Friday, August 31, 2018

In The Landlord Paradise

I love flowers on the side of the house!
In the last post, I shared that I've been tolerating an eight-month long vacancy because of fear, which wasn't even my fear to begin with, but it still paralyzed me.

Now, determined to fix the issue, I set out to find a great tenant ASAP.

Determining Price

To determine the price, I analyzed all for-rent ads on Kijiji. There were 39 of them.

Out of 39, only eight were listed under “House Rental” and the rest were in “Apartments and Condos”.

Even though my unit is an apartment in a duplex, it comes with a basement and a backyard, and takes up a larger part of a two-story house. I decided to put my ad under “House Rental”. It seems to be fair and puts my ad into a bucket with less competition.

Out of 39, the majority of 21 ads were two-bedroom places like mine.

In some cases, prices included all utilities, some covered only some of the services, and some were with tenants paying for everything in addition to the rent. In my case, utilities must be included because meters are not separate.

During my analysis, I made the following big assumptions about the monthly cost of utilities:
  • ·         Water = $100
  • ·         Hydro = $200
  • ·         Water + Hydro = $300

I used these assumptions to calculate all inclusive price for all ads.

Next, I looked at two bedroom units by price and saw that out of 21,
·         6 were below $900
·         4 were between $900 and $1,000
·         6 were between $1,000 and $1,100
·         3 were between $1,100 and $1,200
·         2 were over $1,200.

Aiming to be in the middle and also making sure cash flow would be positive, I decided to price my unit at $1,150.

Placing the Ad

Kitchen Looks Great!

I placed the following ad:

Big 2 Bedroom Duplex for rent $1,150 all inclusive

$1,150.00 URGENT

Looking for responsible tenant(s) for this Spacious Move-In ready Duplex!

- Lots of Parking
- Large Patio & Backyard

- Bright living and dining rooms
- Great functional kitchen
- 2 bedrooms with large built-in closets
- You'll love the spacious Bathroom (pls see pics)!

- Lots of storage space
- Central AC
- Appliances: Fridge, Stove, Dishwasher, Washer / Dryer

UTILITIES: all inclusive

Please text/call or email Anna at MY_PHONE / MY_EMAIL to book your viewing.

We'll be showing the unit this week on THURSDAY, FRIDAY and SATURDAY.

Please reach out to me now to book your viewing: MY_PHONE

Unreal Number of Inquiries

Living + Dining Remind me of Spain Villas - lots of white tile
I got a gazillion responses, mainly through texts!

I booked 31 viewings over four blocks of time: Thursday afternoon, Friday morning, Friday evening, and Saturday morning. Only two people are scheduled for Saturday morning.
So far, as of the end of Thursday, 20 people showed up out of 29.

Landlord Paradise

Since the level of interest turned out to be super high, I started to wonder if I’ve set the price too low.

I asked a few applicants how my unit and its price compare to other apartments they’ve seen. Most said that they are comparable; and only a couple of people said that I could charge a bit more. I checked with my property manager and he thought the price was right as well. It’s what people in the area can actually afford to pay for this size and type of a place.

It appears that the market is very landlord friendly. Lots of demand, and lack of units. Landlords get to choose from a large pool of applicants.

It’ll be a long time, before I forgive myself for an 8-month long vacancy in this landlord paradise type of market. Unreal. I’m such a la-la.

Home Alone: Ever Think a Tenant Might Come After You?

Source: Home Alone.
In my last post, I talked about a duplex conversion. Here’s a prequel to that story…

Eight months ago, we got a duplex in Chatham. The duplex has a one-bedroom unit at the front and a two-bedroom unit at the back. There was a door between the two apartments. I'll call it "The Door" for the remainder of this post.

At purchase, the small front unit was already rented to a tenant and the bigger back unit was vacant.

Long story short, my property manager and the tenant in the small unit did NOT start out with the right foot.

As a result, I was under the impression that the tenant in the front unit was a

  • frightening, 
  • sneaky, 
  • irrational, 
  • demanding, and 
  • crazy person, who is 
  • impossible to deal with, and 
  • who’d sue me at the drop of a hat. 
  • I was seriously afraid of her and her meaniness.

(Hmm... I was wondering if meaniness was even a word.
Now I know that it isn’t, but I’ll still keep it.)

By the end of 8-month long vacancy, the longest vacancy I’ve ever had,

I finally started questioning the absurdity of the situation.

