Eagle Quest Properties

Does Any Of This Interest You?

Here’s a for sale by owner deal, a residential property we have found:

Asking Price:  $319,500.

- Total Income:  $41,800 minus 29% expense = $29,820 NOI

- Down Payment 25%:  $79,875

- Financing: $239,625 Variable Interest Rate 2.25% 25 Year Amortization

- $1,045/month X 12 = $12,540/year

- Cash flow: $29,820 – $12,540 = $17,280/year

- COCR (Cash on Cash Return): 22%

- DCR (Debt Coverage Ratio): 2.38

- Cap Rate: 9.33%

In addition to cash flow, we gain multiple profits such as the following:

• principal reduction as your tenants pay down your mortgage (the total principal paydown is $7,234 after Year 1)
• appreciation of the property (the properties in the area have appreciated by 30% over the last 3 year period, let’s be conservative to use 3%, the value of the property then goes up by $9,585 after Year 1)
• tax benefits from equity depreciation (building, mechanical systems, roofs, driveway, parking lot, …  your accountant can explain how this works).
• the power of leverage by using the bank’s money (we put 25% down to gain access to 100% of the profits from 100% of the property when property value goes up)
• equity investment (if we buy the property below market value, we obtained equity from day 1)

Based on the numbers shown, if we add up the cash flow, the principal paydown, the projected property appreciation: $17,280 + $7,234 + $9,585 = $34,099.  Then $34,099 / $79,875 = 43% ROI (return on investment in Year 1).  Does any of this interest you?

This deal has been posted to the Lynes’ Inner Circle, but we haven’t received a committed response yet.  Anyone interested to know more about this deal, please e-mail our acquisitions department.  Anyone interested to receive immediate e-mail notification of our potential deals, please sign up to the Lynes’ Inner Circle by e-mailing us.  Any referrals you can give us to help us grow our real estate community is forever appreciated.

Variable Rate Mortgages Can Save You Thousands!

We started paying attention to variable rates when we first heard Don Campbell talk about it at the A.C.R.E. workshop back in April of this year.  Don seems to prefer variable rate as he said 85% of the time you win by using variable rate.  His statement is based on the last 80 years track record.  To win 100% of the time, we presume you would have to lock in to fixed rate with perfect timing.  However, that would imply that you knew when the perfect timing was, and your bank doesn’t impose a penalty for locking in.  Mary Flynn also strategically uses variable rate mortgages for generating incredible COCR on her investments.  From 1990 to 2004, interest rates decreased to a low of 3.5% from a high of 12%.  Since 2004, rates moved higher to 6.25%, only to fall again the following year!  The fact is that the prime rate in Canada has maintained a 3% band for the past 9 years.  When inflation is low, we can maintain low interest rates; government encourage consumers to spend which, in turn, should stimulate the overall economy.  Julia is excited to see that she can save $30,000 interest even though she has to pay a few thousand dollar penalty.  Well, do your own homework and seek advise from qualified mortgage specialists.  Does a 4.25% five-year fixed rate look tantalizing?  How about the prevailing 2.25% variable rate?  Now is your opportunity to start contributing to your bottom line and not your bank’s.

Links for your research: mortgage rate history; Canadian mortgage trends:  fixed or variable?

“Our blessing to you all for abundant health and abundant wealth.  See you in 2010!”

- Daniel & Julia

Daniel Lynes and Julia Lee

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A little buzz of Obama’s trip to China.  According to the Financial Times, the American president should have told the Chinese that he wasn’t going to put the US into depression just to protect the value of China’s dollar holdings.  ‘We didn’t ask you to stock up all those dollars,’ as Obama might have put it. ‘It’s not our fault if the dollar goes down and you lose money.’  US economists think China should raise the value of the yuan. This would immediately lower the value, domestically, of the trillion(s?) worth of US-dollar assets China holds as reserves. It would also make Chinese products less competitive on the world market.  Americans built too many shopping malls; the Chinese built too many factories.  One consumes too much; one produces too much.  “You think you’ve got trouble,” Premier Hu Jintao might have replied to Mr. Obama. “Did you know that there are something like 200 million Chinese who still get by on as little as a dollar a day? Let’s face facts. You’re sitting there in Washington, comfortably talking about how much free health care and unemployment benefits to give the American people. We don’t have the time…or the money for those kinds of things. Too many Chinese people. They don’t earn enough to afford the kind of cradle-to-grave bribes you give your people. We have to keep them working; there’s no other way.  “Besides, we don’t quite see why we should pay for your mistakes. It wasn’t our economy that blew up. It wasn’t our financial industry that sold houses to people who couldn’t afford them. It wasn’t our consumers who spent more than they had and went too deeply into debt.   “It’s the debtor who’s supposed to pay, not the lender. We’re the lender!”  (who’s the all take?  Who’s the all give?  Who can decide?)

In the US, consumer spending is about 70% of the economy. In China, fixed capital formation is estimated to have made up 70% of China’s growth in 2008 and as much as 90% in the first half of this year.  Well, paying a little attention to the global economic factors that affect the flow of investment capital helps.

This Is It!

