Welcome to the Million Dollar Journey December 2014 Net Worth Update – Team MDJ edition. A select group of readers were selected to be part of Team MDJ which was conceived after the 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: 33
  • Day Job: Employed as a Real Estate Agent Full Time.
  • Family Income: $130,000 (Personal full-time job); $15,600 (rental income before expenses); and, $50,000 (spouse full time job)
  • Goals: Mortgage paid off by 36, million dollar net worth by 40.
  • Notes: Almost all of net worth is in the real estate market (principal residence and rentals). Current debts are $13,000 owing on a 2009 Audi a4, line of credit used to float business expenses. ($10,000)

My spouse and I currently live in our 4th personal residence since entering the real estate market in 2006. We used to move around town when I was able to find a decent deal to buy. That has all changed now with two kids (4&6), so now my real estate investing is done outside our principle residence. I currently own one rental semi-detached 3 bedroom in my personal name as well as another with 1/3 ownership between family members. We are currently in the process of purchasing a building lot to build and sell a spec home in 2015.

In terms of savings, I’m automatically making bi-weekly deposits into my TFSA to max out the year but I still have plenty of room left.  However, my wife’s account hasn’t been fully funded over the years. I’m looking forward to learning more about investing in securities and transitioning away from rentals as they are extremely labor intensive investments that take a lot of time away from my family.

My biggest challenges that I face to making my goal is a lack of budgeting and a lot of discretionary spending. Having the majority of our household income being commission based and somewhat seasonal has been a battle since day one. We deposit all my income into a Manulife one account secured by my rental property and then pay my family account $2,000 bi-weekly but this system has its faults. I’m hoping for some suggestions from readers in a similar position on how they handle this type of pay structure.

On to the net worth numbers:

Assets: $788,846

  • Cash: $1,500
  • Registered/Retirement Investment Accounts (RRSP): $6,896 (+0.00%)
  • Tax Free Savings Accounts (TFSA): $10,849 (+0.00%)
  • Rental Property 1: $230,000 (purchased in 2009 for $167,000 price adjusted for average selling price annually) (+0.00%)
  • Rental Property 2: $66,000 ($200,000 – 1/3 ownership purchased in 2011 for $160,000 price adjusted for average selling price annually) (+0.00%)
  • Principal Residence: $475,000 (purchased in 2012 for $350,000 price adjusted for average selling price annually) (+0.00% )

Liabilities: $409,735

  • Principal Residence Mortgage: $249,493
  • Rental Property 1 Mortgage: $107,125
  • Rental Property 2 Mortgage: $108,353 –1/3 ownership ($36,117)
  • Rental Property Line Of Credit: $17,000
  • Mastercard: $0

Total Net Worth: ~$379,111 (+0.00%)

  • Started Jan 2014 with Net Worth: $249,924
  • Year to Date Gain/Loss: +51.7%

Some quick notes and explanations to common questions:

The Cash

Any cash I have in my chequing account is currently used to pay monthly bills and living expenses. I deposit all my earnings directly to my Manulife One account.


My savings are held in a Tax Free Savings Account (TFSA) with BMO. I’m currently maxing out my TFSA and hope to do the same with my wife’s account by the end of the first quarter of 2015.

Where Do the Savings Come From?

I’m not a great budgeter or saver yet so the bulk of my savings are in debt reduction to cover investments I have already purchased. (Typically land and investment properties) I find myself that working from behind is the best motivator for me.

Real Estate

My real estate holdings consist of my primary residence and 2 rentals. One owned personally and one held in a corporation with 2 other family members. I’m currently in the process of securing a building lot to build and sell a spec home on.

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Yikes. Sometimes I think my situation is dicey until I read some of these posts. Risk city ! Good luck with not only your career but your net worth tied up in real estate!

I’d be concerned with such a concentration in real estate. I would be thinking about diversifying more. Maybe even selling a property and monetizing the capital gain then maxing out TFSA etc. rather than adding to the congestion with a spec home sale. Not sure what part of the country you’re located in, but all this real estate purchased in the last couple years would have me very nervous.

Interesting, you mention $13,000 owing on a car and $10,000 on a line of credit but I don’t see that in your liabilities.

It sounds like you already know what you need to do, you just need to do it. Diversify your holdings away from real estate and save more.

