50 Doors Annual Results as of Jan 2020

2020 is the 7th year on my road to 50 doors!

The journey started in 2014 when my husband and I decided to go after passive cash flow and financial freedom. Without any prior experience, we set out to get 50 rental units within five years. Each unit would theoretically give us $200 of passive income. Overall, we aimed to achieve 10K/month cashflow.

Here we are seven years later! Happy to share actual results and lessons learned as of the end of 2019.

Financial Freedom Strategy

• Invest in Assets, which put money in my pocket
• Eliminate Liabilities, which take money away
• Until the positive cash flow from the assets covers my family's day to day needs aka we are Financially Free

BIG DREAM and THE DREAMLINE

I am working towards September 2022 deadline.

Or should I say DREAM-line? Ba-dam-shh...

The plan is to go away on a sailing trip during the 2022/2023 school year.

Timing will be perfect. Our little guy will still be in middle school. We'll do some sailing and sight-seeing and come back for his first year of high school in 2024.

My two oldest sons will be independent by then. Ha-ha, we'll see how that goes! As a side note, I would have never thought that handling teenagers can be A LOT TRICKIER than real estate investing! But this is a topic for a different type of blog.

WITH THIS IN MIND, MY BIG 2020 GOAL IS TO GET THE BOAT!!!

Status as of the End of 2019

KEY POSITIVES

• Our portfolio now has 17 assets. We added one in 2019.
• The total door count is 20! Only 30 more doors to complete the original 50 Doors plan
• I'm thrilled that our cashflow has bounced back up to 15K from the 2018 dive down to 3.9K.Tight hands-on asset management definitely paid off.
• I am most grateful for the caring, responsive, and responsible tenants and their families, as well as reliable and easy to work with property managers, handymen, trades, advisors, and partners.
• However....

THE KEY LESSON LEARNED

My biggest 2019 takeaway is EASY DOES IT!

Continuous rapid expansion can be emotionally exhausting and extremely stressful.

Every new asset you add to your portfolio requires resources - time, money, skill, energy, etc. Ever since we started, all equity and cash flow from older assets were going right back into the growth funnel and used to acquire new assets.

Too many times over the past year, my safety cushion was too thin. I relied on pure luck to make ends meet, juggle, and balance all the in-flows and out-flows.

Choosing the right pace is crucial in the long run. Giving myself ample cushion room yet still making great headway is the art I'd like to master.

Update on Objectives for 2019: Mostly Complete

1. Eliminate a big chunk of my most costly liability, Bad Debt. This will increase my overall cash flow. With less debt, I'll attract other people's money on better terms. Done!
2. Acquire assets that put money in my pocket at a reasonable pace without getting new bad debt. This will increase positive cash flow as well. Done!
3. Sell non-performing assets in Spring 2019 to improve cash flow. Kind of done! I was able to improve operations without selling the assets.
4. Acquire liquid assets. You can't buy groceries on real estate equity. Liquid assets will be my rainy day fund to protect me from a fire sale in case of an emergency. Great progress! Lots done and way more still to be done!
5. Plan ahead for the sailing trip! Budget, research, and make sure my husband gets his sailing license. Getting there! Break your leg, Anton! :) Good luck on your skipper exam in a couple of months

Objectives for 2020

1. Double revenue & double cash flow! Not sure how yet... don't ask.
2. Take it easy & enjoy life - read, yoga, meditate, be active, have fun, help and support my loved ones, and give back.
3. Last but not least - Get The Boat!   

Numbers

Link to My Portfolio 2019 is here.

Link to My Portfolio 2018 is here.

How to Become 22% Financially Free

Most of my girlfriends think that
living with my parents is
a horrific idea :)

Over the Christmas break, my family made a very big decision. We all finally agreed that it's time to eliminate one of our biggest liabilities - our home! 

We decided to join efforts cross generations and consolidate two residences: my family moved in with my parents.

This is not only because we love each other to pieces, but also because we saw a great opportunity to optimize our spending. This is a step towards our financial freedom goal and a part of the following chain reaction:

• Spending goes hand in hand with saving.
• Saving goes hand in hand with investing. 
• Investing goes hand in hand with multiple streams of income.
• Multiple streams of income go hand in hand with financial freedom.

I understand if you think it's a crazy move. Even my nine-year-old jokes:

My son: Mom, how do you feel about living with your Mom when you are almost 40?

Leaving 16 years of memories behind

Me: I like it

My son: Why? [Pauses] Free food?!?

Then, he bursts into laughing loudly at his own black humour.

All joking aside, this is a big change for our family. Kids had to change schools, karate dojo, pack
and move all of their stuff, and try to make new friends. My husband and I packed 16 years of life into boxes and garbage bags and piled it in my parents' basement. My parents now have to observe our semi-chaotic living in their previously idyllically quiet home.

