Net Worth Network

To incorporate or not, that is the question

Date: 18 May 2008 | Comments Off
Category: Real estate, Building your business, Entrepreneurs, Taxes

I have recently been taking steps to start on my path of financial freedom through real estate. My goal is to own several positive cash flow properties within B.C. and to also branch out of province too (Winnipeg is looking very attractive right now). The question that I really have unanswered is to whether to incorporate a company dedicated to acquiring rental properties. Using a property management company to manage those properties is also part of the plan. The flipside of the coin would be to personally acquire the properties while still using a property management company to take care of them for me.

There’s many reasons to choose either option. Tax considerations are the most important, but also the most complicated. I know of investors that do it all on their own, as well as investors that incorporate and run these properties through their businesses. Those who choose not to incorporate have had an easier time acquiring financing and since they have full time careers, have used the write offs to reduce their income. Others who have chosen to start a business tell me that their tax rate is much lower.

As an aspiring investor who still has not found the accountant that really specializes in real estate investments, this seems like a very important yet difficult question to answer. I will continue to educate myself as well as seek out advice in this area and will make my decision soon, as I want to keep making baby steps towards my goal of substantially increasing my net worth.

“Free Money” update

Date: 20 April 2008 | No Comments »
Category: Real estate, Building your business, Entrepreneurs, Personal Growth

A while back I took a leap of faith and parted with a tidy sum of money with the hopes that Chris Johnson’s “Free Money From The Government” course would help me come up with a down payment on an income producing property. I had already sat through a 90 min sales pitch at the Learning Annex’s Real Estate and Wealth Expo in December, so I thought that I had a good idea of what I was ordering. When the program was delivered, I quickly got right at it and started reading the manuals and I listened to the audio cd’s. The problem was that all of the information on the programs didn’t make a lot of sense to me without the explanation as to how I could use it as a novice real estate investor.

Enter Free Money University

After a couple of weeks debating as how to move forward, I received an invitation in the mail for Chris Johnson’s Free Money University. This was included in the price of the program, so I was looking forward to attending and finally figuring out how to get my hands on that free money. This was a two day seminar put on in a swanky downtown Vancouver hotel. When I arrived I noticed how diverse the crowd was. It appears that the lure of free money brings all types. Anyways I quickly realized that this seminar was as much as a marketing event as it was an informative event. There were some disappointed faces when our explanation of what government grants would most apply to us was interrupted (on six occasions over the two days) by other experts selling their programs for wealth creation. I did, however, find some of the opportunities quite interesting. Most notable was Dr. Al Lowry and his explanation of using leveraging to purchase undervalued properties. Again, it made me believe that if I follow a system, I could accumulate a portfolio of positive income properties. As far as the content that I was really there for, I did pick up many important tidbits of information. Chris walked us through the main programs available, the sites to investigate, and how to submit a winning proposal. This was all information that was available in his home study course, but it was easier to digest, as he was to relate it to how we could use it for our investing.

Where to from here

I walked away from this experience with more confidence and an action plan. I was given many tools, such as government websites and forms, to get started applying for grants and financing for my start-up real estate investing company. I also was able to network with investors that have used some of these processes to invest in income producing properties. As much as the education, I believe the opportunity to network and intermingle with successful entrepreneurs was invaluable.

I am now able to move forward to incorporate my company and expand my real estate portfolio. For those who believe that there’s no such thing as free money, I believe that I will be able to prove you wrong.

Do your homework on pre-sale condos

Date: 9 March 2008 | No Comments »
Category: Finances, Real estate

Much has been said and written in the past year about the concerning problem of pre-sale condominium and townhome projects going into receivership. There have been some highly publicized cases in the Metro Vancouver area where developers have taken a project close to completion but due to rising costs and mismanagement have had to shut down construction leaving homebuyers in the lurch. Some people feel that this problem is growing and has been likened to the “leaky condo” issues of the 1990’s.

