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How to Double Your Money With Real Estate

January 6, 2014November 24, 2011 by Dave Peniuk

We double our money in real estate almost every year.

That’s not really a fair statement though. MOST of our direct financial investment in our deals is limited. What we invest in our deals is our expertise, time, tons of time actually, and my team which has taken me years and years to build. The value I bring to the deals isn’t financial. We typically put in less than $5,000 on each deal and in most cases I get that back in the first year, if not double it. Our Joint Venture Partners, however, will have to wait about 5 years for their money to double but they are doubling a $70,000 investment not a $5,000 and, more importantly, their return on their time is infinite (as they only have a few hours of due diligence and writing the cheque).

So, when a writer for Canadian Real Estate Magazine interviewed me looking for my tips on how other readers could double their money in three to five years I found the question tough to answer. It really depends on what ROLE YOU WANT TO PLAY.

And, to be really frank with you, Julie and I invest $30,000 to $40,000 a year into coaches, courses, networking and mentoring and have done that consistently for several years now. We also have costs like our office space, our office manager, office materials, websites, marketing materials, parties and other expenses that aren’t directly applicable to a specific deal but are all business expenses we incur as part of generating the income we do with our real estate. So we don’t REALLY double our money every year (although it is growing beautifully!).

Assuming you do want to be the active investor like we are, here’s our formula to finding the deals that are going to be most likely to double the initial investment required in 3 to 5 years – whether you’re doing this with a partner or on your own. Our model for buying rental properties is simple. We only buy properties with a CAUSE:

Convenience: Is the property near schools, hospitals, shopping, public transportation, a university – the more convenient the location, generally the more in demand it will be both for renting and for selling in the future. It also increases the potential rent rate and the quality of the rental pool we’ll draw from.

Attracts families: Areas that attracts families and that fit all the other CAUSE categories tend to be the easiest to rent, with less turnover, and lower maintenance and lower risk.

Under the average price: We focus on buying homes that are 10% below the average price in our chosen market. Why only 10% below? Because if you go much below that you tend to get into tougher neighbourhoods and rougher houses – and just because we buy in areas that are 10% below the average house price for our city doesn’t mean the houses we buy are only 10% under – we’re bargain hunting!!

Starter home: Determine what type of home in your chosen city/market is a starter home (single family detached house, townhouse, condominium) and then buy those types of homes. This is the entry level home and tends to be the most liquid, most price stable and generally the easiest to rent out too. People move up from them and down into them.

Economic fundamentals: Find a city that you are near and that has good market fundamentals (people are moving there, more jobs are coming, amenities and infrastructure are growing, government is pro-business, rent rates are stable or increasing).

Once a property meets all the criteria above, we do the following:

Find someone looking to make a great return in real estate without having to invest the thousands of hours we’ve invested to become experts, and use their money and finance-ability to close on the property.
Find great tenants, manage the property and enjoy the benefits of mortgage pay down, cash flow, and appreciation.

The big thing I want to point out is the fact that so many people get hung up on finding the perfect investment market. The market we’re investing in does not have perfect fundamentals but no market ever does (even the coveted Edmonton market which so many investors run to does not have perfect fundamentals). We’d rather become area experts and stay focused where we are and know that we can control our investments because we’re nearby.

By doing deals just like the two we show below, even if you put in all the capital yourself you will double your money over 5 years, easily. But, you have to focus on buying properties with a CAUSE, otherwise you might end up going through the pain we went through as early “quick cash” investors!

Two recent deals we have done:

Property A:
Purchase Price: $321,000
Cash required from us: $10,000
Cash required from JV: $75,000
Rental Income (Rent To Own): $2,750
All Expenses: $1,300
Net Cashflow: $1,450 split between us and JV Partner
When Tenant purchases in two years, total cash return will be: $50,000 split between us and JV Partner
ROI on our $10,000 = 250%($25,000 / $10,000) over 2 years

Property B:
Purchase Price $303,000
Appraised Value: $330,000
Cash required from us: $4,000
Cash required from JV: $70,000
Rental Income (Buy and Hold Rental): $1,650
All Expenses: $1,300
Net Cashflow: $350 split between us and JV Partner
If property appreciates, on average only 3% per year for next 5 years, total cash return will be: $110,000 split between us and JV Partner
ROI on our $4,000 = 1,375%($55,000 / $4,000) over 5 years

5 Quick Wealth Creation Tips

October 30, 2012January 6, 2010 by Julie Broad

“So what do we do? Anything. Something. So long as we just don’t sit there. If we screw it up, start over. Try something else. If we wait until we’ve satisfied all the uncertainties, it may be too late.”
~ Lee Iacocca

First, let’s be clear about something. Wealth and income are not the same thing. I think many people confuse the two.