Why? Because this change takes us closer to achieving our financial freedom goal. Now, our upcoming year-long Sailing Trip in a couple of years is more real than we've ever imagined.

Myth: Home is an Asset

Most people consider the home that they live in to be an asset.

There is a lot of evidence all around us in favour of this myth. For example, real estate agents will tell us that home is the most expensive asset we will purchase in our lifetime.

A creditor will ask us to put the market value of our principal residence at the top of the Assets column on their credit application.

Our personal financial advisor will ask about the value of our home and enter it on the first line of the assets section of our Personal Financial Information form.

Let's be pragmatic about facts:

A real estate agent will get paid a commission based on the purchase price you pay for your home. 

A creditor will collect thousands of dollars of interest payments when you borrow from them and secure a loan against your home.

A financial planner will help you in many ways:

a mortgage, insurance, a secured loan, an investment portfolio, and a repeating annual financial plan update, all of which is based on the market value of your home; all of which comes with a price tag.

Please keep in mind that I am a grateful customer to a few amazing real estate brokers, mortgage brokers, and financial planners. Knowledgeable advisors help me tremendously on my way to financial freedom! The value of the products and services they provide to me greatly outweigh the associated costs and propel me forward. In fact, I wouldn't be able to achieve what I've done so far without their help. If you are reading this - Thank you!

The trick to appreciating the value of these services is to know exactly what you are after.

The advisors, especially great ones, will give you the advice that you'd like to hear. This is because a huge part of their job is to help you achieve your dreams. They will cater services to your tastes and help you make the decisions to achieve your desires.

Therefore, if you go with conventional definitions and believe your home to be an asset, you will inevitably purchase an expensive home and spend a lot of money on it! Your advisors will help you do it to the maximum.

Your Decisions are Yours to Sponsor

Since my goal is financial freedom, I make it my highest priority to fully understand the costs of each of my liabilities, including my home.

I am fully and solely responsible for all the associated home expenses such as:

Mortgage Interest and principal 

Mortgage insurance 

Life and disability insurance premiums 

Property taxes 

Property insurance 

Maintenance and repair costs 

Snow and grass care costs 

Cable 

Internet 

Phone line 

Security alarm system 

Furnace lease 

Water tank lease 

Utilities 

Interest on the furniture bought on credit card 

Interest on the car as fancy as my neighbour's

Netflix

Amazon Prime 

Cleaning lady (I notice that the trend is more bathrooms than people in a house!)

A second car if the house is far from work 

Given my personal goal, I choose to disagree with the conventional definitions and concur with Robert Kiyosaki, who insists that we put our home on the liabilities side of the equation.

In order for me to balance my personal budget, I have to face the harsh reality and be ready to pay the bills that I signed up for. There's definitely a lot of bills to pay when it comes to home ownership!

Consequently, my advisors strive to help me find the best bang for the buck, save every penny possible, and use my personal home to the fullest.

Abundant Opportunities

Homeownership combined with the home being classified as a liability (as opposed to being an asset) gives you tremendous opportunities.

First and foremost, I bet you can save two to three hundred dollars a month, if you carefully revisit all of your regular expenses, decide which of them you no longer need, and stop paying for them.

Keep in mind that small savings add up.

For example, over the past couple of months I shaved off the following on little things:

- Replaced mortgage and loan protector insurance with whole life and disability insurance +$100

- Stopped paying for a home thermostat rental +$15

- Cancelled Netflix +$12

Sub-Total: $127 per month = $1,524 per year = $1,836 before tax.

After moving to my parents, I've also added the following savings:

- Cancelled internet +$65

- Cancelled home insurance +$40

- Cut utilities and property taxes in half +$500

Sub-Total: $605 per month = $7,260 per year = $8,746 before tax.

Adding $656 monthly saving I shared last month, grand total becomes:

$127 + $605 + 656 = $1,388 per month = $16,656 per year.

At 17% tax rate, that is $20,067 of pre-tax salary.

An average family with 73.7K annual household income has to work for over eleven weeks to earn enough money to cover these expenses.

Given the recurring nature of these expenses, it's not just a one-time eleven-week long work project. You'd have to work for eleven weeks every year to pay for all these obligations.

For me personally, getting rid of these liabilities means that my husband can be on vacation for 11 weeks out of 52 every year. 

This alone makes us 

22% FINANCIALLY FREE

Sailing Trip Awaits!

Not bad, eh?

PS Saving and being frugal around your home-related expenses is just one side of the coin. Being a homeowner can open many investment opportunities and become the basis of your future wealth and financial freedom. Email me at ask@50doors.com if you'd like to learn more

Vacancy: Landlord's Worst Nightmare

Vacancies Keep me Awake at Night!

A few days ago we filled our last vacancy.

What a Relief!

The search took about three weeks. Our property manager began advertising the unit on November 19th. 

We started with $1,650 asking price, which was higher than the average for similar units in the area. There were barely any inquiries at that price. 

