Mike chats with Ruben about the latest developments, including the changes to the framing, waste line and water hook ups.  In the process all the phone lines on the street were taken down accidentally!  The fun continues…enjoy!

Earlier this week we were in Toronto taking care of some business when we got chatting about the “naysayers” who always believe the sky is falling.

You know the type, the ones that call for real estate to fall in value for so many years in a row that one day they’re right. 

Well, we ourselves have been scared off of the Toronto Condo market for some time and although investing for appreciation isn’t our “cup of tea” we continue to be amazed the strength of the Toronto condo market and shot this quick update…

And then, right after the video someone literally jumped on us … one of Nick’s old high school mates lives in the neighborhood and is part of the Indie Music scene.  He gave us the local updates that we love and can only get from someone living in the neighborhood.

Enjoy PART II to this video!

In the interest of full disclosure let it be known that we own real estate as investment and a real estate brokerage … and all the bias that comes with those.  

Good, with that said, let’s continue.

We *think* there was once a day where the stock market was a place that actually helped both large and small businesses.

Wall Street facilitated the selling of stocks and bonds so that businesses could access capital to help them expand and grow.

Investors earned interest payments on their bonds or equity in their stocks.

Stock traders earned a commission.  Everyone was happy.

We’re not sure when the stock market went off course but we do believe that that was the original intent of it.  A place where Wall Street helped Main Street.

Maybe it was just an “idea” and maybe it never actually worked as we’ve just described.

It certainly hasn’t worked that way since we entered the game in the mid to late 1990′s.  That was the era of “irrational exuberance” and the tech bubble took us on a ride that we’ll never forget.

But even in the late 1990′s it *seemed* that you could find businesses that met your criteria as good investments…

A business that seemed to have good, universally needed, products.

Products that were cheap to make, cheap to sell and had huge profit margins.

Products that made the world a better place to live and didn’t ruin the environment.

Management that had the best interest of the owners in mind and were also honest.

Today the world has changed.

Today, with very few exceptions (like Apple) no matter what company you find to invest into, it’s highly likely that their stock price is going to be affected by large global economic factors.

So no matter how well they do on an individual basis the larger winds of change will determine the direction of their stock price.

Things like “Sovereign Debt” (the debt owned by governments who sell bonds to raise cash) which were barely even mentioned 12 months ago are all over the news -daily.

The economy has officially moved from a banking debt crisis to a government debt crisis.

1,000 point drops in the Dow Jones Industrial Average and countries banning “naked short selling”, as Germany did this week, is the new normal.

So even if you fully understand all the fundamentals of the stock you have purchased, much larger forces are now at work.  Huge macro economic events are sweeping their way around the markets that can alter a stock’s value no matter how good its “fundamentals” are.

Fun, eh?

Mark Cuban has one of the better rants on this exact topic.

Now let’s turn to real estate.

It’s not perfect either.  These same large macro economic forces can have devasting affects on real estate as well.

Just look at the U.S.  

30% declines across the board.

Not fun.

But there’s something real estate has that other investments don’t.

Shelter is fundamentally a need.

If you own property in the right “category” you will always have demand for it.

Obviously, owning the right property in the right category is important.  Many will ignore this, they won’t put in the work necessary to learn what the right properties are and those will be the same people who waive their arms in disgust when the winds of change come.

And when managed properly, good real estate produces something critical to your economic life, cash flow.

The value of the property may swing wildly but with tight managment and smart control of your costs, like mortgage rates, you should be able to ride out even the most terrible of economic storms.

“Should” is the important idea here of course.

“Cash, cash flow and credit” are excellent daily mantras.

Most real estate investors are scared to buy properties because its value may fall.

That’s inaccurate thinking in our books.

Your goal is to own real estate free and clear.

You should EXPECT changes in value and plan accordingly.  At some point in your ownership of it … it WILL fall.

Your path to getting to the end goal of “free and clear ownership” may involve many different strategies and styles but at the end of the day you’re looking to flat out own your investments.

That’s what gets you out of the rat race forever.

So wild swings in value are to be expected.

Accept that right now.

The question should be, how will you prepare for them?

When the downward pressure in Canada comes what will you do to protect your investments?

Will you sell?  At a loss?   Or wiill you have the proper reserve funds to carry you through a tough period?

Will you have polished up your marketing, negotiation and “action taking” skills to the point where your are ready to jump into action?

In the early 1990′s our family went through an extremely difficult time and if it wasn’t for some reserve funds we would have lost property to the bank.

