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December 30, 2008

Real Estate is the Best - Besides My School! LOL

There is no business like real estate.   It's been interesting to say the least - and money-making for me, for sure.   What is there to complain about?   Well, let me give it a try.

Well, tonight for the first time since the 1980s, (!) I went to Wine'n'Cheese (or cocktail party)!   I generally don't do that, but I have to admit it was an incredible experience.   I had fun, enjoyed some good times with new friends, had some good food, and learned a few new things!   What could be wrong with that?  Nothing.   But damn it!   Real estate is changing me.  

Another thing is that real estate (and especially my incredible monetary successes in real estate) have made me interested in money.   I was the ultimate 'granola girl' (coined by one of my students) until a few short years ago, but now, I have millions in equity and no more friggin' granola!  Now:  I actually want money!   Well, that's not as bad as it sounds (lol).   I actually want the security behind it.   What is wrong with that?   Nothing, of course.  But damn it!   Real estate is changing me.

A third thing is that real estate has recently MADE me take a weekend off, fly to Florida, and cruise through the Caribbean.  I taught a few people something on the 'real estate' cruise; I learned a few things, and I enjoyed some time in the sun with a few good friends, great food and good wine.   I left my kids, my school, my family, my headaches AND all of the stress of my life.   What's wrong with that?   Well - nothing!   But damn it!   Real estate is changing me.

And finally of course is that now with my club and my part-time real estate career, I have met a lot of new real estate friends.   Previously my life was a series of commas between the days of hectic and fractious teenage output!   Now, my life is punctuated with adult conversation and less "Yo - miss, where's my math back?"   What could be wrong with that?   Well - nothing, of course.   But damn that real estate!   It is changing me!


The Benefits of Lease To Own

One of the best ways to get great cash flow and reduce tenant problems on a small home is by using the Lease-to-Own option.

At first, it seems a little scary - so most people are leery of it. But, if you delve a little further, you’ll realize that leasing properties to ‘owners to be’ is a great idea for everyone.

Let’s say you buy a ‘fixer upper’ for $80k. It takes you about $15k to fix it up. You get it reappraised, and now it’s worth $120k - that’s an equity increase of almost $25k for just a little bit of work and creative thinking. You just made yourself instant equity of $25k. But, what do you do now?

Let’s think about the facts. Now you have a property that’s worth $120k, you’ve invested $15k, plus your original 25% of $80 (let’s assume you did this traditionally). Why not re-finance and pull out the equity increase of $25k to purchase another property which in turn will also cashflow.

But, what do you do with the property? It may not sell quickly, or you may want to hold on to the equity in the home. So you decide to rent. Then, the inevitable happens: your tenants don’t pay, they wreck the house, the cat stains the wooden floor with that horrible stench, the kids have a fight and now you have a load of drywall repairs, and they leave garbage in the garage to build up instead of throw out. These are all the concerns most people have that block them from getting into rental investment, right? Haven’t you heard all the people with different versions of the same line: "I don’t want to fix toilets in the middle of the night?" or "I don’t want to deal with tenant problems."

Let’s look at how the Lease-to-Own ideas answers many of these concerns:

• My tenants will call me to fix the toilet in the middle of the night.

With lease to own, they are ‘practising’ owning the home during their lease contract, so the problems are theirs to deal with.

• The Landlord and Tenant Act gives tenants all the chips in the card game.

With lease to own, you and the lessee are partners in a contract, not landlord and tenant, so the same rules do not apply.

• I need cash flow to survive, as I am struggling myself in my own business and cannot afford to add cash when necessary.

You’ll get more cashflow monthly, instead of less, as you’ll be receiving monthly the market value rental amount, PLUS their monthly contribution to their downpayment. You can use the extra cash monthly to throw at another investment (perhaps a capital gains one that is losing a little each month) or to pay for a toy you just bought.

• I’m worried that I can’t recoup the money on equity lost at the end of the lease.

you’ve included in your contract a small reasonable amount of equity buildup (asset appreciation), for example 4%,

• What happens if, at the end of the lease, the lessee has had credit problems or doesn’t qualify to buy the house, even with the down payment accumulation?

Actually, this is not a bad situation at all, except for that fact that you’ve lost the chance to help someone who couldn’t have otherwise, buy their own home. You still have the house, you get to keep the extra accumulated downpayment, and your house is in much better physical shape than it would have been otherwise.

There are many other bonuses to lease-to-own:

  1. Generally speaking, if a lessee realizes that the house will be theirs at the end of the lease, they will likely take a lot better care of it than they would have otherwise.
  2. You get to help someone buy a home. This is a great way to feel good, help someone out, and;
  3. If they fail to qualify to buy the home at the end of the lease, but otherwise things have gone well, you could offer to renew the lease for a further period of time.
  4. You’ll have few, if any problems with property maintenance.
  5. Since the only other expense you’ll be paying (other than your mortgage on it) will be the taxes (you don’t want to fall behind with those), your cash outlay will be low.
  6. There will be virtually no bookkeeping, as you will receive no other bills, like the hydro or water bill.
  7. You can have the lessee deposit directly into your account by direct deposit (so you have nothing else to do) and you can have an automatic debit transfer of the mortgage amount to the mortgage account, and an automatic transfer of the remainder into whatever you want, e.g. purchase dividend producing stocks, your real estate investment down payment account.
  8. You won’t have tenants who leave easily, making you search for new ones yearly.
  9. The lessees may add value to your property by upgrading the home or adding a garage. This will add value to your property and allow you to ‘pull more equity out’ during the lease term. This in turn could allow you to purchase another cashflow property and replicate the process.

