BUILDING YOUR FINANCIAL HOUSE
Reality TV really doesn’t compare to real life! This summer we have been privileged to work with a client that is turning their old family cabin into their dream home. Fabulous location, great designs and hundreds of tiny decisions about the project.
Technically, this is an “addition” (by permits). But in many ways, we are helping to create a new home. The foundation has been expanded, the main floor is also larger, and there is a fun loft space being added. As we work through the Covid complexities, we can’t help but notice: building a physical house has many similarities to building a financial house (for example, a real estate portfolio).
At some point, almost every investor asks, “where do I begin?” This project began in the fall of 2019, with architect drawings. Then there was the permit process, intermingled with designer details for the interior. As investors, some people wing it, but others start off with a vision of where they want to go. Even if that vision simply narrows down the type of investment property you want to pursue—you still have a basic design to work from.
Then there is the all-important foundation. Cut corners here, and the whole structure has less stability. For this house, the basic foundation needed to be built to a “100 year flood event” standard. Just the rules of the game for this location. What are your foundation “rules?” For many investors, they need some education, and/or great partners, and/or a great team of advisers. With these key elements, their financial house is built with strength and confidence. Sometimes the foundation takes time, and in other cases investors need to go back to re-create parts of their foundation.
When the time is right, the house moves forward to framing. This is where the vision starts to really take shape. Basic raw materials are delivered; then each piece of lumber is put into place. Walls are created, then rooms and roofing. While the homeowner carefully supervises, a team of experts secures each 2 X 4, each 2 X 10, each joist hanger, etc…. Similarly, an investor works with expert real estate agents to source out the best products for their design: each single family home, each ugly house for a flipper, each door for the multi-family investor.
The vision determines the budget and many of the other details. If your real estate investing journey simply involves one home, at one price point, the next steps flow systematically to complete the project and rent it out. On the other hand, if your financial house is more like a custom home build, then there is ongoing attention to every detail.
Windows and roofing will arrive (eventually in Covid times). Electrical and plumbing rough-ins can occur concurrently with other project items. Drywall, cabinets, and finishing work all help to proceed towards the final goals. Each new element further creates the custom house, or the custom financial portfolio.
After 14 years of renovations, one thing we know for sure is that everyone changes their mind about something along the way. For investors, sometimes this is as simple as shifting to a new street in the same neighbourhood. Or it may be as dramatic as shifting from suited homes to multi-family properties. It’s your vision, whether it’s a house, or a real estate investment portfolio. Careful supervision and re-assessment is absolutely necessary along the way.
And because we like to “keep it positive AND keep it real,” we know that there will be challenges along the way. For a homeowner, what good is a half-built house? It doesn’t function as a shelter, and there are definitely no bragging rights! As an investor, no one ever wants to give up on their custom financial home—Covid or no Covid. So if a piece isn’t available, what can be substituted? If a product is unreasonably delayed, what are different product choices? If a tradesperson is backed up for 2 months, can someone else do the job the same or better? Or for investors, if a house doesn’t cashflow in one area, what other communities are out there? The architectural design stays basically the same, but adjustments are made as the house develops.
We are truly lucky to be able to co-create this home. And we are truly determined to continue creating our own financial freedom. What is the next piece or phase for your financial house/freedom?
