8 Binscarth Property
Mollie and I just got back to the cottage after heading to Ottawa to check out the 8 Binscarth property, Mollie’s very first purchase of an income-producing property! We had an amazing day!
Both Mollie and I were in disbelief of what we saw today. The suited house (two separate units) had been completely transformed into two beautifully decorated units, impeccably cleaned up and ready to rent in a couple of days.
Needless to say, Mollie was overjoyed and very grateful for what she could now call “hers.”
Special shout out to Rasna and Pierre of Just Right Rentals for making this dream a reality for both Mollie and her proud parents. They did a spectacular job!
Many people over the past six months have been very curious as they watched Mollie’s story unfold. I wanted to take a few minutes and tell you about this amazing journey that Mollie and her team of real estate experts have taken. It really is remarkable how a 19-year-old, decided to arm herself with knowledge and then put that knowledge into huge action to produce lifelong results for her.
About 1 1/2 years ago, Mollie decided that she wanted to dive into the real estate world and pursue the ownership of her first property. The problem she had was that she didn’t have any money! How could a 19-year-old go out and purchase an expensive real estate property with no money of her own? The answer for Mollie was Financial Education.
Mollie buckled down and started to read Rich Dad Poor Dad books, Stefan Aarnio’s Money People Deal, and then took a course from BlackCard University (Stefan Aarnio) called “8 Weeks to Cash.” From these resources, she began to build her base of knowledge and find answers as to how to buy her first property. The answers were all there in what she studied, and all she really had to do was implement what she learned.
Real Estate investing needs financial education, everything else is common sense.
At that point, our business Glenroe Lending was really starting to catch on and grow like crazy. Rasna Arora and Pierre Bergeron of Just Right Rentals in Ottawa were seeing their real estate business grow like crazy. We had done several real estate lending deals with Rasna and had built a special level of trust and confidence with each other that was amazing for both of us.
Mollie was not educated and experienced on how to renovate properties at her young age, but she knew Rasna was a master of the buy renovate, rent, refinance, repeat system of acquiring properties. At that time, I was busy with my own buy and hold business (Tranquility Enterprises) and focused on growing Glenroe Lending, so I didn’t have the time to guide Mollie through this process.
After a visit to Ottawa and a few long conversations with Rasna, Mollie decided to partner with Rasna and have her find a property, renovate it and then turn it over to Mollie as a finished value-added property for Mollie to enjoy for many years to come.
The result was simply spectacular! As a result of trusted relationships, working with integrity, and an attitude of unselfishness, Mollie was able to work with Rasna over the past six months to create the dream of owning her first property.
So many people ask: how did Mollie do this without any money of her own? A big part of this answer is how the project was created in the buy and the renovation stage.
Rasna was in charge of finding and securing a property for Mollie. She is an absolute expert in the Ottawa areas and knew what we needed to buy and create. Mollie purchased the house for $460,000 that included Rasna ’s fee to see the project to completion. Mollie then spent about $170,000 renovating the property to what it is today. The house is now appraised at $725,000 in the Ottawa Market. Mollie had just created about $100,000 of equity or added value as a result of these numbers. WOW!!
Mollie then had a decision to make. Does she sell or keep it and hang onto this property for a while, get all the debt paid, and then own the house with no mortgage and enjoy the cash flow for the rest of her life? The good news for this was that market rents for these two units were $4000 a month, which by far exceeded the expenses of running the place and paying the mortgage payments. The decision was to keep the property and start looking for the #2 property to purchase.
I am sure by now, all of you are asking… “ya John, great story, but where did Mollie come up with all this money to do this?” The answer is private lending then refinancing to big banks for long-term financing.
With this deal, Mollie didn’t use one penny of my own cash. With little financial education and some referrals from her dad, we were able to find some RRSP/TFSA and some cash to fund the initial purchase and do the renovations. There are all kinds of people looking for places to invest money safely.
Real Estate, in my opinion, is the best option for this.
Mollie used these private funds to offer an interest-only first place secured mortgage to these lenders for six months. She raised enough capital to buy the property, pay Rasna for the work to find and renovate the property, pay for insurance, utilities, taxes, and pay the interest payments on the mortgage for up to eight months.
Now a side note for all you parents, you can do this too, with your kids if you want to be the investor in the deal. You could use cash, lines of credit, or the equity in your home to create a Home Equity Line of Credit that can lend out to your kids and pay you an attractive interest rate.
Remember, access to capital is far more important than the cost of capital for beginning investors, especially on deals like this one.
So, now that the property is paid for and complete. Now what?
In comes the mortgage broker to refinance the property and create a long-term mortgage for Mollie. Special thanks to Derek Maclean and his team at Capital Mortgages out of Ottawa.
Derek had the property appraised when the renovation was complete and was able to secure an 80% loan to appraised value on the property at low-interest rates for 30 years (yes this is where Dorli and I did step in to co-sign the mortgage since Mollie has few assets and no job as a student). What this meant was we could get a mortgage for $580,000 on this project to pay off the private lending Mollie acquired to purchase the project. Although this didn’t cover all the private lending, it leaves Mollie $60,000 to pay off over the next few years.
The Bottom Line is Mollie bought a $725,000 house for $60,000 and now has tenants in place to cover all the mortgage payments and expenses.
But John, “where does Mollie get the money to pay off the $60,000 that wasn’t cover by the new mortgage?”
Here’s the answer. Mollie will have at least $500 a month from excess cash flow from the tenants. That, combined with the fact the house will appreciate at least 2% a year, and her bank mortgage will pay down $14,000 a year. Mollie will be able to refinance with the bank in two years, get paid back the money she has paid down from mortgage payments, and pay off the private money owed of $60,000.
Guess what…. Mollie just bought a house for no money of her own… nothing…. she will receive an INFINITE return on her investment!!! That is simply amazing!!
Mollie realizes what a great deal this is and is already looking at purchasing her second deal at 19 years of age. Remember, Mollie already has the private lending in place from the RSP/TFSA people who were really happy with the return Mollie paid them for using their funds to purchase the property. They are so happy they want to do this over and over. It is a great return as a first-place mortgage and a way to use registered funds. (PS I have four kids wanting to use your RSP’s so message me for details).
For the doubters out there, who say… “well John, Mollie might be able to do this with you as her dad with your experience,” I say yes, “it helps but remember what I said above.”
Real estate investing needs financial education, everything else is common sense.
Both Mollie and I decided we wanted to study financial education to learn how to utilize these strategies above. We made DECISION to study based on what we wanted real estate to create for us. I call that our “WHY.”
The truth is you can do this too!! We have a huge passion to share this strategy with as many people willing to learn.
The reality is we did it, and so can YOU. Copy what we do!
We are always here to serve and help you in any way we can.
Kind Regards,
John Heeney
Glenroe Lending
“We build LEGACY to create TRANQUILITY”
john@glenroelending.ca
519 808 7370
