http://btcf.ngifford.com

I’m hoping to devote more and more time to blogging over the next few months, and this new home will help give me a bit more freedom in how I run the blog itself.

Also check out my photoblog:

http://luminescence.ngifford.com

I’m starting off with a few of my favourite photos taken over the last few years and will be moving towards the present. I just bought a new d-SLR camera, so I’m hoping to start generating more photos worthy of posting.

Like a breath of fresh air.  Well, it has been an interesting year for me.  The end of a major relationship caused a major upset in my life.  I'm just starting to get back into the swing of life again and now that fall has come around, am finding more time on my hands.  Thus, I'm starting to get back into writing and reading blogs.  Hopefully I'll have some useful stuff to post in the coming months, so stay tuned.

For now, I am buying a new primary residence and take possession November 2nd.  It is a small house in a good neighbourhood with lots of potential.  I've got a lot planned for the place and hopefully will find the time to share the results online.

Next, I'm hoping to get together with some new investors to see if I can get myself into a commercial deal (residential multi-plex, apartment, or retail).  Will keep you posted on that as I go.

In order to build a network of investors, I'm trying to get people I know to start using a new service called LinkedIn.  LinkedIn has a very similar taste to Facebook, but with a twist.  LinkedIn is much more adept at managing contacts for business purposes than Facebook ever will be.  Some of the key features:

• Find colleagues from past careers and educational institutions
• Recommend your favourite service providers (e.g. lawyer, real estate agent, masseuse)
• Apply to jobs posted by other LinkedIn users
• Surf through your friends' "connections" (the term used to describe the people in your network)
• Build your own reputation through recommendations and answering user questions
• Network!

So, what are you waiting for?  Start building a network of professionals, friends, friends friends, friends friends friends!!!  And, if you're local to London, Ontario and are interested in joining forces, dropme a line.

Nick 

When we insist on hanging onto our branch, in our ignorance, we think this is freedom.  "I can do whatever I want, and if I feel like falling in midsummer, I will.  And if I want to cannonball, it's my business."  We don't see that what we're calling freedom is actually bondage.

When we act this way, we become the prisoners of our own whims and desires.  As a result, we're unable to act out of seeing our situation for what it is, moment after moment.  We're only able to act according to our cravings.

We think that freedom lies in making choices based on our desires.  But when we see our circumstances, we see much more than just our desires.  We see how the current situation has come to be.

True freedom doesn't lie in having choices.  We always have no choice but to act.  Even if we choose not to act, we're still acting — and still making a choice.

Our only choice of consequence lies in whether or not we're awake. 

[emphasis added]

In my situation, the bold statement really hits home.  It seems like it is very easy to fall into this trap of want, desire, greed and selfishness.  Furthermore, once we do, we no longer objectively consider other options in life.  Unfortunately Freud's Id is a powerful force in the world of the human mind.  Not that our wants, needs and desires are not important.  However, they should not cloud our judgement.  It is important to understand the root cause of such feelings in order to property analyse them and ensure that they are dealt with.

If you are at all interested in learning more about Buddhism, I have found this book to be an nice introduction to the philosophy. 

Just some food for thought today, something off-topic to spice things up. 

Great site and great info.

I have more of a question than a comment. I only have experience in
renting the whole house/condo to an individual, but never dividing a
house up and renting it by the room. Being someone who have never had a
room mate, I will like to find out from your experience how difficult
is it to find tenants, making sure then tenants get along, keeping the
unit clean and tidy, etc.

Any help or suggestion will be much appreciated.

Thanks from a fellow 20 something investor in the National Capital.

First off, thanks for the great question. I've been needing a bit of inspiration lately, so this is just the ticket to get me off my lazy arse and writing a post that I hope you'll find helpful.

1. Legalities

First, let me tread carefully here. There may be legalities in your municipality against student rental properties, or against having multiple people living in a single family zoning area. It would be a good idea to check into local by-laws before trying to rent to students. That being said, rules are often malleable, and in London it is highly common to have 5, 6, 7 and 8-bedroom student rental properties.  Overall, it is difficult for a city to stop student rental homes.  The zoning by-laws typically only prevent homes from being sub-divided.  That being said, I know that London is currently investigating methods of controlling student rental homes.

2. Finding Tenants

Finding tenants has not been difficult for me thus far. I think I can attribute this to the fact that I am easy-going, and I am not trying to squeeze every penny out of my properties that I possibly can. I make a healthy profit off of the properties, and thus, I keep my rents low and am able to offer tenants different things to keep them interested.  The arrangement is mutually beneficial with no party feeling sleighted.

Marketing is the key here. You need to find out what students really want. Guess what, its 2007 now… what do young people want? Super-blazing-fast highspeed internet. Offering free highspeed is a real draw. If you're not an expert in this arena, there are professionals who could wire up your home, or it is easy to get a wireless router and let the tenants worry about the rest.  Again, a caveat, sharing one internet connection is usually against your service contract.  Read it, understand it, and know that there is a chance you could be held liable for illegal actions carried out over a connection that you own.

Utilities included.  I always rent my units all-inclusive.  This can be billed as a benefit because tenants do not need to worry about varying utility costs or setup fees for switching utilities into their own name.  Less hassle.

Discounts in the summer.  Many students return home in the summer months and do not want to pay full price for a vacant bedroom.  You would be surprised how much even a $50 discount in the summer will make a tenant feel better about signing a 12-month lease.  Again, this is win win.  The cost is minimal to the landlord, but the good will instilled in the tenant is priceless.

Some other things to consider that will motivate student renters:  Dishwashers, In-house laundry, a security system, a signing bonus, etc. etc.

3. Policing Roomate Arguments

THIS IS NOT YOUR PROBLEM! Don't feel bad, this is the second time in the last month I've been asked this question. I just plain don't worry about it. Maybe I've just been lucky so-far and people have gotten along ok. I suppose you could have problems if you have one random person in the house who is there to cause trouble, but so far I've rented to decent, cooperative people. I guess it is always good advice to screen your prospective tenants for compatibility with you and the other tenants, and I have had to turn people down from time to time.

The other thing to do is to rent to a group of friends. They are much less likely to have the sort of arguments that require mediation. I'm hoping that I can fill my 2 5-bedroom places with groups of 5 this-year. The best thing is the amount of time you save from showing the property less. These are the groups you need to bargain with as well. People are extremely suceptible to the thought that they are getting a good deal. Only 3 easy installments of $19.95… but you not only get one knife sharpener, we'll throw in a bonus sharpener that you can keep in the garage, or your tackle box…. etc.

4. Cleanliness and Damage 

Now… this can potentially be
an issue. So far, I've been lucky enough to rent mostly to women (who
are naturally more tidy), so I have not had any major issues. General housekeeping is the responsibility of the tenant. I try to go
into the house every couple of months just to address any major issues,
but it is impossible to control the situation entirely.

The
best thing you can do is hire a cleaning company to clean the house
when tenants change. The carpets may need steam cleaning, and the house
will likely require a top-to-bottom scrub.

This is also something
you can market to your prospective tenants along with some of the items
mentioned above. Even if you were already planning to paint a few
rooms in the house, you can use it as a bargaining chip to let the
tenants know that you care about their well-being, are willing to keep
the place in good order, and are giving them a fair deal. It is a show
of good faith.

