Category Archives: Why Real Estate?

InvestKamloops TV – New Purchase

by

My deal of the week last week was a townhouse that is very similar to a deal I just completed.  I did a tour two weeks ago prior to the renos being complete, so here is a video tour now that it is done.

 

 

And here are the numbers in case you are curious:
208,500 cash purchase(private financing).

$5000 for paint, counters, fixtures, install dishwasher, paint.

$215,000 appraisal.

New mortgage at 2.88% for 30yrs for $161250, payments are ~$650

2nd mortgage $400. P&I

Taxes $70

Utilities $200

Insurance $27

Strata $151

Prop Manage $187

Internet: $40

TOTAL EXPENSE: $1725

Lease agreement signed for $1877. DD and 1st mo already paid= $2815.50.

Cashflow is about ~$150/mo on a fully leveraged property!

The trouble with fully leveraged property is that the ROI is infinite, so suppose 25% downpayment were here($53,750), cashflow would be about $550/mo($6600/yr), mortgage repayment is $~3000/yr.

That is $9600/ $53,750 = 17.9% ROI/yr . Not bad, but if you factor in appreciation(these places will be $250,000 within 5 years) ROI gets closer to 30%.

These are great little deals, pick one up before prices rise too much(previously bought for $187K, now selling for $208K!!)

 

Until next time,
Stay SAFE

Where “Stay S.A.F.E.” comes from

by

Someone recently asked about my signature at the end of my blog posts and newsletters “Until next time, Stay S.A.F.E. ”

Besides the link to my business model for investing(Starter homes, Attractive to families, Fairly priced, Economic fundamentals), this salutation has a very personal meaning to me.

Continue reading →

The BEST Way to Invest in Real Estate

by
housecoins1

As a student of real estate investing since 2008, I have seen almost every way to make money in real estate. I have spent thousands of dollars and just as many hours taking courses, reading books, speaking with other investors, and trying methods I learned.

Here are a few examples of how to make money with real estate, keep in mind this list is not exhaustive:

Rent to Own(tenant first or traditional)
Sandwich Lease/ Agreement For Sale
Furnished Rentals(ie High Street)
Bird Dogging/Assignments(Sourcing deals and selling them to other investors)
Reno/Rehab/Flipping
Student Rentals
Development/Building New
Selling Real Estate(Realtors)
Multifamily/Apartment buildings
Commercial Buildings
Foreign Real Estate(ie US)
Joint Ventures
Buy-and-Hold
REITs (stock market)
Mortgage Investing
Single Family/Condos
Property Management

For each vehicle and strategy to invest in real estate, a risk/reward analysis should be made, assessing your strengths, assets, capabilities, and your willingness to invest the time needed for each.

Of all possible options to make money in real estate, I believe one is BEST and here is why… Continue reading →

7 Tax Strategies for Real Estate Investors

by
20140224-112228.jpg

Although taxes are not due for almost 2 months, completing tax returns before the deadline is top of mind for me and many other real estate investors.

We recently completed most of our tax work needed, and sent if off to our accountant. I’m only waiting on a T4 slip from my employer.

It has been a learning curve to get to this point, and here are some tips I have used along the way that make tax time much easier:

1. Each Property Has Own Bank Account
This is key to understanding how each property is performing. This also makes it easy to do your bookkeeping, in fact your bookkeeping is almost completely done for you.

We ensure that every expense and all income for a property is only in and out of that property’s bank account. When you start paying for things personally, then reimbursing yourself from the property, it turns into a bookkeeping nightmare.

2. Know Your Deductions and Credits: Use a Checklist
Common deductions for a real estate business:
– interest paid on the mortgage
– utilities
– property taxes
– repairs to property
– gifts to tenants(ie welcome basket)
– market research

Less common deductions:
– interest on loans incurred to invest in real estate(line of credit used for downpayment for example)
– Capital Cost Allowance is more common with larger buildings(multi family and commercial) than single family homes. That being said, CCA can be worthwhile once your rental income exceeds your expenses by a large amount to offset taxes payable. Keep in mind you will likely need to repay these saved taxes upon sale/deemed disposition of the property, so please consult your tax advisor to see what’s best in your situation.

