January’23 – Side Income Update

Hello dear readers!

Happy New Year! I hope 2023 is treating you awesome so far & your life is getting whatever you longed for. Our long term follower/subscriber may know that I took a break from updating this website for entire 2022 to focus on few more priority initiatives. I am planning to write few articles on key 2022 updates including how restaurant business is doing, how new Indian grocery business is posing new challenges everyday and how life changed after sudden demise of one of our dear business partner, who brought us all together. Overall 2022 was one of the most difficult year of our lives and honestly I am relieved it is over. I will also go back and update about our 2022 passive incomes, if not detailed I wish to at least upload the graphics.

We went aggressive catching up with our pending TFSA limits by contributing little over $25K in a year, via bi-weekly contributions under both my own and wife’s accounts with Wealthsimple. I can’t believe we didn’t start using their platform earlier as I found them super-easy to setup and use for commission free stock trading. All trades are FREE and they support fractional buys, which makes it quite effective to contribute as less as $1 and as many times you can! You can sign-up via our WealthSimple referral link to earn between $5 to $3000 after your first transfer, I get a chance to earn similar cash!

Without further delays, please find below our first update of the year, which as usual starts by updating below two pages with the latest data:

• 2025 Goal tracker on homepage – With everything going on in our lives financially, after careful consideration we revised our 2025 passive income goal (more on this in next section).
• Dividend Portfolio with latest holdings

Passive Income Pie

Monthly Dividend Earnings

January shattered all previous records and brought us our biggest dividend check ever. This is because of our largest CIBC holding pays their dividend in Jan-Apr-Jul-Oct months and hence these will be our “super” months! Key highlights from this month’s dividend income are:

• We received dividend deposits from a 17 different entities (16 Canadian & 1 US), with total value of $1361.39, a 13% YoY increase from Jan’22
• For ease and simplicity, I consider 1 CAD = 1 USD
• Top 3 dividend contributors were CIBC, GoEasy and Telus
• We dripped 27.39 shares in total – 16.39 CIBC, 4 Algonquin, 2 Telus and 1 each from Pizza Pizza, Plaza REIT, Whitecap, Transcontinental & XAW
• We received 3 dividend raises this month: CIBC: 2.41%, Telus: 3.69% & TFI: 29.63% while XAW reduced their dividend by 0.18%
• Average monthly dividends for 2023 so far is $1361.39 or about $44 a day. By 2025, we aim to reach $1500 monthly (or $50 daily)

Dividend Goal Tracker – Planned vs Actual

We wrapped up 2022 by earning $8652.97 in dividend, missing the revised planned goal by 10%. This was still $721 a month or $23.70 daily without actually working for it! We are looking at getting $9600 in dividends this year and we started on a great note achieving 14% of our goal already. Our dividend earning strategy for this year is simple – save and invest as much as we can under our TFSA accounts and narrow down the contribution limit gap. Most of the buys under TFSA will be focused on buying companies with low yield but with a track record of double digits dividend growth rate. Due to significant investment in couple of businesses, we updated our 2025 dividend goals to lower down from $12000 to $9600 and once we have clarity on business earnings we will update our goals once again.

My Marketplace

As you can see from the PADI tracker, it was a bit of a busy month in terms of Buy-DRIP-Sell & Dividend changes. Our net Projected Annual Dividend Income (PADI) for January increased by $93.14, not a huge amount but over time and with discipline & determination, we should see much bigger increases in 5 years.

We sold Automotive Properties REIT regardless of their juicy 7% yield, since the price was almost flat in years. The proceed was used to increase our position in Toromont Industries by 22 net new shares, they currently yields 1.44% and since past 5 years averaging about 15% on both Dividend Growth rate & CAGR, with 32% payout ratio.

We also accumulated few shares of CIBC (bi-weekly RRSP buy) and EQB & MRU (bi-weekly TFSA buys). Due to tight money situation we ended our bi-weekly TFSA contributions under WealthSimple and will resume when time is appropriate. As I mentioned in the beginning of this post, WealthSimple is a commission free stock trading platform and they also support fractional stock buying meaning you can also start regular investment for as little as $1. If you don’t have WS Account and would like to try them out, you can use my WealthSimple referral link to earn $5-$3000 to invest in stocks!

