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What You Can Learn About Investing by reading Conversations With God

Book Review: Neale Walsh’s Conversations With God

Here’s why you should read Walsch’s so-called chat with God. Even if  it sounds hokey or blasphemous. Even if it has nothing to do with Real Estate.

The title Conversations With God is probably one of the least controversial things about this book. Walsch’s premise is that his writing is a sort of revelation. He claims that the ideas in the book come from a divine source, with him as a kind of channel.

It’s a bit hard to see why it makes sense to go there.

Blasphemy or Atheism: Take Your Pick

Claiming you’ve had a revelation means you’ll probably offend a lot of religious people. The whole channeling God thing’s got a bit of a blasphemous ring to it. Along the way, the atheists will check out because they don’t want to hear about God in the first place. It’s not really a winning proposition.

But, and it’s a big but, wait! I promise there’s baby and there’s bathwater.

If you’re interested in mindful living and how we create our lives – and our financial situation along with it – consider these few lines.

Start with this whopper:

“Every human thought, and every human action is based in either fear or love.”

Which one of these are you running on most of the time?

Or what about this: “Life is not a process of discovery, but a process of creation.”

and

“No prayer goes unanswered. Every prayer is creative.”

Wow! What if you applied some of this logic to how you practice real estate or your financial life more generally? Do you act like you’re creating all the time? Because you are. Are your actions and thoughts around finances motivated by worry, anger, Ego, competitiveness or anxiety? Or by creativity, joy and connection?

Conversation with God or not conversation with God, it’s worth thinking about. And it’s with a grain of suspension of (1) disbelief or (2) judgement for blasphemy that I suggest you read what Walsch has to say.

If you’re trying to make any kind of positive change in your life, or if you’re in the process of trying to wake up into a more mindful state of being, there’s some really interesting ideas in this book. The love and fear distinction was enough to make it worthwhile for me.

Offended? Keep Reading

Does it matter whether Walsch is talking to God?

I don’t think that is does.

I actually think it’s possible to make a wider comment on how we hear or read things in this increasingly polarized time. Just because part of what someone says or where they come from a triggers knee-jerk abhorrence in us doesn’t mean he or she has nothing good to say. It doesn’t mean we should tune out right away. To do so is our loss. There is baby and there is bathwater. Before we throw them both out, we may want to stick our hand in to see which is which! The quality of the baby might just merit getting your hands wet.

 

 

How to Avoid Problem Tenants: Have a Good Apartment Screening Process

Good tenants are the best way to protect your investment! Choose wisely

Picking good tenants is almost as important as getting a good deal on a building. Quality tenants will help keep your rental building profitable. They protect your investment and determine the quality of your life as a landlord. All the more reason to choose carefully!

Here are some best practices for stream-lining your tenant selection process.

Without a doubt, the most common question I get asked from students and newbie investors is: “How do I deal with problem-tenants?”

It’s a question I usually answer with a question.

The real conundrum should be: “Why did you rent to problem tenants?”

To avoid renting to problem-people, you need a steam-lined and thorough tenant screening. Your tenants determine the quality of your life as a landlord. So listen carefully! And don’t leave things to chance. This article is the first in a series of 4 that will show you how to run an effective tenant-selection operation.

Advertise in the Right Place

The best way to set up a winning tenant-selection process is to have the biggest possible pool of candidates to choose from. You do this with effective advertising. Onlineis the way to go these days. Forget about newspaper Ads!

Pick the Right Platform

The first thing to do is to determine which platform works best in your area. In Montreal, we use www.kijiji.ca : 98% of our rental are concluded this way. Other platforms  are Craigslist (which also attracts a lot of scammers) and MLS (www.realtor.com). Usually we only use them because a client asks us to. They’re anyway redundant with kijiji.ca in our area.

For MLS, you need an agent to list a property. A professional rental service will cost you one-month’s rent, so you may want to think twice before doing this. In my experience, MLS works best for unique- or very high-end properties.

Facebook posts can yield some leads, but in my experience not very good ones.

A good way to test which platform works is to ask a few people who’ve recently been in the rental market. They’ll know which platforms yield the best results.

Market Your Unit Properly

Unit marketing basics are: awesome photos, the right price, and a clear, truthful description. These are the keys to effective online marketing for rental units. They’re also really straight-forward.

Photos

My advice on photos: pay the 100$ it costs to get a professional to photograph the unit when it is clean and presentable. These photos will serve as a marketing tool for the next 5 to 10 years. They can also easily add 50$-100$ on the value of the rent you can demand. In our high-traffic, saturated media environment, you really can’t attract decent attention without awesome pics.

Price

Rent is a very price-sensitive. 50$ up or down can make an huge difference. Most tenants shop on a budget.

