Archives for November 2015

1. Paying too much for the house – When a lot of new investors (and even some experienced ones) look at a house with potential they worry about losing the opportunity and just pay market price for the property.  The money is made in the BUY when flipping houses and you need to get the property for below market value – even if that is only a 15% discount based on as-as comparables.

2. Over renovating for the area – Just because you see granite counter tops and brand new kitchens going into houses on TV does not mean that is what makes sense for the area your project house resides in.  The worst thing you can do is end up as the nicest house on a bad street!  This will mean your house will appear far too expensive priced right for your profit margins and will sit on the market longer than necessary costing you money in holding costs or “burn rate”.

3. Paying retail for materials and labor – Please avoid paying 15% markup for materials by trades/sub trades, and any time you can avoid buying something at home depot/Rona – always do it! The markup on some of their products such as screws/fasteners can be as high as 1000%.  Wholesale outlets are the way to go, you can set up cash accounts at any of these places with a company name/address giving you normally a 30% or more discount on their regular prices.

4. Not having a plan or having a plan and not sticking to it – Always have a well detailed scope of work, even if you are doing a lot of the work yourself (which I don’t recommend long term) you need to stay on track and on budget and deciding to make even small changes throughout the project can negatively affect your timeline/expenses very easily.  When working with contractors this will greatly simplify the process and avoid disputes over the bill if everything is well documented

5. Doing it yourself when you shouldn’t – Unless you are a professional in a particular area it will always be more cost efficient and save you time to hire out the work you need done, after all the speed to getting the house back on the market is what really counts especially in a market like Calgary right now when prices are shifting quickly.

Respect the hustle,

Tim Reid

I recently attended an event that very aptly illustrated the point that most investments do not keep pace with inflation.  The average return that stocks will yield over a 20+ year period is around 9% – now depending on who you believe the real rate of inflation is around 7-8%.  I know what some of you are thinking – there is no way it’s that high! So, let’s say for the sake of argument that the rate is only 3% per year – if you subtract 9%-3% you get 6%/year is what most investments will get you over the long haul.  This event in particular was about gold – and taught you that the same brick of gold today has the same buying power today that a brick of gold had 2000 years ago – thus a hedge against inflation.  Now, in so far as commodities such as gold, silver, diamonds will always be a hedge against inflation compared to paper currency I would agree – I in fact have invested in precious metals at times where the prices were artificially low with the intent to sell high at a future date: sounds a lot like what you are supposed to do in real estate yes?  I feel that the true way to get ahead and become successful is to have investments that track with/far surpass the rate of inflation – like real estate!! The value of real estate compared to paper currency is always just about the same: normally doubling in value every 10 years, for example a 100K house today will be worth around 200K 10 years down the road which would be a 100% return on investment compared to securities style investments (IE stocks).  That said inflation devalues your money over that same 10 year span, so real estate is just as good a hedge as commodities to hide from the monster of inflation trying to eat your wealth! I don’t know if I am crazy for thinking along these lines…but here goes: I would rather have cash flowing assets that out pace inflation by over 1000% than having a large percentage of my wealth in gold, silver, diamonds (pick one) sitting in a safe that I can’t spend in a store/service provider to obtain the things in life that I want.  Call me crazy for not wanting a hedge to hide behind and would rather have an income/net worth that is constantly growing so fast that inflation is only a distant spec in my rear view mirror while hurtling toward success.

Tim R