A Veritable Buffet of Real Estate Ideas & Opportunities!
several Canadian Real Estate Profits members there, and a couple of them even won awards! Very cool. It was a wonderful opportunity to re-connect with some old acquaintances and make some new contacts as well. I'm pretty sure I've got at least 5-6 new people to interview for our monthly audio CD success interviews—and a couple of Diamond presentations as well.
On November 17 and 18, I was a The other interesting thing was to see speaker and delegate at the 2012 Vancouver how many different ways people are involved Investor Forum put on my Canadian Real Esin real estate investing and all of the different tate Wealth Magazine. It was my first time tactics and opportunities that are available. speaking and participating in this event, and it An old mentor of mine, Ron LeGrand, was a pretty exciting experience. often said, "There are a million ways to make They asked me to talk about Rent-Toa million dollars". From the looks of the FoOwn real estate investing, as they had heard rum, there are almost that many ways within about me from Paul Hecht (one of our contrib- the field of real estate investing alone! uting writers) and knew I wrote a book on Multi-family. the topic. Once again, it goes to show how important it is to get the word out about your Single-family. expertise at every opportunity! Word of mouth and being an author can open a lot of doors. Commercial. After doing my key-note presentation Saturday at noon, we encouraged people to come to our booth to sign up for a follow-up FREE educational session that delved deeper into the whole business of doing rent-to-own. And although the attendance at the main investor forum event was lower than anticipated, we still got a good number of people out to the follow up events and enrolled a number of new R2O students.
Investing in Mexico.
Investing in Brazil.
Investing in the U.S. of A.
One of the big benefits of being at one of these events is mixing and mingling with all of the other delegates and attendees. I met
Converting shipping containers into low-cost housing.
Marco Silvestri - Western Investor of the Year Winner Dave Dubeau’s speaking gig at the Investor Forum… ask him, with Dave Dubeau - Vancouver Investor Forum 2012. and he’s now ‘shared the stage’ with David Chilton! Page 1 © www.CanadianProfitsMembers.com
Ecological Real Estate Investing, and the list goes on (and on and on).
So if you are interested in real estate, it is definitely a good idea to go to these kinds of events on a regular basis— not to get distracted from whatever your core focus is, but rather to open your eyes to different ways of doing things (even within your core focus area) and for all the very cool action-takers you can meet.
Membership Questions? membership@CanadianProfits.ca Or Call toll free: 1-866-680-3842
Upcoming Canadian Profit$ Events and Activities. Dave Dubeau‘s ―Canadian Rent to Own 3 Way Pay Day” Live Events Coming Up in January and February, 2013. Prince George, BC Tues, Jan. 22, 7-9 pm Quesnell, BC Weds. Jan. 23, 7-9 pm Williams Lake, BC Thurs. Jan. 24, 7-9 pm Surrey/Langley, BC Tues, Feb. 5, 7-9 pm Abbotsford, BC Weds, Feb. 6, 7-9 pm Chilliwack, BC Thurs, Feb. 7, 7-9 pm For more information and to register for this FREE introductory event, please visit:
www.3WayPayDay.com The 2013 Rent-to-Own Profits Summit is happening January 25-27, 2013 in Kamloops, BC.
December 2012 Diamond Webinar ****************************************
5 Houses To Freedom
(A simple plan for long term profits). Join Dave Dubeau and professional real estate investor and author, Ken Beaton as Ken shows you a simple plan to create complete financial independence with just 5 little single family homes! Although Ken has 120 ’doors’ in his portfolio, this NEW plan shows how to accomplish the same kind of cashflow in the longterm, but with far fewer properties (and headaches). This event is on Thursday, Dec. 20 starting at 5 pm PST. Current Diamond and Peak Performers, watch your e-mails for the invitation. If you are not a Diamond member, you should be! Go to
www.CanadianProfitsDiamond.com And remember to check out our 2013 Diamond getaway: www.DiamondCruise.CA
Real Estate Reality
by Russell Westcott
How to Present a Deal to a Potential JV Partner In one of the last newsletter editions, you prepared for your face-to-face investor meeting, including taking a personal inventory of your personal skills. In this edition, you will learn how to present your deal. When the pre-screening process doesn‘t reveal common ground, you should contact the individual and discuss the situation. A face-toface meeting may not be necessary— unless you think the issue stems from the prospect‘s lack of knowledge about what you do and how you do it. If you have a close relationship with the individual, you may want to meet with them anyway so the lines of communication remain open. Again, you are following a system that cultivates relationships through appropriate follow-up. When the pre-screening process reveals common ground, set up a formal business meeting. This is where you can review the questionnaire (from a previous newsletter) together and ask questions about why they gave particular answers. Never assume a potential investor has the same real estate investing knowledge as you. Novice JV partners may not know why you are asking about RRSP investments and may need more information about how they might invest RRSP funds with you. That same lack of information may also come into play with rent-to-own deals or deals financed with home-equity loans. Make this meeting an opportunity to educate. Once you‘ve reviewed the questionnaire and clarified why certain information is valuable, present a professional investor package. The details of this package should depend on the prospect‘s level of expertise and might include the following items. 1. A review of the fundamentals: If you haven‘t yet done so, this may be a good place to present a copy of ‗Real Estate Investing in Canada 2.0’ (author Don R. Campbell) to the potential partner. Be prepared to talk about your Real Estate investing system how investment fundamentals guide your investment decisions. Address your own aversion to risk and talk about how your investment strategies focus on longterm wealth creation. Again, your goal is education. Real estate investment is not risk free, but you manage that risk with real estate fundamentals. Be prepared to talk about how you do that. 2. Special reports: Include special real estate investment reports that clarify why real estate invest-
