$1,667,000 and falling up???

Well, it has been a good quarter with our net worth tracking at $1.67 million.

september-net-worth-update

Not much to say on this one. Our investments are ticking on at a great return and there has been some further investment.

The overall growth in assets has continued to expand significantly with debt plateauing:

september-2016-chart

What is relevant for this update? I’m scared and worry I am poised for a big fall in net worth!

You might recall that I said I was worried about a housing bubble? Well, there may, or may not have been a bubble, but there has been government intervention. First, there was the foreign purchaser tax levy. Now there is a CMHC debt service requirement change. The first change targets foreign purchasers, which is generally the high end of the market and the second change reduces the purchasing power of new purchasers by approximately 20%. What does this mean to me? Without going too deep into mitigating circumstances, I would think it would mean my real estate assets should expect to decrease in value between 15% and 20%, which Financial Samurai and I discussed in his comments section.

How can I mitigate it? Well, I could have really pushed the decision to not purchase a home when we sold our townhouse at the peak of the market in May 2016; however, too many people that are smarter than me pointed out if it is your single family home, never get out of the market, it’s too hard to come back in. In hindsight, I might have argued “I am not getting out of the market, I have two apartment units that are coming online in the next 24 months that will continue to bear market volatility, I am merely taking a big portion of my chips off the table”. Now that I type it, I cannot believe I did not come up with this argument. It would have left us in a great spot. Oh well, it is what it is.

Why am I not reflecting a decrease now? Well, a few reasons. First, both of the rental units that I have listed do not have full market lift built in, which could be as much as an additional $150,000 based on current trades. Second, the real estate investment I have will continue to earn interest and mature at ~ $685,000 next June, which is an additional $150,000. Third, when we bought our house at $1.8 million our realtor suggested he could sell it for $1.2 million the next day and we never marked it up and have, if accurate, accrued a 10% cushion in the price. Finally, it’s too early to tell if the market has decreased. Certain signs suggest it has, while other trades are indicating there is still a strong life to the market and prices in certain key areas won’t decline (I’m in those key areas). Given all of this, I feel comfortable that our net worth is reasonably accurate and will continue to increase by ~ $50,000 – $75,000 per quarter through June 2016.

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