Financial Nuggets – March 8, 2017

Five Insurance Policies Everyone Should Have

Protecting your most important assets is an important step in creating a solid personal financial plan. The right insurance policies will go a long way toward helping you safeguard your earning power and your possessions. In this article, we’ll show you five policies that you shouldn’t do without.

Long-Term Disability Insurance
The prospect of long-term disability is so frightening that some people simply choose to ignore it. While we all hope that “nothing will happen to me,” relying on hope to protect your future earning power is simply not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to continue your current lifestyle, even if you can no longer continue working.

Life Insurance
Life insurance protects the people that are financially dependent on you. If your parents, spouse, children or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies. Think about how much you earn each year (and the number of years you plan to remain employed), and purchase a policy that will replace that income in the event of your untimely demise. Factor in the cost of burial too, as the unexpected cost is a burden for many families.

Health Insurance
The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries, that result in a hospital stay, can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the cost of health insurance is a financial burden for just about everyone, the potential cost of not having coverage is much higher.

Homeowners Insurance
Replacing your home is an expensive proposition. Having the right homeowners insurance can make the process less difficult. When shopping for a policy, look for one that covers replacement of the structure and the contents, in addition to the cost of living somewhere else while your home is repaired.
Keep in mind that the cost of rebuilding doesn’t need to include the cost of the land, since you already own it. Depending on the age of your home, and the amenities that it contains, the cost to replace it could be more or less than the price you paid for it. To get an accurate estimate, find out how much local builders charge per square foot and multiply that number by the amount of space you will need to replace. Don’t forget to factor in the cost of upgrades and special features. Also, be sure the policy covers the cost of any liability for injuries that might occur on your property.

Automobile Insurance
Some level of automobile insurance is required by law in most places. Even if you are not required to have it, and you are driving an old clunker that has been paid off for years, automobile insurance is something you shouldn’t skip. If you are involved in an accident, and someone is injured or their property is damaged, you could be subject to a lawsuit that could possibly cost you everything you own. Accidents happen quickly and the results are often tragic. Having no automobile insurance or purchasing only the minimum required coverage saves you only a tiny amount of money, and puts everything else that you own at risk.
*Bonus Tip For Business Owners: In addition to the policies listed above, business owners need business insurance. Liability coverage in a litigation-happy society could be the difference between a long, prosperous endeavor and a trip to bankruptcy court.

Insurance policies come in a wide variety of shapes and sizes and boast many different features, benefits and prices. Shop carefully, read the policies and talk to the agent to be certain that you understand the coverage and the cost. Make sure the policies that you purchase are adequate for your needs, and don’t sign on the dotted line until you are happy with the purchase.
Source: Investopedia

Eight Essential Four Letter Words For Financial Health

Why is it that a few four-letter words have given thousands of perfectly good four-letter words such a bad rap? It doesn’t seem fair does it? I took it upon myself to give them a break. Make a habit of putting these eight words into use, and your finances will be stronger than ever. They won’t offend anybody. You can even say them in front of your parents. How great is that?

Why eight? Well, a recent article indicated that we can be pretty hardheaded when it comes to making changes. The author suggested sometimes we need to get hit over the head with a (figurative) two-by-four to get a message. Multiply two by four and you get eight.

Essential Four-Letter Words

  1. Plan: It’s time to outgrow impulse spending. If you’ve got some exciting goals, and I hope you do, planning before spending will make those goals happen sooner. Whether it’s clothes, groceries or basic household matter, make a list before you head out to spend. You’ll get everything you need and you’ll be less likely to end up with three jumbo jars of peanut butter in the cupboard.
  2. Cook: Sure you’re busy, you’re tired. You come home and the last thing you feel like doing is cooking a meal from scratch. I get that. Take baby steps and make it fun. When you’ve got a little downtime, check out a few online cookbooks and find a new recipe to try. There are millions of recipes that don’t take long, don’t need many ingredients and make great leftovers. Aim for eating one less meal out and cooking one more meal each week.
  3. Swap: Tired of wearing the same scarves and belts over and over? Tempted to go out and buy a bunch of new ones? Host a swap party instead. Start simple. Invite a few friends to each bring five accessories they’re willing to give up for a while and exchange. It can be temporary or permanent – you decide. Everyone will feel like they got something new to freshen up their wardrobes but nobody spent a dime. This doesn’t have to be just clothing either. Sporting goods, furnishings, kitchen items, tools and electronic gadgets are great candidates for swap sessions.
  4. Safe: Do what you need to do to keep what you’ve got. If all your electronic accounts still use the same password you’ve had since seventh grade, it’s time to change. No matter how fond you are of CheetosRgr8t you need to come up with something new and tougher to crack. Don’t use just use one password either. Set up different passwords for different accounts.
  5. Save: You knew it was going to be in here, right? If you are already saving, bump up your saving percentage by 1%. Go ahead, you’ll be glad you did. Little increases add up to big results.
  6. TFSA: Okay it’s an acronym not an actual word but it qualifies nevertheless. If you haven’t already done so Start now. Open a Tax Free Savings Account (TFSA) and set up automatic transfers from your checking or savings account into it. You will be so glad you did. I promise.
  7. Debt: Yes, this can be a good four-letter word. If you’ve got debt of any sort, the good news is you are building a credit history. Make sure it’s a good one by paying your bills on time. At some point or another, you need to have a credit history in order to qualify for (more) debt. I know, that sounds a little strange but if you want to buy a house someday, you get a better rate if you’ve got a higher credit score. The score is based on how well you’ve done in the past with paying off debt so show those financial institutions you’ve got it together.
  8. Give: Almost all the healthiest, wealthiest folks all give time, money or both to help make the world a better place. If you haven’t done this before try it, you’ll like it. Start giving just a little bit and you’ll be hooked. And if you’re already a giver pat yourself on the back and keep on keeping’ on.
    Take these eight four-letter words and make them a part of your life. You will be in a stronger financial place than you are right now.