This month’s play day we chose to see “This Is It”.  It is a concert movie showing Michael Jackson’s final dress rehearsal scenes up to two days before his passing.  As this was our first time watching MJ on stage, we realized his performance was quite uniquely attractive with high impact and lots of energy.  We are truly amused by his moonwalk dancing, flexible movements,  vocal prodigy, electrifying charm and perfect choreography.   “Billie Jean” and his other favorite songs are previewed right in front of us on the big screen.  All the audiences including MJ fans are thrilled!  We are thrilled.  His 50 comeback concert shows had been planned for and sold out in a few hours, the King of Pop is now forever legendary!  Michael Jackson’s music, his love and grace lives on.  “This Is It” is for you to admire and cherish if you so desire.

Outrageous Advertising That’s Outrageously Successful

Buy

Most business owners overlook the importance of marketing as part of their business model.  As a real estate investor, you are in the marketing business as quoted by some gurus.  Simply, your phones won’t be ringing without a good marketing system, and you will eventually run out of leads.  Some methods are: Yellow Pages, Local Newspaper Classified Ads, Google Ad Words & Articles, Internet Lead Sites, Signs around town, direct mail to sellers, REIA meetings, Landlord meetings, Billboards, TV.  To achieve outrageous results, Julia is reading Bill Glazer’s Outrageous Advertising That’s Outrageously Successful. Bill has the unique ability to combine proven and effective direct response marketing strategies with OUTRAGEOUS Advertising that cuts-through-the-clutter, get’s noticed and gets results.  It is definitely a fun book to read.

Highest and Best Use

Here’s an old historical church, which has been converted to a thirteen unit apartment.  Doesn’t it sound outrageously creative?  It looks gorgeous!  We happened to drive by it while we were checking on some other buildings.  It is on a nice corner lot with plenty of parking.  It sold for $850,000 in 2005, yet, the buyer had to incur $1,100,000 financing to rehab and convert to residential units.  The after conversion cost ended to be $154,000/unit.  It is highly unlikely each unit would rent for $1,540/month, considering the 1% unit rule.  The verdict: the best use might not be at its highest economically.

The Numbers Behind The Curtains

A Hong Kong apartment set a record last month.  It was sold for $56.6 million, which works out to be $11,350/sqft – the highest price ever paid in China.  The buyer may well be bullish on China!  Besides the Cap rate, net operating income, cash on cash return and cash flow, we shouldn’t overlook the calculation on the cost per square foot.  Would you buy a 1500 sqft house instead of 2000 sqft house for the same price given both houses have 3 bedrooms and 2 bathrooms?  2ndly, renters would rather rent a 750 sqft unit vs 550 sqft unit given both have the same price in same area.  We come across a building for sale at 8.5% Cap, the cost/sqft is $180.  By comparison, another building at 7.7% Cap sells for $76/sqft in the same territory.  Be aware of replacement cost!  Not only that you can almost build a new building at $180/sqft (depending your marketplace), your insurance company can only pay you up to replacement cost if there’s a total loss on the building.

$1,350 Home Renovation Tax Credit for “Green” Do-It-Yourself

Is anyone doing home renovation for Christmas or New Year?  If yes, please NOTE the Federal Government of Canada is giving out 15% tax credit or up to $1,350 for work performed or goods acquired between Jan. 27, 2009 and Feb. 1, 2010.  Make your home more environmentally friendly, save money, save the environment, and save your health at the same time.

• Lighting: replace incandescent lights with compact fluorescent bulbs operate on a quarter of energy, yet last 10x longer
• Plumbing: using a low-flow toilet can save 15 litres of water per flush.  Inexpensive low-flow aerators are easy to install and cut water use by half or more
• Painting:  Many paints contain chemicals called Volatile Organic Compounds (VOCs) and other toxic components which evaporate and can hurt your indoor air quality and aggravate asthma and allergies. Many major paint manufacturers offer low or no-VOC paints to help you avoid those potential health hazards.
• Flooring: Bamboo is an environmentally friendly substitute for hardwood that provides much of the hardness and convenience of traditional wood flooring at about the same price. Look for a formaldehyde-free pre-finish and low formaldehyde-adhesive emissions. For carpets choose wool—it’s renewable, biodegradable, and often more durable than synthetics.
• Appliances: If your washing machine is more than 10 years old, you can save up to $100 a year by switching to a new, efficient model.

“Doing what you love is the cornerstone of having abundance in your life.“

- Wayne Dyer

Daniel Lynes and Julia Lee

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GOOD NEWS to our real estate investing friends and associates:  8-10% Cap rate buildings are now coming into the marketplace (Ontario, Canada).  Besides lining up the fundamentals, try to find motivated sellers!  We came across an owner who had overpaid for his apartment building by $300K two years ago and is now bleeding $150/unit negative cash flow owing to mismanagement.  Another owner wants to sell a Mixed Use building with 75% seller financing.  Needless to say, there’s more and more power of sales on residential houses you can pick up for a bargain.  If you are real estate savvy, you might want to start analyzing some deals and get ready to buy.

Qualifying a good neighborhood is far more important than the numbers.  We have viewed a condo for sale at $68,000, but the neighborhood is mostly infested with drug dealers, ladies of the night and druggies.  Talk to the cops on the street, they might tell you the whole story behind the scene if you ask nicely (although, officially they’re not allowed to say negative things about their beat).  Talk to the tenants of the building you want to buy.  Talk to the residents on the streets.  Talk to the cab drivers by giving them a tip.  Drive around different neighborhoods at different times, you would be amazed to see one block can be completely different from the next block.  One property owner spent over $500K to retrofit, renovate, convert from office use to residential units with high quality material, yet he can’t convert his tenant profile and the quality of the neighborhood!