Lastly, make sure you are using a comprehensive lease. There are inexpensive leases available online, at Staples, or through your local Property Management Association (e.g. London Property Management Association).  They often have clauses regarding cleanliness and damage.  It would also be a good idea to investigate adding a clause internet use.  Many leases prohibit using the home for illegal activities or for running a business, however it would be useful to extend these clauses to internet use also (always CYA).

Thanks for the great comment William, you've hit on some of the major difficulties involved with renting to students.  I hope I've touched on some potential solutions that you can employ to make renting to students a little easier, and a lot more profitable! 

The gain in real estate value over time is really only important to the average Joe who only owns their primary residence, and even in this case, most people are unlikely to use the capital appreciation in the property for any real purpose because they will likely hold the property for a long time. Also, if they do sell, it will likely be reinvested into another property which has also appreciated the same amount over time.

Now, for someone who is investing in real estate, I also think that these numbers do not mean much. The real value of real estate transactions is that they are a business, they can generate income and cash. I think of it this way, I have one rental property that only cost me $10,000 investment. After all expenses are deducted from rents, my net income on the place is roughly $7,000 / year! Therefore the property is netting a 70% ROI.

These returns are not typical of all investments, but there are some good deals to be had, and some specific market segments where you can generate a tidy return.

The big players tend to invest in commercial properties, or large complexes. In these cases, again, the focus is on your net income, not on the appreciation of the assets.

Also, even for the average Joe, there are a lot of advantages to investing in real estate:
1) capital can be withdrawn if necessary, when renting your money is all lost
2) appreciation does beat inflation, so it is a relatively safe investment (historically). You aren’t likely to lose your shirt.
3) it is a kind of forced savings plan. Most people don’t think about how much equity is in their homes. If something catastrophic happens, the money is there and can be used for health care expenses, etc…. as long as the person is willing to sell the house or take on debt (bad idea).

Just my 2 cents. I generally don’t even think about the increase in property values… it just isn’t money that I can easily use.

This-week the site was featured on JD‘s roundup of Finance Blogs from Around the World.

Last week I was featured on Canadian Capitalist‘s roundup of Canadian Blogs.

Thanks to both of the authors for their endorsement and the associated increase in traffic and feed readership. I hope the new visitors are enjoying some of my previously published content. I will have some more interesting posts ready to go in the near future. Right now I’m just getting adjusted to a new home, so life is hectic.

For new readers, please check out the FeedBurner feed linked on the sidebar.

The nice thing is that two of the tenants in the 1st property might be interested in switching over to the other one, so then I would only be looking to fill up 3 bedrooms!  Sweet!

I think the main benefit to tenants is that were are quite flexible.  We offer a summer discount, we include all utilities, and our rent is actually fairly low or near average.  Plus, these two houses have free laundry, which is a big plus.

<br>

In my next post, I’ll show you my plan for using word of mouth to attract tenants faster, and how I hope to encourage present tenants to stick around another year.

That being said, the idea is that each blogger must state 5 things the community might not know about them, and then pass the contagion along.

1.  I’m a cynic…  sometimes other people misunderstand cynics, but I find cynicism is a source of humour in my life.  It is really my way of poking fun at life.

2.  I have a 2-year-old Golden Retriever named Jackson.  He’s named after a winery in the Niagara Pinninsula…  I stand by the fact that he is the best dog in the world.

3.  I drive a 2003 maroon Saab 9-3 (Merlot Red… to be exact).  I love the car and hope it lasts at least 5-years without needing too much work.

4.  I bought my first house just before 2nd year of university, we rented out two bedrooms in the house, and both my wife and I graduated debt-free.

5.  I am obsessed with egg nogg.  I have a compulsion to buy it when I see it at the store, which is very frustrating for my wife who is a dietician!

Now, who to tag?  Hmm…  Canadian Capitalist, Million Dollar Journey, Getting Finances Done.

PS:  I’m taking a small break from blogging as I have some more important matters to sort out.

In my review of rental tracking software, I mentioned that iiProperty enabled direct posting to CraigsList.  I was unable to verify this feature because iiProperty does not have the ability to accept Canadian addresses in its CraigsList advertisement form.  To me this isn’t a deal breaker, but it sure would have been a nice feature.

Have a look a the site if you get a chance.

Why?
Owning a successful company, no matter how it generates money, means several things to me.

1) It will bring financial freedom. This means I will not be reliant on managers and CEOs, in whom I have little faith, for my livlihood. In the traditional employment framework, one mistake, one economic upset, or one failed product could endanger my ability to provide for myself and my family.

2) Being free of the ‘rat race’ should also provide more time for family, learning, and volunteer work.

3) If all goes well, there should be enough capital and contacts to branch out into entirely differnet businesses (e.g. restaurants or bars, waste clean-up and reduction, clean and renewable energy technologies).

How?
This is the hard part. I’ve touched on various issues in the preivous Road Ahead posts. There are several steps to setting up a corporation for real estate investing.

1) Determine the corporate structure (LLC, REIT, etc.), then incorporate, quickly.
- Currently, I think the incorporating as a numbered company may be the quickest option, and converting to an REIT in the future would still be possible. Given the new taxation rules for income trusts, it may not be advantageous to go that route.

2) Solidify partnerships, and set a board of directors.
- I can not run this company on my own. I need 1-2 dedicated partners.
- I also need a support team (accountant, lawyer, property manager, etc.)
- Once

3) Investigate investment opportunities
- This is the easy part, and will be ongoing
- Having a few potential investments on the board will make it easier to find prospective partners as it will give me some hard numbers to present

4) Develop marketing materials
- A snazzy name
- Powerpoint presentations
- A short flyer
- Business cards
- I need information to present to prospective investors

5) Continue to develop a network of investors (this may have some impact on (1)).
- My current network consists mainly of friends or relatives. This has more disadvantages than advantages, and may pose a serious roadblock
- I will need to expand to other real estate professionals through my current contacts and other networking opportunities

6) Collect investments, issue shares, determine dividend rates, etc.

Questions, questions?

1) Do I currently have enough investors for this type of venture? How feasible is it all?
- Depending on the amount of investment capital I feel I can secure, my options could change. If it is under $50,000, the simplest investment would be rental property under a non-incorporated partnership. Hopefully the first property will be something commercial, however, because I would like to diversify my current holdings.

2) I am not sure about partnerships at this time. I have approached several people in the past, some have already invested, but I am not sure if I can find a partner who is willing to give time to the venture.

Outlook:

Obviously this will not happen over night. The process will take up the better part of the next year as I slowly move through the steps that are roughly outlined above. However, I remain positive that this is possible with the right marketing strategy, the right partners, and some luck.

I hope you have a happy New Year!!! May 2007 be prosperous and joyous for you and your family.

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Part of the writing project over at BiggerPockets.

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Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

1) I’m not sure about the name… anyone have any thoughts on it?

2) I need to move to a hosted blog because it seems like a bit of waste to keep it hosted at WordPress.com since I can’t have any advertisements. Yes, ads suck, but it would be nice if the site paid for its own hosting and domain registration. Item (1) is a major reason why I haven’t done anything on this front yet.

