Historical article note: This article was originally published on 2018-08-14. Rates, policies, home prices, statistics, product names and qualification standards reflect the environment at that time and may have changed. This archive is for historical record and general education only. It is not mortgage approval, investment, legal or tax advice.
The real estate investment we usually talk about actually refers to the small-scale private investment behavior of using civilian residences as collateral, obtaining a mortgage loan, buying a house and renting it out, collecting rent, holding it for a long time and then selling it, and ultimately realizing arbitrage. I call this kind of investment "private real estate investment", which is equivalent to retail investors investing in stocks. Ordinary salaried workers can quickly accumulate assets through leverage and the low interest rate period. However, few people have studied such a good investment, and there are almost no relevant monographs. There are tons of books on stocks. I participate in a radio program on financial management topics as a guest every Wednesday. The previous guest talked about the capital market, and what he talked about was market information. What I talked about were the basic strategies and tactics of private real estate investment, as well as the most basic psychological preparation. I’m not very sure. Is it true that everyone has read a lot of books and already understands the basic strategy of the stock market? There is no need to explain it at all and only market information needs to be updated? Or are there too few people who know about private real estate investment, and we still need to start with the most basic investment methods? In short, I think that for private real estate investment, market information is useless and does not need to be discussed. Many people in Moments and forums constantly update the latest data on real estate transactions. I personally believe that this information is actually noise for private real estate investment and cannot be used as a basis for making investment decisions. The basic principles, principles and psychological preparation of private real estate investment need to refer to some basic elements summarized and summarized in financial management books. Today I would like to recommend a book that introduces investment principles and extracts some relevant ideas for reference by private real estate investment enthusiasts. This book is "The Road to Financial Freedom" written by Mr. Li Xiaolai.
People who invest live in the future. Teacher Li Xiaolai divides people into two categories: expressive personality/be good type and enterprising personality/be better type. People with expressive personalities don't care about good, bad, right or wrong. They only care about whether they "look good". People with expressive personalities live in the present. Such people only feel safe when they follow the crowd and are the same as most people. They never dare to be unique, so they have no chance to be unique and correct. Even if people with expressive personalities are very interested in investing, their investments almost always fail. They always have the same feeling after every investment - "early death and early rebirth." People with enterprising personalities live in the future, focus on growth, don't care whether they "look good" today, and have the courage to do unique and correct things. People with enterprising personality live in the future. Specifically reflected in Toronto real estate investment: When the market was at its craziest in March 2017, many people rushed into the market to buy houses, fearing that they would miss the opportunity to make a fortune and that they would "look bad" compared with "others". These people are people with expressive personalities. At the beginning of the new year of 2018, the market was in a downturn, but people with enterprising personalities quietly began to enter the real estate investment market. The future is a mirror image of the present. From an investment perspective, the future is exactly the opposite of the present - if you want to obtain high returns in the future, you must buy when the current price is low. People with an expressive personality live in the present, buying high and selling low; people with an enterprising personality live in the future, buying low and selling high. Teacher Li Xiaolai’s conclusion: “In the end, people who live in the future must have more wealth than people who live in the present.” Let me add one more point: character determines destiny. If character does not change, wealth will not change. No matter how many wealth lectures you listen to, it will be in vain.
The correct need is to make money, not spend money. Correct rigid needs are the source of driving force and are the result of choice rather than innateness. Many people dream of getting rich, but why do things always go against their wishes? Because if you choose to get rich as your immediate need, you are actually choosing to spend money as your immediate need. How can you accumulate wealth by spending money? Just ask those people who want to get rich all day long. You will know what they will do after they get rich - drive a good car, live in a big house, and travel. . . . Only a very small number of people just want to make money. Take the example of real estate investment in Toronto: Many real estate investors already own several investment properties, but they still only drive second-hand cars; on the contrary, people who do not own an investment property carry huge car loans and drive luxury cars. The difference in rigid needs ultimately leads to huge differences in wealth distribution among people. All progress and growth is a process of re-selecting rigid needs. There are two core factors in "right necessity": patience and status quo. Only those who live in the future have real patience, and the cultivation of financial intelligence requires the most patience. Many people are short-sighted. If it doesn't take effect immediately and see the money immediately, it doesn't count as investment. People who just need to see profits immediately will lose all their principal before the day they learn financial intelligence. I talked with two visitors for nearly an hour last week, and when they left, they still believed that buying, renovating, and selling were the correct ways to invest in real estate. However, when I talked about buying, holding, adding more mortgages, holding again, adding more mortgages, and finally selling, they thought it was too slow. The status quo is the accumulation of the past. Those who are dissatisfied with the status quo have not accumulated enough in the past and have not learned enough. The only way to change the status quo is to accumulate from now on. Ideas and practices to change the status quo immediately are against time and the laws of nature. The more urgent it is, the less likely it is to change the status quo.
