It’s hard to believe that it’s been over six months since my last update. It’s also hard to believe how much has happened, both on the work front but also on the personal side, since December.
So without further ado, let’s dive in:
The biggest event during the last six months was my return to work, albeit on a short-term three-month basis, to serve as interim president of the company I sold in 2017.
Here’s what I wrote in my blog post that I published on April 2nd titled, Another Chance at Bat as I Step Back Into a Management Role.
For various reasons, the company I founded needs me though, and effective March 27th, 2019, I stepped back in as interim president. I will fill the role for a period of approximately three months as we search for a full-time president.
And here is what I wrote in a blog post I published on June 18th titled, My Eleven-Week Experience Running a Business As interim President.
I was interim president for seventy-nine days, and although returning to work in a full-time capacity wasn’t something I wanted to do, I learned more in the last seventy-nine days then probably at any other similar-length period in my business career.
It’s now been almost a month since I stepped aside as interim president, and I’m glad to say that the new president seems to be doing an excellent job. That is a huge relief because I am still a large minority shareholder in the business, and I want to see it succeed, but—almost more important for me on the personal side—I don’t want to go back to work again as interim president.
I’ve settled back into my old life rather quickly and connected with all of my personal consulting clients, who I, unfortunately, neglected somewhat during the three-month period when I was back to full-time work.
I have been so busy for the last month that it’s almost hard to say that I am semi-retired. I use the word “semi-retired” rather loosely, and truth be told, I’m not sure that I will ever fully retire, considering I intend to hang on to my real estate, investment portfolio, and this blog for a long time. Between these three, it’s almost a 20-hour-a-week gig. When I mix in my consulting clients and some of the other ad-hoc meetings I have on an almost daily basis, I am approaching a 40-hour week.
On the real estate front, things seem to be extremely stable. My property manager had to evict our first tenant, ever. In the world of rent control, getting a tenant out of a unit is a huge undertaking … it’s almost as if the board favors the tenant. It takes many months to evict someone, even an individual who hasn’t paid rent in many months and doesn’t even bother to show up to the hearings.
Once a year, I tour my buildings with my wife and property manager, and we enter each unit and make a note of what work needs to be done both inside the unit and in the building and the building perimeter. We set aside a budget for all of the large construction work that needs to be done, and then the manager takes the next four to six months to do all of the minor repairs and capital improvements. It’s a day I thoroughly enjoy, especially because the buildings, and the units themselves, seem to be in very good shape. The buildings have all produced excellent returns over the years, even after the capital improvement and repair work that we always do.
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Now that I have more time on my hands, I am, once again, looking to acquire another investment property. I found a 32-unit apartment building at a 3.6% CAP rate, which isn’t that good, but the rents are well below market. The average rent in the building is approximately $945 a month, and the going rate in the area is approximately $1,350—for an over 40% improvement in the monthly rent. I estimate that with a $4.5 million investment into the property, I can clean up the building, renovate or retrofit all the units, and increase the value of the building by over $5 million. The returns are excellent at over 80% in three years with a 22% IRR. I need to make a decision in the next few days whether I want to make an offer on this building. With regards to the opportunity, I wrote a blog post about this, which you can read here. Here’s How To Buy An Apartment Building And Make A Whopping 110% In Three Years (Image of the building is below).
I have spent the last six months studying asset allocation strategies, trying to understand an allocation mix considering my financial position, my current investments (real estate, stocks, and bonds), and how to design an appropriate strategy to maximize gain while minimizing risk and tax.
When I first semi-retired, I was overwhelmed by the idea of how to invest, but I’ve spent countless hours over the last year studying investments, reading books, and learning from what others have done. I am a paid subscriber to Seeking Alpha, and Money for the Rest of Us and have learned a ton from both of these sites and some of the books that I have read (more on that below).
I know it sounds somewhat counterintuitive that I am studying investing considering the title of my book, The Kickass Entrepreneur’s Guide to Investing, but my book is intended for an entrepreneur who has the bulk of their assets tied up in their business and needs a strategy that isn’t too heavily skewed towards the stock market. Now that I’ve sold the majority share of my business, I have to either hire an investment advisor—something I am loath to do—or figure out how to do this myself. I’ve chosen the latter, mostly because I enjoy researching and investing.
