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Jun 19 2016

A Tale of Two Cities – An Investor's Story

Amina

This story takes place in modern day times! The story is about a real estate investor who has to decide between two properties. One property is in the bustling and over-priced city of Toronto and the other property is in a smaller community to the west known as Kitchener.

The Toronto property is in Guildwood – a sought after area of Scarborough but backs on to a Go Train track. The home is beautiful and offers a main floor with the potential for a basement apartment but it would need renovations to make it happen. The price is $749,000.

The property has been sitting on the market for 31 days in a sought after area because of it’s close proximity to the train tracks. What happens in a few years when my client wants to sell this property – will he have the same issues as the current owner? Even in a seller’s market? Probably!

The Kitchener property is in a sought after area with schools and shopping nearby and also has the potential to add a basement suite but the separate entrance would have to be built-in. The asking price is $325,000.

Seems like a no-brainer right? But let’s look at the numbers to see what makes more sense!

I’ll base both scenario’s on the same interest rate of 5 year fixed of 2.59% with 30 year amortization. However with the Toronto property he would require a hefty 25% down in order to make the debt ratios work and with Kitchener only 20% down.

Toronto Property:

Purchase Price $749,000
Down payment 25% $187,250
Rate 2.59%
Amortization 30 years
Term 3 years

Monthly Mortgage $2,241.89
Property Taxes $350
Rental Income $1,850 + Utilities

Net Rental Income -$741.89
In order to give him the positive cash flow he needed he would need to finish the basement for another $30,000 – $50,000 and be able to rent it out for $950-$1,000 which would give him approx. $258 in cash flow.

Pros and Cons of this property:
• PRO -Close to highways
• PRO -Good area
• PRO- Higher appreciation
• CON -Backs onto Go Train
• CON-Needs to complete basement in order to cash flow
• CON -Needs 25% down to purchase this property – a hefty $187,250

Kitchener Property:

Purchase Price $325,000
Down payment 20% $65,000
Rate 2.59%
Amortization 30 years
Term 3 years

Monthly Mortgage $1,037.64
Property Taxes $275
Rental Income $1,450 + Utilities

Net Rental Income $138

The basement is finished – he just needs to build a separate access, which will cost approx.. $20,000 and he can then rent out the basement for an additional $900 in that area, which means he cash flows $1,037.64 – exactly what his mortgage is – he doubles his mortgage payment!

Pros and Cons of this property:
• PRO -He can easily build the access for 2nd basement suite
• PRO -He can cash flow even without adding the 2nd suite
• CON -Lower Appreciation
• PRO -Lower Downpayment needed
• PRO -Ability to Purchase another property with savings from down payment

With the Toronto property in ordinary circumstances he would have no issues renting it out but there is the train track to consider and not every tenant would be willing to live near a train trace, even if he was.

The Kitchener property although in a nice area, would not appreciate as much as the Toronto property. However with this property he would only be required to put 20% down, he would have twice the rental income (once he put the entrance to the finished basement in) and he would have enough money left over (in his budget) to purchase a second property within a few months.

When you are out there looking at properties I know you are doing a full analysis but also consider the pros and cons of the property itself. Look at it with the eyes of your potential tenant!

Happy shopping and I hope if you come across a Tale of Two Cities of your own, you will share it with us! I would be interested to know how you made the decision to purchase your rental property – was it as difficult for you as it was for my client? Please write and share your story!

I can be reached at amina@aminas-ms.ca or 416 697-5443.
To Your Wealth! Amina

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Feb 13 2015

Personal Business Planning

When you hear the term ‘Business Plan’, you may immediately picture the intense moment of pitching an idea to an investor, hoping to secure some funding for your growing business. In this moment, the investors are going to want to see all of your numbers; sales, equity offer, profit margins etc. All of which would be in a professionally presented ‘Business Plan’. What I am introducing here is a different kind of business planning that is created for you, by you. A Personal Business Plan.

Why, (you may be wondering) do you need a ‘Personal’ Business plan? I propose that writing a vision for your business beyond a mission statement (as well as creating a system to work though strategies for growth), will help keep you aligned to your ‘big’ picture of your business and it’s potential future. Whether you will need partners in the future – planning your business with a personal approach can help you reach those goals by laying a foundation that is specifically aligned to your skills, abilities and personal preferences in business (Note: this isn’t the plan that you would share with the bank. This one is just for you).

