Monthly Archives: July 2009

Why You Should Just Keep Pushing Forward

Mud N Bud 2008 - Dave and I heading to the finish line

Mud N Bud 2008 - Dave and I heading to the finish line

As I was leaning forward on my bike, pushing my way up a trail filled with loose rocks on the side of Seymour Mountain (in North Vancouver), all I could think about was how good this would feel when I was done. Little did I know that the long and painful climb we were doing was just the start of my adventure. My husband Dave was about to introduce me to a trail called Team Pangor which is mostly a black diamond biking trail … Black diamond to me simply means that there are plenty of places to break every bone in your body. Team Pangor did not disappoint in that regard.

Anyway, as I was gingerly trying to find safe passage down this nasty trail, I was thinking that real estate investing is often like training for a big race.

There are plenty of days where it’s hard work and you’ll wonder why you are doing it. There are definitely days where you are on a path that is new terrain and you aren’t yet skilled enough to navigate down easily so you have ask for help from those around you with experience (in my case, I had to ask Dave to carry my bike so I could safely wiggle down the giant rock faces and crawl across the tiny bridges that were 6 feet in the air – GULP!).

There will also be some bruises and scratches – because nothing ever goes perfectly.

But, when it’s all done – it feels amazing. The rewards are so plentiful that you forget the fear, the sweat, and the pain of getting to the finish line.

If you’re struggling right now … just know that it’s worth it to push through! Reach out for help if you need it or try a different approach if what you’ve been doing isn’t working. Whatever you do – just keep moving forward because you will be so glad you did!

When we cross the finish line at this year’s MOMAR race (http://www.mindovermountain.com/momar/) I promise you I’ll be smiling and feeling great! The sensation I get when I accomplish something that was a challenge is nothing short of brilliant … and it’s not unlike the sense of pride and accomplishment I feel when I think of the properties we own, the rent we collect, and the wealth we’ve built up … simply by pushing through the tough stuff to get to the finish line.

So … if you’re not pushing yourself to reach your goals … start today. And if you are pushing, but you’re feeling the pain … keep going!! It’s going to be worth it!

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Furnished Rental Property – How To’s

Furnished Rental Property Master BedroomWith the Vancouver Olympics less than a year away, Dave and I started wondering if we should rent out our home in Burnaby to some Olympic visitors. As we started considering that as an option, it suddenly occurred to us that we didn’t have to wait until the Olympics to do short term furnished rentals. In fact, it might be a good idea to do a test run before we turned our home into a furnished rental for the Olympics.

Since neither of us have to be in an office everyday, and we don’t really HAVE to live where we are right now, we thought we’d just throw an ad on Craigslist offering our place as a short term furnished rental and see what happens.

At first… nothing did happen. But after 3 or 4 days I received an email from a woman whose home had sold in 3 days (when they were expecting it to take several months). They weren’t going to be moving for another 5 months!  She desperately needed a home for her and her family for the short term! We took an application, just like we would when we rent out any property, and checked their credit and their references.

I admit – knowing they’d be sitting on my couch in my living room, I was extra cautious. We  checked EVERY reference we were given, and every little detail. Everything looked great … and 20 days later we were packing up our personal belongings, putting them into storage and heading over to Salt Spring Island where my parents have a gorgeous oceanfront Bed and Breakfast.

The gorgeous view we enjoyed when staying on Salt Spring Island

The gorgeous view we enjoyed when staying on Salt Spring Island

We spent the next four months doing a bit of traveling, but mostly enjoying ourselves on Salt Spring Island. It was really liberating not having a bunch of stuff and not really having a home.

When we moved back in, the place was in pretty good shape, and the transition back was so easy because everything but our clothes and office materials were already there!

Doing a furnished rental is  definitely not the same as a regular rental property transaction though.

The general principals of attracting and screening good tenants are the same, but there’s definitely some things you should know if you’re interested in turning your home into a furnished rental or buying a property to become a furnished rental:

  1. Furnished rental properties command a higher rental rate but they cost you more too … from what I’ve seen online the fully furnished rentals will go for 25% – 50% higher than market rent. That is a big advantage in a market like Vancouver where it’s very difficult to make a place cashflow with regular rent rates. BUT – furnished rentals have a lot more costs. Besides just the cost of furnishing the property (which you probably can expect to spend $10,000 doing), you are responsible for paying all the utilities, telephone, cable, internet, and if applicable security. Many rentals also come with regular cleaning services which is another expense. We charged 24% more than market rent for our property, but we pretty much broke even because of the added expenses. Of course, we used their rent to pay our mortgage for four months so that was nice! 🙂
  2. Fully furnished means that someone only needs to arrive with their suitcase. You are providing everything someone would need to live in your home like:
    • dishes, cutlery and cookware,
    • appliances like blenders, coffee makers, food processors,
    • towels and bed linens,
    • cleaning supplies like brooms, vacuums, and shovels (if applicable),
    • amenities like television complete with cable and wireless internet are pretty standard. Basically if a hotel suite would have it, you should too!
  3. Expect a variety of needs. The family that ended up living in our home brought in their own bunk beds for their kids, but they may have wanted these provided. There are places where you can rent furniture and you’d just have to find one nearby that provides the pieces you require. This could include a crib or high chair or additional desks for people who work at home.
  4. It’s Not Your Home (Anymore). Once the new tenants move in, remember it’s not your home. If you were living there remove anything personal. The new occupants don’t really want to see the painting of your family on the wall, nor will you want anything to happen to your prized possessions. If you will be devastated if something is broken or damaged do not leave it in the home. And remember to expect some natural wear and tear! When we moved back in certain things weren’t in the same condition or they weren’t functioning like they were when we left. It’s too be expected, and if it wasn’t our home I don’t think it would have bothered us but because it is our home, it bothered us a little bit. We just couldn’t understand why they didn’t take a screwdriver to tighten this, or why they didn’t just go to the hardware store to buy a new washer for that. But, just because you’d do that to take care of your own home doesn’t mean they will!
  5. Create a detailed checklist of what is in the property for the tenant walkthrough!  Go from room to room, ensuring you note the details like how many forks, saucers and plates you’re leaving behind. Record the number of towels, the big pieces of furniture and the paintings. If something is broken or stolen you will need a record of what was there in order to use their deposit to buy a replacement. You’ll want your tenant to sign off on this when they move in, and then you’ll want to do a detailed inventory of everything when they move out. This is big pain, and I admit I didn’t count the forks when I moved back in … but I did note a missing glass … which brings me to the next point …
  6. If you’re creating a furnished rental, buy extra boxes of the breakable items. We now have 7 drinking glasses… thankfully we bought them at Ikea and not only are they cheap but we can replace the missing glass easily. Had we purchased a box of glasses on sale at Sears we would now be short a glass. So, if you are setting up a house to become a furnished rental buy an extra box of plates, an extra box of mugs and cups. If it can break easily, be prepared to replace it easily!! You want to have matching sets … and this will ensure you always do!

One successful rental does not make us furnished rental experts … but we wanted to share these lessons learned with you in case you’re considering turning your home into a furnished rental for the Vancouver Olympics or in case you think it’s a great way to make a property cash flow in the Greater Vancouver Area.

Real Estate Investing Newsletter and Starter Tips Guide

Real Estate Investing Newsletter and Starter Tips Guide

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Not All Real Estate Goes Up in Value

bulldoze houseThe UK Telegraph recently ran a story stating the only way for certain cities in the US to survive was to bulldoze down big sections of the city’s homes. Flint, Michigan was the main target of the article, but they referenced many areas in the North East States.

It was not a feel good kind of story, and it should be a wake up call for all real estate investors.

Not all real estate goes up in value. Period.

As a real estate investor, you can buy a well built house at a great price, but it’s not going to matter if you are in a terrible location. It’s why you hear over and over “location, location, location”. Location will determine the tenants you’ll attract, the rental rate you’ll get and your resale value. Even the worst house will increase in value in the right area. But the best house badly located could be doomed to become unsalable and worthless.

So – as a new real estate investor – how can you be certain that you’re not investing in the next city to be bulldozed down?

Market research! It’s Step 2 of our real estate investing process – right after step 1 which is to know your goals.

And with so many new and integrated tools hitting the internet everyday, market research from the comfort of your own home is just getting easier and easier.

Check out some of our favourite market research tools and websites:

  • Walkscore: Calculates a walkscore for the property address you input. We love this because you’ll find that the best rental properties are those that are very well located for tenants to walk to schools, mass transit, parks, shopping and other amenities. This program takes it a step further and even breaks it down to show you what is nearby – naming the restaurants, parks, schools, libraries etc. that are within a reasonable walking distance from the property.
  • City-data: Trends are your friend as a real estate investor – and in this case you’re looking for trends that indicate that more people are moving into an area AND that those people are making money. So you need to find sources like City-Data that provide you with population, income, and employment statistics. Stats Canada and CMHC are your best sources (for the most part in Canada), but in the U.S. this website is fabulous.
  • Trulia: I have some serious envy for our American friends that have awesome websites like Trulia to use for their real estate research. I recently sent a note over to Rudy Bachraty who Tweets on behalf of Trulia (http://twitter.com/trulia) asking if we’d ever see Trulia in Canada and he said “never say never” so I will keep hoping. They have an easy to use search interface, great stats and trends for sub areas within the US and plenty of great resources. Zillow is another great resource that is miles beyond what we’ve got to work with in Canada too …  and they have an IPhone App that almost makes me want to turn in my Blackberry AND my Canadian Citizenship.
  • Rentometer: If you’re looking to buy a property you want to make sure it’s well located so that it holds it’s value AND attracts good tenants. You also have to understand what kind of rent is reasonable for your property and the area. This little tool is fabulous for quite ballpark estimates of rental rates for properties. We’ve talked about this one over and over – but it’s such an easy to use tool. And while it’s not perfectly accurate – you still have to do comparisons of properties of similar quality and similar amenity offerings, it’s a great little tool for simple rental rate gauges. And they are in Canada. THANK YOU THANK YOU Rentometer!!
  • Google Satellite Maps are a great resource for the investor. Even better is Google Streetview – however we don’t have it in Canada just yet. There’s an option for some places in Canada for Streetview-like maps though – head on over to http://www.canpages.ca/ and once you select the business or address you’re looking for click on “Street Scene”. Here’s an example … it’s out front of our favourite local coffee shop in Burnaby.

