See Nick in his ugly Christmas sweater above?
Might be hard to make out...but trust me, it was ugly, LOL!
Last night we hosted Rock Star Inner Circle VIP members for an evening chat that covered robotics, Artificial Intelligence, leverage with real estate, and how the existing economy is likely at a very important inflection point.
You know, fun geeky money stuff!! We love it.
What better way to spend an evening right?
Over the course of our lives, we've found the greatest financial gains have come from riding trends.
So studying the economy is an attempt to identify the next great trend and get on board early.
One of the greatest things that's happened accidentally with Rock Star has been the quality of people in the room at these events.
Last night, Jason, one of the very first Rock Star members ever, gave a talk on robotics and the latest installations and use cases.
Jason is a very high-level senior executive at one of the companies in Canada selling and deploying robotics all across North America.
To get an update directly from him was super insightful.
And he gave the talk with a beer in his hand, what better way to do a presentation right?!
As Nick and I reflect back on some of the best decisions we've made around money and building some financial freedom for ourselves, it has become obvious that focusing on one asset class has been much better than diversification.
We managed to get an "information advantage" on one thing and then leveraged that to the best of our abilities.
Our primary focus was and still is single-family residential resale real estate.
Not large apartments, not commercial, not land, not industrial, not new developments.
Boring, starter homes in good areas.
We could operate them as student rentals, regular rentals, duplexes and rent-to-owns.
They are the easiest to get financing for, they are the easiest to refinance, they have the lowest vacancy rates, they are the most liquid type of real estate in Canada.
It's why the Canadian banks have the most lending options for them...they know if they have to take them back they can sell them fairly easily.
In this space you're also not competing against the big money players, the REITs, the pension funds, the hedge funds, or the big money developers.
And the best part, the banks offer some insane financing options.
You can put 20% down and the bank will give you an 80% mortgage.
It's that leverage that is really the magical part of real estate.
Since 1969 in the Greater Toronto Area, real estate has gone up on average approx. 7% per year.
When you put only 20% down, that 7% is a 35% return on your money.
It's that leverage, if you can survive it and don't overextend yourself, that allows you to outpace the annual increase in the cost of living.
Our money supply in this country grows on average 8.5% per year since 1969.
That's a horrible amount of debasement of our dollar's purchasing power.
And it's why most Canadians, unfortunately, are always left wondering why they can't save. When you have 8% debasement per year you have to grow your finances by at least that, every-single-year, to just stay even.
It's why, for all the problems real estate investing has, you need that leverage (the possible 35% per year gain) to "get ahead".
It's always why you meet very few people who get ahead financially in any other asset class. It's very difficult to beat that 8.5% annual debasement rate.
A "diversified portfolio" that is sold to us by the financial industry is likely not going to do it.
Heck, 493 companies out of the best stock index in the world, the S&P 500, can't do it. Only 7 companies this year, out of 500, crushed that rate this year.
All the others fell below that, coming in at 6% so far this year.
All of this leads us to the 3 bucket strategy that has served us so well.
In the image above, Nick is standing in front of a graphical description of it.
When you're starting out you need to build up some short term savings and liquidity. That's Bucket #1.
Once you have that, you can deploy some of it into income-producing assets. This is Bucket #2.
Ideally, you want self-liquidating assets, meaning that they pay for themselves. And if you can do this with smart leverage you can really propel your wealth building.
And for us, this is obviously residential income properties, those single-family, starter homes.
And then over time as you build up some net worth you want to protect it. So you transition some of your efforts and equity into Bucket #3, your long term savings.
If you leave your equity in assets that don't grow as fast as the currency is debased then your hard work ultimately gets eaten away.
So the choice of Bucket #3 is important. For us it was gold, it's now Bitcoin. It's very clearly Bitcoin for more reasons than we have time to get into today.
(Aside: We get a lot of questions on Bitcoin and where to buy it. In Canada our favourite place is Bull Bitcoin, we love those guys. If you go to them via RockStarBTC.ca you'll get $20 in free Bitcoin when you fund your account! And they are super helpful, can't say enough good things about them.)
Most people, we have found, don't focus on Bucket #2.
They get some short-term savings and life money in Bucket #1 and will move some eventually to longer term savings but very few do a deep dive on Bucket #2.
If you're not getting ahead financially we would challenge you to really focus your efforts on that Bucket.
What strategies are you using? Are you overly diversified?
How much time are you spending learning about the types of investments in that Bucket?
Do you know anyone who is getting ahead financially with the strategy you're currently using?
And don't let the standard objections hold you back.
You know the comments of..."it's too late, prices are too low, prices are too high" etc, etc.
There is always opportunity if you have an information advantage.
Study, research, learn something very deeply and opportunities will emerge for you.
The future is bright!!
If haven't started yet, time to get your 3 buckets going.
And if you have been at this for a while but don't like where you are, time to get more detailed information on where your 3 buckets are focused and change accordingly (and quickly!).
This week we have brand new Rock Star Minutes for you, brand new podcasts (have you listened to the Lyn Alden one from last week yet?) and we're hosting a live introductory real estate training class soon too!
All in attempt to share as much as we can!!
You can grab a seat at the next class on Tuesday, December 12, by visiting:
Enjoy your week!!
Tom & Nick.
p.s. We're typing this out on a flight to Florida today, there are 50 Rock Star team members and investors flying in to check out some newly built, single-family rental properties in the Jacksonville, St. Augustine and Palm Coast area. Fun times!! Sunshine here we come!