Being in the industry, I guys I have to trust you on the market increases you are documenting, but the 35% gain you have booked on your principle residence in the last two years is unlikely to continue. In the long term, residential real estate rises with inflation and it is likely we’ll be seeing some reductions in real estate in the coming years. Like many people say, invest in low cost index exchange traded funds to diversify your investments. It’s really pretty easy.

My rule of thumb at a similar income level is spend 1/3, save 1/3 and pay 1/3 in taxes. You should pay less than 1/3 in taxes with a two income family, so you should be able to save $80,000 per year and still live a fairly luxurious life spending $80,000 per year. That would be $420,000 in savings by the time you are 40, with a 5% return of $600,000. Budgeting is a pain, I’ve never done that. I just think carefully about what I value in life and spend on things that give me the most happiness for the dollar.

Go for it, your goals should be easy to achieve.

Comment #3 Greg is a different person than comment #1 Greg by the way.

Yes, Greg 3 is way more eloquent!

I’m curious to know what city Kyle lives in or at least which province. In my opinion, the stability of his real estate investments hinge largely on the location of his purchases. If they are well positioned in a city with a generally stable market, I don’t feel he is overexposed over the long term in spite of his lack of stocks. One thing maybe worth pursuing though could be a bond ETF or Td e-series bond fun. He is young but with a growing family and money exposed elsewhere, that would be my first move for diversification.

Um…. the math does not add up for me, unless I missed something…
Assets: $788,846
Liabilities: $379,101
Total Net Worth: ~$379,101 (+0.00%)
Started Jan 2014 with Net Worth: $249,924
Year to Date Gain/Loss: +19.06%
NW = Assets – Liabilities = 409745
YTD Gain = 409745 / 249924 -1 = 63.95%

@Tony, add up the liabilities and it’s about $404k, subtract that from the assets and you get the reported net worth. Liabilities total copied from net worth by mistake, I guess.

What city are you in? I assume the rental properties are cash flow positive after taxes given the low purchase price, though the rent is low, probably around $1000/mo. As others have said, you are really heavy on RE. Given your career, and your wife’s income, a drop in RE values and sales would devastate your family.
In your position I’d get rid of Rental 1 and invest the proceeds in stocks. Housing is at a high, stocks are in a pretty decent correction. Seems like a pretty good transfer point. You’d probably net 100K on the rental, with some selective dividend stocks I bet you’d net more income from the stocks than the current rental. Along with a much larger chance of future capital appreciation.

I’d be interested in the tax deductibility of the Manulife LOC. I assume it is not deductible at all.

Jessie: I”m located about an hour east of Toronto.

Greg 2: Thanks for the constructive criticism. Part of the reason I wanted to take this on with MDJ is to help me expand my horizons into stocks. It seems that I am heavy into RE but all of these purchases were exceptional deals and thus the rise in value see high but it was alot of sweat equity to get the properties up in value.

My rental is $1300 a month and I have many times thought about selling it but my current tenant seems like she could be a lifer and I don’t feel like rocking the boat at this point. I have a LOC on the rental and use that money to help fund my current real estate deals. For example in January I am closing a lot and have the opportunity to net $50000-$75000 if all goes well. Fingers crossed the market does turn but its obviously hard to pass up on that.

I appreciate the comments everyone and as I said I look forward to learning and committing to the things that I need to improve on.

1. Diversifying into dividend paying stocks
2. Running a better household budget. (Truth be told this is my biggest fault.) Any help in this regard I would love the input.

Karl , there are a number of budgeting tools available from customizable spreadsheets to elaborate software. From my experience, the best budgeting tool is the one that you actually use.

In the past I was very keen on spreadsheets as I really enjoyed playing with the numbers and tweaking things as I went. After the darling wife and I were married I quickly realized that my wife was not a budgeter and loathed doing budgets – she would become very stressed, agitated, and frustrated as she was well out of her comfort zone having to deal with money, spending, bills, savings, etc.. Budgeting went from one of my favourite past times to something I began to dread.

