Tag: investment

Swapping a rental property for a share portfolio

FIRE v London11 Comments

Having sold my London rental flat, what was I to do next?

I’ve paid the £20k+ transaction fees. I have paid off the mortgage. I set aside the amount to pay my Capital Gains Tax, a liability which needs to be settled within 60 days. I moved some of the remaining equity into other investments and portfolios.

However, one thing is missing. The property rental income. I used to use my property rental income to help pay for household costs; rent was received into my joint household account and was swallowed up there by miscellaneous household bills, cleaning costs, gardening expenses etc. Until I sold the flat, the flat’s service charge and occasional running costs would have come out of that account too. These days, only my Dream Home in London is paid for out of this account – I have opened a different account for the Coastal Folly which I run separately (and is funded separately).

So, I decided to ringfence £500k of the equity that I released for a ‘property proxy’ portfolio. This portfolio will be a worked example of the argument that a stocks/bonds portfolio can be a valid, and better, alternative to a property investment. I will report on progress occasionally on this blog. The portfolio will essentially be an income portfolio, designed for somebody is used to having regular property rental income coming in, and wanting inflation protection.

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A stupid decision to sell my rental property

FIRE v London6 Comments

I sold my rental property last year, after owning it over 20 years. It’s a lovely property, worth around £1m, right in the heart of London – near the middle of the map below. I used to live in it, I travel past it regularly, I know its neighbourhood well. The Modern Flat has genuinely been part of my life – in a way I can’t say for most assets I own.

Central London – roughly corresponding to the Circle Line area

As most readers would I think agree, I am a pretty numerate, analytical person. Yet looking back on the sale of the Modern Flat, in my decision to sell I made two stupid mistakes. I got two of the big numbers wrong. Not just a bit wrong, but properly, materially wrong.

There are lessons here about investing, about selling, and about property vs stocks/shares. Let’s take a look.

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Compounding, type II

FIRE v London1 Comment

Supposedly Albert Einstein called compounding the 8th wonder of the world. Certainly the wonder of compound annual growth rates is something I feel quite viscerally, the more so with each month that I track my portfolio. But I’ve been struck recently by a radical improvement in my portfolio’s dividend income, far in excess of the portfolio’s return, that has occurred thanks to the margin loans I’m using. For anybody curious about margin loans, this blog post shines a light on what’s happening.

While my portfolio has grown 14%…..

As a quick visit to my Monthly Returns page can see, my portfolio has returned around 20% over the last twelve months (to September 2024 inclusive). This is a good, but not exceptional period over the 10+ years I’ve been tracking my portfolio – which has returned just over 9% p.a. since inception over 10 years ago.

As it happens, despite the underlying returns of around 20% my own portfolio (and I’m excluding Mrs FvL’s in this analysis) has only grown in size by 14% over this twelve month period, thanks to some significant withdrawals to pay tax bills, make ‘off balance sheet’ investments, and such like.

… my net investment income has grown 56%

What caught my eye is that my expected investment income, something I record monthly, has grown 56% during the same time period.

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