Financial Planner Articles

You probably won’t like what I have to say. But, the brutal reality is that you can’t spend everything you make and expect to get rich. Period. If you are slipping further and further into debt each month and you think real estate investing is going to save you, I have bad news for you. It won’t.

“But wait,” you say, “those people on TV got out of debt and quit their jobs a couple of months after taking a course on real estate investing.” I’ve seen those commercials too, but I tell you one thing- if those people on TV are real, then they are the very rare exception. It simply does not work that way.

You can, and we believe you WILL, create massive amounts of wealth through real estate investing. Set your goals, find properties that meet those goals with plenty of good research and then hold onto them for at least five years…preferably longer. It works… look at the richest people in your city. Of those that are self-made, I bet at least 25% of them did it through real estate. We always go through the richest people in Canada and Power List for Vancouver, and this number holds up.

The trick is to learn what you’re doing, and then accelerate your investments after you have built a base of knowledge and equity. It’s not the only way to make millions in real estate…but it’s the way that requires less money, has the least amount of risk, and induces the least amount of panic attacks.

I’ve always referred to my wife Julie as a saver. When we started out we only had $16,000. But that didn’t bother Julie; she had just graduated from college and continued to live like a student. With all the extra money she saved, she paid off her student loans and continued to save any extra money. She wanted to go back to school for her MBA and she wanted to do it without getting into debt again.

When I first met Julie, we had very different lifestyles. I was enjoying the money I was currently making. I went out a lot, drove a brand-new Volkswagen with financing, and had some credit card debt. I also had a piece of property that I owned with my mom. But when I met Julie she talked about retiring at 35. She spoke of it so clearly and had such a good plan, that I knew it could happen if I worked at it too.

It took a lot of work on my part to pay off my credit card debt, but I did it. I then started to save a few hundred dollars every month. But the reward was worth the work, and we started to shop for our first investment property.

Thanks to Julie’s savings, we didn’t have to scramble as much to come up with the money for our first purchase. But there are still ways to purchase property even if you don’t have anything saved.

I’m sure you’ve heard of those no money down programs. I’m not saying it can be done; it can be, but no money down is one of the riskiest ways to buy property. There are only three low-risk ways to buy property, and 2 of them don’t require that you have money saved:

1. Cash out retirement and other savings, stocks, and GICs

2. Your home’s equity

3. A partner that has money to invest.

Here’s the hard reality that you won’t like to hear though. Finding a partner will be next to impossible if your own finances are ugly. If you have no experience investing in real estate, you are deep in debt and you are trying to get rich on my money, what exactly is in it for me, as your potential partner? It just sounds risky to me.

However, if you’re in ‘good debt’ (like the kind that comes from student loans that you have been diligently paying down) and if you’ve done your research on real estate investing, then a partner starts to think differently about your debt. After all, you know how to control your money, so you won’t waste his/her money. The potential partner feels that you can be trusted and that any risk to investing with you is slight.

You’ll notice the difference; one person is full of ‘bad debt’ due to poor decision-making and the other person has ‘good debt’ and has shown that they make sound financial decisions.

Before you can buy a single piece of property, you have to be able to control your own finances. This gives you control of your destiny. Living beneath your means is the only way to do that. If you’re unsure about what you make versus what you spend, try this: for the next six months, keep track of every penny you spend. Once it’s there in black and white you’ll be able to see how you’re living and where you can make changes.

I can imagine what you might be thinking - “but, Dave, I always spend a lot during the holiday season”, or “we’ve been planning the trip to Europe for two years”! Don’t fret- if you’ve saved up for those things, you deserve to do them. But, if you are going to end up going into debt for those things, you may have just discovered that you are a SPENDER, not a SAVER. If that is the case, you may not be ready to start growing your wealth and becoming a rich real estate investor.

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Tags: buying rental property, investing, money making, negotiation, Personal Finance, property management, Real Estate, real estate investing, wealth

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