December and January are typically slow months for tenant search. People are busy with holiday prep and after holidays they go into hibernation-mode for the remainder of the winter. I was worried that we'd have a vacancy until Spring.

Vacancies Keep Me Awake at Night

The reason I am so afraid of vacancies is because they are very costly. Every month of vacancy, I'd have to come up with money to pay the mortgage, property taxes, utilities and, in case of this specific property, property management and condo fees as well.

Ouch!

Typically, they recommend that you include 2-5% vacancy fee in your cash flow calculations.

Given 5% vacancy, my annual cash flow would be $1,280. Or $100 a month.

In reality 5% only works if you manage to go without vacancies for a while. Actual losses are a lot higher!

For example, my annual loss for a year with one month of vacancy is about ($1,660). That's because:

I will not get a month of rent of $1,600
Pay about $300 for the utilities during that month
Pay about $2000 for tenant search and making the unit ready - fresh paint, minor fixes, etc. add up
Pay all regular expenses of $16,960...

If my property is vacant for two months, the loss will be ($3,560).

With three months of vacancy, I'd lose ($5,460).

Once I do find a tenant, it will take a l-o-o-o-o-o-o-o-o-o-o-o-o-ng time to catch up.

I'd need the tenant to stay for almost 2 years, to catch up after one month of vacancy.
The tenant will have to stick for over 3.5 years to catch up after two months of vacancy.
Lastly, the tenant will have to stay for almost 6 years, to fully catch up after three months of vacancy.

My math is simplified, of course. I don't take rent increases into account at all, for instance. Still, you get the idea why I hate vacancies. Vacancy losses are horrific.

The danger is on the flip side as well. If you rush and get a BAD tenant, you can end up with thousands and thousands in losses... See my blog post here for details - My $30,000 Mistake.

Here is a chart with the numbers in my examples above:

	Projected: 5% Vacancy	Actual:    1 month    Vacant	Actual:     2 months     Vacant	Actual:     3 months     Vacant
Gross Rent	$19,200	$19,200	$19,200	$19,200
Less Vacancy	($960)	($3,900)	($5,800)	($7,700)
Rent Income	$18,240	$15,300	$13,400	$11,500
Expenses
Financing Cost	$6,860	$6,860	$6,860	$6,860
Condo Fee	$5,304	$5,304	$5,304	$5,304
Property Taxes	$1,961	$1,961	$1,961	$1,961
Other	$1,200	$1,200	$1,200	$1,200
Property Management	$1,094	$1,094	$1,094	$1,094
Insurance	$540	$540	$540	$540
Total Expenses	$16,960	$16,960	$16,960	$16,960
Net Profit (Loss):	$1,280	($1,660)	($3,560)	($5,460)

Success! Got a Great Tenant

Needless to day, the pressure was on.

We lowered the price by $50 to $1,600. Luckily, the interest picked up! 

The ad generated over 230 views, 15 inquiries, three viewings, and a great application on December 9th. 

Our property manager uses Naborly for tenant screening. I've never seen a Naborly report before and was quite impressed. The multi-page document covered most of the information that I typically review for a candidate and gave some additional insights. Here is what the report covered:

• General info about all occupants
• Previous addresses and address verification
• Equifax credit summary and score
• Debt summary including monthly debt payments
• Rental history
• Financial information
• Employment history
• Analytics showing the likelihood of key tenancy risks (late payments, eviction, property damage) 
• Analytics showing the likelihood of a successful tenancy during the entire term.

Our property manager also collected a photo ID, a full credit report, and a letter from the employer. They conducted a face-to-face interview and verified employment and personal references. My property manager summarized their findings including possible risks.

I reviewed all the information as well and did my own due diligence. I typically research every piece of factual information and make sure all facts align and make sense. The way I do it is very simple: research every name, every address, every company name, every email, and every phone number that the candidate provided; look in Google and on all social media platforms; contact all references and chat with them; verify income.

In this case, all checks were successful. I accepted the application and to my delight, the tenant confirmed that they'd like to go forward as well.

No Vacancies!!!!!
Overwhelmed with JOY and
will definitely sleep like a baby :)

The property manager impressed me very much! This was the first time when they found a tenant for me and I loved how smooth the tenant on-boarding process was. 

As soon as this last vacancy was filled, I started sleeping like a baby again! 

How Two Families Got Richer

Miss my car, but don't miss spending ~8K a year 

Over the past 5 years, I've been adamant about eliminating liabilities.

Here is the theory:


Liabilities take money out of your pocket.

The more liabilities you get rid of, the more money you keep for yourself.


Every dollar you keep, you can put to work by acquiring assets.


Assets put money in your pocket.


Once money from your assets cover your needs, you are financially free.

Hence, eliminating liabilities expedites your financial freedom

Easy! Right?

Not really!

It took me over five years to make the decision to get rid of one of my biggest liabilities - my car! 