After all, I am the owner of the property. My property manager is so scared of my tenant that he doesn’t take any action. I am so afraid of the tenant, because of how terrified my property manager is, that I haven’t done anything either for a very-very long time.

I know that every month without a second tenant costs me A LOT of money. The money that I don’t have. I am doomed unless I stop chickening out, step up, and take massive action. So I did….

Home Alone

This property is in Chatham, which is 3-hour drive away from home. I decided to come for a weekend and clean / paint / fix the back unit, so that it’s ready to be rented. If my property manager is too afraid to handle this, I’ll just deal with it myself.

I got to Chatham and kept to myself. I didn’t see the tenant face-to-face during the entire day. I cleaned, vacuumed, planned remaining action items around the unit, went to shop for small decorations for the upcoming showings, etc.

Source: Home Alone Movie - Bad Guy!
At sunset, I was starting to panic.

The darker it got outside, the more panicky I felt.

Finally, my brain started spinning and painting petrifying pictures…

I could hear my tenant having a guest over. They were watching TV…

My crazy-irrational thoughts went kind of like this:

“… There’s a door between the two apartments.

It doesn’t have a lock.

What if my tenant is indeed as horrifying as my property manager believes her to be?

What if she sneaks in during the night and kills me in my sleep?”

What if, there’s a lot of them next door?

How would I stay awake through the night to make sure that I’m prepared to run out of the house and call 9-1-1, if necessary?”

Survival Plan

Source: Home Alone Movie
I decided to set up my sleeping station on the main floor. I placed my sleeping bag strategically in the kitchen. As close as possible to the two exits: the main entrance and the patio door.

I couldn’t see The Door between the two units when I was laying down, but I’d only need to lean forward just a tiny bit to see it.

I tried very hard to stay awake.

I wanted my tenant to fall asleep first. The TV was still mumbling through the wall.

After a day of driving, cleaning, shopping, and working, with every minute passing by, it was getting more and more challenging to keep my eyes from shutting.

I put a Windex bottle next to my pillow. In the worst case, I’ll spray it into her eyes and run for my life!

I positioned a rolling chair right next to The Door with the intention that it would start rolling and make a rolling noise as soon as someone walks through The Door. And that'd wake me up!

I turned my computer on. It would be a lot more cheerful if I had youtube… but I didn’t want to use too much data on my phone.

Deadly silence on my side of The Door.

I turned on the only movie I had on my computer. Beauty and The Beast.

Bad decision! I dozed off before the first song ended…

OMG! She is Right Next to Me!

This is it.

I heard the sound of the rolling chair in my sleep.

It’s happening.

I opened my eyes, ready to run for my life:

“Oh, my gosh. I am so sorry! I just wanted to turn the AC up. I didn’t know you were here! I didn’t mean to scare you! Why are you sleeping on the floor? Would you like me to bring you a mattress?”, said my tenant. I could tell, she felt awkward.

As far as I can tell after meeting and spending some time with my tenant one-on-one, she is practical, to the point, and doesn’t plan to harm me or anyone else in any way.

I’m not sure what the actual misunderstandings and miscommunications have been about between the tenant and my property manager, but the "Horror Tenant" issue did cost me a lot of money, time, and stress.

Lesson learned –  Don’t let other people’s fears become your fears and put you into hibernation mode for months. If you have a problem, take action to start solving it.

$300 Duplex Conversion

Over the past year, I’ve been meeting a lot of investors whose strategy is duplex conversions.

Here is how it works, in a nutshell:

  1. Buy a home 
  2. Get permits to add a legal unit to it. For example, create a legal basement apartment; Or get a permit to split the unit vertically creating a quasi semi-detached home.
  3. Hire and oversee contractors & trades to get the work done
  4. Re-finance to get your money back
  5. Rent both units
  6. Live happily ever after (or until you get another one of these duplex conversions).

Based on meet-up presentations I’ve seen, my understanding is that the cost to add a legal unit nowadays averages at about $90K in GTA. Perhaps, you’d see numbers between $75-110K, depending on how optimistic the presenter is.

Here’s how our “Duplex Conversion” Happened

My husband and I got a duplex. It turned out that the two units are connected by a door. Initially, there was not even a lock on the door, which wasn’t an issue since one of the units was vacant at the time.

As we were getting ready to find a new tenant, we had to replace the door with a wall and properly separate the units.