A ‘Personal Business Plan’ (from my perspective) still dives into the nuts and bolts of business. Covering all of the basics from defining your customer avatar to building a brand to planning a promotion. The difference is that the plans you make relate to who you are as a person and what you want for your future. Here is what I mean:

Within ‘Personal Business Plans’, I encourage you to ask yourself questions that only you can answer; instead of thinking about what someone else may think is ‘right’. These questions will help you identify the lifestyle and purpose around your business, which will inevitably increase personal satisfaction and intrinsic motivation in the long run. Using ‘Defining Customer Avatar’ as an example. Instead of just asking: ‘Who has the most money to spend in this category?’ (Which I still think you need to ask), I suggest thinking about how you personally relate and whom you want to work with. For example: If part of your life experience has included raising children in a rural community with no access to recreation programs – you would probably understand that particular population on a level that cannot be identified on paper. Lifestyle wise, if you are in a season of your life where you want to be traveling, this is where you would ask yourself ‘Will my ideal client/avatar be interested in attending VIP event across the country?’ .If they aren’t – are you willing to sacrifice that need of yours? Or do you need too? Only you know.

Asking questions is part of the process; the other aspect of Personal Business Planning is to reference your future vision with daily choices. When you craft your plans in a way that includes your ultimate goals it can steer you in a direction that you are going to be happy with in the long run. An investor may not know that you see yourself living in on a beach in Hawaii or helping to raise your grandchildren in how ever many years.

Personal Business Planning is a strategy that I have seen many successful female entrepreneurs embrace and I encourage you to try it out and see if it can guide you to the next stage of your growing business.

Tamara is the owner and designer at ‘Your Pretty Pages’ where she provides templates, planners, guides and resources for creative entrepreneurs to get and stay organized. To support your successful personal business planning, Tamara has just released two savings bundles of templates in her shop found here: https://www.etsy.com/shop/yourprettypages

Nov 19 2014

HOW TO REBUILD YOUR CREDIT AFTER IT HAS BEEN DAMAGED!

For the last few months I have been working with numerous other Rent-to-Own companies to help them qualify either potential tenant/buyers and/or potential investors.

One problem I have been coming across specifically is the lack of credit. Too much credit can cause just as many problems as no credit or lack of credit.

Some people are in the enviable position of paying for every purchase with cash. This is great – except for when it comes to establishing credit. The strength of your credit history determines if you qualify for a car loan, mortgage or even credit card and also at what interest rate you will pay.

Lenders will use credit reports and credit scores to quickly assess an applicant’s creditworthiness and to check their credit history.

For new or young borrowers or even borrowers who suffered damage to their credit and are now scared to have any credit, however, this poses a serious catch-22: How do you qualify for credit without a credit history, and how do you rebuild a credit history after it has been damaged.

Step 1 – CHECK YOUR CREDIT RATING
Credit bureaus will open a legitimate credit file in your name when a creditor (bank, credit card company or other lender) reports that you’ve had an active credit account for at least six months. All borrowers, not just first-timers, are encouraged to check their credit reports at least once a year and scan them for errors. Mistakes can damage your credit score for years — up to 5 years for negative information like late loan payments and 7 years for a serious default like bankruptcy. If you find a mistake, contact the credit reporting agencies immediately and have the mistakes corrected.

Step 2 – PAY YOUR BILLS ON TIME
Whether it is a credit card, utility bill or any other type of bill, get into the habit of paying your bills on time. While your utility bills are not recorded on your credit bureau, lack of payment that goes to collections, is recorded and that can affect your credit score and your ability to get a good interest rate on a credit card.

Step 3 – GET A CO-SIGNER
Most lenders will allow someone with an established credit history to co-sign the credit application with you. This can include your parents, older siblings or family friend. As with any financial transaction, you should be careful when co-signing for credit. First of all, make sure that your co-signer actually has a good credit history. If your older brother tends to exaggerate, don’t take his word for it. In the eyes of the lender, you are only as good as your brother’s credit score, so ensure that you see it in writing and you can only get that through their credit bureau report.

The most important thing to understand is that co-signing for credit means that both parties are now responsible for its timely repayment. If your dad co-signs your credit card application and you run up hundreds of dollars in late payment fees, both of your credit scores are going to take a hit.

Step 4 – START WITH A SECURED CREDIT CARD
Secured credit cards are a great way to establish credit or even rebuild your credit, when it has taken a hit. Unlike regular credit cards, secured credit cards are tied to collateral in your bank account. In other words, your credit limit equals your checking account balance or another amount required by the card company — although payments for purchases made with this card won’t be drawn from your bank account. If you have $500 in the bank, then your credit limit for the card is $500. If you try to charge more than $500 on the secured card, the transaction simply won’t go through.

Be careful of the distinction between secured credit cards and prepaid credit cards. Prepaid cards are not really credit cards. They’re actually debit cards in disguise. Because it’s not real credit, your activity on your prepaid card won’t be reported to the credit bureaus.