The good news is, that although there were difficult days, we came out the other side.  We survived and it made us stronger.

Here are some of things we personally enjoy with real estate investments:

1. We’re the board of directors.  So we can take personal responsibility for results.

2. Our product always has a need (starter homes).

3. We can control where we own them (what community, with what fundamentals – population, employment, transportation, infratstructure).

4. We can closely watch the global economic landscape, increase our financial education, and have plans for multiple different economic changes that could come sweeping through.

Here’s the interesting part.

For years, numbers 1 – 3 on this list were the most important factors when investing in real estate.

Knowing your “local” market was the key to success.

And it’s still important.

But in today’s world, number 4 has become critical.  Essential even.

If you’re only watching the “local” fundamentals you are not watching enough.  You are not preparing enough.

The days of just knowing the population trends, employment sources and transportation routes are over.

Huge macro economic trends are here.

It’s a new world.

Get ready for it or get out of the way.

Until next time … Your Life!  Your Terms!

Many moons ago I went on a trip to Cuba with my wife to “find my life’s purpose”.

I was in a bad place.

Waking up every morning wondering if my life was really reduced to the 9-5 grind.

I had gone to school, earned a University Degree and I had incorrectly believed that everything else was going to be pretty easy.

How wrong I was.

I got a job in the IT industry programming mainframe computers.

Now let me explain something.

After learning about the latest programming methods and the hottest Internet based web development programs in a post-degree grad program … programming mainframes every day was like hammering rock with a sledge hammer.

I felt like Fred Flinestone.

I began having nightmares about my life and my future.  Waking up sweating in panic.  Seriously.

I couldn’t figure out if I was meant to program old mainframes in the basement of a building on Front Street in Toronto for the next 40 years.

Shortly afterwards I got a job do tech support at a software company and I was happy because I was learning and it paid better … but that happiness ended quickly.

Answering call after call I began to feel like the high paid software consultants I was helping knew nothing and that I was doing their job for them.

It was a great environment and I learned a lot but I just couldn’t see myself on a phone queue answering calls for the rest of my life … or even for the rest of that year!

The money was good, but I didn’t care.  My sanity was more important.

So I go on this trip to Cuba with my wife and have a great time.

On the trip I bought this little leather journal at the local market that had the word “Cuba” carved on it and I as I was relaxing pool side I began brainstorming ideas for my own business.

I kept asking myself, “What do people want?  What can I create that will serve an unmet need?”

And I came up with a glorious idea.

In the middle of bocce ball matches on the beach with my wife we brainstormed further and it confirmed how great the idea was.

I would create a website where woman (and men, but mostly woman I assumed) would be able to get information on all the latest sales going on in and around the city.

After all, every proud woman in the world loves a good sale.

Jackpot!

I had found it.

This was back in 1999 or so, maybe 2000.

When I got home I quickly registered www.SalesInTheCity.com.

Cool name I figured.

I got some graphic guys to put together a small web site that collected email addresses and each week I would email out the “sales going on in the city”.

Well, the thing kinda went viral and within about a month I had over 1,000 people registered.

At that time collecting 1,000 subscribers, even for a free service, in a month was a pretty big deal for yours truly.

My business plan was to offer the information for free but when I had enough subscribers I would charge retailers a fee for advertising their sales.

Brilliant!

I was totally giving myself two pats on the back at this point.

But then disaster struck.

I realized that I didn’t like researching all the sales going on in the city.

It seemed that almost every store had some sort of sale every week.

How do you figure out if it’s a “real” sale or just an ongoing sale that some stores seem to run continuously?

Confused I turned to my wife….and although she enjoyed shopping at the sales I found she wasn’t interested in researching all the sales every week.

I couldn’t blame her.  It wasn’t here idea, it was mine.

And the research part of this process got old really fast.

People began emailing me about planning their whole weekend around the sales I sent out.  And if a retailer didn’t quite offer what they advertised I would get some nasty comments for it.

I quickly learned that I actually hated this business.

I hate shopping.  I hate crowds.  I hate stores.

I can barely handle going to the grocery store to pick up a single item on a week night when the place is deserted.

For years I’ve avoided shopping malls.  My wife has heard me say many times that,

“I only have a certain amount of ‘shopping mall’ energy and if you tell me we’re going to two stores and then surprise me when we’re there with an unplanned visit to a third store I can’t handle it because I’ve already used up my ‘mall energy’ on the first two.  I need to know well in advance how many stores we’re visiting so I can pace myself.”

