Bryce Kander
Realtor
Realty Executives Alberta Elite
They say that this generation will inherit more money than any of the previous generations to date.
So what should you do in case you inherit some money...even $10-$50K?
In the past 7 or 8 years we have interacted with a couple different young people who both inherited $40,000.
In one scenario, someone convinced them to lend all the money for an investment that was unproven and sadly they lost it all.
Bryce sat down to have a financial discussion with the second one. As is the case with the majority of young people who come into money, this person wanted to go out and buy a new car.
Bryce explained that instead of buying a car that will just depreciate, they could buy a house with a basement suite and a garage and rent them out and the house would pay for the car. They said emphatically, "Bryce it just doesn't work like that!"
But it actually IT DOES...
Cole and Bryce actually both bought houses that did just that.
This is how it works...
They bought a house then for $245,000 and put down $12,500 as downpayment. Then they rented it out for $1200 up and $800 down and that's not even including the garage! Their rental income less payment, (including principal, interest, taxes, insurance) worked out that they would have cash flow of $363 a month. There is the car payment!
Over the seven years since then, they have paid down their mortgage from $232,500 to $155,200. Therefore they had $363 a month cash flow each and every month for seven years. They would have had some improvements here or there but they have also paid down an average of $1100 a month over those seven years.
So instead of buying a car for $10,000-$15,000 that would have been worth nothing 7 years later, they bought a house that appreciated $80,000 and they have paid off $77,300 PLUS have cash flow of $30,492 over the seven years.
Summary:
If those that inherit money had bought a car for $10,000 and just let it depreciate, in seven years they would have zero to show for it and probably be needing another new car.
BUT If they bought the house and invested $12,500, they would've had a total gain of $187,792.
What would you rather have... $0 or $187,792?
This just goes to show that you don't need to start with a lot of money to create wealth very quickly.
The younger you start, the better and you're not getting any younger so lets get you started!
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I hear this a lot from people but is it really true???
Years ago, I bought a piece of lakefront property at Sylvan lake for $169,000. I believe I borrowed the money at 14.5 %. That seems like an outrageous interest rate but at that time it was cheap because interest rates were as high as 22%!!
Now, that same property can be purchased for around
$1 million but you can borrow $1 million at 2.3%. It does cost more per month but it's not five times more because the interest rates are so cheap right now.
So...don't ever think that you've missed the boat. It's never too late.
There's always another boat. Grab an oar and let's get going!
#GeneralRealEstate
#StartToday
#NeverTooLate
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A recap from a couple weeks ago...
We talked about a deal on Property 123 Abc Street
You bought this suited property for $330,000!
You rented out the basement suite and you lived upstairs in this 3 bedroom 2 bathroom legally suited upstairs space for $78 dollars a month! How? By renting out the basement for $900 and living upstairs with 2 roommates plus you rented the double garage to either your upstairs or downstairs tenants@$200 for a combined monthly rental income of $2,200. (Rooms rented at $550 x2 = $1,100, garage rented at $200 plus the basement suite@$900 = $2,200)
Listing price, $330,000.
Down payment:$16,500
Property type- Legally suited house
Property taxes: $2,400 ($200 per month)
Mortgage: $1,477 per month
Insurance: $100 per month
Utilities $500 per month
Total EXPENSES= $2,278 per month
Total rental income = $2,200 per month
Total cost of living= $78
In my last blog post, I write out a detailed explanation of this: http://bit.ly/Homeownershipfor78dollars.
Right now I am going to assume you are paying rent somewhere, for around $550 to $1,600.
If you bought this 123 Abc property you are paying off your mortgage approximately $816 per month on your mortgage for signing a 5 year locked-in interest rate!
You are now paying only $78 every month out of pocket. At the end of 5 years that is a $55,320 savings in real cash that you'd have had to pay in rent somewhere else. Even if over the 5 years you saved $17,000 or $18,000 to buy another house, this home allowed you to save money to help you purchase your next home but that’s not all it does... Once you move out of your first home at 123 Abc Street, you can rent out the upstairs to one tenant and have cash flow coming from your basement suite, upstairs and garage all being rented out.
