Author Topic: Terrible LNW but good income producing TNW - RACE TO 50% LNW  (Read 1448 times)

Enigma

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I have a terrible LNW 15% compared with a better TNW.  Although my TNW brings in $16k in residual income each month.
I have focused on mostly paying towards a $1.4MM (.3M loans) rental empire that has a capitalization rate of ~14%.

With that being said I started seeing TNW/LNW on the race to 1MM and 2MM threads.

TNW   1.40MM / LNW 215K (15%)

I am only now changing direction.  The interest paid off on the investment property are pretty much written off due to operating costs.  Plus the profit (income - interest - most expenses) capital gains taxes on my investments is 20%.

******************I quoted another thread with the following adding small tweaks ***********
LNW == Liquid Net Worth (short-term investments, savings, retirement accounts, etc.)
TNW == Total Net Worth (LNW + home equity, business equity, and other assets that aren't easily converted to cash very quickly)
******************I quoted another thread with the following adding small tweaks ***********

This is the start of my race to 50% LNW

SwordGuy

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Re: Terrible LNW but good income producing TNW - RACE TO 50% LNW
« Reply #1 on: May 22, 2019, 10:05:52 AM »
We're about 50% LNW.   It will go up another 5% when a mortgage note we financed gets paid off within the next 2 1/2 years.
It will go down a bit as we purchase another 2 rental properties.

I think it's important to have sufficient LNW to handle things when the going gets rough.  But why are you focused on 50%?
Seems to me that the % isn't important, it's the $ amount needed to deal with tough situations.  After that $ amount is in hand, then why not invest in more real estate if you will get better returns?

Enigma

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Re: Terrible LNW but good income producing TNW - RACE TO 50% LNW
« Reply #2 on: May 22, 2019, 02:08:23 PM »
I think it's important to have sufficient LNW to handle things when the going gets rough.  But why are you focused on 50%?
Seems to me that the % isn't important, it's the $ amount needed to deal with tough situations.  After that $ amount is in hand, then why not invest in more real estate if you will get better returns?
Various factors.  Biggest being I left the workforce in Oct-2018 and figured my residual income from the rentals would be perfect.  I invested in another 'to good to pass up' rental that knocked out my liquidable savings.  Slap all the property taxes and insurance that became due at the end of the year.  I felt miserable.  My networth was growing but not at double digits.

So, I jumped back in the workforce.  Actually I was approached by a company and offered a job with full benefits.

Poor planning on my part.  But it would be nice to have another residual income besides my rentals.  Also I am a workaholic.  I probably could have made do and trudged threw the storm instead of getting back to work.

Calimerostache

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Re: Terrible LNW but good income producing TNW - RACE TO 50% LNW
« Reply #3 on: June 04, 2019, 10:07:33 PM »
I'm in...
I have focused more on paying mortgage down so far by accelerating principal payment.
I'm now changing my thinking since my mortgage rate is only 3% and believe I can get better return
So Im going to focus on building LNW

TNW   1.02MM / LNW 340K (33%)

Enigma

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Re: Terrible LNW but good income producing TNW - RACE TO 50% LNW
« Reply #4 on: June 06, 2019, 06:30:06 AM »
I'm in...
I have focused more on paying mortgage down so far by accelerating principal payment.
I'm now changing my thinking since my mortgage rate is only 3% and believe I can get better return
So Im going to focus on building LNW

TNW   1.02MM / LNW 340K (33%)
Welcome to the party, I agree that I believe I can earn more on my LNW than I am paying towards my mortgages.  My mindset was just to pay that off as quickly as possible.