Tag Archives: investing

Jan 16 2025

Real Estate Investment: The Case for Renting Your Condo

So, I just met with the realtor – We think we can sell my condo for about 180K. I owe about 144K on the mortgage. After breaking my mortgage, lawyer fees for new home purchase, realtor fees for new home purchase, etc…I’ll probably have 20K left over. Not as much as I’d like for living in it for 10 years. But better than a kick in the pants.

However, I currently pay about 790 in Mortgage, 390 in condo fees. So about $1200 a month total. I could rent it out for about 1600$ a month. Principal is being paid down right now at about 200$ a month.

I have zero landlord experience. But I thought I could get a property manager. Would they take care of most of the work? I don’t need to sell the condo to buy the new home. (We have 100K saved). The condo is in an excellent location near a university, and it would likely be rentable. We have steady jobs as both a teacher and a health care worker. If I sell, I’ll probably never have a rental property again. Also, we have no debt other than this current mortgage and our upcoming home purchase. Excellent credit. 40K on a line of credit if needed.

I could also take that 20K and put it in a TFSA of some kind. Let it grow. Maybe that’s easiest and least risky.

The condo is in Sask.

Thoughts?

Here’s my analysis. I know which decision I’d make. Hopefully it helps you to make an informed decision.

Option 1 (Stocks): total benefit of $73,200 over 20 year duration.

  • After 20 years, your $20K will be worth ~$93.2K; a gain of $73.2K
    • The above assumes that you obtained average returns of 8% per year, compounded annually.

Option 2 (Real Estate): total benefit of $407,807 over 20 year duration. ($294,951 + $112,856)

  • After 20 years, it is anticipated that the real estate will be worth $294,951
    • Assuming 20-year mortgage at 5.24% interest on average.
    • Assuming 2.5% average real estate property value appreciation per year, compounded annually.
  • During those 20 years, you will have collected $112,856 positive cashflow over 20 years.
    • Assuming an increase in rental income each year by 3%.
    • Assuming property management fees of ~12% of rental income, so that you can outsource property management. ($1,600 x 12 x 12% = $2,304)
    • Assuming $2K per year of repairs in addition to the condo fees (internal unit repairs).
  • At the 20 year mark, your mortgage balance will be $0
    • Moving forward your positive cashflow will be significantly higher (+$790 monthly, as there is no more mortgage). Congrats!

On top of all the above, I left out the biggest benefit of real estate investment, being able to write off all mortgage interest payments on your income taxes to reduce your legal tax exposure for the entire duration while you retain the investment property. Additionally, there are other taxation benefits that can be leveraged in appropriate situations (e.g. depreciation of real estate to offset capital gains, etc.)

So, with that, it’s your choice, but as you can see the option of keeping the real estate will deliver 557% better returns from year 0 to 20; and even better returns thereafter as you will no longer have a mortgage on the property, delivering you positive cashflow in perpetuity moving forward.

Reference Worksheet:

YearStocksReal EstateReal EstateReal Estate
ValueValueAnnual CashflowMortgage
0$20,000$180,000$0$144,000
1$21,600$184,500$4,200$139,779
2$23,328$189,113$4,326$135,334
3$25,194$193,840$4,456$130,652
4$27,210$198,686$4,589$125,742
5$29,387$203,653$4,727$120,552
6$31,737$208,745$4,869$115,087
7$34,276$213,963$5,015$109,331
8$37,019$219,313$5,165$103,287
9$39,980$224,795$5,320$96,906
10$43,178$230,415$5,480$90,186
11$46,633$236,176$5,644$83,109
12$50,363$242,080$5,814$75,670
13$54,392$248,132$5,988$67,823
14$58,744$254,335$6,168$59,560
15$63,443$260,694$6,353$50,859
16$68,519$267,211$6,543$41,704
17$74,000$273,891$6,740$32,055
18$79,920$280,739$6,942$21,894
19$86,314$287,757$7,150$11,194
20$93,219$294,951$7,365$0
Total: $112,856
Sep 16 2024

What makes you happy? What gets in your way? Don’t forget to also invest in yourself!

People are so busy in their daily lives that they don’t give themselves the time to see anything that falls outside of their routines and habits. Unfortunately, as a result, most people never achieve peak happiness. Take the time to do one of the favorite exercises that I do with my students :

– What makes you happy?

– What keeps you from doing these things?

More often than not, the first one revolves around family and friends. New experiences, travel, social gatherings and games are typically involved the descriptions.

While experiences often mentioned require some money in order to experience, they typically don’t require amassing possessions, which is most often what keeps people from doing these things. They’re often neck-deep in work so that they can pay for their amassing of bigger, better, upgraded possessions; most of which they don’t use nearly enough to ever break even on.