3) More graphics. I’ve tried to add graphics to this recent series, and I will continue to do so in the future. It is a tip I gathered from EscapeFromCubicleNation. I think it makes the posts more inviting to read.

4) More of the same, I will continue to be focused on real estate investing, but I will also likely want to branch out into other forms of investing for the odd post. I tend to spend most of my online reading time split 60/40 between REI and the stock market.

5) More interaction with other bloggers which will hopefully increase the number of comments. I’d like to build a good community similar to the one over at GetRichSlowly or CanadianCapitalist.

This doesn’t sound like much of a plan, I know, but blogging isn’t my major focus… the investing aspect is. Are there any comments on the current site theme?

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Part of the writing project over at BiggerPockets.

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Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

In years past we have used the local university off-campus housing service to list our properties, and we have also put a few ads in the newspaper.

Medium:
For 2007, we plan to up the ante because we’ve had vacancies over the summer months that aren’t acceptable. We will advertise in three mediums, the off-campus housing site, the campus newspaper, and online through iiProperty and any rental listing sites I come across. We will also expand our listings to the local college which is a 20-minute bus-ride away, but at least it is a direct route.

Differentiation:
How can we differentiate ourselves from the thousands of per-bedroom vacancies in London? Number one, we include all utilities and wired/wireless highspeed internet in our homes. Second, our properties are fairly well-kept (upper-middle of the pack) and are thus well-priced. Third, we offer free laundry in our 5-bedroom houses.

Word of Mouth:
This-year we want to expand on the power of word of mouth advertising by offering incentives to our tenants.
1) We will offer 1-month free rent to current tenants who sign a 12-month lease.
2) We will pay $150 for each referral (obviously only ones who sign leases).

Property Managers:
Because we lost a lot of revenue due to having 6 vacant bedrooms last summer ($9600), we’re going to be in touch with one or two property managers this-year. Last year we had one, but we started using her too late in the game, and she couldn’t find any tenants for us. If we start earlier this-year, we should be in luck. Last-year she only charged 1/2-month of rent for the property, which works out to only $1000… a small price to pay!

Wish us luck!

This post is part of the writing project over at BiggerPockets.

Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

Now that I have three properties to take care of and my Masters is out of the way, it is time to get serious about organizing my tasks and time. Up until now, I have done as little maintenance as possible to the properties because my schedule and budget didn’t afford much of an investment. However, this-year, I need to get serious about scheduling various activities.

First comes our marketing campaign. The worst thing about renting to students is that they tend not to be repeat tenants. Once their 12-months are up, its on to bigger and better things, and that brings the potential of vacancies. To counteract this trend in 2007, we will begin an integrated marketing plan starting in the first week of January. In past years, we have left the advertising too late into the spring, and I feel we lost many prospective tenants. More on the marketing plan tomorrow.

Furthermore, two of our properties are in need of some capital investment for repairs and upgrades. Property 1 needs a fresh coat of paint inside, some new carpeting, some drywall patching, a new screen door and a new railing. The railing and door are already purchased, so the only remaining task is to schedule their installation. The problem being that I don’t know whether I can find someone willing to do it in the winter. I may just leave the drywall and painting until later in the year because they are not pressing. Plus, we can always use a new paint job as a carrot for potential renters who are sitting on the fence. I don’t think carpeting is in the budget for this-year, so it will have to wait.

Property 2 is in fairly good shape, however, I was there yesterday and am quite concerned about the 2nd floor washroom. Some water has leaked around the tub, and has rotted the sub-floor slightly. I caulked up around the shower doors, which should stop the leak, but to repair the floor will require nearly a complete bathroom reno. In the spring I’ll need to get some estimates, right now I have no clue how much it could cost. Otherwise, property 2 is in good shape, but could use a bit of paint if there is money.

So, how will I get organized? I posted previously about using Monkey GTD, which is a variation on TiddlyWiki using the GTD principles to keep track of upcoming tasks, appointments, reminders, etc. It is really a great system. You can host one on the web over at TiddlySpot making it accessible from anywhere you can find an internet connection. There is built-in security for protecting your information, and if-required, multiple people can edit the same wiki. Here’s a screenshot of my Rental project:

Lastly, I plan to use Quicken to better keep track of my rental expenses in 2007. I think this will help me visualize where money is going, and how I can reduce expenses and increase profits. To keep track of tenants I intend to start using iiProperty. It is free, and should help me take better care of tenant information.

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Part of the writing project over at BiggerPockets.

Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

In 2005 we purchased our first rental property for $143,000 CDN. The property rents 5 bedrooms at $400/month for a cap rate of 16.8%. This, I figure, is a pretty good investment. Unfortunately, it has been a struggle to find student renters for 12-month leases and thus, the property has under-performed over the summer months. However, we have consistently made money off of it to the tune of approximately $5-6000/year.

In August of 2005, we purchased a new primary residence which included a 3-bedroom basement apartment. The rooms are again rented for $400/month. The cap rate of 4.36% on this home is not as nice, but we have the added benefit of living in a nice house, in a very desirable neighbourhood.

Then in May of this-year, we purchased a second rental home. This time it was a 5-bedroom, 2.5 bathroom condominium for $145,000. Leases were already signed from May 2006 – May 2007 for $395/month. Thus, the cap rate is 16.3%. Overall, the property nets about $600/month plus the principal payments which is about $10,000/year.

So… 2007. Since I invest with my wife, it is a bit more difficult to plan perfectly, however I’ll take a stab. We should be able to save $30,000 this-year and I would like to pour that into one more investment property, a new Etrade account, and our 5% savings account. I’ve seen a few ads around for hard-money at 0% down, so I might investigate this, which would enable us to get another property with only 5%. Why 5%? I like to own a bit of the property off the bat just in case the market tanks, I don’t want to be stuck owing more money in uncertain times if I need to sell the property in a hurry. So, investigating my funding options is a primary task.

I also want to investigate starting a small REIT, or even a LLC selling shares to small-time investors. This way I can use OPM to really start getting into bigger, more diversified real estate holdings. I’d like to investigate commercial property opportunities.

My take on the impending housing burst, is I think that property values will not crash, but will correct. I hope that they will drop no more than 10-15%, and I hope this process will take a few years to pan out. If I’m lucky (i.e. correct), we will be able to weather the storm, and ideally will still be pulling in positive cash-flow throughout.

In my Etrade account, I’d like to get into some blue-chips, as well as some iShares index funds from Barclays. Hopefully the portfolio will do well, and it will balance my bond investments through my ESPP, and all of my real estate investments. There is a REIT iShare that I am very interested in as well.

I hope that my diversification strategy pans out, and most importantly, that the real estate market in London remains strong through 2007. The forecast looks good, but it really depends what happens south of the border.

Tomorrow: Organization… How can I conquer my natural tendency towards distraction?

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Part of the writing project over at BiggerPockets.

Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

So, most of the increase can be attributed to starting work as a full-time engineer. In May, my salary increased due to being hired on full-time, which also helped greatly.

In 2007, I can expect between a 6 and 10% bonus from work (depending how my handlers rate my performance relative to the other plebs). This will hit the bank account in February and will technically count towards my 2006 income, but will be reflected on my 2007 NW.

