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Team MDJ’s Newest Millionaire – Karl the Real Estate Agent (+47%)

Welcome to the Million Dollar Journey June 2017 Net Worth Update – Team MDJ edition. A select group of readers were selected to be part of Team MDJ which was conceived after my million dollar net worth milestone was achieved in June 2014. Karl the Real Estate Agent was selected as a team member and will post net worth updates on a regular basis. Here is more about Karl.

  • Name: Karl
  • Age: 35
  • Day Job: Full-time Real Estate Agent
  • Family Income: $150,000 (Personal full-time job); $TBD (Income from consulting company); and, $150,000 (spouse full time job).
  • Goals: Mortgage paid off by 36 (DONE!!!), million dollar net worth by 40 (DONE!!!).
  • Notes: Almost all of net worth is in the real estate market (principal residence). Starting to invest in the markets now. Also a sucker for holding second mortgages.

Assets: $1,461,800(+95.0%)

  • Cash: $15,000(+500%)
  • Registered/Retirement Investment Accounts (RRSP): $87,500 (+954.0)
  • TFSA: $19,300(-12.3%)
  • Business Account : $15,000
  • SAVINGS ACCOUNT : (0)
  • Other Corp Account : $15,000
  • 2016 Truck Paid For : $40,000
  • Building Lot: $400,000
  • Holding Second Mortgage @ 12%: $60,000
  • Consulting Business: $60,000
  • Principal Residence:$750,000 Updated (+25.00% )

Liabilities: $411,300(+941%)

  • Principal Residence Mortgage : $0 Paid in Full
  • Building Lot Mortgage: $275,000
  • Wife’s Car Loan: $30,000
  • Line Of Credit Used to Buy Consulting Business:$100,000
  • MasterCard: $6,300

Total Net Worth: ~ $1,050,500 (+47%)

With the help of the crazy real estate market we did it – Million Dollar Journey accomplished! It really is a strange feeling but in the big picture, nothing has changed. No one in your life really cares lol. My wife and kids don’t love me anymore than before, but there is something inside that feels fantastic.

I remember when I found this blog in 2007 I was so jealous of FT’s commitment. I never thought I would be able to follow him along the way. I have to say that being part of TEAM MDJ has truly changed my life and helped me achieve my goals that at one time were only dreams. Now it all seems easy moving forward because I have done the work on the front end (mortgage free) and not spending everything I make (sadly this is the norm in the real estate industry).

It really has been super simple. Work hard and don’t spend it all. Saving becomes addictive once you see the results. Just like getting up to go to the gym in the morning (at least that’s what my wife tells me).

So off we go to some new and exciting goals but first a recap of some things that I have been up to since my last update.

Building Lot – Purchased an infill lot as it was a great deal and this is what put me over the top.

House value– The valuation of my home has been ultra conservative throughout this whole process. My property peaked at close to $850,000 early in the year but has come down since with the shift in the market. I decided to be more accurate with it value now that I’m at my goal and will update this if it corrects anymore (current value is still on the conservative side).

RRSP: As tax season has come and gone I made my first major contribution to my RRSP in years to reduce my taxable income. I was lucky to be taken on as a client of Scotia Private Wealth which allows me to hold second mortgages inside my RRSP.

So as it stands now the Toronto housing market is in a correction. This has led to more stringent mortgage underwriting which has resulted in decent second mortgage’s to pick from.

Goals for 2017 – (Revised) With another rise in my wife’s earnings due to her crazy work ethic and having our home paid off – I’m super excited for what the year should bring. We are able to live off my wife’s wages completely while saving mine. We have some projects around the house that we delayed while we paid down the mortgage, however, they now need to be addressed. That being said nothing will be paid with credit.

My goal is to invest $100,000 a year towards our RRSP and TFSA until we reach $500,000 invested.  I plan to have this completed by age 40. At that point, I’m going to relax on the savings and let the power of compound interest carry me most of the way.

My wife and I have asked our parents about retirement expenses as they seem to have a comfortable lifestyle.  Our parents feel that $80,000 a year should be sufficient. Including inflation over the last 20 years, we figure we need at least $1,750,000 in investments to retire quite comfortably with some cushion room.