When I remove these individuals from their daily lives to see what they’re doing, it’s always so crystal clear to them. You see, humans tend to get into routines and develop habits. We just keep doing the same thing over and over again, even if it never helps us to, and even pushes us even further away from, achieving peak happiness. Nearly everyone keeps themselves so occupied that we don’t even give ourselves time to think about what makes us happy.

If someone finds themselves in this boat, they should block off time each week to remove themselves from their daily lives so that they can sit down, relax and just think about what makes them happy and what gets in their way. This will lead to a plan as to how to achieve more happiness while eliminating the obstacles.

Removing ourselves from our daily lives is a gift that everyone should give themselves regularly – a few hours each week and a few weeks each year – the return on happiness from doing so will be immeasurable.

May 9 2024

Why should I become a venture partner in real estate investing? I want to do it all on my own!

Time for successToday I had an interesting call with a colleague of mine, a friend that I hadn’t talked to since college.  She called me up because she was flustered, clearly aggravated and there was an easily detectable amount of sarcasm in her voice.  The first words that I could understand while trying to read between the lines of her rant-like statement were “Why are you looking for venture partners?  If I was going to invest in real estate, I would do it on my own!  In fact I’ve been saving and saving and have a wonderful nest egg built up and I’m going to do exactly that when I find the right deal”

Typically I wouldn’t even bother getting immersed into a debate of this type or even take the time to explain myself for that matter.  If I spent every day trying to convince people to do business with me; I wouldn’t be an effective leader.  I’d spend the majority of my time talking instead of actually creating deals and working towards financial freedom for both my investors and myself.  But, she was a friend, so I bit the bullet and decided I’d at least try to extend her the courtesy of explaining myself.

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Jul 16 2022

How to invest in appreciating assets to create your own financial freedom

7 years ago today, we took possession of a luxury 6-plex with 3 bedrooms / 2 bathrooms / underground indoor parking / central air for four of the units and the 2 bedrooms / 1 bathroom / central air for two of the units.

We acquired it for roughly $1 million after environmental fees ($965K + closing costs and fees) with ~$220K down. While most people assume this would be out of reach for nearly everyone, we borrowed the capital from the equity within our homes by using a home equity line of credit.

Many people take out home equity lines of credit to perform renovations, purchase trailers / luxury vehicles or to take luxury vacations. All of these purchases depreciate in value and/or eliminate wealth, so we chose to go against the norm and to transfer our equity into assets that appreciate instead.

In this timeframe of 7 years, having borrowed ~$220K from our home equity, we’ve paid interest of ~$42K on the loan (~$6K per year x 7 years). In that same timeframe the property has appreciated to a value of $1.5 million and our mortgage owed is now down around the ~$650K mark. Paying interest of $42K have earned us a return of $600K ($1.5 million value minus $650K mortgage minus $250K outstanding home equity line of credit). This investment has resulted in a whopping 1,300% return in just seven years!

Now, to acknowledge the unusual market conditions, we are acutely aware that this won’t always be the case; properties have appreciated at a ridiculous and unsustainable pace over the last several years; in fact our forecasts had us earning $300K less, which had that happened, it still would have been an incredible return. What were the assumptions we used to calculate our returns? We assumed historical averages of appreciation aligned w/ inflationary metrics.

I’m not sharing this to brag. I’m sharing it because I have family, friends, clients and investors that continue to be apprehensive to invest in their own financial future. If this helps even one person to take the first steps required to invest in their future selves, then this post was worth my time. Anyone could do this. It does require a bit of learning and some patient due diligence, but it is absolutely a worthwhile investment. The biggest barrier to us having ever taken this step was fear. Once we got over that, it’s been mostly smooth sailing.

The biggest lesson of all that we’ve learned on this journey is that if we had never taken these first steps to invest in our future selves, our net worth would be millions of dollars lower, we wouldn’t be in any position of financial independence and the only people who would have paid the cost of our inaction would have been ourselves.

If anyone takes anything out of this post today, stop procrastinating, write down your dreams, put a plan together and begin working towards it. Baby steps, one at a time, a little bit each day; believe me, if I can do it, so can anyone else. We’ve achieved our dreams, not because we did anything extraordinary, but because we took action, set our fears aside and moved forward a little bit at a time. Why wouldn’t you do the same? Your future situation depends on what you do today. Go get ’em tiger!

Mar 5 2019

The new Tesla Model 3 is only “$35K”?

