How’s that for a summary of my current financial status? Don’t let the numbers scare you, I’m still saving as aggressively as ever. Yes, the debt is ballooning… but I’m not worried. Unlike congress, I’ve got everything under control! In fact, it’s all going according to plan.
Although I am not quite near being ready to retire just yet, I am making progress and headed in the right direction. I haven’t posted an update regarding my net worth in quite some time… mostly because everytime I check it on Mint.com it shows my debt balance being more negative than the last time! 🙁
Since I first started my real estate investing journey, I’ve been borrowing more and more money to fund each transaction. Even though my total balance owed is increasing, the corollary is that the total value of my controlled assets is also rapidly rising.
Here is a breakdown of assets:
401k and Roth IRA: $143,070.50
Rental Property #1: $400,000
Rental Property #2: $400,000
Rental Property #3: $160,000
Grand Total: $1,115,233.16
Stocks are actual values as of closing on July 26, 2013. Rental Property numbers are what the appraised value would most likely be today (somewhat conservative estimates).
And how much they pay me:
401k and Roth IRA: $240/month
Rental Property #1: $2090/month
Rental Property #2: $2150/month
Rental Property #3: $2050/month
Grand Total: $6530/month or $78,360/year
Using gross numbers, my yearly yield is 7.02%. This is pretty good, considering my stocks (TSLA) are currently paying me $0 in income.
The Debt Numbers
Obviously, if I was actually receiving $6530/month in net cash flow, I’d already be retired and relaxing on the beach! 😉 But because I’m borrowing so much money, that’s not the case. However, here’s a quote I truly believe in:
“What you owe today, you’ll be worth tomorrow.”
Like planting a tree, it’ll take many years before I can harvest the fruit. All in due time. I know if I put in the work now, I’ll reap all the rewards later. The sooner your start the journey, the better off your future self will be.
Here are the scary debt numbers:
Rental Property #1: $230,507.99
Rental Property #2: $230,107.77
Rental Property #3: $118,125.00
Grand Total: $578,740.76
These debt numbers might seem daunting at first. And they definitely eat into my returns since the mortgages are so high. But that’s just temporary. As readers are well aware, I’m a huge fan of leverage because I believe it’s what will ultimately set me free sooner rather than later. Even better, even though I’m on the books for more than half a million dollars (yikes), ultimately, I’m not going to be the one to pay it back! This monumental task will be distributed amongst my current and future tenants.
And really, that’s what sets real estate investing apart from all other investment vehicles out there. To become wealthy, you MUST own valuable assets. Anyone seeking to become wealthy must partake in an arm’s race to acquire as many valuable assets as possible. Leverage will allow you to become wealthy over time as you gain more and more control of ownership over each piece of asset that you own. Eventually, with full 100% control, you will owe zero debt. That’s when the real fun begins!
Even with all this debt, my rental properties are all cash flow positive. After all payments, my net cash flow looks as follows:
401k and Roth IRA: $240/month
Rental Property #1: $460/month
Rental Property #2: $330/month
Rental Property #3: $620/month
Grand Total: $1650/month or $19,800/year
For rental properties, numbers were calculated without factoring in reserves for vacancy and maintenance. So, these numbers are more optimistic than conservative. Still, my original early FI target was just $1500/month, so it looks like I’m pretty close to reaching my original goal (need to exclude 401k + Roth IRA cash flow). Before I exit the rat race for good, I’d like to be at over $2000/month.
Next stop, Rental Property #4! Let’s do this!
And in closing, my net worth is now… *drumroll*…
Net Worth: $536,492.40