Aug 27, 2014
We have eagerly awaited the latest release of WordPress 4.0. Although it is not as large a release as WordPress 3.0, it is moving us to our goal of greater functionality on our backend operations. As the release occurs on Wednesday Aug 27, we will be busy updating the site but it should in no way affect your access to our ongoing updates. Normally, one should wait a few days before upgrading but we chose to make an exception in this case.
Is it better to own a house or condo as an investment property?
Aug 20, 2014
There is a classic investment question which asks if it is better to own a stock or mutual fund. There is no right or wrong answer but I believe the article shown below addresses both sides of the debate.
Read more: http://tinyurl.com/q2pqhrf
There is also no right or wrong answer as to the debate of whether a house is a better investment than a condo but I prefer to say that the home is superior and illustrate my reasons why:
1) There is more prestige in owning a home versus a condominium.
2) There are no fees along with mandatory special assessments in condos unlike owning a home. This means you are responsible for your property and not your neighbors.
3) The accounting for a single family home is easier to understand than a condo board’s annual financial statements which may or may not have strict reporting controls.
4) There is greater privacy in owning your own home versus a condo.
5) You have more control of your investment in a home than a condo as one must abide by the condo board rules in the latter.
6) It is better to have a larger mortgage with corresponding payment (and hence built up equity over time) rather than have that money go to condo fees which will only be an increasing expense with nothing but a tax deduction to show for it.
7) Generally speaking, houses tend to have both a higher cash flow and equity appreciation rate than condos.
Aug 13, 2014
Of all the expenses in real estate, advertising for a tenant is the only one which has a positive rate of return. Everything else from repairing a faucet to property taxes are considered a cost of doing business and will not give a positive yield on your investment.
With that in mind, there are certain times of the month which will give you a greater chance of success than others. Here are some tips which should assist you in timing your next rental advertisement.
The 1st-5th are a good time to advertise because tenants will need a place and it is early enough in the month that they are still motivated to move in.
The 7th-12th usually have the lowest responses because it is too late after the first week and far too early for most to seriously consider moving for the next month
The 15th-20th have a good response like the first five days of the month because serious renters are being proactive in their search for a new place to live.
The 21st-end of the month usually give the best responses because month end is coming and people will want to get everything in order to move into a new place.
Aug 6, 2014
Have you ever heard of insider trading? If not, a definition would be appropriate. Generally speaking, it refers to using non public information to financially benefit from a transaction before the general public becomes aware of such knowledge.
If you ask anyone in the securities industry (i.e. someone involved with stocks, bonds, debentures, etc) whether it is legal, you will get a resounding no because it could lead to fines and/or imprisonment if caught. Many people have gone to jail for acting on a hot stock tip and ended up paying heavy fines.
In real estate, it is a completely different issue. If you hear of a property which has a million dollar valuation that a seller wants $800,000 for and you purchase it before it is ever on the market, it is not only legal but rather savvy! Acting on non public information will put you in the lead for finding the best deals.
Ultimately, the answer as to whether insider trading is legal depends on which asset class you are talking about, securities or real estate?
Have a written business plan for every property
July 30, 2014
Businesses come in many types of specialties. Some examples are banking, telecommunications, restaurants and vehicles. The best real estate investors realize that real estate is also a specific type of business. This is because one requires knowledge of the management, product, market, business plan, corporate structure and financials to progress.
One of these elements, namely the business plan is what many novice investors overlook when purchasing their properties. Real estate is a numbers game and one must have them in a written down fashion with realistic tangible objectives.
In your business plan, one must include the monthly, quarterly and yearly income and expenses for the property. These would necessarily include a cash flow statement to be reviewed monthly at the very least. One should also factor in any capital and current expenses into your plan to account for unforeseen and planned upgrades to the property. Do not forget to include a vacancy allowance because even the best properties in the best markets are occasionally vacant.
A key point which should be obvious after completing your first plan is that equity is not a priority but cash flow is because it is the heart of any successful business.
If you have never written a business plan, sit down with your real estate specific accountant and they can help you write one down which you can use as a template for your overall portfolio.
July 23, 2014
Before the internet was widely utilized in mainstream society, finding amenities for any property required the individual to visit an area and find out where they were located. One would usually have to ask neighborhood residents or drive around to find the nearest grocery store, laundromat, bank, etc were located and essentially guess how far each of these were from your place of residence.