So by my math. $500,000 invested by 40 years old and compounded equals:

@ 7%

  • Age 50- $983,000
  • Age 55 – $1,380,000
  • Age 60 – $1,900,000

@ 10%

  • Age 50 – $1,300,000
  • Age 55 – $2,088,000
  • Age 60 – $3,360,000

I’ve used both figures as I know the average 20 year TSX return is 9.4% which allows me some wiggle room if I only net 7%.

Stuff I still need to do – Setup my wife’s TFSA for auto withdrawal once home renovations are complete.  In addition, I need to add her as a Scotia Private Wealth Client to include mortgages in her RRSP as well.

Diversification – I have heard from the start that I need to diversify to protect my wealth. I can’t totally agree with this as I believe that investing and putting your money into things you understand is much more important. As the real estate market corrects I’m not concerned about losing money but am more excited about the buying opportunity (10% cap rates again for rentals, building lots get real cheap etc).

With second mortgages, I really pick and chose as to what and who gets my money. Properties need to be local, in good condition, loan to value needs to be a very conservative (70% max), and returns need to be between 10-13% plus setup fees and interest penalties.  I really don’t feel much risk in these even with the market slowing.

Motivation – During this journey, I learned so much about myself and also about the topic of motivation. I didn’t reach my goal by following the cold and hard rules of saving like:

  • pay off your credit cards first;
  • invest over paying off your mortgage;
  • don’t sell rental property to pay off the house; and,
  • buy RRSP’s while your young etc.

For the longest time, I have known that these are 100% the best and most effective way to save yet for me they didn’t hit home.  My motivating factor was simple. I look at the majority of people I meet through work and there is no way that they will be able to retire. They are most likely going to work until the day they die and unfortunately, this is the norm and no one sees anything wrong with it.

Every day I see 40-year-olds with $400,000 mortgages on $125,000 a year wages. That scares the hell out of me and that right there is all I focus on. The fear that I won’t be able to relax when I’m old. It’s not about the money for me it’s about the security it brings. It took me a long time to recognize that this is what works for me. I only mention this because it has changed my live for the better. It’s whatever gets your butt in gear and gets you focused and only you will know what that is. Don’t worry about anyone else’s thoughts except what drives you. Thanks one more time to MDJ everyone on the site for the comments, encouragement, tips etc that have sped this process along for me.

It took me a long time to recognize that this is what works for me. I only mention this because it has changed my live for the better. It’s whatever gets your butt in gear and gets you focused and only you will know what that is. Don’t worry about anyone else’s thoughts except what drives you. Thanks one more time to MDJ everyone on the site for the comments, encouragement, tips etc that have sped this process along for me.

So now it’s the race to $500,000 by my 40th birthday. When I reach that goal I will mentally allow myself to go buy whatever car I want.

Again I thank everyone for the support and welcome any comments, questions, concerns etc.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 26 comments… add one }
  • Bob June 12, 2017, 9:34 am

    Now you just need to reach $1m in net worth excl. principal residence =)

  • Owen @ PlanEasy June 12, 2017, 9:57 am

    Congrats on your success Karl! I wondered why you had a second mortgage at 12% but see that it’s in your RRSP through Scotia. What did they charge to set that up? Is there an ongoing fee?

    • Karl June 12, 2017, 6:57 pm

      Fees are cheap but it is an invite only program. I fluked out through my lawyer who was then scolded for giving out the contact info. I’m the small fish in that pond to be honest. Can’t wait for the first invitation I get to an event. I’ll be taking the hors d’oeuvres home with me. lol

    • Al June 13, 2017, 9:14 pm

      Owen you can set one up with Olympia trust: $100 set up fee & $10/month for admin costs.

      • Owen @ PlanEasy June 14, 2017, 11:50 am

        Thanks Al. Didn’t realize it was that inexpensive. Last time I looked into it the fee I recall was $1,000 setup and 0.25-0.5% annually.

  • Greg June 12, 2017, 2:16 pm

    Good work. Is the truck worth $40,000 if you sold it this weekend?

