Tag Archive for: Investing

Want to Invest in Real Estate? Not Sure How? Get Started in 5 Easy Steps

An Antidote to Confusion About Where to Start

Lao Tzu wrote: “The journey of 1000 miles begins with a single step.”

Ah, but which step? There’s the rub! Start with the wrong one, and you may travel 1000 miles in the wrong direction!

It’s precisely this fear that kills dreams in their infancy. Don’t let this confusion end your real estate dreams!

Here are some really simple steps you can take to begin your journey.

Educate Yourself

This doesn’t mean talking about your project to Uncle So-and-So who once owned a duplex, or Aunt Thingamajig who wrote her Real Estate exam, unless they were successful at what they did in a way you’d want to repeat. Seek out resources who have a proven track record. Before launching a networking offensive, either read some books, watch some videos, or take a cheap online course. With a base level of knowledge about Real Estate Investment strategies you’ll have more useful conversations.

As you branch out and start shaking hands and making calls, you’ll be happy that you took the time to understand some basic concepts and terminology.

One caveat : expensive Real Estate courses, while often of some value, sell information and coaching at a very, very high mark-up. If you’re willing to apply a little discipline and do some work on your own, you can easily educate yourself without signing five-figure cheques or paying thousands of dollars for mentorship or classes. Why spend your down-payment money on Real Estate classes when the information is available at a very low cost? Try these resources first.

Where to seek affordable education?

  • You can check out the Recommended Readings on my website. Pay particular attention to the “Real Estate Investing” section, where you will find good “starter” books.
  • Consult online education platforms like Teachable or Udemy. Both have Real Estate sections. Online courses sell for a either tens- or a few hundreds of dollars. They’re easy to follow and are usually consumed on demand. You can go through the material at your own pace, in the comfort of home, and even follow a few different subjects that outline the major strategies for making money in Real Estate (Flipping, Buy-and-Hold etc.)
  • Organizations like the Real Estate Investors Club sell in-person/classroom or webinar training for a few hundred dollars.

 

You really shouldn’t pay any more that this.

Book An Appointment With a Banker or Mortgage Broker

Your mortgage banker or broker is a bit like a general practitioner in medicine. He or she will be able to give you a general bill of your financial health. Is your credit any good? What’s your borrowing capacity based on your current revenues? Very few of us know the answers to these questions, especially when we start out in the real estate game. Before defining your project, it may be a good idea to have a professional analyze your file.

Even if you’re sure you won’t qualify right now, it’s best to know what you need to do in the future in order to obtain financing. This will allow you to build a plan to get there. There are a million strategies! But, like that fateful visit to the doctor, if you don’t know where you stand, it’s very hard to move forward. Don’t let fear of bad news stop you! You need to know your starting position in order to plan your journey.

Bad credit? No down-payment money or insufficient revenues for conventional financing?

Okay. In this case, AFTER you’ve spoken to a conventional financing person and they’ve told you what you need to do to become creditworthy, go back to Step 1. There are a ton of resources out there to learn what’s called “Creative Finance”.

Network With Other Investors & Professionals

Remember what I said about Uncle So-and-So and Aunt Thingamajig?

Talking to them about their Real Estate debacles is NOT networking. If you want to succeed at something, learn from someone who is where you want to be.

I’ll repeat myself because this is really important: Take advice only from people who stand where you want to be! If you don’t yet know such people, no problem! It’s time to leave the house and start building your network.

You can join my Meet-Up to attend networking events in the Montreal area. The Real Estate Investors Club also hosts monthly networking events.

If you want to learn more about how to network effectively, check out my blog article on How to network effectively.

You could also check out anything by author Ivan Misner, founder of BNI (Buisness Networking International).

Find A Mentor

A few months ago, a woman approached me at one of my workshops. She offered to take me to lunch.

“I want to learn from you,” she told me. Naturally I was flattered and I accepted. We went to lunch, and as we were chatting, she had another interesting offer.

“Let me work for you for free for some months,” she proposed. “I’ll do anything, I just want to learn the business.”

What do you think I said?

This situation is now a total win-win. Instead of paying thousands of dollars for private mentorship, my new intern has access to me 24/7. Her boots are on the ground meeting tenants, seeing construction problems, talking to every real estate professional around: contractors, notaries, mortgage people – everyone who is involved in my business.

Do you think I’ll give her free advice on her own investment decisions now? Of course!

Not only is she learning for free and building her own network in an organized way, she works maybe two evenings a week and an hour or two on the weekend. If she was taking a (paid) class, she’d have to devote the same time and IN ADDITION pay.

You’d be surprised how accessible successful- and knowledgeable people are when approached with a little flattery. An offer for lunch or a coffee might be all it takes. Try it!