Instead of it costing you -$78, you now cash flow +$172!
Therefore, saved rent PLUS Mortgage pay down of $816 per month, for 5 years = $49,000 EQUALS cash savings of $55,320.
Getting excited yet?
Time to purchase house #2!
Purchase price $340,000
(The basement suite was new! You can now rent it for $1,000)
Down payment: $17,000
Property type- Legally suited house
Mortgage: $1,531 per month
Taxes: $200 per month
Utilities: $500 per month
Insurance: $100 per month
Total EXPENSES= $2,331 per month
Total Rental income = $2,300
Total cost : $31 per month
BUT WAIT!
Now 123 Abc is rented out and you have moved to house #2.
Total Rental income from 123 Abc Street = $2,450.
Total rental income from 456 Xyz Street = $2,300.
Total combined expenses= $4,609.00
Total rental income = $4,750.00
Total living cost in your 2nd property, $0 (actually less than 0)
$4,750 - $4,609 = $141.00 You now live for free and have cash flow!
Plus you have $49,000 in mortgage pay down on 123 Abc street & now you have #2 being paid down and you still aren't paying rent anywhere SO there is another $53,200 in savings. That savings is based on $1,000/month being your rent. If you are currently a roommate paying $550 you'd only get $28,320! (You get the idea)
Too long? Didn’t read the whole blog?
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Here is the short and sweet: TLDR.
Buy a legally suited 3 bedroom property with a double garage with 5% down payment. Rent out the basement suite, rent the garage, rent out 2 rooms and live upstairs. Save $28,320-$55,320 in your own rent you'd be paying elsewhere. Use that money to buy house #2.
Live for free in house #2 while your mortgages are being paid by a combination of roommates and renters. Keep saving with your sights set on #3 and #4 and just like that...you'll be a millionaire!!
Don't wait...Give me a call and lets get you started now!
Bryce/Penny Kander
Realty Executives Alberta Elite
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FREE HOUSE! Are you tired of using your own money to make your rent and car payments?? I have one friend who currently owns a condo that he paid $0 for, and now he has made almost $10,000 by being a landlord! This is commonly known as a rent-to-own. (I just lost half my readers because of those last 3 words.) A Rent-to-own is a great way to buy properties! It gets your foot in the door of the market.
What is the hardest property to buy? THE FIRST ONE!
Where do most people stop? BEFORE THEY START!
How can you get your foot in the market? You get your foot in the market by finding a realtor who is knowledgeable and understands the process. You only need one Realtor to show you any property. The property can be listed with Realty Executives, C-21, ABC realty, or even a private seller, etc. Any property that is on Realtor.ca can be shown to you by whichever agent you choose. Most commonly, people will call the person with the sign on the lawn if they don't have someone working for them. If you find someone who you trust and is knowledgeable about all the various ways that you can get your foot in the market, be loyal to them. Then they will work in your best interest instead of just trying to sell you something. I can provide you with all the information you need and you get to make the decisions. I can show you the half duplex with the nice veranda, or if you're interested, I can show you how you can buy a house that will in turn make your car payment for life!
How about you and I go see legally suited houses? I'll pick the best 3 and give you the grand tour. Legally suited homes typically rent for $1,300 upstairs & $900 downstairs. There's often 2 bedrooms downstairs and 3 on the main floor. Your payments will be around $2,200. Lets look at the rental income. $1,300 + $900 = $2,200... BUT WAIT! If you'd like to get in with only 5% down you will need to live there. If you live upstairs, and get two roommates for $550 each, your contribution to the payment is only $200/month. Now if you've made it this far I will give you the last part of the formula. Lets say your current rent is $550-$900/month. Your new investment is now $200/month.
THERE'S YOUR FREE CAR!
Oh and as an added bonus, you're paying off $500 a month on your mortgage. Therefore if we look at the numbers again, you're living in your own home and you're making $300 a month and you have no car payment. Is there any reason why you wouldn't want to get started on your first property right away? Don't Wait!!
Give me a call or message me right away and I'll be happy to walk you through the whole process!
Bryce Kander
Realty Executives Red Deer
403-896-7331
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