Buyers in this market have seen at least a half a dozen projects fall into financial difficulties in recent months. The most recent is the Brio in Abbotsford. It was touted as the tallest project between Surrey and Calgary. It was going to be a 28 story condominium tower with more than 170 suites with such amenities as concierge and valet services. It was marketed as a very luxurious option for buyers in the area with prices ranging from $279,000 to $1.1 million. The problem is that only 30% of the project sold. The developer has shut the project down for the time being and has decided to give full refunds with interest on deposits. With median condo prices in the area being only $187,000 it is quite obvious that price was the issue here.

For some a pre-sale condo is their only affordable way into the market. “Flipping” has become commonplace. As the project completes the prices reflect the rise in the market during construction. This makes it difficult for those who buy into the project after it is built as it costs thousands more. So what should you do when looking at a pre-sale project?

Make sure that you know who the developer is and what other projects that they have completed.

Legislation has been made to make it easier to find out if the developer has had any projects fail or any bankruptcies.

Seek out legal advice to ensure that all of the details in the contract have been explained to you.

If you speak with experts in the Greater Vancouver Homebuilders Association they will tell you that this issue is not as prolific as the media makes it out to be. in fact there have been more than 78,000 successful new home and condominium projects in the lower mainland in the last 4 years.

So, if you’re in the marketplace for a new home and you are considering a pre-sale project as an option please do your homework. The results could be devastating if you don’t.

The long and short of the 40 year mortgage

Date: 27 February 2008 | No Comments »
Category: Finances, Real estate

More and more home buyers are now opting for the 40 year ammortization period in the mortgage market. The biggest selling point that most will point out is the affordability factor. With lower monthly payments vs. say a 20 year mortgage it is a much more attractive option for those who are just entering the market. With housing prices hitting great highs in most major markets in Canada the monthly payments could seem out of reach. Enter the 40 year ammortization. While some may say that this may be the only way into some markets, a simple comparison can show how much more one would pay in interest for this option.

Here’s the math:

On a $350,000 mortgage @ 6.45% over a 40 year ammortization period weekly payments would be $465 with a total interest cost of $597,000.
That same mortgage over a 20 year ammortization would have weekly payments of $596 but only a total interest cost of $265,000.
The difference in interest costs over the two ammortization periods is a whopping $332,000
The 40 year mortgage costs you an extra 45% in interest charges over the 20 year mortgage.

The above example was taken from a Global TV report discussing the relatively new option of the 40 year mortgage. The main issue raised in the report was affordability vs. total interest costs. Many people looking at this option are not aware of how much more of their hard earned cash would end up in the hands of the bank. The flipside is that that same home buyer could buy more of a house with the longer term. So as each home buyer’s circumstances are different, one would have to weigh out affordable payments vs. total interest costs and make a decision that suits their financial situation and goals.

Home Inspections Go High Tech With Infrared Cameras

Date: 18 January 2008 | No Comments »
Category: Technology, Real estate

Global TV recently reported on a new tool that professional home inspectors now have at their disposal — a camera that uses infrared thermal imaging to see what would normally be hidden. Ryan Wiebe of Star Home Inspections has been using this technology in the Kelowna area to help potential homeowners find any hidden flaws within a property’s walls. The home inspection would carry out as normal but also be aided by a camera aimed at certain areas which exposes potential pitfalls such as water leaks, missing insulation, overheating circuits in electrical panels, and the list goes on.

What a great idea! Many times have I heard of someone hiring a licensed home inspector that had missed many hidden problems within the house. This camera, when operated with a trained eye, could eliminate the surprises that many homeowners deal with shortly after purchasing a home. The fact that it has the ability to find water damage could save someone from purchasing a mould infested home, cutting down on the potential health risks. Also no longer would someone have to worry about potential fire hazards from poorly done electrical in the house. In my mind this technology could save thousands of dollars in potential repair costs for the first time homebuyer who is normally stretched for cash in the first place.

Mr. Wiebe believes that an inspector can see approximately 30% of the home on a traditional walk through, but with his camera he believes that he is seeing approximately 60% now. Also, since it is being recorded he can share these images with his clients, ensuring that they are truly seeing the property that they are about to purchase.

