2015 has arrived! We are now in Year 4 of the early FI journey. And I can’t say that I’ve ever been more excited about the prospects for the future. 🙂
Also, at this time, I would like to say congrats to all the other freedom fighters out there who continue to hustle each and every month, putting down a solid foundation that will lead to financial freedom forever and ever after! It’s tough work, but if you stick to it, you will get results! So keep at it!
Let’s see where the net worth stands as we head into 2015:
According to Mint, my net worth is currently $781,996.44. This represents an increase of 2.40% from last month ($763,680.73). I’m still using Zillow’s Zestimate to determine the value of my properties.
I currently have $9,323.02 stashed away in my checking account ($8,632.18 previously). I spent a portion of it this month to purchase Chevron (CVX) stock.
I’m still in the process of doing a cash out refi on Rental Property #2, so hopefully cash reinforcements will arrive in early January. This will help me close Rental Property SH #3, and give me some more ammo/cash buffer to work with.
I owe the following loans:
Rental Property #1: $224,385.39
Rental Property #2: $224,855.13
Rental Property #3: $115,399.80
I currently own stocks in my taxable brokerage account. My other investments are in 401k and Roth IRA.
Current 401k: $2,011.23
Roth IRA: $57,697.45
As mentioned above, I added some CVX stock to the portfolio this month. Also, I am now participating in my new company’s 401k plan. The old 401k is still in tact, as I still get discretionary matches on the dividend payouts, and I like the choice of funds in that portfolio. For now, I’m just going to leave the old 401k alone.
According to Zillow, here are the values of each property:
Rental Property #1: $473,773.00
Rental Property #2: $469,291.00
Rental Property #3: $123,267.00
Rental Property #4: $85,917.00
Rental Property #5: $103,391.00
To keep track of my side hustle deals, I am simply inputing the downpayment amount. Rather than having to keep track of each property value and dividing out my ownership stake (25%), I’m going to keep this simple and uncomplicated. However, these deals were made with the idea of future appreciation in mind, so ultimately their property values do matter!
Rental Property Side Hustle #1: $24,500.00
Rental Property Side Hustle #2: $32,562.00
The following debts should be listed under the Loans tab, but unfortunately Mint forces manually inputted loans to show up under the Properties tab.
Rental Property #4: $63,064.47
Rental Property #5: $124,447.58
Rental properties experienced some movement this month. Right now, I believe Rental Property #1 is being overvalued, and the true price is closer to around $460,000. Rental Property #2 just got appraised at $440,000, so again, the Zestimate is too high.
For the out of state properties, they didn’t move much this month… but are still too low. I purchased Rental Property #5 for $180,000 and it is valued at $103,391. Perhaps that’s the market value for properties in that neighborhood, but I doubt that figure takes into account the extensive rehab that was put in…
The total value of all assets now checks in at $1,534,158.81, an increase of 1.05% from last month ($1,518,288.51). I also owe $752,162.37.
2014 was an incredible year… I increased my net worth by over $200,000, which is something I never even knew was possible before. As such, I’m getting that much closer to early FI. Actually, after all was said and done, I ended up generating more cash flow than I needed to pay for expenses in 2014. My semi-passive income for the year came in at $33,285.13, which translates to $2,773.76/month, which is more than I need for bills each month.
So, you could argue that I became financially independent in 2014. Realistically, since I am investing in rental properties, I will still need to build up a stronger cash buffer before I’ll feel confident enough to check out of corporate for good. Also, my plans post-FI do involve earning side income, so I’m not too overly concerned with not having enough semi-passive income. More buffer is always good though, and besides I may just stick around slightly longer so that I can find some more good investment deals…
Safe Withdrawal Rate
All along the journey, I’ve never put too much emphasis into safe withdrawal rates (SWR), as I’ve always been more fixated on finding the next cash flow generating deal, instead.
My plan, after all, is to NEVER deplete principal, but instead rely on semi-passive income that will only keep increasing over time. Further, with rental properties, after 30 years, the units will be owned free and clear (mortgages paid off) which will only supercharge the cash flow (even though cash flow WITH a mortgage should be able to outpace inflation)…
And although appreciation is never guaranteed, I’m placing an educated guess that Bay Area properties will continue rising generously over the next few decades. Or in other words, I would hope to be able to sell off one of the “golden geese” to avoid any potential catastrophes.
If I do run the math, anyway, with my current net worth figure, and assuming I need to spend $2,000/month each month, it would look like this:
SWR = 3.07%.
For early FI, I believe 3% SWR is generally regarded as a very good safety number (for 60+ years of retirement), using historical data from the last 100 years, and assuming an investment portfolio comprised of only stocks (e.g. index fund). So, I guess if I was the conventional type, I could liquidate my entire portfolio, convert everything into an index fund to track the S&P 500, draw out $24,000 each year, and simply call it a day!
But I am a bit of a gambler, I guess… And I am a huge fan of real estate investing, so I don’t see myself going down that route anytime in the near future… We’ll see.
Finally, just using simple math (none of this fancy Monte Carlo analysis) and assuming I just need $2,000/month in cash flow to pay for living expenses, my net worth right now should provide for 32.58 years of living expenses.
Regardless of what method you want to use, I think that I’m right at the cusp of early FI and hope to get there sometime in 2015. Let’s keep going strong and make that dream a reality!
2014 Net Worth Summary:
December 2014: $781,996.44
2013 Net Worth Summary: