Skip to main content

$2 Million in Net Worth

We’ve done it – passed the $2 million mark in net worth!  We didn’t creep by the milestone, we blew by it.  Increased our net worth by over $150,000 from the first quarter.  It came from some healthy saving (about 70% of income), the start of a new project at work, and a positive single family real estate market.

Our assets still look like a monopoly game – properties, hotels, houses, and maybe a thimble in there somewhere.

Investment Assets (net worth – primary residence) are currently at $1.65M.  Our loose goal for financial independence is $2.5M of investment assets.  We have some upcoming capital events at work (sales, refinances, project kickoffs), so we could 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 ($100k: $50k increase) has gotten a little heavy.  But with bonds so low, I’m struggling to take money out of the NC State Employees Credit Union (money market at 1%) to put in a bond fund (VTBLX) that only pays 2.17% with a 5.7 year duration.  Either way, I do have a bunch sitting in our Wells Fargo account getting paid zero percent, so need to move that to the credit union at least.
  • Stocks/Bonds ($564k: $7.5k increase) Not a ton of movement this quarter – just kind of drifted up and down a little bit.  We are currently a year into the process of “Value Averaging” out of a substantial cash/bonds position.  Still at 43% cash/bonds, versus our goal of 25%.  Should take another year or so to get to our target, depending on the market.  I’ll write a post on our allocation strategy and value averaging in the next couple of months.
  • Two Rental Houses ($202k: $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, I revalue the houses semi-annually using zillow.  Value increased by $19k – which is actually decently conservative for what I’m seeing in the sales market in that area.  All’s well on the net worth side, but cash flow on Rental 1 was bloody (described in the cash flow post).
  • Commercial Real Estate ($789k: $57k increase) A good bit of movement in work projects.First, we sold Property 2 last month.  I’ll receive about $53k in cash due to the sale, paid over 6 months.  I’ve received a little over $20k of it so far, so have shown the Property 2 account reflecting this partial disposition.  Given our equity setup (I will not go into details), it was not a great sale.  Made a ton of sense for our partner (package deal with other properties), but we would have been better off holding tight and receiving cash flows from operations on this particular asset.  Still, converting paper equity to cash is always nice.  Second, we kicked off another apartment project.  I’ll track these projects going forward at this personally-defined Book Value.  Book Value – meaning the appraised value at time of some capital event: construction loan, permanent loan (stabilization), or sale.  In this case, my portion of the general partner beginning equity account (created from deferring fees) equates to $76,000.  This should be a conservative way to value my real estate holdings – providing for fun upside surprises instead of sad/frustrating capital events.
  • Our Primary Residence ($480k: $20k increase) is fully owned by my wife & me, no loan involved as of this year!  The increase this quarter came due to housing prices being on the rise around here.  I’m updating it semi-annually using zillow – as long as the value feels conservative.

Below are the details:

Net WorthSubtotalTotal Comments
Cash/Short Term$100,301 Up $50,000 - Savings, Property Disposition
Bank 1$66,571
Bank 2$37,973
Credit Cards($4,243)
Stocks/Bonds$564,068 Up $7,500 - Market, Dividends
401k 1$177,862
401k 2$15,993
IRA 1$77,880
Roth IRA 1$53,488
Roth IRA 2$50,114
529$20,249
Restricted Stock$7,385
Taxable Account$161,097
Rental Houses$202,054 Up 22,000 - Mortgage, Value Increase
House 1 Value$283,000
House 1 Debt($177,277)65% LTV
House 2 Value$261,000
House 2 Debt($164,669)66% LTV
Commercial Real Estate$789,608Up $57,000 - Disposition, New Project
Property 1$445,000Retail
Property 2$31,108 Hotel
Property 3$12,500Apartments
Property 4$125,000Apartments
Property 5$100,000Office
Property 6$76,000Apartments
Net Investment Assets$1,656,031 Up $117,500
Primary Residence$480,000Up $20,000 - Value Increase
Home Value$480,000
Home Debt$0Still Hooray!!
Total Net Worth$2,136,031 Over $2 Million!!! Up $150,000

And looking forward at net worth, I expect the rest of 2015 to head in a positive direction.

We will continue saving almost 3/4 of our after-tax income.  We haven’t quite gotten down to our $50k annualized spending goal (more on that in the Q1 cash flow post), but our current lifestyle vs income leaves a lot of room for savings.

We also have 3-4 project starts upcoming in the second half of this year.  Property types range from a hotel to apartments to office.  I could be looking at several hundred thousand dollars of new equity if things go well.   I’ll keep working hard and hoping for a stable market.

Additionally, we should be selling another asset in the fall.  Property 4 (book value of $125,000) has been exceedingly successful and matched by a very hot market.  It will likely sell at a value leaving me with 2.5-3x the currently held amount.

I don’t expect much help from the stock market.  But just like other people, I don’t know which direction it will go.  So I’ll keep plodding along and increasing my investment level monthly.  I’m a little hesitant of bonds right now.  I will likely overweight in money market, or maybe pay down some of the mortgage on the rentals.

As I stated last net worth update, we aren’t diversified well per the textbooks – 60% of our investment assets are in real estate.  I would never buy and hold this much in REITs.  I do however believe that being invested in active real estate on the general partner side is a good way to beat the market.   I get a promoted interest on upside returns – akin to a partner in a hedge fund.  So still have the downside, but the upside is set at a much higher rate of return.  Therefore a more-than-fair average expected return.

With this said, as these development assets stabilize, I’ll continue rolling cash from dispositions into general stocks and bonds to diversify.

Do you have any recommendations for me going forward?

 

17 thoughts on “$2 Million in Net Worth

    1. Thanks for stopping by to read and for the compliments, Alexander. We’re certainly excited about the house being paid off. It’s crazy how quickly things have come together after getting our priorities set.

  1. Dear SFF,

    Ouhaaaa, well done and congrats. I am impressed by the diversity of your investment strategy clearly high level of professionalism.

    Hopefully, we will get the 2mio mark in the 5 to 8 years.

    Cheers,

    RA50

    1. RA50, Thanks! Hopefully the investments will pan out. Good luck in reaching your goals also.

  2. Hi,

    Great website! You and your wife are doing an outstanding job.

    Have a nice night and take good care.

  3. Fantastic Quarter you guys had. Way to blow past the $2M mark.

    Few questions:

    1 – How many years did it take you to get to $1M?

    2 – How many years did it take to get to $2M?

    My guess is that the second million came faster than the first???

    Cheers!

    1. Dominic-

      Good questions, and good guess. Probably worth a post of its own. I have a lot of net worth in non-marketed illiquid assets, so valuation changes/timings are tricky. Quick answers are (1) 10 years, but really about 5-7 of savings effort; and (2) 1-1.5 years, depending how you count some asset values.

      Everyone’s story is different, but biggest thing I saw in growing my net worth was that once I changed my view & got control of spending, then increases in income all started falling to bottom line & compounding. This took a couple of years to see, but pay increases compound almost like interest. And then investment income adds to the savings pool. Quickly you can be saving a radical amount of income without even winning frugality awards. Although better to be frugal and earn more, you can kind of get by with just one. I’m probably a “C+” & “A” student respectively.

      -Bubba

      1. Second that, everyone’s story is different for sure!

        Our income has grown dramatically over the past couple years and we have continued to add rocket fuel to our Net Worth as we increase income. I think that many people underplay how important your savings rate is in the early days of wealth accumulation.

        I have witnessed first hand that increases in income have a much larger impact on Net Worth (assuming we continue increasing our savings) than compounding does at this point in the journey. At some point we will cross that critical point where compounding contributes more to increases in net worth than savings does.

        We definitely have room for improvement in our spending. We close to being done on the improvements around the house, which should add another $10K to $20K a year in savings/investing. And there are other areas that we probably need to look at as well.

        Cheers!

Comments are closed.