I say that this technology should be in the hands of all home inspectors, giving the homebuyer the most amount of information possible to guide their decision making.

Trump’s Latest Book — “Think Big and Kick Ass”

Date: 13 January 2008 | No Comments »
Category: Real estate, Personal Growth

I recently finished reading the latest book put out by Donald Trump and The Learning Annex’s founder Bill Zanker. The title is “Think Big and Kick Ass in Business and Life” and it is a reflection of the Donald himself. After reading this book my impression of big real estate investing is that one must dream big and carry a big stick.

For those who don’t know the relationship between Trump and Zanker, a few years back Zanker approached Trump to be involved with the Learning Annex through the Wealth and Real Estate Expo idea that Zanker had. These shows were created to spread the wealth of information that the experts had to the general public for a fee. Trump would stand to make millions in appearance fees and Zanker’s fledgeling company would get a huge boost in revenue brought in from entrance fees for these events. This union worked and is still generating a large profit for each.

Now, back to the book. Each chapter in the book is written with Trump’s take on a topic followed up by a more tame interpretation from Zanker. I found it easy to read as Trump’s style of writing is the same as his personality — loud and somewhat amusing. Zanker, on the other hand, wrote in a much more factual manner, where the point was easily spelled out for you with personal anecdotes for emphasis. Each chapter is summed up with key points to remember. As for the content, I found the main message to be one of aim high and execute, and don’t look back facing harsh times but forge ahead full steam. Trump refers back throughout the book to his terrible years in the early ’90’s when his empire of towers nearly all came crashing down. He knew that even in those harsh investing environments that he had to keep moving ahead. He believes that he rebuilt his empire because of his passion for the closing of a deal. It was interesting to me to read that someone so down could make it big once again. Through hard work, and building great relationships with bankers he was able to get himself back to the top in no time. A favorite quote from the book — “The harder I work, the luckier I get” is a mantra that we should all live by.

Most of us know that not every real estate investor has what it takes to become a tycoon, but in the first chapter of the book there is a 15 question quiz to see if you are ready for the big leagues. The questions mainly pertain to drive and enthousiasm towards reaching your goals. Be honest and it will be a great motivator to keep you on your path, or it will open your eyes to the dog eat dog world that Trump refers to many times in the book.

Because of the interesting stories in the book I would recommend reading it, but this is by no means a handbook for real estate investing. It should be viewed as a motivator to get out there and kick ass.

B.C. Home Assessments up 16%

Date: 4 January 2008 | No Comments »
Category: Finances, Real estate

The B.C. Assessment Authority has released the 2007 Assessment numbers as of July 1, 2007.
Here are some of the highlights:

The province average is up 16% from the previous year — substantial gain but not as much as last year’s 23%.
1.92 million properties in B.C. were issued assessments with a total property value of $940 billion.
The lower mainland has come in at a 10-20% increase in value this past year.
New construction was up 15% this past year to yield a record $21.5 billion in value
49,729 homes in B.C. have assessed values over $1,000,000.

The Numbers and You

So these were the statistics released , but how does this affect the homeowner? Global TV reported that assessed values tend to be less than that of market values. The reasons for this are that the assessed values really only take into consideration a few factors such as recent sales in your neighbourhood, size, location, age, general condition, and outstanding characteristics ie: waterfront. What is missing is what you’ve done to make your home your personal space. Renovations and upgrades ie: granite countertops, hardwood floors, central air are not taken into consideration. What might set your house apart from others in your neighbourhood will not send your assessed value higher. Is this a bad thing? I would say no. The assessed value does link to property taxes, however, you should only see a minimal increase unless your home has been assessed at a much higher % increase than the municipal average.

Online Assessment Comparisons

If you logon to www.bcassessment.bc.ca/ you can access comparison information to similar homes in your neighbourhood. One note though, you will need your assessment statement as you will be asked for a PIN number and an assessment roll number. This is an easy way to see how your property stacks up to others in your area.

