The November net worth index update now contains the equity value of my new investment property. I have been looking forward to closing this deal for the past few months and have been working on buying a new investment property for a year or so. Also this month, there has also been a significant increase in the Dow Jones Industrial Average (DJIA) which resulted in a positive move in my net worth. With my extreme investing approach, I expect that changes in the DJIA will cause significant changes to my net worth, for good or ill.
Let’s take a quick look at some of the big changes. I’m excited about the positive movement and hope you are also seeing the benefit to your stock portfolio as well.
November Net Worth Index
Headline Net Worth increased 14,616 points from 114,421 to 129,037. This represents a 12.8% increase for the month which is pretty great. I’m excited about this but realize it is totally unsustainable. Recall that my net worth index does not reflect the dollar amount of my net worth. It is simply a tracker which started at 100,000 to represent my beginning net worth and show changes from there.
Here is the graph showing progress from earlier this year:
The big run-up in the index was caused by two primary factors. The first one was closing the purchase of my investment property which has positive equity and the second was the increase in the stock market following the elections.
Using a wholesaler was a huge help in finding an investment property. The great thing was that it also allowed me to purchase a property for below market value.
Wholesalers often have websites where you can sign up to receive a listing of properties that they have for sale. They are buying these properties from people who simply need to unload them quickly. The idea is to make an offer and turn it around and sell the house to an investor for a slightly higher amount.
The key to wholesaling is to build a network and create a large volume of deals. They don’t need to make $100,000 on each deal. In fact, sometimes they will make as little as a few thousand dollars on one deal. But considering that they may only spend a few hours on it, this isn’t a bad arrangement. Also, wholesalers may do hundreds of deals in a year.
The property I bought was in pretty good condition and only required minor updates and repairs before marketing for rent. The property will actually be listed for rent tomorrow!
Thanks to buying through a wholesaler, I was able to get the property for a lower price and did not have to compete with other buyers using the Multiple List Service (MLS) which is where most retail buyers and their agents are looking. This vastly changes who you are competing with to get these wholesale properties and is a great advantage.
Stock Market Gains
The stock market also increased this month. As I suspected, without the concerns about the election results the stock market has been free to drift higher. Yes, I characterize it as “drift” because I feel that the current is pushing the market higher due to the past decade or so of poor returns and the slower turnaround in the economy.
I don’t yet see a strong impetus for the market to rocket higher, although I do expect the economy to move towards a more significant expansion in the next decade and for a major economic expansion in the next two to three decades.
The current climate should result in moderate gains followed by down periods and sideways action. However, when we hit the major economic expansion I would expect the market to rocket higher, euphoria to increase, and a general asset bubble to be created. This has happened in the past and I have no reason to expect that history will not repeat itself.
Have you been able to benefit from the recent stock market gains or are you moving more to cash to avoid risk?