The last twelve months have been an interesting time for investing. So as the year draws to a close, I thought it would be fun and enlightening to outline and report on my various prospects, successes, and failures embarked in 2023 for anyone interested to observe. I will “open the kimono,” so to speak, to my myriad chaotic financial endeavors undertaken this year.
For context, my investment goals have remained consistent for the last decade: to seek passive income streams, so that my passive income will ultimately exceed my monthly expenses (“PI > ME”).
In other words, I choose to define financial freedom not through the lens of attaining some nebulous ‘pot of gold’ in the distant future when I “retire” (using qualified plans such as a 401K, IRA, etc), but rather through the “here and now” pursuit of purchasing assets that generate consistent streams of passive income.
It is perhaps a paradigm shift from the status quo, but seeking passive income goals in this way is far more prudent, more engaged, and a more savvy way of investing.
I’ll say one other thing on the topic: I don’t choose to conflate investing with throwing money in the stock market and hoping for the best (aka “speculating”). Although I fully admit that certain equities with a solid track record of many decades can sometimes be prudent investments–providing regular dividends and even consistent growth–yet even they are subject to the macro trends of a mercurial marketplace as well as the whims of the ‘market cycle’. Even a stock market speculator theoretically gaining that coveted “10% average return each year” (hint: this is a myth) can still wake up one day to find more than half of their nest-egg wiped out in a massive bust that “no one saw coming!”
Anyway, without further pontificating, here are my passive investing pursuits this year along with a very brief narrative about their relative success or failure:
| Lobster Boat & Commercial Lobster Fishing Business | |||
| Investment | Passive Returns | Financed By | %Equity |
| $163,103.00 | $2,500+/wk lobster sales | IBC Policy Loan | 25% |
| Fisher Lobster, LLC Opportunity: This was an interesting opportunity I just couldn’t pass up. Admittedly, this is one of the more wild & speculative pursuits I have ever engaged in. Why? Because I know absolutely nothing about lobstering! And I know even less about buying and maintaining large commercial fishing boats. However, what made this deal enticing (and thus worth pursuing) was the operator! If the secret to successful real estate investing is location, location, location – then the secret to a successful passive business investment is: operator, operator, operator! Without making a long story even longer, I have known my lobstering partner for over a decade. He has over 20 years’ experience lobstering. So over a beer (or two … or even three) I learned that “all he needed was a much bigger boat” as well as some capital for investing in new lobster gear (rope, new traps, etc). So after even more beers … a business arrangement was born! He’d captain the boat and haul the lobster; I’d provide all the capital. And we’d split the business 25/75 (me/him). Most importantly: he would be 100% responsible for everything. Voila! Passive investment in a burgeoning lobstering business. Results: So far, so good! While it was a wild ride at the beginning (e.g. the boat had over $24,000 in repairs right off the bat!), ever since then it has been relatively “smooth sailing”—with the business hauling between 500-1000 lobsters each week (weather-permitting!) We sell most of them wholesale at an average of ~$6.75/lb. The nascent net income in 2023 ($22,152.70 NOI, imputing a 13.58% COC return) I feel is just the beginning for the business since it’s in its very first year (hell, most businesses take a loss in their first 3 years!). Our primary goal for 2024 is to sell more of our lobsters retail—directly to restaurants and local seafood lovers. That’ll increase profit margin by over 35%. Our value prop is this: we’ll deliver the lobsters right to you (as long as you’re within a 25mile radius); no one else on the seacoast is offering anything like that. So it’s time to be shellfish, and make some real money! COC Return: 13.58% (thus far) | |||
| ATM Investing – Managed Fund | |||
| Investment | Passive Returns | Financed By | %Equity |
| $104,000.00 | $2,262/mo | IBC Policy Loan | 100% |