I eventually found an elegant solution using a program called YNAB (YouNeedABudget.com). The program is very simple and easy to use for a household budget with enough flexibility to ‘help’ with managing your properties as you can create multiple accounts. After a couple of months using YNAB my wife was much more comfortable working the numbers and (near!) marital bliss has resulted. We now budget for about 5-10 mins a couple times a months. We are working much better as a team with our finances and have our spending well under control, all our debts are paid off (save for the mortgage), our savings grow every month, and we have no financial emergencies.

Others may step in here and describe programs/software/tools that work best for this or that and can perform functions XYZ – and they will be correct. Ultimately it comes down to a budgeting tool that you will actually use and develop a new habit pattern of budgeting. YNAB is definitely worth checking out – and no, I am not affiliated in any way with the company. I just love their software… and how it has saved my marriage!


I’m suprised how nervous people are when it comes to real estate investment. If done right rental properties are “hard to lose” investment. At 30 years old my wife and I own three rentals plus we rent the basement of our principal residence. The three rentals are cash positive, but from year to year this can change. If you have multiple properties they will typically balance each other out. Even if the real estate market dips, you simply hold on to your property until it recovers, collecting rent the entire time.

My suggestion is to hold on to your properties for as long as you can, just make sure to keep up with routine maintenance and proper tennant screening and you’ll be golden!

I would suggest paying off any non mortage debts first, I never carry any debt outside of mortgages. Even if you have a low rate, not having the burden of a debt allows more freedom to invest.

Biggest thing you can do to inprove your household budget is to sit down and figure out what you need and what you want. You can’t avoid what you need, but cutting down on the wants is the important part. For my wife and I, we splurge on things like travel. Other big ticket items we are contempt to wait until older, an example instead of an Audi A4. how about a Honda Civic. I could easily get the credit to buy an Audi / BMW, which I would love to have, but for now I’ll invest the money and spoil myself when I’m older and financially stable.

As far as budgeting, I have a lot of trouble with the whole “Jars” and formal budget thing. To be honest, I have two small kids like you, and I just find the whole thing too damn cumbersome. I don’t have time to be noting every transaction (from two spouses, then combining), paying with cash out of jars, things like that. I’ve tried but it just doesn’t work for us.

Instead of that bottom-up approach, we use a top-down approach.

I know what our monthly NET income is. For illustrative purposes, let’s say its $8k combined NET (not gross) pay. Ever year, we set “savings” goals – a certain dollar amount of mortgage paydown (let’s say $2000/mo) and saving/investing (let’s say $2000/mo there too). Maybe you want a couple different savings “pools”, an emergency fund, however you want to slice it…

Then you just set those on autopilot. It all goes into and comes out of one account. Every month, the $2000 for mortgage and $2000 for savings comes out. That leaves me with $4000/mo left and that’s what we have to live on. Food, daycare, fuel, other bills, etc., all has to come out of there. If we spend less than the $4000 in Jan, then the next month my chequing acct balance will be higher. If I spend more, it’ll be lower.

This way, I am saving, I am investing, and I don’t need to track every damn nickel every month (though I do have a decent, +/- $100 idea of where the rest of the $$ is going every month). Personally I find this much easier, though with a more variable income like yours, it might be trickier.

BTW we also “increase” the savings amounts each year, to keep ourselves honest. So maybe next year I’ll start investing $2100/mo instead of $2000.

Dwilly. Thanks alot I’m going to sit down with the wife and see of we can get this set up for January 1st. Like one of the posts higher noted my savings should be substantially higher and this approach will definitely help make that happen

Here’s what I would do, in this order:

1) First sell your least-favourite rental property. Use the proceeds to pay off the mortgage and use any surplus to pay off the Line of Credit, then pay any extra as a lump sum payment on your principal residence mortgage. Avoid the Line of Credit in future – keep a cash balance to “float” expenses. Save the 4% interest – it’s like a risk-free dividend.

2) Consider selling your other rental property also and doing the same as above. If you really like it and it cashflows positive, consider keeping it but only if you feel really good about it (all the time).

3) Have a blended approach of making extra payments on principal mortgage and investing monthly in stocks, or preferably low-cost stock based mutual funds which are easier to accumulate monthly at low cost. When you get a decent amount accumulated you can transfer it into individual stocks. Be very careful about advice to go heavily into stocks, there are large inherent risks that many so-called PF bloggers don’t really understand because they haven’t witnessed them personally. Stocks can decline greatly in certain environments, even so called “safer” dividend paying stocks can go through hell for long periods of time. In contrast, extra mortgage payments provide a guaranteed positive after-tax rate of return.