In addition, some secured credit cards carry higher interest rates and fees but with good history, most lenders will let you graduate to an unsecured credit card, which will increase your credit limit and help you establish a better credit rating.

Step 5 – APPLY FOR A SMALL LOAN
A loan is also known as installment credit, since you pay back the loan, with interest, in set monthly installments. A mortgage or a car loan is a good example of installment credit. If you want to make one of these major purchases someday, it’s a good idea to show lenders that you have some positive experience with installment credit.

Student loans are just one type of installment loan. Banks and other lenders allow you to take out small loans for just about anything: a used car, an appliance, a vacation or even a personal loan.

Where most people get in trouble is when they cannot make their monthly installment repayments, which in some cases leads to bankruptcy. It is important to remember to only borrow what you can repay.

Step 6 – GET A GOOD JOB!
If you apply for a mortgage, salary history is one of the most important considerations that lenders will make. Usually, you’ll be asked to supply income tax forms for the past two years and current pay stubs as proof of your earnings.

When lenders examine a borrower’s employment history, they’re looking for stability. If you’ve been at the same job for years and your salary has continually risen, then you’re a good prospect for credit. If you constantly jump from job to job and your salary has been erratic, that puts you in a less desirable position for lenders.

Your employment history is also a good indication of your capacity to repay credit. A person with a low average annual salary wouldn’t have the same capacity to repay a large credit card balance than someone with a higher salary.

Step 7 – DON’T MESS UP!
One of the best ways to build good credit over the long term is to avoid the small and large mistakes that can stain your credit report for years.

Pay all of your bills, loan installments and credit card payments on time. Not only will you pay a fortune in late fees, as most credit cards charge over $30 for late payments – but lenders will raise your interest rates for future credit.

Avoid bankruptcy at all costs; it’s the credit equivalent of death. Bankruptcies will mar your credit report for 7 years. Keep in mind that letting a debt go into collections is just as damaging as it also stays on your credit report for 7 years.

Establishing your credit can be done with due diligence and also making regular payments on time. Rebuilding your credit can also be done after it has been damaged – make sure to take great care and seek advice if you are unsure about the necessary steps. It will be time well spent!

The following links will assist you with establishing your credit.
There are two Credit Reporting Agencies:
-Equifax Canada – www.equifax.ca
-TransUnion – http://www.transunion.ca

You can read more about it here at Office of Consumer Affairs – Government Agency http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02178.html

Amina Mohamed is a Mortgage Agent and Real Estate Investor who believes in helping other investors look at all of their options when it comes to finding a mortgage. She writes a weekly blog on her own website and for other investors as well and is keen on helping people fix their credit issues so that they too can become homeowners and possible real estate investors. Amina can be reached through her website at https://www.aminasmortgageservices.ca or on Facebook here or on Twitter here

Dec 29 2013

Taking The Leap Into The World Of Business?

Are you thinking of starting your business? If so, join the millions of people who at one point or the other in their lives have considered whether or not to start a business. The thought of having a successful business, being your boss or doing something you are really passionate about sounds very appealing, right? And these, amongst other reasons are why people leave their jobs and decide to start their own thing. The familiar question is; do I take the leap? And if so, when and how do I take the leap?

One of the greatest challenges for some people in starting a business is the challenge of leaving the security of a paid job. For some it is the issue of choosing the right idea to turn into a successful business. Well, these two challenges can be easily overcome.

First and foremost before venturing into you own business, undertake some research on how viable the business idea(s) is. Are there potential customers? And what is the potential ROI (return on investment)? I’m sure you’d agree with me that it is not very wise to invest your time and money into a business that doesn’t seem viable on paper, or give up your job to start a business based on a whim. However, many people do.

Secondly, an approach to starting a business without giving up your Job is to actually undertake a pilot while still working. And believe me, doing this will require the skill of being able to multitask. To undertake a pilot means doing some test marketing in order to test the market or gauge how responsive people are to your product /service. This will enable you make better decisions on the idea and what to do next. I’ve got to warn you though that this could prove to be hard work juggling a business with your fulltime job, most especially if you have a family to take care of. It requires time management, focus, perseverance and more. These are only some of the requirements you will need both in the short and long run if you want to have your own business. So, as opposed to immediately taking a leap, consider taking long steady strides.

Having looked at your business idea and undertaken some research, you may decide the business idea is viable and you’d like to take that leap into the business world. There are a few basic things that you’d need to do in order to take off. I very much believe in building solid foundations that will allow one to build much taller and weatherproof buildings. And to build a solid foundation you need to get either some business advice or coaching and write a plan.