| Prestige Fund D VI Opportunity: I invested in ATMs in 2022 after listening to a terrific, educational podcast on the topic. Based on this success, I doubled-down in 2023. This is a far more “boring” investment vehicle than others this year. But the results are consistent. And the investment is quite risk-free (relatively speaking). And, most importantly, it’s 100% passive! I receive funds ACH’ed into my checking account like clockwork on the 23rd of each month for 7 years. Results: Aside from being a great COC return (19.09%), the asset class also boasts terrific tax benefits! The investor can write off the ENTIRE asset as a depreciable asset against their taxable income in year one (“bonus depreciation”). This allows me to save tens of thousands of dollars in taxes each year for each ATM fund I invest in. I love these ATM funds, and will continue to put money in them each year. COC Return: 26.10% | |||
| Short Term Rental Fund – Managed Fund | |||
| Investment | Passive Returns | Financed By | %Equity |
| $50,000.00 | $145/qtr (non-guaranteed dividend) | IBC Policy Loan | 100% |
| TVR 2 LLC, A-2 Tier, Techvestor STR Fund – TVR 2 LLC Opportunity: In May of 2023, I invested $50K in a managed fund that invests in short term rental units. I took out a “flyer” on this fund, and frankly it was a poor decision in retrospect. For one thing, I am already so over-exposed to the short-term rental asset class! But given I know quite a bit about this type of investment I felt it was worthwhile trying to make short-term rental investing even more passive than it already is for me. Results: Thus far, results have been very uninspired. Since May of 2023 there has been literally only one (1) distribution of $145.00 (in November 2023). haha, yea you read that right. Yuck! Additionally, the fund manager is fairly uncommunicative (sending very infrequent updates); and the financial results (so far) are paltry to say the least. I understand there (in theory) will be a sale of the asset(s) at a profit within five years; but regardless, I will not be investing further in this fund! It’s too little juice (i.e. meager cashflow) and definitely not worth the squeeze. Brass tacks: stay away from this one! COC Return: 0.29% (thus far) | |||
| Oil & Gas Investing – Managed Fund | |||
| Investment | Passive Returns | Financed By | %Equity |
| $100,000.00 | $157 – 168/mo (so far) | IBC Policy Loan | 100% |
| King Operating Partners II LP, King Operating Corporation Opportunity: I invested in an Oil + Gas fund in January of 2023 to take advantage of the incredible tax benefits and massive upside potential in this space. This is one of the more speculative investments I’ve made in recent years, and the jury is most definitely still out as to whether or not it will pay off. It could very well be a massive flop … or a spectacular windfall. The results will be entirely dependent on a) the price oil and gas in that timeframe, b) the ability of the drilled wells to strike oil, and c) the ability of the fund manager(s) to sell the assets in year 5. Results: I made my investment in January 2023. Cashflow did not start “flowing” (pun definitely intended) until September — 8 months later. So far the cash flow has been anemic. BUT that’s frankly to be expected in the first 12-18 months (any cashflow for this asset class during this early period is just gravy!). The goal of this investment class is to strike oil, start massive production, and then sell the oil-producing well(s) to a far bigger player (e.g. Mobil, BP, etc) at 10-20X+ the CAPEX + drilling costs. So, I’ll know in 2024 or 2025 if my investment will 3-10x OR if it even breaks even. It’ll be a fun ride. COC Return: 0.66% (thus far) | |||
| Buyout of Partner in Marketing Agency | |||
| Investment | Passive Returns | Financed By | %Equity |
| $176,400.00 | N/A | Promissory Note | 85.00% |
| Loud Canvas Media, LLC – Web & Digital Marketing Agency Opportunity: In January of 2023 I choose to buy out a minority stake interest from a silent partner in my web and digital marketing business, Loud Canvas Media. My previous partner held 10.00% (a deal coordinated in 2020 for an exchange in equity in his business). After much thought and prayer, I decided early on this year that the BEST thing I could do with my money from an investment perspective was not to put too much of it in additional speculative asset classes, but invest in myself & my primary business. In other words, I know my ability to grow and expand my own business. So I chose to be jealous of its equity and its growth potential. I’ve found over the decades that the best investment I can make is “invest in myself,” so this was my way of doing that actively. I coordinated a plan to pay him out on an installment plan over 84 months at $2,100.00/mo. Results: The long-term results of this decision will pan out over the next decade or so. But so far, since executing the buyout, the agency has already grown by 13.78%. Through hiring of the company’s new President (last year) as well his focus on opening new strategic verticals and building strong partnerships, I hope to grow the company by 10-15% YOY for the next 10+ years–which would make this equity buyout perhaps one of the best investments of my career! Time will tell… COC Return: TBD | |||