The Learning Annex Wealth and Real Estate Expo

Date: 28 December 2007 | No Comments »
Category: Real estate, Entrepreneurs

On 2 December, I attended a one day event staged by The Learning Annex Wealth and Real Estate Expo in Vancouver, British Columbia with fairly low expectations. Donald Trump was the marketing engine that pulled this train into town. The advertising for this event in my area consisted of newspaper ads and mailers that were offering the tickets for free, so if I picked up even one small tidbit of information, my return on investment was looking good. When I mentioned to friends and family that I was attending, I got the usual response that it would be a wasted day. I decided to attend regardless. I’m glad I did.

The Agenda

Raymond Aaron. The morning started off with a presentation from Raymond Aaron who was selling his “Monthly Mentor” program. He told his story of his life achievements, conquering the business world and accomplishing many personal goals along the way. He believes that one would only become wealthy by surrounding himself with wealthy people. This is the premise of the “Monthly Mentor”. One would subscribe to the program to have a guiding light in the world of finance. Of course, this comes to you for a price.
Lee Brower. Next came Lee Brower, star of “The Secret”. His 90 min’s was spent by informing and enlightening rather than selling. The main point that he was trying to convey is that without a system for your prosperity you will fail. In other words, develop a plan, think it, see it, do it, and celebrate it. One must keep it in motion even if it is just small steps at a time. Do not procrastinate!!
Dr. Al Lowry. Dr. Al Lowry was the next speaker. He bombarded us with info on strategies to buy real estate at 30-50% below market value. What I really liked about his approach is that he really opened up my eyes to the multitude of ways to make money in this game. The problem was that he only touched on those techniques. To fully grasp the “how to” he was offering a 3 day training program for thousands of dollars. Now if his program works, your investment would be returned on your first deal.
James Smith. The next speaker was the most entertaining but the least informative — James Smith. Again he was selling a 3 day training program on how to make money off of real estate, but he did it in such a way that you did not feel like you were being pressured to buy anything. His special brand of in your face humour kept us laughing in our seats but did nothing to inform me on how to make the money that he said his clients have.
Chris Johnson. Our last live speaker was Chris Johnson. He is a local Canadian who has spent years figuring out how to get “free money” from the municpal, provincial, and federal governments to promote economic prosperity. This “free money” comes in many forms but the most common are government grants for real estate investing, start-up businesses and for education. Chris’ strategy in his 90 min presentation was to provide as many testimonials a possible to convince us that this is a very viable option to using our own money for investing. His program was a CD and book based system to guide you through the steps for applying for these grants. This seemed to me to be the most actionable program that we were offered.
Donald Trump. Finally, the opportunity to hear from Donald Trump himself (taped from an earlier Expo in New York). Now after sitting for approximately 9 hrs, I was expecting to be blown away with his enthousiasm and energy. Frankly, I wasn’t. He told a few funny anecdotes but again did nothing to inform me on how to create my own fortune—huge let down. But by that point my brain and my butt were swollen so it was time to go.

Personal Motivation

I viewed this day as an opportunity to motivate myself even further along my path in increasing my net worth. Since this Expo was, in general, an all day live infomercial I knew that even without a large cash investment, I would walk out the door with some ideas and a large amount of personal motivation. The Expo made me realize that all of these speakers have one thing in common — they are all just people. People that have had great ideas, have worked very hard and have become successful doing so.

Would I Recommend this Program?

I’ve been asked this question a fews times now. My response has been that I would attend another only if the tickets were free. I have noticed on other advertising for Expos in other cities pricing up to $299. I would not feel comfortable giving a thumbs up at that kind of price.

Did I feel motivated to take action after the seminars? Yes. Did I feel it was necessary to spend more money for that motivation? No.

Archive: Real estate

To incorporate or not, that is the question

“Free Money” update

Do your homework on pre-sale condos

The long and short of the 40 year mortgage

Home Inspections Go High Tech With Infrared Cameras

Trump’s Latest Book — “Think Big and Kick Ass”

B.C. Home Assessments up 16%

The Learning Annex Wealth and Real Estate Expo

The Agenda

Personal Motivation

Would I Recommend this Program?

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