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$2.3M Net Worth – Q3 2015

Against a headwind of higher spending and some investment decreases, we actually charted some solid overall net worth gains in the third quarter.

The largest financial news was the purchase of a new (correction: used) house.  Bad news is: we haven’t sold our current house yet.  So our balance sheet has swelled up like the federal government’s.

Investment Assets (net worth – primary residence) are currently at $1.72M.  Up $70,000 from last quarter. Our loose goal for financial independence is $2.5M of investment assets. Our Net Worth went up by $170,000 to $2.3M.

I focus much more on Investment Assets than Net Worth, as Investment Assets get me closer to financial independence.  So diverting $100,000 of assets to housing was painful, but it was a family decision. The goal was to get more yard for the boys, better schools, and closer to work & friends.  It was also a luxury.  We bought a moderate fixer-upper, but in a very nice neighborhood.  Hopefully our sale price will be close to our purchase price – but there are a ton of transaction costs (for a future post).

Looking forward, the rest of the year should be strong on the asset-creation side.  We still have some (fingers crossed – could be 3) upcoming project kickoffs at work by year-end – one should close in the next week or two.  So we should continue making good headway on net worth through the end of 2015.  Still aiming for middle of 2017 for full FI.

Here are the highlights on variances from last quarter’s net worth, followed by a chart of all the assets/liabilities:

Cash on Hand ($72k: $28k decrease) moved around a lot this quarter.  We paid some mortgages down a bit, then saved some extra, then spent a big chunk on new house down payment. Two cash infusions (about $20k each) came from real estate – second payment from disposition of Property 2 and cash out from a refinance on Property 4.  Now cash is ready to go down the tube as we pay taxes then pour a good bit into renovations of the new house.

Stocks/Bonds ($535k: $29k decrease)  Yikes, tough market.  Our US stocks did poorly, until I saw internationals and commodities.  Glad I’m comfortable with our long-term strategy & allocations, because this is some bloody red for one quarter.

Rental Houses ($224k: $22k increase) Equity marched up its steady $3k per quarter as the rentals pay down about $500 per house per month. On top of that, we paid down almost $20k as extra principal payments in July.

Commercial Real Estate ($895k: $106k increase) First, we got a another payment from our disposition of Property 2.  We decreased that asset value as we moved that to cash.  Second, we refinanced Property 4 to a permanent loan (instead of selling).  This project was extremely successful during construction and lease-up while the capital markets stayed attractive. So a tremendous amount of value was created.

As discussed last update, I track these real estate projects by this personally-defined Book Value.  Book Value – a relatively conservative measure meaning the appraised value at time of some capital event: construction loan, permanent loan (stabilization), or sale.  With the refinance, I’m just now recognizing the value that has been created over the last couple of years.

Our Primary Residence ($580k: $100k increase).  Just when we were feeling good about having our house paid off, we up and bought another one.  Damnit, back to mortgage-life.

Seriously though,  having our mortgage paid off gave us a ton of flexibility to do what we wanted.  We looked for a new house at our leisure for the past year. Then when we found what we were looking for (at a good deal), we were able to jump on it.  Not ready to sell our house, and dealing with handfuls of real-life, we were able to proceed anyway.  It’s like tasting the first bits of FI.  We probably would’ve had to drop the contract if we were holding an 80% mortgage on our current home.  Great to have flexibility.

Below are the details:

Net WorthSubtotalTotal Comments
Cash/Short Term$71,857 Down $28,000 - Lots of Movement
Bank 1$49,096
Bank 2$29,869
Credit Cards($7,108)
Stocks/Bonds$534,787 Down $29,000 - Market
401k 1$172,811
401k 2$18,062
IRA 1$74,798
Roth IRA 1$44,140
Roth IRA 2$45,687
529$20,365
Restricted Stock$6,705
Taxable Account$152,219
Rental Houses$224,233 Up 22,000 - Mortgage Paydowns
House 1 Value$283,000
House 1 Debt($166,149)59% LTV
House 2 Value$261,000
House 2 Debt($153,618)59% LTV
Commercial Real Estate$895,500Up $106,000 - Disposition, Refinance
Property 1$445,000Retail
Property 2$8,000Hotel
Property 3$12,500Apartments
Property 4$254,000Up $129,000 - Refinance Appraisal
Property 5$100,000Office
Property 6$76,000Apartments
Net Investment Assets$1,726,377 Up $70,000
Primary Residence$579,186 Up $99,000
Home Value$503,590Booked CapEx
Home Debt$0
New Home Value$590,000Bought New House
New Home Debt($514,404)Boo!!...Hiss
Total Net Worth$2,305,563 Up $170,000

And looking forward at net worth, I expect the rest of 2015 to head in a positive direction. Queue: recession, real estate implosion, and inability to sell our house.

If worst case doesn’t actually happen, we could get a big asset increase from the real estate project starts upcoming this year.  We’ll continue rolling any real estate distributions into stocks/bonds when possible to diversify away from our current “monopoly board” of investments.

With the stress from health issues and renovation/relocation fever, we have not had the bandwidth to improve upon our spending habits.  I don’t see us getting significantly better in Q4 – probably end the year around $60k.  Not good at all, by blogger standards.   But we are still saving the majority of our income and are on track for 2017 financial independence (with some padding).  Not too shabby.

We’d love any recommendations going forward…

8 thoughts on “$2.3M Net Worth – Q3 2015

    1. Good question. Yes, we’re planning to pay off the mortgage when we sell our house. Not having a mortgage around my neck is too nice to justify the tax/cheap-debt benefits…for now.

      But to give ourselves flexibility in the future, we did structure the debt with $200k as a line of credit. That way we can pay it off now, but dip back into it later in case of emergency or for whatever reason. Will let us keep less cash around, so should help overall returns indirectly.

  1. There’s no debt on any of your commercial real estate? May be time to sell or refinance those and reinvest in more real estate.

    1. Very fair point. Those are net equity values of my portion of the various LLCs. Generally we have about 60-70% debt on stable assets and 65-85% debt on construction projects. We have lowered our typical leverage as this cycle has aged.

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