Panic in the Streets
The global stock market fell more than 10% recently. Over five trillion dollars ($5,000,000,000,000) of value was wiped out. And just like that – I have lost my seven figure net worth. I’m now a commoner once again, lol. It was fun while it lasted. 😛 But I am not disheartened – because my mind these days is focused on more exciting things! 🙂
New Real Estate Investment
The truth is, I’ve actually had a great start to the year so far. After selling my farmland in January I purchased a new residential property. I have been talking about wanting to do this since late last year. But now I have finally closed on a one bedroom rental condo in the Greater Vancouver area. I paid a 30% down payment (about $135,000) and financed the rest with a mortgage at 2.44%. 🙂 Buying real estate isn’t easy. I kept myself motivated by listening to house music.
Anyway, my balance sheet will look a little different going forward. On the asset side I have welcomed a new line item worth $450,000 – the property purchase price. Meanwhile the liabilities side will now include a brand new $315,000 mortgage. Yay, more good debt. 🙂 I’ll post more details about this over the next couple of week.
I also made new plans to buy some stocks soon to take advantage of this recent market correction so there will be lots to write about over the next little while.
Liquid’s Financial Update February 2020
*Side Incomes: = $2,500
- Part time job =$900
- Freelance = $200
- Dividends =$1000
- Interest = $400
*Discretionary Spending: = $1,800
- Food = $400
- Miscellaneous = $400
- Interest expense = $1000
*Net Worth: (ΔMoM)
- Total Assets: = $1,511,100 (-$290,100)
- Cash = $153,500 (-130,000)
- Canadian stocks = $209,300 (-8,400)
- U.S. stocks = $133,500 (-11,700)
- U.K. stocks = $20,700 (-2300)
- Retirement = $139,600 (-7000)
- Mortgage Funds = $37,700 (-800)
- P2P Lending = $35,800 (+300)
- Home = $331,000 (assessed land value)
- Rental Unit = $450,000 (purchase price) NEW
- Total Debts: = $533,200 (+314,400)
- Home Mortgage = $184,400 (-400)
- Rental Property Mortgage = $315,000 NEW
- Margin Loans = $33,800 (-200)
*Total Net Worth = $977,900 (-$24,300 / -2.4%)
All numbers are in $CDN at 0.75/USD
I haven’t been in this much debt since 2013 after I bought those farms. Finally I’m back to having more than $500,000 of debt. It’s a familiar and comforting feeling to borrow so much money again – using new money that I don’t have to leverage my financial gains. Yay. 😀 Using other people’s money to get rich saves me so much time.
Here’s why I’m excited about this. Thanks to my new mortgage, I was able to buy a new property that pushed the total value of my assets to $1.5 million for the first time. 🙂 If my assets can earn a mere 5% average return per year then my investments will gain an expected $75,000/year. Wow. How great is that? 😀
Of course borrowing money is not free. I’m currently paying about $14,000 a year of interest on my total debt. But that’s just a fraction of what I expect my investments to earn over the long run. 🙂 This is essentially passive wealth creation – build up a large, diversified portfolio, even if you have to use some debt, and then simply be patient.
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Random Useless Fact:
The French sweet roll pain au chocolat can be served hot or cold.
Something really cool is how in 2013 w/ 750k in assets and 500k in liabilities, 66% of your assets were backed by debt. Today w/2x the assets and the same 500k your debt only represents 33% of your assets so essentially you have twice the wealth with half the risk. Pretty good spot and I’m sure with the cash flow to match. Keep it up bud 👍🏼 More debt soon please! Haha
Thanks Edwin. Good observation. So far it appears my long term plan has been working as expected – which is to slowly pay down existing debt while wait for asset values to rise. My debt to equity ratio has dramatically improved over the years. I’m really excited to write about my new investment property next week because unlike my farmland investment before, this one actually cash flows from day 1. 🙂 If the Bank of Canada lowers rates later this week then that’s even better for my financial situation. 🙂 And if the stock market falls even further I can use additional margin debt to buy the dip. I feel like the primary driver for prosperity is to simply have a good plan. An ounce of preparation is worth a pound of reaction. Modern Monetary Policy has been the name of the game for quite some time. And it rewards those who take calculated risks. Unfortunately MMP has real life implications on inflation and the wealth gap. We can’t change the minds of policy makers. But we can take action to protect ourselves. I think that’s why REITs are going up across the board when most other Canadian stocks are… Read more »
Hello, your investment condo is cash positive even after mortgage interest, property tax, strata, and every day wear and tear?
2.44% interest rate? That’s practically a free loan. Isn’t the inflation rate around 2.5%?
Hi Sarah. Yes, the rental rate in the area I bought is quite strong and I was able to obtain a relatively high capitalization rate of nearly 4%. I end up with $60 surplus after all expenses like mortgage payment, tax, and strata. 🙂 I’m not sure how to accurately calculate everyday wear and tear though so I left it out for now. The official inflation usually hovers around 2%, but I think 2.5% is closer to reality. So you are right. In real economic terms my mortgage is pretty much a free loan.