In Our Case, Duplex Conversion Was a Lot Less Elaborate

Step 1. Take measurements & get some two-by-fours and other hardware

Step 2. Measure & cut.

Step 3. Put a back wall up & add insulation

Step 4. Finish up with the fancy front wall. VoilĂ !

Now we have a proper two-unit house. Can't wait to find a great tenant to move in!

Oh-oh! Power Has Been Shut Off

Taking out melted
two-week-old food
out of someone else's fridge
does NOT feel glamorous
Hi! Did you have a good summer?! I hope you did!  I'll post a few articles today. I did a lot of camping in August, and stayed offline most of the time. It's time to catch up now.

Yay! We got a New Door - door #18!

At the end of July, we acquired a new asset. It’s a condo townhouse in Barrie, ON, which we will fix up, clean, refresh and rent to a nice family.

This town house is different for us because it’s our first condo – comes with a pool, gym, and snow/grass services. Very nice!

On the flip side – vacancy costs a lot more than with our typical freehold town homes: Condo fee is quite an expense to carry in addition to mortgage payments!

Oh-oh! Did I miss something??

Since we’ve done quite a few acquisitions, you’d think that everything would go smoothly! but…

I didn’t call the power company to open a new account fast enough and they shut off the power!

This mishap was a definite oversight on my part: I had a lot on my to-do list and held off with all the administrative set up for too long, so that I could finish higher priority tasks. Now, I am sitting at the house and waiting for my hydro appointment.

Since it’s summer and there is no tenant yet, being without power isn’t really a big deal.
No hydro during winter when you already have a tenant would feel a lot more stressful. And that has actually happened last December at another property when a furnace suddenly died.

Having said that, previous owner of the place was leaving quickly and left all her groceries in the fridge. I can tell you for sure - Taking out melted two-week-old food out of someone else's fridge does NOT feel very glamorous. I had to triple-bag the garbage. Yucky....

Any Costs?

Luckily for me, there is no re-connection fee.

The only cost is my time – I have to drive to/from the property and stay here during my scheduled 4-hour appointment time block.

This trip pretty much takes up an entire day! I can imagine how stressed I would've been, if I was still working and had to ask for time off to take care of this.

I am keeping fingers crossed, and hope my cell phone and laptop battery will last until the technician arrives.

Here we go… The technician is here! Hurray!

Should've Would've

Here's what I should've done.

Within a couple of days after closing, I should've called all vendors, enabled new accounts and set up auto-payments for the following services:

Condo Fee

In addition, I should've notified each provider of my intention to rent the unit and to have tenant pay the utilities down the road.

In this case, many vendors have a process for rentals to make sure the account automatically goes back into the owner's name without re-connection fee, as tenants come and go.

Thursday, July 26, 2018

Little Things I Love!

Over this Summer, there were several days when 

I thought to myself how incredibly lucky I was. 

And that was because I was doing something I really enjoyed. In particular, I got to do some gardening around one of our properties. And I truly loved it.

The garden was all set up by the previous owner, and left to grow wildly over the past four years. 

It is a bright mix of perennials.
Bright white daisies spread out confidently throughout the middle.  

Orange lilies proudly take up an entire corner. 

Red blanket flowers are about to bloom and brighten up the entire garden. 

Mint and lavender add gentle aroma reminding me of our cottage back in childhood.

Beautiful yet overgrown, the garden needed some care.

I was delighted to give it a trim.

Under the warm Ontario Sun, this was a dream come true.

I first weeded, and weeded, and weeded. Until I took out 5 bagfuls of various greenery.

Then, I trimmed the bushes, making sure they wouldn't put too much shadow on the garden. I also wanted them to stay safely below the eaves.

Next, I re-arranged the fresh sprouts, and moved some of the flowers around. My goal was to add a little more order yet keeping the nature's charm.

Lastly, I put landscaping fabric and mulch all around. This made my work look complete. I hope it will last a while now.

Voala! Job well done. And so much fun.

"I have looked in the mirror every morning and asked myself:
'If today were the last day of my life, would I want to do what I'm about to do today?'
And whenever the answer has been 'No' for too many days in a row,
I know I need to change something",
Steve Jobs 

Friday, July 20, 2018

What?! Seven grand for life insurance!!!

As I'm building my portfolio of 50 Doors, I can't help but wonder what happens if I die yesterday.

Initially, just the thought of leaving a gigantic pile of debt behind for my kids to deal with, upon my passing, was giving me goosebumps.