The word ‘Business Plan’ seems to be such a dreaded word, many people think of it as long-winded and unnecessary. However, I promise you that it is one thing that will need doing either now or later for a more successful business, better now than later I say. Planning and building the concept in your head is not enough, pen it down on paper. The saying goes, “Write the vision and make it plain, that those who is it may run with it” and that includes you, your potential business partner or financiers. Writing the plan takes you through the process of developing and refining your idea, it is also very much needed if you plan on raising capital externally. Please note that it is not enough to just write a business plan for the intention of raising capital, you should also use it as a blueprint for successfully managing your business.

Another challenge often faced in starting a business is Capital. Sometimes, the bigger the idea, the bigger the capital required. Don’t let this hinder you if raising capital seems to be your own challenge. Instead, think out-of-the box in identifying ways to raise the capital required. Look for avenues to cut back on the initial capital required, some ways of cutting back on capital includes; offering trade by batter or buying second-hand instead of new.

The following options are available to you and all except for personal savings will require a sound Business Plan; Personal savings, Friends & Family, Bank loan, Government Initiatives, Private Investors and Venture Capitalists.

Having researched the idea, written a ‘Plan’ and raised the required finance, you are all set to take off. Nothing Ventured, Nothing Gained. Take the leap if you feel very strongly about it, but plan and prepare for it.

Please refer to past articles on fundamentals such as ‘Research’, ‘Writing a Business Plan’ and ‘Raising Finance’ that will help you prepare for starting your business. http://www.oliveblue.com/category/blog/

Yvonne is a High Performance Consultant, Coach and Speaker focused on working with Individuals, Entrepreneurs and Organisations to execute and achieve their goals. She can be reached at: www.facebook.com/oliveblueinc,www.twitter.com/oliveblueinc

Oct 31 2013

How Do You Raise Finance for your Business?

You have done the required research, and written the business plan, now how do raise the funds required to kick-off your business? Assuming you carried an initial research, you should have identified some potential sources of finances. If not, you can do this research easily on the internet by using the right keywords, checking what banks have to offer, and visiting your local business centres and libraries.

Also, while writing your business plan, you should have determined how much you need and what you need the money for, this will be important information when approaching potential sources. When raising finance from external sources, it is often helpful to show that you have personally raised or invested some money towards the business. This shows that you are willing to take a personal risk yourself, making financiers more willing to want to take the risk with you.

Sources of finance can vary, the easiest and most stress-free source is your savings. No one asks you questions, and you are not accountable to anyone but yourself. This is assuming you have saved some money before venturing out to set up your business. If you haven’t, don’t lose hope, there are still other means though not as easy.

A popular source that first comes to the mind of most people first is the bank. Should you choose this line or an external funding organisation, it is imperative that your business plan is sound. Sound, meaning it is well written, clearly defines the business idea, demonstrates potential, and return on investment. Simply put, your business plan is your written sales pitch in convincing an investor to lend you money. More important is having a relationship with the bank, having a guarantor who can stand for you, or assets as collateral. You can either apply for a loan or request an overdraft. Ensure you compare the interest rates and repayment terms offered by the various banks. Should you to consider borrowing money against your home, seriously consider this option and weigh the odds, as this could be risky.

You also have the Private Investors and Venture Capitalists. This is where things get more intricate and not as straightforward as getting a loan from the banks. However, Private Investors are willing to invest in more risky ventures but most times in return for shares in your company.

Venture capital funds are funds put up by investment trusts, pension funds, banks, insurance companies, private individuals and industrial corporations. These funds look to invest in companies that can reach significant profits in order to regain their money.

A popular source of finance these days is ‘Crowdsourcing’. This allows you to raise money from the public and interested for your business idea, and usually on the internet platform. In return, you are often required to give something back such a percentage stake in your company or profits. For more information, search the word crowdsourcing on the internet, and you will also fin websites who offer these services.

Another source of finance is family and friends who believe in the business concept and are willing to invest or lend to you the money with or without interest. An option also worth considering is ‘lay-by’ where a group of people come together to contribute money monthly, and the monthly lump sum is taken by an agreed contributor in turns.

Consider soliciting professional help when looking to raise large amounts of funds for your business. All in all, before investing funds into the business, ensure you are working with a financial forecast and plan you should have written as part of your business plan.

Yvonne is a High Performance Consultant, Coach and Speaker focused on working with Individuals, Entrepreneurs and Organisations to execute and achieve their goals. She can be reached at: www.facebook.com/oliveblueinc,www.twitter.com/oliveblueinc

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