ing is a good way to generate long-term wealth. Real estate networks may make available special reports you can use to illustrate your business plan for a certain neighbourhood, town or city. Sophisticated investors may also allow members of their professional networks to use reports they‘ve generated. You could also use these as templates to create your own special report. Also provide prospective investors with relevant news articles about economic development in a particular community and how it‘s expected to impact housing. Sharing solid information with prospective partners is another way to demonstrate your market awareness and commitment to due diligence. 3. A deal or three: If you‘ve already executed a JV real estate deal, share that information at this meeting. Outline how that deal works and draw attention to its win-win focus. You can also share details of a deal you‘re working on, or walk the prospect through the kind of deal you propose to complete with him or her. If you have a specific deal on the table, share those details. While every JV deal is unique, you can use templates (see future newsletters) to give you a starting point for discussion and can be used to guide the first round of talks on an actual deal. If you get to this point in your business plan and have not yet completed a transaction on your own, don‘t worry, there is still hope. Many investors have completed a successful JV deal without having completed a deal on their own yet. To bring a money partner online without previous investing experience requires that you show your potential JV partner that you have mastered an investment system and do whatever it takes, ethically and legally, to get the job done. My first JV partner was secured based 100 percent on my confidence and my willingness to do whatever it takes to make the venture a success. In the next newsletter, you will be provided a Joint Venture workshop and some real life examples to help you close more money partners. #END# Russell Westcott: Canadian Real Estate Investor, Educator, Researcher, & Best-Selling Author. He is the Vice President of the Real Estate Investment Network™ (REIN™). His presentations have been called passionate, entertaining and educational and have been attended by thousands of real estate investors. He uses his personal experience to present his Advanced Buying Strategies™, and Joint Venture Secrets™ that have helped Real Estate Investors think creatively and raise investment capital to buy their next piece of real estate. Visit www.jvsecrets.ca for more information.
R ENT -T O -O WN (R2O) R ICHES
D AVE D UBEAU
An R2O Strategy For FLAT Markets I met one of our long-time Canadian Real Estate Profits members, Gary Spencer-Smith, at the Vancouver investor forum. As we chatted, he told me about what he is up to with his real estate investments in the small city of Port Alberni (pop. 18,000) on Vancouver Island. I thought that what he was doing is so clever that it would be good to do an interview with him (which you will be getting next month). Gary does a combination of buy and hold, as well as a rent-to-own strategy. But it is the way he does his rent-to-owns that I think is very clever and very smart. You see, the real estate market in Port Alberni is pretty flat. In fact, in some areas, it is actually going down. But Gary has a strategy to counteract that—in fact, I've boiled it down to his 5 key strategies: Strategy #1: Focus on growth areas within the town. So just because the over-all real estate market is flat doesn't mean it is flat everywhere in town. There are certain areas where there is growth and prices are consistently increasing my 3-4%. Those are the areas Gary focuses on. Strategy #2: Find motivated/distressed sellers in those areas. Gary does not do the 'client first method,' he instead focuses on finding the property and then turning it into a 'traditional' rent to own. So he knows that he creates the most opportunity for himself when he buys the property at a very good price. He looks for fixer-uppers and gets them for under-market value. Strategy #3: Work with properties that can be 'suited'. Part of his overall strategy is to make sure that the properties he has can be turned into up/down suites. This is very smart, because it not only means that he can enjoy much higher cash flow during the deal (he gets above market rent from his R2O client, and normal market rent from the basement suite), but it also helps his R2O client to qualify for a mortgage, because they can show that the rental suite downstairs is a consistent revenue source. SMART—really trying to set
his clients up to win! Strategy #4: Be SUPER Conservative. Gary structures things so that even if only one of the suites is rented out (and even for normal market rent) it still brings in enough cash flow to cover all of the expenses for the property. He carries this forward by making sure that he structures the deal so that his R2O client also has built-in equity at the end of the deal. In other words, he is selling it to them at slightly below market value at the end of the deal, again to ensure that they can qualify for a mortgage more easily. Strategy #5: Have a 'Plan B'. Gary's plan for the property is to sell it to his tenant-buyer in 3-4 years. However, if that does not work out, both he and his investors are ready, willing and able to keep the property as a long-term buy and hold deal. So, as you can see, this is a very ingenious solution to doing rent-to-own deals in a down or flat market.