The Lynes’ Inner Circle

We would like to say thank you to all who inquired about our real estate opportunities.  The more deals we analyze, the more time we spend with appointments, and power team members, the less time we can attend to individual inquiries.  It has been suggested we form an inner circle to serve our real estate community.  Initially, we want to set up an exclusive mailing list for readers to be notified about all the potential deals: Commercial and Residential.  We believe residential properties with opportunity for some minor upgrades for a quick flip can produce quick chunks of cash in good pockets of neighborhoods.  Our criteria: any one within our database who are interested in real estate investing in our residential and/or commercial projects.  Any questions or concerns, please drop us a line.

If you have decided to join us, we welcome you to send us a e-mail with subject line: “The Lynes’ Inner Circle”.

Is It A Setback?

Life is not getting easy for most of us in today’s turbulent economy.  We see friends being let go from their long term jobs.  We have financial constraints from overspending on real estate courses, unexpected vacancy on a property, Daniel’s unstable contracting work and the list goes on.  Part of us (the impatient side) want to quit, but Scott Scheel’s story inspires us to move on.  Scott incurred a $400,000 debt from failing in a business venture.  He couldn’t even feed his dog and he had to move back to his mom’s tiny basement suite.  (Be grateful to supportive parents when they are).  With his creative strategies, Scott bought his first 24 unit apartment building with 80% VTB, which cash flows $2,500/month.  He now owns and manages hundreds of millions of commercial properties.  Should we believe a set back is a set up for a come back?  If denial is not a choice, we can only work harder to get through our challenges and learn from our mistakes.  Going through a setback requires mental strength and taking actions, yet, you will see you will become a much stronger person at the end.  Cheers!

Free Seminar:  Risks in Real Estate, Kitchener, ON

For those of you in Ontario, the Gowlings law firm will be hosting a free seminar at the Holiday Inn, 30 Fairway Rd S, Kitchener, ON.  Free breakfast is served during registration at 7:30am.  Seminar starts at 8am and lasts until 9:30am.  The title is ‘Risks in Real Estate‘.  It will touch on the topics of Aboriginal Issues (the duty to consult and what it means to you), Official Plan Policy Changes (impact on development), and Paying the Rent (landlord and tenant points of view).  If you are going to attend, please register at Gowlings’ website.  For more information about the event, please contact Chantal Chaves by phone at 519-569-4558, or by email.

4 Full Days of Complete Immersion!

Here we are in the Rock & Roll City, Cleveland, OH attending the Commercial Property Academy as alumni.  Scott Scheel never ceases to amaze us by his genius creativity in adaptive reuse, financing in volatile market, advanced market analysis, reading trends, repair & rehabbing, condo conversions, mini-storage and much more!  Aside from the seminar world, Scott took us to the real world.  He took us on a bus tour to show us some of his properties, how he analyzes the upsides in real numbers, structures the deal, acquires the property, organizes phases, budgets, adaptive reuse strategies and how he makes the profit at the end of his project.  What an eye-opening experience!  If you are going to learn, learn from the best!

One intriguing scenario:  A gung ho young man, Ted bought a property in 2006 for $2,000,000 at a 7% Cap rate with 10% ($200,000) down and 10% ($200,000) seller financed note for 3 years at 5% interest with no payments.  He took out a bank loan of $1,600,000 with interest rate of 4.5% for 25 years with a 3 year term and monthly payment of $8,856 ($106,272 in annual debt service).  He has a DCR (debt coverage ratio) of 1.27 with his NOI (net operating income) of $135,000.  Over the next 3 years, Ted successfully raises his NOI to $155,000, so that he can refinance the property.   He hopes that the refinance will allow him to pay off the seller’s $200,000 note and pay off his acquisitions loan of $1,600,000.  Sadly, when Ted sits down with the loan officer to discuss his new loan in 2009, he is shocked to realize the interest rate has climbed to 8%.  He can only support a loan payment of $10,700/month or $128,400/year based on $155,000 NOI.  Thus, his property can only support a loan of $1,279,230.  After paying on his loan for 3 years his balance is still $1,488,092 and the balance with interest on his balloon to seller is $231,525.  This leaves him $440,387 short of being able to pay off his notes and keep the property.  Ted has already invested $200,000 up front and he has no where to go to raise the $440,387, to avoid foreclosure by the bank and pay off the seller.

Don’t be caught in the bubble!  Knowing when to get in and when to get out is critically important.  NEVER EVER OVERLEVERAGE on your properties!

The New Top 10 Towns

Don Campbell, president of the Real Estate Investment Network (REIN), has released the list of Alberta, BC and Ontario’s top investment towns for 2009 – 2014.  The list for Ontario is as follows:

1. Technology Triangle: Kitchener, Waterloo, Cambridge
2. Hamilton
3. Simcoe Shores:Barrie- Orillia
4. Brampton
5. Durham Region – Whitby, Pickering, and Ajax
6. Ottawa
7. Brantford
8. Toronto
9. Vaughan
10. Whitchurch-Stouffville

For further information about REIN Canada (named North America’s best REIA by Robert Allen), or to purchase the reports, please contact REIN at 1-888-824-7346, or by email.

