Improving and expanding my passive income portfolio
At some point, I’d really like to stop working: That’s why I need a passive income portfolio
I enjoy my job, but I am guessing if I had the opportunity to simply “manage my own affairs”, I’d jump at it. I guess I’d like the ability to choose not to work.
It’s a nice dream. But, without a job I will definitely need to increase both the number and the volume of my passive income streams. As you can see from the screenshot from my Personal Capital below, retirement on my 401k and investment streams alone is a long way off at 53... best case scenario.
Before I get started, I need to do a full review of how much passive income I am making from each source, set an improvement goal, and make an action plan for meeting it by the end of the year. I am realizing now that I don’t even know conclusively how much passive income I am making… probably because it’s not that much.
State of the union: My passive income portfolio
Right now I have three sources of passive income: the condo, my stock portfolio, and this blog.
Current status: As I documented earlier this year, the condo has been a fantastic source of wealth creation, but it isn’t an income generating machine. Like… not even close.
Currently, rent is $2350 with monthly expenses (ex. maintenance) coming in at $2330 after my HOA fee was raised. I know, yowza. If the property value hadn’t appreciated so much in the past two years I would be a bit concerned.
Monthly income: $20
Yearly income: $240
Goal: Realistically, I’d like to clear around $2k from the condo on an annual basis, with 10% increases in take home year-over-year after that. Since my margin is so low already, it shouldn’t be too hard to work that out as long as I raise rents a little every year.
Plan to achieve passive income goal: Obviously, I have to either decrease costs or increase revenue. With interest rates rising, refinancing is out of the picture. All of the rest of my costs are completely fixed and out of my control, so my only real option is raising rent. I’ll do a more detailed post on this later, but after some research I think I can probably raise rent to $2500. At that rate, I will clear $170 each month. That brings income to $2040 a year. Not bad!
Current status: As I wrote up in my yearly report, I made a 2.6% yield on my portfolio which totaled up to around $1800.
Goal: That 2.6% yield is pretty good for an 85% stock portfolio, but that doesn’t meant it couldn’t be better. I think I can probably reallocate a little bit to increase income without distorting my allocation. I’d like to reach a 2.75% yield, and with additional investments increase my passive income to $2500 a year by the end of the year.
Plan to achieve passive income goal: Quite simply, I need to save. The more money that’s in the portfolio, the more I earn.
Other than that, the only way I can increase my income is by increasing the yield on the portfolio. Conveniently, I was already planning on trying to skew my new investments towards bonds this year. In my view, the economy is in the last year or two of a very very good run, and it wouldn’t hurt to be a LITTLE more conservative right now. That also has the advantage of increasing yield in the portfolio as a whole (since bonds are the highest yielding components of the portfolio). REIT’s are the second highest yielding element of my current portfolio, and they’ve gotten hammered recently. Perfect opportunity to invest on a dip and increase yield!
Current status: Right now, I am not making much off of the blog, and I am really not trying to. Last month I made around $20 from AdSense, and $20 from affiliate revenue. A whopping $40! In case it wasn’t obvious, I am doing this for the joy of writing, not for the money. That being said, I am a finance blogger and I’d be a HACK if I wasn’t at least trying to make more money than that from the blog.
Goal: I don’t really want to set a goal for the blog right now, because it’s so early and I make so little. All the same, to cover my hosting expenses from Squarespace and at least offset the considerable time investment, it only seem reasonable to shoot for a monthly goal of $200, or $2400 annualized.
Plan to reach goal: This one is simple. Make great content, and promote it. If user growth increases the way it has been recently, I should be able to make that goal without a sweat. I will also continue to optimize my AdSense placements as much as possible (and take advantage of their awesome in product optimization tools).
Am I ever going to have some freedom with my passive income portfolio?
Right now, I am making a total of around ~$2500 a year from my passive income streams, almost all of that from my investment portfolio. If I am able to juice my investments, raise rent on the condo, and keep making great content for the blog, I think I’ll be able to triple that to around $7k (annualized). That’s not life changing, but it is significant. If I’m able to build on that number little by little, year by year, I should have the freedom to choose not to work by around ~45.
After a long, long… LONG week at the office, I can confidently say that is a goal worth grinding for.