#END# Dave Dubeau is a professional Real Estate Investor, Publisher and Author based in “beautifully bountiful” Kamloops, BC. After doing “18 flips in 18 months” between „03 and „05, in 2010 Dave re-entered the Real Estate game with his new company, BCRent2Buy.com (Results Holdings Inc.). Dave enjoys getting as much as 12 times the „rental norm‟ in monthly cashflow with his rent-to-own properties without the toilet and tenant headaches usually associated with being a landlord. Dubeau‟s newest book “Rent to Own Profit$ for Canadians” is now available www.RentToOwnProfits.com
S IMPLE P ROPERTY MANAGEMENT
J OANNE B EATON
Looking For Opportunities to Improve Your Cashflow You have probably heard Ken or me quote one of our favourite sayings, ―IF it were easy, then everyone would do it!‖ I really believe this about property management and investing! It‘s certainly not the easiest way to make a living, but hopefully you have found that the rewards outweigh the challenges. Something that we like to do on an annual basis is a brainstorming session about increasing the income in our rental properties. Below, I have included 10 tips to improve your cash flow. 1. Raise the damn rent! You would be so surprised to see how many landlords neglect to keep their rents at market level and neglect to raise the rents annually as allowed by the province. You are allowed to raise the rents once per year, so do so. As your units turn over, you have an opportunity (depending on the province your property is in – sorry, Winnipeg) to adjust your rents and expenses at that time as well. Check the market rents and be sure you are in line. You don‘t need to be the market leader with the highest rents in town, unless you also happen to have the best properties in town, but you also don‘t want to be the lowest in the town either. Check CMCH and Stats Canada stats, the local newspaper and even the local real estate brokerages to see what the local rents are, and adjust yours accordingly. Not only does this help you today, but it translates to a higher property value when it‘s time to resell. (See one of Ken‘s articles to understand that!) 2. Install laundry: Assuming your property doesn‘t already have onsite laundry, consider installing a pay-per-use washer and dryer. There are some companies out there, like Coinamatic, that will lend you the laundry machines and will give you a percentage of the proceeds back. You might decide to purchase your own machines, even used, and collect all the proceeds. (Remember, it‘s only our kids that think laundry is free, which is why they bring it home when they visit to do! Laundry does cost money to do – water and electricity costs, so your laundry proceeds aren‘t entirely profit!) Depending on how large your building is, you may have an opportunity to install laundry vending machines and sell soap and dryer sheets to your tenants. If you are renting to students, can you imagine how beneficial this might be!
3. Download expenses: You can‘t change the terms of a lease once you have it signed with a tenant, but when you have a unit turnover, you have the opportunity to have the tenant pay for their own utilities that are individually metered on a unit that was previously rented to a long-term tenant who has been paying below market rents with utilities included, since before you bought the property and there hasn‘t been anything you could do about it. (This is a bitter, bitter point of mine – I have a handful of tenants that, should they leave, I could realize more than $300 in rent/month/unit IF I could change them over!) 4. Charge for parking: This is a common expense to charge for, especially in big cities. You may decide to provide one free parking spot to each tenant and charge for an additional space. Prices can range from $25-$50/month or even more if you provide access to a winter plug! 5. Charge for storage: If your rental unit has storage, either inside or out, why not charge an additional $50/month for that? 6. Install central cable and rent out: We haven‘t done this ourselves; however, I have heard of landlords installing a satellite dish on their rental building and then reselling the cable to their tenants at a profit. 7. Rent roof space for business signs, sun panels for electricity: Again, this isn‘t a strategy we have done ourselves, but I do know it is possible to rent out your roof space to companies that are looking for city spots to install sun panels. 8. Do energy saving repairs that will put money back in your pockets: Sometimes you have to spend money to make money. For example, simple things like installing low-water consumption toilets, or water-saving shower heads. (continued on page 14) Joanne Beaton is both a real estate investor as well as the owner of the finest little property management company in Eastern Ontario- ARCA Property Management Company! Her “all girl” team of 4 ½ employees successfully manages more than 150 doors. Their company motto of “managing your property as if it‟s our own,” is what differentiates them from their competitors. Check out their new website at www.landlords.arcapm.com.
Building A Real Estate Investing Business with Paul Blacquiere. The Value of Failure Recently, I read a short interview with Sir James Dyson, founder of the Dyson Company, famous for the dual cyclone vacuum cleaner. The article focused on how Dyson used failure to keep him moving forward when he was trying to invent his first vacuum. Incredibly, over a period of 15 years, Dyson created 5126 versions of his vacuum cleaner before he created one that worked! When I read that figure, I was absolutely floored. I mean, how many people would ever consider trying something that many times without giving up? I‘d say 99.999% of people would likely give up after 1-5 tries. Yet, here is a man who discovered over 5000 ways a vacuum would NOT work before he found one that did. And the reward was that he created a multi-billion dollar company. Lessons Learned From Failure: Many new investors look on the MLS for property or maybe they call a realtor or two, and when they don‘t find any good deals, they give up and say, ―There are no deals in my area.‖ They have no persistence, no drive to keep pushing past failure until they succeed. What they don‘t understand is the fact that we all learn our best lessons from failure, not from success. This lesson took me a while to learn. But when it finally sank in, I realized that, over the years, some of the best lessons I‘ve learned were from some of the biggest mistakes I made and pushing past those failures until I succeeded. For example: I learned how to lose $50,000 to a property manager who went bankrupt, and how to make sure that never happens again. I learned how expensive full evictions can be, and how to avoid them altogether by paying tenants to leave. I learned how to lose a deal as well as inspection and appraisal costs because an investor backed out at the last minute, and how to ensure that never happened again. I much prefer learning from other people‘s mistakes, but sometimes, life throws curve-balls at you, and you just have to learn as you make your own mistakes. The alternative is to just keep repeating the same mistakes again and again. Failure Spurs Creativity: Another side benefit of failure is Want More FREE Real Estate Education? Check out my blog for a free PDF report where I‘ll show you how to: Analyze A Deal In 60 Seconds Buy Property With Nothing Down Use Investor Cash And Credit Plus you‘ll get free email tips and more. Download your copy today at www.spirepoint.ca/report