So, for the next year, I would like to set a similar goal of increasing the family net worth by $45,000. I think this is achievable given that both my wife and I should see moderate raises in the new-year, and we hope that with a more directed marketing approach, our rental business will thrive (more tomorrow and on the 28th and 29th).

Lastly, my company’s ESPP kicked in in November netting me a company matching contribution of 3% of my base salary. This should help contributed to even better performance next year (as long as the company stock remains healthy).

Past Performance:
December 2006 (see this post)
November 2006
October 2006
September 2006

So, wish me luck, it should be a fun year… tune in tomorrow for a discussion of my investment performance in 2006 and goals for the New Year.

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This post is part of the writing project over at BiggerPockets.

Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

All the best,

Nick. 

Now that my Masters degree is out of the way (since August), I’m finding I have a lot more time on my hands than when I had a full-time job and a thesis to write. So-far I’ve been using it to write this blog and read other blogs for interesting ideas on investing, personal finance, and real estate. However, next-year, I’d like to accelerate my hobby/side-business. The purpose of these posts is to help me get a sense of what is possible in the next 12-months.

I hope you’ll joing me for this 6-part series, which I think will have some interesting thoughts on investing, real estate, blogging and personal finance. Here’s an outline of what to expect:

1. Net Worth (Dec. 26, 2006):
The first post in my first blog series will deal with my net worth results from 2006, and detail my net worth goal for the end of 2007, as well as how I think I can get there.
- 2006 results
- Goal for 2007

2. Investment (Dec. 27, 2006):
- First I’ll summarize the property investments I have made thus-far
- Next, I’ll talk about capital improvements made in 2006
- Finally, what is planned for 2007 (improvements and investments)

3. Organization (Dec. 28, 2006):
- Financial steps to keep track of my income and expenses
- Tracking tenants
- Leases, using Web2.0 to get organized, etc.

4. Marketing (Dec. 29, 2006):
- New outlets and the general plan for 2007

5. Blogging (Dec. 30, 2006):
- Where is this blog going?
- What are my goals?

6. The Famous Corporation (Dec. 31, 2006):
- What’s the general idea?
- What is required?
- Structure, and outline of the potential steps in 2007.

Part of the writing project over at BiggerPockets.

Tags: goals, finance, net+worth, real+estate, BiggerPockets Goals

The first two-part series is on something called the Smith Manouevre (Part 1, Part 2) posted over at a new Canadian personal finance/investing blog called Million Dollar Journey.  The author FrugalTrader is on the warpath to accumulate $1.0M by the time he hits 35!  A tall task, and I wish him luck.

The Smith Manouevre consists of using a HELOC to invest in rental property.  The interest paid on the HELOC is tax-deductible as long as you invest in the right type of vehicle (dividend paying stocks or real estate for example).  Mr. Smith suggests reinvesting the saved tax dollars into your non-tax-deductable home mortgage, which then increases your HELOC room so that you can invest in more real estate.  The benefit is that your home mortgage is paid off faster and you have access to more OPM for investment purposes.

The second post of interest is from the Investment Property Insider who tells us a little bit about how you can use commercial real-estate to make money, even when the value of the investment declines significantly.  He goes over a quick and dirty example of how a $1M property could lose 20% of its value in 8-years, yet the owner could still make money at a 7.5% cap rate.  His calculation does make a few simplifications, but most notably it assumes that you borrow the money for the downpayment.

Lastly, I came across the first blog via Canadian Capitalist , which is a fantastic site full of great information for the Canadian investor.  I came across it a few years ago, but had lost track!  I'm glad to now have it in my agregator.

Enjoy 

The 23rd Installment of the Carnival of Real Estate also made it to the press today.

Stay tuned for next-week's Carnivals. 

Quickly, for comparison, a $250,000 mortgage on a 30-year amortization will run you $1531.17 per month at a fixed rate of 6.2% while an ARM at the above rate will run $1466.88.  So, people opting for the ARM are only saving themselves $771 in payments per year, or less than 1/2 of a monthly payment.  Now, this doesn’t seem like a lot when you are buying 30-years of consistency and security when you go for the fixed rate mortgage.  However, it boils down to the question of whether you believe interest rates will continue to rise, or that they will fall slighlty.

30-years is a long time to try to predict interest rates. Historically, the United States prime lending rate averages out to 7.7% over the last 50-years (source: US Federal Reserve Data).  So, there is a chance that interest rates could rise above 6.2%…  This data includes the anomaly of the early 80s where rates spiked up to 18.9%, so the average is somewhat skewed to higher rates.  The one thing you can count on is that the banks have a large number of very intelligent economists working for them, and they are obviously betting that over 30-years, the banks will make enough money at 6.2% to cover their asses.  So, they’re betting

There is, however, significant research indicating that variable rate mortgages (ARMs) outperform fixed rate mortgages historically.  These articles look at historical data for the last 50-years.  Looking at my chart below (using data from the Bank of Canada and the US Federal Reserve), you can see that the prime lending rate is always lower than the 5-year fixed rate.  Also, 30-year mortgages are often padded (depending on economic conditions of course), so they would fall higher to ensure bank profits.  But, versus refinancing every 5-years, the ARM is always going to save you money, historically speaking. 

The bottom line is that if you can afford to weather some unexpected, short-term spikes in interest rates, then you should go for an ARM.  However, if you can’t take the heat, you are better off locking into a fixed rate mortgage. 

Ramit has also stated that he has consciously chosen not to invest in real estate.  However, many savvy investors and bloggers hold some real estate because it can be a good way to diversify ones portfolio.  Residential real estate is somewhat more volatile.  But, if the housing market does turn for the worse because people cannot afford their homes, that means the rental market will be hotter (although rents may decrease slightly, vacancies will decline).  This is a good time to invest in more income properties due to the low prices.  Commercial real estate can often be a very good investment also because the tenants tend to stay longer, and they actually make improvements to the property rather than causing decline as most renters do. 

If you are looking to diversify, but don’t want to invest directly in properties yourself, you should consider looking into REITs.  There are many local REITs that you could look up and make investments and there are also some publicly traded REIT funds such as iShares Exchange Traded Funds (USA) from Barclays.  The Canadian REIT Sector Index Fund has increased in value by 120% since 2002 and appears to still be on the increase.  This fund will be partially affected by property values, however, the paper value of the assets of a company are not the basis for stock performance.  The REITs tracked by this fund make their money off of rents and leases, and barring a significant depression in the economy, their income should remain fairly consistent in my opinion.

Some of the comments on Ramit’s post were interesting.  There seem to be many misunderstandings about real estate in the comments section.  One reader says there are more foreclosures now because people have made bad decisions.  I question the use of the word bad because although the decisions have not turned out well, they were most likely misinformed decisions.  There are a myriad of reasons a person could end up in foreclosure such as losing a job, interest rate increases, health issues, etc.  Also, because people are entering into high-ratio mortgages, the payments are much higher, and thus more difficult to afford.  There is also talk of whether houses are good investments.  Well, there are many ways to make money from owning a house.  Improving the house will increase its value, you can invest in real estate for rentals and earn money monthly, and in general, housing prices rise over time.  Yes, prices can decline, but on-average they increase.  Furthermore, compared to renting, you are able to build equity in the home, so that must be considered when looking into whether to rent or buy.

