What would you do with 200k

[Courtenay]

My girlfriend needs to sell her Victoria condo (she`s moved and strata won`t allow a rental) and she will have about 200k to play with once the deal closes. She`s interested in buying something else, but she`s a very conservative investor and has asked me to pose this question to your collective wisdom.

What should she do with the money? She`s emotionally attached to Victoria and has a desire to buy a similar rental unit there. Obviously with that much down it would be easy to make just about any condo or single family home cash flow. I`m encouraging her to look at other areas as it`s an investment not a home and she doesn`t need to like the city it`s in.

I should mention that we currently own a house in Toronto with a basement rental suite.

This is a different climate than the one she first bought in. Where have people been finding value? I took the REIN workshop in Toronto last year, so I`m aware of Hamilton, Orillia, KWC etc., but I`m also concerned about talk of interest rates rising/prices coming down etc. I would say that this would be a five year investment for her.

What do you guys think? What would you do?

 

[Rickson9]

QUOTE (Courtenay @ Dec 14 2009, 11:01 PM) My girlfriend needs to sell her Victoria condo (she`s moved and strata won`t allow a rental) and she will have about 200k to play with once the deal closes. She`s interested in buying something else, but she`s a very conservative investor and has asked me to pose this question to your collective wisdom.

What should she do with the money? She`s emotionally attached to Victoria and has a desire to buy a similar rental unit there. Obviously with that much down it would be easy to make just about any condo or single family home cash flow. I`m encouraging her to look at other areas as it`s an investment not a home and she doesn`t need to like the city it`s in.

I should mention that we currently own a house in Toronto with a basement rental suite.

This is a different climate than the one she first bought in. Where have people been finding value? I took the REIN workshop in Toronto last year, so I`m aware of Hamilton, Orillia, KWC etc., but I`m also concerned about talk of interest rates rising/prices coming down etc. I would say that this would be a five year investment for her.

What do you guys think? What would you do?

Honestly I would bank the winfall and start renting. In the meantime, I would focus on learning how to interpret financial statements. All investors need to know how to interpret financial statements in order to have any kind of success. Specifically you will need to know your way around an income statement and a balance sheet. The cash flow statement would be something you can pick up later.

You can either learn how to interpret financial statements online by doing a Google search or look for an easy-to-understand book at Indigo.

Once you get the hang of it you can try reading vanilla, audited and controlled financial statements like those found on the Coca Cola, Disney, Tootsie Roll, or Nike web site. These business are very straight forward and will give you some practice.

After that, you can wade into the lawless world of unaudited pro forma financial statements that are provided by the Sellers of real estate. This will take some time since Sellers are notorious for `excluding` expense items, but the same principles apply.

The only threat to the $200K is impatience or the need to `do something` with the money.

I understand that this is probably not what you want to hear. My wife didn`t want to hear it either. It`s like trying to tell a smoker not to smoke - the chances of success are virtually nil. In the past, in order to teach my wife the value of education + patience I gave her investing lessons, but like the example with the smoker, it really didn`t resonate. I needed a `heart attack` moment so I gave her $5,000 and asked her to invest it; that is, to `do something` which she felt needed to be done. The money was gone fairly quick. She understands a bit better now. $200K can go just as fast as $5K.

To try to invest without knowledge is very dangerous. There are a lot of sharks and very shrewed and cut throat investors out there. This is not to say that they are bad people, but if you don`t know how to defend yourself you will be taken, and you won`t even know it.

I`m not the sharpest knife in the drawer nor am I the richest guy on the block, but when I do a deal and sense weakness (eg. lack of knowledge, sophistication, desperation etc.), I really smell blood and will maximize my benefit. And that is real.

 

[invst4profit]

Down Payment or even paying cash for a property may produce cash flow but it does not create positive cash flow. In fact it has no effect on positive cash flow at all.
The difference between the return based on 100% financing and the actual financing on a property is your return on capitol not the return on the property it self.
When investing cash into a property you create two income streams. One from your cash the other from the property itself. Almost any deal can cash flow if you throw enough money at it but that does not make any deal a good deal.
To invest wisely you must learn the difference between cash flow and positive cash flow. Huge difference.

Has your girlfriend maxed out her RSPs.

 

[vandriani]

The bigger question is:

Does she want to be active in her investing or passive?

If she is set on real estate investing and wants to be active then educate, educate and then educate some more. Remember there is a great amount of work to be active and successful in this or any investment arena.

If she is set on real estate investing and wants to be passive then she has many options such as JVs, RTO JVs, rental pools, syndicates, etc.

 

[CollegeRentals]

QUOTE (Courtenay @ Dec 14 2009, 11:01 PM) My girlfriend needs to sell her Victoria condo (she`s moved and strata won`t allow a rental) and she will have about 200k to play with once the deal closes. She`s interested in buying something else, but she`s a very conservative investor and has asked me to pose this question to your collective wisdom.

What should she do with the money? She`s emotionally attached to Victoria and has a desire to buy a similar rental unit there. Obviously with that much down it would be easy to make just about any condo or single family home cash flow. I`m encouraging her to look at other areas as it`s an investment not a home and she doesn`t need to like the city it`s in.

I should mention that we currently own a house in Toronto with a basement rental suite.

This is a different climate than the one she first bought in. Where have people been finding value? I took the REIN workshop in Toronto last year, so I`m aware of Hamilton, Orillia, KWC etc., but I`m also concerned about talk of interest rates rising/prices coming down etc. I would say that this would be a five year investment for her.

What do you guys think? What would you do?


That is a great question. I`m not saying my path is correct, but I came through with $180k after selling my first principal house. I`ve since used this to become an active investor in Student Rentals. Now, if your girlfriend is not interested in being an active investor I would certianly not suggest the Student Rental route, as I find they need to be hands-on investments. However, through financing I was able to turn that $180k into $700k in Student Rental properties with $55k/yr. Cash Flow. If you find a good investment-based Mortgage Broker they can help you effecienty and effectively finance your $200k.

Good luck!

 

[markl]

Are you educated? First step join REIN and get educated. I would take the money and make a lump sum payment on my principal residence therefore getting extra pay down while your getting educated about what path you want to take. Get an re-advancable LOC on your principal residence so when your ready to invest the money is there and the interest is tax deductible.

There are many ways to make money in RE you have to find out where her and your own comfort level is and get educated and take action.

Regards,

 

[Courtenay]

Thanks for your advice guys. The main thing that`s coming through is the aspect of goals and education. This isn`t five or six years ago, so real estate decisions have to be made more carefully.

Thanks for the help.

 

[EdRenkema]

QUOTE (Courtenay @ Dec 17 2009, 02:08 AM) Thanks for your advice guys. The main thing that`s coming through is the aspect of goals and education. This isn`t five or six years ago, so real estate decisions have to be made more carefully.
Thanks for the help.


You are correct about goals and education but read Mark`s reply again, he is saying put the money toward a pricipal residence, this will be a safe parking spot for the money and if bought in city such as one of REIN`s top 10 and selected for good quality it will be a good hedge against inflation, the re-advanceable line of credit will be money avaialable at any time at a very favourable interest rate and if used for an investment the interest will be tax deductible.
I am a huge proponent of owning your own home, I never had one till 4 years ago and since purchasing my own home and learning these concepts and many more plus taking action I have tripled my net worth.