 

Fail Forward

Above all – don’t be afraid to look silly or make a few mistakes. Everyone who’s built success over many years remembers how little they knew at the beginning.

I tell my clients this, when they’re shy to ask what they think is a silly, basic question.

“We all start in the same place! With a dream and no bloody idea of how to make it happen.”

Anyone successful who’s acting puffed-up is doing so just because they want to feel big, NOT because you’re somehow unworthy or stupid. Don’t feel ashamed to be where you are.

“The journey of 1000 miles begins with a single step.”

hand writing on blackboard

What’s The Number One Reason People Invest in Real Estate?

Or how is wanting properties like wanting a six-pack?

“I really want to make more money!”

This is often where conversations about investing start. Is this really the true reason why we want to invest?

Think about it this way. How many gym memberships are bought with the words: “I want a six pack for summer…” ?

Do we really want the six pack? Or are we after something else? Wouldn’t it be better to feel fit, healthy and confident when you wear that bikini or pair of board shorts to the beach?

My guess is it’s more about how we want to feel and less about the six pack itself. Maybe the six-pack is just shorthand, because we’re a bit too lazy to think about what will really make us content and confident in our skins.

Perhaps the gym membership is only part of the solution.

Why Invest in Real Estate?

Real estate investing isn’t that different.

Most of us start out thinking it’s all about the money. But what do we want more money for? When we really look at our motivations, we may find that we’re really after something else… something that will be better than a big bank balance.

To find out more, watch the first video in my five-part series on the basics of real estate investing…

 

Why Should You Stop Selling Your Time & Build Passive Income through Real Estate

We all know real estate investing is a good way to create wealth… but why exactly?

The answer: passive income. Real estate is such a powerful tool, because when we invest, we use capital to generate passive income. Maybe you’ve heard the word “leverage”?

Do you really get how it really works? How is investing different from working a job?

Let’s find out!

Active Income

Do you have a J.O.B. ?

We first need to distinguish between passive and active income.

If you have a job, your income can be calculated with the following equation:

Number of hours worked    x    Hourly rate     =      Income

See the problem here?

There are only two ways to increase your wealth.

  1. Work more hours. For obvious reasons this isn’t a good idea, especially if your quality of life matters to you. Even if you overwork yourself, you only have a finite number of hours. Your time is the upper limit on how much you can make.
  2. Increase your hourly rate. This strategy may work if you put time into educating yourself or running after promotions, but sooner of later your industry will place a cap on the value of your time. Promotions aren’t a silver bullet either. They often come with more responsibility, more stress, and more hours, and there may come a time when getting promoted becomes a law of diminishing returns.

You need to find a way to unhook your income from your time and your hourly rate.

Professionals & Salespeople

Listen Up!

So, you’re a professional – an accountant or lawyer maybe – and you think I’m not talking to you.

Think again!

You don’t escape this problem just because you have a high hourly rate and no boss. Your income is still limited by the number of billable hours you have to sell.

Want more money?

You have the same options as an employee: raise your rate or work more. Either your clients will eventually balk at your fees or you’ll get too tired and overworked. It’s the same issue served with a different sauce.

Real estate agents, independent brokers and salespeople of all kinds – you’re in trouble too! While the money you make for an individual transaction may be high, your income still depends on the man-hours you have to create money.

Your income will be limited by the hours you have to put into generating business.

 

Passive Income

What is it? Why is it so good?

Passive income happens when you own a system that doesn’t obey the equation of hours x hourly rate = income. Think business ownership, stocks or real estate investments.

Passive income systems generate money whether you get out of bed or not. This is why creating or buying a system for producing passive income is the key to building wealth and to gaining control of your time.

Passive income is the means to escape the trap of selling your hours.

 

Leverage

How do we create passive income?

We create passive income with leverage.

In real estate investing, you use capital (a down-payment) to set up a system that generates income with other people’s money and the market. Tenants pay the rent. You property appreciates. All this happens without you having to get out of bed.

Real estate investors also – perhaps without knowing it – leverage knowledge and social capital. Investors have networks that help find deals. The professionals, advisors, and contractors they work with help make good decisions, which end up making them more money. Knowledge about the property- and rental markets, tenancy laws, and so on can be leveraged to increase the profitability by making smarter and smarter moves.

This is another kind of leverage.

Of course leverage isn’t only to be found in the real estate sector. It’s a property of how businesses work. Business owners leverage specialized knowledge and human resources (other people’s time) to create income generation systems.

You’ll probably do this too when you become a landlord. Think of the concierge’s hourly rate versus yours. If his hours cost less than yours, you’re leveraging human capital to make more money.

Leverage is a powerful tool, because it allows you to move away from selling your time.