100% ridiculous I know.  But it’s true and she still loves me!

So basically I began to hate this little business I had started.

I hated the responsibility of having to send out this weekly email or face the wrath of email threats asking for it.

And I hated the stress of managing the daily tasks required to make it work.

Today, looking back ten years later on this it’s pretty embarrassing to admit that I found it stressful.  After all, it really wasn’t that much of a responsibility at all.

But at the time, for the person that I was then, it was too much to handle.

Since that time I’ve moved into commission based sales, I began investing in real estate, I went to a start-up software company with insane monthly targets and together with Nick we’ve started three different companies.

We’ve handled more stress in the last three years than I ever imagined I would.

We take 100% ownership of everything we do.

We feel 100% responsible for all the investors we work with in our brokerage.

We often feel like we spend more time worrying about other people’s actions and properties more than we spend on our own.

And looking back recently over the last ten years I noticed something.

Handling stress and handling the responsibility of working with other investors and caring for them is a competitive advantage.

Let me repeat this…

Handling stress and responsibility is a competitive advantage.

Both personally and professionally.

Here’s why most people don’t get into real estate investing.

The don’t want the stress of dealing with tenants.

They don’t want the responsibility of dealing with mortgages, bankers, lawyers, contractors.

They don’t wan the responsibility of owning real estate.

They don’t want the responsibility of managing real estate.

They don’t want the responsibility of filling vacancies.

They don’t want the stress of dealing with unexpected problems.

But here’s the good news.

Because no one wants stress and responsibility … if you are willing to take it on it’s a huge competitive advantage!

Think back to the SalesInTheCity.com example.

I didn’t want the stress, however embarrassingly small, of putting out that list of sales in the city every week.

I didn’t want the responsibility of accurately reporting the sales.

So I gave up.

I began my search for the next “shinny money making object”.

“Late night TV and Internet Marketing here I come!”

And now I’ve learned the cycle repeats until I’m willing to change myself.

Recently I had PVR’d a documentary about a Russian Billionaire.  The interviewer asked him how he handled the huge amount of stress he had managing all the different companies he owned around the world.

His reply…in his words,

“Handling stress is my competitive advantage.”

BINGO!

So until a person is willing to be disciplined and save up money for a down payment….and deal with the curve balls that owning real estate will throw at you….and to handle the stress that comes with it….until they’re willing to accept the responsibility and stress they won’t achieve doodly-squat.

You can’t own real estate and not deal with problems.  It’s a real business.

The majority of society doesn’t want stress and responsibility.

And if you’ve heard us explain how you want to “go in the opposite direction of the masses”, then that should be your first clue as to why you want it.

Stress gets bad press from everyone.

And that’s another good clue as to why you should want it.

It’s the reason so much “get rich quick” stuff is sold … the sales pitches for this stuff make it seem you can work 4-Hours A Week and play on the beach for the rest of the week.

So here’s the deal.

You have two of the biggest competitive advantages right in front of you.

You don’t need to go chasing the next shiny Internet Marketing, Foreign Exchange Trading, Real Estate Investing “easy money” object.

Pick something you like.

Something that you can stick with.  Something you can leave a legacy about.

Accept the responsibility of having to do work at it.

Accept the responsibility of dealing with the stress of perfecting your craft.

And be happy about it, knowing that the majority of people around you right now are trying to avoid it.  Buying books on how to decrease it.

And the best part?

They’re free!  Your biggest competitive advantages are yours for no cost.

Imagine if I had kept going with that SalesInTheCity.com website?  Do you think that could have been a great little cash flowing business.  I do.

Someone else even owns the domain name now – I let it expire.  I don’t even have that to show for it!

I will never make that mistake again.

It’s amazing just how much responsibility it actually takes to take control of your finances, to make some great investments, to start your own business.

Much, much more than I ever thought.

The last 10 years have proved to me that handling stress and responsibility has big payoffs.

No one wants them and that’s exactly why you should.

Booyah!

Until next time … Your Life!  Your Terms!

Nick shares a quick update from Puerto Vallarta, Mexico.  Even in Mexico he’s sharing some thoughts on last week’s 1000 point Stock Market drop … and I’m sure he’s off to have a cold drink right after this!

In this Month’s Rock Star Inner Circle Newsletter we share a dinner party story about coming up with your own magic financial nest egg “Number” and how it may be higher than you think!