For some more information on ARMs, visit the Wikipedia entry here.

Now I just have to find out what other software packages he was talking about, or perhaps I should change the title to specify tools for the small landlord… either way.

Edit: The post also made the Carnival of Real Estate #22 although I did not make the list of the Top 11 at Active Rain, maybe next-time.

Thanks again, I hope the post had some useful information.

Tags: carnival, real+estate, investing, software, reviews

From Christmas, sn…

Here are a couple of photos of my neighbourhood just for interests sake. My house is burried, the snowblower could barely get through it… but… my dog was having a blast!

From Christmas, sn…

From Christmas, sn…

The best part is that my car isn't capable of getting off my street, so I'm stuck. Gotta love a good old snow-day!

NG

Quicken

Price: $39.99 (Quicken Cash Manager, no business features) to $99.99 (Quicken XG, with business features)

Features: Quicken supposedly tracks rental properties, although to the best of my knowledge it does so in a very rudimentary way. So far, I’ve managed to set up my assets and liabilities, and it will update my loan balances automatically (I think). However, I have yet to locate any advanced features to keep track of tenants. I look forward to using some of the project tracking features that enable you to enter To Do type items.

Missing: Tenant tracking, property details, to-do lists for your properties, mailing letters, etc.

Price: Depends on the features, $0.00 up to $64.99/mo for up to 55 units.

Features: There is a somewhat limited free version that anyone can try out. The software provides tracking options for multiple addresses, multiple tenants, etc. One of the most useful features I see is the ability to advertise your properties. You can create your own real estate site for vacancies and properties for sale. The site will have your company name across the top, and shows a picture of each of your properties. For each property, you can then add pictures, and a flyer detailing the terms of the offer. Furthermore, when you upgrade to one of their paid services, iiProperty will send mailings such as late payment notices, statements, repair notices, etc. This feature sounds like a real time-saver.

The best feature is that you can access this service for FREE with some limitations. 

Missing: Automatic account downloading, tax integration, Canadian flavour (although I am TOLD that this is on its way).

Price: Ranges, the hosted, online software is $10/month for 1-10 units.  There is also a locally-hosted version, but pricing is not available on the website (read: expensive).

Features:  Rent magic is a fairly robust package.  It includes the ability to track as many properties as you have, track your income, expenses, notices and letters, tenancy agreements and legal documents, and also helps with all of your accounting needs.  One feature that sets Rent Magic apart from other solutions is that it is able to do payroll for your rental business if you happen to have several employees.  You can also set up access passwords for your different employees.  Also, it integrates perfectly with Ontario rental law (the Tenant Protection Act), which is a huge bonus for Ontario landlords.  The system is advertised as being powered by ManageUDA, so perhaps you can find localized versions for your area.

Missing:  I don’t believe there is an advertising/marketing module similar to that offered by iiProperty.

This review is not meant to be exhaustive, it is merely meant to discuss some of the options that I have come across in the short two years that I’ve been a landlord.  Please let me know if you know of any other rental software packages that you would recommend.  Personally, I would recommend iiProperty for the small landlord with only a handful of units, and a solution like Rent Magic for the landlord with more than 10 units to keep track of. 

I know that there are a lot of high-priced accounting packages that do the same thing, but I think these solutions are much easier to afford for the landlord with only a couple of units.  I have signed up for iiProperty and will post more thoughts on it at a later date!

Feed me!

Tags: software, real+estate, reviews

Learned Helplessness is an affliction that affects all of us to a certain extent, at one time, or another, in our lives. However, in some cases, the condition mimics paralysis, imposing restrictions upon oneself that feel very real. Learned helplessness is difficult to diagnose.  It has been suggested that it is related to clinical depression, and no wonder, if I didn't think I could solve any of life's problems, I'd be depressed too!

So, why am I writing about this topic?  Well, it seems to me that many people find themselves feeling helpless at one time or another.  I am often confronted with people who put up barriers to any problem.  I can't do that because of these 20 mostly irrational reasons.  Or people who are constantly asking you to help them with the same problem even though you gave them documentation for reference that would tell them exactly how to do it if they would just take five seconds to read!

I think people like this can't help but have their every-day decisions, and especially their investment decisions clouded by negative thoughts and feelings.  It is very unfortunate.  I suggested that Casey Serin is suffering from a form of learned helplessness.  In a post , Casey was asking whether he should rent out one of the many homes he owns that are facing foreclosure.  However, after posing the question, he went on to describe many different reasons why the idea was not good, and none of the benefits of renting out the house.

How can this be overcome?  I suppose a thorough analysis of any problem should help you to decide on the correct course of action.  However, I think the best thing is to be aware of what they call negative self-talk.  When you put yourself down, or find yourself expressing the negative aspects of a problem, you're mind goes to sleep.  Some people do a great job of convincing themselves that they are dumb, or their ideas will never work, and thus… they don't do anything.

So…  get out there and try something.  Read Escape from Cubicle Nation for some inspiration. 

 Feed me!

It was not an overly interesting month per se. Loans were paid down including $2500 of a $10000 personal loan. It always fees nice to retire debt! I also began investing in my corporate ESPP (Employee Stock Purchase Plan) where my employer matches 50% of up to 6% of my base salary. Since I’m married, but without children, it will not be a problem for me to invest 6% of my income each month. I’m happy, the matching funds work out to almost 2 weeks pay over a year.

Those are the only highlights with the exception of some accounts receivable due to my wife and myself for work-related trips we took in October/November.

Overall, it was a good month with my net worth increasing 4.6%, or $7076 from $153k to $160k.  It would be interesting to work current housing prices into the fold, however, that data isn’t as easily available in Canada as the US.

Check out my NetWorthIQ page for more detailed analyses, or scroll down and look for the graph at the bottom of the sidebar.

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Learned Helplessness is an affliction that affects all of us to a certain extent, at one time, or another, in our lives. However, in some cases, the condition mimics paralysis, imposing restrictions upon oneself that feel very real. Learned helplessness is difficult to diagnose.  It has been suggested that it is related to clinical depression, and no wonder, if I didn't think I could solve any of life's problems, I'd be depressed too!

So, why am I writing about this topic?  Well, it seems to me that many people find themselves feeling helpless at one time or another.  I am often confronted with people who put up barriers to any problem.  I can't do that because of these 20 mostly irrational reasons.  Or people who are constantly asking you to help them with the same problem even though you gave them documentation for reference that would tell them exactly how to do it if they would just take five seconds to read!

I think people like this can't help but have their every-day decisions, and especially their investment decisions clouded by negative thoughts and feelings.  It is very unfortunate.  I suggested that Casey Serin is suffering from a form of learned helplessness.  In a post , Casey was asking whether he should rent out one of the many homes he owns that are facing foreclosure.  However, after posing the question, he went on to describe many different reasons why the idea was not good, and none of the benefits of renting out the house.

How can this be overcome?  I suppose a thorough analysis of any problem should help you to decide on the correct course of action.  However, I think the best thing is to be aware of what they call negative self-talk.  When you put yourself down, or find yourself expressing the negative aspects of a problem, you're mind goes to sleep.  Some people do a great job of convincing themselves that they are dumb, or their ideas will never work, and thus… they don't do anything.