You can learn to use different kinds of capital – social, financial, and cultural – to create systems that provide return on investment in a way that is basically not tied to the amount of time you work.

This is how leverage and passive income fit together.

 

Should I Quit My Job?

“I understand passive income, should I tell the boss to take a hike?”

Not so fast!

Building passive income systems takes time. If you start investing today, it’ll likely be years before your passive income begins to exceed what you earn at your job. Real estate – like investing in stocks or starting a business – is a long game.

So, should you tell the boss to bite it today?

Probably not yet!

Should you start building a passive income system that will free you from selling your time?

Absolutely! Start right now!

And if you’re not sure how, pick a passive income vehicle (real estate, stocks, business) and educate yourself until you know how. Otherwise, you’ll be trapped selling your time for the rest of your productive life.

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Article in La Presse: Renting Using an Agent? Terrie’s Advice

Hire a professional to rent or manage your properties?

Read what Terrie had to say to the French-language newspaper La Presse

screenshot of article

 

Terrie Schauer is a real estate coach, speaker and author. Her domain of expertise: rental properties. She’s also a real estate broker and the owner of a property management agency. MyRoom Gestion manages around one hundred units in Montreal.

Most of the work associated with renting units is done by an administrative assistant. The person posts Ads, screens tenants on the phone and coordinates visits. “I only sign leases,” says the owner of the agency.

It’s possible to advertise on a variety of sites, but in Montreal, Kijiji works best, says Terrie Schauer.

“An Ad posted on Kijiji in the morning ends up on page 24 by lunch. It’s enough to make you want to pull your hair out if you don’t know what you’re doing.”

Answering the calls and emails generated an Ad is also demanding. First you have to make sure the caller actually read the whole advertisement, and that the unit matches their needs. Next, you have to question prospective tenants about their employment- and living situations.

Knowing the rental market helps maximize the price you’ll get for your units. “We track the stats of all the units we advertise,” explains Terrie Schauer. “If one unit is getting less clicks, we can reduce the price or take better photos. Sometimes a price adjustment of 15$ – 20$ makes a difference between no calls and twenty leads.”

Once someone applies, the agency does a full background check: credit score, criminal history, references from the current landlord and employer, and lastly, priors at the rental board (Régie du logement). In some cases, the company also runs similar checks on co-signers, if the prospective tenant is a student or a new immigrant with no credit history.

This service costs one month’s rent, whether the tenant stays in the unit for a year or more. MyRoom Gestion can also offer a full management service for a fee of 7 % of gross rent.

Is this advantageous for the landlord? If he or she lives outside the country or absolutely doesn’t want to deal with bad tenants, certainly it is.

It can even make financial sense. With her knowledge of the rental market, Terrie Schauer often manages to rent units for more money than if the owner handled the rental him- or herself. “If I can get you 10 % more on your gross rent and my services cost 7 %, you win without lifting a finger!”

Read the original article:

https://www.lapresse.ca/maison/immobilier/conseils/201810/22/01-5201163-un-courtier-pour-louer.php

 

Can I Check My Credit Score Without Hurting It? Yes, But….

Not All Credit Checks Are Created Equal! Protect Your Credit Score

Here’s How to Check Your Credit Without Hurting It

Did you know that too many credit checks can lower your overall credit score? If you’re applying for a phone, a mortgage or an apartment, there are a few things you can do to protect your credit in the process.

Hard & Soft Credit Checks

The first thing to understand is that not all credit checks are created equal. There are “hard” and “soft” credit checks. A “hard” credit check affects your score negatively, docking somewhere around 5 points from your overall score (with Equifax, for example). The more “hard” credit checks you do in a small time-window, the bigger the amount of penalty points. The idea is that someone who does lots of credit applications in a short time is desperate for credit. As a result, you are penalized for too many hits to your credit in a short time. The credit rating agencies do not care that you may be shopping around for a mortgage. Because they don’t take this into consideration, you need to avoid to many “hard” hits to your credit score.

“Soft” credit checks, on the other hand, do not affect your score.

How can you know the difference?

Most third-party credit checks are “hard”. This means, when a landlord pulls your credit it will affect your score. Same thing for a credit card-, cellphone-, or mortgage application. If you sign a consent form for a third-party to check your credit, most likely it will have a negative impact on your score.

Some third-party systems are able to do “soft” credit checks, but the information provided in these checks is less thorough. This is why most companies prefer “hard” checks. Also, most lenders, landlords and phone company employees have no idea how the credit checking system actually works. They simply don’t know what their checking up on you is having a negative effect on your rating.

So, how can you be sure what type of check is being run?

How Can You Protect Yourself & Your Credit?