In Love with My Car

In love with my car

My husband and I knew precisely the cost of owning two cars. Yet we hesitated. We had a lot of questions: do we really need both cars? can we do with one car? how much extra time will we spend on logistics if we were to get rid of one of the cars? which of the cars we keep? how much can we save?

Most of uncertainty and hesitation came from the fact that my car was really important to me. I loved it! It was an integral part of my life.

It was hard to imagine not having my own car. I was used to being free to go whenever and wherever I want.

Managing our properties, driving kids to schools and sports, visiting our parents, getting tons of food from Costco, etc. all required a lot of driving. My husband and I often had to be in two or three different places at once. Eliminating one of our cars would cause a lot of stress and cost time.

After discussing pros and cons, we always came to the same conclusion: we had to keep both cars.

Even though I knew my car was an expensive liability, I loved it too much. I couldn't let it go.

Annual Car Cost = Seven Weeks Working 

It's been taking a TON of money out of my pocket. In 2018, relevant  expenses added up to $7,878:

Costs	Amount
Gas	$3,473
Insurance	$2,435
Fixes	$1,507
Parking	$463
Total	$7,878

At 17% tax rate, this equals $9,492 of pre-tax money.

An average family with 73.7K annual household income has to work for over seven weeks to earn enough money to cover this liability. This is a recurring expense, so it's not just a one time seven week work project. You'd have to work for seven weeks every year to pay for all the car expenses expenses that year.

Time for Change

All good things must come to an end

This year our personal situation changed.

Our oldest son moved out.

Our middle son became fully self-sufficient. He prefers TTC.

I work from home most of the time.

My husband takes train to work.

We noticed that both cars are parked and idle during most of the time.

The next step was obvious. No more hesitation. We no longer needed two cars. Time to sell!

My Ex-Car is now an Asset

Once we made the decision, selling was easy. We found a buyer on Kijiji.

What I loved the most was that he turned the car into an Uber! It's now an asset and is putting money into the buyer's pocket.

One transaction made two families a little bit richer:

My family got rid of a liability. We now keep more money for ourselves.

The buyer's family acquired an asset, which puts money into their pockets.

Discovery of the Year: Passive Income Exists! and why I say so

Lo-o-o-o-o-ng road to Financial Freedom

Up until very recently, I thought that 4% return on your money was a GREAT deal.

In fact, I believed that anything better than 4% was most likely a SCAM.

Given this information, my freedom seemed practically-unattainable:

My financial freedom was THREE MILLION dollars away

3 million @ 4% = $120,000 / year = $10,000 / month

Imagine, how HAPPY I was when I learned that there are 

NUMEROUS LEGITIMATE WAYS

to make more than 4% on your money! 

How about 6%, 8%, 12%, 17 % or even 20+%?!?

With higher returns, the path to financial freedom is much shorter! 

For example, at 8% return, financial freedom is

1.5 million away:

1.5 million @ 8% = $120,000 / year = $10,000 / month 

Discovery of Private Exempt Market

During summer, I started investing in what is called private exempt market. I learned about this type of investing from a good friend, whom I met at a networking event about a year ago.

Investing means lending your money to someone who will use it to create value and pay you your money back with a profit.

You have to remember that investing can be risky - you can lose time, money, go through a load of stress, etc.

This is why there's a whole slew of regulation around investing in private exempt markets, which is in place to protect consumers (aka you and me) from making bad decisions and getting themselves into financial trouble.

Private market means all non-public businesses, from mom-and-pop-shops to huge private enterprises.

Exempt means that there are rules for investing into these private deals.

You have to meet one of the exemptions to qualify. 

These exemptions are governed by law. Their purpose is to protect the consumers from financial losses, which they can't withstand.

Up until a couple of years ago, only accredited investors were qualified to invest in private exempt market and private companies could not advertise investment opportunities to non-accredited investors.

Accredited investor is someone who meets at least one of the following criteria:

• Earns more than $200,000 per year before taxes
• Together with spouse, earns more than $300,000 
• Owns more than $1 million before taxes of financial assets but net of related liabilities
• Owns more than $5 million of net assets 

Needless to say, the whole concept of private exempt market was invisible / forbidden / unattainable to average middle class professionals because most of us don't qualify as an accredited investor, so we fall under the protected class.

I personally had no idea about these deals. Protection worked :)

The Good News!

The good news is - the legislation was updated and we now qualify and can learn about investing in private exempt market. 

Here is the recently added Eligible Investor exemptions:

1. Owns $400,000 or more net assets
2. Earns more than $75,000 per year before taxes 
3. Together with spouse, earns more than $125,000 

Lastly, there is one more exemption - Any Investor!

Legislation still protects us by setting the limits of how much Eligible and Any Investors can invest.

