Earlier this year, we published a post on goal setting.
For year one, how did we do?
Based on a very hot real estate market, we have actually blown past our original target. Also, by leveraging our real estate assets, we were able to realize some great returns in our RRSP investments and our real estate lending investments.
Without further ado, the 12.31.15 net worth update is:
- We have marked the Frugalers’ home to appraised value.
- ‘Based on current market prices proximate to our presale, a “book” gain of $100,000 is considered reasonable.
- We invested $28,000 as a downpayment on our second investment property. As an early purchaser, we paid ~ $100 less PSF than market value.
- $30,000 was invested this quarter and investments were marked to market.
- $35,000 was invested this quarter and investments were marked to market.
- We borrowed $97,000 from our LoC to invest in investment property #2 ($29,000), lending investments ($30,000) and RRSPs ($35,000).
- Family vacation, Christmas, dental procedures all conspired to increase the credit card balance for the month; however, it is important to note that ~$54,000 of this balance remains static as an effective 0% interest LoC and all credit card balances are paid off monthly and all expenses are run through our credit cards to maximize benefits / points.
Originally, I felt we were going to be well off of our goal for the year of $890,000; however, we ended up ~ $50,000 ahead of that target.
Unfortunately, it was not 100% the way that I would prefer to have done it. We received a lot of help from a very favorable real estate market and less help from the frugaling department. Our contribution of savings was not as high as I would have liked it and will be a focus in 2016.
In 2016, I would like to target a total net worth of $1,150,000, being an increase of $210,000. Of this amount, ~ $75,000 should come from return on investments (lending investments and RRSPs) and $135,000 would have to be saved by the Frugalers next year, a definite challenge.
So what has me scared? The market has me scared more than anything, specifically the real estate market where we live. While it has allowed our net worth to climb quickly, I worry about the impacts of a market correction.
One thing I am contemplating doing is adding updates on “what am I reading now” and it happens to be that I am reading the Black Swan, which has me thinking about what swans could impact my family fortune, how would I prepare for them, how can I diversify more away from real estate? Coming up next is Antifragile, the follow on to the Black Swan and ideally there will be some good thinking on how to address our net worth.
For our investment property #1, it will be coming online later in 2016, we could do a few things with the property: (1) Sell it and realize a gain (not tax efficient); (2) Maintain it and leverage it comparably to our current home, or (3) Maintain it and lower the leverage on it as much as possible.
While I have argued in the past that leverage isn’t always bad, in this situation, I am leaning towards #3, which is to lower our leverage on this property for many reasons. To buffer us in a real estate downturn and to have chips on the table to take advantage of any good investment opportunities, such as a stock market correction in 2016.