May was another great month. Net worth increased by $5,600, mostly thanks to my tenant’s $5K rental payment 🙂 This represents half the year’s annual rent. The other half is due in October. The first farm I bought in 2012 using $20,000 of my personal savings is now worth $50,000 more. Luckily my aggressive 8:1 leverage has paid off and has earned me over 100% ROI every year so far. I don’t think it’s too late to buy farmland today, as long as investors plan to hold it for 10+ years 😉
But how would rising interest rates affect farmland prices in the future? I don’t try to time the market or predict when rates will rise. But I believe higher interest rates will be caused by higher growth and inflation in the economy, which means higher commodity prices, which could mean even higher farmland values. In my humble opinion hard assets generally perform well under inflationary periods. Of course I could be wrong. I’m still cash flow negative so my farmland investment is only speculation at this point 😐 And if you noticed groceries costing more, sorry. It’s because people like me have been speculating and driving up the cost of farmland, and farmers are paying higher rent.
*Side Income:
- Part-Time Work = $400
- Dividends = $400
- Eating Out = $100
- Others = $100
*Net Worth: (MoM)
- Assets: = $818,900 total (+9,000)
- Cash = $10,300 (+10,000)
- Stocks CDN =$88,800 (-900)
- Stocks US = $51,000 (-100)
- RRSP = $41,800 (same)
- Home = $254,000 (same)
- Farms = $373,000 (same)
- Debts: = $531,300 total (+2,900)
- Mortgage = $198,400 (-400)
- Farm Loans = $206,500 (-500)
- Margin Loan CDN = $31,000 (+3000)
- Margin Loan US = $26,100 (-200)
- TD Line of Credit = $33,000 (-400)
- CIBC Line of Credit = $13,500 (-100)
- HELOC = $19,800 (+2000)
- RRSP Loan = $3,000 (-500)
*Total Net Worth = $287,600 (+2.17%)
All numbers above are in CAD. Conversion rate used: 1.00 USD = 1.08 CAD
I’m pretty happy with May’s results, even though it’s not as exciting as my $53,000 wealth increase in the previous monthly update 😛
After depositing the $5K rent, I borrowed an additional $2K from my HELOC and $3K from my Margin account, so now I have $10K total in cash. I have written a cheque for $10,000 made payable to a company called Canadian Western Trust for a major purchase coming up. I need to keep the $10K in my bank account until the transfer goes through. I normally don’t keep this much cash idling around though. I like Warren Buffett’s analogy that cash is like oxygen. It’s important to keep enough of it around, but you don’t need excessive amounts of it, lol. It’s much better to hold profitable businesses or productive real estate than to keep a lot of cash on hand. I hope everyone else also had a great month financially 🙂
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Random Useless Fact: Hedgehogs are lactose intolerant
Awesome as usual, but not unexpected as you have a financial plan and continually execute on it. What I find interesting, is that many never figure out that it is the plan that is the key to financial success. Have you started that volunteering we discussed a few posts back? If not, add it to the plan and execute! – Cheers
Only a little bit at an animal shelter, but I hope to do some more in the future. The hardest part of a plan is to start it. I find that once the gears have been set in motion the momentum takes care of the rest 🙂
Congrats on another great month, F35. I like reading how people use leverage to vault ahead…adn your blog provides a great use case. Keep it up
R2R
Thanks dude. I find leverage to be a great tool for myself 🙂 Your passive income is progressing really well too.
Awwww, poor little hedgehog. I love milk.
I think cats are also lactose intolerant, but they are sometimes seen drinking milk in cartoons lol.
I’m curious whether you know your credit score? Borrowing money on margin and LOCs negatively affects one’s score (even if you pay all your bills on time). Might this affect your ability to get a larger mortgage or a car loan in the future?
My credit score has been gradually decreasing over the last couple of years because my usage capacity has gone up. In 2012 my score was a bit over 800. But now in 2014 my score has dropped down to only average. My goal is to maintain my credit score above 700 and hopefully bring it to over 750 in the future. To me it’s about the balance between borrowing enough to maximize my growth potential, but not so much that it will severely thwart my future borrowing opportunities. Businesses deal with this problem all the time. They want to borrow enough to continue expanding and hiring because the more they spend and invest the more potential revenue they will make. But at the same time they don’t want to have too much debt relative to their assets because that would make them a more risky borrower and increase the cost of their future debt (eg: bonds or demand loans.) So far my leveraged investments into stocks, farms, etc, has helped grow my wealth beyond what I had initially imagined. With the U.S. stock market increasing 100% over the last 5 years I think pretty much anyone who borrowed on margin… Read more »
I don’t understand what advantage there is to an 800+ score, other than being able to brag about it. Anything over 680 and you will still get secured and unsecured credit at competitive rates. A creditor is more interested in your debt service ratios on existing and new debt.