that it forces you to use your creativity. It‘s all about asking the question, ―How can I achieve this?‖ versus ―Can I achieve this?‖ When you fail at something and you ask yourself how you can achieve your goal next time, the question itself commands your brain to come up with answers. Maybe not right away… but if you keep asking yourself ―How?‖ the ideas will eventually come. I once had a tenant that was a major thorn in my side. There was no lease signed, he wasn‘t paying rent (for a variety of reasons), and I knew if I tried to evict him, it would be a long, drawn-out process that would be very expensive and take months. I asked myself, ―How can I get this guy out with the least headaches and expense for everyone involved?‖ I put myself in his shoes and asked myself, ―What would he want?‖ I began coming up with ideas, and I decided to have a discussion with him and my property manager. Within a short period of time, I was able to come up with a solution that, although it wasn‘t ideal for both of us, we could both live with. The alternative was to keep going as-is, which was painful for both of us. Although I had failed (put a bad tenant in with no lease signed), I was able to solve the problem by asking myself the right questions. I used my creativity to come up with a solution that fit both parties. Taking Risks: Our school system is designed in such a way that it encourages ‗correct‘ answers and discourages ‗wrong‘ answers. A side effect of this is that after many years, a typical student will try to avoid the ‗wrong‘ answers so much that they avoid taking any kind of risks whatsoever. In business and investing, risk is part of the process. If you don‘t risk something (e.g. time, energy, money), you don‘t progress. Yet I see many new investors who want to get it right the first time and ―hit a home run.‖ What they don‘t understand is that there are no guarantees in real estate investing or anything else in life. You just have to take a calculated risk, and adjust accordingly if you fail. (continued on page 14)
Investment Wisdom with Paul Hecht. The Three Keys to Selling Your Property Fast Regardless of how the current market is performing, there are three key areas that vendors need to focus on to secure a sale. Whether it‘s a buyer‘s market or seller‘s market, there are really only three things to consider when selling any home: Product, Price, and Promotion. In a buyer‘s market, you must address the following in order for someone to even consider writing an offer. In a seller‘s market, you get top dollar if you cover the following. PRODUCT: That first impression is everything. Start with the exterior before making your way inside. Stand in front of the property and look at the old roof, the peeling paint on the eaves and window trim, the leaves in the gutter, the overgrown lawn, the dead trees, the fence that is falling over, and the front door that sticks, and ask yourself: Is this a home that has been taken of? In a slow market, for a buyer to even consider writing an offer, the product needs to be in excellent condition, which means all of those deferred maintenance items need to be addressed prior to listing the home. If you fail to address these initial maintenance issues, you risk three outcomes:
A potential buyer will either deduct the cost of engaging a professional to fix everything they believe needs repairing.
They simply won‘t bother making an offer as they can go down the street and buy a house that presents in better condition.
They won‘t bother booking a showing to see the rest.
Deferred maintenance sends a subconscious message that if the front of the home is in average or poor condition, it‘s a representation of the seller‘s attitude towards the care and maintenance. Therefore, the rest of the home is likely the same. It also makes a buyer‘s mind wander to thoughts like, ―I wonder how well they have maintained the furnace, the hot water tank, have they dealt with any water or drainage issues, or just let it go for months, if not years.‖ Once the front of the home is in good shape, you should turn your attention to the inside of the property. Making sure the front entrance is clean and appealing is your next priority. It‘s the point where all buyers stand and take a good look around while
someone fumbles with the key to get inside. Once inside, evaluate each room as if you‘re a potential buyer. Identify paint touch ups, broken light switches, cracked tiles, and any other small repairs that can help to lift the look of the room. It may seem tedious, but don‘t be tempted to skip over any repairs. In a slow market, buyers notice everything. Ask your real estate agent for staging tips and suggestions. After all, they view properties day-in, day-out, so they‘re in a good position to offer advice. When the market is booming, vendors have the benefit of urgency on their side; when prospective buyers are aggressively competing against each other, they‘ll often pay a premium price to secure their favoured property. In a slower market, however, buyers have the luxury of being able to shop, look around, and take their time before making any decisions. Under these circumstances, the best way to get a buyer off the fence is to combine an outstanding product with an irresistible price. PRICE: Sellers make two common mistakes when settling on their list price.
Pricing their property where everyone else is, or
Listing at a higher price with the assumption that they can lower it later if they don‘t achieve it. In doing this, vendors risk alienating buyers at the beginning of their sales campaign, which can drag out their eventual sale by weeks and even months.
The aim of the game is to wow potential buyers from the get-go, as the best buyers are often the ones who go through your home within the first two weeks. These are the serious ones and, more than likely, the ones who know the market, often better than the seller. These buyers have been inside every other similar home on the market and are waiting for the ‗perfect home.‘ So, a seller needs to know the market intimately to set the price right. (continued on page 14) Paul M. Hecht is an investor, seminar leader, mentor, real estate agent and author of Everyday Real Estate Millionaires: How Average People Really Do It. Featured on radio across North America and monthly columnist for Canadian Real Estate Magazine, Paul continues to inspire other everyday people to invest safely in any market. Visit www.PaulMHecht.com for more Wealth-Building tips and strategies for today‘s market.
