$25,000 Farm Fund Complete – Liquidity For the Win

Earlier this year I wrote about buying a Saskatchewan property at an auction 🙂 But I had to raise $25,000 by the completion date, or I lose my deposit forever! 🙁 The seller has since pushed back the original completion date to October (lucky me) but regardless of the extension I’ve successfully secured the rest of my downpayment now 🙂

But what knocked my toque off is that I’ve managed to exceed what I actually need and somehow doubled the size of my property fund to $50,000 😯 And it’s all thanks to liquidity.

I have definitely landed among the stars 😀 A few months ago I had no cash savings, and no rainy day fund. Today, I can literally buy a brand new BMW 3 series or an Audi A5 in cash!!!

But my priority for now is the farm. I can always use the income generated from the farm to buy myself a sweet ride some other day 😀 At first I wasn’t sure if I could come up with the rest of the down payment in time. But like I’ve stated on this blog many times in the past, wealth is more about what we do with our money than how much income we make or save. So I took my own advice and pulled through in the end 😀 Here’s a breakdown of the $50K.

• $10,000 – Sold Stocks. In the beginning I was concerned I might not find the $25,000 in time so I sold some stocks in May.
• $3,000 – Swing Trade. Turned $2K into just over $3K in a few short months. Sold earlier this week to get the money back.
• $5,000 – Credit Card. I took advantage of a low interest rate credit card balance transfer program.
• $21,000 – HELOC. Applied for, & was granted approval for a home equity line of credit to borrow money against my condo.
• $6,000 – Savings. Cash I saved since April from my income after expenses.
• $5,000 – Margin. The recent rally in the stock market means I can borrow more money without risking a margin call.

With Central Banks around the world printing money, I want to re-balance my asset allocation to contain less equities/fixed income, and more hard assets. By using my current investments as collateral to further invest and diversify my asset column, I can still benefit from any future gains to my existing portfolio while also taking advantage of new opportunities. Hurray! (^_^)

$50,000 – Total Available Capital ready to deploy!!!

As we can see, it’s due to the financial decisions I’ve made with my savings in the past that permits me to be as “Liquid” as I am today 😆 (Yes, pun totally intended.) The cash savings only make up a small portion of this fund, so we don’t need to a lot of cash in order to raise a large sum of capital relatively quickly.

“Oh, big whoop” some readers might retort sarcastically.”You just restructured your balance sheet. But it’s not like you’re $50,000 richer.”

Yes, that’s correct 🙂 But here’s a secret to making money: We don’t actually need to have money in order to profit from an investment. We just need liquidity 🙂 In my case for example, with access to this capital I now have the means to own the farm worth $172,500. The rental income will more-or-less cover the mortgage cost, so if the farm itself appreciates in value by just a modest 2% annually, then that’s several thousand dollars added to my net worth every year going forward. Which is money I would not otherwise make 😀 By thinking outside the box like this we can make easy money by creating the illusion that we have cash to invest, without actually having any cash to begin with, lol. Mind = blown right? (゜o゜) I believe people on Wall. St call it “financial engineering” 😀

In summary:

• Don’t equate what you can save to what you can spend. If I had tried to buy all my investments through cash and savings alone I would probably be in my thirties before accumulating the same net worth as I have today. The reason is quite simple: If time is money, then wasted time is wasted money. If we think we HAVE to save $50,000 first to afford a down payment on a home (like many people think,) then by the time we save that much money the down payment would need to be more than $50,000 because the price of the home would have probably gone up. So get into investments and own assets as early as possible! Even if the real value of the property stays the same, it would still cost more in the future because of inflation.
• Cash isn’t King, liquidity is more important than cash flow.
• Being fully invested can maximize our returns. And if we have enough assets to shuffle around, then we don’t need an emergency fund.