute a part of the earnings to their shareholders. This is a non-recurrent dividend and therefore not to be expected next year. The adjusted dividends for June come in at €163,32.

July was a rather poor month, bringing in only $72,64. However as I was literally ‘off the grid’ due to work, it was truly work-free capital joining my account.

By the way, I just exceeded 2016 dividend income with my 2017 dividends YTD.
Total YTD dividend income stands at €1477,5.

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Hope you have a nice summer so far!

Survive or Thrive?

Since I’ve known the concept of FIRE, I’ve wondered if it really is a destination for me or more a step-stone to something way bigger. I’ve found 2 good definitions which could be used to describe FIRE.

Financial independence is having enough money in passive income that you can stop working. Essentially, the money you have invested and saved provides you enough of a return that you don’t rely on a traditional income anymore, hence the term financial independence. People that pursue FI generally have plans to pursue their passions and other things in life.

Early retirement, while similar, takes an ode to its traditional retirement counterpart. It generally means that you retire early and stop working. But instead of retiring at 65, or later, you may retire at 45 or 55. In general, people that want to retire early want to enjoy the traditional benefits of retirement.

However I could still find myself in the FI definition, the Retire Early is not a thing I would pursue. I mean, I don’t want to be sitting on a chair watching through the window all day at age 35.

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Nonetheless, the FI definition can be interpreted in many ways. To me there is a big difference in the ability to stop working VS. pursuing other passions and things in life.

In Belgium, an individual could survive with €18,000-€20,000 a year with a modest lifestyle in my opinion (mortgage/rent included). Without a mortgage or rent, €12000-€14000 should be enough. However, this doesn’t imply traveling to exotic locations, fancy ski holidays or expensive dinners.

Some people enjoy sitting at home, which I fully respect. However, I think this becomes pretty boring soon enough and people tend to spend more money when not working (at least in my case). By seeking new opportunities, money will be required. The portfolio income will thus not be sufficient to cover extra or unforeseen expenses.

What if you want to go Down Under with your family? What if you would like to start a project which requires a sum of money? What if you would like to roadtrip the USA? I don’t plan these things years ahead so it is hard to budget this.

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I rather pay for experiences than for possessions, meaning I’d rather go on a roadtrip to the USA instead of buying a new design leather couch set. I would love to go scubadiving around some cool islands. Or throw a party on a boat with some friends on a hot summer night. Unfortunately these experiences tend to be rather pricy. However, there is a very thin line between prestige and these experiences. I really appreciate a nice car with a roaring motor and some cool options to play with. Is it about the experience of driving it, or about the prestige? It can provide thoughts for an endless discussion.

Knowledge is power, but so is money. Money creates opportunities. As I’m turning 22 soon enough, I’m keeping my eye on the real estate market. Old apartments need a lot of renovations and are still expensive. New apartments cost a lot more but enjoy the benefit of low energy costs and fewer maintenance costs the first 20 years. Then I started thinking if I could buy a piece of land and build let’s say 8 apartments. I can’t, because I don’t have enough money. However it would be way more economic instead of buying just one. I could sell or rent out the other 7. I’m pretty sure I could make a profit out of this, but on my current budget it simply is impossible. I could try to find like-minded people to help me fund it, but I rather have the full control in my own hands.

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I would really enjoy those projects on my own or fund start-up businesses and invest in them. Having enough money to fund these kind of initiatives, is only were my FIRE starts… Being able to do something for the good of the community or start your own business. A whole lot of opportunities and possibilities…

Do you sometimes have similar thoughts in which FIRE for survival just isn’t enough?

 

 

Dividend Report May ’17

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With a little delay, May’s dividend income report! A great part of European companies pays their annual dividend in May, so let’s look at the numbers!

British American Tobacco: €29,24
Bayer AG: €32,00
AB Inbev: €42,00
Sofina SA: €32,26
Solvay: €107,35
BASF SE: €38,65
Peugeot: €23,52
Intervest Offices & Warehouses: €77,42
Ageas: €147,00
Euronav: €27,46
Verizon Communications: $13,75
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Total dividend: €569,40

This is by far my highest passive income ever! I was hoping to reach the €500 mark for once and my stocks didn’t let me down!

May is one of my favorite months as next to my regular paycheck, my holiday money comes in. This is a very nice boost for my net worth.

€1,732 (paycheck) + €1,385 (holiday money) + €569 (dividends) = €3,686 of free cash flow.

However I went on a citytrip to Copenhague and had a very nice time, I still managed to re-invest around 95% of my free cash flow.

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Did you enjoy May?