A Powerful Use of Google Maps

Do you know that you can now view Google Maps at the street level while sitting in the comfort of your own home?  This is new to Canada and Europe.  The US has had this feature for a couple of years now, but due to privacy issues in Canada and Europe it took a while before everyone was happy with it.  It is called Google Street View and It is a great little tool.  Type in an address and drag the little man to your designated spot to view.  You can check for blighted lots, trashy streets, schools, shops, and anchors from your own desk.  You can view a rental building you want to rent from.  Try it, it is great!

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”

- Winston Churchill

Daniel Lynes and Julia Lee

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The real estate market seems to be making a recovery in Canada, the US and China.  But, just because the market seems to be making a recovery, don’t assume it will.  Always base your investment decisions on sound investing fundamentals.  Buying real estate for the income it produces always works well in any market condition.  When people look at buying real estate as a speculative investment (only making money if the value increases), and treat real estate like gambling is when they can get caught.  The commercial real estate market is still lagging the residential real estate market.  Currently, retail and mixed use buildings are difficult to find 65% LTV (Loan To Value) mortgages for.  You generally end up finding lower LTV’s.  Industrial and office buildings cannot get 65% LTV at all in today’s market.  The banks are quite uneasy about commercial mortgages currently, because of the instability in the market.  When your mortgage comes up for refinancing, you’ll find this out very quickly.  The BAD news: the RECESSION is not Over!  The GOOD news: you can still profit from buying the right cash-flowing property!

This month has been quite dramatic.  An investment firm in New Jersey is being foreclosed on for ten different properties, has entered into Chapter 11 for some of its subsidiaries, has been cited for numerous violations by the city, and the president of the company has been threatened with jail time.  One of these complexes, a 102 unit building for $6.2M worth of first and second mortgages, was only acquired two years ago.  With decisions made by banks to lend on properties like this, one can clearly see what the commercial mortgage market is looking like.  Mortgages were too easy to get a few years ago, and the cap rates were at all time lows…low enough that it was not economically possible to still carry the mortgage, solely using the income produced by the property. 

It’s NO Secret!

We have a few readers asking for advice on how to get started in real estate investing, where to buy, what type of properties to buy.  Our simple but not so simple answer is, "why not start with your education first?"  It’s no secret! (Sorry to say.)  Really.  Real estate is not a get rich quick game plan (it needs lots of hard work).  We used to believe if we spent money to hire a field trainer, he or she would select the best investment property for us.  Wrong!  Nobody cares more about you, but you!  It is critical to have a solid understanding of the marketplace, the cycles, the economic fundamentals, cash flow analysis and implementation of strategies.  Is real estate your true passion?  (We have encountered many fellow investors sidetrack to something else within a year.)  Then how much time are you going to spend to research the right market, find the deals, analyze the deals, do your due diligence, negotiate offers, buy and manage the property?  Benjamin Franklin once said, "investment in education pays the highest interest."  If you are going to buy hundreds of thousands of dollars worth of investment property, it would be wise to seek the proper education that suits your investment needs, be it fix and flip on houses for making chunks of cash or buying apartment buildings for cash flow.  Knowing your niche helps!

A "White List" Message to Our Readers

We have been advised by a couple of readers that they have not been able to receive our newsletters.  They found out the newsletters has gone to their spam filters!  To help ensure your continued receipt of this e-newsletter, please take a moment to white list our e-mail address (newsletter at eaglequestproperties dot com) to your address book, contacts, e-mail filters or safe list.  By adding our e-mail address, you are notifying your Internet Service Provider (ISP) that we are a known contact for mail you wish to receive. In so doing, you should find that the mail does not end up in your SPAM folder.  If you need assistance with this, please contact your ISP.  As always,THANK YOU for allowing us to stay connected with you.

A Swan Sighting

Here comes a beautiful snowy-white swan at Long Point, Ontario.  Julia feels excited to see swans for the first time while she’s learning how to kayak.  These hefty swans can fly when Daniel made a chase after them.  Lots of Ontarians love to own cottages in rural areas near water.  Some friends from church graciously invited us to their boat house.  Daniel has learned a good lesson that he shouldn’t carry his cell phone with him into the kayak.  He tried sitting down into the kayak, but lost his balance and plunged into the water instead!  (More than 500 contacts from his cell phone are now gone.)

A Dream Home Found

Further to Bill Bartmann’s "9 Steps to Achieve Any Goal" from the last issue, we echo Bill’s last step, "You have to envision your results before it happens."  He says to keep a picture of your dream object with you at all times and make it visible all over your house.  Well, no harm, no fault, we then take time to drive around high end neighborhoods and here is our dream home found as our goal motivator.  It oversees Lake Ontario, and a gorgeous view from atop the Niagara Escarpment.  A beautifully designed 3000 sqft home with 4 bedrooms & 2 baths in Hamilton, ON.  It happens to be up for sale for $600,000!  We are surprised to see the price as it would easily cost you more than $2 million in Vancouver.  We invite everyone to find their dream home sooner, not later.

What’s Coming Up?

The "All New" Commercial Property Academy by Scott Scheel in Cleveland, Ohio (US) on Sept. 29 – Oct. 2, 2009.  Scott says, "it takes one good deal to set you free."  A definite thumbs up!  Call 1-800-577-5848.  (Sorry for the short notice, but Cleveland is only 6 hours or less from Toronto, London, Hamilton, Detroit, Buffalo, Rochester, Pittsburgh, Cincinatti, Toledo, and Indianapolis.)