T HE V ERSATILE I NVESTOR
M ARK L OEFFLER
Tips For Maintaining Healthy Relationships It seems appropriate, when we‘re this close the holiday season, to pause for a moment to reflect on key relationships in your business and how important they are to your success. Be they with partners, your realtor, clients, mortgage broker, accountant, property manager or even your tenants, healthy and strong relationships can go a long way to helping you achieve your goals. Here are a few tips to consider: Communication: Communication is a crucial ingredient in any healthy relationship. Even if you‘re not the most extroverted person in the world, making a point of communicating calmly and clearly will do wonders for you in any relationship. And that involves the receiving end as well—listening—not just talking. Don‘t be so anxious to get only your point across that you‘re not open to listening what others are saying. Meet: Hold regular meetings when necessary or via telephone when appropriate. Technology makes emailing, texting, and even teleconferencing so easy, but nothing replaces face time, and nothing builds connections more than personal meetings. Referrals: If you‘re happy with the work of a member of your team, for example, don‘t be shy about providing referrals to others looking for similar services. Few things are as powerful in business as a strong referral. Both parties will appreciate it. Celebrate successes: Let‘s face it, almost everyone likes a pat on the back now and then. If one of your team members does a great job, tell them. A simple email, phone call, card, gift or face to face handshake and ‗thank you‘ can do wonders for the person on the receiving end. Do it genuinely, and they will feel the gratitude and will want to work even harder for you to
show the faith is warranted. Avoid conflict: Few people enjoy conflict or confrontation, and it can turn a relationship sour pretty quickly. The key to avoiding conflict is to be clear about expectations and deadlines up front, and to check in when appropriate to make sure tasks are being done and objectives met. And on those occasions when conflict does arise, don‘t use anger or frustration to fuel the conversation. Observe the ―24 -hour rule‖ for a cooling off period, reflect on what‘s happened, and discuss solutions and ways to prevent future recurrences. Be fair: Being fair requires skill and diplomacy. Too many people are focused only on ―being the boss,‖ portraying an air of ―me, me, me‖ all the time. Think long-term—what gets the most and the best out of people long-term, not just in the moment. Managing with anger and intimidation can work, but with limited and only short-term results. In business or in many other areas of life, it‘s all about relationships. Put extra thought, effort, and care into building and maintaining strong relationships, and you won‘t believe what a difference it can make. #END# Mark Loeffler is an experienced real estate investor with more than 13 years in the business, specializing in the tenant-first rent-toown-strategy. Mark has parlayed his expertise into a portfolio of more than 50 investment properties and has been featured in Canadian Real Estate Magazine and has appeared on numerous TV and radio programs and in other media. Through his own seminars, a regular blog and website, guest-speaking engagements and author of best-selling “Investing in Rent-to-Own Property - A Complete Guide for Canadian Real Estate Investors”, Mark has helped thousands of other Canadians realize their dreams to become real estate investors. For more information please visit: www.TheVersatileInvestor.com
“There is only one way in the world to be distinguished: Follow your instinct! Be yourself, and you’ll be somebody. Be one more blind follower of the blind, and you will have the oblivion you desire.” —Bliss Carman, poet
R EAL E STATE : B UY I T AND K EEP I T
J ULY O NO
Can You Fill Out a National Instrument 45-106? Are you investing legally? For that matter, is the seller/promoter offering a legitimate investment? There are exempt market investments and publicly offered investments. A publicly offered investment is marketed to the general public via an Offering Memorandum (also known as an OM) or a Prospectus. An exempt market investment is commonly referred to as Private Equity. Exempt market products often have a document referred to as a Proforma, an informal document that has not been screened by the local Securities Commission. Exempt market investments are only available to four (4) classes of investors: (1) family, (2) friends, (3) close business associates and (4) accredited investors. Sellers/Promoters of exempt market products are not allowed to market to the general public. It is illegal to advertise, promote or sell these types of investments to the public without an OM or a Prospectus. To find out if you qualify as an accredited investor according to the Canadian guidelines, Google ―National Instrument 45-106‖ and select which category best describes your financial report card. If you are unable to select any of the categories, then you do not qualify to invest with an exempt market offering unless you are either (1), (2) or (3) listed above. To qualify as an accredited investor, you must have either:
financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds $1,000,000,
net income exceeds $200,000 in the past two years, or
have net assets of at least $5,000,000.
Otherwise, in order to be able to invest, you must qualify as a family member, close friend, or close business associate. The Securities Commission has a test to determine if you are ―close.‖ How long have you known each other? Do you celebrate birthdays? Do you celebrate significant holidays together? Do you exchange gifts? What are the names of your friends‘ children? What are the birthdates of your friends and their children‘s birthdates? These measures are put into place to protect unsophisticated investors from placing their money into investments they do not understand. Unfortunately, I know very few investors (accredited and unsophisticated) who even read through an entire Prospectus or Offering Memorandum as these documents are profoundly confusing and require a finance degree to comprehend even half of what it contains.
Accredited investor means that you have at least $100,000 to invest. Accredited investor means that you have the financial comprehension to invest in exempt market investments. Accredited investor means that you have the ability to conduct appropriate due diligence. You have earned this privilege by the size of your financial report card. If you have created a million dollars or more in assets, then it has taken a lot of study and personal development to grow your financial context. This does not include those individuals who inherited or won their millions without earning the financial literacy to create, maintain and grow their wealth; as these people usually end up broke or worse within five years of such a windfall. How can you expect to be a good steward of money if you have never developed the discipline of becoming an excellent money manager? The ability to sign off on a National Instrument 45106 means that you‘ve paid your dues, you have excellent money management skills, you are financially literate and you are free to invest in the investments of your choice. Unsophisticated investors (aka Joe or Jane Public) are restricted by law in what they can invest their money in. That‘s why their choices are limited to low interest-bearing instruments as the safest and least riskiest. These safe investments are not designed to create wealth for the masses. They are designed to create wealth for the banks. Accredited investors have earned the right to invest their money in higher interest yielding investments because they can weigh the merits of the investment‘s risk versus reward according to their financial agenda. #END#
July Ono is a real estate investor, educator, and mentor. She is the president of On The Beach Education Corporation and the founder of the Real Estate Network Group, an ongoing mentoring and coaching program designed to take the fear out of real estate investing and to help their members leverage proven systems to create their freedom day sooner than later. Since 2006, her students purchased over $38 million of investment properties. The Power of Real Estate Program is the best of her experience and expertise that have helped investors grasp the foundation of real estate investing skills and tools to create financial independence for themselves. www.OnTheBeachEducation.com
Dave Dubeau’s... “Deal magnet” marketing The REAL Breakdown of Your Market In November, I attended an excellent event put on by "Leader to Luminary" training (Callan Rush and Justin Livingstone—from Vancouver). At the event, I was reminded about the 'basics' of marketing—as it is easy for me to get diverted and overcomplicate things sometimes.