Yet, we all now have an opportunity to invest into many of the same deals that accredited investors have been investing into. And I bet, most accredited investors wouldn't be too thrilled investing into something like this, which I constantly see in my Facebook feed:

This is NOT a good deal.
Hope you aren't clicking on ads like this one...

My First Two Assets in Private Exempt Market

11% vs. 3.2% - Gets You There Faster!

I invested in two private exempt market deals so far. Here are the key reasons why I chose them:

1) Like the horse and bet on the Jockey 

• I educated myself about the details of the project and understood it. I checked with people who are a lot smarter than I will ever be.
• I am very clear about the business model, project plan, exit strategy, and underlying securities 
• Most importantly, I verified the track record of the Jockey. I know that they’ve done what they are about to do over and over and over and over again successfully. 

2) Operating within my comfort zone

• Using RRSP money, which will not be available to me anyways for a couple more decades 
• NOT putting all my life’s savings into a deal all at once - I allocated two chunks and spread them across two independent projects 
• Selected projects within the real estate niche, which I'm familiar with
• Am comfortable with the timeline and the fact that my money will be locked for 3-5 years

3) Trust but verify

I chose one asset with frequent cash distributions and another one with higher return and longer waiting period.

The former pays investors quarterly. I chose it because I wanted to see how the asset works start to finish, before looking for any other deals.

I got my first quarterly deposit! Over $900 dollars - a single quarterly payment covered my family's internet for an entire year. Not bad!!!

The best thing is this income was purely passive.

I can imagine how much work it has taken the private business to generate this return.

For me, it is truly passive - zero effort - 11.06% annualized return.

Now, that I've completed this small proof of concept, the sky is the limit :)

Hope this blog post helps.

I wonder if you knew these deals existed and 6, 8, 10, 17% or 20+% passive return was achievable? 

What was your experience? 

Feel free to leave a comment below! 

Can't Afford Financial Freedom? Start with these THREE Steps

Overcoming the No Money Hurdle.
This is how I feel when I need to finance a new deal.

I recently sent out a 2-minute survey about financial freedom. If you haven't responded, feel free to  fill it out HERE -  it's fun, super-quick, and your response will help me understand what's important to you.

It'll also give you a moment to think about your personal financial goals.

One of the survey questions was:

"What's holding you back from reaching financial freedom?"

So far, the top-most response with 58% vote is:

"I can't afford it. Not enough money" 

I thought it would be helpful if I gave you the exact steps I followed to finance my real estate assets. This approach worked for me over a dozen times.

Step 1: Acquire an Asset not a Liability 

An asset puts money in your pocket. A liability takes money away from you. 

Assets are easier to finance than liabilities. 

By definition, assets make money and, hence, provide a less risky security for a prospective lender.

A typical A or B lender always makes money, no matter if you pay your mortgage or not:

• If you pay mortgage, they make a LOT of money (see my previous blog post - Mortgage Free by 2023).

• If you stop paying your mortgage, the lender can collect the rent instead of you. This is why many lenders require a current lease agreement, so that they have a way to verify how much income you collect from the asset. This gives them a method to make money, even in the worst case.

• In case of default, the lender can choose to sell your property. If your property makes money and is priced under market, there will be lots of buyers - the sale will be quick and easy. This is why most lenders will also require that an appraiser they approve off, provides a current market assessment and confirms the market value of the property. The bank will only finance up to 65-80% of the value. 

On the flip side, all your liabilities add up and play against you. You may be able to get financing for the first few real estate properties, which are not cash positive, if your personal income can support paying for them. However,

• Most traditional lenders will turn you down, if your debt service ratio is worse than 44%. This means that at the most, 44% of your income has to be enough to cover all your interest, tax, and heating payments. 

• When you go after liabilities, you reach this 44% ratio very fast. As soon as that happens, most traditional lenders stop giving you money. Your strategy becomes too risky for them.

Keep in mind that you can usually find more creative ways to finance the deal. However, in my experience, creativity usually is expensive. You have to get more expensive money from lenders who don't mind extra risk or trade equity for money. Either way, mathematically there is a point at which financing cost turns your property from an asset into a liability - you start losing money.

Long story short - getting financing for assets is a LOT easier and more affordable than getting financing for liabilities. 

My recommendation is to focus only on assets and stay away from liabilities. 

Step 2: Play by Lenders' Rules 

There are numerous lenders out there. Each lender has their unique underwriting rules and procedures. These are similar on a high level, yet minor nuances sometimes make a big difference. You might not qualify with some of the lenders, but be a perfect candidate with others.

Underwriting is the process by which a lender determines whether you qualify for a mortgage or a loan with them. Knowing how the underwriting process works is half the battle.

Hence, it's beneficial to work with an expert who knows this process inside out and can help you navigate through the mortgage application, and position you properly with the lenders, where you have the most chance. It's similar to resume writing and interview process - a good mortgage broker can help you with your money resume and your money application.