Karl : exactly, this way is just easier. The point is, one just need to be saving. Set that up, and why bother worrying where every other nickel goes? In my opinion, the only time you need to budget or deep dive down to that level is if you have a problem. Ie you have no money left at the end of the month and no idea where it’s going. Or you think your fixed bills should be one amount and they seem to be twice that. Etc.

But if you’re saving at a decent, respectable level that you ate comfortable with, why sweat where the rest goes?

Karl & Dwilly I don’t budget per se, but for a couple years now I’ve kept detailed records of all our spending. This wasn’t out of concern for over-spending or running out of money but for learning where our money truly went. It’s a very enlightening activity especially over the period of an entire calendar year. It can highlight areas where you spend far more or far less than you realized. The former can expose opportunities to spend less. The pearbudget spreadsheet works nicely for this but it’s easy enough to set up your own. Just a thought.

nobleea – the Manu1 loc has sub accounts so it would be possible for the a portion of it to be tax deductible if utilized properly.

Karl have you structured the rental properties to be efficient tax wise in terms of ownership between yourself and your wife?

Also the spec home net of $50k-$70k will be income not capital gains so after tax closer to 25K-35K if things go well, how much time and capital will this project take that could be invested elsewhere?

Should I be building this property in a corp or my personal. I currently have a corp set up that I was planning to use for my 50% and am wondering if its better to just do it personally or in the corp from a tax perspective.

Hey Karl
SmilingSaver here.
What we found automatic withdraw on a pay day, work wonders. Also to reevaluate our budgeting we spend cash only for about 2 weeks whenever we feel the budgeting is getting out of hand. It is more to zero in on where exactly the pennies are going. We are not doing it often, but it helps a lot.
I lover spread sheets, but my fiancé hates them. So I will try the program that Dave suggested YNAB.

Here is my 2 cents.

If you do it in the corporation or personally, it’s going to be income either way. Doing it through the corporation gives you more options for minimizing the tax hit, especially if your wife is a shareholder.

The idea of holding rental properties if housing prices collapse sounds good on the surface but doesn’t work in principle.

If housing prices collapse, you run the risk of being under water on your rental properties. You might not be able to revew at the end of your terms, or be required to put up a large lump sum to compensate.

As housing prices fall and more buyers move into the market, the rental market becomes tough and rates are depressed.

So, if you haven’t already lived through a real estate market correction while holding multiple mortgaged properties you really have no idea what’s going to happen and whether you can handle it financially or even emotionally./

I also have been tracking spending as an alternative to budgeting. I have regular transactions which are pretty consistent month to month (mortgage, utility bills, car loan, city taxes, car insurance) and then everything else, which is inconsistent, irregular and screwed up this year by the 11 weeks I spent out of town on business (fuel, parking, car maintenance, cash, clothes, dining out, groceries, household expenses, medical, vacation) there’s no consistency month to month on any of those. I have one month where I spent $406 on fuel, and two months where I spent 0$ (months spent mostly travelling in business, so hardly even started my car). Mostly though I’m just trying to keep expenses (including savings) under net income, keeping a cash float in savings to balance month to month and once that goes over a certain value the excess goes back to RRSP or TFSA, depending on which needs the cash at the time.

Hi Karl,
with $130,000 income you would do well to start catching up on your unused RRSP contribution room.
You’ll be getting close to 50% back from taxes on the first $30k / year.
I would just do a low cost S&P500 index fund in a self-directed RRSP trading account. VOO perhaps.

Watch how much your number dips when the property bubble bursts.

Cold Truth, I agree that if someone isn’t prepared for a dip in property values it can hurt them. I would always advise people to ensure they have ample savings and diversified investments. Anyone looking to invest in multiple properties should be aware of the risks and should have a sound financial plan. We also put large down payments on all the properties, lowering the risks. It may not be for everyone, but we average a 15-20% annual rate of return on our initial investment. And to be honest, with the climb in property values over the last few years, it would take a very large collapse to even bring the home values back to what we paid for them.