Cycles cannot change the trend, and the trend requires at least two cycles to be determined. Why do so many people who explore the future, try new businesses and new ideas die before their ambitions are fulfilled? Whenever a huge technological change occurs, a group of investors "die" on the way? The reason is that no big development trend can be seen at all before going through two economic cycles. The last low point of the Canadian real estate cycle occurred in 2008, and this time it occurred in 2018. If you draw a line between the housing prices at the low points of the two economic cycles, the trend can be clearly seen. I don’t understand why people always ask me when the real estate market will pick up. It is impossible to predict the market in the near future, but the prediction of the long-term is the prediction of the trend. The result is certain, it will rise. When it will rise and how much it will rise, no one knows.
Long-term investment is the time it takes for your income to be four times your investment. Many investment books warn investors to make long-term investments and not to gamble in the short term. But long-term, how long does it mean, specifically how many years? Teacher Li Xiaolai’s answer is: when selling assets, the time it takes for the return to be four times the principal. If your investment is managed by Buffett, the annual return rate is 21%, and 6.8 years is considered a "long-term" investment. If you invest in a Toronto condo apartment with a down payment of 70,000, the tenant will pay for the loan and other fees, and there will be no additional investment. The time it takes to get 280,000 when you sell it is "long-term." If the income when selling an asset is twice the principal, the time spent is considered the time corresponding to "mid-term" investment. It can be seen that because people with high financial intelligence spend a short time in "long-term" investment, financial intelligence can make people live longer.
The safest investment strategy is to buy low and sell high. This strategy may seem nonsense, but look at the situation of real estate investment in Toronto and you will understand: when housing prices are high, people rush to buy, but when housing prices are low, they dare not buy. Many "reachers" always ask me the same question: "I want to invest in real estate. When will the real estate market pick up?" To me this is an invalid question. Why should we invest in real estate after housing prices rise? Do you want to buy high and sell low? Ask anyone who bought a home at the highs of early 2017 how it felt to do so.
Teacher Li Xiaolai's "The Road to Financial Freedom" answers the most basic questions of many investors very directly and simply. The answers to these questions are essential qualities for every investor. Many investors, whether they are investing in real estate or stocks, fail because they have no investment literacy. It is recommended that everyone read the full text of this book. As long as you understand the content of the whole book, you will not make basic mistakes. Whether you can make a profit depends on your own practical experience. I have only excerpted less than 10% of the essence of the book. To put it all together, I will give you a basic idea for investing in real estate in Canada: Those who feel that they are living well now and do not want to plan for the future do not need to make any investments. Only those who dare to be responsible for the future and do not want to rely on government relief will work hard to learn and practice investing; gratification cannot be postponed People who are sentimental cannot make investments, and people who regard accumulating wealth for the future as an urgent need and who grit their teeth and work hard without being able to enjoy themselves can make investments; people who are impatient cannot make any investment, including real estate investment, because real estate investment will not see cash at all for more than 10 years, or even decades, and people who want to count their cash every day have no patience. Real estate investment; People who do not believe that people who come to Toronto to rent or buy houses in the future will be more able to afford it than people now, and people who do not believe that Toronto will be more crowded and housing prices will be higher in the future, cannot invest in real estate in Canada; people who cannot see the trend clearly will "die" in the cycle, but no country's economic development develops in a straight line and does not go through any cycles. , people who are afraid of the cycle cannot do real estate investment; people who have no long-term plan and earn 4 times before quitting cannot make big money, and can only make a few small profits by speculating; people who dare not buy low cannot do real estate investment and follow the trend and can only buy high and sell low. Sooner or later, they will be swallowed up by the market, and provide investment profits for those who have the courage to enter the market when the market is down.