Let's review: Here is your market ...
As Real Estate Entrepreneurs, we are in the business of solving people's problems at a profit.
I'm going to suggest that your competitive advantage lies in being able to attract and work with as many people as possible in the 67% of your market (bold and underlined above) who are NOT actively looking for your solution, but who need it and can use it.
Here's the bottom line when it comes to our 'target' market of people who we'd like to do business with—whether it be tenants, property sellers, property buyers, investors or whoever.
3% of them are ACTIVELY looking for what you are offering right now. These are the 'hungry' ones who know they have a problem and are looking for a solution FAST. So these are the folks who are ready, willing and able to make a decision quickly...that's the good news. The bad news is that these are also the people that ALL of your competition is going after too— and they know it. This means that these people tend to be very price sensitive and are looking for the best deal they can get.
7% are OPEN to the idea of working with you, but are not actively looking right now. They know they have a problem, but it isn't a burning issue with them...yet.
30% are AWARE FOR THE FUTURE. They know they have a problem, but it isn't burning, and they keep putting it off until sometime down the road.
30% are UNCONSCIOUS. They have a problem, but they are not even aware that they have the problem.
30% are a NO. Either they don't want your solution, can't afford your solution, or for whatever reason just won't ever do business with you, no matter what. These folks we can just cross off the list!
3% ACTIVE 7% OPEN 30% AWARE 30% UNCONSCIOUS 30% NO WAY.
These are the VAST MAJORITY of your market, and they are ripe for the picking because no one is going after them. If you 'crack the code' on how to communicate with them, you will have such a HUGE competitive advantage you will never have to be worried about competition again! Next month, we will talk about the #1 FOCUS of your marketing and how it will help you to attract this 67% (as well as the 3% that are 'hot' right now). # END #
R EALTY L EGALITIES
B ARRY M C G UIRE
MORTGAGE MADNESS, A.K.A. LENDER LESSONS The general rule is that a lawyer should only act for one client. Residential real estate is an exception to the rule. When we act for you as a buyer, we are also usually the lawyer for the bank. Over 37 years of acting for buyers and banks, we have picked up a lot of tips. Here are five of the best.
Banks love plain-vanilla. Just like vanilla ice cream is, by far, the best-selling flavour, banks do mostly plainvanilla deals, and that's what they're good at. Anything out of the ordinary has real potential for timing or approval difficulty. Three time-sucking, stressful examples are non-resident borrowers, secondary financing issues, and RRSP loans. I could write 10 pages on each of these. For now, it's just important that you know any non-resident, secondary financing, or RRSP component takes way more time and way more effort with a much bigger chance of application failure or excessive cost. Leave yourself at least twice your usual amount of time to get financing approved and then twice the amount of time to close.
A signed but conditional mortgage commitment doesn't mean you have a mortgage. Look carefully at borrower conditions, mortgage broker conditions, and lawyer conditions in the mortgage commitment you sign. Satisfy yourself that all those conditions can be removed. Then, remove them or confirm others have removed them!
Never remove the ‗subject to‘ conditions in your real estate purchase contract without an UNCONDITIONAL mortgage commitment. Even when you think you have satisfied all conditions, confirm with your mortgage broker or lender. Get them to tell you, ―Yes, you are unconditional, quit bugging me!‖
―I'm going to be on the title, but I don't want to be on the mortgage,‖ or ―I'm okay with being on the mortgage, but I don't want to be on the title.‖ Either version comes up a lot when members are applying for a new mortgage, especially in a JV situation. The rule is that if you are on the mortgage, you are on the title. Yes, you might be able to make amendments after the deal is closed, but, when placing the mortgage initially, if you are on the title, you are on the mortgage; if you are on the mortgage, you are on the title.
Banks like ‗plain-vanilla‘. As investors, we sometimes like ‗creative‘. When writing real estate deals and applying for mortgages, ‗creative‘ raises concerns about mortgage fraud. Whether it be secondary financing, rebates, or fix and flip issues, if you fully disclose to your bank and they agree with your plan, it can't be mortgage fraud. Get approval on the basis of full written disclosure acknowledged and approved by the lender. Barry C. McGuire, from Edmonton, AB is a veteran Real Estate Lawyer with more than 35 years experience. He is also a Real Estate investor, speaker, educator and bestselling co-author of „97 Tips For Canadian Real Estate Investors‟. Barry offers a variety of Real Estate focused programs and home-study courses. For more information about Barry and his services, please visit: BarryMcGuire.CA
Real Estate My Way
- with Ken Beaton
Financing With Insurance Back in the 80s, my wife and I purchased my family‘s campground, but we did it in a very unconventional way. In our case, the business (campground), as successful as it was, didn't generate a lot of cash flow. My parents operated it as a business, but my father also had a full time job, which meant he didn't need the income from the business—unlike myself. We managed to take the company to a much higher level on a financial level, but even then, we couldn't afford to finance the business purchase. So what did we do? Around the same time that we wanted to purchase the park, we were also looking at what we needed to consider for our retirement, so we asked a financial planner to sit with us and create a plan. What we learned from this meeting had a much greater impact than we could ever imagine. During the conversation, we quickly realized that we had a very long road ahead of us before retirement. The other discovery we made was that we could buy the business or finance the business through an insurance policy. This is a strategy that is commonly used in estate planning, and it won't work in every situation; however, it may spark an idea for you. At the time we purchased the property, both my parents were in very good health, with my mother in her mid-60s and my father in his early 70s. If my parents sold the park to anyone else, then they would be forced to leave their home, which they did not want to do, so part of the plan was for us to purchase the business and allow them to continue living there for as long as they wanted. My parents could have held a VTB (vendor take back mortgage) for us, but we couldn‘t afford to make the high payments. My parents could have just given us the business, but I would need to compensate my two siblings. We struggled trying to figure out how we could make this work and be fair to everyone involved. This was what we were struggling with when we met with the financial advisor to discuss our financial future. He suggested that we take out a life insurance policy against