Tesla Model 3The new Tesla Model 3 is only $35K? That’s at least what their advertising would like you to believe. It’s only a “bit more” expensive than your last vehicle purchase. Maybe it’s finally time to get on that; you’ll save so much money on gas too!

Hmm… it seems too good to be true, let’s slow down and take a moment to do some due diligence… after all, the advertised price is after government tax rebates and alleged gas savings. That seems like a shady way to advertise… after all, the base purchase price is really ~$47,600 and after all the fees and high financing costs it’s really much, much more.

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Jul 27 2015

Retiring a Few Years Later Can Make All the Difference

compound interestOne of the most important lessons in investing is to learn about the power of compounding. In many cases, investing early and regularly can make all of the difference in the world.

Let’s take look at a chart that shows the impact of investing $100,000 by age 30 vs. investing $200,000 by age 45 (assuming 8% average return each year). As you can see, even though the second individual invested an additional $100,000, they will have nearly $600,000 less at the age of 65… that’s a breathtaking difference!

the power of compounding

Investing $100,000 at 30 years old vs. investing $200,000 at 45 years old

But what if you haven’t had the luxury of starting to invest early? What do you do then?

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Jul 23 2015

Our Love for “Luxury” is Costing Us Our Freedom

luxury house with poolDoes that $30,000 kitchen renovation really make you that much happier? Did you need granite countertops, new stainless steel appliances, built-in double ovens and recessed ceiling lighting?

Alternately, would new modern cabinetry with a standard countertop at a tenth of the price have been sufficient?

What about that $30,000 pool install? Did it need to be installed in-ground? Did you also need to replace your patio and extend it with high-end interlocking stone?

Alternately would an above ground pool that was a tenth the price have been sufficient?

Do these “luxurious” upgrades really bring you increased sustainable happiness or are you a victim to consumerism, short-term lust for higher-end physical possessions and, of course, trying to keep up with the Joneses.

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Jan 16 2015

Financial freedom: Where Do I Begin?

Steps to Financial FreedomThe first step is to consider what area interests you the most; it’s always easier to choose something that you have some degree of interest in because you will be more likely to best absorb the materials and take action.

If you’re a beginner and not sure what area interests you most I recommend you read one of the following blogs I’ve written that are geared for beginners on these topics:

Blogs

Financial freedom

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Dec 15 2014

Get Over Your Fears and Take Action Today!

ObstaclesBy the end of 2011, I had completed nine years of real estate investment courses.  Acquisition, cashflow, buy & hold, flipping, landlording, rent to own, taxation law… the list goes on and on.

Despite my educational knowledge, I still had not yet purchased a single investment property. Even though I had successfully run my own company for the previous fifteen years with positive cashflow in each and every year, I was still afraid to take the plunge.

I kept asking myself “How could I take so many calculated risks but be afraid to take this one?” I was stuck in a state of fear commonly coined as “analysis paralysis”.  I would look for the perfect deal but before I would pull the trigger I’d make up excuses as to why each potential deal wouldn’t work. The truth is there’s no such thing as a perfect deal. The human mind can be our own worst enemy and I was battling against nobody other than myself. Trying to psyche myself into taking the next step, but for some reason I kept backing down, convincing myself as to why each opportunity wasn’t optimal.

In mid-2012 I booked vacation. I decided to stay home and relax. The previous two years’ vacation was spent repairing the house after extensive water damage which had nearly depleted all of my savings. It was early afternoon and I grabbed an ice cold Corona from the fridge and went to sit in the yard and do some reading. As I hunched down in my lounge chair I continued to read my latest real estate investment book. My attention was drifting in and out and I found myself reading and re-reading the materials. I felt frustration growing within me as I thought to myself “I know this s&%t. I’ve read it a hundred times in other books.” I stood up and blurted “That’s it! I’m going to buy a property or I’m going to stop reading about real estate investing.” That was the catalyst, the last nudge through the barrier of procrastination, the trigger required to break through my analysis paralysis.

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Oct 8 2014

How can I make money in real estate?

disorientedEarlier this week I had a meeting with one of the local startups that I am mentoring.  Over the last year his company’s bank account has been reaping the rewards of their hard work and so he has been considering his best option to invest the returns from his compounding successes.

Knowing that I am an active real estate investor he wanted to learn about how real estate makes money.  He had performed a number of cashflow analyses, but, was failing to find lucrative returns.  I could sense his frustration mounting in each additional word that he was saying.  “The best cashflow I’ve been able to find is approximately 8% on a real estate investment and that’s just… well average”.  He frowned.  I smiled and excitedly said “That’s fantastic, you should put in an offer, do your due diligence and buy this property if everything checks out.”

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