  • Make sure you ask the third-party to provide some kind of documentation or guarantee as to what type of check they’re running (hard or soft). If they’re running a hard check, they should be able to tell you how many points you’ll lose as a result.
  • If you’re shopping around for a mortgage, loan or apartment, make sure you get the landlord, banker or broker to tell you at what point they will hit your credit. Lenders can give you a quote without running a credit check. As you’re shopping around, make sure you do comparison shopping without a credit hit each time.
  • Check your own credit and disclose it to the interested party. In Canada, a person is allowed to check their own credit without affecting their overall score. TransUnion and Equifax are the two credit rating agencies and they will provide you access to your own credit report for a fee. This helps when you want to check your credit rating for your own information. Most lenders, however, won’t accept a report you pulled yourself. (Photoshop anyone?)
  • This is where third-party sites like http://www.backcheck.net come it. They allow a prospective tenant to request (and pay for) their own credit report, and then share it with a landlord. See the subtlety here? You’re requesting your score, so there’s no negative impact. The great thing about this is that both parties benefit: the landlord gets a third-part copy of your credit report (and so doesn’t have to worry that you doctored it with Photoshop), and you get to protect your score. The downside: it’ll cost you about 70$.

Landlords, Brokers & Investors

Landlords, as a courtesy to your tenants, make sure you know what kind of credit check you’re running and inform the applicant. At my firm, we now give our tenants a choice of which type of check they want. We can run our standard “hard” check for free as part of our application process.

If the tenant wishes to use a “soft” check instead, we refer them to http://www.backcheck.net/tenant-screening/residential/tenant-share.html and require them to assume the cost. Third-party sites like www.backcheck.net are available across the US and Canada. All a landlord needs to do is fill in his or her email, and then send the application to the prospective tenant. He or she then receives a copy of the report in their email inbox.

Tenants & Borrowers

Be warned: lenders and landlords are pretty ignorant about the kinds of credit checks they run.

I was! This issue came to my attention because an investor-client of mine did too many simultaneous mortgage applications and almost wasn’t able to qualify for financing because his credit score tanked! I did some research to understand how credit checking works and figured out how to help others avoid this situation in the future.

As a result, my property management company started offering a third-party “soft” credit check option very recently. Just because a lender or a landlord is a professional, doesn’t mean they understand the ins and outs of the credit checks they are running!

So, investor, tenant and buyer: as you go through various application processes, make sure whoever is handling your credit knows what they are doing. If they sound shaky, refer them to this article 🙂

Maybe they’ll learn something!

How to Shop for the Best Mortgage Offers in Canada in 2018

Five Do’s and Don’ts of Shopping for a Mortgage

Want to get your mortgage financing under control? Read this!

Shopping for a mortgage is a very important part of turning your real estate investment into a winner. Your interest rate will probably follow you for five years, and working with a competent financing person can make the difference between doing and not doing a good deal. Most people don’t realize how much power and how many options they have when shopping for a mortgage.

Here’s a quick list of do’s and don’ts to make sure you get the best deal on your mortgage.

  • Do talk to multiple brokers / bankers

Mortgage markets are like markets for anything else: the more healthy competition you create, the better deal you’re likely to get. Not only will talking to multiple parties give you a sense for what’s a good rate, it will also allow you to say things like: “So-and-so offered me x, can you beat it?”

You want to handle this shopping mission before you start visiting properties. You don’t want to be scrambling to get your financing sorted out once the (sometimes) tight delays in a promise-to-purchase start running. Ideally you should know who’s getting your financing business before you start making offers.

Talk to a minimum of one conventional banker and one mortgage broker. These two types of specialists have access to different products, and have different ways of working. If you want to get the best rate and the most interesting conditions, it’s better to consult both.

 

  • Do get a pre-approval letter

Mortgage lenders can provide you with a pre-approval letter. This is a best-practice when shopping for a property, as in today’s competitive real estate markets the listing agent will want to protect his or her clients by seeing that a prospective buyer has the funds for a purchase.

If there are multiple offers, the listing agent will be inclined to deal with a buyer who has a pre-approval letter. It’s a listing agent’s way of minimizing surprises for his client-seller. Requesting a pre-approval from a prospective buyer also helps the seller avoid tying up his or her property without knowing whether the buyer has the funds. It’s not in the seller’s interest to allow his property to be “under contract” for two weeks while he or she waits for a response from the bank, especially when there’s no certainty as to the prospective buyer’s solveability.

As a buyer, a pre-approval makes your offer more attractive, and it makes you look serious. The added benefit to you, is that you can really know what your budget is before you start visiting properties. Pre-approval costs nothing.

I recommend my clients go through the process of qualifying before they begin their search. This way everyone is aware of the budget for the project being undertaken. You’ll also have the security that your offer, when you make one, is as strong as possible.