my mother for the amount equal to the purchase price of the park. The insurance premium was still a very large amount to pay out every month, but it was substantially less than what a mortgage payment on the campground would be. The plan was that we would make the monthly payments until such time that the insurance policy would pay out an amount equal to what I would owe my siblings or I could continue making the payments beyond that time period and any excess insurance money would remain as ours. Initially, we were bothered with the idea of benefiting financially from someone‘s death; however, we all agreed that this option made very good business sense. For us, as I suspect it would be for many of you, it was important to remove the emotions from this business transaction and look strictly at the business side of it. As I mentioned earlier, this is not a common strategy nor can it be used frequently. It is just another example to stimulate your mind and help you think unconventionally. This is a very common strategy to help your family pay for the high costs of taxes on your properties upon your death as well. I strongly suggest that you speak with a tax lawyer and your accountant to help you understand your situation so that you can make appropriate plans for you and your family. Never stop learning, ask plenty of questions, and replace the simple statement of ―I can‘t‖ with the statement of ―How can I?‖ Do all these and you will definitely start thinking more creatively. #END# Ken Beaton is a successful real estate investor, landlord and real estate agent. He is President of ARCA Real Estate Investments which he operates along with his wife Joanne. In 2011 he started up a new full service real estate company called Fast Track Real Estate Inc along with Darren Weeks. His extensive investing and teaching/mentoring of so many budding new investors will continue and help make his new company very successful. His personal belief of ensuring each real estate transaction is a win/win/win scenario for his students, sellers and buyers. To learn more about Ken you can visit his personal website www.arcagroup.ca and to buy or sell real estate or to just learn more about Fast Track Real Estate please visit www.fasttrackrealestate.com
by S. Mathew Frederick
The Value of a Mentor Many struggle to be great real estate investors, yet find themselves achieving results that barely satisfy or resemble what they wanted to achieve. What they fail to realize is that, except for a few small but key decisions along the entire path, the result could have been very successful. Enter the mentor to be there at these critical moments. There is free information on how to analyze the economic fundamentals of an area, determine the profit/loss of a particular property, and how to execute most strategies. What is not easily available is the wisdom and timing that a successful mentor can bring to the deal. The following are a few spots where a mentor shines. A mentor can help you establish the right perception. A transaction takes place when the other side‘s perception of the value of what you have to offer is higher or equal to the price you are asking. Your mentor can identify what the true currencies are for the other party and help you structure your offer to match their perceived value. This will reduce over-explanation and the stress that comes from misunderstanding. A mentor can help you manage your emotions. People tend not to look at the big picture. A mentor will allow you to look at the big picture to determine all the elements and determine all the ramifications. They will help you transform your thoughts on what you want to say into benefits for the listener. They will show you how to manage your emotions by turning it into controlled passion. I have purchased houses at deep discounts because I had a greater passion and vision for the property than the seller. I have sold houses for greater profits because I was able to share my passion and vision of the property with the buyer. A mentor can teach you to be mindful of your assumptions. When it comes to assumptions, it is natural for people to feel that they are in a weaker position and that the other party has a stronger hand. Belief of a weaker hand will be translated in your gestures, looks, actions, and words. The mentor will cause you to realize that the other party has the same assumption and how to position yourself on the high ground. In war and peace, whoever holds the high ground usually wins, and it is the same for negotiations.
A mentor can teach you how to massage the timeline. Here is an example of a mentor massaging the timeline: A property seller represented by a mentor needed to sell in 30 days. During communication with the buyer, it became evident that the buyer‘s purchase deadline was absolutely no less than 60 days. It‘s a fact that whoever has the more relaxed timeline usually wins in a negotiation. So the mentor projected the seller timeline to be no sooner than 120 days, which was unacceptable to the buyer. The seller was then able to offer an option that if sold sooner than 120 days, it would have to be within 30 days, and a few concessions would have to be thrown in for the major inconvenience. A mentor knows the rules of the game, but also how to play. As you can see, the mentor was instrumental with perception, implementation, assumptions and timeline. These soft skills are as important as the economic fundamentals and the property analysis. This is where a mentor shines and can make all the difference on satisfying what you wanted to achieve. #END# Mathew Frederick, director of Coridian Capital, Inc., began his career with the Bank of Montreal as a Computer Systems Analyst and then a Small Business Development Specialist with IBM. Later, Mathew began a decade of teaching Business at the postsecondary-school level. He began investing in residential real estate where he learned the ―hard way‖, ―up through the ranks‖, how to buy -fix-sell, lease option and rent income property. Over the past 17 years, he has renovated over 50 properties and managed a multimillion dollar real estate portfolio. He has spoken to thousands of Canadians as a facilitator, author, and TV personality. Mathews focuses on acquisition, improvement, management, and development of solid, profitable real-estate investments. His passion is finding great investment areas through rigorous research, and immersing himself in that market to understand its dynamic nature. Then, securing assets with great potential to share with other like minded investors. Contact him at coridiancapital.com.