Fortunately, those days are rapidly coming to an end due to a website called Walkscore. This unique and free service is dedicated to removing all the unknowns as to which amenities are available for addresses in Canada, the U.S., Australia and New Zealand.
One can download this useful tool on your mobile device from either the App store or Google Play.
If you are a real estate professional, you should definitely have a look at their site as it is rapidly being adopted into mainstream real estate sales. Have your IT team member install the appropriate widget on your website to promote your properties and answer buyer’s questions before they ask them. The widgets are easy and quick to install for any WordPress site.
For more information, please visit www.walkscore.com
Hire specialists not generalists
July 16, 2014
Suppose your vehicle needs some transmission work which cannot be put off any longer. Would you take it to a general mechanic or a transmission specialist? Although the mechanic would know a great deal about how vehicles work and their associated repair, my guess would be that you take it to the specialist.
The same type of reasoning applies to real estate investing. Your team needs to be full of specialists in real estate investing and not standard home buyers. Whether it is realtors, mortgage brokers or property managers, they need to be investors first and foremost. That is why one of the questions you must ask all these people is how properties they currently own. You should also ask them for references from other investors who have used their services in the past.
Do not use a realtor because they happen to be a friend or someone who lives close to you. Likewise, the mortgage agent at your corner bank probably does not deal with investors full time and would not be an ideal choice.
Also ensure that everyone you deal with is a full time registered professional and not a part time realtor, appraiser etc. Your money will be working full time and so should these people.
Does the rent have to be paid on the first of every month?
July 9, 2014
One of the most important parts of any landlord/tenant agreement is how much and when the rent is due. The amount due is generally set by market conditions but can be lower or higher depending on what unique attributes your property has to offer such as a convenient location to transportation and/or amenities.
The time of month the rent is due is another matter altogether. Generally speaking, rent is due on the first of the month but this is not always the case. The due date is an arbitrary number that the landlord/tenant agree upon which is consistent throughout the term of the lease. I have seen some landlords have the rent due on the 25th so that the tenant pays this expense before all their other monthly bills and therefore is less likely to miss a payment. Others choose sometime after the 1st such as the 5th of because their mortgage payments are not due until later in the month and they do not need the funds at that time.
Whatever date you choose, ensure that the payments are current as this is a win/win for everyone involved in the business transaction.
What possession date should one put in the offer to purchase
July 2, 2014
As stated before, taking possession of your first or any property is one of the best parts of the deal. Although any time of the month which works for both the buyer and seller is acceptable, you should consider certain repeating factors in your decision. Choose a date which is not in the first 3 business days of the month. These are usually the busiest for renters, movers, accountants, property managers and other professionals in the industry. You may also wish to avoid the last 3 days of the month for the above mentioned reasons. I like to choose between the 10th and 20th if at all possible as it is right in the middle and should cause the least amount of interruptions for everyone.
Possession day of rental property
June 25, 2014
Taking possession of a property is one of the most exciting parts of real estate investing. All your efforts have now produced something tangible.
Here are some tips I have found to be useful on that day which can alleviate some aggravations. Not all of these will apply if the property currently has a tenant.
1) Have a fully charged mobile device. This is more precautionary than anything else because you never know when you need it.
2) Arrange for someone to perform a maintenance call on the heating/cooling system on that day. Since you are already at the property, it makes sense to save yourself a trip.
3) If you have a property manager, have them meet you at the place about an hour after you take possession. They can then perform a walkthrough and inform you of any deficiencies which need to be addressed. .
4) Have a light snack with you in case you get hungry. Nothing can take your attention away from investing more than hunger pangs.
5) Bring a few rolls of toilet paper, towels and some soap for at least two bathrooms. Even if you do not use them, someone else such as a contractor or tenant will certainly appreciate the fact that you looked after this.
6) Ensure that all of your utilities are starting on possession day. With all the other details, it is easy to forget that you or someone else needs water, electricity and gas.
7) If you have the opportunity, meet the neighbors and start a relationship with them. You never know when you may need their help especially if you are managing your own property. This is doubly important for condominiums.
