October 2007

West Coast Prices Sky High

This year I’ve been dealing with an increasing number of clients from British Columbia. They love the west coast weather and lifestyle, but don’t like the prices of local investment real estate. In contrast to the $120,000 condominiums and $250,000 new single detached family homes available in Kitchener Waterloo, Ontario, prices in Vancouver are sky high. How high is sky high? Let’s ask the New York Times:

One of the guests was Annu Gill. With her fiancé, Rick Gill, who coincidentally has the same last name, she bought a 1,200-square-foot condominium at the Sheraton Wall Centre, a 42-story hotel with 74 units in downtown Vancouver. The condo cost one million Canadian dollars, currently worth about $1.03 million.

“When I try to explain to friends in the States how much it costs here, they don’t believe me,” Ms. Gill, 29, who is a real estate broker, said of the city’s high prices. “They say, ‘You’re lying.’”

But $840 a square foot — which is how much the couple paid for their condo — is not unusual these days.

Downtown Vancouver is the most expensive housing market in Canada, according to a survey of 21 cities worldwide released last April by Century 21. The average sales price for a condo in Vancouver was around $419,750 in 2007, up 14.6 percent from last year, according to Royal Le Page Real Estate Services.

The number of homes in Vancouver selling for more than $2 million also rose this year, by 48 percent.

Yikes! I always tell my clients ‘Live where you like, but invest where the numbers make sense.”

If you live in an expensive market (Vancouver, Calgary, Toronto etc.) you would be well advised to consider investing your hard earned equity into real estate investment property in a value priced region like the Kitchener Waterloo area. Call me at 519 570 4447 for a free consultation on how Real Estate investing can help you retire rich, and earlier than you thought!

Benjamin Bach wants to show you how Real Estate Investing can make you wealthy. He works with investors from across Ontario and Canada, helping them build wealth through smart real estate investments.

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at Benjamin(AT)BenjaminBach.com or call him at 519 570 4447

5 Skills That Will Make You Rich

The great Jim Rohn (he’s the one on the left in this picture) says “don’t wish things were easier, wish you were better.”
Life is no walk in the park. We are all presented with challenges that we must overcome. Winter always comes. In order to succeed at a very high level you must develop yourself and grow as a person. To grow, you need to master the 5 skills of personal development:

1) Absorb
Be a sponge. Learn whatever you can, everywhere you are. Take in the experiences of life: the words of a book; the lyrics of a song; the advice of a friend. Be able to learn from everyone and everything. Don’t miss anything that will be valuable to your future.

2) Reflect
There is value in the past, and much more if you can remember it. Learn to reflect on what you’ve taken in. When should you reflect?

• At the end of each day, reflect on it. How did you do? What did you learn? Who did you help?

• At the end of the week, reflect on the past six days. Now you can see what you need to do in the next six days. Invest what you learnt in the past six days into the next six days. Life demands measurable progress in reasonable time; after 6 days you should see progress.

• At the end of the month, reflect. Success is a numbers game – know them! How much time did you spend with the people you love? How much profit did the marketplace reward you with? How many times did you exercise? How many books did you read? How many pages did you write? If you aren’t seeing visible progress after a month of action, re-adjust your plan.

3) Respond
Let life touch you. Let sad things make you sad, let great things inspire your soul. There is something inside everyone that recognizes extraordinary things. Let beauty affect you. Let your mistakes frustrate your conscience into inspirational dissatisfaction.

4) Act
Get excited about being able to work the six days. The six days are where fortunes are built. Rest doesn’t build a fortune, the six days builds a fortune. Work works the miracle. Learn to embrace and love work. The six days allow you to create a great life for yourself. Ask, who can I help this week? Whose life can I touch? What can I give to the marketplace and my clients? Relish every hour of work, no matter how hard it may seem. Always do more than you get paid for, as an investment in your future.

5) Share
Something I told a class of mine recently is that in order to be a leader, you need to go from being ‘learning based’ to being ‘teaching based.’ Learn with the intention of teaching it to others. Hear a great story in order to tell it to someone. Read my newsletter thinking of how you can use these ideas to help your friends and colleagues. When you share, it is a true win-win situation. The listener is transformed by the knowledge, and you are transformed by giving selflessly.

In order for things to change, you must change. Learn the skills that will help you grow, and you can create a magnificent life for yourself.