Just because someone is making $250,000 a year doesn’t mean they are wealthy. In fact, they often aren’t. They live in a big house with a big mortgage, drive a fancy car, with big payments and take luxurious vacations. They are living the high life but that doesn’t mean they are wealthy. In fact, many people with big incomes are struggling to stay afloat because they feel they have to keep up with the other people around them. They have to live in a certain area of the city, they have to drive a certain type of car, and have a cottage for their family to spend weekends at in the summer. They have a whole bunch of liabilities burning through the big pay cheques they bring in every month. If something happens to that monthly income then their entire lifestyle will crumble before their eyes.

They are not necessarily wealthy.

Income is what you make… the money that is coming in every month. Wealth is what you have built up. It’s what you’re worth.

So how do you create wealth? There are five simple things you can do:

Learn the difference between assets and liabilities, and then focus your efforts on accumulating assets. And folks, I don’t care what your accountant tells you, your home is not the kind of asset we’re talking about here unless you have a rental suite in the basement that is paying your mortgage. Keith Cunningham says it best when he says “Assets will feed me. Liabilities will eat me.” If you have to make monthly payments out of your own pocket then you haven’t bought yourself the kind of asset that is building your wealth.
Don’t eat your babies. We partnered with some friends of ours on one of our latest purchases. They were selling their house to purchase a bigger place with a yard and we pleaded with them to not “eat all their babies” when they sold the property. We suggested they send some of their babies out into the world to make more babies. And to this day they continue to report back to us on the babies they’ve eaten or the babies they didn’t eat. The income you earn are your babies. When you invest your money into assets that produce cash flow, like a solid rental property, you’ve effectively sent your babies out into the world to grow up and make more babies for you. So, when you spend that hard earned money, you are effectively eating your babies. When you think of it this way that brand new flat screen t.v. or designer purse doesn’t look as appealing does it? This is also known as paying yourself first and there have been dozens of books written about the subject from the Wealthy Barber to David Bach’s books on the Automatic Millionaire Finish Rich principles. The bottom line is that you can’t spend all your money and expect to become wealthy.
Do what you have to do to become who you want to be. In other words… if you made a new years resolution to buy $1 Million worth of real estate this year then let’s get to it. Too many people are searching for a magic button to solve all their problems but the real solution lies in yourself. If you want to build wealth you have to do something every day to do that. You have to be so serious about building wealth that you are actually going to DO something about it. If you want financial independence you have to take action to create it. Period.“As you begin to take action toward the fulfillment of your goals and dreams, you must realize that not every action will be perfect. Not every action will produce the desired result. Not every action will work. Making mistakes, getting it almost right, and experimenting to see what happens are all part of the process of eventually getting it right.” ~ Jack Canfield
Use leverage. When I suggest that you don’t eat your babies, I am not suggesting that instead of eating them you save them. It’s going to take a long time to save your way to rich. And let’s face it … cash is actually worth a little less every year so if you have money sitting in the bank it’s actually shrinking in value. So instead of saving your way to wealth you invest your way to wealth. And… when you invest a dollar use other people’s money to leverage your dollar into many many more dollars. Leverage is the best part of being a real estate investor. For very little money you can control assets worth hundreds of thousands of dollars… and in many cases you barely need any of your own money at all to do this.
Educate yourself. I cringe every time one of our friends mentions what their financial planner suggested they do. It’s not because they’ve trusted a stranger to invest their money instead of investing in one of our deals (ok… maybe there is a little of that going on but not much!). It’s because the advice of an average financial planner is not really that good. Now… there are excellent financial planners out there. Most of the time they are fee based… so they make money because YOU PAY THEM to evaluate your situation and help advise you on your investments. This is very different than the free financial planners that make money when they do a transaction… and unfortunately while I am sure there are good ones, the advice of these folks is almost always the same. And it’s not usually very good. But it’s easy… and it’s free… and a lot of people will find themselves utilizing the services of a financial planner for that reason. So instead of following the easy and free route take the time, money and effort it requires to educate yourself. If you want to invest in stocks, learn about stocks. And if you want advice pay someone that knows what they are talking about, has made money for themselves and for others. The same things goes for real estate. Don’t just blindly hand over your money… if you want to create real wealth you need to get in the driver seat of your own financial situation and drive. I really don’t think the good things in life come for free … except in the Rev N You newsletter… 🙂