Get A.L.I.F.E. Toronto by Don Campbell & the REIN Team is coming to Toronto, Ontario (Canada) on October 3-4, 2009.  You get access to the brand new Top 10 Ontario Investment Towns Report.  Why not?

Malware and Viruses on Cellphones and PDA’s

As one of our readers found out this month, cellphones and PDA’s are not impervious to getting viruses and/or malware.  There’s not as much available for it, particularly if you’re using a Blackberry, iPhone, or a cellphone running a proprietary operating system.  However, if you’re running Symbian or Windows Mobile edition, you certainly have numerous viruses.  Our reader that got infected uses a Blackberry, so they’re still susceptible as well.

To help those of you that have been lulled into a false sense of security because you don’t think of it as a computer, we’ve found some antivirus and anti-malware software for your mobile devices this month.  For Symbian Series 60 and Windows Mobile Edition, there’s F-Secure.  For Windows Mobile Edition, there’s also Avira (I more highly recommend this one, than F-Secure, for Windows users, because it’s able to identify more Windows viruses than any other product.)  And finally, to round up everything else, there’s S-Mobile’s Anti Theft and Data Protection product.  It is available for Windows Mobile Edition, Symbian Series 60, BlackBerry, and Google Android.  For the iPhone, there’s only one virus scanner available, and you require a Mac to run it.  MacAfee is coming out with a virus scanner for it, but it’s still in beta.

"Your wealth can only increase to the degree of your financial literacy"

- July Ono

Daniel Lynes and Julia Lee

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Wow, it is getting hotter and more humid than Orlando in Southern Ontario.  Are you enjoying your summer yet?  The summer days are getting longer and we are navigating to a new focus for our specific region.  We have driven around town to identify decent neighborhoods with good anchors.  We have found the 12+ unit apartment buildings we like.  We talk to the tenants, talk to a few owners, and pull titles on some buildings that we have identified as being buildings we were interested in.  We have talked to a senior planner in the city to get a more solid picture of their budgets and plans.  We have requested traffic counts from the engineering department for a couple of different mixed use buildings we were looking at.  There’s one area we encountered where the whole neighborhood was bad, with undesirable tenants and unkempt yards.  Many American real estate gurus advocate buying properties unseen.  We suggest reconsidering that proposition.

We are grateful for a few of our readers interested in taking assignment deals from us.  Once again, we are here to support each other in our mutual goal to achieve financial freedom.  We are analyzing more and more potential deals.  Anyone who is interested to know more about our projects, please email our acquisitions department.

The Lynes’ Lion Safari Adventure

Daniel intentionally surprises Julia by taking her to the African Lion Safari on their anniversary.  Daniel drags Julia out of bed bright and early and tells Julia not to wear red clothes???  Driving through a few little towns and some farm fields, they arrive to a gate which reads, “Do not leave your windows open, or you will be eaten alive.”  Julia screams out in fear and refuses to enter the two storey tall gate.  Daniel drives through the second gate, laughing like a hyena.  A big sign says, “close your windows and lock your doors.”  Following the small winding trails, their car comes to a sudden halt near a big tree.  Three big baboons jump right up to the windshield and one of them started urinating and defecating on the side mirror.  At a blink, you can see a few dozen of them jumping out from some tree tops.  These animals are quite vicious fighters against each other.

Here comes a shocked driver with his rooftop luggage container popped open by the curious baboons.  (Wouldn’t they make great customs inspectors?)  The best part is the thrill you get from watching ten elephants forming a bee line by clinging their trunks to tails one after the other; heading down to the lake for their leisure swim.  Well, we will let you explore the ferocious looking lions and other animals yourself.

Daniel’s New Blog

Hey, Daniel is stepping out of his comfort zone by starting a blog.  He takes an article that captivates him and share his opinion with you.  It is only an opinion; you don’t need to agree with a single word he says.

You can read his blog entries by clicking on the archives, ordered by month, on the righthand column of our Website.  If you’re looking for an article on a particular date, you can also click on the day on the calendar object in the righthand column.

If you find something interesting, there is an option on the Website to comment on the particular article.  We’ll stay current with economic developments and industry news in the region, Canada, and the U.S.A. to give you a heads up for any new changes.  We cover off topics such as new regulations affecting the industry, LEED happenings, building industry, economics, retail industry, service industry, toxic materials, and other related issues affecting real estate investment and/or property management.

Bill Bartmann has a Gift For You

We thank Jack Canfield, who emailed us about his friend, Bill Bartmann.  Bill Bartmann is most famously known for going from flat broke to becoming a billionaire!  Bill left home and joined a traveling carnival when he was 14 years old.  He became a teenage alcoholic and gang member.  His life changed when he learned to think better of himself and realized his true potential.  He learned how to take his dreams and turn them into reality.  Ultimately, Bill received his GED and eventually graduated from law school.  He went on to build seven successful businesses in seven different industries.

Let’s listen to a billionaire’s “9 Steps to Achieve any Goal.”

The One Little Golden Goose

Julia feels fortunate to have started using credit cards at very early stages of her working career.  At the time, a co-worker graciously introduced her to use dividend credit cards; Julia ended up getting paid dividends annually.  The best side effect was she had built up her credit score, unknowingly.  When you have a good credit score, the credit card companies will mail out extremely low interest rate offers to you.  Would you like to make use of credit cards like a small golden goose?  Some benefits are huge: build up credit line, increase credit score, get paid up to 1% cash back, accumulate air miles to fly free, and get free groceries if you use the President’s Choice credit card.  Needless to say, some investors use it to finance fix & flip single family homes.  Just one small way to build wealth.