    Also why in the world do you have a car loan and a $6300 mastercard? plug those drains man.

    • Karl June 12, 2017, 4:14 pm

      Greg,

      Yes the truck is worth $40,000 if I sold this weekend. The mastercard is honestly what we use a a meter to control our spending living solely off one income. (For example right now I am broke even though I am saving alot on my end. Trust me it hurts to pay the interest on that but it is what I use to keep me in check. That being said I can’t argue the fact by the numbers it is stupid but like I said in my post its about not about textbook saving and investing, its about starting and staying on the right course.

  • Jared June 12, 2017, 4:21 pm

    Can you list the purchase price and year of the houe and lot? They essentially make up 80% of your assets, so it would be great to show the appreciation you are accounting for on them.

    Also your networth went up by over $250K in 6 months, so what exactly explains that significant increase? Is it entirely based on a new valuation of the principle residence?

    • Karl June 12, 2017, 6:53 pm

      Jared,
      The large increase in my networth is on two fronts.
      #1 I was massively conservative with my home valuation over the last 24 months and it may have not been as accurate as it currently is. (Still conservative) I believed the market was in for a correction for the past 24 months so I didn’t want to push it. That being said the average sales price in my area went from $455,000 to $700,000 in that same 24 month period. The spike on the chart is my over cautious value on my holdings.
      #2 is I was able to purchase my latest lot at a very good price as the closing was so far out and I also got the same appreciation before even taking ownership. (total fluke)

      • Jared June 13, 2017, 12:26 am

        Karl,

        Not to be too much of a complainer here, but your numbers just don’t seem reasonable to me.

        When I look at what you had listed in January compared to June of 2017, it is a huge difference. Your assets went up by $700K in 5 months. When I break it down the increase looks like this: $150K house (fine, can’t argue there without other info), $400K Empty Lot, plus actual $$$ increase of RRSP $80K, Truck $40K, cash $12K, Business Account $15K, Other Corp Account $15K. Based on these numbers, there appears to be an input of money of $162K. Where did this cash come from?

        The mortgage on the Lot is $275K. So the Lot went up almost 50% since you purchased it? Also assuming you didn’t mortgage at 100%, where did the down payment amount come from? That would be added to the $162K above of actual cash that was added to your Net Worth total.

        Thank you for clarifying.

  • FT FT June 12, 2017, 4:22 pm

    Karl, you have considered OAS and CPP as part of your required retirement income?

    • Karl June 12, 2017, 6:44 pm

      Nope. I”ll have to do some research into it.

  • FT FT June 12, 2017, 6:49 pm

    Karl, essentially, if you lived in Canada for most of your life, you’ll be entitled to about $570/month from Old Age security. So for both you and your wife, that’s $13k per year. Add on CPP, assuming you qualify for the avg CPP, everything combined, you’d receive around $25k/year. So essentially, instead of $80k /year in retirement, you’ll need $55k. However, nothing wrong with saving a little more than you need. :)

  • Forebiz June 14, 2017, 6:32 pm

    If you feel there is further correction (I agree) in real estate why not sell some of your real estate assets and move them into the market. You can always buy back later. If interest rates increase and real estate does correct I would think those second mortgage investments might be at elevated risk.

    Congrats on making your mil. I like your future plans and I think you’ll find the second mil will come quick, I made my first like you at 35 (800K in Real Estate) and now at 39 I sit at 2.3mil (with 600K in Real Estate). There might be a lesson in those RE numbers but I think you are doing great. I owe a lot of my savings strategies to Garth Turner’s Blog, he has great info but would not like your particular portfolio.

    • Karl June 18, 2017, 8:52 pm

      Forebiz,

      I truely appreciate the comments. Its great to know someone has been down a very similar path. There are concerns about the real estate holdings and I agree that there will be a correction but like all corrections it provides great buying opportunities. As stated my only goal right now is to sock away $500,000 in my wife and mines RRSP and TFSA accounts and then it should be smooth sailing. That should diversify me enough to help avoid any major drops in net worth.

      Thanks again for the comments

  • Russ June 15, 2017, 7:52 am

    Congratulations Karl!

