August numbers:
- Personal:
- Gross monthly W2 pay: $4,833 (no change from prior month)
- Net monthly W2 pay: $3,328 (no change from prior month)
- Total credit card debt: $25,403 (+$3,843)
- Total other non-mortgage debt: $6,282 (+$3,043)
- Total mortgage debt: $143,095 (+$32,768)
- Cash/cash equivalents: $13,650 (-$2,436)
- Total retirement savings: $150,158 (-$2,073)
- Non-Equity Net worth: $-10,972 (-$42,164)
- Total Net Worth: $216,329 (-$44,163)
And now we start getting into the meat of things, and see some negative consequences. Yay! As you can see, there has been a criminal erosion of my net worth, and explosion across all debt categories. There’s good news and bad news here, though.
The bad news: like I said, much more debt and more to come! August is when all the costs of putting on my new property really started to hit, and they’ll actually be showing up through September, and likely, October. In order to minimize the chance that the bank would deny the loan I kept the prospective invoice to the basics. This meant that I had an opportunity to meet minimum spend on my new Chase Sapphire card (this is an affiliate link – meaning I’ll get a benefit if you apply and get the card) by buying supplies for my contractor and appliances. (Side note: I also do this with my Chase Freedom card by stacking my expenses in one card or another and taking advantage of their quarterly 5% bonus categories.) Additionally, the new mortgage and HELOC product – more details on the loan and purchase numbers to come – hit my balance sheet this month. In broad strokes though, this is a home purchase and improvement loan rolled into one. Unfortunately, this increases my personal debt quite a bit. Equally unfortunately, this has also drained my real estate contingency funds (which I don’t treat as a component of my net worth) completely, so I’m down to bare bones.
The good news: I add a house to my collection, bringing me to five. While only three out of my other four are rented at the moment (damn it!) the income from those three covers the mortgage and sewer for the four, so I don’t have an out-of-pocket cost each month running the business. Until I get the fourth rented things will be tight, though, and I won’t be able to rebuild my real estate contingency fund in a way that makes me comfortable. However, when construction is fully complete I can (hopefully) get a roommate in my current house and defray personal expenses that way. Final bit of good news is that I will be able to refinance the house and roll as many of the expenses as possible into a lower-interest 30 year mortgage. Side note: this is a variation on the BRRRR (buy, rehab, rent, refinance, repeat) method concept popularized biggerpockets. I highly recommend it. Refinancing will eliminate the higher-interest HELOC and credit card debt, and replace it with a loan near the inflation rate which I can have tenants pay off over time (after I move out) with steadily less valuable dollars.
Overall, my feelings on adding this new house have been mixed. I certainly spent too much money, and I absolutely learned a lot I would do differently in the future, but overall I think the house turned out nice (I will do a deal diary with before/after pics at some point) and will be profitable long-term. It’s just getting to long-term without going bonkers that’s going to be the challenge!