So You Want To Flip A House….

HGTV makes it look so easy – buy a fixer-upper, throw a little money at it and voila – you’ve just made $50,000. Of course the reality of flipping houses for profit isn’t quite as simple as ‘reality TV’ would like to make us believe. There’s a lot you need to know:

Know your numbers! When it comes to deciding which property to buy, you need to do a lot more than determine fair market value. How much will your renovations cost be? What will your closing and selling costs be? What are your carrying costs? What are the tax implications?

Don’t get emotionally attached – you’re an investor, not an end-user. Don’t pay $100K over asking unless the house was underpriced by that much in the first place.

Know what you will sell for! This is one of the most important factors in choosing what property to buy (and one of the reasons you want to work with an experienced REALTOR). Buyers don’t care what you paid for a house or how much money you put into it or how much profit you want to make. Find out what prices the street can carry and don’t over-renovate for the street. If you buy a house for $600K , put $100K of renovations into it, on a street where the most expensive ever sold is $700K, prepare to lose money.

Location, Location, Location! To really see a profit, you need to buy in a HOT neighbourhood that has a low supply of renovated homes and a high demand from Buyers. Easy access to transportation, parking and shops/restaurants/services will all be factored into how much a Buyer will be prepared to pay.

Timing is everything! While you’re renovating, you need to remember your carrying costs: mortgage, insurance, taxes and utilities. If it takes you 12 months instead of 6 months to complete the project, your costs have just gone way up (and you’ll be paying those costs out of your profit margin.)

Stay on top of your trades! If you aren’t a contractor yourself, make sure you align yourself with someone you know, like and trust. Their ability to manage costs and a timeline will impact your profitability, and if your contractor does shoddy work, you’ll feel that in your pocketbook.

Focus your renovation dollars in the right places! For example, kitchens, bathrooms, floors. You’ll likely have unsexy money to spend too, and don’t forget that the Buyer who buys the renovated house doesn’t want to worry about the furnace, the electrical or the roof either.

Always remember your target Buyer! If you’re looking to sell your renovated house for $800K, remember that Buyers at this price point will have definite expectations of features and finishes. Too often we see cheap flips that don’t sell because of poor quality materials and workmanship.

Permits, Permits, Permits! No, you can’t just tear down walls and change out the knob and tube electrical because you want to. Most buyers will want to see that your renovation was done on the up-and-up, and that means permits (and permit headaches). Buyers will pay more for a home that was renovated with permits.

There are no guarantees! Yes, some people make a lot of money flipping houses in Toronto, but not everyone makes a profit.

Treat this as a job! Don’t fool yourself: flipping a house for profit takes a lot of time. You’ll be picking finishes, managing workers and timelines and need to check in on the progress frequently.

Stick to the plan/budget! This isn’t the time to get creative and make it up as you go along.

Make sure you work with a REALTOR who has experience guiding people through the flipping process. As always, we’d be happy to chat!

Do you have what it takes?
Whether due to houses, condos, or simply paperwork, if in the end you’re receiving a profit, then technically you’re flipping the property. Some people believe they can flip a house without even breaking a sweat. Don’t be fooled. It won’t work out just because you may have a good stable job, trust in getting a good mortgage, put a small amount of money down, renovate on the weekends, and then sell. House flipping is a full planning process that you shouldn’t take lightly.
The art of renovating homes is a tough dedicated job. It involves being realistic and making a budget, knowing how and what to renovate, what price to charge, whom to hire, and how long it will take. Also, you must know your margins and timelines— otherwise, profits may suffer. But what if there was an option to flip your home without all the hassles and risks?


