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.

The Universe Has Your Back - A Real Estate Fable

I thought I was helping
Image by Gerd Altmann from Pixabay

One of my tenant families struggled to pay rent. It's been an issue over the past three years.

The family would miss a rent payment. Then take a few months to catch up. Once caught up, they'd miss another payment the very next month. The cycle repeated.

I deeply empathized with their problems. I had experienced many of them in my past too - a close relative going through a critical illness, losing a job, going through challenges raising kids, car breaking down at the most horrible time, etc.

I thought I was helping the family by being patient through all their troubles. It seemed that they were trying so hard and needed a break. Besides, they seemed to have been able to always come out on top.

The Universe Has Your Back

Things always work out
Image by Gerd Altmann from Pixabay

Finally, the universe heard them. Things started turning around. First, a social housing program helped them catch up on rent - $2,200 was gifted to the family. Next, both parents found part-time jobs. Shortly, they worked full-time hours and multiple jobs. Once they apologized for a delayed reply to my text because they were too busy working! Hurrah!

With a sigh of relief, they told me one day that money wasn't an issue anymore. They'd be okay from now on. They sympathized with my dependance on their rent payment to pay my mortgage and other costs. They said that I shouldn't worry about their rent anymore.

I felt grateful to the universe! Things always work out somehow.

You Just Have to Do Your Part

Just a short month later. Another missed payment.

This time, the auto-deposit process on my end glitched. All transfers usually get auto-deposited, but

Did I misread the signs?
Image by TiNo Heusinger from Pixabay

this one went back to the sender because of a recent new release of the banking app. Not realizing this had happened, the tenants unintentionally spent the returned rent money. They had no money to pay rent. Understandable. A new cycle of struggles began.

My tenant put together a payment plan. They sent it in writing and laid out upcoming catch-up payments. Date - payment - date - payment - date payment...

Then, they missed the first catch-up payment.

What happened? 

No answer. 

What's the status? 

Apologies. CRA delayed our child tax benefit payment. It won't happen again.

Then, they missed the next planned payment.

Worried, I followed up again.

The Universe Has My Back

My tenant was frustrated. She confessed that there was a time when they didn't have any money to buy groceries for weeks and were getting food packages at the church.  Once they started working, they've been handing over their full paycheques to me. There was a list of issues at the house they weren't happy about. They didn't get sufficient value and service from me as their landlord, for their money. They brought up a poorly executed door replacement job from two years ago and said that I hired a drunk...

Please move out! I pleaded.

I checked and verified that there were more affordable housing options in the area for a family of the size. I don't want your full paycheque. Please don't give it to me! It's not right that you don't buy food. It's not right that you don't love your home.

Please, please, please don't stay in the house, especially if you are not getting a good value for the price you are paying. You know where the door is! Please please please move out.

I was sending my thoughts to the universe, begging it to resolve this nonsensical situation.

My tenant didn't reply. 

They sent the next rent payment on time. 

And then the next one. 

To be continued?

A Landlord Toilet Story with Numbers

When a tenant calls, I expect an issue

It's been almost five years since we acquired our first rental property. Still, every time a tenant calls, I hesitate before picking up the phone. I know that they wouldn't call me if everything was going smoothly. 

Tenants only call for two reasons:

1) They can't pay the rent on time
2) There is a repair or maintenance issue

Either way it's not a happy call. So I dread picking up the phone. I look at the phone display with the tenant's name. I count down in my mind.

Five, four, three, two, one. Then, I pick up the phone.

My skin is getting thicker.

After five years, I know that whether I pick up the phone now or listen to the voice message a bit later, the issue will need to be addressed. I also know that the sooner I resolve it, the least costly it will be. Rarely, I see issues resolving themselves. Unfortunately, most of the issues not only stick around but also worsen rapidly whenever I procrastinate.

However, I also learned that there are always different ways to resolve an issue. The easiest way is often the most costly.

Let me give you an example.

What's the Issue? 

O-oh! Hard water, ruined tap

A couple of weeks ago, my tenant called and let me know that they have a few problems: the shower tap is broken, kitchen and laundry room faucet leak.
I scheduled a local plumbing company. They visited and gave me a quote....

I always expect the worst. So I wasn't even in complete shock. But still... this specific quote made me nauseous.

It's January - the first month of the new year - and the cost of this repair basically wipes out most of my profit for the entire year. 

Any future maintenance issues at this place would eat away cash flow from other properties.

How is this possible? All it takes is a broken tap and two leaking faucets?

I reviewed the quote:

Service Charge   $49.99
Kitchen Faucet   $599.45
Laundry Faucet  $368.31
Shower Valve Remodeling Plate $192.33
Handle Wall Mount Tub & Shower w/ Valve $911.50
Become an Advantage Plan Member $99.99 and get 15% off
Member Discount ($248.60)
Tax $256.49

Grand Total: $2,229.46

We thought we could
handle the easy stuff 

That was the worst case. The best case quote was for $1,420.13. Better, but still bad.