A Business Plan is The Start

We are finally writing up our business plan.  Our procrastination!  The real value of creating a business plan lies in the process of researching and thinking about your business in a systematic way.  The act of planning helps you to think through your ideas thoroughly to avoid costly, perhaps disastrous mistakes later.  The most time consuming is in the research part.  The two great helpful sites we have found for drafting a business plan are: Industry Canada and the US Small Business Administration.

The Power of Leverage – Your House

Assets are something that put money into your pocket vs Liabilities which are something that take money out of your pocket.  Is your house an asset or liability?  The answer is No and Yes.  Most of us were brought up to believe that our house is an asset.  Actually, it’s the equity in the house that is the asset portion.  The equity belongs to you.  If you carry a mortgage on your house, the property is technically the bank’s asset.  Yes, your house doesn’t become a true asset until you sell your house and realize the capital gains (convert the equity into cash).  If you understand that, the next question is why not leverage the value of the equity in your house and put it into higher yielding investments?

Most banks currently loan up to 75% of the equity (HELOC) in your house at a rate of around 4%.  Some stock savvy investors then put this money into high yielding funds in the stock market.  Some novice real estate investors would prefer to buy an apartment building to create passive income.  eg. If you own a mortgage free house worth $650,000 in Vancouver, you can use a $400,000 HELOC to buy a decent 8 unit apartment building in Southern Ontario.  If you can rent each unit for $700, based on a 45% expense ratio, you realize a net rental income of $385 x 8=$3,080/month.  After paying a HELOC interest only payment of $1,333/month, you are putting a net passive income of $1,747 into your pocket every month.  Would you see how this would benefit you by turning your house into a money making machine?

“Life is not easy for any of us.  But what of that?  We must have perseverance and, above all, confidence in ourselves.  We must believe that we are gifted for something, and that this something, at whatever cost, must be attained.”

- Madame Marie Curie

Daniel Lynes and Julia Lee

We are heading into the third quarter of 2009, and already this year’s looking considerably different from 2008.  We’ve had a large dip from the peak of the last decade’s housing bubble, and last month we had some up tempo buying in the low end of the housing market in Vancouver.  We’ve seen a lot of market insiders suggesting that we’ve ridden out the bumps in the market place and that we’re going to see a very gradual increase in prices until 2010, when the market is supposed to go back to normal.  Based on what we’ve seen for prices on the historical charts (from BC Real Estate Association’s own data), we believe we’re heading for another price correction in the market place that will be happening sometime between September, 2009 and the end of 2010.  After that, we believe there’ll be a bit of a flattening out before the market returns to normal again in Q4 2010 to Q3 2011.  We’re starting to see price corrections in the commercial real estate market now, too.  Apartment buildings that were selling for 6-7% cap rates in Kitchener, Cambridge, Hamilton are now starting to sell for 8-12% cap rates.  Yippee, it is now a better time to shop for apartment buildings!  As the market unfolds in Southern Ontario and Vancouver, we will be sure to keep you updated.

Hold is Gold

How can you sell your property in a declining market?  Our answer would be don’t.  Hold is gold.  How do we know that?  Been there, done that.  We have tested the market by hiring a top 1% Realtor to sell a condo for us.  After doing our homework by researching the sold comparables, we decided to discount our listing price by 15% from the average sold price and 10% from similar competition listings.  That creates a competitive edge.  Even if there might not be a feeding frenzy, there should be a couple of offers within the first month.  The verdict is no offers despite the high number of showings.  We kind of know the market to expect a worst case scenario and our exit strategy is only to try it for a month or two; our Realtor understands and agrees to that.

The 1st month of your listing is the most critical stage to attract buyers.  If you price it right, you would normally end up with multiple offers within the 1st month of the sale.  Otherwise, your property can be on the market for months as we have seen on a recently sold unit which takes 8 months.  In today’s hot buyers market, you need to plan DOUBLE EXIT strategies: use a competitive price as listing price yet sticking to your price point to sell; if it doesn’t sell, you either use it for yourself or rent it out until the market turns around.  On the other hand, if you are buying in today’s market, you don’t necessarily wait for the market to reach the lowest because you never know when the market hits the bottom.  Instead, you buy when the market hits your price point.  Some smart buyers are monitoring their dream property listings every week.  When their price point is met, they make their move.

May “Faith” Inspire Faith in Us All

We thank Aggie Chan, one of our readers, who shares an amazing inspiration with us, from Faith, the dog!  Faith was born with two legs on Christmas Eve in 2002.  His mother didn’t want him.  His first owner didn’t think that he could survive and thought of putting Faith to sleep.  But then, his present owner, Jude Stringfellow, met him and wanted to take care of him.  She determined to teach and train this little dog to walk by himself.  She named him Faith.  In the beginning, she put Faith on a surfboard to let him feel the movement.  Later she used peanut butter on a spoon as a lure for him for standing up and jumping around.  Miraculously, after 6 months, Faith learned to balance on his hind legs and to jump to move forward.  Not only that, Faith could now walk like a human being.  Read more about Faith, and see more pictures of him.