As the owner of a property with development potential, which is usually old and in need of renovation or rebuild, choosing to sell it to a builder or developer you earn a fraction of the potential profit locked in your property.

Understandably, most people don’t have the time, money, expertise, or desire to do the work required to unlock all the profit built up in their property.
It’s way too risky, trades don’t show up, do poor work, or simply rip you off, trying to get the money to do the job, knowing what to build, dealing with the upheaval and stress a project like this will have on your life and relationships.

So instead of receiving the full benefits and wealth built up in your property, a builder or developer buys it, gets financing, builds on it, and sells the property making handsome profits; Profits that could be yours.

While you do what you love to do in life, you have a trusted experienced development team to partner with that would reduce your risk and do all the work to unlock all the profits in your property? What if your partner managed, financed, designed, built, and directed the sale of your property for maximum profits as if it were their own?

FIXNFLIP works with you to finance and develop your property’s full potential, then manages the sale for maximum profit. The additional profit is split 80/20 between you and FIXNFLIP (80% going into your pocket) Upon the sale you enjoy your share of the additional wealth generated from the development of your property


Your property is appraised to determine market value as of today. This is approximately how much you would make if you sold the property on the market today. Less sales commission, this is your base valuation. When your property sells, you get paid this base valuation plus your share of the additional profits generated from the development and sale of your property.

FIXNFLIP arranges financing, designs/builds, and manages the sale of your developed property for maximum profit. FIXNFLIP arranges financing for the project through a mortgage on your property. We design for maximum profits and maximum architectural beauty. Our team is led by respectful builders with decades long experience. We oversee and direct all aspects of the marketing and sales process to achieve maximum profit.

You get paid the base valuation plus your share of the profits generated from the sale of the developed property. When your property sells, mortgages and commissions get paid. Then you get paid the base valuation, the amount you would have earned if you would have sold the undeveloped property, plus your 80% share of the profits generated from FIXNFLIP’s development of your property.

Here is an example for a property with an appraised value of $1mil and an existing mortgage of $500k.

Step 1: The home gets independently appraised. Let say the valuation comes in at $1mil, FIXNFLIP does not value closing costs only what the home owner will walk away with in their pocket after the sale. So we deduct closing costs to get the FIXNFLIP valuation.

$1,000,000 x (.05 commission + h.s.t.)= $56,500.00 commission
$56,500 commission + legals approx. $2000 = $58,500 closing costs

$1,000,000 sale price – $58,500 closing costs = $941,500 FIXNFLIP property valuation
$941,500 – mortgages owing $500,000 = $441,500 Clients walk away profit based on a $1mil sale if she sells the house as is.

Step 2: With a $200,000 FIXNFLIP renovation, you sell the home 3 months later for $1,500,000

$1,500,000 renovated sale price x (.05 commission + h.s.t.) = $84,750 commission
$84,750 commission + legals approx. $2000 = $86,750 closing costs

$86,750 closing costs + $200,000 mortgage for renovation = $286,750 total project cost

$1,500,000 renovated sale price – $286,750 total project cost = $1,213,250
$1,213,250 – $941,500 FIXNFLIP property valuation = $271,750 total profit generated from renovation

271,750 profit x .80 (Clients profit split, 80% of the total profit from renovation) = $217,400 Clients profit from the renovation.

Step 3: The Client gets paid; in this example the client would have made a profit of $441,500 if they would have sold the house on the market without FIXNFLIP.

In 3 months working with FIXNFLIP the client makes $658,900 in profit, the FIXNFLIP program earned her an additional $217,400 within a 3 month period.

For more information on how to benefit from this program, please contact Minee Nehru, Realtor with RE/Max West Realty Inc. at 416.282.2444

How To Make Money In Real Estate?

Whether you’re curious about the investment potential of real estate or simply sick of infomercials promising millions of dollars in returns from a new and obscure way of investing in real estate, it is worth learning how wealth is created through real estate.

We’re not looking at strategies for how to profit from real estate. Instead, this article will focus on the basic ways that money is made through real estate. And, fortunately for us, these haven’t changed in centuries, no matter what kind of gloss the gurus of the moment try to put on it.

The most common source of real estate profit is the appreciation — the increase in the value — of the property in question. This is achieved in different ways for different types of real estate. And, most importantly, it is only realized through selling or refinancing.