If you don't qualify at the moment, an expert mortgage broker can explain to you what may be missing. This way, you can plan your next step and work your way to your next deal. Alternatively, knowing what is missing, you can find ways to partner with friends, family, or third parties to fill in the blanks and make the deal work. Understanding lenders' rules gives you a chance to structure your deal correctly and make things work.

Financing is a repetitive task. At the minimum, you have to review financing for each asset every 5 years. When you build your portfolio aggressively, financing becomes a never-ending ongoing task.

You are always looking for money. You are always looking for ways to replace expensive money with more affordable money. Every time you find cheaper money, your cash flow goes up. 

Financing mistakes are costly. In my experience, each finance/re-finance transaction ends up costing at least $7,000 on a small residential deal. On an ongoing basis, my regular mortgage payment is often just under 50% of gross rent.

It makes sense to have a good partner on financing side of things. The last three transactions that I completed were possible thanks to the help I got from the Loan Central team. 

If you are in GTA and access to money is your biggest hurdle, give Loan Central a call! It doesn't cost you anything to ask the question. You could also drop in and attend one of their weekly meet ups. I've attended several and found lots of great FREE information and connected with a few like-minded people.

Here's Loan Central's contact info. They helped me multiple times.
If you have financing related questions, ask them!

Step 3: Be Extremely Organized 

No matter how many assets you plan to acquire - one, two, ten, 50, or a 100, stay organized.

On many occasions, lenders, mortgage brokers, and money partners complimented me on giving them the information they needed quickly and in the format that was easy for them to follow.

Lenders typically need a lot of information to complete their underwriting process and determine whether you qualify for a loan with them.

The way you present the information and its accuracy makes it easier or harder for lenders to make the decision.

It's in your best interest to make your application to be as easy to evaluate as possible.

• Provide complete accurate information 
• Double check all numbers against supporting documents before you submit information
• Make it a rule to keep track of information on a regular basis - after all, making money is what you are after. 

You will make MORE MONEY, if you keep track of it.

This is how I feel
EVERY TIME
when I finalize financing for a new deal

Here is a link to download my Excel tracking template. If you'd like it FREE, please email me and ask me to email my sample Excel portfolio template back to you. I'll respond as quickly as I can.

Here's an old blog post on what sort of documents you'd typically be asked to provide when you apply for a mortgage.

Hope you find this blog post helpful. If you have any comments or questions about money, please leave me a comment below.

PS You also might be wondering how you can come up with a down payment. That'll be in one of my future blog posts. Please stay tuned.

The Beauty of A La Carte Property Management

Loving A La Carte Property Management

A friend of mine runs an amazing property management company – they offer on demand white glove property management services. I call it a la carte property management.

I think this service is amazing. In fact, it’s just perfect. I tried it last month on one of my rentals and absolutely LOVED it.

To start, let me share my view on traditional property management and some challenges that I've come across.

This will help me explain why I am so excited about a la carte property management!

The Pains of Traditional Property Management

Traditionally, property managers charge a percentage of gross rent per month. Usually, somewhere between 5% and 8.5% of your gross rent. For example, if you rent a unit for $1,500, you’d be paying around $100 a month to the property manager. You pay based on proforma, not actual, i.e whether or not your tenant pays rent, you still pay your property manager.

Given a skinny average cash flow of $200 per unit, property management could easily take away half of your cash flow. So instead of getting $200 a month in your pocket and self-managing the unit, you’d be getting $100 a month from the unit when you outsource property management.

The biggest benefit of hiring a property management company is that your property manager becomes the point of contact for your tenants, instead of you. You never see, communicate with or hear from your tenants. Your tenants contact your property manager with all their questions and issues. The property manager coordinates issue resolution, gets your approval on costly items, and sends you an invoice at the end of the month. This invoice includes:

• Property management fee of 5 – 8.5% 
• Cost of labour to resolve issues
• Cost of materials to resolve issues

Traditional Property Management can get Ugly

Here are some examples of what is not included in the property management fee and will be added as an extra line item on your invoice:

Painting / cleaning / making unit ready for a new tenant, plumbing issues, snow/grass care, new tenant search, sending an eviction notice to a non-paying tenant, representing you at the landlord and tenant board, fixing a broken screen on a window, etc. 

Basically, everything is extra with the exception of:

• rent collection 
• the contact phone / email that your tenants get to call when they need help
• in some cases, annual rent increases. In my case, I have to remind my property manager about these.

In theory, this model works great for hands-off investors. You pay someone else to take care of your property and your tenants. You pay the invoice to cover all associated costs. You trust your property manager to do a great job and believe they will act in your best interests. You sleep great at night and can spend your time doing something more exciting than answering your tenants’ calls.

However, in my experience so far, the model seems to fail frequently. 

Some property managers that I’ve run into would let your unit stay vacant for many months. They wouldn’t put in any effort into collecting rent. 

