Net Worth 2016-03

Total Net Worth in March: $405,389 ($91,563) – Incredibly satisfied

March was the best month we have ever had.  The stock market did well, our tenants moved in.

During the month we broke the $400K barrier for the first time, 21 months since we broke the $300K barrier and 4 months since we broke the $310K barrier.  I know we kinda ‘cheated; to get here since I picked this month to update the value of our properties, but even without the increase in asset values, we had a really good month.

Assets: +$78,242 –Incredibly satisfied

After holding off for some time, I decided that it was more appropriate to occasionally update the value of our real estate holdings.

I came to this conclusion for a few reasons.  There was getting to be a significant discrepancy between the values of our real estate and the values listed on the Net Worth updates.

More importantly, we are making decisions to buy/spend/rehab/invest etc on real estate, the results both good and bad are best reflected by keeping the values at least somewhat close to market.  For instance we might decide to sell a property if the value has gone way up.  Maybe we rehab a house based on our value vs the after repair value.  Maybe we accept low cash flow if we are getting 10% year over year appreciation vs selling if the market is flat.

I think real estate valuations are very subjective, and I don’t want to get into monthly updates since places like Zillow etc are so volatile. I plan on making a couple of updates a year, and I am trying to make it so the value listed would roughly approximate the amount we would take home after a sale.

The Duplex’s value went up from $308K to $340K in our latest Net Worth Estimate, similar structures in the area have actually sold in the $350K-$390K range.  Zillow currently has an estimate of $385K so I don’t think that $340 is overly aggressive.

I have increased the value on the rental house from $230K to $280K.  This house is in a booming neighborhood in Dallas.  Our real estate agent estimated that its current value would be about $300K.  So the $280K number I believe to be fairly conservative.

I  left the price of our current house the same as we just bought it in Nov of this year and a few months ago, I already increased the value a little based on some rehab work we did to the house.

I used KBB to update the value of our autos and reduced the car value by $616, and the SUV by $555.

Net Cash Accounts: (-$4,208) –Not satisfied

Our cash balances were down quite a bit.  My wife’s kids came to town, and we spent some money shopping, eating out etc.  So our credit card balances (which are paid in full every month) went up.

In addition we paid everything we could on our personal loan so the overall balances in this area were negative.

Net Cash Rental Accounts: +$965  – Satisfied

We were up this month on our rentals.  Finally have someone living in our old house offset by some final expenses we took on to get the house ready to rent.

Retirement accounts: +$9,708  – Incredibly satisfied

A great month in our investment accounts. My 401K account had its best month ever.  My IRA did well as Apple is starting to come to life. The wife’s 401K did well as she is entirely in a Vanguard S&P fund.

Honestly in this area we just need to continue investing, and to continue increasing our contributions over time.

Liabilities: +$6,857  – Incredibly satisfied

A great month, we paid off the personal loan (+5,761) we took out to buy/rehab the house we bought in Nov.  I absolutely hated taken out this loan, it went against just about everything my wife and I are trying to do.  Being able to get it paid off is a great relief, it lowers our fixed costs by $310/month.

Next month we will turn our focus to the 401 loan, we owe $19.2K, I would like to see us have it paid off by Aug.

The remaining improvement (approx +1,100) was just due to regular amortization on our other loans.

How did you do in March?

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Net Worth 2016-02

Total Net Worth in February: $313,826 ($8,943)

February was a solid month.  The stock market particularly KMI rebounded, and we didnt have a ton of major expenses.

Assets: +$0

We continue to take a conservative view of property price appreciation, and have made no changes to the listed values of our real estate holdings.

I haven’t typically updated the value of the properties.  But I think going forward I will update our assets a couple of times a year and will probably do a full update next month.

Net Cash Accounts: (-$1,168)

Our cash balances were down slightly.  We did a lot better on spending and our credit card balances (which we pay off in full every month) were down $1,000.  Our checking account was down $2,500 as we made an extra payment to our personal loan.

Net Cash Rental Accounts: ($476)

We were slightly positive on our rental accounts even though we continued to spend money getting our house ready to rent.  Great news, we have new tenants that have signed a lease and will be moving into our house in March.

Hopefully with both rentals fully leased, we can see some improvement in this area over the next few months.

Retirement accounts: ($4,300)

The month was solid, KMI, knock on wood seems be turning the corner and rebounded from $15/share back to $18.52.   I still like the company for the long run, it has fantastic assets but its been tough to hang in there over the last year or so.

During the month, we moved about 1/4 of the cash in our 401K account into our other funds.  The market seemed oversold and each time we get a 10% pullback I try to move money from cash into equities.  In addition I turned off new contributions to the Vanguard Healthcare fund.  The Healthcare fund has been a huge winner over the last few years, but I believe this fund is at risk from being targeted in this political cycle.  Pharmaceutical companies  could be challenged for a while.  I don’t plan on selling anything in the fund, but its time to put contributions in other places. (Value, S&P, Small Cap)

Liabilities: ($5,335)

This was a much better month.  We were able to pay down our personal loan by $4,239 in Feb.  Hopefully we can have it paid off in March or at the latest in April.