A tip: start your advertising early. This lets you be optimistic and a bit greedy 🙂 Always post a higher rent amount that you think your unit is worth. If after a week or two you’re not satisfied with the number of responses, lower the price. It’s the best way to make sure you’re not leaving money on the table.

Another tip: if your unit isn’t renting, consider dropping the price by 50$-100$. When you weigh the alternatives with your calculator: major renovations, or having the unit empty for a month, you’ll see how cost-effective it is to adjust your rent downwards. (50$ x 12 months = 600$). Depending on your unit price, dropping the rent by 50$ will probably make more sense than having the unit empty.

Phone Screening Script

Don’t waste time on useless visits. Don’t get into silly conflicts or interminable discussions with bad candidates.

I don’t get off my ass to open a unit unless I’m convinced the people can:

  1. afford the place
  2. speak to me in a courteous and efficient way
  3. tell me a coherent story about who they are and why they want to rent the place

I don’t want to waste my time running back and forth to open doors. And – perhaps more importantly – I don’t want to have fights when I refuse unqualified potential tenants because I let them see a place they fell in love with.

The gate-keeper to useless door-opening is a good phone-screening script. You want to find out:

  • who will live in the unit (how many people | are all adults on the lease) ? is the number of occupants appropriate to the size of the place ?)
  • do they have good credit ? a history at the rental board ? references from a previous landlord ?
  • what type of income do they have (does everyone work? | are Mum & Dad paying the rent? | are they on social assistance?)
  • why are they moving (relocation | divorce | new baby | unhappy with their last place) ?

If any of these answers make you uncomfortable, take down their number and tell them you’ll return a call at a later time. In my experience, it’s a better alternative than the shouting match that can ensure from refusing an application live on the phone 🙂

Set Up A Winning Visit

Sounds self-evident, right? Here are a few things to watch out for. When you’re planning on showing a unit, be aware of what things can turn candidates off a place.

  • bad smells (buy a candle | show up 5 minutes early and open the windows)
  • messy tenants (schedule visits with lots of notice & explain to the tenants that the faster they clean up, the faster you’ll stop your visits)
  • existing tenants who’ve caused problems and who may run off their mouths to new candidates (plan visits when the tenants are not home)
  • big dogs (some people don’t like dogs & they can have a bad visiting experience if one lives in the unit. Ask the tenants to go for a walk while you show the place)

Have a Thorough Application Form

Do

  • request social insurance number & bank account info; if the tenant defaults, you won’t have to hire a detective to get this info
  • get a signed authorization to run a credit check
  • request contact info of the previous landlord
  • ask for a guarantor if the candidate has questionable credit, is from out of town, or doesn’t pay the rent him/herself
  • request employment information
  • take a small deposit while you do your background check. (You can deduct this from the first rent cheque, or else refund it if you refuse). A small amount of money makes the candidates more likely to commit and not waste your time running a check while they decide to rent elsewhere.

Do check all these points thoroughly!! Don’t forgo a credit check because it’s costly or complicated to obtain one. In my experience, credit history is the single best predictor of what kind of person you’re dealing with.

Don’t

  • let the candidates leave out information
  • not give you the deposit
  • get away with anything you wouldn’t want to accept later on in your relationship; the application process is your time to set the tone

Trust Your Gut

As a candidate jumps through different hoops and you have multiple interactions, pay attention to what your gut says.

  • Are your requests handled in a courteous and timely manner?
  • Is this the kind of person you want to deal with regularly for the next few years?
  • Do they quickly return phone calls or force you to make multiple requests for simple things?

Your tenants are your quality of life. If there are behavioral red-flags at the beginning, think twice. Do you really want someone harassing you every 5 minutes with silly requests? Not returning your calls when you have urgent requests? Being unpleasant or incoherent on the phone?

A final word: tenant selection is like dating. If it’s complicated from the start, maybe it’s not meant to be 🙂

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.

 

 

 

 

 

Local real estate prices

Local real estate prices too expensive? Here are come creative solutions…

Shopping for real estate in areas like Montreal’s Plateau Mont-Royal, or the GTA. Markets in many desirable areas present a challenge for first-timers and more experienced investors alike.