| Real Estate Purchase – Lakehouse in Milton NH | |||
| Investment | Passive Returns | Financed By | %Equity |
| $500,000.00 | 2023 Profit ($-27,706) | IBC Policy Loan | 33.33% |
| JASK Properties, LLC – STR Company Opportunity: In August of 2023 I went into business with several of my best friends. (NB: going into business with friends is often problematic; but I choose my partners very carefully and believe I have made the right decisions again here with intelligent, hard-working, and very solid partners). The opportunity is another short-term rental property in New Hampshire. Having managed and run short term rentals in the area now for over 10 years, I am familiar with the business model, the pitfalls, the challenges, and the potential for wild upside/success. This specific property offered a unique opportunity in that it is an absolutely beautiful lakehouse (fully renovated) and essentially “turn-key.” Moreso, it is situated directly on a private lake and boasts over 200’ of sandy beachfront (PS no others on the entire lake have anything else like it). I believe the sellers misclassified the listing and sold the property 20-25% cheaper than they should have (i.e. they listed it on the MLS themselves, without an agent, and without checking the “lakefront property” option). This afforded my partners and I an “opportunity of a lifetime” once we noticed the listing! Not giving the sellers an opportunity to determine their mistake, we immediately offered 1.5M cash and closed the deal within a few weeks (and requested ALL furniture in the home to be included as part of the sale). I sourced my 1/3 share of the funds for the deal through IBC policy loans, as I do with most strategic investments. This allowed the deal to close quickly and without a commercial bank involved. Results: Cons: In 2023 the business was NOT profitable (nearly a $30K loss); BUT this is due to CAPEX invested in a brand new hottub, electrical work, a new patio, and a new 100gal hot water tank. Pros: I listed the property for rent on Airbnb BEFORE we had even closed the deal and purchased the home (haha, in retrospect this was very foolish). We closed on Aug 10, and had the place rented on Airbnb the week after! We were able to rent every remaining weekend in August and September between $4000-$6500 a weekend! Given our property is a lakehouse, we plan to make the majority of our revenues in the summer; that said, we have had preliminary success renting it in the fall and winter. I am very encouraged by our ability to attain banner results in 2024! We also did a Cost Segregation Study on this property to take maximum advantage of the asset from a tax/depreciation perspective. COC Return: N/A (not yet profitable) | |||
| Real Estate Purchase – Multi-Family Rental in Manchester NH | |||
| Investment | Passive Returns | Financed By | %Equity |
| $150,000.00 | TBD | Debt @ 8% | 50.00% |
| SHALA Enterprises, LLC – 305 Cedar, Manchester NH (9 Unit) Opportunity: In December 2023 my beautiful wife and I purchased a multi-family rental property in Manchester NH with nine (9) units. The goal will be to progressively increase rents and refinance after two years (optionally pulling out equity) once the commercial asset has appreciated accordingly. In the meantime, the asset will generate a very comfortable cashflow. I am most encouraged that this investment will be entirely passive, given our friend and business partner, Tim Baxter (and his property management company), shall be driving the day-to-day execution of the asset. Results: We closed on the property only Dec 28, 2023, so the jury is still very much out on this one. However, there is a very solid pro forma promising strong results of $61,298.00/yr net profit (in the first year) and then after rent revisions, increasing up from there. My wife and I are 50% equity stakeholders, so we plan on receiving roughly $2,500-3,000/mo, imputing a COC result of 20.43% (in the first year). Time will tell what the long-term results will be… COC Return: N/A (not yet profitable) | |||
| Private Loans to Colleagues, Friends, and Businesses | |||
| Investment | Passive Returns | Financed By | %Equity |
| $285,000.00 | 12% – 17.5% ($7,786/mo) | IBC Policy Loan | N/A |