Of course – we wouldn’t buy a house without knowing an area intimately. There are things you just can’t learn by looking online – like how the area smells, what’s new in the area, what the people are doing to their homes, and other things that you just have to be there to see and understand. But, these tools will sure save you a lot of time and gas money in choosing areas, monitoring them and researching properties when you find out about them!

The only way you can be certain that you are INVESTING your money and not just gambling is to do your research. If you ensure that there are more people moving into an area than leaving, that there’s a sustainable and preferably growing employment base in the area, and that there are amenities near the property you are looking at that will attract and retain good tenants for years to come then you can feel confident that your investment won’t be one in a line up of homes to be bulldozed 5 or 10 years from now!

If you know of another research tool or website we should have included please share it in the comments – there are so many great websites these days that it’s hard to keep track of them all!!

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How to Have Someone Else Put $1900/Month Into YOUR Retirement Savings

Saving moneyIf you’ve been checking out our blog lately, you’ve likely seen that both of my brothers are carpenters. They were really helpful with our recent rental property renovation!

All three of us are pretty close in age. And, my youngest brother bought his first house last year. But my other brother hasn’t yet taken the plunge into owning a home. That is fine – I don’t believe owning your own home is the right thing to do for everyone.  I’ve often pointed out the fact that I bought a rental property before I bought my own place to live in!

But,  as I’ve been spending more time with my one brother, I decided to do what older sisters do best – stick my nose where it probably doesn’t belong! 🙂

You see,  my one brother is a talented carpenter. Before that he was an amazing chef. He also is extremely good at rebuilding and repairing cars and will probably get it automechanic ticket to go along with his chef and carpenters tickets. Anything that requires hands on patience and attention to detail seems to be something he is exceptionally good at. That is, except when it comes to his finances.

He’s only slightly younger than I am, and if you’ve been reading our Rev N You with Real Estate newsletters for long, you’ll know that I am in my early thirties. At his young age, he’s happy to keep working for the next 30 years but I do worry about the fact that he’s only saved a little bit for his retirement.

So, I decided to make a plan for him. There’s probably a lot of ways he could save money, but the big thing I focused in on was the fact that he owns three cars! One of the cars has to go, and with it gone, he will be able to save about $500/month plus he can add the proceeds of the sale to his savings.

He can also take on side jobs. People are always asking for help with building fences or kitchen renovations. He doesn’t have to work too many weekends and in a year, he will have enough saved to put 10% down on a beat up house that he can buy at a decent discount for around $200,000.

For a couple of years, he can live there while fixing it up and continuing to save more money. Then, he will turn that house into a rental property, renting it out for about $1,400 / month. He then buys and moves into a new property.

Now, keeping this really simple, let’s look at what my brother has when he retires in 25 years:

Assuming he adds about $25,000 in value by fixing the property up and the property appreciates by 4% each year, in 25 years he will own one property worth $576,743. And – his tenants will have paid the mortgage off for him! It’s almost like someone else was putting nearly $1900/month into his retirement savings plan for him ($576,000 divided by 25 years divided by 12 months)!

Even if the property doesn’t appreciate by 4% each year (which has historically been the average), his tenants will have paid off his mortgage in 25 years, and he will still be able to enjoy profits from the rental income each month (his positive cashflow from this one property could be as much as $2,350 each month if rent and expenses increase 4% each year for the next 25 years too).

Plus, he will also have his residence which he will have paid off by then … giving him over $1 Million in property for his retirement … assuming he does nothing else to further increase his wealth in the next 25 years! What an easy way to get someone else to pay for a big part of your retirement!

When I explained this to my brother he sold one of his cars! And with the money he made helping us with our property, he’s already putting together a nice little down payment for a home.

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