However to suggest a drop in housing prices will create less rental demand is simply not true. We own in two different cities, one of them having some of the lowest housing values in Ontario (even Canada for that matter). Yet we still have huge demand for our properties. The reality of the world today is most people spend and accumulate debt. I am often amazed at how much some of our tennants earn yet can’t fathom saving enough for a down payment. If anything the rental market is getting stronger, at least when it comes to demand for my properties.

MistrustREagents: Of course if property values dropped, his net worth would drop. The same would happen if the stock market collapsed. At least with rentals a income source is still present. Additionally, investing in real estate is more about long term gains, not what your year by year net worth reads. It’s all about diversifying and having multiple income sources, so if one slips, the other can stabilize your portfolio.


You should hold all of your real estate assets in the corporation.

The two benefits are:

1) tax efficiency; and,

2) liability.

Most online commenters do not understand point 2.

Regarding point 1, you are effectively building a real estate investment co. like Morguard or Dundee. Starting with a corp. Simplifies your future dealings with the assets.

I’ll try to put together a detailed post on the advantages in the near future.


I should have known that others would quickly comment on the extreme lack of diversification. To put a number on it, it looks to me like over 95% of your net worth is in real estate! Nearly 60 percent is in one, non-income-producing asset (many people would question whether you should include your home in your net worth).

If you’re serious about diversifying, I think that, as with all things, having a goal in mind would help. How diversified should you be in regards to real estate (admittedly an asset class where a lot of people hold much of their wealth)? One “rule of thumb” I’ve seen is the “rule of 90.” That is, RE as a proportion of your net worth should be equal to 90 – Your Age. In your case, 57% of your net worth should be in real estate.

Arguably, as a real estate agent, you should be diversifying away from real estate holdings even more than “normal” people. I know most real estate agents don’t do this in the least, but you’re really exposed to the vagaries of the housing market.

Also, on this site and many others, there are good analyses that tell you why paying off your low-interest mortgage aggressively is not as good a strategy as saving and investing early.

Congrats on your success in the real estate industry. It helps when you have a spouse earning a steady paychque. I could never imagine two real estate agents getting married. It would be too risky – like putting all your eggs in one basket.

But that’s exactly what Karl has done — one egg in one basket.

Two different camps: 1) put all your energies and resources into one area/sector/business and work it like a rented mule until you become proficient. professional, and successful, or 2) diversify your education, career, time, money, investments, geography, etc.

Both have their merits and drawbacks but I think route #1 requires a great deal more dedication than say an average Blue Chip middle-management 9-5er plopping 10% into RRSP index mutual funds every year.

The caveat with doing it The #1 Way is that you are most likely working in a tail-end, but you probably won’t know on which side of the curve until much later down the road. You’ll either make it or break it.

Re-read Karl’s story, it appears he may be a left-tailer admiring the green grass of the big 9-5er hump in the middle.

My advice (because every has one) to Karl is keep pushing with what you are doing, your break-through endeavor may be just around the corner. You want to complete your MDJ by 40 yet are considering abandoning your path after only 10 years — “I’m looking forward to learning more about investing in securities and transitioning away from rentals…”

Then again, selling RE and owning RE require completely different skill sets, so this may be a case of one egg and two baskets.

Is that correct? $1300 gross rent from the combined two properties? That doesn’t seem great from assets worth ~$300K ($230K Property 1, $66K Property 2). After deductions for property taxes, insurance, income taxes, and mortgage interest, you’re netting what, $600, 700 at best? That’s the same as a 2.6% dividend. Could do much better in stocks and given the dip that some have gone through, a good change at better capital appreciation in stocks than from housing. Of course, it’s hard to get the leverage, though with the equity you have and a margin account, you could probably get just over $200K to invest with.

Congrats on the real estate. Lots of people may have opinion but it takes work to get them going and it’s good stream of income. That’s how real estate magnets have started…

Obviously, your RE properties should be treated like investments while your home not so. I would recommend that you figure out a way to understand your ROI for your properties and compare that with stock investments. You may be missing on massive growth by not having stock investments.

Passive Income Earner:

I’m in the process of selling one of my rentals now as there are better returns to be had in the stock market. Can’t wait to get about $100,000 free’d up in June hopefully..

Question is canadian banks or oil companies??

Karl, ding me in June…we’ll chat. :)

Great job. Thanks for sharing your net worth.