September Net Worth Update

Update of our Net Worth from June 2015.

September Net Worth Update

Life at home and at work has been busy and there hasn’t been much time to update our net worth, which is unfortunate. While it would be great to be able to update each month, I am focused on my career and family, which bring in the net worth and are the reason I want to increase it :-). That all, said, I do project out one to two years for our net worth, by month and the updates are not far off when we get to them. This update was less exciting, with a $17,000 increase since June 2015 (2.39%). Drivers of the increase:

Note 1:Interest is good, it’s trucking along. While I am accruing at ~5% under where I expect we will end up on this loan investment, the return is not guaranteed and I am comfortable with the state of the project and the ability to repay the debt.

Note 2: 50% of my RRSP investments are in the United States and a lot of my RRSP investments are in real estate, both are doing well; hence, a pretty solid return on this section.

Note 3: Net, the credit card has grown and the cash balance has grown – simply a timing issue relative to repayment, net nil.

Note 4: It’s always great to pay down your mortgage, feels great!

That’s it, not much going on; however, there is some great news that I am excited about that is going to drive some pretty decent returns in ~ 2.5 years. While that won’t affect my short-term goals, it will impact our long-term horizon, which is the focus – Freedom 45 to 50.

We had an opportunity to state our interest recently in an upcoming real estate development project. The project would require us to put down between $50,000 and $70,000 on deposit and we would close on a condominium unit in ~ 3 years (our first investment condominium is coming online in ~ 6 months), which we would rent out long-term. Why am I so excited? Like our first investment, this one is a great deal, which offers terrific upside. Specifically, from a current rent perspective, it would cash flow such that we would be cash neutral. Second, we will be acquiring at a price of under $600 psf (per square foot) and the psf for resale in the area is ~ $100 higher. On a unit that is just over 500 sq. ft., that is an increase in value of $50,000. By investing a $50,000 deposit for 3 years, there is an opportunity for a $50,000 capital gain in three years…Finally, the deposit is being sourced from our home equity line of credit at a rate of interest of ~ 3%. Thus, no cash equity is being put up. While there is risk that the $50,000 gain disappears, the cash positive nature of this property should not disappear. I am super excited on this one.

Second, I am increasing my investment in one of my real estate lending projects by $30,000 and should expect to accrue some additional great interest on that project, consistent with Note 1 above. Again, this is coming from an increase in our home equity line of credit, corroborating partially the increase I did in the anticipated value of our home at our last update.

Importantly, I am excited that I am growing the top side of our net worth, specifically the assets available to generate return. While I am doing a lot of it through debt utilization, the key is that the assets are generating returns far in excess of my cost of capital. To grow material wealth long-term, I am a firm believer in utilization of leverage. I recall, but could be wrong, that Doyle Brunson felt his chips were little soldiers and they went out and fought for more chips and he didn’t like leaving any behind. I feel like that about the assets on my balance sheet. If I can grow the assets significantly and find opportunities for my little soldiers to go out and generate above average returns, while being risk sensitive, then I have an opportunity to outgrow my liabilities and materially increase my net worth; else, I have to simply hope for five percent to eight percent returns and wait for my money to double every decade, which would not allow me to hit my retirement goals (dollars or timelines).

Enjoy your frugaling, your investing, your saving, I will!!!!!

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