  • Do get every mortgage offer in writing

Make sure each broker you speak to gives you a written offer stating the rate, the terms (fixed/variable rate, the term, amortization period) and any bonuses they can include. Brokers and mortgage specialists can sometimes pay some or all or your notary fees if you ask. They can also sometimes give cash-back at signing or other incentives.

It’s important to get an offer in writing in case you need to comparison-shop. An email is a great tool for placing two parties in competition.

Tip: written confirmations also avoid any nasty surprises that can arise, should your broker forget what numbers he or she shot at you on the phone.

 

  • Do take the time to calculate your monthly payments

When you have an offer in writing, take the time to calculate what your monthly payments will be. If you’re not sure how to do this, there are many mortgage tools available online. Type “Canadian mortgage calculator” into Google. Before making an offer on a property, you need to know what your expenses will be. The right time to do this analysis is as you’re comparing mortgage options. Calculating your payments will give you a way of comparing the different propositions your mortgage specialists will be preparing.

For example, is it better to take a rate of 3.75% over 30 years or 3.5% over 25 years? How will this affect your cash flow? Or the amount of interest paid over the total amortization period? If you’re looking at an investment property, interest is a tax deductible expense, whereas on a principal residence it is not. You may make different decisions in either case. Without calculating your payments and your interest portion, you’ll be making these decisions in the dark.

Take the time to fiddle with mortgage calculations: you’ll see the major impact of +/-0.25% or an extra 5 years of amortization. You want to be aware the impact before signing your mortgage.

 

  • Do ask for extras & let the broker know there’s competition

Mortgage lenders know they operate in very competitive markets. It is common practice for a bank or a mortgage broker to offer to pay all or part of your notary fees. They won’t come out and offer this to you, so you need to ask.

The same goes for interest rates. Banks and brokers often have “stated” rates that are given to anyone who walks in off the street. The institution can always do better than the first rate they quote you. The best way to get them to come down is to let the person you’re dealing with know there’s competition. If you can quote a rate offered to you by another bank, even better! This way you can be sure they’ll ask head office for an exception.

The same goes for your amortization term. If you’d prefer a 30-year term, ask for it. Many bankers offer you the “standard issue” deal until you push for more. So, don’t be shy!

 

  • Don’t let every lender you talk to run a credit check

Mortgage brokers and bankers can be a bit cavalier with running credit checks. It costs them nothing and they have nothing to lose in the process. You do have something to lose! Each time your credit is consulted, your overall score is affected. If three or four institutions hit your credit in the mortgage application process, it can have a big impact on your overall score.

If you’re getting quotes from multiple parties (as you should!), make sure each party doesn’t run a credit check.

Competent brokers should know this. They can complete a pre-qualification with you and give you their rates without hitting your credit. When you speak with a banker or a broker, make sure you know at what point they will consult your credit file.

The best time for them to run a credit check is once you have chosen the deal that works best for you. This way you’ll only run your credit once in the process and not have a big negative impact on your credit score from too many credit checks.

 

  • Don’t wait until the last minute to shop for a mortgage

Okay – a word for the procrastinators: don’t leave your mortgage shopping to the last moment. Do your comparison-shopping before you make an offer. Don’t do your shopping when the time pressure is on you. In an offer, you’ll have a delay to produce financing approval. You don’t want this time pressure affecting your negotiating power by forcing you to go with the first offer a lender gives you. It’s stressful to risk losing the property to a time-delay. Make your decisions when the pressure is on the other guy!

 

Happy shopping!

Best Investing Books for Canadian Real Estate Investors in 2018

Top five must-read books for Canadian Real Estate Investors in 2018

Want to learn about the best investing books for real estate? Read this!

Reading is one of the best ways to learn how to do something. You can get how-to advice right from the horse’s (or in this case world-class expert’s) mouth. It’s also really cheap! For about ten bucks a pop, you can have access to what the world’s experts have to say on any topic. There’s so much you can learn about real estate investing just by reading a few books!

Not sure where to start?

I’ve put together a list of the top five books you should read if you’re interested in real estate investing in Canada. Below, you’ll also find a summary of one of the main ideas in each one. Just in case you’re feeling too lazy to read the whole book, I don’t want to leave you with no take-away after reading this article.

So if you want to learn about real estate investing, before you spend all kinds of money on online courses or seminars, please please read these books!

 

  • Book no. 5 : The Wealthy Renter by Alex Avery

People assume that buying a principal residence makes good financial sense. Why throw money away on rent, right?  Not so fast, says Alex Avery. Investing is all about leverage, so the question should be: what else could you do with that money? Avery thinks you can find better ways to leverage your down-payment money, instead of plunking it into a single-family-home.

