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Tuesday
Aug262014

Make Your First $Million in Real Estate Investing

If you want to make your first Million in real estate investing you need a plan. 

In this month's Canadian Realth Estate Wealth magazine I provide a roadmap to help the average Joe real estate investor achieve their goal of finanical independence.

If you have a little capital to work with and are willing to put forth some effort, a Million dollars in real estate weath is well within reach.

Full Article

Friday
Aug012014

Just Pull the Trigger

Just this past week alone I've had the same conversation with 3 different friends and associates.  They all went something like this:

Friend - "How's the real estate market?"

Me - "Great! It should be good for the foreseeable future and I'm looking to add to my portfolio."

Friend - "I need to purchase an investment property."

Me - "So what's holding you back?"

Friend - "I don't know ... fear of the unknown."

Every conversation didn't go exactly like that, but it was pretty much the spirit of every discussion we had.  These are all smart and educated individuals with the means to acquire an investment property and the skill set to easily manage an investment property.  The common theme is always the fear of actually pulling the trigger.  This mindset has alot to do with the fear of the unknown and it makes total sense.  I think its just human nature to be cautious when delving into new areas.

I purchased my first investment property some 15 years ago.  Not only was it my first investment property, it was my first property purchase period.  At the time I was still a student finishing my MBA and renting an apartment.  Was I nervous about pulling the trigger?  Of course.  Who wouldn't be in my situation ... especially given the fact that it wasn't a duplex or triplex I was purchasing, but instead it was a 12 plex.  Was there fear of the unknown?  Absolutely.  However, I crunched all the numbers, did my due diligence, reviewed the applicable laws and guidelines and eventually I pulled the trigger and have never looked back.

When it comes to real estate investing, time can be your greatest ally or worst enemy depending on which camp you're in.  If you own real estate, the passage of time is contributing to (1)cash flow, (2) mortgage paydown and (3)appreciation.  If you're sitting on the sidelines waiting to build up the courage to pull the trigger, every day that goes by is a lost opportunity.

I can think of a number of individuals within my sphere that were sitting on the fence for years before actually pulling the trigger.  Sometimes I think they got sick of hearing me preach about the virtues of real estate investing and just invested to get me to shut up :-)  Had these individuals pulled the trigger when they first had the inclination to invest they would have been much further ahead in terms of wealth creation.  Nonetheless, these individuals have done very well with their investments since pulling the trigger and every single one of them regrets the fact that they didn't act sooner.

Real estate investing may not be for everyone, but for those that have the means and the desire to do it, but just can't pull the trigger, this is my advice to you.  You will never have all the answers before you invest in real estate, there will never be a perfect time to invest as something will always come up and there will never be a perfect investment property as you will always find some faults with it.  If you can come to terms with the above then just go ahead and pull the trigger.  The one thing I can assure you of is that experience is the greatest teacher of them all.

When it comes to real estate investing, time is money, so make the decision to pull the trigger sooner rather than later.

Paul Kondakos, BA, LL.B, MBA - Professional Real Estate Investor

Tuesday
Jul292014

Good Debt vs. Bad Debt - Huge Difference

Let's face it.  I don't think anyone has ever had a conversation that started with, "My debt levels are super high and I'm pumped about it!".  Debt has always been perceived as an evil, especially when you have credit card companies charging almost criminal interest rates of 20% annually.  That is definitely BAD debt.  This, compounded with the fact that the media is talking about record levels of Canadian household debt on a daily basis, you can't help but have a bad taste in your mouth where debt is concerned.

I grew up in a household with Greek immigrant parents and the old school Greek mentality that if you didn't have enough money to buy something, you simply didn't buy it.  You NEVER took on debt.  You waited to save up enough money in order to buy it.  No doubt, many of us today would benefit from this simple logic.  To this day, my 70+ year old mother has never had or used a credit card and has never leased or financed anything.  After all, debt is a bad thing. Or is it?

I want to challenge the assertion that all debt is bad.  More specifically (for the purposes of this article), when it comes to real estate investing, debt used properly can actually be a GOOD thing as long as you have structured it correctly. 

With the recent run up in Canadian real estate, many Canadians now have a large amount of equity sitting in their principal residence.  There are a couple of ways to access this equity:

1. Re-finance

2. Secured Line of Credit

Both options lead to new debt, however, if used to acquire a cash flowing investment property this would be considered GOOD debt.  Why is considered good debt?.  The answer:

1. The interest on the debt used to acquire the investment property can be used to offset your taxable income

2. The right investment property will have enough cash flow to service the investment debt, property expenses and mortgage payments and leave some cash at the end of every month.

3. The investment property offers mortgage paydown and appreciation over time.

The main distinction here between good and bad debt is that bad debt must be serviced by the borrower, negatively affecting their cash flow situation, whereas good debt positively affects the borrowers cash flow situation and helps to create long term wealth.

Obviously this is a very simplistic overview, but hopefully it is enough to get people thinking that all debt is not created equally.  Used wisely, debt can be a very powerful tool towards wealth creation.

 

Paul Kondakos, BA, LL.B, MBA - Professional Real Estate Investor

 

Monday
Jul212014

Condos v. Other Real Estate Investments

I was recently asked my thoughts on investing in condos v. other real estate investments and creating $1 Million in wealth.
 
Here are my thoughts on the subject:
 
Leveraged investing in real estate will invariably create real estate wealth.  The important factor is the amount of time it will take.  Getting to the $1 million mark through condo investing will take significantly more time than other real estate investment choices.
 
The 3 pillars of real estate investing are (1) cash flow (2) mortgage paydown and (3) appreciation.
 
I think that if you invest in condos right now, pillars 1 and 3 are inferior to other real estate investment opportunities.
 
Pillar #1:  The cap rate on condos is poor.  On average you would be looking at a cap rate of approx. 4% to 4.5%.  This type of cap rate will likely lead to negative cash flow on a monthly basis.
 
Pillar #2:  As stated above, leveraged investing will invariably lead to real estate wealth as the investor is forced to make payments on the principal amount every month, eventually paying off the mortgage.
 
Pillar #3: This one is up for debate.  We've seen an incredible run up in the price of condos in major urban centres such as Toronto and Vancouver.  The question is whether this type of growth is sustainable.  I personally think we've neared a plateau in terms of run up.  I think the condo market will stabilize, but I don't see much appreciation in the future thus making pillar #3 weak for condo investing.
 
In a nutshell, you can get to $1 million eventually investing in condos, however, it may lead to negative cash flow on a monthly basis and will take a lot longer to get there vs. other real estate investments.
 
While investing in condos may not be the best real estate investment vehicle, it is still better to invest in condos that have have your money sitting in GICs, Bonds or T-Bills as the return is far superior.
 
Paul Kondakos, BA, LL.B, MBA - Professional Real Estate Investor
Monday
Mar312014

Important Ruling on Deposits for Ontario Landlords

A recent decision by the Ontario Superior Court in Covers v. Bumbia has significant implications for Ontario landlords when it comes to renting out apartments and condos. A little history ... it is illegal

Click to read more ...

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