The quote seemed high. I just got my own new bathroom faucet for $47 off Amazon. $599.45 for a new kitchen faucet seemed absurd in comparison!

I checked with my property manager. Does the price seem reasonable? He'd quote around $1,200 for the worst case. I called a different local plumbing company. They quoted $1,500 for the worst case.

My husband and I went to our favourite store. You guessed it right - The Home Depot.

We decided that we'd at least be able to get the easy stuff done on our own. Then, call the plumber for the hard stuff and save that way.

We showed the tap picture to a Home Depot staff member.

How do we go about it? 

In the best case, they told us, we'd be able to buy the parts and replace what's been broken. We just had to know exactly the brand and type of the faucet and taps.

In the worst case, we'd have to call a licensed plumber. They didn't recommend that we'd attempt to cut the tile on our own. We didn't look handy enough...

This time we were lucky!

My husband was able to replace just the broken parts. We decided not to worry about the laundry faucet for now as the issue seemed to be very minor when we examined it up close. So my husband fixed the kitchen faucet and the shower tap.

Actual Costs

Aaawwww....
My husband fixes our tenants faucet

Manor faucet    $79.98
HANDLE         $13.49
FLANGE          $5.92
FLANGE          $5.92
WASHERS       $3.94
CARTRIDGE   $9.56

Tax: $15.45

Grand-total: $134.26

Problem Solved!

All I can say is: Tenants are happy! We are happy! 

Forced Appreciation for Noobs

You know those customers at Home Depot, who point their finger and call everything "Thing" or "Thingy" when seeking advice. 

They have no idea what any of the tools are called in English. They just show up and trust the Home Depot staff will understand their mumbling and point out a way to resolve the issue.

Well. That's me. And trust me - the approach works!

Ever since I started 50Doors, I mostly point my finger, gesture, mumble and draw the best I can whenever it comes to building, renovating, and fixing things and thingies.

And people around me not only understand me but also gladly help me out!

To my big relief, I realized that not knowing can be advantageous.

Through lack of knowledge and skills, I learned how to trust people who know better, how to tell experts from talkers, and how to create real value from simple ideas.

Here is an example.

I had an idea of renting a property, which was never rented out before, but I was unsure because cash flow wouldn't be good enough. I talked my idea over with a friend who is a lot more experienced. He suggested that I renovate, split the place into two units and double my cash flow. My gross annual rent will increase by $14,400 and result in positive cash flow.

I loved the suggestions, but I was unsure that I could split the unit into two apartments. I talked it over with my husband who is a lot handier. My husband thought the concept was feasible and explained to me how the unit could be split. Together we made these drawings:

I loved our discussion and the drawings, but I wasn't sure how this could actually be accomplished and what it would take.

So I sent our drawings to my friend, who runs an on-demand property management company. Within a week, I had several quotes and a start-to-finish renovation project plan. I now knew that a $25,000 investment will be required. The work could be finished within about three weeks.

Wow! That's a 57.5% return on investment!

ROI is $14,400 / $25,000 = 57.5%

It's been almost three weeks since the start. The work is nearly complete. Two separate units are now a reality.

I am starting to look for tenants! It seems surreal that the ideas came to life so fast and soon there will be two families moving into their new homes and starting to build their memories.

Simple ideas turned into real value, which will positively affect the lives of many people for many years to come.

I am extremely grateful to the amazing property management company that actually got the job done!

Fortune Property Management 

converted my mumbling into 

two beautiful apartments 

within a couple of weeks.

Thank you!

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

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! 

Million Dollar Decision: Spend or Save?

Balancing Act! Spending vs Saving

Recently, I ran across a fantastic company. I loved their business model.

The team their helps Canadians take control over their finances and build passive income. Most of their clients achieve the following objectives:

1. Pay off their bad debt within about 30 days
2. Create about a $1,000,000 investment portfolio within 8-10 years
3. And all this, without sacrificing their current lifestyle. 

I am starting to work closer with this firm, to learn more about the specific software program and approach they use to achieve such tremendous success. I can see how this process will benefit many of my readers.

Wouldn’t you want to have a million dollar portfolio!?

This afternoon, I worked through my own numbers and a couple of scenarios to see how I can use my primary home plus leverage to build up my passive income.

I'd like to share my notes with you. It’s amazing how the decision to hang on to current lifestyle affects the long-term outcome!

The Formula

Step 1) Re-finance your primary residence to extract as much equity as possible. Pay-off all high interest rate bad debt and invest the rest.

Step 2) Repeat step #1 above three times: today, then in 3 to 5 years, and then again in about 10 years.

Assumptions

Below are the key assumptions I made when working through my own numbers. These assumptions are reasonable in my particular case.

