Real estate investing

by Mark Broady on Wednesday, June 3, 2020
Epiosode 23- Real Estate Investing

In last week's episode, I told the story of how I ran my first marathon and the biggest lessons I learned in the process.
 
 The greatest obstacles that stood in my way were my own limiting beliefs. I gained a new appreciation for the expression, "I'm my own worst enemy". It was as if I finally understood what that meant. There was no outside force preventing me from running a marathon. There was no evil giant standing in my path. There were no government restrictions prohibiting me from lacing up my shoes and going for a jog every day. The only thing stopping me was ME
 
 Once I was able to fully grasp that concept and begin to defeat my negative mindset... I began my journey towards achieving what I set out to do - and what I finally BELIEVED I was capable of. 

I also discovered that running a marathon is not all that different from other challenges we face in life. We're all guilty of being our own worst enemies at one time or another. If you really stop to think about it, there are probably a dozen or so "limiting beliefs" that each of us are holding onto right now, perhaps without even realizing it.
 
 Here are some of mine that still hang over me like dark clouds...

1. I'm disorganized

2. I'm forgetful

3. I'm terrible with money

These are all things that I tell myself over and over to the point that I accept them as indisputable TRUTHS. Sadly, nothing could be further from the truth. Once again - these are just parts of the story that I tell myself, and I now know that my story can be re-written any way I like. I hold that pen.
 
 For the purpose of today's log... allow me to focus on limiting belief #3 from my list: "I'm terrible with money $$". I've always believed this to be true. As if it were some kind of incurable disease!

Saving has never been my forté. I can't stand financial planning. I avoid my accountant and my investment advisors like the plague. I'm not even an anxious person, but RRSP season causes me anxiety. 

Fortunately for me though - my sister and business partner Catherine - is great with money!

She's highly organized. She's been saving like a squirrel since she was 6 years old, and over the past several years, she's become a real estate investor - which is the focus of our story today.

I sat down with Catherine a couple of weeks ago and discussed her experience with real estate investing. Here is a re-cap of our conversation:

M: Describe how you first got started as a real estate investor?

C: I never actually set out to become a real estate investor. It wasn't like I had it pinned up on my vision board as a written goal of mine. Like most people, I simply wanted to be a homeowner. My husband and I bought our first home together - a small bungalow on York Street in Beaconsfield - for $335,000 in 2012. It was the best house we could find within our budget - it had a big lot, it was in a great location, but only had 2 bedrooms, no basement, and it still needed quite a bit of work. But despite its limitations, it suited our needs at the time. 

We lived there for 5 years and during that time, we gradually renovated the house, bit by bit. We re-did the kitchen and bathroom, and we turned the attic into a finished living space - sort of like a "loft". 
 
Then in 2017, we saw our neighbour's home sell for $680,000. This house was practically identical to ours, so that confirmed to us that our home was now worth about double what we had paid for it 5 years prior. This meant that we had built up a considerable amount of equity in our home thanks to some strategic investments in renovations, and some strong market appreciation in our area.
 
 M: Would you say a light bulb went on over your heads at that point?

C: You could say that! We had just had our first child and so, the next step for us was to look for a bigger home. But with all the equity we had accumulated, we realized that we had an opportunity to leverage it. We had some discussions with our mortgage rep. and discovered that we would be able to buy a new property without having to sell our home on York. Instead, we were able to re-finance the bungalow and increase the mortgage on that property, and still have the 20% down payment we needed to purchase a new house - with enough money left over to cover any renovation costs. All we needed to do was put the house on York up for rent, to offset the higher mortgage payments. And once again, thanks to the renovated condition of our home, and the strong rental market in Beaconsfield, we were able to cover our mortgage and taxes and rent the property at break even cash flow. This was how I became a real estate investor! 

M: So although you never actually PLANNED on becoming an investor in real estate… you did pay attention to the opportunities when they arose, and you sought out the advice you needed to make good decisions. What has been your biggest lesson learned so far?

C: I think the fact that we weren’t planning on it, was one of the reasons why we were successful with our first investment property. The mistake a lot of “would-be” investors make, is that they’re over-eager, they’re not patient, and they want to hit a home run their first time up at bat.

M: So you think your lack of experience actually helped?

C: In a way, yes. It just meant that my husband and I were in no hurry to hit the jackpot with a “great deal”… we just saw an opportunity, we did our research, and we remained very conservative with our numbers. We were happy just to break even and get our foot in the door, which has now lead to further opportunities for us.
 
 M: Such as…?

C: Well, after we moved out of the bungalow on York and found a suitable tenant, we bought a bigger house in Pointe-Claire. Again, this property needed a lot of work, but we had enough equity from York to get started on some key renovations, and we were in no hurry to cash out. This allowed us to slowly improve the home while the market values in the neighbourhood continued to climb. After three years, we consulted with our lender again and determined that we had benefitted from another substantial increase in property value. That meant we had built up enough equity to leverage another potential investment property.
 
 M: It sounds like this time around you were a little more intentional about it. Am I right?

C: Yes, for sure. We now had confidence. We no longer doubted ourselves and we believed that we were capable of finding and vetting a solid deal. We understood exactly what we needed to look for and we established some very strict criteria for our search. Once again, we were patient, we waited for the right opportunity, and we were very careful with our numbers. We ended up finding a great little townhouse in Pointe-Claire that we have been busy renovating over the past 5 months, and our new tenants moved in on Monday. 

The fact that my husband and I are both realtors obviously helps, but to think you need a real estate license to invest in real estate is a myth. Anyone can be successful at this if they stick to certain guiding principles.

M: So you just acquired your second investment property, which means you now own three houses including your own residence. Not too shabby. What advice would you give someone who’s considering real estate investment, but may be unsure about how to get started? (like me).

C: You know those ads from the banks where the tag line is “You’re richer than you think you are”? Well that’s often true. Many homeowners have been busy paying down their mortgages for years while the market value of their homes are rising. We’ve all been taught to believe that a mortgage-free home is a badge of honour, but we fail to realize the opportunities we are missing by NOT leveraging the equity we have built up. That equity can allow us to invest in further growth, and when we’re playing the long-term game, it can offer us much greater returns in the end.
 
For anyone considering taking that first step, I would recommend they seek out professional advice first. Talk to your lender and talk to your real estate broker.

If there was anything I learned from this discussion with my sister it was the importance of mindset. Just like the marathon, it’s that BELIEF in yourself that allows you to break through the barriers holding you back. Opportunities are everywhere. If you’re not sure where to find them – let us know – we can help.
 
The important thing is to take that first step, and then be sure to stick to your guidelines once you get started. Real estate investment is not gambling. It requires in-depth knowledge, careful calculations, and a solid team to support you. 
 
 Signing off…


Capt'n Mark