8) Ensure that all lightbulbs are in proper working condition. This is especially true for the outside lights as they convey a message of safety before a potential tenant even walks through the door.
9) If there is any landscaping that needs to be done, arrange for it to be done at this time unless it is the middle of winter in which case the sidewalks may need to be shoveled.
Utilities on rental properties
June 18, 2014
In a previous commentary, we mentioned that the tenants should be responsible for their own utilities. There are some important points to follow up on this important topic.
1) If you are purchasing a property which is empty on your possession date, ensure that the heating/cooling utilities, water and electricity will all commence at that time. All too often, investors have their attention on many other details including dealing with realtors and lawyers that they forget about this important step. As soon as a tenant moves in, stop paying for the utilities.
2) If a tenant moves out, arrange for the utilities to immediately revert back to your name for as long as the property is empty. This can be easily setup with a simple phone call to each utility provider. It can be a valuable time saver and potentially ensure you do not have burst pipes in the middle of winter! In the event a property manager is overseeing your property, have them pay all the bills while it is vacant and you can then reimburse them upon successful placement of a tenant.
3) Utilities providers sometimes entice customers into signing longer term contracts using the sales pitch “saving you money”. There are no hard and fast rules in this area because every contract is different and situation unique. However, you must recall that before they ever approach you, they have done very extensive due diligence as to what is in their best financial interests and not necessarily yours. The rates they offer for utilities are designed to maximize their profits.
June 11, 2014
Purchasing a positive cash flow property and having the market drive equity prices higher is the most common method real estate investors use to increase their net worth. It is important to note that this is not the only method of doing so.
One approach is to renovate an existing property and have it appraised after the work has been accomplished. There are many types of renovations one can follow through on but they do create equal return on investment dollars so it is necessary to be choosy as to what one undertakes.
A simple approach to this is to do some painting on the inside and/or outside. The time and cost required to do this is minimal compared to say putting in a new kitchen although both go a long way to improving the value of one’s property.
Some common renovations which are not recommended are to furnish the basement in a home or install a swimming pool. These generally require a large capital investment and do not produce a large return.
If the newest trends in home improvements motivates you to renovate, then go and visit the showhomes in your area. This is a simple but very effective way to discover what the developers in your area are doing to attract buyers and may give you a few ideas as to what is trending in the marketplace.
For more tips on renovations, please visit: http://tinyurl.com/mph6435
June 4, 2014
No matter who you are or where you are investing, an offer to purchase property or land is essential to your success. It does not matter how much research, due diligence and discussions one has, an offer must be written and accepted at some point. It separates those who take action from those who watch on the sidelines.
In order to stand out from the crowd, you must be memorable. That is why the real estate cover letter will go a long way to ensuring your success. After all, this is a sales pitch you are presenting. For more details on writing a cover letter, visit: http://tinyurl.com/l2bqyz3
As for the actual offer, it is a legal document and if you are unsure of any aspect, investigate before you sign and not after. It is null and void if there is no signature at the bottom. If one still uses paper, use a blue pen and not black to distinguish it from the rest of the document.
I also like to put an expiry on the offer of anywhere from 30 minutes to 2 hours from the time it is presented. The offer then becomes an option which gives the buyer the right but not the obligation to accept it and you are leveraging your time instead of potentially wasting it. As options traders often say, you never want to be long and wrong!
For more details on writing a winning offer, please visit: http://tinyurl.com/pcyke82
May 28, 2014
The tenant (customer) is what drives your real estate investment. For the buy and hold investor, they are your lifeblood to success. With that in mind, it is very important to find someone who can help you achieve long term success. On March 6, 2013, we gave some pointers on how to proceed on this very important subject. As a follow up to that post, we are would like to mention these as well:
1) Have the security deposit (which may equal the first month’s rent) in your bank account before the tenants move in. This is non- negotiable and is designed to protect you the investor.
2) Ensure the tenant(s) have a bank account. If they insist on paying in cash, this could be a signal that the banking system does not trust them and neither should you! You cannot be sure that the source of funds is even legal especially if they want to prepay an entire year of rent in cash.
3) Do not rent out a property to someone you have never met. There is absolutely no substitute to meeting someone face to face and getting a first impression of who they are. If you get a funny feeling that something is not right, there is probably a reason for it and it is best to say “I have decided to rent out the property to someone else”. Even if you have not found this “someone else”, it is a way to avoid any potential legal issues down the road.
