Annual Wealth Building Review – 2014

Back in 2013, I conducted an annual review. I meant to do the same thing last year, but getting my latest book off the ground ate up my schedule, and I frankly forgot about it until now.

To catch up, I started tracking my net worth month-by-month on a spreadsheet in September 2012. This was after I had started up an EIUL, but before I moved into real estate. As before, I’ll start with total growth and then move into various categories to see how things have gone.

Comparing my current net worth against last year’s annual review (which would be 15 months ago), I have seen a growth of 25.4%. That’s not too bad considering we’ve seen a couple big sell offs of the market. I don’t think we have seen anything quite like the 2000 and 2008 market crashes. But a few times there were things like “market consolidations” and this latest drop tied to the drop in the price of oil. My total growth since I started tracking net worth on my spreadsheet in September 2012 is 132%, which¬†over this time span, derives an annualized growth rate of 45.28%.

As I’ve done so in the past, I again clarify that I don’t expect to earn 45% annualized growth over the lifetime of my investments. Instead, it’s important to look at the long term. Since I started tracking things, the annualized growth rate has been slowly dropping. The first month I tracked it, annualized growth was 118%. The following month it jumped to 258%. Then it was back to 117%. But the truth is, anything of five years or less isn’t very effective at making long term predictions. My various assets need to settle down and continue on their slow, but steady growth in both incoming cash flows and general increase in capital value.

Now let’s dig into the details.

Real Estate

My rental properties have actually declined by 10%, according to Zillow. I warned last year to take these value estimates with a grain of salt. They can jump up and down quickly. You don’t really know until you sell the property. At that time, things like total cash flow compared with operating costs can have significant impact on the value, and I’m sure Zillow doesn’t factor that in.

Our vacation home in Florida has grown in value by 52%. This is much better, but again, not highly critical because I don’t plan on selling it anytime soon. We get a lot of value out of that. The fact that I’m funding it with my company bonus check against a 4.5% 30-year fixed mortgage turns it into a nice piggy bank. If anything, the value of the equity may become useful if I decide at some point to pull out equity and invest. Another nugget of knowledge is that since we bought the unit, they have completed two new building and have started building a third. Definitely a sign of positive economic action. Seeing the current selling prices of the new units indicates that we bought our unit at essentially half price.

Mortgage debt on the rental properties has dropped by $21,878. That is because I have been pouring extra rent into the smallest mortgage. The “estimated” value of the properties may have dropped 10%, but our debt on the rental properties has now fallen by another 5%. 5% may not sound like a lot, but it certainly counts when it comes to building real net worth.

Stocks

Last year, I had a big position in VNR and was using it to pay off the HELOC on my house. I also had decent growth in Apple, and Berkshire Hathaway, even though I didn’t really have big positions in those stocks. GD has shown great growth by essentially reaching double price from what I initial paid for it.

All in all, my stock portfolio reach a 10% growth on what I put into it. That’s when I decided to sell my entire stock portfolio and use it to kick off a discounted note portfolio.

Discounted notes

I recently blogged about getting into discounted notes. The note that I bought, I essentially bought it at 66% off the cover price. The hope is that I can continue to rake in more cash than I did with VNR, and when it finally pays off in a few years, triple my investment. It should open the door to buying more notes, and paying off rental loans even faster. But since it’s just gotten underway, I don’t any real performance to report. Stay tuned for next year’s report

EIUL

My EIUL has continue to grow silently and slowly. If you calculate premium dollars that went in, subtract the fees, and then add up the credits, it still hasn’t hit positive. Essentially, you could say I’ve lost money so far. But I ran a spreadsheet that shows that it each month, the loss rate shrinks and shrink. In fact, in about six years, it should turn positive. And the idea is that by the time I reach retirement, it will have reached a very nice annualized rate of around 8%. Then I can start taking out tax free loans and have a nice, risk free source of cash.

Simply put, performance of the various parts of my plan is going well. Stay tuned!

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