Step On It: Record Keeping

The only way to know how your business is doing is to have updated record keeping. For me, record keeping includes the bookkeeping as well as keeping track of all the details for each properties we own.

For our rentals, I keep a spreadsheet with the details of the tenants, the rent collected, all the expenses and the debt repayment. I keep such a spreadsheet for each property for each year. As my property managers send me their report, I transfer the information of the income they have collected and the expenses they where in charge of. I keep most expenses in my control but the management fees and any maintenance fees I leave in their care. Before any major maintenance they contact me with a quote for approval. This system works for me, since I keep the control. Should I ever list one of my properties to sell, I have all the information ready to go.

The struggle is to keep on top of it. It is easy to get behind and to just randomly update our records. I'll admit that is a struggle for me. With work, and kids and life in general it's easy to put this on the back burner.

So I'll make a half way through the year and then some resolution. I shall catch up to my record keeping and maintain it. The kids are about to go back to school, I'm hoping having days to myself will enable me to catch up.

What A Life: Acadian Day

Did you know that August 15th is Acadian Day? Probably not, not very many people out west know. I am of Acadian decent, with my boys being born and raise in Alberta, they will never be truly expose to my heritage so I decided to do what I can.

For years now, since visiting New Brunswick during Acadian Day we have been celebrating it with the boys at home. We have been making acadian food and having our own Tintamare. A Tintamare is basically a noise parade. This is what a Tintamare can look like in the Maritimes.

Of course there is not that many Acadian in my area, in fact I may be the only one. So instead we invite our friends and neighbours to join us. This is what our Tintamare looks like.

So although you may not be an Acadian, Happy Acadian Day!!

Rich Dad Radio: Back To School

This week on Rich Dad Radio, Robert and Kim have Tony D'Angelo for a guest. They are discussing the back to school season for students getting ready to attend college.

Student loans are the financial burden of this generation. There is more student loans then credit card loans at this time. The student loan wont go away by declaring bankruptcy. In fact there are only three way to rid yourself of a student loan: pay it (and if your are able to find suitable employment that is fine), become disabled, or die.

That is why every student should take a close look at the cost of education and if it will matches what you receive. With the high rate of unemployment and under employment, it may not be the case.

Inspirational Corner: Show Me The Money

I was talking to someone about education for real estate investing. He was concern about the high cost of the courses up front, which is a legit concern. He was also concern about the amount of the presentation that was spent on motivation, he said my motivation is "Show Me The Money", the presentation should be about showing the money. I asked if he meant an example on paper. He said no, helping us to make a deal and prove that you can make money.

Here is the main problem with that, as far as I'm concern. If you are looking to learn to become a real estate investor and you can only be motivated by the money you make you will never be successful.

If you are unable to keep yourself motivated during the learning process, or during mistakes you have made, you will never reach a level where you can be successful. You will quit at the first hurdle. That is why to have a high success rate for a real estate investing education company, the screening process should cut out the non motivated. Their likeliness of success is low and they might as well save their money.

Good To Know: Appraisal

I have been sending many offers out lately insulting many realtors and property owners in the process. I have been contacted by realtor justifying the listing price and the value of the properties in the area. I agree with them, they are right.

Properties are appraised in three different ways. There is the cost approach, direct comparison approach and the income approach.

Cost Approach: This would be today's cost to purchase the land and construct the building to replace the subject property after depreciation.

Direct Comparison Approach: This compares the subject property to similar properties that have sold in the market place over the past six to twelve months depending on the market activity.

Income Approach: This calculates today's value of the future income of the subject property by analysis of current and future cashflow and actual or anticipated income.

Realtor's use the direct comparison approach as they should, but for a Buy/Rent/Hold property I want to add to my portfolio I use the income approach. With some of the properties I've purchase, the income appraisal is higher then the direct comparison appraisal, that is a great deal for me. Sometimes (most of the time) the income appraisal is much lower then the direct comparison appraisal. This is when my offers offends the realtors and sellers.

Here is a copy of an appraisal I had done on a property in the past.

Cost Approach:

Direct Comparison Approach:

Income Approach:

We ended up with three very different amount. I expected to get an average of all three but that was not how it worked out. Here is the summary of my appraisal:

I found it odd that the appraiser averaged the value to $217,500 when the average was around $234,500. The reason is because he was looking at an other amount; the accepted offer. I had an accepted offer at that time to purchase this property at $197,000.

My sister was upset with a neighbour a while ago. She owns a town house and the neighbour put his up for sale. He was a motivated seller, eager to sell and accepted an offer that was below the property value. Going forward that sell as significantly affected the Direct Comparison Appraisal on her property and those of her other neighbours.

What Are You Reading? Why "A" Students Work For "C" Students - Part One, Chapter Two

Chapter's two action step for parents was: Take time to discuss money and the role it plays in life.

When I was growing up, money wasn't abundant in our household. It was a big source of stress to my parents and as a result, talking about money was taboo. If money was part of a conversation, that conversation was more an argument. I learned very little about money in that stage of my life.

In this chapter's action step, Robert suggest money issues should be discussed as a family. Discuss real life money problems when they occur in the course of the everyday life. Talk about the problems and challenges, what causes them and how to resolve them. Make your home a place to discuss money not argue about it.

Tools Of The Trade: Google Map

When looking into purchasing properties, I look across Canada. I do not visit each property, in fact I haven't visited any of them. I send my property management to view the property and they assess the property and neighbourhood. Of course I request that they send me photos of their inspection. I also like to use Google map. Although the image on Google map is not always very recent I don't mind seeing what the property looked like a few years ago. Did they cover any problems with a lipsticks solution? Sometimes those things would show.

There was one property I was evaluating a while back. This is the photo the realtor provided to me.

When on Google this is what I saw.

What I was able to see on this picture is that the paint is severely peeling on the other side of the building.

I now know to inquirer about this issue and get a quote so that I can use this in my negotiation. Of course my property manager would be able to provide me with this information as well, but if he doesn't I would question him about it. If he doesn't disclose this maybe he is not the property manager for me.

I can also go on a virtual walk around the neighbourhood and seeing what is around and the quality of the neighbourhood.

This is a great tool, easily accessible and completely free; might as well put it to good use.