4) Do not rent out your property to a friend or a relative. This will only blur the line between your investment and your emotions. If they do not pay the rent, it could be more difficult to remove them from your property and may involve consequences for your personal relationships.
5) If the rent is not paid on the first of the month, start the eviction procedure the next day. Your property taxes, insurance and mortgage are all due at the same time of month without any extensions. Your tenant must follow the same policy.
Why you should never own a property free and clear
May 21, 2014
A fully paid off property is the dream of many homeowners. The fact that one’s debt to a lending institution has been cleared and they can never take away the property can be bliss. What is not appreciated is the fact that a new type of danger has been exposed and it can have frightening consequences.
A fully paid off property is a signal to criminals that one’s mortgage free property is an easy target for identity theft! Thieves can write phony mortgages with fraudulent signatures and result in your property having a mortgage you will be responsible for. In order to curtail this before it starts, there is a simple and effective way to deter this from ever occurring to you.
Obtain a small mortgage or secured line of credit, (say $5,000) and have this registered at all times on your property. The payments are usually less than your monthly coffee budget but the real benefit is that it deters thieves from ever wanting to steal your property because the bank is now involved. The lender would have the time and resources to pursue this type of fraud and the thieves know it!
A mortgage is really a type of insurance against identity theft and it won’t cost you any extra.
May 14, 2014
Stock markets are terrific newsmakers in that they always report how the major indices like the Dow Jones and S&P 500 have done in the past day, month or year. The ROI on your investment is the same regardless if you live in one part of the country or another.
In the United States, there is a popular metric called the S & P Case Schiller home Price Index. This essentially tells you whether the average price of residential homes are going up or down. I do not pay much attention to it for the following reason.
Generally speaking, real estate is a local phenomenon and it does not necessarily correlate across an entire region or country. Even in the same city, certain communities will outperform or underperform others. One cannot extrapolate a national average to be an accurate indicator as to what is occurring in one particular region. For the most part, the trends to watch are in the area you are investing in. For example, Toronto’s expansion of the 401 highway should not grab your attention if you are focused on Edmonton. There are some variables that would defy this rule such as interest rates and oil prices which have a national or global impact.
Heating/Cooling System Maintenance
May 7, 2014
To succeed in real estate, one must keep the expenses low while being proactive in preventing problems. A simple but very effective way to achieving this result is to conduct a regular maintenance on the heating and/or cooling systems in your properties. This often overlooked step that investors need to address can go a very long way to saving you money.
The best time to schedule a maintenance call for the heating/cooling system is on the day one takes possession of an investment property. From that point on, setup a regular maintenance schedule ranging from 2-3 years depending on your situation. Many investors do not follow through on this step and they are the ones who end up paying large invoices for an emergency service call when their furnace stops in the middle of the night. A regular maintenance schedule also lengthens the life of the furnace/cooling system and can potentially save you thousands of dollars later on. Setting up this reminder in your mobile phone as a recurring event will ensure you never forget this critical step.
If you decide to use a service from the internet, please read the Google, Yelp (or other) reviews that describe past customers experiences. Also ensure that the company you are using to conduct the work is certified.
Political predictions for 2014
April 30, 2014
Investing in real estate require one to be conscious of geopolitical forces that shape the environment. These can be local, regional, national or global in nature. For that reason, I wish to venture out with two predictions as to what will transpire this year for Alberta investors.
1) Russia will invade eastern Ukraine sometime in May. There is simply no other reason to have tens of thousands of troops at the border conducting military exercises. Having said that, I do occasionally go to the Pravda website as to hear their side of the story. The disintegration of the Soviet Union has left Russia in a weaker state Putin may wish to get some of that sphere of influence back. Recall that he took over Crimea in March!
2) Jim Prentice will be the leader of the Progressive conservative party come September. Although I do not believe it to be a coronation of any type, he is the front runner to be the next leader because he is not tainted with the same type of history as his opponents. A strong track record at the federal level only strengthens his case.