You might now be convinced that a Lease-to-own program might be one of the best ways to get great cash flow and reduce tenant problems on a small home. Don’t be afraid because other people are leery of it. More often than not, the one who does well is the one who is not afraid to go beyond their comfort zone. Lease-to-own is the positive cashflow property of the future!


Playing A Game Changed My Life


Play The Cash Flow Game

It’s amazing how a little board game changed my life. Well, okay - it didn’t actually change my life; I changed my own life. But the game helped a lot. In fact, I don’t think I could have done it without the game.

Let me backtrack a little. First, I got the ‘rock bottom’ experience which motivated me to make serious changes in my financial present, so that I can ensure my financial future wasn’t going to be just more of the same. That has kept the motivation to change strong. Then, I started reading, researching, and uploading information to my brain. That was the research part that so scares everyone. Thirdly, I started acting: with nothing, I started buying assets - then figuring out how to pay for them. Well, true to my character, I thought I knew just about everything.

I had been trying to follow the Rich Dad idea of ‘doodads’ in my investment education. Other than books, I had not really purchased anything including courses and seminars. I decided that with the first money I made, I would purchase the CashFlow 101 and CashFlow 202 electronic version. I justified the purchase by saying the theories had helped me purchase some small cash flow properties, and I could teach other people (as a way of giving back) with my new-found knowledge - and I could use the games to teach others, expanding my own knowledge and enhancing theirs at the same time.

It was at this time that a huge lesson in humility and learning was about to be presented.

I did buy the board game, and I started playing it with friends, investment group connections, and my students. (I am a teacher of teenagers, and had decided to impart my newly found knowledge to them, too.)

I was shocked to realize that although I had been successful investing in small ways, and I had read all the books, and could talk all the talk, I had really not applied my new learning. The Cash Flow game taught me some huge lessons. It seems that although, if given some time and I was concentrating on the theories, I understood. But, given only a moment or so to make decisions, without the freedom of time and a book beside me, I really had not altered my decision making.

Why didn’t I pay off my bills when I had extra cash and lower my expenses? Why did I even consider stuff I could not afford? Why did I try to sell stuff that were bummer deals to other people? Why didn’t I always give to charity when I knew I had the money? Why was I so afraid to short the stocks?

I realized, with the biggest dose of humility, I had not actually learned to apply the lessons. The board game is worth it, and so is CashFlow 202 - if you have a chance, buy it:   THEN PLAY IT!   It’s worth its weight in gold - the real kind.

December 24, 2008

Money Really Does Talk

Truth be told, I was once labelled a 'granola woman' by a quick-witted, very intelligent but very difficult student.  He laughed at my insistence that making money was not the be-all and the end-all and that the passion I had for my work was what really mattered.   He would laugh and confidently say "You don't know what the f.... you're talking about!" (My students are somewhat  He would continue, "Money talks.  And granola sure doesn't."

It took me awhile to realize that, although my passion was real and spiritually fulfilling, money does the real talking.  

For example, I once tried to explain to my bank manager (who had not been pleased by my series of returned cheques - someone had returned a cheque on me and of course, I had no back-up, so the ripple effect took place), that my job was incredible and that money wasn't everything!

He said "You're talking to your bank manager, not your soulmate and you're in the bank staring me down because of your mistake, you're not on a dock watching the canoers go by."   It was just a few minutes later that my lovely student made the granola comment. 

I thought long and hard about how I was sandwiched between my young, wild-child brilliant student and my stern older, conservative bank manager.   They were both on opposite ends of the pendulum, but they were both saying the same thing.

It was just after that when I answered the phone to Toronto Hydro threatening to cut off my hydro at my place of business because the bill hadn't been paid.   I immediately visualized walking into the bank and the Hydro company and offering a granola bar as payment!   I laughed out loud.  But, I had learned a valuable lesson:   money talks, not granola!

I Saved A Lot Of Cash This Christmas

Well, I was looking for ways to save money this Christmas.   Loaded with my incredible list on hand, and my knowledge of the imminent economic disaster in mind, I decided to practise what I preach and find a way to reduce my cash output this Christmas.  

It was then that I fell upon a new Canadian (local) and very interesting site:   If you're looking for something without having to pay for it, or you want something but can't afford it, swapping or bartering is the way to go.   Here's a list of the things on my Christmas list I either swapped or bartered for over the last few weeks:  Raptors tickets, Winter Trip Accommodation for my school (a value of about $2500 - I would have had to pay for it out of pocket), a massage gift certificate for a very stressed out friend, and completely new carpeting for the open basement in my cottage.   Try it.  You might just like it!   And you might save a load of cash!

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If you're part of our exciting club, you will already know how much you've learned here.   This new blog will only add to your learning.  Given the state of the economy and our current economic outlook, why wouldn't we all want to learn more about how to make money and protect our future, our families, and our financial health?   Join me in learning about your future.