Wealth creation is not something that you can do overnight. It’s not going to be easy but it is relatively simple and if you take these five tips to heart and work them into your plans for 2010 I promise that you will see some very impressive results by the end of the year. And if you don’t, I will give you a full refund for what you spent to read today’s article. 🙂

Published on January 6th, 2010

The 10 Million Dollar Dream

March 22, 2013August 27, 2009 by Julie Broad

A few years ago my Dad told me that he’d set a new goal. He wanted to owe the bank $10 Million Dollars.

I nearly choked on the freshly baked chocolate chip muffin I’d been devouring.

“Why in the world would you want to owe the bank $10 Million dollars, Dad? I thought you were trying to retire!!”

He went on to explain that it wouldn’t be $10 million dollars in debt from living life extravagantly. If he and Mom just spent the money going on cruises, buying nice cars and eating at expensive restaurants while accumulating that sort of debt load, that would be bad debt. But, his intention was not to get into bad debt. It was to get into good debt.

The concept that any debt can be good can be a tough one to wrap your head around. We’re taught that when you owe someone something you should pay it back as quickly as possible. And, in general, debt comes with a negative stigma. And, in many cases, it should. Debt that is accumulated for the purchase of “stuff” is not good debt.

But, when you take on debt carefully, only accepting debt attached to an asset that will generate cash to cover the cost of that debt then that is good debt. In the case of real estate investments and their associated mortgages, it’s debt that someone else is paying for through the rent they pay. It definitely qualifies as good debt!

So back to my Dad’s $10 Million dollar dream …
I’ve heard Donald Trump say, “If you’re going to think, you might as well think big.” In my Dad’s case he realized that it is going to take the same amount of time to pay of $1,000,000 in investment property debt that it will take to pay off $10,000,000. He said to me:

“It’s going to take me 20 years to pay it off whether it’s $1,000,000 or $10,000,000 so it might as well be $10,000,000.”

In other words, if he’s going to wait 20 years for his assets to be paid for by his tenants he might as well be waiting for a $10,000,000 pay day instead of just a $1,000,000 pay day.

AND – the incredibly rewarding part of his plan is not just that he is thinking big and challenging himself at a time in his life when most people are content to roam the golf course and play the slot machines at the casino – it’s that the properties he started buying a few years ago in pursuit of his $10 Million dollar debt dream have gone up in value substantially and are creating a VERY nice cash flow that helps him pay for his living costs today!

I’m also working hard to follow in my Dad’s footsteps. So when my Dad recently said to me “Julie, you and Dave are in way more debt than we were at your age” I know he is proud of what we’ve been able to achieve and is complimenting us on our progress!

I encourage everyone to take a lesson from my Dad and his $10,000,000 dream:

It’s NEVER too late to start making your dreams come true – so what’s holding you back? Plan your plan and starting working that plan today.
Make sure you know the difference between good debt and bad debt. Get rid of your bad debts quickly (or better yet, don’t take on any bad debts if you can!) and grow your good debts quickly yet carefully. It’s only good debt if someone else is paying it off for you!
If you have to wait 20 years … you might as well make the pay day a good one!

If you liked this article check out Julie’s 10 Simple Tips for Wealth Creation.

Published on August 27th, 2009

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“So what do we do? Anything. Something. So long as we just don’t sit there. If we screw it up, start over. Try something else. If we wait until we’ve satisfied all the uncertainties, it may be too late.” ~ Lee Iacocca

“So what do we do? Anything. Something. So long as we just don’t sit there. If we screw it up, start over. Try something else. If we wait until we’ve satisfied all the uncertainties, it may be too late.”
~ Lee Iacocca