Originally blog’d at Joyful Jubilant Learning Network

Benjamin Bach wants to show you how Real Estate Investing can make you wealthy. He works with investors from across Ontario and Canada, helping them build wealth through real estate. Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

How much is bad advice costing you? Too Much!

About a month ago I met a new client of mine, a very smart young guy. He bought his first real estate property 3 years ago for about $175K, put some ’sweat equity’ into it, and it’s worth about $250,000 today. My mortgage broker Jeff Reitzel had an approval in hand to refinance the property, pull out $100,000 to re-invest – while keeping the new mortgage payment less than the potential rent the home will generate (meaning it will ‘cash flow’). With this equity, my client could acquire up to $800,000 in property by leveraging the equity, while still keeping a healthy reserve fund (a must for clients I work with).

My client is 28. He had set a goal a few years ago to own three properties before his thirtieth birthday (great goal!), and he is in a position to make that happen. Unfortunately for him, he is getting some bad (but well intentioned) advice which may have a big impact on his net worth down the road.

From what I understand, the professionals (banker, lawyer, accountant etc) he employs are not real estate investors. Their advice to him is to refinance the property, but only take out half the equity available (40K actually), and use that as a down payment to purchase one property. The rest of his equity will be earning next to nothing for him sitting in the (now) rental property. Failing to invest that extra equity will have a six figure impact on his portfolio in the future. They justified this to my client by explaining that with his net worth he shouldn’t ‘take a risk’ and buy more than one property – even though he can conservatively (i.e. 20% down, and with a reserve fund) afford more.

My client has increased his equity significantly since he bought his first property in 2004 – no other investment he owns or has owned comes (remotely) close – yet it’s a risk to acquire more of it ? This logic sounds funny to me.

Here is what my client can do: Pull 100K in equity out of his current real estate property, and use $80,000 for down payments, keeping $20,000 as a reserve (or ambien) account. If we use a conservative 20% down payment rate, my client can acquire up to $400,000 of property in a growth region with high rents, like Kitchener Waterloo, Ontario (scenario 1).

If we use a more aggressive strategy aimed at accelerating equity growth, we can put 10% down and acquire up to $800,000 of cash flowing real estate investment property in Kitchener Waterloo (and for a reminder of why, look at the Top 10 Reasons to Invest in Kitchener Waterloo Real Estate). We’ll call this scenario 2.

Here is what his accountant wants him to do: Pull out $40,000 (instead of $100,000) in equity and buy a property for $200,000 (scenario 3) with 20% down, and wait a few years. This will be scenario 3.

Say the investment property appreciates 20% in value – not in a single year, but over a few years, let’s say four (so we’re going to estimate a conservative 5% projected appreciation a year) – how much have your new investments earned you in new equity?

In scenario 1, your $400,000 of cash flowing real estate investment property appreciates $80,000.

In scenario 2, your $800,000 of newly acquired property appreciates $160,000

In scenario 3, your $200,000 property is now worth $240,000, appreciating $40,000.

Don’t get me wrong- 40K is a good return on an initial investment of 40K. It’s just so much less than the $160,000 gain on an initial investment of $80,000 in scenario 3.

So, after 4 years, the investor may be out 100K of potential growth, give or take twenty thousand dollars. That’s not where it gets ugly.

When he goes to re-invest the profits he’s made, he has much less equity in Scenario 3. Since the client is still in his early thirties at this point, an extra hundred grand invested can mean a significant difference in his net worth in 20 years when he retires – yes, in his early 50’s.

He can leverage his 160K into around a million dollars of additional real estate property. His 40K will only buy him another $400,000. Now look at 20% appreciation on that amount. When you do the same thing again in 5 years, the numbers start getting big.

Moral of the story: Take real estate investment advice from real estate investors – as many as you can find. If your accountant only owns one house, she might not be the right person to advise you on how to grow a real estate portfolio.

For a free consultation on how you can maximize the growth of your wealth, call me at 519 570 4447

Benjamin Bach wants to show you how Real Estate Investing can make you wealthy. He works with investors from across Ontario and Canada, helping them build wealth through real estate.

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

Investor Alert: Real Estate Opportunity

This morning I toured a two bedroom condominium unit with an identical layout to a unit we just purchased. The condo is vacant, and needs new flooring in most of the unit (maybe 600 sq ft of flooring) and could use a paint job and some updated lighting.