Your situation might be different, so please adjust and feel free to post questions below the post:

• Property appreciates steadily at 5% a year
• At first refinance, my mortgage interest rate will increase from 3.15 to 4.5%
• Mortgage interest rate will remain at 4.5% for all future years
• I will be able to re-finance up to 75% loan to value every five years
• My portfolio will be invested with an average 11% annual return.

Scenario 1: Keeping My Lifestyle

After each re-finance, I’ll spend all of the passive income.

It is important for me to use the extra disposable income right away.

Outcome

• Fifteen years later, my net worth will be $770,000.
  
• My investment portfolio will be $383,000, producing $42,000 of passive income a year. This income will not be enough to cover my annual mortgage principal and interest payment of $55,000.

Scenario 2: Extreme Frugality

After each re-finance, I’ll find a way to reduce my day-to-day spending, so that all of the passive income goes right back into my portfolio. 

As a result, my disposable income will get smaller with each refinance, yet my portfolio will grow very fast thanks to the compounding interest.

Outcome

• Fifteen years later, my net worth will be $1,307,000.
  
• My investment portfolio will be $1,001,700, producing $110,000 of passive income a year – more than enough to cover my mortgage payments of 55K. 

Know Your Options - Make Conscious Decisions 

These two scenarios show you the full spectrum of possibilities.

The first scenario best fits those who appreciate today and live in the moment. It shows that with some effort put into making your equity work for you, you can build some wealth while enjoying some extra passive income.

The second scenario emphasizes the importance of being conscious about the impact of compounding interest over a long time. If you can be frugal – be frugal! This will pay off over time and you could be on the road to creating a multi-million-dollar portfolio and hundreds of thousands in passive income!

Whichever point on the spectrum of options you choose, it's extremely important to know yourself well, evaluate the possibilities, and go for whatever plan you believe fits your needs and desires best.

Time to Collect Your Money

As I summarize in the 1-minute video on the left, last Sunday I woke up to an email  from Shopify with the subject of... drum roll... champaign bottle pop... hold your breath...

Time to collect your money

"Hmm. Really?!? " was my first thought.

My strategy is always to expect the worst. This approach helps me keep going and not take disappointments to heart. So, I told myself to chillax before clicking into the email.

Chillax is my new favourite word by the way. I learned it from my kids. It means exactly what it sounds like: calm down and relax.

And being as calm as I could be, I clicked into the email, which told me to finish my Shopify Payments setup to get paid for my first sale.

So, it was official: my online store had its first sale! I had my first customer who bought several digital products at 50 Doors. Yay! It worked!! I couldn't believe it.

My new online asset is starting to put money in my pocket. To be specific, here's how the math looks:

$20.00 from customer - $5.68 to google ads 

= $14.32 profit

As you may already know, asset is something that puts money in your pocket.

The theory is that if you own enough assets, the money from all of them will add up and cover all your expenses. 

Once that happens, you can consider yourself infinitely wealthy. 

A wealthy person has assets working for him or her. Per this definition, the wealthy can live forever without relying on going to work to make money. 

To measure how wealthy you are, just think how long you can survive for without working. 

My starting point was 30 days - simply because I lived paycheck to paycheck. I am still not a lot more ahead, but making some progress. 

My husband and I set out with our 50 doors goal: 50 assets, each putting $200 dollars a month into our pocket, so we have about 10K a month to feed our (always hungry) family. Boys sure do eat a lot!

There are many different types of assets. In my mind, the major categories include: 

1. real property
2. businesses and 
3. financial assets.

Real Property Assets

The basic idea is that you own something tangible and get paid for letting others use it:

A house, car, vending machine, solar panels, fancy suite or dress, a parking spot, etc. 

Take an object, find someone who'd like to borrow it, lend it and collect cash.

Business Assets

Business is a system set up to solve a problem for a profit. 

Find something that will help others around you. Figure out how to attract people in need of the solution that you are offering and help them at a profit.  

This is what I hope my website is doing. It is helping people educate themselves and get their first real estate investment property in Canada smoothly.

Financial Assets

I recently came across this table (source: Desrosiers Automotive Consultants Inc. (“DACI”):

Automotive revenue in Canada 

What struck me is in the column highlighted with blue. Let's take 2015:

Imagine all the factories building new cars: that's 32% of revenue

Imagine all the dealerships selling used cars: that's 18% of revenue

Imagine all the servicemen helping us repair and maintain our cars: 10% of revenue.

Now think about the money we borrow to buy all of the above:

Automotive finance produces 

the biggest chunk of revenue: 

40%

The point is that money can easily become one of your assets as well.

There is unlimited number of opportunities around you to put that asset to work for you. Examples include investing in private businesses, mortgages, equities, bonds, etc.

What I am now finding out is that you don't need a lot of money to start. You can make each dollar that you don't spend become an asset that works for you.

The trick is to educate ourselves, so that we can make decisions and balance risk and reward in each project. Then, act on our knowledge and get in the game.

Interested? Hesitant? Afraid? Let me know your thoughts in the comments below. I can't wait to hear from you.

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