Down payment on rental properties
April 23, 2014
One of the most daunting tasks facing a first time real estate investor is dealing with the financing. Banks can very intimidating when you are dealing with their money and unless you know what you want, they will be unable to assist you. Some people advocate putting little to no money down so not to have your own money involved whereas others profess to putting 100% down to avoid the banks altogether. My approach is take a middle of the road approach with 35-40% down for Alberta properties. Here is why:
The properties which have little to no money down will usually not cashflow and hence any market downturn will have a negative impact on these investors the most such as it did in 2008. Putting 100% down is an inefficient use of capital and will result in a rapid depletion of funds which stops you from growing a portfolio.
35-40% down is a compromise between the two extremes and is a good rule of thumb. Banks will usually approve mortgages with this much down and it will most likely cashflow. This amount also takes into account the potential damage that can be brought to investors through unforeseen risks such as derivatives. There heavily leveraged unregulated financial instruments are more plentiful today compared to 5 years ago when the world nearly went into another depression. They also have less reporting restrictions compared to equities which results in more unknown risks. Because of the potential damage they can inflict upon investors, it is better to be safe than sorry when purchasing properties for long term wealth. Also, a positive cash flow portfolio is a form of insurance in the event one has a reduction in their equity position because one can immediately start rebuilding financial losses even if they have not been realized.
In any other marketplace around the world, the down payment should be enough for a property to cover all the monthly expenses (i.e. positive cash flow) and have something still left over. A positive cash flow investment will surely increase the odds of your success!! Investing for equity appreciation only is definitely not recommended.
Please note that publicly traded Real Estate Investment Trusts (REITs) in Canada are known to put 50% as a down payment on their investment properties so they can declare dividends to their investors.
April 16, 2014
We have been very busy behind this scenes this past week due to substantial progress we have made on both the IT and legal fronts. Let me explain.
First of all, WordPress has released a number of patch releases in anticipation of their major update called WordPress 3.9 which is due any day now. We have been updating our systems to ensure they are fully up to date. All of this is going on without interfering in our service to you the reader. We would never use an antiquated system such as myspace or any variation of it in 2014 and neither should you if you are on the web!
Secondly, we have nearly finalized our choice of legal counsel for our corporation. Our final few candidates have offices in Calgary and are internationally renowned law firms. Once we have made our final decision, we will let it be known as they will key in us proceeding forward. This comes at a critical time as our major announcement from October is nearly ready.
Renting out the garage as extra income
April 9, 2014
The most common method of earning income from an investment property is through tenants paying rent. This is very effective for creating cashflow but it is by no means the only method available to an investor. An often used strategy is to rent out the garage. Many novices mistakenly believe that the garage automatically goes to one of the tenants but this is not necessarily true.
Garages are great because people often use them as storage facilities for long periods of time, have little maintenance and are generally easy to rent out in any economy. Garage rents can range from $50-$600. The $600 figure is a very high end garage in a residential dwelling. If you prefer to go down this route, just remember to make the lease for at least a year term and have the renewal come up during the cold winter months as to provide a disincentive to the renter for them not to move and instead renew their lease. Garages may or may not be governed by the same set of laws regarding residential dwellings which can give the owner more flexibility in their choices as to who they choose to be their customer.
Alternatively, one could rent out the garage as a parking unit from one of the tenants or someone else who does not live at the property.
For more information, please visit: http://tinyurl.com/n3gt6mp
April 2, 2014
An important part of investing is to be presented with other people’s viewpoints and opinions. No one individual can have access to everything and that is why having other’s knowledge and experience can be very useful in your investing journey. Later this year, we will have a number of experts from the real estate industry present their perspectives on real estate investing. We are still finalizing the list and when we are ready, they will appear in this section.
In addition, Karl will be writing several articles on businesses, investing and of course his vast knowledge of the IT world. I have often said that he is the elite in the world when it comes to his IT knowledge and experience and I will leave it for him to describe his extensive one on one experience with leaders in that sector. Even if you have never worked in the technology field, these names will be familiar to you all!!
March 26, 2014
Owning investment property can be challenging and very rewarding at the same time. It takes a certain set of skills to handle all the accounting, property management, legal, insurance and other issues which arise from its possession. Some investors want the upside to owning real estate but do not want the potential downside. This leads us to discuss the Real Estate Investment Trust (REIT).