So…  get out there and try something.  Read Escape from Cubicle Nation for some inspiration. 

“My wife and I are interested in getting into investment real
estate, but we’re having trouble identifying properties with which we
could generate a positive monthly cash flow. We have some (but not a lot) of
money that we could put down; unfortunately it’s not enough to bring even
the most basic expenses (mortgage, taxes, etc.) to a monthly dollar amount
below what we could rent the units for.

Did you run into that problem, or is that just our market (Boston suburbs)? Do you have any ideas on how that might be overcome?”

I guess I am lucky because the city I live in is heavily populated by students, and enjoys relatively low real estate prices.  The average home in my city costs approximately $250,000 CDN, but you can find town-homes and a lot of smaller homes in the $150,000 range.  My first home is a war-era home converted from 3 bedrooms to 5 bdrm, 2 bath.  My second income property is a 3-bedroom townhouse converted to 5 bedrooms.  Furthermore, I charge per bedroom since I am renting to students. This works out to $2000/month rent.  Expenses are kept low ($1200-ish) including mortgage payments due to the low cost of the homes, so the mortgage payments are reasonable.

I’m not really sure what the Boston market is like.  You may
wish to consider leasing out a property, or flipping a house or two to generate capital.  However, flipping is a risky business and one must very carefully plan out every eventuality prior to purchasing a house to flip.  I think flipping will become even more dangerous in the coming years as some of the air gets let out of the housing bubble.  For a light-hearted view of the Flipper Nation, check out this online video series. (It is worth a watch!)  There is also the question of flipping in a market which has a good potential for downturn.  I, for one, think it is still possible to flip a house as long as you do it right…  What does that mean?  You need to get in and out quickly, get the house on the market ASAP, know your market so that you can guarantee the house will sell fast, and keep in mind all of your expenses including depreciation of the market value.

Another idea would be to attempt to buy up some foreclosures.  There are several ways of doing this, and it does require a fair bit of legwork, however, you can often get the house for much less than market value.  I have not attempted this, so I really don’t know how to go about it.  I have some ideas… but untested ones, I’m sure a trip to your local Chapters would dig up some good information here.

Either way, the more down payment you can scrounge up, the more cash-flow you’ll have.  Ideally your yearly cash flow will be able to pay for all of your repairs, and other miscellaneous expenses. Otherwise, these will be out-of-pocket expenses, and I wouldn’t recommend getting into a situation like that.

Here are some questions for you, maybe you could chat them up in the comments:

1. What is the average cost of a house in Boston? 
2. How much do you think you could rent it for? 
3. How much is property near the colleges? 
4. College students pay exorbitant amounts of rent (because they are much shorter term usually).
5. Have you set up a spreadsheet to compare properties (more on this later)?

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I watched a program on one of our specialty channels on investing in Rio de Jineiro. Evidently, you can purchase a condo 5 minutes from the beach for in the neighbourhood of $150,000 USD. Not a bad price given that you would only need to come up with the down payment, and the place would be yours.

Costa Rica:

1. LandShareProfits answers the why of retiring to Costa Rica? The website is 100% focused on Costa Rican real estate.
2. Free the Drones posts a lengthy article with some nice details on the legal aspects, and includes some real estate listing sites to-boot. They also have a few other posts on the topic .

Thailand:

1. Free the Drones also posts about retiring to Thailand. It is mostly an outline various travel guides to the country, as strict retirement guides are not available in print. However, the author states that he’s working on a collection of what the internet has to offer on the topic. Visit the Retire Abroad tag for more goodies.
2. Good news , the coup has not significantly affected real estate prices.
3. More good news , if you’re American, you might find better healthcare in Thailand and neighbouring countries than at home, so why not retire there?

Furthermore, here are some other ideas:
1) Invest with friends and time-share the home
- this spreads the inital cost out
- a recurring yearly fee would take care of the regular expenses
- in short order, I’m sure it would be easy to find enough interested parties to fund the home
2) Rent the house for most of the year, while owning it yourself
3) If you find a house in the right area, it could appreciate significantly in value as more and more people consider buying up property in areas where tourism and trade are only just beginning to take-off.

To be continued…

It is becoming more and more clear that Casey has some mental difficulties. He is terrible at making decisions, is extremely impulsive, has little regard for the well-being of others, and has no idea how to predict the consequences of his actions.

Here’s my comment from No Limits Ladies‘ account of the story.

My
guess would be that NLL offered to take on Casey’s properties, sell
them for a profit, make sure Casey broke even on the deal, and also
take a significant chunk of any media (print, film, documentary and
what-not) royalties to-boot.

Not a bad deal for NLL… and if Casey was smarter, he would realize
that it is a good deal for him too. Unfortunately, he doesn’t realize
at this time that he is incapable of selling his properties himself and
bailing himself out of debt. So… the floundering will continue.

I mean really, who spends 18-hours on a post admitting that you’re
stupid, you aren’t a man of your word, and that you can’t make a
decision?

My thesis adviser, a wise man by my standards, once said “there’s
nothing worse than a man who can’t take a decision.” (no, he was not
referring to me, thankfully

If I were NLL, I would consider holding Casey to his word. He signed
the agreement, now he should have to live with the consequences of his
actions (FOR ONCE!!!).

Casey entered a contract with these ladies, and has now backed out of it (kind of like a child might do once they realize that the deal will entail some kind of sacrifice in order for them to ultimately get what they want). Why would he back out? Greed… greed is the only reason I can figure why Casey would back out.

NLL were trying to help bail him out of hot water. In return for their hard work (selling his properties where he had failed over the last several months), they likely would have taken some or all of any profit, as well as rights to some of his book royalties.

Now… it seems here that everyone is getting something of the deal. I believe, and have stated in my comment, that Casey at this point in time does not realize that he is incapable of digging himself out of trouble. He has consistently shown his lack of tenacity and drive by choosing to spend hours and hours writing blog entries when every minute of every day his debt, and missed payments stacks up.

Casey… its time to play Let’s Make a Deal!

And remember:
1) Deals are always negotiable, think of every possible way you could restructure the contract and propose them all to NLL.
2) You’ve already accepted the deal anyway.

For approximately the next three months, we watched the new owners driving in and out with a pickup truck, hauling junk, and renovating like crazy. The house was placed on the market about six months ago.

The online listing looked good. They had redone all of the kitchen cabinets, and created a beautiful master bedroom suite on the whole 2nd floor. The master suite included cherry hardwood, a spacious bedroom with 3 dormer windows, and a large bathroom with a corner jacuzzi and standup shower. Original list price, $345,000.

