Category Archives: Alberta (Commentary)

Celebrate the Season

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With Christmas being only a week away, many parts of the world are in a definite slowdown mode and I am no exception to this. Now is a perfect time to attend those parties that you may have skipped this past year and catch up with people over a cup of coffee. My IT team is essential to everything I do and that is why I keep the lines of communication open especially at holiday time. Most people who come to this site are interested in real estate and thanking your own team for their 2013 contributions would very much be in order.

Some last minute tax planning depending on your own situation would also be in order now before you can really kick back and enjoy the festive season.

Please note that the news articles on this site will be fewer at this time of year than any other but there will always be something new to read.

Annual Insurance Check Up

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Many people see a doctor on an annual basis to detect any health issues which may arise. My father is adamant about an annual tune up on his vehicle to keep it running smoothly. These parallels lead to the question of how often you should check the insurance policy on your investment properties.

Ideally, an annual check up on your insurance coverage would be in order. In a booming marketplace like Alberta, you may find that you may be underinsured as the values keep rising. Conversely, if you live in Detroit, you may find that the values drop and you need less insurance than the previous year.

It can be as simple as a phone call to your insurance company and any changes to the policy could also be brought to your attention that may be unaware of.  Please ensure that you have your most recent property tax statement when contacting them.

If you are considering purchasing an investment property, ensure you are dealing with a broker who deals specifically with investors. It is comparable to having a heart surgeon perform surgery on a ruptured aorta versus a general practitioner.

Yale’s Goal setting study of 1953

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After you have attended a number of real estate seminars, you are bound to hear about a study from Yale university which promotes the value of writing down your goals in order to achieve them. Their results claim to have found that 3% of graduates who wrote their goals down outperformed the other 97% combined in achieving financial wealth after having them followed for a 20 year period. This study is heavily quoted in order to get people to purchase a rental property or sign up for expensive courses. All of this leads to my question. Did the study ever actually occur as has been mentioned over the past 60 years?

I attempted a simple Google search and found that it had not!! No one from Yale ever recalls being part of the study. The secretary of the class of 1953 did not know of the study. The administrators at Yale were consulted and various offices records were also examined with no results. This is but one example of how seminars heavily promote their own agendas without doing any due diligence on what they are talking about.

For the record, I have never written down my goals because I am too busy taking action.

Recall what you have learned

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Sometimes, it is worth repeating what one has already covered.  For that reason, we ask our readers to review our previous posts in this section. Some lessons may have been forgotten because there is so much to recall. In order to proceed with investing at a higher level, an occasional review is definitely in order. Otherwise, we are doomed to repeat our past mistakes.

There you have it, your homework for this week!

Why I prefer the internet over real estate for wealth creation

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I have been very fortunate to have met many successful real estate investors in my lifetime and continue to do so on an ongoing basis. To them, it is their preferred choice to keeping their net worth. I have a strong secondary affinity to this asset class but must confess that the vehicle of wealth creation I have chosen is business ownership and specifically an internet business.  Running an internet business is not without challenges but I believe it is much easier for the average person to succeed on the web versus a portfolio of investment properties.  Here are some of my reasons why:

1)  Properly used leverage is a key to success. Having a $300,000 mortgage with $50,000 cash on an investment property sounds great but compared to the global reach that a website can provide is absolutely insignificant.

2)  The operating costs of an ongoing web based business are small. There is no reason why anyone cannot start one out of their own home with a few thousand dollars. Compare this with a down payment in the tens if not hundreds of thousands of dollars of a rental property.

3)  The internet is the most profound invention of our lifetime and is bigger than the printing press was 500 years ago. An apartment building or even a portfolio of them cannot compare to the impact technology has on our lives.

4)  The cash flow from a rental property is much smaller than a web based business can provide. It is much easier for someone to quit their jobs via an internet business versus purchasing rental properties. The idea of owning sufficient investment properties to quit one’s job sounds great but does not work out very often because there simply isn’t enough cash flow present.

5)  The possibility of a real estate portfolio going from $10,000 a month in cash flow to $10,000,000 in several weeks is absolutely impossible. However, this is in the realm of a website which goes viral and hence creates enormous wealth.