Raw Land
The most obvious source of appreciation for undeveloped land is, of course, developing it. As cities expand, land outside the limits becomes more and more valuable because of the potential for it to be purchased by developers. Then developers build houses that raise that value even further.

Appreciation in land can also come from discoveries of valuable minerals or materials, provided that the buyer holds the rights. An extreme example of this would be striking oil, but appreciation can also come from gravel deposits, trees and so on.

Residential Property
When looking at residential properties, location is often the biggest factor in appreciation. As the neighborhood around a home evolves, adding transit routes, schools, shopping centers, playgrounds and so on, the value climbs. Of course, this trend can also work in reverse, with home values falling as a neighborhood decays.

Home improvements can also spur appreciation, and this is something a property owner can directly control. Putting in a new bathroom, upgrading to a heated garage and remodeling to an open concept kitchen are just some of the ways a property owner may try to increase the value of a home. Many of these techniques have been refined to high-return fixes by property flippers who specialize in adding value to a home in a short time.

Commercial Property
Commercial property gains value for the same reasons as the previous two types: location, development, and improvements. The best commercial properties are in demand, and that drives the price up on them.

The Role of Inflation in Appreciation
Of course, there is one major factor we skipped in our summary – the economic impact of inflation. A 10% inflation of the dollar means that your dollar can only buy about 90% of the same good the following year, and that includes property. If a piece of land was worth $100,000 in 1970, and it sat dormant, undeveloped and unloved, it would still be worth many times more today. Because of runaway inflation throughout the ’70s and a steady pace since, it would likely take over $560,000 to purchase that land today – assuming $100,000 was fair market value at the time and all other factors remained constant.

So, inflation alone can cause appreciation in real estate, but it is a bit of a Pyrrhic victory. Even though you may get five times the money due to inflation, many other goods cost five times as much to buy now.

Generally referred to as rent, income – or regular payments – from real estate can come in many forms.

Raw Land Income
Depending on your rights to the land, companies may pay you royalties for any discoveries or regular payments for any structures they add. These include pump jacks, pipelines, gravel pits, access roads, cell towers and so on. Raw land can also be rented for production, usually agricultural production.

Residential Property Income
Although it is possible that you may earn income from the installation of a cell tower or other structure, the vast majority of residential property income comes in the form of basic rent. Your tenants pay a fixed amount per month — and this will go up with inflation and demand – and you take out your costs from it and claim the remaining portion as rental income. While it is true that you will get an insurance payout if your tenants burn down the place, the payout only covers the cost of replacing what is lost and is not income in a real sense.

Commercial Property Income
Commercial properties can produce income from the aforementioned sources – with basic rent again being the most common – but can also add one more in the form of option income. Many commercial tenants will pay fees for contractual options like the right of first refusal on the office next door. These are essentially options that tenants pay a premium to hold, whether they exercise them or not. Options income is sometimes used for raw land and even residential property, but they are far from common.

Real estate investment trusts (REIT) and Mortgage Investment Corporations (MIC) are generally considered to be great ways of getting income from real estate. This is true, but only in the sense that real estate is the underlying security. With a REIT, the owner of multiple commercial properties sells shares to investors – usually to fund the purchase of more properties – and then passes on the rental income in the form of distribution. The REIT is the landlord for the tenants (who pay rent), but the owners of the REIT get the income once the expenses of running the buildings and the REIT are taken out.

MICs are even a further step removed, as they invest in private mortgages rather than the underlying properties. MICs are different from MBSs in that they hold entire mortgages and pass on the interest from payments to investors, rather than securitizing the interest streams independent of the original mortgage. Still, they are not so much real estate investments as they are debt investments. Similar to securities with real estate underlying the investment, most of the alternative “blow your mind with super fantastic return” methods are merely a layer on top of these two basic streams of income.

For example, there are informal residential real estate options where you pay a fee to have the right to buy a house at a given time, say after a month, for an agreed upon price. Then, you find investors who will pay more than your option price for the property. In this case, the premium you get is essentially a finder’s fee for matching a person looking for an investment with a person looking to sell – no different than a real estate agent. Although this is income, it doesn’t come from buying (i.e. holding the deed to) a piece of real estate.

Similarly, no money down or OPM deals are simply the financing aspect of the deal – it doesn’t change how the buyer is planning to make money in the long run.
The bottom line is that iff someone is trying to sell you on a new way to make money in real estate other than buying low and selling high or collecting rent, they’re probably trying to sell you on the process of real estate investing, rather than a new mechanism for making profits. Whether the process is worth it or not is up to you, but know that it doesn’t change how the money will be made (or lost) in the end