Now, you might be thinking that there is something fishy going on. Why is the house still on the market after six months? Here are some of the major mistakes made by the owners:

1. Incomplete renovations
   • Almost all of the doors, windows and some of the flooring were left original (50-years old).
   • The main floor bathroom remained untouched… and ugly.
   • The basement was untouched, and remains useless.
2. Shoddy workmanship and cheap materials
   • Drywall and kitchen finishing’s were not well-done.
   • Exterior was largely untouched and has a very cottage-feel.
   • The upstairs shower enclosure is very inexpensive, but it is paired with an expensive showerhead.
   • The bathroom tile is the cheapest variety and looks quite mundane next to the high-gloss cherry hardwood.
3. Bad planning
   • The bathroom is not well-thought out, the toilet is in an odd spot in the open in the middle of a wall, there is only one sink when most couples prefer two.
   • In the kitchen… they reused 20+ year old appliances.
   • The cook top is located in the corner of the counter, where it is less accessible and also sits underneath the upper cabinets.
   • Furthermore, because the appliances are old, I think future buyers will have trouble finding new appliances to fit the custom openings.
4. No curb appeal
   • Slate tiles were used to cover the walkway up to the front door, this looks nice. However, the garden work is atrocious. Bad stone combined with mortar that blends in makes it look like they built concrete terraces for the garden.
   • The siding around the dormers was kept plain white, and looks dated.
   • The roof shingles were left green… it just doesn’t look good. The house needs a colour scheme on the outside that doesn’t remind you of christmas.

In general, I think the owners of the house just missed their target market all-together. The idea to renovate the 2nd floor and turn it into a master suite was a good one. However, the execution was not consistent throughout the house. Also, a couple who would appreciate such a large space for themselves with cherry hardwood would likely want nicer bathroom tile, and newer appliances. Furthermore, the outside looks like it is suitable for your grandparents, so I don’t believe it will attract younger buyers.

They have lowered their price to $299,000 now, but I still believe it to be overpriced for the neighbourhood. We purchased our house for $330,000 a little over one year ago, and it is larger, has a much larger kitchen, a much larger yard (we’re on a corner lot), an attached 2-car garage, and a 3-bedroom basement apartment (that conveniently pays our mortgage P&I). Thus, I think they will still have trouble selling at the reduced price given the above points.

On another interesting note, I would estimate that holding on to the property for these six months will have cost them about $10,000 in mortgage payments, utilities and insurance. So, I think it is very important to find the right price quickly rather than holding the property for too long and slowly lowering the price. Otherwise, the monthly expenses quickly cut into your potential income!

I also wonder if this house would have been better to flip over into a student rental. I live close to the university, and I think that lowers the quality of prospective buyers. However, the rental market in this area is booming, so I think the property would have been better to convert into a 6-7 bedroom house rented to students. The gross income would be up to $3000/month, with a net cash flow of approximately $1000/month depending on the mortgage terms.

On the bright side, the real estate agent was informative, young and friendly. He showed us a data sheet for a $128,000 quad-plex currently renting for $2000/month! Very cheap, but apparently it does need some work such as a new roof (not surprising at that price).

All in all, the timing was perfect. We were able to critique the flip, see many different examples of what not to do, make a new contact, and find out about a potential investment opportunity. Not bad for a Saturday afternoon.

“Wow this really made me mad. Casey had tried to sucker people into a scam real-estate deal less than a week before he admitted he was going through foreclosure.”

I agree with this point, Casey did not do well to disclose his current financial situation when attempting to gather new investors. This reeks of an attempt to use other people’s money to satisfy some of his debt. I guess he was desperate enough to try to take his friends down with him?

“I was fortunate enough to recognize his pitch as bullshit, but what if someone had gotten conned into it? Financial scams on unsuspecting people make me furious. So I read through his site. It turns out that he had bought multiple houses in different states (hoping to flip them quickly), lied on his applications to get his loans approved, and had grossly miscalculated how much it would cost to renovate and flip them. Bad move. His debt is now over $2 million.”

On this, I do not agree. What Casey is proposing in his first email is a simple scheme, not a scam. The legalities are unquestionably acceptable, however the moral implications are arguable. The scheme would involve approaching owners who are facing foreclosure and offering to buy them out of their debt obligations. The investors (Casey) would then assume the mortgage and pay the former owner somewhat less equity than they would gain in selling the house for full value. Say prospect 1 has a $150,000 home with $50,000 in equity. Buyer 1 would offer to stop the foreclosure and give Prospect1 $40,000 cash (or less… sometimes much less). Often the investor can refinance the mortgage to take most of the equity out of the house again. The house is then leased back to the former owner (because 90% of the time they don’t want to leave).

Now, secondly, Casey is not actually $2.2M in debt. Why? He bought 8 homes, so the houses have an average value of about $275,000. However, these houses have a liability of nearly 100% of the purchase price, but all of the homes are still worth probably close to 90% of the purchase price (in some cases perhaps more because he has done some renovations). So, figuring that the houses are worth 90% of their purchase price, he has $140,000 in unsecured credit card debt, Casey is actually in debt for the tune of $360,000… theoretically. A far cry from $2.2M no matter how you look at it.

At this amount of debt, I’m really not sure why Casey isn’t trying harder to unload these properties and minimize the impact. The credit card debt could likely be held for up to a year with minimal payments, now all he has to do is sell some of the houses ASAP, and try to find tennants for the rest……… is this happening?

Casey, Earth to Casey, what the hell are you doing to solve this problem?

It is a simple matter to get a mortgage for the purchase price of a house, however, it is often more difficult to find traditional financing for renovations.  So, here are some other ways I am thinking of raising some needed capital to pay for renovations:

1. 0% balance transfers
   • See this great article on 2million‘s blog.
   • He gives some great advice and specific strategies for taking advantage of 0% transfers.  The guy’s a pro at it.  He currently has almost $40,000 in loans at zero percent…  now you’re talking!  Thanks for the great guide 2mil.
2. Remortgaging my properties back to 25% principal (similar to a HELOC)
   • This could net me $20,000 in working capital.
3. Increasing my own credit card limit
   • Bad idea because I don’t want to carry a balance, period
   • Also, I eventually want to separate my business and personal finances so I have some level of decreased personal liability, and potential for some tax benefits.
4. Secured line of credit
5. Using other people’s money (investors)
   • This is my primary focus at this time.  I want to gather some investors, and offer them a tidy return (10%) in return for the ability to use their money on the flip.
   • Right now, I haven’t started signing people up, but some preliminary work has been done to feel out some prospects.

Any other ideas out there?  That’s all I can think of for now.

The post is entitled “The delicate are of business partnering.”  In it, Pam has a lot of interesting points about the personality traits to beware of when considering a business partnership as well as some of the various legal structures that can be employed, and their related pitfalls.

Her list of items to consider when choosing a partner is:
1.  Legal structure
2.  Money matters
3.  Market reputation matters
4.  Communication style
5.  Shared values

If you and your partner’s views align, more or less, in these 5 categories, your chances of success will be elevated.

Personally, I am struggling with this right now as I have two potential partners for REI.  My wife, and a close friend.  However, there is so much to determine before entering a partnership, that I will certainly take this advice to-heart, and make careful considerations before making a final decision that could affect my business and success for years to come.

Escape from Cubicle Nation was featured here before.  I recommend it for anyone looking for advice on entrepreneurship.

Anyway, here’s the graph from NetWorthIQ showing my $3500 increase.

We had a few extraneous transactions last month. One, my wife went to Vancouver for a conference (flight $800, hotel $460), these expenses will be reimbursed, but for now it shows red on our NW. We also took a trip to Niagara-on-the-Lake to visit some wineries and spent about $400 stocking up our wine rack. The wine will probably last 4-6 months, and has already served as gifts for a couple of people.