Hello, I live in Regina. I’m a residential appraiser and I work with 4 commercial appraisers. Also, some of my family are farmers. So naturally, I’m interested in your farm value posts (but I also enjoy many of your posts). I was thinking about your 29% increase in farm land prices over last year. And I asked my co-workers about it. I’ve also discussed it with my farmer family members. And they both had some interesting things to say and I’ll share them with you. My co-worker says of the 29% increase that the numbers are skewed because property near the city limits is also considered farm land. So for example: http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14349335 This property is only 140.98 Acres but it has a selling price of $7,250,000 or $51,425.73/Acre. Why? Because it’s right off Highway #1 and 2.5 miles east of Regina. I’ve heard about some appraisals where they bought the property in the last 3 years, in the city limits and then sold it for huge profits. Sometimes they even sell them for huge profits after only owning 1 year. So when you mix $50,000+/acre into the prices with the $1000/acre prices, the average will be higher. Regina and Saskatoon… Read more »
Thanks for the long post. Lots of good information you’ve provided here 😀 That’s interesting about how they lump all the farm values together even though city land should probably be assessed separately. The last time I had a proper appraisal done on one of my quarters was last year and it was worth $184K based on 3 other recently sold farms in the area. But it’s hard to say because many farms are bought and sold between relatives or family and the price doesn’t reflect true market conditions. Saskatchewan feels like a small community because it only has about a million people. Everyone seems friendlier there than in B.C., like people wave when they drive past each other in their F150s lol. One concern I have is the ageing population of farmers. The average farmer in Canada is 55 years old, which raises questions over who will produce the country’s food in the coming decades haha. Maybe farm landlords like myself should go and actually learn how to farm the land just in case.
What’s your end game with your wealth…freedom only?
Yeah, pretty much. More specifically I’m trying to maximize my free time. The earlier I reach financial independence the more time I can buy back from life and live however I want without financial stress. The end game could be travelling the world, spending time with family, making a movie, joining a music band. I’ll have plenty of time to decide later on 🙂
Wow monster net worth gains. Congrats man! I was wondering about your farmland. How hard is it too lease out? term of lease? what areas are they in? I got a rental commercial warehouse but my yield will be shrinking soon due to low lease rates. Might be time to switch it up for me.
It’s easy to lease out. There’s a lease agreement on the government of Saskatchewan’s website you can use as a template. The terms are all on there and are pretty straight forward. You can also use third party leasing methods and pay a small fee. My agreement is 2 years and I have to renew it for next year. Both farms are about 40 miles north east of Yorkton, Sk. I want to invest in a rental commercial warehouse too, but it’s really expensive in the lower mainland and the cap ratio is too low. Let me know if you decide to buy another commercial place, like a restaurant maybe, or another warehouse, and if you need a partner I’ll go in with you 50/50 😀
Thanks for sharing the info about your rental income. And $400 for the month of May in dividends is huge. My intermediate dividend plan is to generate $1000/month. I had a pet hedgehog a while ago. No more.
$1K is a great goal. Good luck with that. I’m aiming for $10K a year at the moment. I think I can get there in another few years. I wouldn’t mind being a hedgehogs for a day.
Great job on the net worth Liquid! I like how you’ve levered up to propel you to your goal. I think I need to do the same to help me reach my own goals. Also great job on the monthly dividends – $400/month is not too shabby at all.
That’s pretty neat you invest in farmland. Like the work up on famland real estate via your investing page. my ex BIL rents out his land and they farm hay. makes up some of his costs for having acreage and a nice place. Hmmm…. definitely something to consider doing in the future (when the debts are pd off).
Hey Liquid,
You are very close to reach million dollar assert value (0.8 million, don’t worry about debts now). I know you took pretty high risk in the farmland investing and it is paying off well now. Keep up your great job and good luck with your new investment in MIC.
Cheers,