Bits and Pieces that Didn't Quite Fit (Beaton, from page 5) Water is so much more expensive than we realize, so anytime you can save on this, you end up winning. It is possible to purchase ―energy locks‖ for properties that you pay the heat in. This prevents the tenant from cranking the heat when they are cold – then they need to put on socks and a sweater! Do you have any idea how many tenants wear shorts and t-shirts and bare feet in the winter? You need to do the math to see what the payback period is and decide whether or not it is worth the expense. 9. Look at your financing: Pay attention to the terms of your mortgage. There may be times when you want to lock in your variable mortgage. You might be able to renew a mortgage before the maturity date and get more favourable terms like a lower interest rate and save several months on your mortgage payments. 10. Watch for opportunities through municipality, province or federal government to receive “free” money: It‘s a great idea to monitor websites of your municipality, province and federal organizations such as CMHC to watch for opportunities for ―free‖ money for property owners. Edmonton just discontinued their $25,000 grant to landlords to install basement suites. We have made use of thousands of dollars through CMHC programs to improve our buildings. Not instant cash flow, but we are still happy to take advantage of those funds.
I would love to hear of your suggestions for improving cash flow in your building, so feel free to share your ideas with me. Send me an e-mail and put ―Improving your Property Cashflow‖ in the subject line. # END #
(Hecht, from page 7) You ultimately want to make the buyer say, ―This is the best property we‘ve seen so far, and the price is great—we‘d better make an offer today.‖
(Blacquiere, from page 6)
PROMOTION: You may have a fantastic piece of real estate to sell at a competitive price, but if no one knows about your property, how are you going to attract buyers? If you are selling the home yourself as ‗For Sale By Owner,‘ then promotion is one of the biggest hurdles you can face. You need to consider this seriously and budget for advertising both online and offline.
You can definitely reduce your risk by becoming educated first on what to look for in a deal, how to build a team, etc., but ultimately, you have to take a ‗leap of faith‘ and trust yourself.
In today‘s marketplace, the reality is that over 90% of buyers start their search online, and MLS.ca is the go-to resource for those in the market to purchase property. So if you want your property seen by the most people, you‘ll need to get it listed on MLS (Realtor.ca). Only registered realtors are able to list properties on MLS, so those attempting to sidestep the middleman will need to be creative.
Perhaps if more people truly understood the value of failure, and how your biggest lessons and creativity can come from it, they would be more willing to take (calculated) risks.
The only other promotion a seller can offer is unique selling propositions that are so unique, they set the property apart from all other properties. Not in the physical sense, but in the way the property can be purchased. Seller financing, rent-to-own, incentives like paying the buyer‘s mortgage or condo/strata fees for a period of time are all unique selling propositions. These are benefits that can be offered on any home regardless of its physical appearance. Seller financing and rent-to-own are promotions that target a unique buyer who is often not even looking on MLS because they cannot qualify at the bank. Therefore, those promotions need to also be targeted in different media.
So the next time you‘re beating yourself up because your latest deal didn‘t go the way you wanted, or you let a bad tenant into one of your properties… remember the story of James Dyson. If he can fail over 5000 times and keep going, you can certainly fail 5-10 times and keep going as well.
Finally, make sure the house is clean. A buyer can get over a toy left on the floor or even some clothes on the bedroom floor. However, most buyers will not get over a dirty toilet, moldy shower stall, or a smell that cannot be explained. # END # Page 14
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Final Thoughts This Month: The Coolest Cash Flow Idea I’ve Heard in a Long Time One of my favourite things about attending the Vancouver Investor Forum was seeing all of the different ways people are making money and opportunities with real estate. Heck, there was even one group there selling DETROIT real estate! These guys have figured out a way to make money in one of the worst real estate markets on the continent—a city where I've heard the population has shrunk from 2 million to approximately 700,000 people and where they are actually bulldozing entire neighbourhoods and turning it back into farmland! But the coolest 'new' idea I heard about was from a young fellow who came to one of my Rent To Own 3 Way Pay Day events. His name is Aaron, and he is a relatively new real estate agent in Vancouver. He came up to me after my presentation, and as I was signing my book for him, he told me about the 'creative' technique he does—similar to a sandwich lease rent to own deal, but it is more like a sandwich lease, rent to rent deal! He finds good rental properties that he can LEASE for the long-term and where he has the right to sublet to another tenant. He then goes out and buys furniture for the suite and then sub-lets (rents) it, fully furnished! He was telling me that his best deal is where he has an $800/month lease, and he is able to sublet the property, now fully furnished, for $1,800/month— making him a NET profit of $1,000 a month!
I didn't have time to quiz him about all the details, but I imagine he is renting out a 2-bedroom apartment to two people for $900/month each. In which case, he probably has a lot of tenant management issues and has to re-let the property on a fairly regular basis. But who cares? Aaron has found a very cool niche, and he is helping lots of people. He is providing frustrated landlords with a 'hassle-free' way to rent out their properties (leasing them long-term to him, instead of month-tomonth to individual tenants). Aaron is providing tenants without furniture a great option to be able to unpack their clothes and move into a place that is fully functional and ready to go. And Aaron is making good money as well. If he is netting $1,000/month from this one deal, he only needs 4 or 5 more deals like this to have a full-time income (and with very part-time effort). As with anything, there is a lot more involved to this strategy than meets the eye on the surface, but it still is a very smart idea, and seems relatively simple to do. And it is a very creative way to create income from a rental property you don't even own! And I love hearing and discovering new ways that creative real estate investors are finding opportunities, solving people's problems, and profiting handsomely for it. # END #
From our Canadian Profits Family to Yours...May You Have a Very Merry Christmas and a Wonderful New Year! Page 16