At the moment, I have quite a large blue-chip Canadian and US dividend-paying stock portfolio and have recently started investing in preferred shares. (You can read about that here.) I have approximately 55% of my preferred shares in fixed resets and 45% in perpetual. I am benchmarking my preferred share portfolio to the iShares S&P/TSX Preferred Shares Index Fund, and so far, I have been beating the index by a few basis points every day. I, unfortunately, can’t say the same about my blue-chip portfolio, which is lagging the S&P index but provides a 4.4% dividend yield, which far exceeds the S&P. I am still learning and building and really enjoying the journey.
Overall, my portfolio has done well over the last six months, considering my investments are still heavily skewed towards fixed income (GICs, bonds, and preferred shares). The liquid portion of my portfolio (not including real estate) has a mix of 75% fixed income, and 25% equities, and my overall portfolio is up by approximately 5.1% in the last six months, which, if annualized, would be 10.2%. That’s not too bad considering the bulk of my returns were driven by the 25% equity portfolio, however, I expect that the second half of the year’s returns will be much more muted.
I tend to be patient with my portfolio and hold on to marginal positions longer than I should, but, I’ve been getting better with doing the occasional trimming. I sold a small position in Netflix and Apple recently and took some profits off the table. I bought both of these stocks years ago, and my returns have been 764% and 371% respectively, plus, I don’t believe that either will continue to see the large gains in the future as they have in the past.
There are about a dozen more positions I’ve picked up in the last few months, and maybe I’ll dive into my stock selection and overall asset allocation in another dedicated post.
In the meantime, I wrote a detailed post on my investment philosophy a couple of months ago titled Long-Term Investing Buy and Hold Strategies That You Can Use for a Lifetime.
My wife and I had to cancel a trip to Southeast Asia that we had planned for February. Unfortunately, my mother-in-law got quite sick (she’s better now), and we stayed much closer to home. We spent a total of nine weeks in Florida this past winter, which is a personal record. Next winter, I am aiming to be out of the snow for a minimum of 12 weeks, and in fact, we delayed our February 2019 SE Asia cruise to next February 2020. Prior to beginning the cruise, we intend to fly to Cambodia before heading to Singapore.
I finally got on board with Airbnb and listed our Florida home on the site. So far it’s been booked almost every week that we’re not using it and has provided an additional $36,000 in revenue for 2019. There are still some vacant weeks during the fall, and I expect those will be rented as well. The best part is that I’m now a Superhost.
Later this summer, we are planning a family trip to Portugal, and once my son and daughter are back to school, my wife and I are going to head to Croatia for a week’s vacation with some friends.
Outside of travel, I had the pleasure of sharing the stage with some other fellow Queen’s University graduates (my alma mater). On June 24th, we spoke at the Queen’s Master of Management program. The title of the presentations was “The Entrepreneurial Exit: What’s Your Intention.” I was thoroughly impressed with the students and the nature of questions they asked following the presentations. I look forward to an opportunity to speak at additional Queen’s entrepreneur events, perhaps something I will do more of this fall.
I’ve read a few books over the last six months, and I’ve listed them below:
Red Notice by Bill Browder-I started this on the beach in Turks & Caicos and couldn’t put it down. It’s a true story about how the Magnitsky Act came into law and is a definite must-read. It will change the way you view Russia, corruption, and Russian oligarchs.
Bad Blood by John Carreyrou-this is a story about Elizabeth Holmes and Theranos. It’s also a page-turner and another definite must-read.
Applied Financial Macroeconomics & Investment Strategy-the title pretty much explains what the book is about. It’s quite technical, much of it was above my head, and I had trouble plowing through it.
Wealth of Wisdom by Tom McCullough-The subtitle is “The top 50 questions wealthy families ask. ”The subtitle explains what this book is about. I can’t say I gathered too much from the book, but it was interesting, nonetheless.
The Sales Acceleration Formula by Mark Roberge-This was probably one of the best business books I’ve read in a long time. Mark is the former VP of Sales at Hubspot. Mark details the step-by-step approach he used to scale his company from a startup to over $100 million in revenues.
On the fitness front, I’ve been going to the gym at least five times a week. I try to take a 45-minute walk every day and also recently joined CrossFit, so overall, I’m living a relatively healthy lifestyle.
I would like to thank all of my readers for sticking with me, especially those who have reached out to me personally by email. I am looking forward to helping you scale your businesses, build wealth, and achieve your own levels of business success and financial independence.
Continued good luck with your business.
Some recent posts you might have missed: Three Accounting Ratios You Need to Measure Your Business By. How Does Your Business Compare?
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