Sunday, October 21, 2012


I almost got involved in a real estate investment.  Last month I was hyped and ready to sign off on it, but Ken felt squeamish.  Thank goodness for that.  I mean, I don't think it was a scam, but it probably wasn't as good as it looked either.

This was the investment opportunity.  The company, let's call them Big Grin Sales Inc., buys up oldish concrete high rise apartment buildings.  They make some improvements to them, legally divide them into condo units, and sell the units to individual investors at a profit.  It's the same idea as buying a large pizza for $5.99, dividing it into 12 slices, and selling the slices for $1 each.  That's where BGS Inc. makes their money.

The units are legally transferred to investors, however the tenants who live in them remain.  The tenants shouldn't notice any difference in their experience of living in the building, except maybe the lobby's a little spruced up.  The tenants continue to pay rent every month, and that rent goes to pay off the investor's mortgage.

There's also a Rental Pool agreement.  Let's say there are 100 condo units in the building, all owned by investors, and lived in by tenants.  Everyone gets 100% of their rent every month.  Then one tenant moves out, and that unit sits empty for 2 months until the management company finds someone else to live there.  Instead of that one investor missing two months of rent while everyone else continues to collect, the loss is shared amongst all the investors.  Everyone gets 99% of their rent until the vacancy is filled.

I had saved up some money and was looking for a safe place to invest it.  These days you can't even keep it safe stuffed under your mattress, because inflation will eat away at its value.  I'm totally over mutual funds.  I held some in my RRSP for several years, and the value kept dropping.  Every year I would complain to my bank and every year they would throw fancy phrases back at me.  "Long haul investing!"  "Dollar cost averaging!"  Whatever.  After the third year in a row of losing value, I cashed out and switched it all into GIC's.  It's earning a pittance of interest, but at least it's not shrinking.

I get really annoyed with my bank.  I'm a saver by nature, and when they see that they can't wait to get their hot little hands on my money.  Every time my chequing account rises over a certain limit, I get a phone call from the bank.  Some honey-voiced woman called "Melissa" or "Katie" helpfully wants to talk me into buying, you guessed it, mutual funds.  It makes me want to punch them through the phone.

Anyhoo, due to Ken's reluctance, I looked into this real estate opportunity a little further.  Amazingly, I found a couple of real estate lawyers willing to spend time giving me free advice over the telephone.  Lawyers?  Working for free?  *shrugs*  Just when you think you've seen everything...

The bottom line was that the rental pool condos don't tend to be a very liquid asset.  Because they're just rental units, without their own washer and dryer, and lived in by tenants who may not take very good care of them, they're difficult to sell.  You have to find someone else who wants in on the investment scheme.  Either that or you take your chances ending up with a scruffy, cigarette-smoke-smelling unit that you could lose money on in a sale.

So I've pretty much given up on that idea and instead Ken and I are going to do our real estate investing by moving to a bigger home.  We want to move from a two-bedroom flat into a three-bedroom townhouse in our current condo complex.  Maybe sometime next summer.  I'm already planning how I'm going to use all the extra space.  So exciting!  :-)


Jameil said...

Fun! I really look forward to us moving to a new place!

DarcKnyt said...

Well, moving to a new and better place can be fun! I mean... you know, beside the exhaustion, hard, dirty work, expense and hassle. Good job scoping out the scoop on the investment too. Seldom are things ever as good as they seem.

G. B. Miller said...

Now that's definitely a good investment and return on your money.

Warped Mind of Ron said...

I bought some swampland that is supposed to be an awesome investment. When global warming kicks in full gear and the oceans rise it will become beachfront property and I will be rich!!!!

Lynn said...

That sounds fun - moving to a bigger place.

LL Cool Joe said...

That sounds like a much safer option, and more fun too! I hope you find the prefect place.

Jenski said...

That's exciting! The best investment I ever made was holding on to some Euros for several months while the dollar dropped against the Euro. Made a bit o' money on that laziness.

DarcsFalcon said...

Oh how exciting and fun to plan how to use a new space! I'm so happy for you! :)

And how wise of you to delve more deeply into that investment thing. They have lawyers here too who will give a "free consultation." It's a good thing too.

Can't wait to see what you do with the place! Congratulations!