Even though, the kids are older now, they are definitely not prepared to chase rent checks, fix toilets, make sure mortgage payments go through without hiccups, etc. Their current focus is studying and finishing their education.

Since I was freaking out a lot about all the debt I took on, I decided to get some quotes for life insurance. The quote came back at $579 / month, which is almost


I was shocked! My husband and I didn't have to think very long to decide that this price is definitely not in our budget. We've been chasing assets, which on average make $200 dollars a month, and are not in a position to set three assets aside to pay for the life insurance. It's just too expensive!

Dangers of Self-Diagnostics: Hire a Professional

Several weeks later, I met an outstanding financial advisor. I attended his talk, read his book, and scheduled a one-on-one consultation. It turned out that I was looking at insurance completely backwards!

Instead of consulting someone knowledgeable and experienced and letting them guide me, I rushed to a decision. I had self-diagnosed my insurance problems and self-assigned a cure: that I must buy a huge coverage policy to pay off all my debt immediately, the moment something happens to me or my husband. Then I discovered that the huge policy was too expensive and left myself and my family in the same risky situation of not having a contingency plan in place.

Only after I talked to a real guru, I realized how much difference knowledge makes. There's a reason we have professionals who know exactly what they are doing! It's a shame I thought for a brief moment, I knew anything about insurance.

Lessons Learned

1) Start by Educating Yourself and/or Hire a Professional

Whenever you do anything for the very first time, it pays off to spend time on education and find experienced professionals who specialize in the field. 

Having read the book by my advisor, I got a good initial understanding of key terminology and common problems, solutions, and use cases around insurance. This helped me ask good questions  during my one-on-one consultation and discover what my personal insurance needs are.

2) Understand Your Own Needs

Surprise, surprise! After understanding how insurance works and what options would be suitable in my situation, I discovered that I don't need a huge policy to cover all my debt. It just doesn't make any sense. No wonder that would cost a fortune!

Instead, I realized that my needs are completely different. For example:
  • Be able to stay home for a few months, if one of our family members gets sick
  • Survive a sudden income interruption, in case my husband has to take a break from work
  • Have a sufficient emergency fund to avoid a fire-sale of one or more assets
  • Ensure that our kids finish their education, no matter what
  • Establish a detailed plan for our executors and get their agreement on this.
What I realized is that insurance is NOT a lottery. There's no need to buy millions of dollars of insurance. All you need is sufficient to go through a life change without sacrificing your future financial and emotional stability. 

Make sure you have enough for you and the rest of the family to still have your lives, businesses, and routine to come back to, after the storm is over, and carry on from where you've left off.

3) Understand Your Family Needs

It was interesting to me to work with my husband. During needs analysis, we drafted his and my estates. This means that we looked at:
  • what my husband will need, should I become disabled or die; and 
  • what I'll need in case he dies or gets sick.
It turned out that our two estates are drastically different.  

I'm actually a lot more demanding aka vulnerable at the moment, because my husband covers most of our day-to-day bills, while I work on building our future wealth. 

In other words, a brief interruption to my husband's work schedule, would cause a sudden financial shock to the family. While if I am out of pocket for a few months, no major collapse would happen. In this case, we'd just need to adjust our long term strategy.

With this in mind, as of now, my estate needs to be insured at a lower amount, compared to my husband's. 

Being Prepared Feels Great!

Even though it sounds very creepy to be discussing in so much detail what will happen when one of us gets sick or dies, I feel great having gone through this discussion! 

Here are some of my take aways:
  • Statistically, the chances of being out of pocket are pretty high! 
  • Basically, almost everyone will be sick in the next 10-20 years. So it helps to plan ahead how to afford to stay home while you recover and/or stay home with a sick relative.
  • Dying is easier than being sick. Sickness is hard on the person recovering and those who take care of him or her.
  • If you plan your insurance coverage well, you'll have a much higher chance to weather a storm and reach your long term goals after it.
Being prepared feels great! If you'd like a referral to the awesome financial advisor I'm working with, ping me and I'll connect you. No obligations and no referral bonuses for me! I honestly think it's super helpful to know more about this stuff and make educated decisions about how to best protect yourself and your loved ones.

Friday, July 13, 2018

Hey! Where should I invest?

