Episode 19 - Securing Your Retirement with Real Estate Investing
In this episode, Quentin talks with a member who is new to investing and wants to use it as a vehicle to set up her family's financial future and her retirement. They explore some options she can take during her growth phase of investing.
Talking about their background, the member shares that they are originally from Durham. They had been living in Toronto, in a single detached house. They decided to rent it, but the cash flow was not ideal compared to what they can get out here, for a lot less mortgage. In June, they bought duplex in Bowmanville, and rented the top floor, while they worked on the basement to rent it out as well. The renting arrangement for the upper floor came around to $1500 due to a family arrangement, and the basement for $1775 plus utilities.
Quentin adds that working with family is fine, as long as they have a proper lease in place, as sometimes there can be a little tension, especially in such cases. The member adds that both of the leases are short-term. Quentin says that as they are helping a family member out, they're doing them a favor, and hopefully that'll come back to them. On the subject of why they want to invest in real estate, they member shares that while both she and her husband do well financially, and have pension, they want to do this for their three kids. They want to do something like they didn't get help themselves, but to help them, like with a down payment, and then it would be nice if they had another one to help themselves.
She also shares that they do not have access to equity that they could repurpose into another property, and with the closing cost, the property cost them around $715k. Quentin adds that if they make it a legal duplex, then there should be value that's added to it, because if it's illegal duplex, they will be able to include both rents when you're applying for a mortgage. He mentions the related content on the subject in the vault, called The Phases of Real Estate Investing, Property Management, Key Policies and Procedures in the start area, as well as the course Your First Three Properties.
Quentin adds that they can rely on other property management services in the area to help them out, and some of them will just do tenant placement for them. In addition to this, the five-hour course on Property Management is helpful in this regard as well. The Getting Higher Appraisals course can help them get better appraisals for their property, and set themself apart from everybody else, as most people will never do this. He adds that there are a lot of times when we get paid in this business, we get paid in cash flow, and when we sell a property, but we try not to do that very often. What's better than selling a property is the appraisal; that's when we get paid.
Talking about another way to mixing the funds from one that's deductible to nondeductible, is The Smith Maneuver. It's a strategy that allows you to turn your nondeductible debt, which is the interest on your mortgage to make it tax deductible. He suggests that if they take from the refi, put it on their principal, and then access it again, they're basically converting their nondeductible debt to deductible debt. Then the next year, if they did it, bought a property and the same process, they're basically converting their principal residence into deductible debt. Once they've done the whole process, and it's all line of credit, then they go back and get a new mortgage, it's clean, because all of it has been deducted. Then the interest would be all tax deductible; the principal wouldn't, but the interest would.
In conclusion, Quentin suggests attending the Q&A calls, as they're great for networking to meet other people in the area who are investing. The other thing is to make sure to take advantage of the video materials. There's a lot of resources that are on there. If they want to do something specific, they can go through the roadmaps, as they are packed with enormous value, and can make a huge difference.
How Much are They Renting Their Property For? [00:02:19]
Who are They Renting the Upper Floor to? [00:03:31]
What is their Next Step Once Their Property Has Stabilized? [00:05:10]
Do They Have Access to Equity That They Want to Repurpose into Another Property? [00:06:44]
What do They Think the Value of the Property is Right Now? [00:07:34]
What's the Current Mortgage Amount on Their Property? [00:10:50]
Writing it Off with Refinancing of the Rental Versus Wrapping It Into their Primary [00:18:03]
How Long Have They Been in the Mortgage For? [00:22:37]