If all goes well, next-month we’ll see a good increase in NW due to these reimbursments. Also, we had some rental expenses which will hopefully be reduced next month…. there’s a possibility we may need a new roof though….ouch.

Subject: Financial advice, interviews, etc.

Verdict: Good site, fun to read, sarcastic and synical.

Details: Ramit has a good sense of humour, likes pens, and thinks he’s better than everyone else (not that there’s anything wrong with that). This interesting mix makes for an interesting read, and the fact that Ramit is indeed knowledgeable in terms of becoming financially successful means you can learn something at the same time.

The best part of Ramit’s site are his weekly features. Every Friday he interviews a successful entrepreneur. These interviews have been very enlightening as the inverviewees run the gambit from owners of a small specialty pen distribution company, to Pam Slim of Escape from Cubicle Nation who blogs about how to successfully start your own business. Every Monday he will also be posting a new way to renegotiate one of your service contracts to save money (the first post showed us how to save on automobile insurance). We’re still waiting for the next installment which is due today.

Anyway, I strongly recommend checking out Ramit’s site. His site was a major contributor to my desire to start blogging about real estate, so it must be good. There is a wealth of useful information in the archives, so be sure to surf around.

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I found this website was fairly honest and consistent. The real estate advice he gives in his articles section is fairly basic, but it gives a prospective real estate investor some basic fundamental understanding of what is required for the job, how to make sound financial decisions using ratios, etc.

One segment that I enjoyed was his complete disdain for Robert Kyosaki that culminates in a 185kB plain text document outlining inconsistencies in his book Rich Dad, Poor Dad, his life, and other musings. It really is quite scathing, I’m sure Ken over at ARRDPD would disapprove.  However, it is consistent, and reads well.  It is actually quite amusing to look at how JTR’s research disproves many of the careless comments in Rich Dad, Poor Dad.

I do see JTR’s point though. When reading RDPD, one gets the feeling that everything is exceedingly vague. I think Kyosaki, if anything is a fantastic salesperson who has managed to find a key niche of selling real estate investment advice to people who will probably never get involved in real estate investing.  The book is dumbed down, and mostly amounts to a bunch of flag waving like you see at a highschool pep rally. 

For some readers, Kyosaki makes them feel smarter by giving them ‘insider’ information like how to calculate your net income.  For other readers he makes you feel superior to the rest of the world by constantly putting down people as not being able to figure out the most basic foundations of accounting.

The article entitled
“Suggested sequence for starting a real
estate investment program” has some good information.  Its more of a
pre-questionairre to see if you have the right-stuff for investing in
real estate.  It is a simlar approach to that used by Robert Griswold in “Property Management for Dummies.”

Either way, there is some good information on John’s site that is worth a look and skimming the Rich Dad, Poor Dad book review is good for some amusement on a Friday afternoon.

NG

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Its all about perspective. The way Casey attempted to “get rich” was by knowingly breaking the law. Along the way, he made a lot of bad decisions, and took on way more than he could possibly handle on his own. To do 10 properties he would probably need a team of 20 people and some very good business contacts (contractors, agents, lawyer, accountant, etc.).

There are ways to get rich in the real estate business, but it requires careful planning and good timing. It is possible, for instance, to flip a property for a profit. However, it requires the right property, lucky timing, and careful research. You have to determine your target market, renovate the house to suit their needs, and keep in mind your projected selling price, cost of renovations, and therefore how much profit to expect.  To profit, this must be completed to a very strict, tight schedule.  Otherwise, the monthly upkeep costs get out of control and slowly destroy your potential profits.

If done correctly, a fair amount of capital can be generated. However, its not easy… I hope to attempt my first one in the next year, but it all depends on financing, finding the right property and making sure the market is still warm enough.  (Not to mention finding a partner and convincing my wife it’s a good idea).

Once you’ve earned that capital, let’s say $30,000, it is possible to then roll it over into other investments. Perhaps flip another, more expensive house, then invest in some commercial properties.

In my current situation, I’m renting 13 bedrooms already, so I have some significant passive income. Once the mortgages are paid off, I would be earning $5000/month.  Thus, I am already fairly close to being able to live off of my passive income.  If I had 5 or 6 properties paid off and generating the same ballpark income as my current properties, I would be able to live comfortably on passive income alone.  From here, this would require an additional investment of 25% downpayment + 5% closing costs * 3 properties = roughly $120,000.  Hopefully I can come up with some of this through a flip or two, and through attracting investors.

As in my previous post “The Market“, however, this all depends on the real estate market in your area. I live in a small town with more than 10% of the population being students. Furthermore, we have a vibrant downtown core where people are willing to spend more on rents. So, in my opinion, there are many opportunities for real estate investments.
Obviously I’ll need some luck and a lot of hard work, but I think it is possible to make a good living off of the real estate business without putting in full-time hours.

The article interviews one Michael Zaransky who is co-CEO of a REI company in Northbrook, Ill.  His company specializes in university dorm housing.  The university leases them land on which to build.  Zaransky then charges a fee to gather financing, oversee construction, and then manages the properties.  The company is invested in 15 dormatories on 5 campuses, and one of his competitors in Texas “manages 53 on- and off-campus properties with 32,000 beds.”  Yowza!

My favourite quote from the article:

“About 80 million echo boomers born between 1982 and 1995 will turn 18 over the next 10 years. These children of the best educated and most affluent generation in America’s history will be attending universities whose obsolete dormitories, on average, have beds for only 30% of today’s enrollment.”

This bodes well for my ideas, current ventures, and future plans!  I think I might have to pick up Zaranski’s book.

PS:  Sweet!  Categories are fixed!

Her most recent post/podcast reviews two books that discuss negative self-talk.  Since Pam’s website focuses on helping entrepreneurs to succeed and make the jump from the shackles of the cubicle to the freedom of self-employment, her focus in this article is how negative self-talk affects a new entrepreneur.

As always, her advice is highly useful, and written in an accessible way that anyone can read and quickly apply in their own life.

She offers up this questionairre from Finding Your Own North Star:  Claiming the life you were meant to live by Martha Beck, to help people determine whether they are in-touch with their true personality.

1. My life feels like a great adventure
2. I feel sure I can solve any problems I encounter
3. I have fun
4. I laugh out loud
5. I feel overwhelmed by gratitude
6. I spend time in comfortable solitude
7. I am fascinated by things I am learning
8. I feel deeply understood
9. Things just seem to work out for me
10. I get so involved in projects I forget to stop
11. I use my imagination
12. I do things I loved when I was a kid
13. People seem to enjoy being around me
14. I play
15. I feel perfectly safe
16. I get excited when it is time to go to work
17. I feel mentally sharp and alert
18. I have really cool ideas
19. I love my body
20. I’m flooded with love for other people
21. I do new things, or old things in new ways
22. I do what I want to, even if it is scary
23. I’m completely relaxed with other people
24. I feel intense physical pleasure
25. I am very pleased with myself in general

I find that these questions really do make you analyze your current situation in life, and think about whether you are truly satisfied.

Are you?

Personally, I could use a little bit of a makeover in some of these categories.  But, is that just my personality?  Maybe I shouldn’t worry too much about it?