A REIT is a company that owns income producing real estate. It may contain apartments, commercial real estate or even shopping centres. If the company is publicly traded, its common or preferred shares are listed on a stock exchange and can be purchased through a registered investment advisor.
Sometimes, investors state that they own real estate whereas in fact they own shares in a REIT. In order to own real estate, you need to be on title (deed) and have legal counsel register you as such. This is a simple but key difference between owning securities and possessing investment real estate.
How to get discounts from contractors
March 19, 2014
When utilizing a buy and hold approach to real estate, a solid team of contractors will be invaluable to you. Whether it is an electrician, plumber, furnace repairman or any other specialist, these people will perform the tasks which are associated with maintaining your investment portfolio.
Many investors try to get these contractors to reduce their rates or labor costs from the very beginning. This usually does not result in a reduction in fees and you will potentially lose an excellent contact.
Instead of asking for a price reduction from the beginning, insist that you pay the full price and do so as soon as possible.
The next time you need their help, they will remember your previous dealings and place a higher value on you over everyone else who requests a bargain from the beginning. Over time, you will develop a relationship with these contractors and they will start to give you discounts on parts and/or labor on jobs that are required. Continue to pay all your bills when you receive them if not sooner. By focusing on long term relationships, you will get more discounts and will stand out above the crowd.
How often should you visit your properties
March 12, 2014
First of all, we would like to say hello to all of the visitors from Brazil. There has been a substantial amount of interest from your country and we wish to acknowledge that.
Whether you are managing your own properties or have a manager who does it for you, a regular visit is recommended for continued success in real estate. The only exception to this would be is if you do not live near your investment properties and it is not practical to routinely travel and do a visual inspection of your portfolio. No one will ever care about your real estate portfolio as much as you do!
In the world of paper assets such as stocks and mutual funds, a quarterly report is sent out to investors to inform them how much their portfolio has changed in the past 3 months. With this in mind, it would be advised to drive by your properties once every three months. Also ensure that when you take your trip, it is done in the middle of the day. This is to ensure enough sunlight exists such that you can see any small problems which can turn into big problems such as cracks in the foundation. Other potential problems you may wish to observe are any derelict vehicles nearby, uncut lawns, windows which need to be replaced, etc. This is yet another example of being proactive and not reactive in your investing.
March 5, 2014
A critical part of any real estate purchase is the home inspection. Some people choose to forego this expense in a booming market but I would strongly recommend against it. This simple due diligence step can save you tens if not hundreds of thousands of dollars in unforeseen costs. With that in mind, here are some tips which can save you both time and money.
1) Ensure that you have a home inspector is lined up before you go about purchasing your next property. Be proactive and not reactive in this step.
2) If possible, ensure that there is no business relationship between your realtor and your home inspector. Some realtors like to work with home inspectors who are more relaxed in their inspections and it results in buyers proceeding with a purchase that would otherwise not be recommended by others.
3) When purchasing prebuilt real estate, a key component in your offer to purchase must be a line stating “subject to buyers satisfactory building inspection within 15 days acceptance”.
4) When conducting a home inspection, please ensure that you are there for the entire process. Before you make any large purchase such as an investment property, it is definitely worth your time to see every small detail you may have missed and that a licensed professional will find.
5) Investigate to see if a home inspector is currently licensed and has a professional designation. Any honest and reputable inspector will gladly comply with this simple request.
For more home inspection tips, please visit: http://tinyurl.com/yz85f42
Do you need to be fully invested at all times?
February 26, 2014
Years ago, one of my financial advisors placed me in an equity mutual fund which was 85% cash. I had questioned her about the approach the fund manager was taking because he only had 3 holdings whereas other mutual funds had 30-40 if not 100 stocks. She assured me that he was an outstanding investor and knew exactly what he was doing. I again questioned about his technique because it seemed he was more lazy than prudent. Nevertheless, I invested in May of that year given my strong relationship with my advisor and great advice she had always given me and does so to this day!
All through June, the fund manager did not buy any stocks because he felt they were all overvalued. Then in July, he finally bought a 4th stock to add to his portfolio. At this time, many investors were fed up with his approach and had bailed out but I decided to stay with him because at least he had not lost any money.