It’s hard to find properties that cash flow. Barriers to entry for a first purchase are about to take a step skyward. With changes planned to lend criteria early next year, many will see their buying power decrease. Tempting to sigh and conclude you’ll never be able to get into the real estate game?
Don’t! Maybe it’s just time to get creative.
Answers exist outside your local market. Instead of plopping down 500k for a condo in the Plateau, why not consider a triplex in a less sexy part of Montreal? Duplexes and triplexes in areas like Mercier or Lachine go from 300k-450k. At this price, it’s possible to find properties that break even or have slightly positive cash flow.
Not stoked about living in Lachine? Or Hochelaga? No problem! If you want to live in a pricey area, consider renting. When you run numbers, you’ll be surprised how cost-effective renting may be. Let someone else lose money on negative cash flow!
Don’t forget: you pay your mortgage on a principal residence with after-tax dollars. Add to this the fact that interest in your private residence is not tax deductible. Now you’ve added two tax burdens to compound already exaggerated property prices.
If you live in Toronto, prices may have you thinking you’ll never own property. Did you know a one bedroom condo in Montreal can go for 175-200k?
With a property like this, well rented, you can cover your costs with pre-tax rent dollars. You can deduct the interest as a business expense. If Montreal seems too far, what about student havens like Kingston or London? Prices in these areas are lower than the GTA, and you’ll have a pool of student-renters with parents as guarantors who can sign your leases. Food for thought!
Whatever market you choose to live in, don’t let soaring prices dash your investment hopes. Think again! In a challenging market, I like to put a twist on an old proverb: when the going gets tough, the tough get creative.
Yours in property investing,
Terrie Schauer

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 →

Eyeing Better-Than-Market Returns? Avoid This Mistake

Eyeing Better-Than-Market Returns? Avoid This Mistake

Those sexy numbers might be hiding something

Every year I encounter one or two new investors who want the best deal ever made in human history. He or she (but usually he) expects to buy a property with outstanding upside. For buckets under market value. The first time they do a deal. In a competitive market. The investor then proceeds to look properties farther and farther in the boonies, with bigger and bigger defects, and worse and worse tenants. Sound familiar? If so, here are a few words of advice to consider.
Risk & Reward
When you invest in stocks, your broker (should) mention risk tolerance. In stock investing, it’s common knowledge that high returns carry high risk. If you want a portfolio that offers ten plus percent return, you gotta be willing to deal with a downside. Read: you can make big returns, but you might take big losses.
Real estate is no different. Real estate markets – like other markets – operate according to baseline metrics (Cap rates, GRM, NRM, and so on). If you’re looking to beat these returns by a wide margin, chances are you’re heading for one of two not-so-great scenarios.
 
What’s Your Time Worth?
First, it’s possible that the time component is missing from your number crunching. Let me give you an example. A building full of studio apartments may show juicy returns on paper. On the ground, these returns aren’t quite so sexy. A property filled with small units may indeed generate lots of income. But, your turn-over rates will be bananas. Bad debt percentages on these kinds of properties are usually high. You’ll probably pay utility bills and perhaps have to maintain appliances. The tenants will call you more.
Basically, you or someone you pay will be spending time dealing with a high maintenance property and population. This will eat your on-paper gains. Certain types of properties are time-suckers. Learn what they are and avoid them. Or else make very sure you’re accounting for your time.
 
Banks & Insurance Companies Judge Risk Better Than You
Properties that show higher-than-average returns on paper can also be riskier. Small-unit properties like the one I mentioned carry higher fire- and water damage risks. This is why banks are more reticent to finance them, and why insurance is costly. In fact, take the banks and the insurers as a guide. What is expensive to insure or hard to finance is probably risky.
The same goes for buildings with commercial revenue. If a property has a good mix of commercial and residential tenants or even a good mix of commercial tenants, the risk may be mitigated. But, if a building looks profitable based on the occupancy of one commercial anchor tenant, you may want to watch out. With Amazon and the current trend in online retail as well as telecommuting, the market for commercial space is definitely in flux. Factor in that commercial tenancy is very sensitive to economic cycles and neighbourhood evolution. Also, when cash flow depends heavily on one commercial tenant, this indicates a high-risk scenario.
That’s why the bank demands higher interest rates, more information, personal guarantees and higher interest rates for commercial properties. Commercial insurance is more expensive. This is not robbery. Banks and insurers charge a premium because these kinds of investments are, statistically, riskier. Trust me, whatever calculations you’re making, the bank made them a long time ago. If they’re nervous, maybe you should be too! They’ve been in business longer…
Debbie Downer Does Investing
Don’t get me wrong. It’s very possible for beginners to make money investing in real estate, and even to find good deals once in a while. Simply, it’s important to be mindful of market realities and to factor risk and time into closing decisions. As your network and experience in the industry increase, so will your ability to discover and pounce on a great deal. Don’t let greed and Ego make the wrong decisions for you early on.
So, please go out and look for deals, but play safe!
Yours in property investing,
Terrie
2018 GUIDE TO MONTREAL REVENUE PROPERTY: Make 2018 your year !

2018 GUIDE TO MONTREAL REVENUE PROPERTY: Make 2018 your year !

Want to invest in rental property in Montreal in 2018? Don’t miss this Meet-Up!