They’d procrastinate for many-many months keeping issues that are important from owner stand-point in their waiting queue, and decide that it's not necessary to address these issues at all. 

They’d find a gazillion excuses and explanations of why some issues cannot be addressed or addressed timely. 

In the meantime, your have zero interaction with your tenant and practically no insight into what is actually going on at your property - you are at the mercy of your property manager. 

While you are becoming more and more frustrated with how things are going, the property manager still collects the monthly fee.

And the issues that are bothering you and costing you time and money still remain open, adding up to hundreds and sometimes thousands of dollars.

The Beauty of A La Carte Property Management

The way on demand property management works is very simple.

You run your property the way you like. You keep in touch with your tenants. When you need an extra set of hands or an expert to do a certain property management or tenant management task, you pay for the service.

There is no monthly fee. You pay as you go.

In my case, I have a triplex in Guelph. My monthly gross rent is $3,126. I have long term tenants in two units. They are great tenants and rarely have issues or requests. They keep an eye on the property and bring up issues that need my attention. We have a great relationship. There is really no need to hire a property manager to manage these two tenants.

The third unit has higher turnover. My last tenant was a young professional. He bought his own place and moved out. I needed to find a new tenant. 

The property is about an hour away from my place. I have so much going on that I really had no time to clean, freshen up the unit, market it, screen applicants, etc.

In addition, I recently re-financed the property and pulled out most of the equity. As a result, my cash flow is barely positive. Every penny counts. There is no room for an ongoing property management cost.

Hiring a traditional property management company doesn’t feel right and, frankly speaking, isn’t cost effective.

A la carte property management, on the other hand, is just perfect.

What I needed was:

• Great team to freshen up the unit and get some work done - mainly cleaning plus repair a couple of minor things
• Expert marketing and advertising - respond to numerous requests timely
• Run an open house for all interested applicants and show the unit
• Complete applicant screening, reference / background checks, etc.
• Help me choose a great new tenant.

This was exactly what I got! It took them under a week. I got a great price. 

I loved the experience and the result:

Feeling Happy!

Zero vacancy.
Perfect new tenant.
No ongoing cost.
Got exactly the services I needed when I needed them.

Would you like to try a la carte property management? 

Ping me in comments below, if you’d like a referral to my friend’s firm. They are based in Toronto and serve a pretty wide radius. 

A la carte property management also works great for 2nd homes and cottages. For example, you can outsource your Spring / Fall routine to a professional property manager. 

Financial Freedom Blueprint Gets You There Faster!

Financial Freedom Blueprinting! LOTS to think about!

Do you ever wonder if you are on the right track? 

Do you ever question your past decisions? I do!

Recently I partnered with a company that creates professional Financial Plans.

Working out the first draft of my financial plan took a lot of pondering, discussion, questions, answers, assumptions, frustration, and so forth.


Once all data has been gathered and finalized, we entered it into the financial planning software.

The program ran through hundreds of calculations and applied a few algorithms to project the value of our estate, upcoming tax obligations, assets, liabilities, cash flow, savings, etc. for years to come.

Within seconds, I got to see:

• how much money I'll have when my kids grow up
• upcoming periods of cash surplus and shorfalls
• the size of my future estate 
• my future TAX liabilities!! 

Amazing! The Financial Plan instantly gave me a visual summary of my financial future. It also helped me assess my progress towards my goal to be Financially free.

Just to give you a taste - below are some sample charts I pulled out. This is using dummy data.

What Will my Net Worth Be?

Here's a sample graph that shows a Net Worth forecast.

Red bars show liabilities. Black bars are total assets.

What will my Estate be when I turn 80?

Here's a sample estate summary  - you can see it for any point in time!

Analyzing Financial Plan

The next step is to review the initial outlook. Analyse it. Consult with experts, run through a few scenarios, and create an action plan.

The biggest and most obvious issue in my personal financial plan is insufficient liquidity.

Most of our assets are hard assets. Therefore, our long term plan shows that we should work on a strategy to acquire liquid assets, and focus on creating additional streams of passive income, as well as converting some of the hard assets into liquid.

This is not a surprise! In fact, we are currently approximately 66% done with our original passive income goal, so there's definitely room to improve. 

However, it was surprising and rewarding to realize the long-term effect of our efforts so far. Even though there's still lots to do - the plan shows that we've accumulated a lot of value, which will continue to grow with time.

Financial Freedom Blueprint

I'm so-so happy to continue to work with the Financial Planning team to build out a few scenarios for the future and incorporate upcoming actions: acquisitions, re-finances, exits, addition of new asset types, and so forth.

There are a few forks in the road when it comes to building wealth. 

Each of the scenarios we've prepared shows me a different path forward. 

So all of these scenarios together become a part of my financial freedom blueprint. 

Having an accurate and validated plan adds a LOT of clarity to my action plan. 

There's no reason to constantly question myself - the road ahead is clear.

