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Our family continues to make progress towards making our first million in net worth. This quarter we maintained our retirement saving rates and day-to-day life was pretty much status quo.
There was a TON of activity on our side-businesses:
- Almost reached the first $1,000 in revenue on my blogs
- I was approved for 6 new credit cards during my April “app party”
- I started the refinance of our 3rd rental property that we bought in March using our HELOC
- I created an LLC and won two bids on my first rehab & resell properties
Assets (aka Stuff I Own)
Assets increased by 2% over the 1st Quarter primarily due to market gains in the stock market, ongoing retirement contributions, and real estate valuation increases.
The year-over-year increase was more substantial with strong growth of 29% primarily due to the purchase of a 3rd rental last quarter, retirement contributions, and increases in value of assets I already owned.
At 64%, real estate is a significant portion of my assets, but with market gains and continuing contributions, my retirement and non-retirement investment portfolios make up 30% of my assets.
With my renewed focus on real estate and desire to own more rental properties, the real estate share of my assets should continue to grow. From a strategic view, however, the income generated by real estate acts like a bond portfolio, so that will allow me to weigh my investments towards a heavier stock allocation. This will increase volatility in my investments, but should generate greater returns in the long run.
Liabilities (aka Debt)
My overall debt declined by a fraction of 1% since the 1st Quarter, but increased 11% over the prior year because of real estate purchases. I continued to pay my auto loans as scheduled since the interest rates are effectively zero (0% for 6 years on my Tahoe and 1.9% for 5 years on my wife’s Volt). I paid off a couple more Home Depot 0% promotions that came due. Mortgage debt was paid on time.
I have been working to refinance my 3rd rental property. When I bought the 3rd rental property using my HELOC, I was told by several banks that I would have to wait 6 months for the property to “season” before I could refinance it. I contacted a mortgage broker that I had worked with in the past, and he said no problem.
I did a cash-out refinance for 30 years at 4.75% with no points on the rental to pay off the variable rate HELOC on my primary residence. Because it is a rental, the maximum cash you can pull out is 75% of the appraised value. Good news: during the appraisal, the property value came in over $3,000 higher than what I paid for it!
Doing this cash-out refinance will accomplish two things:
- I will lock in a relatively low interest rate for 30 years on the rental property
- It will substantially pay down my HELOC, allowing me to reload and be ready for the next opportunity
The loan closed at the end of June and my first payment is due August 1st.
Due to the mix of my asset portfolio, it’s not a surprise that mortgage debt is such a large portion of my overall liabilities. Credit cards, although at 3% of liabilities, get paid off each month, except when there are 0% promotions, like those I have with Home Depot, Lowe’s (now paid off) , and Ashley Furniture.
My net worth continues to move in the right direction – up 3% over the prior quarter and 52% over last year. My family is so blessed to be in the situation we are in.
I wish that I could say we live frugally in all things that we do, and that is the reason we are making good progress. We still waste money on stupid stuff on occasion, and not every decision works out in our favor. Overall, we try to spend money on experiences and things that really matter to us, and not spend money on regular dinner and a movie dates, and other things that are not important in our view.
A favorite personal finance blogger and podcaster of mine says it correctly… you can afford anything, just not everything. My take on it is “Life is about choices… and every choice you make leads you down a specific path. As long as you choose the things that matter to you, ignore what anyone else tells you.”
I value travel and experiences above most things when I choose to spend. Yet, I bet your values differ from mine… or at least your definition of travel and experiences is different. Some people who value travel want to be in First Class, while others are ok with Economy. There is no right or wrong answer… as long as you’ve taken care of business back at home by paying off debt and saving for the future.
Nothing has changed regarding our jobs and the income they provide. My 3rd rental took 2 1/2 months to get a tenant, which hurt since I was paying on the loan during that time. I believe that it was vacant for two reasons:
- My no pet policy — nothing ruins a rental faster than a pet peeing everywhere, chewing/digging/clawing around the house, and overall general odors of pets. I love my dogs… I just don’t love dogs in my rental properties!
- I got greedy. I was told a reasonable range for house rents for the neighborhood I bought in and went with the highest rent. I knew better, but greed got the best of me. Once I lowered the asking rent down to the bottom of the range my property told me, it was leased within a week.
The websites started to generate a little bit of money from affiliate links. Through June, I have made almost $1,000 this year. When factoring in the number of hours I have spent and the expenses I’ve incurred, I’m probably making less than minimum wage doing this… but the sites are young, I’m learning a ton, and this is a marathon, not a 100-yard dash.
I completed another “app party” at the end of April before I went on a 10-day vacation to Australia in Business Class using a combination of airline miles, hotel points, and our timeshare. During the app party, I was approved for 6 new credit cards, which will net me 261,000 miles and points. I can already smell an awesome vacation in the works!!!
I know what you’re thinking… man, your credit MUST be ruined after applying for 6 new cards at once like that. The short answer is no, it’s not.
According to Barclay’s free monthly credit score, courtesy of the Barclay Arrival Plus or Barclay US Airways Premier, my credit score is actually near the highest I’ve ever seen it. Yes, your credit score does take an initial hit for each inquiry that lasts 3-6 months, but so long as you don’t run up the balances on your cards, the additional available credit will offset the temporary drop and will benefit you as long as you keep the card open.
Coming in Q3
In July, I will be closing on the first two residential rehab and flip properties. It’s been an exciting time bidding on properties and “winning” two bids… but now the real hard work comes. Getting the properties rehabbed and ready to sell before the summer sales season is over. The contractors say it should take about 3-4 weeks to complete the repairs, but you never know!
In August, Anna will be graduating from her MBA program. That will bring new opportunities and, hopefully, an increase in her compensation. This will help since we’ll need to start paying on her student loans since she was only able to receive a partial scholarship despite her stellar grades and work ethic.
In September, I’ll be making a journey to my first FinCon, which is an annual financial blogger conference where people meet to share ideas, content, and learn from the best in the business while meeting with vendors and potential partners.
Oh yeah, September also marks the start of my busiest time of year… the dreaded “budget season,” where we establish bank, division, and regional balance and revenue growth objectives.
Times have never been more exciting, yet draining. I have a lot of balls up in the air (family, work, blogs, rentals, flips, etc.), so it will take great concentration to ensure that each one receives the right amount of attention. It’s a tough decision to focus so much on building for our future at the expense of spending time together today. I feel it with all the ventures I’m involved with, and I know that Anna feels it with her work and school commitments. We just have to know that we’re doing the best we can and shower our boy with all the love and affection he needs and deserves.
In the meantime, since I’m only averaging 6 hours a night, I need more sleep! I’m off to bed. I wish you and your family the best 4th of July yet. Enjoy the fireworks and the 3 day weekend.