The remaining improvement (approx +1,100) was just due to regular amortization on our other loans.

How did you do in Feb?

Net Worth 2016-01

Total Net Worth in January: $304,882 (-$21,727)

January was one of our worst months in years from a ‘Net Worth ‘ perspective.  The stock market was terrible, we had moving expenses and additional rehab expenses.

Assets: +$0

No change in this area.

We continue to take a conservative view of property price appreciation, and have made no changes to the listed values of our real estate holdings.

I did a back of the napkin calculation.  We likely have our 3 properties listed as much as $100-110K less than they are worth.  Duplex $20-25K light, Old House $60-70K light, New House $20K+ light.

I don’t update the properties because of the difficulties of identifying market value without selling them and we aren’t in the market to sell.  Plus there is a lot of transaction costs to buy or sell a property.

 

Net Cash Accounts: (-$4,196)

Our cash balances were down this month as we paid about $15,000 towards house remodeling expenses, Plus a couple thousand more went to moving expenses.  We offset this by taking on a $10,000 personal loan.

Net Cash Rental Accounts: (-$2,492)

We were negative this month as we spent money to get our old place ready for rent.  We bought a dish washer, paid for a make ready cleaning etc, replaced some hardware like door locks, towel racks etc.

Unless we have something unexpected happen, I would expect this area to be a lot more positive over the next few months.

Retirement accounts: (-$6,113)

Its been a tough few weeks, our contributions have been offset by continued losses in the market.  Not much is going well.

We bought some more Disney, and in our 401K account we move some money (5% of the total) from cash into mutual funds.  If we get down 20% off of the highs, we will move another 5% of cash into the market.

I know the market will return, and we try to be counter cyclical to the market, ie move money in a disciplined way out of cash and into the market when the market is doing poorly, and trim a bit of our high fliers/winners in an up market.

Liabilities: (-$9,195)

Ok….Not happy with this one.  We had a cost overrun with our rehab projects.  Honestly it was on us, during construction we found additional things and chose to get the house into a live-able condition before we moved in, we ran over and decided to take out a short term personal loan (3 yr, $10K).

I think taking out the loan was the right thing to do, and overall we have added a lot of equity to this house.  We have a couple of additional things left to do, one of our bathrooms is only roughed in.  We need to install tile throughout, install fixtures and add a vanity/countertop.  In addition we need to install new flooring.

Our 2016 goal is STILL to reduce this category  in 2016.  I hope we can have this personal loan and 401K loan paid off this year (assuming we can get our old house rented).  I will be really disappointed if we dont make some real headway in Feb in paying things down.

2016 Goals

Part of the reason I created this blog was to hold myself accountable to financial and personal goals.

With that, here are mine for 2016.

  1. Hit 400K in net worth.
  2. Payoff 50K in debt.  We would like to payoff the 401K loan and most of the loan listed as Mortgage #2.
  3. Max out Roth by the end of the 2016 tax year (some of this may actually happen in 2017)
  4. Get our wills and other documents in order.
  5. Lose 30lbs.
  6. Have a successful marriage.  Don’t get me wrong, my marriage right now is really good.  But I don’t ever want to take it for granted.
  7. Learn to install tile.  OK, a random one.  In an effort to be budget conscious with our new property, we decided to do the tiling work for a bathroom that we had redone.  We have two other baths in our house so we have some time to do the work ourselves on this one.
  8. Take a trip.  (see #6), my wife and I really haven’t gone on any ‘real vacations’ since we got married.  Although we regularly go back to the Midwest for the holidays to see family, we really haven’t taken a vacation just to take a vacation IE a beach, a winery, a foreign country, a national park.  Hopefully we can change that this next year.
  9. Be successful in my career.  Honestly, knock on wood, I feel pretty good about things.  I have been with my current company about 8 years now.  I know the ropes, get along with my boss, like my company, the work life balance and am comfortable with my compensation.  However my company is merging for the second time in 12 months, so there is a chance that I could end up looking for a job.  Hopefully things work out.

What are your goals for 2016?

Net Worth 2015-12

Total Net Worth in December: $326,610 (-$11,823)

December was a tough month, we had a really bad downturn in Kinder Morgan.  In addition we spent a significant amount of money on rehabbing our house.

Assets: ($757,556) -$2,974

This month, I updated the KBB values for our autos, something that I hadn’t done in a while. Also, I dropped the assumption for the quality of the cars (good vs. very good condition).

We continue to take a conservative view of property price appreciation, and have made no changes to the listed values of our real estate holdings.

Net Cash Accounts: (-$3,419)

Our cash balances were down this month.  We had Christmas expenses, travel, gifts etc.

In addition, we paid just under $6,000 towards house remodeling expenses. I would expect about $10-15K more will be paid out in January as we finish up the work we are having done.