I often get a question:

"Hey, I'd like to invest in .... 
plug in any town or city you are wondering about - Toronto, Milton, Hamilton, Windsor, Oshawa, Montreal, Ottawa, Rochester, Buffalo, etc... - 

... what do you think?"

To be honest, in most cases, I think absolutely nothing. I'd really have to do some homework and educate myself about the market before I can answer such a question.

Sometimes, I have a gutt feeling. Especially, when I've had some previous experience in a certain city. Still markets are so fluent and I'd need to look up latest stats and information, in order to provide an educated opinion.

I'd like to share a few questions that I research, whenever I'm getting ready to expand into  a new location.

If you have questions or would like to share your own tips on how to choose a great location to invest in, please add a comment below or send me an email!

1. Do People Want to Live There?

Ideally, population should be 100,000 - 200,000. If it's smaller, you'd really need to study the demand and supply carefully and make sure you know who your tenants are and how you'll find, attract, and keep them. You’ll also need to verify current inventory. Last week, I came across a city that had 26,000 vacant units while the total number of households is around 85,000 and has been declining. This tells me that supply drastically exceeds the demand and I’d have issues filling in units. Prices will not go up for a while in this market. 

There should be evidence and factual proof of recent and upcoming population growth. There are many great cities that, for one reason or another, have experienced population decline. Study latest trends in detail, before deciding to invest in them.

For example, if you come across a town that has been losing people over the past 50 years, I wouldn't bet on a sudden popularity spike. Watch out when you see outward migration, job loss, crime rate increase, poverty climbing up, vacancy rates sky-rocketing, lots of unused or abandoned inventory, etc. All these signs show you that you will likely have difficulty finding quality tenants. 

On the other hand, if you see population decline slowing down, flattening out, and notice people  starting to flood back in, you are onto something! Projected population spike might be a potential gold mine. If you start investing at the right time and get your property at a price that works, you might catch the wave of appreciation. 

Even though appreciation is always a bonus and should not be used in your assessment calculation as a given, it still makes sense to look for areas with high probability of growth and stay away from dying towns.

Projected population growth, recent considerable increase in population, new jobs and businesses opening, new or refreshed infrastructure changes, nearby city or town becoming hyper expensive and over-populated, and vacancy rates dropping are some signals of an emerging market.

2. Lots of Diverse Positives 

Look for social and economic diversity with lots of positives. Be careful when you see a location that has only one great thing going for it. An example of this is all the single big employer cities as well as cities majorly supported by a single industry.

I know that it might seem highly improbable for a giant company to shut the doors, yet we’ve seen so many examples. Windsor, Detroit, and Rochester are some examples of cities that went through a relatively long down town due to larger employers leaving.

One of the ways to find cities with lower risk of over concentration is to look for diversified and balanced list of positives across a wide spectrum: diverse demographics, income levels from entry to high, education from high school to PHD, household sizes from single person to families with kids, several unrelated employment industries, various types and levels jobs - white color, blue color, small businesses, large businesses, new technologies, and established employers, etc.

3. Who and How is Helping the City Grow?  

Lastly, I do a lot of research regarding economic development plans for each location that I plan to invest in. 

Looking at the plans of a City gives you a lot of insight into upcoming trends. For examples, some cities would promote latest technologies, set up programs to attract businesses, implement solutions to upgrade skills of the population to meet incoming businesses' requirements. You'd come across articles when agreements are made between various levels of the government to fund major infrastructure improvement programs: build new bridges, highways, and train stations; grow wind mills farms; re-build airports, etc.

On the other hand, you might come across a town that has its entire budget dedicated to fixing some pot holes in the roads. Most achievements listed on their website would be outdated or insignificant. No major partnerships with outside investors would surface, when you search for news on economic development. You'd realize that no one cares if the city grows. The focus is on status quo. In this case, you'd need to make sure you are good with the status quo and it works for your strategy. Momentum might last a few more years and this may be sufficient.

To recap, since my strategy is mainly based on buy-fix-rent-and-hold-long-term, I focus on finding locations with a high probability of market appreciation due to:

  • Sufficient market size for my needs
  • Recent, current and projected positive trends in population growth
  • Lots of evidence for finding quality renters and demand for the type of units I offer
  • Good supply/demand balance and trends 
  • Minimal risk of economic collapse due to over-concentration in a single niche/industry/social group/etc.
  • Great leadership and people interested in helping the city grow with budgets dedicated to major improvement projects that will attract jobs, people, businesses, and money. Work already under way!