It’s the 1st of the month, so it’s time for another entry in my net worth series. I’m documenting my path towards reaching $30,000 in annual passive income and $1 million in net worth before I turn 30 years old.
If you’re interested in real-time updates on the numbers, you can check out my net worth tracker, which I update on the 1st of every month.
Our Third Real Estate Deal
As I mentioned in my last update, I was preparing to close on a real estate deal in Chicago.
It’s a townhome that will become our primary residence.
Well, we closed!
We were able to close in about 3 weeks since I worked with a lender I’ve used previously and was willing to move relatively quickly. I represented myself as the buyer’s agent, which saved me a few thousand on the deal.
In total, it was a $285,000 purchase.
Since I’ll be living in this property, I got to take advantage of owner occupied financing. That means I locked in a 2.99% interest rate, fixed for 30 years. And I only had to put 5% down.
Between the down payment, closing costs, some light rehab, and my initial reserves, I am investing around $25,000 into the deal.
For this deal, just looking at the principal paydown (assuming the property doesn’t appreciate at all) I’ll be getting $5,000 back on my initial investment of $25,000 every single year.
That said, I do intend to rent it out in the future.
If rents are steady, it should serve as a breakeven rental, meaning I’ll be able to fund reserves and cover all expenses each month but won’t have additional cash flow to enjoy. I’m OK with that given how little I had to put into this deal, and I like the area the property is in.
Once we move in, we’ll rent out my condo that we’re currently living in.
If you’re interested in viewing more details about this deal, you can check out this video.
Overall, I’m excited to take this next step for my portfolio!
Anyways, let’s get into this month’s numbers.
August 2021 Net Worth Numbers
As a reminder, my net worth last month was at $80,011.61.
Assets – August 2021
The biggest change to our assets this month is our new primary residence, which we closed on a week or two ago.
I’ve marked it at $290,000, even though the purchase was $285,000, partly because I think I got a good deal on the property and because I’m making some minor upgrades to it that I’m in the middle of.
This brings our real estate portfolio to over half a million dollars. I do plan on making this a much larger portfolio, but it’s a nice start.
Since I was able to represent myself in the real estate deal, I was able to get a few thousand dollars back in commission, which is noted on my accounts receivable section.
This real estate deal did put things on hold for the rest of my portfolio. I wasn’t able to do much else this month – other than pulling out some margin, which we’ll get into when we discuss liabilities.
In total, this leaves our assets at $715,136.86.
Liabilities – August 2021
The huge change associated with the deal is that I have a new mortgage. This is a 30-year, fixed-rate loan at 2.99% interest with about $60 per month in PMI.
I thought that relatively small amount of PMI was well worth the ability to close with only a 5% down payment (I would have had to have brought an additional $42,750 to the deal to remove PMI entirely).
To cover any closing costs, I pulled out some margin from M1 Finance. I’m planning to pay this down pretty much immediately, as I have a good amount of cash leftover that wasn’t needed for the deal.
Once you get past the 5% down payment, most of my closing costs were covered because of a closing credit from the seller and my commission from being the agent on the buyer’s side. Given the size of the deal, I didn’t have to pay much out of pocket at all.
Otherwise, I have a special assessment for my current primary residence. It’s a condo and this is just to take care of some exterior maintenance on the building which every unit owner pays for.
In total, our liabilities this month are $625,104.72.
My Net Worth – August 2021
All in all, that leaves us with $90,032.14 in net worth.
That’s an increase of $10,020.53.
That leaves our debt ratio at 87.41%.
And our passive income remains at about $350 per month.
What’s Next?
It’s nice to have another deal closed!
I’m looking to do some de-leveraging in the future, especially paying back that margin.
Within the coming months, I’ll definitely be looking to build up our stock portfolio, specifically on M1 Finance. I would like my stock portfolio to be relatively large to act as a liquidity tool for future real estate deals, similar to how it worked for this last deal.
It’s a riskier approach, considering it’s largely dependent on the market. But that’s a major goal I have for my stock portfolio.
I’ll still be keeping an eye out for potential real estate deal. If I land another, I’ll probably pull out more margin. I’m potentially looking to do a flip in the near future, likely here in Chicago.
Simply put, I only want to take out additional debt if it means I can land a solid deal.
I’m also planning on applying for a couple more credit cards. Leading up to this real estate deal, I haven’t touched my credit to guarantee that I got the best terms possible. Now I can start taking advantage of some introductory offers again to earn some free travel and cash back.
Beyond investing, I will be moving into this new house within the next month and getting my current condo ready to rent, which will probably take up a good amount of my time.
If all goes well, I’ll have some positive momentum to carry me through the coming months!
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