Plumbing 911!

Oh-oh! Plumbing 911!

Over the past couple of weeks, I had to deal with a few plumbing issues. Just wanted to share some pictures, so that you can see how simple or extensive a plumbing problem can get!

Urgent yet Easy Plumbing Issue

Our tenant called on Friday evening. Their basement was flooded. Every time they used a toilet, the water would back up in the basement. Urgent help, please! - tenant really needed help. It's unpleasant when you can't use the bathroom.

We called a few plumbing companies and were placed in their priority queue. We called and called! Trying to expedite the resolution. However, no one was available and most companies didn’t even return our calls. Thankfully, our tenant was quite understanding. We did our best to get help as fast as it was possible, but no luck until the end of the weekend.

It helps when you have good local connections in the area! 

This is one of the reasons why I’m working towards gradually shifting from self-managing all units towards partnering with a property manager.

Finally, we got an appointment scheduled for Monday morning.

Fortunately, it turned out that the issue itself was easy to fix.

The plumber cabled approximately 45 feet to clear blockage, finding it approximately 32’ in the drain line at the front of house. When he retrieved the cable, we found roots on the line.

Roots Blocked a Pipe

Non-Urgent yet Difficult Plumbing Issue

We recently acquired a duplex (the one we've split up into two units). During pre-purchase inspections, we identified two problems that needed to be solved:

1) Sewer stack rusted and needed to be replaced
2) After each rain, rain water mixed with sewage backed up into the basement.

The two issues were not urgent and didn't create too much inconvenience for the tenant - he knew we'd find a good solution and was not rushing us.

Our tenant recommended an outstanding local plumbing company! 

Two technicians visited us and did a lot within just a few hours:

• replaced the old stack with new ABS plumbing
• cleared sewer lines, removing calcium build-up and roots
• fixed broken plumbing under the utility tub in the basement
• replaced P-traps and some old sections of the lines
• cleaned floor drain and put a back trap on it
• there was only one section of the lines (6-7 feet) that could not be snaked and inspected with a camera.

Now, the first issue was resolved.

Next, we had to wait until it rained, to find out if the basement would flood.

Flooded! Not Again...

There was a big storm over night! Unfortunately, the basement still got flooded.

The plumbing company let me know that most likely the problem comes from the city lines.

However, we had to inspect the last section of our pipes, to make sure everything is in order on our end. Without this, the city would never start looking into the problem.

The plumbing team came prepared to inspect the last bit of hidden lines. Take a look at the pictures below to see what it took!

Now, we know that all of the plumbing under our house and up to the City line is in good shape.We'll wait for a rainy day to find out if the basement would still get flooded. Fingers crossed...

Getting ready to dig!

Where does this pipe go?

Holly, molly!

New Pipes!

No More Flooding (Hopefully!!)

Cleaning Up!

Instant Return on Investment

Ready for the Winter

The townhouse I acquired with a serious discount last month, came with no heating.

The previous owner removed electric baseboards throughout the house and used a gas stove in the basement as the only heat source. She was saving considerably on the monthly utilities!

My brother-in-law being extremely frugal as well is another person I know who uses a wood stove to heat his entire house!

However, I don’t think I’ll be successful finding tenants who’d be thrilled about a similar set up.

Most tenants would be looking for either baseboards on every level or a gas furnace. I don’t blame them!

Can you imagine starting a wood stove early mornings when it’s 30 degrees below zero?! 

I was debating between installing new electric baseboards or using the opportunity to upgrade to a gas furnace. I decided to get quotes and work timeline for both options and go from there.

My amazing property manager received several quotes from multiple reputable vendors. Now, we knew that the costs would be as follows:

1) Electric baseboards: $6,000
2) Gas furnace including ducts: $9,000.

Instant Return: $9,000 makes $4,000 = 44% ROI

A local appraiser let me know that the price of the property would go up by $15,000, conservatively, once the gas furnace is in place. This is a $4,000 net gain on a 9K investment.

44% return - not bad, eh?

An additional benefit is that the property will look more attractive to potential tenants. Many families prefer gas heating, as it typically costs less than electricity.

This property is a condo town house. I learned from the condo manager that, before making any updates, I am supposed to get approval from the Condo Board.

Getting Board's Approval 

The approval process turned out to be much smoother than I expected. I received an “Alteration / Renovation request Form” form from the Board. Then, completed this form and returned the following to the Board before their scheduled meeting:

1) Completed Alteration / Renovation Request form
2) Photos of the locations where the contractor will core through the brick (with the area circled)
3) Contractor’s WSIB eClearance Letter and Insurance Certificate.

My property manager helped me with all three of these!

The Board confirmed their approval and we now have all the work scheduled.

I am very grateful to my Property Manager and his team. 

Can’t wait to start looking for a tenant! I’m sure they’ll love this home and enjoy being warm and cozy during the winter.