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How am I doing? #3 July 7, 2009

Posted by shaferfinancial in Finance.
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The final installment will cover several different investments.

My real estate ownership is varied.  Some people argue that one should not include their personal residence in their calculations because it doesn’t create income.  I partially agree, but do include it for the following reasons:

1.  I practice equity management allowing me to put equity to work. [I never refinance above 80% and incur the additional cost of 80%+ financing]

2.  It effects my net worth positively when it appreciates and negatively when it depreciates.

3. Not all investments pay dividends nor interest, but rely on capital appreciation just as a personal residence does.

Now all this does not deny that it is better to own investment real estate with cash flow than a personal residence/2nd home from a pure investment standpoint.

So the first two real estate properties I own can be more accurately described as life-style choices that throw off long term appreciation that can be capitalized using equity management.

My personal residence in Florida has remained at about the same value over the last 6 months [maybe 3-5% loss?].  It is hard to get a true value on real estate until the day it is sold, but in general single family homes in my neighborhood after dropping 25-30% in 2007-2008 have stabilized.  My current loan to value is below 60% so I feel pretty comfortable with that level.  When the property starts to appreciate??? I will have to make a decision as to pulling out equity or possibly making some long term changes.  Until then,  status quo.

I own a vacation home in New Hampshire.  Property values there have stabilized too.  Since I have not owned it as long, my loan to value is around 75% and I have not had an opportunity to pull equity.  Next year will be a critical year for us with a decision on putting it up for sale [should the capital be best served somewhere else?].  I would probably reinvest the capital into investment real estate if sold.  Meanwhile it provides great joy for the family in summer and in winter.

I own farm land in southern Indiana.  This relatively small track has actually appreciated about 20% over the last 6 months as farmland everywhere has done well.  It provides a small amount of yearly income. Soon a new highway will be finished going about 1 mile from the land.  There appears a good chance of there being an interchange on our road which may change the dynamics enough to make some changes in the use of the land profitable.

Finally, I am invested in a real estate firm.  Of late this investments has not done well with several projects failing due to the credit crunch and lack of availability of the capital markets.  Reacting to the current reality of the real estate market, we have now moved into mortgages.  Buying mortgage portfolio’s around .37 on a dollar at least initially has given us renewed profits.  Needless to say this is high risk stuff and not appropriate for most folks.  I still have high hopes, but recognize total loss of capital is a very real possibility.

I have a large equity indexed universal life insurance policy [EIUL].  Since I often blog on this product I will not go into the details of how they work here.  My point-to-point date is December.  Last year it returned the minimum or 0%.  This year it is up slightly [4%] at this point.  However, it is critical in my strategy as it allows me to take risks elsewhere [see above] without a “bet the farm” mentality.

Finally, I own gold coins.  I choose to buy coins for their numismatic values [collectibles] that are gold and therefore gain from golds appreciation [or fall from its depreciation] as well as the long term appreciation of their numismatic value.  Since gold has recently risen in value, these coins have also risen in value.

Well there you have it.  A full accounting.  You shall be the judge of how I am doing?????

Any comments or suggestions are appreciated.  You see I live what I advise.  Do you think I am properly positioned to take advantage of the next five years?  Are my risks out of line?  Am I properly diversified by assets?  Is my analysis cogent?  Any feedback is appreciated.



1. investmentblogger - July 10, 2009

Hi Dave, you’ve got a nice mix of investments & assets, having both stocks & real estate (and within real estate some differences as well), in addition to the EIUL. I have yet to further enhance the insurance aspect of my own mix, and will have to read your insurance articles again. I am guessing most of your real estate ideas/thoughts are being focused on the real estate firm nowadays?

2. shaferfinancial - July 10, 2009

Yes. It is a very difficult environment at this point. Solving the riddle of where the best opportunities are is a constant issue.

If you have further questions on the insurance aspect contact me.

3. Joshua - July 18, 2009

May I ask why you don’t use BawldGuy’s services for your real estate investments?

4. shaferfinancial - July 19, 2009


I met the Bawld one about two years ago through the internet. I was already involved with the real estate development company at the time. Since then I haven’t been able to put more capital into real estate, not did I want to increase my real estate exposure. Had I met him 4 years ago things might have been different! Currently, I am comfortable with my risk/reward exposure. In the future I might want to change that and you can bet he will be the first one I call. I have encouraged several of my clients to talk to him and believe him to be honest and a great real estate guide.

I have a well thought out plan. I encourage others to do the same. I even help folks get that plan [for a price of course]. Not all plans will include ownership of investment real estate [although the risk/reward ratio is very favorable]. There are many ways to skin the cat!

5. Joshua - July 19, 2009

Thank you for the update!

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