Value of time VS Value of Money

Sorry for not blogging for a while.  Recently I have had the pleasure of overcoming some fairly serious obstacles which have taken up the vast majority of my time (more on this to follow!).

Recently I had a chance to sit down with a large player in the real estate industry (I will call him Joe).  In the last five years, Joe and his brother have grown a small start-up company into a multi-million dollar company with over $100 million in assets.

But this didn’t happen overnight and they started with almost nothing.  And the real kicker is that Joe gave up a seven figure salary to start his own real estate company with his brother.

Read that again…..I said SEVEN figure. 

The real reason for giving a million dollar salary was the value of time.  His wife had recently given birth to their first child and they were expecting another.   His boss and mentor had congratulated him and told him that it was great to have kids, although it was difficult to spend time with his own.  Digging deeper, Joe found that, due to the long hours he put in to become partner, his boss only saw his kids on weekends….if at all.

Instantly something clicked in Joe’s head and he realized that this was not the life for him.  The work was challenging and the pay was fantastic, but nothing was worth more than watching his kids grow up.  On top of this, he always had an entrepreneurial spirit.

Now I am sure he had challenges along the way, and I’m sure there were some long days/weeks/months, but he is doing what he wants to do with his life….on his own terms.   If his kids need him, he is there.

I applaud his efforts and thank him for his inspiration to me. 

More than anything, this reassured me that I am travelling down a path that I want to take, not what everyone else thinks I should be doing.  And it is nice to know that I am not alone with these thoughts. 

For those of you out there who are interested in doing something out of your comfort zone….do it.  Do it because you may not ever get another chance.  Do it because it’s exciting.  Do it because it inspires you. 

I’m not telling you to quit your job and start flipping houses, but if you have always wanted to try something new…at least take the first step.  If it doesn’t work out, at least you tried.  If it does…gravy.

BMO Introduces Teaser Rate??

Last week, an article ran in the Globe and Mail, with limited fanfare, entitled “BMO move spurs rivals to drop mortgage rates”.

Here are the first two paragraphs of the article:

A gimmick by Bank of Montreal (BMO-T58.25-0.41-0.70%) to attract new mortgage customers in a traditionally sluggish month for sales has sparked a mini price war among rival banks.

A day after BMO announced it had dropped the rate on a five-year fixed-rate mortgage to a historic low of 2.99 per cent as part of a two-week promotion, Toronto-Dominion Bank (TD-T77.750.050.06%) and Royal Bank of Canada (RY-T52.09-0.68-1.29%) followed suit with limited-time-offers of their own.

The article goes on to say that this supposed promotional rate may be held over for much longer than the anticipated two week period. 

Now did anyone else notice the types of words used in just two brief paragraphs?

“Gimmick…..promotional……price war”.

So what are they saying here?  Sales are slow enough that there are now “teaser” rates targeting the marginal home buyer .  What does that spell?  Disaster for these fools who jump in head first thinking a 5 yr fixed rate of 2.99% will last forever.  Fast forward five years to renewal time.  If you are a marginal buyer at 2.99%, what does that make you at 7%?  Probably a cash-strapped, paycheck to paycheck, owner of a house worth less than it was five years ago…..Sound familiar?

I’m no economist Mr. Carney, but can someone please do something about this before it is too late?

Here We Go 2012!!!

I can’t believe where the time has gone.  It seems like just yesterday that I was sitting around in my pyjamas waiting for the world to end New Year’s Eve in 1999.  Yikes!

2011 was a great year for my professional life and personal life as well.  I started a blog, took a new position with private REIT in Guelph (awesome company!), purchased a lease-to-own investment property and got engaged!

Yes it was a whirlwind year full of change, opportunity and a ton of stress! 

What’s on the agenda for 2012?  Lately, I have been focusing on attainable goals because I’m sure you all know how it goes when you set too many or unattainable goals.   Nothing ever gets accomplished!

So for 2012 I have set two goals:  Lose 10 pounds (cliché I know, but in the last 6 months, I have been so busy with work and renovations that I have gotten away from my typical healthy routine….but I’ve actually already lost 3 of these pounds since Jan 1^st!).  My second goal is to purchase another investment property.  I’m not sure exactly what type of property, but given my recent rent-to-own deal, I think I am in the market for another!  I have had a couple of interesting of near-miss deals here so I think another one is definitely on the horizon.

So what are your goals for 2012?  If there is one thing I have learned is that keeping them high, yet realistic, will go a long way in attaining them! 

Good luck! J

Fractional Reserve Banking....Legal or Ponzi Scheme?

late September, the U.S. Justice Department filed a civil suit against Full Tilt Poker, an online gambling site.  They claim that thousands of online poker players were defrauded out of more than $300 million that is still owed to them. The government said that, in total, the 23 owners of the site had taken out $444 million in distributions over the years.

According to the Wall Street Journal…..On March 31, 2011, Full Tilt owed approximately $390 million to players around the world, but the company had just $60 million in its bank account, the government said in its filing Tuesday.  (Quick math…this is about 15% money on hand vs what is owed).

Credit: chadelliot.com

Enter “Fractional Reserve Banking”.