It has all the characteristics of an investment I love:

• Investment property in a residential neighborhood
• Near a school
• Near major shopping centers
• Near the highway (I promise, this is a good thing in Kitchener Waterloo; if you’re near the expressway you can get anywhere in 15 minutes)
• Needs cosmetic work and priced accordingly
• Less than 20 years old

The unit I saw is offered for sale at $105,000, which is less than other main floor units have been selling for this year. An identical unit in the complex we bought in is for sale right now for ~$118,000 – it is in better shape, but that’s only a new paint job and some flooring away

If you invest in this condo for $105,000 with 20% down payment – $21,000 – you will need a mortgage for $84,000. If you get a 5 year fixed rate mortgage for 5.89% (that’s the rate I got in July, and in fact rates are a bit lower now) and amortize the payments over 40 years, your monthly mortgage payment is about $452 a month according to the mortgage calculator I’m using. Condo fees are currently $210.00 a month, and taxes are a shade under $100 a month. Insurance should be under $20 a month.

$452 (mortgage) + $210 (condo fees) + $100 (tax) + $20 (insurance) = $782.00

If you rent your unit out for $825 + hydro a month, you have a great condo paying for itself each month. All you have to do is collect twelve rent cheques each January.

Could your retirement portfolio benefit from the accelerated equity growth real estate can offer you? Call me now for a free consultation about how you can start investing in real estate today!

Benjamin Bach is passionate about helping people build wealth so they can live the life they love. He works with investors from across North America, helping them Retire Rich, and earlier than they thought possible!

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

Bach on Business Networking

Speaker and Author Josh Hinds recently interviewed me for his excellent site BusinessNetworkingAdvice.com.

He asked me some great questions, including what ‘networking’ means to me, why I feel it’s so important, and even my thoughts on body language when approaching someone for the first time.

Here’s a little tidbit. 

Josh: Benjamin, how do you define Business Networking and why do you feel it is important?

Benjamin Bach: Networking for me is all about meeting people and seeing if I can be valuable to them. Maybe I know someone who they should meet, maybe I read a book which can help their business – however I can help, I’m glad to do so.  Part of my enduring purpose is ‘to give freely,’ and I really try to live up to that when I’m in a ‘networking’ setting.

It’s crucial to any business, since our profit lies in the pockets of everyone else. If I have a valuable service or good, I can sell more by reaching more people. Networking lets you be valuable to more people. If you’ve built a business model around being paid for value (and you should), this will result in more profit for you and your organization.

Click here for the whole interview.

See also: First Impressions and Networking = Learning + Sharing

Leverage in Real Estate

Last month I was speaking with someone who is looking for an income producing investment property in Kitchener Waterloo. She has $250,000 in equity, and wanted to buy a multi unit property for cash – i.e. without a mortgage. She felt, ‘why take on debt if you don’t have to?’

My answer: to make more money!

Let’s look at scenario 1, where you buy a duplex for $250,000, all cash.

In scenario 2, we’re going to use the same $250,000 to put a 25% down payment on $800,000 worth of real estate – maybe a 10 plex, or a triplex and 5 condominium units – and keep $50,000 in a reserve fund (or a sominex account as Bawldguy calls it), just in case. We’re going to assume that you do all your due diligence and only buy good, solid properties with healthy income. The income should cover the expenses as well as the mortgage payments on the $600,000 you borrowed to buy the $800,000 in property.

If the properties in both scenarios appreciates 10% over two years, in scenario 1 your property is worth $25,000 more. In scenario 2, your property (or properties) are worth $80,000 more.

If you’re investing for the long term (10+ years), the differences are even greater. Leverage allows you to control more real estate, and when you’re in the growth (or acquisition) phase, you benefit from being able to buy more real estate with the same amount of equity.

One client I’m working with now is taking $100,000 out of their current property, and using that to purchase $350,000-$450,000 in new assets. This conservative use of leverage allows them to accelerate the rate their wealth grows at.

How much would your portfolio be worth in 10 years if you utilized the principle of positive leverage? What would you do with the extra seven figures worth of equity?

If you are interested in a free consultation about how you can maximize the growth of your real estate investment portfolio, call me today at 519 570 4447!