Net Cash Rental Accounts: ($1,677)

Cash for our rentals was up this month offset by some repairs/improvements.  As an example we installed some additional security lights, bought some new light fixtures and a couple of new faucets.  Short term we are investing our cash flow in repairs and upkeep.

Our long term strategy is to have well maintained properties that are easy to rent and where we can continually attract high quality tenants.  Over the long term we should be able to charge higher rents, have fewer vacancies and eventually earn more money.

Retirement accounts: (-$8,475)

Its been a tough few weeks, our contributions have been offset by continued losses in KMI.  There may be some additional downward pressure, but over the long haul, they have some of the best assets in the business, and KMI will benefit from the long term trend to natural gas.

Liabilities: ($1,368)

The liabilities went down due to our regular monthly payments. Our 2016 goal is to reduce this category by $50K

Net Worth 2015-11

Total Net Worth in November: $338,432 (+$21,147)

It was a great month, ok maybe I am a little biased, we closed on a new house in November.  We broke thru the $330K mark for the first time.

Assets: ($760,530) +$205,000

We added a new house this month.  Our intent is to move in (after we do some improvements), and then lease out our last property.  I am assigning a reasonably aggressive number to the value as $205K is more than we paid.  (But less than our real estate agents estimate).

Otherwise we are taking a conservative view of property price appreciation, we made no changes to the listed values of our other real estate holdings.  The value we have listed for all of our properties combined is conservative.

We used the same KBB values on our vehicles as last month.

Net Cash Accounts: (-$9,255)

This section contains the balances of all of our cash accounts outside of our rental property.  Emergency funds, banking, savings accounts, HSA, FSA and credit cards. We pay the credit cards off in full every month, but the balances obviously change from month to month.

Our cash balances went down due to closing on our house.  This was offset by increased savings.  I expect it will down more in December as we pay for some home improvements on the new place we bought.

Net Cash Rental Accounts: (-$1,426)

Cash for our rentals was down this month.  We spent some money to buy some demo tools to take down a wall and bought some locks, air filters and other misc items, In addition we paid for pest control and water/trash.

Retirement accounts: (-$144)

Its been a tough few weeks, our contributions have been offset by some very bad losses in KMI.

I still have a lot of long term faith in Rich Kinder (CEO of KMI), even after they cut the dividend.  I think it is a broken stock not a broken company.  And having traded in the midwest, I know NGPL, and why it is an excellent pipeline and key to the midwest. Especially as coal plants continue to be shut down and replaced with natural gas.

I have been very wrong so far, but we will stick it out.

Liabilities: (-$173,030)

The negative is entirely due to the addition of a home loan.

Net Worth 2015-10

Total Net Worth in October: $317,286 (-$2,855)

Not a great month, we ended up in the red.  We has some car repairs, we spent some money for a closing that should happen the first week of Nov, and we even had a little bad luck in the markets.

Assets: ($0)

No change this month.

We are taking a conservative view of property price appreciation, we made no changes to the listed values of our real estate.  Compared to what we are showing in our net worth calculation, we may have another $20-30K in equity on our rental, and I suspect our house has gone up $10-15K in value from when we bought it.

In addition we used the same KBB values on our vehicles as last month.

Net Cash Accounts: (+$22,629)

This section contains the balances of all of our cash accounts outside of our rental property.  Emergency funds, banking, savings accounts, HSA, FSA and credit cards. We pay the credit cards off in full every month, but the balances obviously change from month to month.

Our cash balance is way up this month, we took out a 401K loan to go to purchasing our new house (+20K) and the closing is now supposed to happen the first week of November.  In addition, we also have put aside some money to do repairs and make some minor renovations to the new place.

Net Cash Rental Accounts: (+$2,230)

Cash for our rentals was up this month.  We collected our Oct rents, (we got both on the first of Oct), and we have collected one of our two Nov rents.  I expect the second one will come in the mail on Monday.

We had a bill for pest control (and paid for a prior month treatment), we changed out a door lock, did some door repair, and had our normal water/trash bill. (-$450 total)

Retirement accounts: (-$8,535)

OK, it was a tough month for our investments.

We took out a $20K loan from our 401K account.  Not my favorite way to finance a property, but I think the opportunity was great enough to take a little bit of a risk.

During the month we added to our position in Disney @111.09.  I think now is a good time to pick up some Disney shares as I think the next Star Wars movie will be a huge success.

Oct. was really a rough month for our largest mutual fund position, Sequia (SEQUX). (-9%)  The fund has done well since we bought it 4 years ago, but it had way too much of its assets in Valeant. (almost 1/3).  I may sell some of it this week, I still like the fund for the long term, it has a very long track record of beating the S&P, but it might be prudent to get out of the fund for the next few months while they liquidate their position in Valeant,

Liabilities: (-$19,179)

We paid off our 401K loan last month, and unfortunately took out another one this month with the intent of using it for a down payment on our next property. (-$19,872.)  Our goal is to pay off our 401K loan by Apr or May of 2016.

The pay-down on our mortgages will continue to be about $700/month over the course of the year.