| Various Loans to Entities including Baxter Real Estate LLC, Moose Properties LLC, etc Opportunity: With extra cash available in IBC policies, I choose to loan monies out, whenever possible, to worthy and reliable persons that represent a low credit risk. Results: Loans with an average rate of return of 13.28% have resulted in passive income of just under $8k/mo. | |||
| CAPEX in Owned Rental Property (Short Term Rentals) | |||
| Investment | Passive Returns | Financed By | %Equity |
| $43,426.00 | N/A | Cash Flow | 100.00% |
| Dempsey Estates – Refurbished Rental Properties to Increase their Value Opportunity: Leveraging cashflow produced by short-term property assets, in 2023 I invested in CAPEX to improve the buildings and interior of properties at 2 Alex Court in Somersworth NH as well as 83 Maple St in Morristown VT (aka “Maple House Manor”). Specifically, for Alex Court, I invested $11K installing a standalone ‘whole home’ generator on site which will turn on whenever there is a loss of power. This will improve the ability for the asset to perform during the winter if/when weather causes a loss of power. I also invested $7,500 in new wood floors throughout the 2nd floor of the home. Additionally, I invested $10K for indoor pool repairs and improvements at MHM. I also invested an additional $15K finishing the basement in MHM, turning it into a beautiful game room for guest use/enjoyment. Results: The impact of these capital expenditures will be hard to quantify in the short-term; however, over the long-term, I expect the results to manifest in a greater number of five-star reviews as well as an increased number of stays. The improvements have also improved the underlying value of the real estate assets themselves. COC Return: N/A | |||
Other items of note:
- I sold off my business Remnant Properties LLC via a long-term promissory note (for its passive income stream … details not relevant). Ultimately, this business (land flipping) was one I regret getting involved in—not because I don’t appreciate the business model, but because I failed to acknowledge the active involvement and regular commitment required.
- NB: specifically, in 2023 I re-learned that the TYPE of investment paradigms best suited to an investor’s “investor DNA” is so crucial during the early phases of investing. It’s so tempting to want to just throw money at a fun and exciting idea (especially if the returns look promising). But I learned (the hard way) that this is not the best way to proceed. Learn from me and don’t make the same mistake!
- I sold this business (at a fraction of its real long-term value) to two people I love and know will run the business far, far better than I did. And I know they will recognize a lot more long-term value and profit in the business than I achieved.
Looking into 2024…
Some goals going into the new year include:
- Investing marketing dollars into growing my business ManagedBNB, LLC and doubling its revenues and profits in 2024.
- Increasing profitability of Maple House Manor and reducing by 15-20% unnecessary operational spend and overhead (e.g. reduced contractor spend, perhaps investment in solar panels to decrease my $1200/mo electric bill, etc).
- Several private loans made in 2023 mature in 2024; realize these profits and reinvest…
- Grow Industrial Traffic’s top line revenue and increase profitability through partnership with cost-conscious operators and strategic partners.
- Look into investing into more ATM funds to increase passive income from that asset class.
- Evaluate additional private loans to colleagues and small businesses (ideally at rates of 15%+ APR).
- Focus on growth of JASK Properties and its summer rental income. Ideally bring on an operator by end of this year or early next year to manage day-to-day management of the short term rental.
Final Words
I didn’t just pull the numbers above out of a hat. I believe very strongly in TRACKING success and failure and being completely honest with the results. Smarter people than I have said “What you track grows; what you track and report on grows exponentially.”
To this end, I found an absolutely wonderful piece of online software called Vyzer. It allows investors to track their success and transactional history in various investment classes, including business assets, real estate assets, managed funds, and even personal loans. It provides a terrific cashflow management tool for forcasting purposes. It’ll inform you if you’re missing a monthly distribution as well as provide guidance on what your COC return ROI metrics, per investment. It’s free to signup. Give it a try by clicking here. I recommend it highly!
Thanks for sharing Sean! Congrats on the great successes, here’s to many more!