6)  There is more internet support than ever before. I believe this trend will only increase as technology takes over more of our lives. Finding talented IT staff is easier than a locating a good mortgage broker who understands investments.                       

Choosing a secure PIN for your bank account

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Banking is an aspect of life that affects most people whether they are involved with businesses, investments or even if you simply have your wages deposited into your account. In today’s internet age, its importance is only growing and so is having safe and secure protection measures in place for someone’s money!

With that in mind, it is astounding how many people use very simple pass codes for their banking and personal information. I was surprised to learn that 11% of the population uses the code # 1234 for their banking information. Someone has worked quite hard for their money and then disregarded important security measures by using a code that anyone can guess.

Also, please do not tell your PIN code to anyone including family and friends. The entire purpose of it is to provide security and telling others defeats the intention.

Please avoid using anything which is easy to remember. If you an easily recall it, chances are that someone else can too. Avoid using birth years and “feel good” codes such as 5683 (i.e. LOVE).

For more information on this very important subject and if you have an inclination towards statistical analysis, please visit: http://tinyurl.com/9maclut

Special assessment as part of an offer to purchase.

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Suppose you have decided that your next investment will be a condominium. There are a number of differences that must be taken into account versus a residential home. One of these is the monthly condo fees which are levied by the condo board. These can increase subject to the sole discretion of the board and can be as high as they see deem necessary! In the event that the monthly contributions from all of the owners are insufficient to cover the expenses, then you will hear the two most dreaded words an investor fears on their bottom line: SPECIAL ASSESSMENT.

A special assessment is a one time levy which must be paid to the board which is above and beyond the monthly condo fees. These are non negotiable so please do not hire legal counsel for litigation purposes.

When purchasing a condominium, you will want to avoid this at all cost. The best way to do this is to insert a clause in your offer to purchase that makes the other party legally responsible for assessments which were levied before you bought the property. You may wish to add a clause that states “The Seller is responsible to pay all special assessments levied by the condominium board up to and including the Completion Day, no matter when actually due and payable.”  The seller will then be obligated to pay for any assessments approved by the board regardless of when they are due even if it is after closing.

Building your investment vocabulary

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To all of our readers around the world.  We have had an unforeseen delay regarding our major announcement.  As soon as we are ready, we will publish it in our daily news feed.

Regardless of where you put your money or even if you leave it in a bank account, a simple but very powerful prerequisite to success in the money game is to have a large enough financial vocabulary.

You must first choose your asset class that you wish to focus on. In my case, the internet is where the bulk of my time is focused on.  Words like dedicated server, HTML, Googlebots, bandwidth and patch releases are what I use to communicate in my field.

If the stock market is your vehicle of choice, then other words such as market capitalization, ex dividend date, asset allocation, prospectus and initial public offerings have meaning.

You must become literate before you proceed.  I have seen far too many investors wowed by technical terms they do not understand, put their money into something and then lose a substantial portion if not their entire investment. A simple way to increase your vocabulary is by going for lunch with someone in the field you wish to invest in and having them describe concepts they have used to become successful. They may even have a recommended reading list they have used in the past to further their knowledge.  There is no shame in saying my three favorite words “I don’t know” because there is far too much information for one person to ever grasp in a lifetime.

Politics in Washington D.C.

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We have been very busy this past week with a number of behind the scenes internet activity as we prepare for our major announcement. WordPress 3.7 will soon be available to users around the world and we are anticipating its partial automation of updates which will simplify our ongoing efforts.

Wednesday, the world witnessed a near catastrophe as the debt ceiling level debate in Washington D.C. went right down to the wire. I will not go into details here because it has been very extensively covered around the world.

In double entry accounting, one person’s income is another expense. An example of this is rent payments are considered an expense to a tenant but income to a landlord. With that in mind, Washington’s tarnished image as of October 16th will now serve as the key “trigger event” that Karl and I have been looking for a very long time. This will take us to the next level which will occur before the end of this month.

As a result of our imminent breakthrough, we are nervously anticipating the onslaught.  Watch for the fireworks on this site and you will fully understand exactly what we have been up to!!