    You’re doing great and at a very young age, don’t take this as a criticism but I’m curious what others think because I’ve always thought of a millionaire as having $1M in cash and investments. Not necessarily net worth.

    I am in a very similar financial position to yourself but I can’t think of myself as a millionaire until I’m at $1M excluding primary residence and cars etc. You seem to be motivated by goals, maybe that could be a future one?

    Also you seem aware of it, but I would just caution that you are extremely exposed to the real estate asset class. A large correction would wipe out a lot of your net worth (house and lot value) and hit your income at the same time. My humble advice would be to liquidate the building lot, realize the gains, and max out your RRSPs and TFSAs Into passive index ETFs. Check out the Canadian couch potato blog if you haven’t already. It changed my life.

    Just some suggestions. Keep up the good work, your future is bright!

    • adrian June 16, 2017, 10:52 am

      I agree with you – I live in Toronto and our networth is over $1m (we have a small mortgage and houses in our area are easily 1.2) but what I am focused on is building our investable assets and owning the house completely mortgage free – so we have more cash flow to build assets.

    • Ian June 16, 2017, 2:42 pm

      I’ve always distinguished that in my mind as “millionaire” and “Millionaire”.

    • Karl June 18, 2017, 8:57 pm

      Russ,
      Thanks for the comments. I am definitely goal driven and the building lot is a goal that I’ve been working on. I’ve always wanted to build a house and the lot is zoned to accommodate 2 duplexes that I could hopefully general myself and either keep or eventually give one to each one of my children. (I really haven’t got that all figured out yet)

      Laser focus right now is getting that $500,000 put away so I can lighten up and start traveling and buying some stupid things I have been putting off for years. lol

      Thanks again for reading my posts. :)

  • nobleea June 15, 2017, 2:01 pm

    Why is your wife’s car loan on liabilities, but the matching car is not listed as an asset? You have the truck listed as an asset, so the car should be on there too. Obviously they are depreciating asset and they should be depreciated every year/quarter in the books, but I think they should still be on there. Even if you’re upside down on the loan.
    For sure you have a lot of real estate. However, your liabilities are not crazy, so if RE values were to take a hit, your net worth would take a hit, but you should be ok. Your income might be a bigger concern, but your wife appears to be making good coin (not sure if her income is RE related too). I assume your consulting business is RE-related as well?
    It’s nice to increase your networth in a crazy RE market, but people are usually very slow to adjust them down when the RE crashes. People will find ways to justify keeping the higher value.

    • Karl June 18, 2017, 9:01 pm

      Yeah I agree with the value of RE> as such thats why it was so conservative over the past few years with the valuation. I will be sure to change it when my next update comes and I very well could be a past millionaire at that point. Time will tell. The only reason I listed my truck was because I paid cash for it in the fall and my wifes is financed at 0.9% so I don’t really view it as an asset or liability at this point.

      • nobleea June 19, 2017, 12:15 pm

        Well you obviously view the car as a liability since you have the loan in the liability section. I believe there should be an asset entry for the car value and a liability entry for the loan. It is not hard to quantify the value at any point in time of both the asset and the liability. Businesses do this all the time. CRA has depreciation schedules for a whole variety of asset classes.

  • Leo T. Ly @ isaved5k.com June 16, 2017, 9:13 am

    Congrats and welcome to the millionaire club Karl. Accumulating your first million takes a lot of hard work and commitment. However, this set the stage for your second million and the road is a lot less bumpy and easier to navigate. I feel a lot more secured and safe once I hit the first million mark. It gives me quite a bit of freedom and motivation to reach for the second million. See you there in a few years.

  • Passivecanadianincome June 17, 2017, 12:55 am

    Congrats man. That is awesome. Didn’t know Toronto’s market was in that much of a correction.

  • Andrew September 9, 2017, 12:50 pm

    Hey good stuff!

    I’ve also come to the view that you can’t call yourself a millionaire by counting equity in your principal residence. But this site has always been very generous in its “millionaire accounting.” (e.g. counting RRSP accounts at full value).

    Anyway, great work and I have no doubt that you will hit one million in investments within a few years.

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