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Networth update

February 1st, 2014 at 05:43 pm

Net worth update

House added a lot of equity

house value at lowest of realtor sales estimate - commission
everything else at purchase price

Goal this month..stabilize.. rebudget.. count my money and adjust my plan. I need more CASH LIQUID savings

Upped 401k to 10%.. if I change it to 12% I will max out at $17500 w the employer contribution.

Goal to get emergency funds at max.. I am approx $12k short across both.

Also want to find money for hardwood floors in this house.. got a friend who can help install but got several thousand in materials.. (not figured that out yet) and I feel since the house is now mine.. I want to 'fix improve' several things. most small. some larger.. but just excited. I will make a list and prioritize. i want to enjoy my 'new house'.. got to save money for the yard.. I need some help this year.. getting it in maintainable shape and l ooking nice.. how exciting!!

MOre updates/questions later as I figure things out.


4 Responses to “Networth update”

  1. Another Reader Says:

    I don't completely agree with how you have calculated your net worth. You would typically show the actual amount in each account as of the date the net worth is calculated, In addition, both cars' current values (to be conservative I would use trade in value) belong in the asset column.

    In your shoes, I would be more concerned with an income and expense statement. You now have a mortgage payment that is almost half your net pay and you will soon lose the income from the two family, That's almost a $5000 decrease in your net income after housing every month, plus you will have to budget for property taxes and insurance for the payments when the money set aside for those is used up. I suspect that the negative cash flow from the rentals, the loss of the rental income and the high mortgage payment are going to strain your budget. Selling one of the cars and suspending your retirement contributions might be helpful or even necessary.

    In your shoes, I would be concerned about a heavy ongoing debt load that extends well beyond your current employment contract. If your contract ends in June and you do not have a new one lined up, it looks to me like you would be in a lot of trouble. I would seriously consider selling the Hyundai, because you have a loan on that car. If I did that, I would put the net proceeds away in Barclays to rebuild the emergency funds. There will be nice cars in the future, but for me the risk of keeping this one is just too high.

    In my view, you are trying to do too much too fast. If I were buying rentals in Joliet, I would be looking for positive cash flow. Leverage is a wonderful tool, when you can afford to use it and you can stay cash flow positive. If your job disappears, you could end up in the same position you were when this mess started, except you won't be able to file bankruptcy this time.

    Even if you don't post it here, I urge you to sit down and do a thorough income and expense analysis for the next 12 months. It might also be helpful to look at what your financial advisor person suggested. If you post the recommendations, you will get sensible feedback from this group.

    I'm not saying what you are doing will fail, I'm saying it's very risky and the consequences of failing are very high. You have worked hard and accomplished a lot so far. It would be a shame to lose it all because of unwise leverage.

  2. Rachael777 Says:

    I think my net worth is correct. but please explain what you mean by the 'actual amounts'. I do not list the cars as they are decling right. so do not want to count them.very good comments and I see the same risk

    the contracts on tthe 3 units and 6 homes are set .,. there is no wway I can dial back the 'pay off'.. and yes things will be tight.. I have an income and expense sheet and maybe I will post htat for thoughts..but YES things will be tight and scary but I know of no other way to get out of that. Buying the house (that I live in) was not in the plan and majorly strains my cash flow..

  3. Another Reader Says:

    I think I misunderstood the amounts "left" shown off to the right in your spreadsheet. You mentioned you might have to take money from those funds temporarily, and I mistakenly concluded that you did that. I apologize for missing that.

    Your net worth is a snapshot in time. As of today, if you had to sell everything in an orderly manner and pay off your debts, what would remain? That's your net worth. Both cars could be sold for significant amounts of money, so they go in the asset column and the loan goes in the liability column. Some people would argue you should subtract selling costs from real estate assets. You did that with your house, not sure if you did that with the rentals. Actually, they aren't yours anyway, because you don't have title. You can't really "sell" them.

    I brought up the income and expense issue, because when I read through your entire blog and looked at your cash flows, I could not see how you are going to pull this off. You managed to pile up a lot of cash because you were not paying on either mortgage. You lived in the house with no principal and interest payment and you are still collecting around $2,000 a month on the two family. Originally, you were talking about a mortgage in the 6 to 7 percent range on your house, and you ended up at 12 percent. It took most of your saved cash to get that loan. Now you want to up your 401k contributions and contribute to a Roth. To be candid, I don't think this is realistic.

    Once the rent disappears and the $2,970 payment kicks in, you are not going to have much room. Another $12,000 wall repair or replacement of a leaking roof would be a real setback. Ever had a tenant go bankrupt and not pay for 9 months? It happens.

    I understand wanting to recover as quickly as possible. Buying cash flow negative properties in bulk with a large mortgage on each package does not make sense to me as a way to do that. I think you would have done better to buy similar houses for cash one at a time as cash became available. Take the income stream, add it to your other savings, and buy the next one. As your credit problems went away, you could have begun to leverage again and stepped up the rate of acquisition, with very little risk.

    However, the decisions have been made and you are where you are. Your success relies on you maintaining your job income - that's the only net income you have. In your shoes, I would try to get rid of as much debt as possible and conserve cash. You may need to support these properties for a couple of months if you have to look for new employment.

    Because the house was not in the plan and because you possibly may not be able to refinance it in 12 months, I would get the house prepared for sale. If things work out, then decorate.

    You are going to have an interesting year. If you continue to document it here, a lot will be learned from watching you get through this critical time.

  4. Rachael777 Says:

    Very good point. I CAN NOT sell the 6 homes or 3 units right now.

    I get a fully paid off deed for 1 of the 6 homes every 15 momths but right now have none. 3 units I have no deed until the end. VERY good point.. need to keep clear and cash reserves so I do not lose these or 'get into trouble'

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