In the fourth quarter, we saw a strong increase in net worth and hit another milestone: over $2.5M…$2.53M to be more exact. Crazy – we had a net worth of under $700k when we started tracking it in June 2013. A good two and a half years. Really shows the value of containing lifestyle inflation and letting salary inflation run away from spending.
Each quarter this year has been affected by remarkably different factors, but the increases have been consistently up/right on the graph. I’ll take it.
Largest category gainer was commercial real estate – we officially capitalized 5 new projects at work! Really, we started construction on 2 (large ones); but we acquired funding for predevelopment stuff on 3 others. We sold another one, but I won’t see any proceeds from that until 2016.
Investment Assets (net worth – primary residence) are currently at $1.93M. Up almost $200,000 from last quarter. Our loose goal for financial independence is $2.5M of investment assets.
We did continue to divert $$ to our used-to-be-fixer-upper, in the form of renovations & furnishings. While we spent a bunch of bucks, we got pretty good mileage for each of them. I ran a decently tight ship on the contractor front (overspent a bit on the master bath), and my wife ran something almost resembling a tight ship on the furnishings side.
Looking forward, the first half of next year should be strong on the asset-creation side also. I have a large bonus that should hit in January. Then we have another 5 projects in heavy predevelopment. Without a real estate implosion, they will kick off in 1H 2016. Busy times at work, as you can see. So we should continue making good headway on net worth through 2016. Still aiming for middle of 2017 for full FI – but it could pretty easily be a year early at this rate.
Here are the highlights on variances from last quarter’s net worth, followed by a chart of all the assets/liabilities:
Cash on Hand ($20k: $52k decrease) went down due to house improvements – mainly to our new house. We spent about $40k on fixing up the house – probably about $5-10k more than I was hoping. I’ll detail that all in a post when the dust settles, literally. (a handful of boxes remain, some light painting, and some hopefully light electrical)
We also have spent pretty heavily on furnishings. The house isn’t the same style as our previous, so it was hard to use the same furniture. Other context: my dad was always an ass about not letting my mom get new furniture. I’m sure out of weird Freudian somethings, I held my nose and said yes to most things even though it was painful.
Also some higher than average cash went to paying taxes and the doctor.
Stocks/Bonds ($564k: $29k increase) We stuck with our long-term strategy & allocations, and got all the losses back from last quarter apparently. Well not quite, because we contributed some to 401ks. It’s the long game here though.
Rental Houses ($237k: $13k 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 mark these to market every six months. Upped one in particular based on zillow and some sale comps.
Commercial Real Estate ($1.1M: $208k increase) Huge quarter at work again. We capitalized & started construction on two more large projects. We closed on land/predevelopment financing on 3 additional projects. Pretty wide open around here. To keep it conservative (accounting-wise), I have not counted a third project where we initiated construction but have not finalized the debt-side capital yet.
As discussed previously, I track these commercial real estate projects by a personally-defined Book Value. Southern Fried BV = my implied ownership equity amount based on appraised value at time of most recent capital event: construction loan, permanent loan (stabilization), or sale. So this mitigates speculative swings in the real estate market somewhat – only increases equity accounts when an appraiser or purchaser validates things. It tends to understate projects as they near a capital event.
Our Primary Residence(s) ($607k: $28k increase). Still two primary residences…one sitting on the market with a dumb “for sale” sign. Well, when our son’s health issues came up and we decided to proceed with the purchase/move, we knew we would move slower than ideal. With the delays, we assumed that we wouldn’t sell our old house until after the Holidays. But I can’t say I didn’t still hope. And we had lots of tours, just no bites. Damn. Hopefully soon – I hate having a mortgage again.
We did book an increase in the value of our new house. We repainted, fixed floors, and upgraded bathrooms. I added those costs to our sales price to get an adjusted value. I won’t take this up from here until (1) we do more capital investments in the house or (2) zillow/etc show that the value has risen past this #.
Below are the details:
|Net Worth||Subtotal||Total||Comments / Change from Q3|
|Cash/Short Term||$20,092||Down $52,000 (House Work)|
|Stocks/Bonds||$563,742||Up $29,000 (Market)|
|Roth IRA 1||$43,669|
|Roth IRA 2||$47,777|
|Rental Houses||$237,236||Up $13,000 (Revalued, Mortgage)|
|House 1 Value||$285,000|
|House 1 Debt||($164,595)||58% LTV|
|House 2 Value||$269,000|
|House 2 Debt||($152,169)||57% LTV|
|Commercial Real Estate||$1,104,000||Up $208,500 (New Projects!!)|
|Property 7||$100,000||New Construction: Office!!|
|Property 8||$85,000||New Construction: Apartments!!|
|Property 9||$10,000||Land: Apartments|
|Property 10||$10,000||Land: Apartments|
|Property 11||$10,000||Land: Office/Apts|
|Net Investment Assets||$1,925,070||Up $199,000
|Primary Residence||$607,162||Up $28,000 (Booked CapEx)|
|New Home Value||$616,376||Up from Renovation|
|New Home Debt||($512,804)||Hanging around until sale|
|Total Net Worth||$2,532,232||Up $226,669|
Looking forward at net worth, I expect 2016 to provide more increases. It’s just crazy how things progress once this net worth snowball gets rolling.
I understand that real estate could implode anytime – it’s very cyclical in nature. Meanwhile the sun is shining, and we’re making hay. We should start another handful of projects in 2016. Also, we sold a project recently that earned me a large bonus to be paid in the next few weeks.
At home, we hope to get our spending under control. Actually, we plan to get it under control. I promise we don’t have a new house to buy. I promise we don’t have a new house to furnish. Hopefully just slow down and live our little life with the boys. We’ll restart our goal for a year with spending closer to 50k than 60k. 2015 was not that year.
We’ll continue rolling any surpluses, bonuses, and real estate distributions into stocks/bonds when possible to diversify away from our current “monopoly board” of RE-heavy investment mix.
My goal for a while has been to achieve financial independence ($2.5m investment assets) by mid 2017. We are getting closer and closer to this. We might even hit it this year. So I’ll need to start thinking of what exactly that means for me. Exciting, and a little scary.
We’d love any recommendations going forward…