Some Numbers

Let’s take a simple example. Suppose you want to buy a condo or cottage for 300k. Let’s assume you put down 20% (60k). At 4% interest, these payments will run you 1250$ / month. Add 200$/month property taxes and the same in condo fees or, in the case of a home, 250$ in maintenance (no upgrades!!), and you’re running 1950$ in monthly payments. None of these expenses is tax deductible. You’re building equity at a rate of about 500$/month. Your ROI in terms of building equity is 6000$/60,000$ or 1%. Sound like a good investment? I’m thinking, Meh.

“What about market appreciation?” you say.

Okay. Let’s assume 3% appreciation per year. (We’re not accounting for the ups-and-downs of real estate cycles). You’re now making 4% on your money. Still sound like a good investment? Remember: your payments are made with after-tax dollars. None of the work or maintenance you do is tax deductible, neither is your mortgage interest. Sure, you won’t have the capital gains hit when you sell. But still, 4%?

Let’s consider what happens if you put the same money down on a rental property. Your cost structure is the same (1950$ / month), but now you’re making 1950$ in rent. Also, you expense all sorts of things to help create a loss in the early years of ownership, creating a tax advantage. You can also expense your mortgage interest.

What about my rent? you say. You need a place to live.

Sure! Let’s make your rent 1000$/month. In this case, your out of pocket is half the amount it would cost you to own.

Now, let’s say you’re still making 3% appreciation like in scenario 1, but you’re also saving 1000$ per month because your tenants are paying your mortgage and building expenses. Add 12k to the initial 6k being capitalized. You’re now making a 30% return, plus the 3% market appreciation. That’s 33% return versus 4% as a homeowner. See Avery’s point?

I Hate My Landlord’s Kitchen

But wait, you say. There are other blah things about renting. I can’t upgrade or really customize my place, right?

Says who?

I’ll tell you right now, if one of my tenants offers to redo a kitchen for me, I’d happily reduce the rent a bit. Consider what happens if you spend 5k redoing your landlord’s kitchen in scenario two.

Suppose you negotiate a 100$ rent reduction in exchange for 5k of renovations. You now save 13,200$ on your living expenses in comparison with scenario one. Subtract 5k for the kitchen renos from your savings, and you’re still ahead by 8,200$ over the person who bought their home. Now add the 6000$ of equity. That’s a 24% return! Still think becoming a landlord and redoing someone else’s kitchen is such a bad idea?

The key idea in Avery’s book is this: you need to understand the cost-structure and opportunity cost of plunking down-payment capital and after-tax dollars into a principal residence. His calculations are sometimes a bit hard to follow (maybe like mine where in this summary?), but the reflections these two financial scenarios is really important before making investment decisions.

That’s why I put his book in position number five on my list.

 

  • Book no. 4 : Secrets of the Canadian Real Estate Cycle

It may sound a bit silly, but the main idea in Secrets is that there are real estate cycles in Canadian markets and that we, as investors, should be mindful of these cycles in our purchasing decisions. Amazing, right? In all our excitement about investing, we sometimes forget to assess where our particular market may be in it’s inevitable up-and-down price cycle.

Influencing Factors

The authors point out that real estate markets in Canadian cities are influenced by a very specific factors. Because real estate cycles are long (usually many years in depth), and because the media give us all sorts of conflicting information, we sometimes forget that there are a limited set of elements that come together to determine real estate prices and the availability of housing both for renters and owners.

Authors Don R. Campbell, Greg Head, and Kieran Trass do their best to name these influencing pressures in Secrets. For example, net incoming migration, economic patterns and industry concentrations, amount and quality of available rental housing, as well as possibility for geographic expansion are all factors that impact local markets. Rent control, for example, like in Montreal, or lack thereof (like in Calgary) can also greatly affect building profitability. Macro- factors such as interest rate trends and government regulations (especially in Canada’s regulated banking industry) also impact both local and national markets. (Think of the Bank of Canada’s lending laws or Vancouver’s foreign buyer tax as a few examples).  

Case Studies

The authors carry out case studies of each of Canada’s major markets (Toronto, Montreal, Vancouver, Ottawa, Calgary). They present some of the different forces that led to boom-and-bust cycles in each of these cities in the last decade. The cases studies are super valuable in terms of illustrating how different markets respond to different types of pressures. (For example Toronto has an incredible rate of growth due to immigration, whereas Montreal has limited on-island space. Calgary has a very resource-based economy, and so on.)

The one weak point I found in reading is that the authors spend a lot of time stating and re-stating that there are wise investors, and lemming-investors who tend to jump over a cliff because of frenzied information in the media. There’s obviously truth in this. That being said, at times I found this detracted a bit from space that could have been used to elaborate on more tangible and practical tips for understanding real estate cycles.