Let us be thankful for what we have.  When we wake up every morning, It is a blessing to all of us to be able to open up our eyes to see the blue sky, to walk to the garden to touch and smell some beautiful rose blossoms.  Faith has been trained to get out of his comfort zone and now he’s touring around the world to inspire the human race.  May each one of you be inspired by Faith to get out of your comfort zone to live your dream: your life – your freedom. 

A Big Celebration in a Small Town

Happy 142nd birthday to Canada!  We, Canadians, take this day to sit back and reflect on this wonderful country that offer us the ability to live a safe and harmonious life like nowhere else on planet earth.  Likewise, happy birthday to American’s Independence Day to some of our American readers!  We have a blastful of festivities from dawn to dusk in Caledonia.  You can enjoy a complimentary pancake & sausage breakfast at 8 am, watch the parade, participate in a craft show, attend a Citizenship Ceremony, take your kids to see the children’s group performers and the Steven Young memorial duck race.  The Tianna Woods Band is one of the performances we enjoy the most.  Tianna Woods is such a multi-talented high energy singer with a vibrant voice almost as good as Celine Dion.  Wouldn’t you believe you can also enjoy a 15-minute firework extravaganza in a small little town of  9000 people?  For that, we have to thank all the sponsoring vendors and volunteers for their generosity and time.

Application With the Highest and Best Use

After spending much time, money and energy learning about real estate investing, it is time to apply the knowledge and take massive action.  First, we set a short term goal to acquire our first 20+ unit apartment building with a deadline.  Our project can be in any towns in Southern Ontario, which has qualified for 9 out of the 12 economic fundamentals set up by Don Campbell.  We analyze any properties with the highest potential for growth and increased property value besides cash flow.  For generating leads, we run marketing campaigns.

What is the highest and best use of your time, talent, and skillset?   Your most valuable resource is going to be your time.  The beauty is that you can leverage other people’s expertise and time to maximize your effort to do a project for your business.  To operate a successful real estate investing business, you need to set up a power team.  A power team would have: commercial real estate attorney, accountant, inspector, tradespeople, realtors, appraiser, architect, title company, insurance broker, mortgage broker and most importantly, a good property management company or building manager.   Realize that no man or woman is an island, and that the success or failure of your efforts in real estate is going to largely depend on the quality of the relationships that  you create.

Search Engine Ranking of Your Website

The Internet plays a large part in our future.  How well are you marketing your website?  As a property owner, you’re probably always wondering just how good that property manager is that’s been around for 5 years.  If a property manager’s been around for 5 years, and they have a web site, chances are numerous landlords and/or renters have reviewed them and rated them on the Internet.  The more pages there are that link back to their website, the more favorable they rank on the Google, Bing (formerly MSN or Live), and Yahoo search results.  Just an aside, Yahoo just got purchased by Microsoft.  Did you know that there’s a barometer you can use to measure just how popular any given website is?

When Google was first starting out, they came up with a barometer index to give a relative measurement of how popular given websites were.  This barometer index is one of the methods they use to determine how close to the top of search results your website should come.  Nowadays, they use more than just this ‘page rank’ to determine it, but back when they were first starting out, it was the main yard stick.  The official name is the ‘Google PageRank‘ index.  If you’d like to see the Google PageRank of each website you visit, the easiest way to do it, is to install the Google Toolbar (the link should work for both Firefox and Internet Explorer users).

The idea of Google PageRank, is that when your website first hits the Internet, it starts out with a Google PageRank of ‘NA’, or Not Available.  From there it starts at ‘0′, and works its way all the way up to 10, with 10 being the most popular website on the Internet (it’s not Google).  So, there you have it…try it on your own website as well, to see how well your Internet marketing efforts are working!  You may also consider Realtors’ PageRank before you hire them to showcase your property for sale.

“To begin is the most important part of any quest, and by far, the most courageous.”

- Plato

Daniel Lynes and Julia Lee

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We are in a recession.  Maybe it will become a greater recession.  We don’t know.  But it is a time of credit contraction instead of credit expansion.  A $5 shirt?  A $10 pair of shorts?  That is a sign of deflation.  A few months ago, these same clothes may have had designer brands on them – Diesel or Polo Ralph Lauren, perhaps.  Excess capacity was created by excess credit.  That is what happens in an expansion.  Manufacturers borrow to increase capacity, so they can sell more products to credit-addled consumers.  Then the excess capacity dooms them.  They put out too many goods and too many services.  When demand falls along with incomes and housing, prices fall too.  A couple of our readers share that their line of credit (LOC) has been revoked by their bank, because they have not used it for many years.  If you are relying on your LOC as a contingency fund, be aware and be prepared.  Ideally, the purpose of a LOC is to buy income producing properties that create positive passive income every month.

Recap to Apartment Investing

Further to the last issue, we are so passionate about apartment investing that we can’t help to share a few more jewels with you.

PHYSICAL ANALYSIS: In-suite conditions must be livable, clean and functional with a good efficient layout. Common areas, roof, mechanicals; security is key as everyone wants to be safe while they are sleeping.

FINANCIAL ANALYSIS: Check lease provisions. Ensure terms are properly enforced with background checks. Historical data should have three years of operating history; a major upturn just before being placed on the market should be a concern. Almost everyone lies about their utility costs, so ask for the utility bills.

TIMING VS LOCATION: If you buy the property right in the wrong location, you can still get hurt.  The physical location will help us read the demographics.

