Plenty Of Opportunities to Breakeven Over Time

by Julie Broad

On the weekend Dave and I attended Ozzie Jurock’s Landrush conference in downtown Vancouver with 600 other eager real estate investors (and a few dozen realtors too).

The conference had a jam packed line up of speakers covering everything from the latest mortgage rule changes to Canadians buying real estate in the US to market specific presentations covering various areas in British Columbia.

On the surface it really covered a wide array of topics relevant to British Columbians. And Ozzie’s jokes were, as always, funny and pointed. And his message about real estate was positive and forward looking.

We definitely got a few gold nuggets from the day, and really that is all you can ask for from a low cost seminar like this, but I fear that some people walked away with some troubling advice. Essentially the message was to buy real estate because it always goes up in value. … that was the message of most of the speakers.

They all said it in different ways but that was pretty much the message. “Buy in my area because the future’s so bright you gotta wear shades.” “Buy the biggest and best house you can afford to live in today because it’s best investment you’ll ever make“. “Buy a house and hold onto it and you’re going to make money”.

I could talk about many reasons why the underlying message of “buy a house and you’ll get wealthy” bothered me but I will just focus on 3:

  1. If you’re new to real estate investing the worst thing you can do to yourself is just buy whatever property you CAN just because it will eventually go up in value. And I realize that is not specifically what was said but because none of the speakers got into what makes a good deal this is really the message that you walked away from that conference with. Yes … over 20 years the value is darn near guaranteed to more than double just because of inflation … but if those properties don’t have good solid positive cash flow they will eat you alive and you’ll likely not hold onto them for 2 years let alone 20. That means you’ll probably LOSE money not make money.You have to stick to the fundamentals of real estate and buy good solid properties in good or up and coming areas that generate positive cash flow.

    One speaker actually said to the audience that his market had “Plenty of opportunities to break-even over time.” We hope he meant have break-even cash flow … but even at that … what a lousy selling point!! I don’t want break even cash flow… I want money in my pocket every month!

  2. Careful what makes a good deal. One of the speakers showed us examples of properties on the market that he thought were a great deal right now.  This would have been really interesting except what made it a great deal to him was the difference between this year’s LIST PRICE and last year’s LIST PRICE (which the property didn’t sell for). He gave us one example of a home that was listed for $875,000 last year and didn’t sell. Now it’s on the market for $700,000 and he was telling the audience what a steal of a deal it was now.Sorry folks but if it never sold for $875,000 it was never worth that in the first place. So using a fake price to justify it as a bargain is a terrible way to spot a deal.
  3. Your home is not an investment so you shouldn’t treat it like one. Your home is a lifestyle choice and yes, if you hold it for a long time you will likely see some nice price appreciation that is capital gains tax free in Canada, but here’s the thing that always bothers me about this:YOU WILL NEVER ACHIEVE FINANCIAL FREEDOM IF YOUR HOUSE PAYMENTS ARE EATING YOU ALIVE!

    In other words, buying the biggest house you can afford just because the gains are tax free is lousy advice if you want to be rid of your job. Instead you should buy a place you can pay off quickly so you don’t have mortgage payments to worry about. And even better, you should find a way to have your payments paid for by one of your investment properties. To do that, you would be smart to have smaller payments not bigger payments.

    And if you want to challenge me about whether your home is an investment or not … let me ask you … if you lose your job … is your home going to feed you or is it going to starve you??

There were a lot of smart and experienced people standing on stage dishing out what I consider bad advice. Now, for the average Canadian that is happy to carry on going to work every weekday and just wants a comfortable retirement at age 60 or 65, it wasn’t bad advice. But if you don’t want to work for “the man” as Dave calls it, then you should pick and choose the advice you follow carefully. We picked up a couple of really good ideas and tips from the conference … but we also laughed at and discarded more than 80% of what we heard. That type of advice doesn’t fit the life we’ve created for ourselves.