You can download a useful checklists here.

3. Stay Organized
I am not a very organized person, so thank God for my wife. She keeps close track of the receipts(I must remember to write on the receipts what each expense was for), and reconciles them with the bank accounts using spreadsheets. The only thing I need to remember to do is use the proper bank card for the proper expense. It’s wonderful that she has even put labels on the bankcard telling me which one can be used for which property/business.

20140224-125641.jpg

If you are well organized, congratulations! If not, hire or marry someone who is 🙂

4. Make Sure Your Advisor is a Real Estate Expert

There are many good accountants and advisors out there. In my experience however, there are very few who are real estate experts.

I get my advice from accountants who own real estate. They know what works best for them, and can translate that into what will work best for me.

My accountant, like all advisors that I lean on, are real estate investors. Mine even wrote the book on real estate taxes in Canada!

20140224-113030.jpg

5. Repair or Improvement?
This is a common question I get from other owners of rental property.

Repairs can be immediately deducted from income. Improvements must be capitalized over time (see CCA above) , this is usually less desirable.

If you are bringing something in your property back to original condition, this is generally a repair expense.

If you are adding something new(a pool or theatre room, finish a basement) or making an improvement(replace ordinary counter with better one like granite), this will need to be capitalized, deducted over time.

Something that has become my mantra is “I am bringing it back to original condition.”

6. Review Last Year and Make Your Next Tax Plan the Year Before
It’s good to step back from the busyness of life and look over an annual “report card.” Since the rewards of real estate are slow, annual taxes provides an opportune time to review the fruits of the hard work. The nice thing about investing in real estate is improvements/net worth becomes markedly better year after year. This information can revitalize you and helps reinforce that all the hard work IS worthwhile!

Your goals and circumstances change often(mine do anyway). It’s important to review your taxes to make sure that your tax plan is helping to get you closer to your goals.

If you fail to plan, you plan to fail

7. Know Your Deadlines
Personal Taxes must be filed April 30th.
Business Taxes must be filed June 15th.

Taxes for both must be paid by April 30th. A tax Callander can be found here.

Taxes are just one component of real estate investing that requires an intimate knowledge. To succeed you must educate yourself, or hire someone like me to do it for you 🙂

Until next time,

Stay S.A.F.E.

Objective Truth? Relativism?

by
20131204-150129.jpg

Just read a fascinating post by Robert Ringer, a “mentor from a distance” I have been following for the past month.

This is not exactly directly related with real estate, it is more of a matter philosophy.

20131204-125844.jpg

But, property owners are wise to understand why we have property rights, and a duty to be responsible stewards of wealth.

I hope this gets you thinking as much as it did for me.

Read the full article here.
 

Until next time,

Stay S.A.F.E.

Are Double-Digit returns too good to be true?

by
20131123-091535.jpg

I was recently speaking with a potential joint venture partner. When I showed him the expected returns, he said 10% ROI sounds too good to be true!

Have to admit, I was unprepared to answer him. I guess as a real estate investor, and doing this for several years, double-digit ROI has become the norm for me.

I have spent some time thinking of an example to best illustrate this, and the best example comes from real life.

Continue reading →

Words Have Meaning. And a great marketing tip.

by
20131115-224023.jpg

If you can’t tell who is up on stage, it’s because I was an hour late(Coquihalla was very snowy) and had to sit at the back of the room tonight. I did however get there in time for the keynote speaker. There was some very powerful words from this man, thought provoking and inspiring.

Continue reading →

Real Estate Crystal Ball

by

After yesterday’s post that completed the explanation of “Fat Bear” strategies, you should understand why Real Estate is such a powerful creator of wealth.

But, can you identify  the key thing you need to make it work?

Like any business, real estate needs paying customers to sustain it, ie. tenants.

So how do you know where the tenants will be?

The answer lies in the following formula, developed by the Real Estate Investment Network, through over 20 years of research.

Continue reading →