For those that do not know, Fractional Reserve Banking is a form of banking where banks maintain reserves (of cash and coin or deposits at the central bank) that are only a fraction of the customer's deposits. Funds deposited into a bank are mostly lent out, and a bank keeps only a fraction (called the reserve ratio) of the quantity of deposits as reserves.  Typically the reserve ratio is 10%, meaning that for every $1 that the bank has in the system, they can create loans for up to $10. 

Funny how this is legal, yet Full Tilt Poker is a Ponzi Scheme.

Now I know that these examples are different.  The owners of Full Tilt Poker were clearly stealing the money, however if they were intending on putting this money back into the “pool”, should this have been allowed? 

Canadians ought to know that the banking system has their own set of rules.  Sometimes this is a benefit and sometimes it can build a foundation for a catastrophe (see “Lehman Bros.”)

Thoughts?

Whack-a-Mole your stress away!!

Every once in a while, things happen in the real estate business that seem to put a damper on things…a really big damper.  

The game of real estate is an ever changing battle with unforeseen events popping up all around you….much like the game of “Whack-a-mole”.  They key is to whack the mole as quickly as possible and then be on the lookout for the next one!

I’m here to tell you to hang in there!!

Even the most seasoned investor has times where he thinks “Man, things are getting tough….maybe I’m not cut out for this.”…..but the seasoned investor quickly puts these worries aside and fixes the problem… and then move onto the next one……Whack a mole!!

Credit: smartboardgoodies.com

The thing they don’t tell you is every time you deal with a problem, the better you are equipped to deal with the next one.

Speaking from experience, I often look back and laughed at what I considered “stressful”.  The problems I have faced in the past seem smaller and smaller each time something comes up!  Things like a leaking tap or broken stove seemed to be keeping me up at night.  Now it is a phone call and a $50 repair bill.  No big deal. 

As I have said in the past, being able to handle stress is a competitive advantage.  And the more stress you can handle will give you the fortitude to drive forward in the face of adversity!

Hang in there everyone!! And one day real estate may set you free!!

Fire Prevention – Document , Document, Document

In my real world job, I recently went through a fire at one of my properties.  The fire was in late August and I am still dealing with the fallout today.  Luckily almost everything was in place and there was limited push back from the Fire Department. …..luckily….

The main point I want to get across is that you NEED TO DOCUMENT EVERYTHING.  I cannot stress this enough and this goes for the smallest landlords to the biggest landlords.

When it comes to big landlords, there are numerous things to organize and take care of.

Typically for smaller landlords, there are only a few things, however having your affairs in order and properly documented can make all the difference.

photo credit: westperth.com

For those out there with smaller properties, here are some things to think about:

1.       Smoke detectors:  These have a 10 year life span at max and the batteries should be changed every year.   Having the detector hardwired is much better and you don’t have to change batteries…just push the button to test it.  These also come in a battery-backup version.  Remember: document all of your inspections, tests and battery changes including dates and times.

2.       CO detectors:  Even if you don’t have a gas burner appliance or wood stove, it is a good idea to have at least one of these.  Again, test it frequently and document this.

3.       Fire extinguishers: Make sure these are charged properly and have an inspection tag if possible that is updated monthly.

4.       Fire Safety Plan: This is usually reserved for bigger properties (ie, larger than 10 units) however those buildings with fewer units should still have a plan.  This plan should be put to the test with quarterly fire drills and practiced escape routes.

5.       Letters of acknowledgement:  All of the above should be signed off by the tenant at the property…not just the landlord…and have this witnessed by a third party.  This insulates the landlord from any potential lawsuit.

Does anyone else have any other tips for fire prevention??  Comments welcome!!

Enough Already!!!....and Thanks Rock Star

Lately I have been sick and tired of the negativity that has surrounded me.  It seems as though I cannot escape the people bitching, complaining and telling stories of hard times and how “tough it is out there”.  These have been typically people in their 40s and 50s who are well into their working lives and still several years from “retirement”. 

I have one request of these people…..Please keep the negativity to yourselves. 



photo credit: http://www.daimanuel.com/



Why?  Negativity breeds negativity….and I have had just about all I can handle recently.  Everyone is dealt a different deck of cards and some have got the short end of the stick…..but there are people out there who have been wildly successful having been dealt a very poor hand (think Robert Herjavec).

Lucky for me, I recently read an inspiring blog post on the Rock Star Real Estate Blog entitled “Two Monks Lost in Corporate Communist Canada”.

Basically the jist of this story is that…..as Rolf Potts puts it…. “We end up spending (as Thoreau put it) “the best part of one’s life earning money in order to enjoy a questionable liberty during the least valuable part of it.”

However, the guys at Rock Star do a good job of motivating people who follow their blog.

Their response to this?

“Keep reading, keep saving, keep investing, keep building.

It may seem like slow progress at first but each little step you take towards personal independence will pay off.

Stay focused.  Stay disciplined.  Don’t get frustrated and give up – it’s too easy to do that.

Find people that are doing what you want to be doing.  Go and hang out with them.  Listen to their language, watch their actions, examine their results.

And one day you’ll wake up realizing that all those little steps have taken you to an entirely new world.  One where you’re the boss.”

Thanks for the much needed motivation Rock Star Team.  I needed that one.