Then the unpredictable happened in September of that year. Two planes crashed into the World Trade Center in New York and the rest is history. The fund manager had 300 million dollars sitting in cash and when the markets eventually opened up, he was able to purchase securities at discounted prices because he had followed his disciplined systematic approach to investing. The AIC American Focused Fund managed by Larry Sarbit made a 5 or 6% gain on the year which was far better than the 20-30% losses of other comparable investments.
Another great example is that if you had invested in the NASDAQ Composite back in March 2000 when it was at approximately 5000 points, you would still have lost more than 10% of your money since that time using a buy and hold strategy. This would have greatly underperformed holding your money in cash over the past 14 years!
The point I wish to make is that it is OK to be in cash if you are unsure what to do. Being fully invested means someone is making a commission when you part with all of your money.
Questions to ask your IT team member
February 19, 2014
In any kind of team investment environment such as real estate, having an Information Technology expert is critical to success. There are many talented people who have degrees in computer science and whom I would never work with because they lack necessary business skills that I look for. The days of having an IT consultant who does not have any understanding of businesses are long gone. If your IT help does not have any business or investment training whatsoever, do not spend any time vetting them and move on. Here are two examples of what I now use to see if they have a basic understanding of the business side of the internet
1) If your IT team member is unable to install a widget on a website they are overseeing, they need to be fired immediately! Widgets (such as what we have with Ratehub’s Mortgage rates) are fairly standard with any WordPress application and have been since approximately 2003. Not understanding widgets or being unable to install them on a website currently in use is comparable to not upgrading your mobile phone over the past decade!
2) If your IT member is building you a blog, have them present you a purely business case as to why they are using WordPress, Joomla or Drupal for the site. These are three most popular blogging formats with WordPress overseeing approximately 20% of the internet. If you are not using any of these very popular current formats, have your IT member thoroughly explain to you from both a technical and business perspective why they are not leveraging the most modern technologies available to developers today.
Before someone meets you today, chances are they have gone to your website and already evaluated you based on that impression. A loss in a joint venture or other business opportunity could result because of your IT consultant’s deficient and potentially outdated skillset.
February 12, 2014
When I was completing my undergraduate degree in physics, I made no secret that I was a theoretical and not experimentally motivated student to solving problems. Back then, Star Trek the Next Generation was a very popular TV show and I called myself the “Greatest Experimentalist on the Holodeck”.
The Holodeck was a 3D dimensional recreation room where one could make any object or person appear. Although the TV show was make believe in its time, it is rapidly approaching the point where science fiction is now becoming science fact.
3D Printing is a trend which many people believe will change the world. If one looks back to the middle ages, it can be argued that Gutenberg’s printing press was the greatest invention of that time period. 2D printing literally changed the world!
3D printing is a process of making a 3 dimensional solid object from a digital model. You can already buy a 3D printer on Amazon. I believe this will usher in a new type of industrial revolution which will affect manufacturing and medical advances to name but two areas which will see huge changes. Eventually, everyone will have a 3D printer in their home to manufacture anything they desire. Watch for this megatrend to change the way real estate construction and manufacturing are done over the coming three decades.
February 5, 2014
Why do you invest in stocks, real estate or any other asset class. Some may scoff at the question, but I am quite serious about this.
As famed venture capitalist Kevin O’Leary often says, “It is to make money”. This is a common answer but i do not believe it to be the absolute and total truth.
Upon much reflection, I have subscribed to the Jim Dines explanation as to why we truly invest and that is for lifestyle!
Whether one wishes to acknowledge it or not, the prime symbol of our world is money just as stone was in Egypt thousands of years ago. Because of this attachment to necessities and the luxuries of living, we invest and often continue to invest in whatever asset classes we believe will give us the lifestyle we desire.
Investing is the difference between Honda or Ferrari, a weekend in the mountains or a month long cruise. Remember this the next time you make your next investment decision.
What do tenants look for in a property?
January 29, 2014
In order for you the investor to succeed in the real estate game, seeing the deal through someone else’s eyes is essential to your success. We have previously looked at what a banker looks for in a real estate transaction. Suppose you have a found a great property and have closed the deal with bank financing in place and you are preparing it for a tenant to move in. The question now becomes what the tenant wants in a rental property.
A beginning investor will immediately respond that the tenants (customers) want a low rent. That quick answer is not correct however. In fact, one of the biggest draws for a tenant is the location of the property. The old adage of location,location,location is also true for them.