Benjamin Bach is passionate about helping people build wealth so they can live the life they love. He works with investors from across North America, helping them Retire Rich, and earlier than they thought possible!

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

Understanding Real Estate Terms

Real Estate zoning and allowed uses can be a tricky subject. This week I have been dealing with small income properties in Kitchener Waterloo with a few clients who previously had been investing in single family properties.

One property we looked at was a legal non-conforming triplex. What does that mean ? Is it a legal triplex? Is it illegal ? No ( in both cases).

Legal non-conforming means a use that is not recognized in the Zoning By-law but ‘which lawfully existed on the day the Zoning By-law was passed (June 6, 1994). ‘In Ontario these uses have a right to continue and cannot be “zoned” out of existence.

As long as the owner can prove that the property has continuously used the property in this fashion, it can continue. If a legal non conforming triplex is ever converted back to a single family home, it cannot go back to the previous non conforming use.

Before you buy a real estate investment property, you want to do your legwork, including ensuring that the property is legally allowed to be used as it is; consult your local real estate attorney.

Are there any real estate terms you’re unclear on ? Post them in the comments, and I’ll answer them (or find someone who can).

Benjamin Bach is passionate about helping people build wealth for an abundant retirement. He works with investors from across North America, helping them retire rich, and earlier than they thought possible!Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

What real estate investment strategy are you using ?

A lot of people come to me talking about the ‘gross rental multiplier’ on a single family home, or about how important it is to get maximum cash flow, or how they won’t look at properties under a certain capitalization rate.

Poor planning is the downfall of many would be investors. Maybe they don’t know what to look for in an investment property. Sometimes they don’t have their criteria nailed down. More often than not, they have a basic misunderstanding of wealth building.

One of the first things you need to do before you build your real estate portfolio is determine whether or not you should be following the Growth model for investing, or the Income model for investing.

Which model you choose will depend on a number of factors, mainly the size of the gap between how much equity you have, and how much equity you’ll need in retirement.

As we discussed yesterday, the income you receive in retirement is directly tied to how much equity you have. Your income is based on the return you make on your equity. The more equity, the more income.

In the Growth model, you are trying to accumulate as many assets as you can, in order to benefit from the appreciation and principle debt reduction over a large portfolio. In the Income model you are primarily investing your equity in order to receive cash flow to live on (or use for other business ventures).

What this means is, unless you already have a few million in equity, you should focus on Growth, rather than Income.

If you only have $100,000 in equity, it would be detrimental to look for an investment that will maximize your cash flow. What I would do is leverage that 100K into a portfolio of real estate in the Kitchener Waterloo area that is positioned to appreciate over the next several years (and your individual situation will determine the holding time).

In real estate, you benefit from owning more real estate, not from owning more of one piece of real estate. Leverage, used in combination with due diligence and a solid educational base, will allow you to accelerate the growth of your equity considerably.

Call me now @ 519 570 4447 for a free no obligation consultation about how your equity can be growing faster.

Benjamin Bach is passionate about helping people build wealth for an abundant retirement. He works with investors from across North America, helping them Retire Rich, and earlier than they thought possible!Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447

Retirement Income – a quick primer

It used to be that you could work for a company for 45 years, and retire with a pension to meet your needs, and a gold watch to match.

Nowadays, there is no such thing as job security, and and any pension or government funded retirement plans are likely not enough to keep you living the lifestyle you’ve become accustomed to.

During the typical working career, you go to your job and are paid for the work you do, or the time you put in.

If you go to work and do your job, you get paid. You are living off of the income you produce.

When you retire, you no longer go to work everyday to produce income – you now need to live off the income (or cashflow) your assets produce.

If you want to have a retirement income of $100,000 a year, and your investments generated a 10% rate of return, you would need to have $1,000,000 in assets. The more assets you own, the greater your potential retirement income.

Do you have a plan that will leave you with seven figures in assets by the time you want to stop working ? Call me at 519 570 4447 for a free consultation, and I’ll work with you to develop a plan that will allow you to reach your dreams.

Benjamin Bach is passionate about helping people build wealth for an abundant retirement. He works with investors from across North America, helping them Retire Rich, and earlier than they thought possible!

Call or email Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) today to learn how you can start your Real Estate Investment portfolio.

Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.

You can reach Benjamin at benjamin(AT)benjaminbach.com or call him at 519 570 4447