Terrie Schauer, rental property manager, runs a workshop that will help you outline your investment goals for 2018.

This workshop will show basic financial guidelines for identifying profitable investments. Terrie will share her insider’s market analysis of which areas are profitable, as well as price-points for making profitable investments (condos, small plexes).

Join us! Don’t forget to bring business cards and your notebook.

https://www.meetup.com/GROUPE-IMMOBILIER-MONTREAL-INVESTIR-GERER-RENTABILISER/events/246023549/

What's the biggest act of self-sabotage real estate investors make?

What’s the biggest act of self-sabotage real estate investors make?

Dear Fledgling Real Estate Investor,

If you want to make positive cash flow buying rental property: please, please, please don’t shop for yourself!

Yours,
The Agent Who’ll Be Stuck Renting Your Overpriced Units

Let me describe one of the biggest acts of self-sabotage I witness when I work with beginner investors.

“Terrie, I want to buy an investment property.”

“Okay. Tell me.”

“I was thinking of a condo in ***insert over-priced, high-end neighborhood here***”

Watch as I hold my head. Housing, maybe more than any other business, is an emotional industry. I get it.

But, if you’re purchasing an investment property, it’s got to have positive cash flow, right? If you’re renovating a rental unit, it’s to maximize your return on investment or to protect it, no? Aesthetics has its place. Providing good, reliable services to your tenants are important. But be mindful of what makes economic sense and what is a matter of personal taste. You’d be surprised how many beginner investors struggle with this concept.

Let me give you my take on where this issue comes from. If you drive a Mercedes or let’s say, one of the old Volkswagen beetles, it might be difficult for you to imagine that anyone would want to drive a Toyota Camry. I get it. BUT which manufacturer sells more cars? Which car is easier and cheaper to maintain? Which producer will do better in a recession? Which car brand is more vulnerable when people start cutting back on luxury items?

You see where I’m going with this. When economic cycles take their toll on local economies, the one-bedroom for seven- or eight-hundred dollars stays rented. In fact, if this type of unit takes a price hit in a bad market, it’ll be a fifty-dollar hit. No so for the luxury two-thousand dollar a month loft in your oh-so-trendy neighbourhood.

The bread and butter of the residential tenancy markets are in middle-and-lower income areas. It stands to reason that higher-end rentals are in direct competition with the condo market. Whoops! The promoter decided to throw up another tower just as interest rates went up? You’ll have to keep your rent below what his prices are now. Lower end units don’t face this type of competition.

Also, your cash flow is directly related to the cost you pay per unit. What’s the cheapest condo you’d personally consider living in? Don’t like the ground floor? The busy street? That not-so-awesome graffitied neighbourhood. That’s fine! You don’t have to live there! The only thing that should interest you is how much someone else is willing to pay to live there.

For all we know, the owners of McDonald’s don’t like the Big Mac. The point is, enough people do, and the cost of manufacturing the sandwich leaves enough margin for the business to make money. You don’t have to want to live in your rental units. Your tenants do! That’s how you make an investment make cents.

Investment property is a business. Our success as investors depends on selling the right product to the right market. We need to be in the business of providing what the market wants, not in the business of creating something we personally would like, and then desperately trying to sell it to cover our overhead costs.

Think of that as you evaluate what type of investment property to buy.

Yours in investment,
Terrie

Local real estate prices too expensive

Local real estate prices too expensive? Here are come creative solutions…

Shopping for real estate in Montreal’s Plateau Mont-Royal, the GTA, or BC can be frustrating. Markets in these areas present a challenge for first-timers and more experienced investors alike.

It’s hard to find properties that cash flow. Barriers to entry for a first purchase are about to take a step skyward. With changes planned to lend criteria early next year, many will see their buying power decrease. It may be tempting to throw up your hands and conclude you’ll never be able to get into the real estate game, or that your portfolio is doomed to stagnate at its current size.
Not so! Maybe it’s just time to get creative.
There may be answers outside your local market. Instead of plopping down 500k for a condo in the Plateau, why not consider a triplex in a less sexy part of Montreal? Duplexes and triplexes in areas like Mercier or Lachine go from 300k-450k. At this price, it’s possible to find properties that break even or have slightly positive cash flow. If you want to live in an overpriced area, why not consider renting? When you run numbers, you’ll be surprised how cost-effective renting may be.
Don’t forget: you pay your mortgage on a principal residence with after-tax dollars. Add to this the fact that interest paid on your private residence is not tax deductible. Now you’ve added tax burdens to compound already exaggerated real estate prices.
Worried that with Toronto prices you’ll never own property? A one bedroom condo in Montreal can go for 175-200k. With a property like this, well rented, you can cover your costs with pre-tax dollars. You can deduct interest as a business expense.