For more details, please refer to these two articles:
10 Amenities Tenants desire in a property: http://tinyurl.com/n99sxpq
What tenants really want in rental properties: http://tinyurl.com/kb3tq2t
A key requirement to success in real estate
January 22, 2014
When investing in stocks, bonds, mutual funds or commodities, an analysis of the fundamentals and technicals along with a solid team can lead to success. This can usually be done with aid of a computer and smartphone.
The above mentioned points are essential to success in real estate but I have found there is one is hardly ever mentioned. Real estate is far more physically demanding than investing in paper assets or commodities. The need to use one’s body (especially the back), handle stress and have healthy joints are some examples. Keeping physically fit and taking enough vitamins and minerals not only keeps you healthy but helps when you are under pressure closing a deal, multitasking or completing renovations.
Before you start your next real estate endeavour, ensure your body can keep pace with your own investment expectations. See a chiropractor, get a physical check up or go see a dietician. You will thank yourself for it!
The most important question to ask before investing
January 15, 2014
Over the past 15 years, I have been exposed to a wide variety of investments in diverse asset classes from stocks, bonds and options, to licensing agreements, commodities and real estate. It is very important to know what you are investing in and be able to forecast a cash flow in your investment. It is also important to know if there could be a capital gain and have a clear understanding of where your money goes. I used to believe that these were the most important questions to ask.
I have completely revamped my philosophy and now ask the following question before anything else. Is the investment being offered to you legal or not? Let me give you a few examples.
Someone asks you to sign a document for a mortgage on a property which you claim to be moving into. You never actually live there as your home and collect a commission for lying on the mortgage application. Congratulations, you have an infinite rate of return (because you put no money into the deal) and have committed fraud!!
You attend an investment seminar whereby a promoter you have never met is selling shares in a real estate development project. They go to great lengths to discuss the rents, landscaping, new roads, amenities, etc. At the end of the seminar, they give you a piece of paper asking you to purchase shares in their real estate project. For the purposes of illustration, let us assume you are not an accredited investor (i.e. millionaire). The following questions must be asked by you:
1) Are they legally registered with the appropriate securities commission to solicit these non-real estate investments? If not, it is illegal. Real estate is not the same as shares in a real estate project!!
2) Do they have a prospectus filed to prove that the securities being offered have been thoroughly vetted (i.e. reviewed). Ask to see the prospectus (especially if they are not registered to do this work). If they don’t have one, this is also an indicator that the offering is most likely illegal.
The next time you see an investment offered for a development or quick cash for signing a mortgage application, ensure that it is legal? If uncertain, ask someone not interested in your transaction for assistance such as a real estate or securities lawyer before you invest.
January 8, 2014
As you begin down your investment path, many words and ideas will come to you. It is very difficult at first because of the investment vocabulary utilized by others and the fact that everyone has to start somewhere which is usually at the bottom. It is very much an emotional battle of getting out of one’s comfort zone. You must go through a period of uncertainty and haze and know that this time of not knowing what you are doing will eventually lift. If you have purchased 1000 different securities or properties in your lifetime, the next one will have a slight difference to it compared to the previous purchases. This leads to the question as to when you will ever have enough information to be 100% knowledgeable when investing.
The answer is that you will never ever have all of the facts to make a decision. There is always something new to learn. No matter how small, the intricacies are always there. Ultimately, investing is not about the facts and figures as it is about your instincts telling you to proceed or not.
January 1, 2014
If there is one thing we can all agree on is that 2013 is finished and it won’t be coming back! It was the year of Nelson Mandela passing on, the Boston bombings and Alberta’s floods to name a few memorable moments. It was also the year we extended our internet reach worldwide. In over 60 countries, our impact has been acknowledged and is rapidly approaching a tipping point in which the world can no longer ignore Alberta’s role in the investment community through this website. It is always a thrill to see which countries around the globe are visiting our site. From the Americas, Europe and Asia Pacific, we welcome you all to read our unmatched daily research!
The initial stage of getting our name out to the world is now complete. 2014 will be the year where we are judged by our performance of providing Alberta’s real estate trends through the internet. We have only given you a sample of what is in store for you.
All the best and hang on for one hell of a ride!!