Archives for March 1, 2015

Today I am going to come right out and say that most people are terrible with their money.  There was a time in my life where I was part of this very large herd of Canadians that spend just about everything that they make.  I have come a long way since then becoming VERY Finicky about my finances.  One of the things that I recommend that people should do is save every receipt for anything you buy no matter how small to see where your money truly goes each month – the results will be surprising.  Often in life when an opportunity comes your way you may look at the price tag associated with that investment whether it be in training, tools, a new rental property and say “I would really like to get involved but I don’t have the money right now” – well there is likely a reason why and that exercise mentioned can shed some light on the path that got you to “no money”.  I read in an article recently that statistically more Americans own cats than they own stocks, that is very telling on how well us north Americans are doing with investing for the future instead of buying TV’s and cars.  I am not a huge believer in paper assets but I think they have a place in a well balanced investment portfolio.  Clearly, there are a lot of Canadians that could be a bit more finicky about where they spend their after tax dollars. Some might want to consider putting a bit more money into tax deferred assets such as RRSP’s.  There are a lot of people that have lost a bunch of money in their RRSP’s in the last few years… and if they were a bit more finicky about how their money was being invested and not just trusting the banks/financial firms they might have considered Arms-length mortgages which are secured by real estate – one of the most common ways the bank makes their money in the first place! If someone is willing to inquire about what their options really are to invest they might realize that they could be just like the banks in a number of ways such as hard money lending for real estate projects.  Real estate provides a lot of opportunities but you need the right education to be successful in it because the profits are high in real estate but the mistakes can cost you big as well – make sure your being finicky with your finances to make sure you can invest in the next opportunity that comes your way.

To your success!

Tim R

There are those that might say you should not be “anal” about things or finicky in life for a variety of reasons, now in some contexts I would agree (and in general) you should not sweat the small stuff.  However, in terms of how you should finance your real estate deals you should be as finicky as possible! There are a number of reasons why – firstly knowing your numbers inside and out on any deal is imperative to be able to mitigate your risk and turn a profit.  Thus, you need to be as meticulous as a spider weaving a web to be able to nail those numbers down so being fussy here is a really good thing.  Also, the rates that you get from the bank, hard money lender, credit union may or may not work for your deal the way you wanted to execute, and if the numbers do not give you enough options to have a plan A and B then you are greatly increasing your risk profile having the 1 exit strategy – which is never a good thing.  In real estate no matter how well you plan and how much you focus on having your first strategy work, things could change in the market/economy that prevent that plan from working out with a good profit margin.  For example: you plan to do a renovation project and sell the home in 6 months for a profit but prices drop by 25% over that 6 months and now you have a house you can’t rent out for enough money to cover its expenses.  The way you could avoid this would be to make sure that the property will cash flow if you had to hold it, there is always more than one way to do a deal and make money you just have to think creatively enough to see all the options. Having the negotiation skills to make sure you are able to get seller financing is also a way where your finicky nature will ensure you realise greater profits than those that just accept their fate and have to constantly spend the full down payment to get into every property that they buy – eventually they will run out of money and a lot sooner than the picky investor! When talking with your mortgage broker (who uses just the bank to buy real estate anyway?) being “anal” over getting an open loan/variable mortgage is essential if you plan to flip any properties, otherwise you could be slapped with an IRD (interest rate differential) and trust me when I say that WILL eat into your profits in a big way.  Those investors who are very finicky about the renovation budget they set not being exceeded will always make more money than those that just say OK and pay the contractor’s bill that was over the quote but within scope.  There are a lot of things you should not worry too much about such as: spilt milk, bad weather, hangnails — but in real estate I am of the opinion that being finicky is just fine!

To your success!

Tim R