TIMING VS VALUE: If you buy cheap enough, if the market tanks I will still be okay?  Not really true.  If the market takes a dive, you could have a serious challenge getting your project to fill.

The key is that if you are cashflowing in a property you don’t have to sell even if the market is down.  Therefore, you have to buy right, at the right time, in the right location with the RIGHT TERMS.

The Passing of a Legend

With the passing of Michael Jackson, the undisputed King of Pop Music, we are reminded of our extreme mortality. Tomorrow is only a hope; today is a gift, called the present. Why don’t we live life to the fullest with a purpose? Michael was truly living his purpose even when he was only 5 years old.  Sadly, he passed away at 50 from a heart attack on June 25, 2009 in Los Angeles.  Our prayers are with his family in this sad time, for them.

Let Us Help You Help Us

We have been actively looking for 20+ unit apartment buildings in Southern Ontario.  If you have come across apartment owners who want to sell and you are not in the market to buy, please call us at 1-877-978-9788 or e-mail Daniel.  We will reward you according to the size of the deal, that we close.

If you want to share any of your insights, market knowledge and your resources, we would always appreciate it.

Master Your Invisible Power

We feel fortunate to have attended the world-famous seminar “The Millionaire Mind Intensive” by T. Harv Eker’s team.  To master the inner game of wealth, you should read Harv’s book: Secrets of the Millionaire Mind.

Each of us has a personal money and success blueprint already engrained in our subconscious mind.  It is this blueprint that is running our financial life. Yet, we might not know how to reset it for success.  Our comfort zone is in direct proportion to our income zone.  We should have an active income as well as a passive stream of income: real estate, storage, Internet marketing, etc.  Millionaires are good money managers.  Yes, we are excited to start using an excellent and easy money management system.  You can too!

There was one exercise that made some people in the audience and Julia cry.  In the end, Julia was taught to let go of her pain from childhood experiences owing to her mother’s extreme dominating and abusive behaviors.  People who have to be right are usually the most miserable.  Research shows that 47% of all cancer is related to unresolved anger.  The seminar trainer, Doug Nelson, says it best:  “everyone does their best they can at times.  We don’t necessarily forget, but we do necessarily forgive”.

If you are ready to experience a life-changing journey yourself, please call or e-mail us as we have received some free tickets from the event.

Managing Your Credit Score

A credit score is a number that lenders use to help them decide “if I give this person a loan or credit card, how likely is it that I’ll be paid back on time?”  It essentially dictates your finances.  Most of us don’t know this number until we apply for a loan.  Julia has met a lady, who got declined for a mortgage because she had been paying everything in cash and had not established a credit history in her life.

FIND OUT WHERE YOU STAND: Request a copy of your report from the three major credit reporting agencies (CRAs):  Equifax, TransUnion, Experian.

FIGURE OUT THE FACTS: One late payment on your Visa can stay on your report for up to seven years.  If you find any discrepancies, you need to fill out a dispute form and send it back to the CRA by registered mail.  Fortunately, the law states any item not being verified as accurate must be removed from your report.

CLEAN UP: Set up a plan to eliminate existing debts.  Clearing up debt can take time. Remember that you have the right to add remarks to your file. Take the opportunity to defend yourself and point out the good areas of your report, such as highlighting a loan or a mortgage that was paid on schedule.

PROVE RELIABILITY: Taking out a loan that you don’t need and then paying it back in a short span of time can prove that you are a good credit risk.

TOO FEW OR TOO MANY: The ideal position is to have a few lines of credit, never more than you could afford to pay off on your income, and with none of them maxed out.  Cancel old cards that you never use.  Don’t ever max out one giant line of credit by putting your entire debt on it.  This is akin to killing the goose that laid the golden egg.

“Holding on to anger and resentment is like drinking poison and expecting someone else to die.”

- Unknown

Daniel Lynes and Julia Lee Lynes

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Volume #2 Issue #4

2009

The Deal That Wasn’t To Be
We have been looking at a property in earnest in Hamilton lately.  However, after spending some time analyzing it, running the numbers, and weighing all the possible options we have decided not to go ahead with it.  Everything looked great on paper, but we felt that there was just too much potential for the numbers to become very skewed, because of the age of the building, and the lack of existing services.  On another note, we are constantly pursuing other properties that fit our profile.  If anyone is open to joint venture possibilities, please feel free to email our Acquisitions Department.

Tweeting on Twitter
If you haven’t heard about Twitter yet, perhaps you should.  It’s a great tool for both propelling your online presence to the next level, and to hobknob with some of the best minds in your areas of interest.  Since joining Twitter, we’ve found a wealth of information on real estate and search engine optimization (SEO) that we wouldn’t otherwise have known about.  Before you jump onto Twitter, you might want to learn one simple rule of etiquette.  If you like something someone said, and you want other people to know about it, you should ‘retweet’ it.  In layman’s parlance, that means give credit to the original author.  You do this by preceding the quote with ‘RT @twittername’, where ‘twittername’ is the twitter username of the person you’re quoting.  ‘RT’ means ‘retweet’.  If you wish to reply to someone, merely type in ‘@twittername Whatever your response is’.  If you wish to send them a private message (a direct message in twitterspeak), type in ‘D @twittername Whatever your direct message is’.  If you would like to join Daniel on Twitter, you can follow him at @dlynes.  Happy tweeting!

“Be faithful in small things because it is in them that your strength lies.”

Daniel Lynes and Julia Lee Lynes

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