Still, this book is a must-read for any Canadian investor looking to make a buck and capitalize on the up-and-downs in his or her local market. That’s why I make this book my no.4 pick.

 

 

  • Book no. 3 : More Than Cash-Flow by Julie Broad

Julie Broad is not a happy camper. Her book begins by voicing her (intense) disappointment with some of the (very expensive) real estate seminars she attended. Despite her level of anger, there are two really great things about this book. First, Broad really puts into perspective the realities of owning rental property.

Crackheads & Roaches

From crack-head tenants to the challenges of owning rental property in far-away places, she gives the would-be investor an up-close-and-personal set of impressions of what it means to be a landlord. This is valuable because so few authors and speakers who deal with investment property are really clear about the weird, wonderful and wicked realities that come with tenants and rental buildings. Broad pulls no punches here!

Bigger, Better, Bust

The second very important thing she does is question how the real estate coaching industry celebrates more deals, less money down, better numbers, a bigger portfolio. A lot of educational material on real estate investing celebrates high-risk leveraging practices. Workshop presenters often tell stories of investors doing fifty, eighty, one hundred deals in a year. What they don’t tell us, Broad suggests (and I agree), is about all the heart-attacks and bankruptcies that happen because newbie investors go to far too fast. Depending on your profile and ambitions, slow-and-steady may be a better idea than fast and furious.

#Landlordlife

Overall, what I like about Julie’s book is that she paints a very realistic picture of what it means to landlord, exploring what happens when real estate investment is a key part of your financial picture. This is rare in the industry, and it’s valuable. I appreciated her anger a little less. But, sit tight, read past this, and you stand to gain some valuable insight into what life as a landlord may be like.

 

  • Book no. 4 : It’s Not About Money by Brent Kessel

    This book is not specifically about investing in real estate. So what’s it doing in a top-5 list of real estate books?

    Well, so far no one has written a real estate investing book that so cleanly addresses the practice of living a financially free and fulfilling life. Kessel’s book is ultimately about money management and financial planning. I highly highly recommend reading this as you’re looking at ways of making more money, because in trying to make ourselves financially richer, it’s very very very important not to lose sight of the true prize of wealth, which is – of course not a bigger bank account – but a better, more fulfilling life. Real estate investing is, at it’s base, a vehicle for building wealth, and so it fits neatly under the umbrella of what Kessel is talking about.

    Better Not Bigger

    Kessel’s book makes a great case against the our society’s drive for bigger, better, faster. His goal is to push the reader to reconsider his or her relationship to money, thereby increasing both financial stability and contentment. Kessel takes inspiration from Buddhist thinkers such as Thich Nhat Hanh, as he asks us to evaluate what he calls the “desires of the wanting mind.” He goes on to point out eight archetypal relationships people have to money and suggests ways of working within our archetype

    His book is persuasive and intelligently written. He takes us on a voyage of self-evaluation, encouraging us to pinpoint our financial acts of self-sabotage. Overall, his goal is paradoxically, to get us to realize that financial planning and investing is “not about the money”. Building wealth at it’s best should be a practice of cultivating a better life that suits our individual needs and desires, not some sort of competitive sport, or a place to let our neuroses run rampant.

Money and Mindfulness

The other thing that’s cool about Kessel’s book is that it’s a great counter-weight to Julie Broad’s anger in More Than Cashflow. While Broad is (justifiably) unhappy with the level of charletanry and exaggerated claims made in the real estate coaching industry, her anger is sometimes not terribly constructive for someone hoping to develop a mindful and healthy relationship with wealth. Until someone writes a real estate investing book on how to build an empire without trading in your peace of mind, read Brent Kessel.

 

  • Book no. 1 : Rich Dad, Poor Dad by Robert Kyosaki

If you’re consider investing in real estate and you haven’t read this book: shame on you! Rich Dad, Poor Dad is the bible for real estate investors. While Kiyosaki’s book offers many insights and inspirational words for the new investor, the essential take-away is being able to recognize the mindset that separates the wealthy from everyone else.

Don’t Trade Your Time For Money

Kiyosaki defines three money mindsets. The working class, for him, have expenses and liabilities. Cars, rent, TVs, food, vacations – these are all expenses or consumer goods that lose value with time. Spend on these things and you’ll be subject to the law of diminishing returns.

The middle class, on the other hand, usually own a family home and believes it to be an asset. While it is true that real estate tends to appreciate over time, once you factor in that mortgage-, maintenance- and upgrade payments are made with after-tax dollars, plus the fact that neither interest nor work on the property is tax-deductible, you’ve basically only contributing to a forced-savings plan (see Alex Avery in Wealthy Renter for a more detailed explanation of this).