We focus on buying positive cash flow properties in good areas because we want investments that take up as little of our time as possible while giving us the most amount of cash in our pockets today!! Of course, long term, because we’ve purchased in good areas with positive looking futures, we expect them to go up in value. But that isn’t what pays for our ski trips and dinners out today … it’s the positive cash flow that does that for us! And we didn’t do that by purchasing properties that breakeven over time. 🙂

As for the gold nuggets we learned … we’re going to check out one of the tools we found out about, and research a little further into a couple of the ideas we got, and we’ll get back to you on those!! If they pan out I think fellow BC real estate investors will be excited with what we learned…

10 Comments

Filed under Education, real estate

10 responses to “Plenty Of Opportunities to Breakeven Over Time

  1. As always Julie you are right on the money. As we have been taught we have to look behind the curtain as to who is saying what and why they are saying it. I wonder how many speakers on that stage make the majority of their income from speaking and training or by buying real estate. I think we have the same outlook on events such as these if I can get one idea or meet the right person that can make the event for me.

    • Thanks for your comment Mark. Half of the speakers were realtors and they have a vested interest in making their market look good. It really does come back to what you’re saying look at “why they are saying it.”

      And given what many of them were saying I am quite confident they are not real estate investors!

      Anyway – we are thrilled because we’ve discovered a new property valuator tool by Landcor. It’s an investors dream come true. For $30 it gives you an appraisal like assessment of your property. We’ll do a full post on it soon. It’s really good!! Not sure if Teranet has anything like this in Ontario …

      It’s a great addition to a JV Deal Summary package or just to get some comps and information on a deal you’re doing privately for your own research purposes. It was just launched a week ago and I am not sure when we would have heard about it if we weren’t at the event. So that was worth the price of admission without a doubt!! And we got two free reports from the event as well which made me extra happy.

  2. Cameron

    I couldn’t agree more Julie. My wife and I live in a condo, that’s all we need…we may want more but we don’t need more space. I classify things into wants and needs.

    We have 3 houses that we rent out, but we live in a condo. We drive 10 yr old cars. Some, well most of our friends look at us sideways, and ask, why do you own all these houses and live in a condo, and drive old cars.

    They however are strapped for cash all the time, lease new cars each 3 years, and haven’t started for retirement yet, mainly because they can’t afford it. Houses, at least ours have positive cash flow, and should appreciate over time. They pay our life/health preiums also. Cars are almost 100% guaranteed to go down in value, all they are useful for really is A to B, sit at work 8 hours a day and sit at home another 14, 15 hours.

    Having it all here and now is not what our goal is, nor is it your’s from what I see. Being a financial advisor myself and seeing many people not going to have a comfortable retirement, we have made a decision early to make sure we will retire young and have a better quality of life in retirement, unlike 90% of our friends. They are banking on the parent’s inheritance, but with people living longer, costs going up, increased medical costs, I’m not expecting anything from my parents death.

    I enjoy your blogs, I hope we can meet in the future at some point, and chat about strategies and goals.

    • Thanks Cameron. Your thoughtful comments are always appreciated. I seem to recall that you’re on Vancouver Island? Is that right? If so, I am speaking at the Nanaimo Real Estate Investors club meeting on April 6th … perhaps you could attend and we could chat there?

      I love your story about your friends … we try to strike a balance between enjoying today and building for tomorrow. We make conscious choices. Right now we’ve really been reinvesting our time and money into buying properties. That does mean we make sacrifices today… and because we’re pretty open about our net worth and our deals some of our friends don’t get the choices we make. But over the years we find ourselves surrounding ourselves more and more with like minded people – and that is motivational, inspirational and fun!! And we rarely get the sideways looks now because people get it. There’s nothing better than conversations with like minded people.

      – Julie

  3. Linda

    Another great post Julie. Thanks for sharing this point… I attend a lot of conferences and often forget to ask myself why someone is giving me the message they are giving me. I will be more aware now.

    • Thanks Linda!! I always ask myself if the person talking has another agenda. It’s ok if they do … most people do … but I want to understand what their agenda is so I can make better decisions for myself. Have a great day!!

  4. Pingback: Quick and Easy Property Valuation for British Columbian Real Estate Investors «

  5. David

    So nice to read a post that tells it like it “should be” rather than reading all the hype and misinformation that unfortunately is followed by novice RE investors. Thanks Julie.

  6. Stephen

    While all of us try to demistify the “realestate transfer of wealth” at present, Julie you are absolutely right on track. I have a very special friend in my life, my present wife, and one valuable piece of advice she has taught me of the course of us being together is: “Assess the resource of were the information is coming from.” This basic phrase has saved us many lengthly and unnecessary discussions on here say and non credible resources and our marriage has stayed strong because of it.

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