On Crypto front, we did nothing at all in entire 2022 and don’t think I have any funds or appetite to deploy any more than what we currently have. Last year was pretty rough year for cryptocurrencies both in terms of price depreciation & many providers declaring bankruptcy. Unfortunately Celsius network was one such platform on which we had all our Bitcoin & Ethereum holdings and since August of 2022 they have stopped paying interests on holding cryptos & even withdrawals from their platform is halted. So money is stuck there, let’s see when we could recover our holdings. Once we are able to recover our money, we will redeploy on CoinSquare platform which apparently hold the fort pretty well when others kept collapsing! Also, once our financial situation improves we will resume investing in cryptocurrencies.

Rental Earnings

In last 1 year, the Real Estate market got heavily impacted as Bank of Canada ran havoc increasing the policy interest rate rapidly to tame the skyrocketing inflation. BOC raised the rate whopping 8 times in short duration of 11 months, increasing from 0.25% to current 4.5% and this had drastic impact on mortgage and other debt products. People started feeling the pain due to high interest market and suffered as their payable interests shot up real quick, making it difficult to make the ends meet. I know many whose monthly mortgage payments increased with each rate increase while we were fortunate not to suffer this torturous situation. Though in our case, the entire payment we are making month after months are going solely towards interest with no principal paid at all! Take a pause and think about it for a moment – the payment we will make till renewal (..in few years) will not decrease our principal at all!

Principal residence – We house-hack in our principal resident by building a legal basement unit with separate entrance. Our old readers shall know that we built a legal basement in the summer of 2021 from which we collected $1300 in rent, which went straight away towards paying off the debt we accumulated to build the unit. The rent comfortably covers ALL our annual bills for property taxes, hydro, gas, water, loan interest & maintenance (if any); I can’t even imagine paying all these bills out-of-pocket. The unit is self-sustained with a separate entrance and pathway, tenant don’t have any car and I literally see them once a month when they stop by to pay the rent. I highly recommend building a second unit if you have the possibility, it is of great help and makes financial sense in the time when almost everything is super expensive and it is getting difficult to make ends meet. 😊

Investment property 1 – Some of you may know from my Dec’21 updates that our then upstairs’ tenant stopped paying rent starting Jul’21 due to a job loss from Covid. We tried everything we could to accommodate late payments but it didn’t work out and we left with no choice than filing an eviction case with Landlord & Tenant board in Aug’21. Our first hearing was scheduled in Nov’21 and after waiting patiently on a zoom call for 5 hours, the judge ran out of time and directed us to reschedule, which could take another 3 months! It was quite a frustrating experience with LTB but fortunately our tenant left the house abruptly without telling us the same month with about $11000 in rent, utilities & LTB filing dues. We spent 5 stressful months during which we didn’t received any rent but were still obliged to pay the mortgage, taxes and all utilities, on time. We were sort of broke & happy at the same time as we left behind a horrible landlord-ship chapter. I spent entire Dec’21 renovating the property by hiring a cleaner & a painter to get rid of the smoke smell and mess they left for us. Midway I also decided to add an extra room to the house and hired set of contractors to get it done and in parallel listed the unit for renting again. As someone said – luck favors the brave; we had already lost $11000 in rents while continuing to pay all bills and then we spent another $8000 to renovate the place. The courage paid off and we found a good set of tenants starting Jan’22.

We were in deep red with this property and every thing that could go wrong did indeed went wrong except one silver lining – the basement unit rent kept coming and provided a small help with the bills. This tenant joined us in Oct’21 and so glad to say they are still with us in Jan’23 and continued paying their rent on time if not few days ahead of due dates.

Total cashflow on this property for this month is $1587.52 which is a resultant sum of all expenses (mortgage, insurance, property tax, utilities, maintenance) and all earnings (upstairs & basement rents, utilities chargeback). While this is nothing compared to the valuation of the property, we have no plans to sell it for now as this house is located in a beautiful and demanding neighborhood and the price have appreciated decently as compared to other properties we own.