So, working-class families tend to have no assets, only expenses. Middle class families tend to have liabilities (a single family home) that they consider an asset. But the true defining factor in creating wealthy has to do with cash flow and passive income.

The real trap, according to Kiyosaki, is to tie the number of hours you work to the ceiling on your salary. Anyone who’s main source of income is dependent on the numbers of hours they have to sell with forever bump against the fact that their number of “billable” hours are limited. If you get paid by the hour, your revenue depends on how much time you have to sell. Worse, the only real way to increase your income is to sell more hours. See where this little trap leads?

Wealth Mindset

“Passive income”, of which rental income is one source, is Kiyosaki’s answer to this problem. For him, cash flow is the defining marker of what separates the wealthy from everyone else. The wealthy set up systems – businesses or investments – that generate cash flow while they sleep, go on vacation, or work at their other jobs. In this analysis, real estate becomes an easy vehicle for creating a revenue stream that doesn’t require a specific amount of work-hours to produce fruit. In addition, there are all sorts of tax-breaks and deductions that come with real estate investment. Kiyosaki mentions this as a further advantage to owning property. The middle class, for him (and I am inclined to agree), is burdened with the largest tax burden vs. income structure, as the wealthy tend to have all sorts of strategies for paying less tax. Real estate is one such vehicle.

It’s Time

So, if you’re looking at investing in real estate and you haven’t yet read Rich Dad, Poor Dad, it’s time.

 

Can You Afford Not to Read These Books?

I’ll leave you with this closing thought: real estate gurus and coaches sell education packages that usually start with five-figures. These five books combined will run you fifty Canadian dollars if you buy the Kindle version or perhaps seventy-five bucks if you opt for paperback. The amount of time it’ll take you to read them is probably comparable to a three-day weekend seminar.

If you’re potentially becoming a landlord, can you afford not to spend this money and take this time to get similar value? On your path to building a cash-flow empire and a mindset that will slowly lift you from the ranks of the middle- or working-class, I’m hoping that the answer to this question will come easily.

 

 

 

 

 

How to Build a Killer Investor’s Network

Missed Our Last Workshop?

A Sneak Peek At What Happened…

Networking is one of the keys to success in the real estate industry. But it’s a struggle for so many of us!

Networking can be a struggle because we don’t have a good understanding of the science of effective networking building. We go to random events, wasting time and effort and often enduring social awkwardness because we don’t know how to network effectively.

Without giving away everything that happened at the workshop (including networking), here are a few do’s and don’ts:

– Do attend activities that allow you to have regular contact with people (recurring meet-ups, BNI breakfasts, etc). Networking is more like farming than hunting. You’re building a network, so the more you see the people in your network, the more you’ll be top-of-mind, and the deeper your relationships will become.

– Do attend events with an objective in mind. Who do you want to talk to? How many people would you like to connect to? Who do you want to meet? Otherwise, it’s too easy to spend the evening talking to the same 3 people.

– Do think of other people. When you meet someone new, keep in mind how you can be of use. Ask yourself: how can I add value for this person? Who can I connect them with? How can we help each other? This prevents you from being in sales-pitch mode.

– Do attend smaller, focused events. It’s better to be in a room with ten useful connections, than in a room with one hundred tourists.

– Don’t be afraid to ask potential mentors or peers for a 15-minute Skype call, a lunch or coffee with the phrase: “I admire what you’ve done. Would you have a few minutes to tell me how you did it?” You’ll be surprised how far a little flattery will get you!

– Don’t assume that once you’ve made a connection it will “stay warm”. There is a science to maintaining your network with scheduled phone calls, newsletters, emails and so on. There are some great podcasts on this topic. Schedule time to maintain your network so you remain top of mind.

– Don’t be afraid to use social media. LinkedIn and Facebook are obvious ways of connecting with people, whether peers, clients or potential mentors. There is also a new Tinder-like app called Shapr that will connect you with people who have similar interests and want to grow their network.

In Real Estate and in life, your social capital (or network) has a direct impact on your financial outcomes. Whatever the current state of your personal- and professional networks, there is always room to improve.

 Did I leave anything out? Got any favourite networking tips or techniques? 

Leave your comments below.

Looking to grow your network? Hope to see you at our next networking event!

Property Management Workshop : What to Do About Problem Tenants

Wednesday, Mar 14, 2018, 6:00 PM

Centre d’affaires Communoloft HOMA
3965, rue Sainte-Catherine Est Montréal, QC

8 Investisseurs en devenir Went

The most popular question my clients ask me is: “What can I do if I have problems with my tenants?” BEFORE you sign your leases for 2018, don’t miss this workshop. We share property-manager’s secrets for how to avoid renting to problem-tenants.

Check out this Meetup →