I realized I haven’t posted an investment income update in a while. The last one I did was the December Investment Income Update from 2019.
Back then I had about $1,100 in income from investments.
As a recap, here’s what that was from:
- $1,008.79 from interest from savings accounts
- $107.51 in dividends from QYLD
Since then a lot in the world has changed. I’m not going to recap any of that here, except for the part that is relevant for this post.
When COVID hit, the Fed reduced rates, and subsequently so did high-interest savings rates. Back in January rates were close to 2%. As of the date this blog post was published, rates are as follows:
- Wealthfront: .35%
- Betterment: .4%
- Ally is at 1%
- American Express is at 1%
- Marcus: 1.05%
- Citi is at 1.1%
These are massive drops. More than 100% in some cases.
Given that a lot of my investment income was in savings accounts, this is not great for me.
However, my plan was never to rely on interest income.
A large portion of my savings I have designated for real estate investments.
In March, I closed on my first 2 properties in Fort Wayne, Indiana.
- A 3 unit for $100k
- A 6 unit for $250k
My girlfriend and I decided to convert the triplex into a duplex, live on the side that has 2 combined units (and use almost half of it as a home office), and rent out the 3rd unit. The 6 unit building will all be rental units.
So in total, we’ll have 1 unit we are living in and 7 rental units.
Currently, only 1/7 is rented.
Because we have been doing a ton of renovation work. We’re significantly improving the property, which will allow us to increase rents and also increase the value of the properties.
We’re spending about $250k on renovations.
We still have another couple of months before they will be rent ready, but we are getting there.
In another post I’ll go through the financials in more detail plus elaborate on all the improvements we are making (might need to be more than one post).
So, let’s get back to the June numbers.
As for June, we only had ~$400 in income from investments.
You can probably guess by now, but the reason it dropped so much from $1,100 is due to two factors:
- High yield savings interest rates decreased significantly
- We used a decent amount of cash that was in the savings accounts on the real estate properties so that cash is no longer generating interest income, nor is it generating rental income because the units aren’t leased up.
Once all leased up, our projected cash flow from the 7 units will be ~$2500 per month.
We’ll also have some income from interest coming in (assuming we don’t invest it in real estate or other assets), but we’ll still be shy of the 2020 target of $5000 per month in income from investments.
So, we still have some work to do, but we’re making some good progress.