Investment property 2 – This house is a new addition from last year (when I was not writing updates!) and is a joint venture with a friend of ours. We sealed quite a deal literally on the last day of offer acceptance date, it was snowing heavily so not many people turned up to see the house and put an offer. The seller agent didn’t had any offer at hand and accepted ours even when comparable from the area were quite higher than what we quoted. Later on we came to know that the house was put up for sale hurriedly as the sole elderly owner was hospitalized due to deteriorating health. After few days we were informed that the owner passed away and the deal went on a probate requiring an extension on closing date as it has to go through estate lawyer involving appropriate paperwork and clearances. One month extension was deemed appropriate by seller lawyer which we agreed to and closing happened in May’22. The house is in our names since the mortgage is in ours but our friend paid 50% of the down payment and closing costs. We have no formal documentation and just a verbal agreement – we buy two properties, one in our names and another on theirs with both of us paying 50% of all costs for each house. I know this is not ideal but it is based on pure trust, which we both have immensely on each other.

This house is a less than 10 years old detached two-storey house with unfinished basement, located in a demanding town and sought after quiet neighborhood. Our plan was to rent out the upstairs till we build a legal basement unit and flip it in approximately 6 months for a decent profit. Destiny had something else on mind and the real estate market started declining post the offer acceptance itself in Feb’22. The inventory started dwindling and sales dried up but whatever was still getting sold had higher price tag than our buying price, so we didn’t see any paper loss. Due to changed market we were forced to rethink and change our plan, instead of renovate & flip, we now had to keep it for longer (and unknown) duration. As planned we rented the upstairs unit so to cover majority of our mortgage and in parallel hired an architect to design the basement unit, after which we applied for a city permit. While we were waiting for the permit to come, we finalized our main basement building contractor and others needed for the job. Post permit approval we faced couple of major challenges of relocating the AC unit and a complicated process of gas meter movement involving Enbridge and this itself pushed our timelines by “costly” 4 weeks! At a high level the work involved making a separate side entrance by cutting the main wall, running the plumbing & HVAC through empty basement, framing as per design, run electricals as needed, put dry walls, flooring & finishing. It is a 1 bedroom unit of approximately 500 sq ft with 1 washroom and shared laundry and we had many challenges to overcome but still managed to wrap up the actual construction within 6 weeks! We still couldn’t manage the widening of driveway and concrete pathway due to colder weather and had to push it till spring (Apr-May timeframe).

While basement unit was getting built, the upstairs tenant bought his own house in Niagara and was ready to leave, within 4 months of his 6 months contract. He was quite cooperative with the ongoing construction and we were quite happy for them starting their own “story”. We were fortunate enough to finalize great tenants for both upstairs & basement starting Dec’22 itself. Our portion of cashflow for this month is $377.07 after all expenses and earnings. We have incurred additional debt to build the basement unit and even when the overall RE market is still dwindling, we managed to force a positive cashflow out of this house and in the process also appreciated the valuation of the house significantly with a legal second dwelling unit. A positive cashflow is going to help us retain this property for next couple of years at the minimum or could be more depending on the market but whenever we are good to sell, we had already ensured to make a profit.

Lending Interest Earnings

Our overall financial situation remains quite tight due to exploring and investing in too many initiatives and hence allocation towards lending stays low and I don’t see this improving any time soon. On our $2000 trial money dumped on to Lending loop platform back in 2019, we earned $14.21 in total interests from several lending loop commitments (loans). The weighted average gross annual yield (whatever that means) is 12.9% which isn’t bad for a little diversification. You can also explore this option with a smaller capital and if you invest, we both can earn $25 each using our lending loop referral ink, once you invest $1,500 on their platform. I have noticed that the new loan needs have significantly reduced post pandemic and it is both due to stringent background checks by the platform and not too many risk averse businesses wanting to get into high debt trap.

That’s it for now readers and apologies for such a long read! I came back after a year and still have so so much to share with you all and will do so gradually in subsequent monthly updates. Please do subscribe using the widget at the bottom of the page to get our once a month update, I don’t spam and you will only get an email or two in a month, whenever I post on this website.

Stay safe, stay cool, and most importantly Save-Invest-Repeat! 😊