This week was life changing – my wife and I welcomed our first child, Daniel, on June 13th. I have heard from lots of people that having children gives you a whole new perspective on the world. And – they are right. Not only does it make you want to strive for more, so you can provide the best of everything for your children – but it also truly shows you the value of time.
As new parents to be, my wife and I were reading up on parenting, trying to prepare ourselves for the absolute unknown the best we could. I read an article on why gifting ‘experiences’ is so much more powerful than material items. And the one thing that is most necessary to build up these experiences is TIME. I want to provide financial stability for my family, but I also want to have the time to take my kid to his first baseball game, trips to the zoo and family vacations around the world.
BUT – raising a child in Canada is getting more and more expensive. I came across this article in MoneySense which calculates that raising a child till age 18 will cost a whopping $243,656. Now think about most families who have two, or even three children.
When I meet with people who are looking to get started in real estate, I always ask them what is your ‘big WHY’. What is it that is motivating you to make the decision to start investing. The answer I get most often boils down to financial freedom. When I think about the definition of financial freedom or independence, it generally means having sufficient personal wealth to live, without having to work actively.
But nothing is that simple. When I started investing, getting ‘rich quick’ and leaving my 9-5 job were the only two things I thought about. I was making my investing decisions on this, thinking about what could get me there the fastest. At the time, I thought this meant buying the cheapest properties available (hence having super high cash flow) and buying as many as I possibly could.
Economic fundamentals? I didn’t even know what those were. I just looked at one thing – CASH-FLOW. I didn’t care about location, tenant profile or condition of the property. I was attracted to the cheapest properties which were in the worst locations and came with challenged tenants. On paper, these properties were supposed to make me a lot of money, but it also came with stress, hassle and sleepless nights. And – they were only making money on PAPER.
Over time, I realized that cash flow, although an integral part of any strategy, is not the main thing I should have been focusing on. And – there is no such thing as ‘get rich quick’, especially in real estate. Yes, many of the worlds richest invest in real estate and it is no doubt one of the greatest vehicles of wealth creation, but, slow and steady wins the race!
Today I have realized that slowly growing a stable portfolio with properties in areas with strong economic fundamentals is key. Cash flow does increase with a larger portfolio, and there are ways (including multi family and suite additions) which help to increase cash flow for those who need it.
But most of all, I invest with the future in mind. I am the proud owner of each of my properties – they attract good quality tenants and I am confident that owning them will continue to build generational wealth for me and my family.
So long story short – invest with the future in mind. Buy properties in areas with good economic fundamentals (job growth, transportation etc) and you will attract good quality tenants. Yes, cash flow may be minimal (a few hundred dollars per month) but your tenants will be paying down your mortgage on your steadily appreciating property. That is what it is all about!
So until next time…………………..