NSR-Property+PPM-Property=Asset Allocation
NSR-Property+PPM-Property=Asset Allocation
We’ve derived our Asset Allocation based on our Property estimates. Working backwards, we know that our Property Asset Allocation is at 25% of our Net Worth, so using that as our reference point, we’ve derived our remaining asset allocations. We also know that EKSuper is about 25%, so 50% is fully allocated. That leaves 3 more categories: PPM, EFI, and ING Offset. Since PPM is 75K, that makes up 17%. We also know that EFI and ING Offset is the same, so that would leave 70K for each at 16.5% allocated. It’s like playing Sudoku, but with Finance.
We’re estimating to increase our net equity in contributions by 431K within 3 years. Contributions only, so this excludes net worth growth. Goal is to see if we can pay off our remaining mortgage within 3 years utilizing our NSR and PPM contributions, while maintaining Property at 25% allocation.
Based on our Notes, Property, PPM, and EKSuper is achievable so long as we can maintain our monthly contributions. Property: 3K and PPM: 2.5K. EKSuper of 36K contributions per year. However, EFI and ING Offset, we have an estimated shortfall of 6K/annually for each. EFI: MR/Divs: 7% at 135K=10K. FC: 3.5K, Int Cost Savings: 4K. For ING Offset, Int Cost Savings: 17K. Will be hard to maintain EFI and ING Offset Allocations, so will need to utilize various offsets.
Increasing 431K in equity through net savings would bring our NW closer to 1.5M. If we include growth at 7%, would increase by another 75K of growth annually, so another 75Kx3=+225K (excluding Property). 1.1M+431K+225K=1.75M. 650K / 1.1M = 59% equity increase within 3 years, so about 20% annually. We’ve sustained our NSR at +60% for 4+ years, and our NSR averages about +120K annually.
Mortgage Interest Rate is at 6.79% to-date. Our property value increased by 150K within 3 years, so that’s about +7% increase annually. Definitely not sustainable and its making our property asset allocation % out of whack compared to our other assets. We’ve pushed hard on our Prepaid Mortgage (PPM), and we can manage to keep our interest charge under 1K monthly, so this frees up our cash flow to push even harder on our Monthly Contributions back to PPM and so forth. Fully paying off our mortgage within 3-to-5 years is achievable.
What begs the question now is whether or not to utilize some of our equity to purchase a rental property, but in doing so, would open up another mortgage, while having an existing mortgage. Is this considered property investing or speculating? Granted, we can utilize negative gearing and all the tax strategies that property investors use, but we would still have interest charges. With negative gearing, needs to have a cover. Even if the property value increases, we don’t plan on taking a HELOC, increasing our liabilities and risk. It would deter our Financial Freedom even if our Net Worth would increase, but this would be considered speculative risk. Another option is to have our market returns and dividends from EFI to rebuild our cash reserve back up and make a down payment of another 200K on a rental property. That’s only if we decide to get into property investing. If we choose financial freedom without consideration for property investing, then we’ll keep our investments growing through Income Funds and ETFs.
