Step 3 – Prep

Clarity Call

Sometimes, before people sign up for full-on coaching, they want to do what we call a Clarity Call (or a clarity session).

What’s that?
It’s a one-hour zoom call (or skype session) where we try to determine if there is a match between coach and coaching client, and what kinds of things will be dealt with during coaching. There is usually a charge for this, but it is not a significant investment, at least in terms of money.

What do you get from your CLARITY SESSION with Prof Bruce?

  • develop your real estate and PB4L business models
  • set out your financial goals
  • review together where you are at today
  • know exactly where you want to go
  • know exactly how to get there
“Risk comes from not knowing what you’re doing,” Warren Buffett

EACH SESSION IS INDIVIDUALLY-TAILORED TO YOUR NEEDS AND CONCERNS…

Preparing for your clarity session

To get ready, here’re a few things for you to do:

  1. Watch this 12 minute video, How to really provide for yourself and your family,

https://www.youtube.com/watch?v=0yXycpt6axo&list=PLd3QdcBlEm99ne8FcvIotTgjBmtSxEmuB&index=1 

  1. Read this, Why You Should Treat Even Your Principal Residence as If it Was a Rental,

http://profbruce.tumblr.com/post/153639912969/why-you-should-treat-even-your-principal-residence [After you’ve read the blog post, please watch the Robert Kiyosaki video at the bottom but only after you’ve read the article—about a 1-hour long Kiyosaki video but worth it ?]

  1. Read this too, Warren Buffett Methodology Applied to Real Estate Investing,

http://profbruce.tumblr.com/post/155903593104/warren-buffett-methodology-applied-to-real-estate

  1. Can you also prepare your PBS (personal balance sheet)? We attach a couple of samples for you to use.
  2. Next, complete the form what interests you most in real estate (also attached).
  3. We also want you to think about what type of PB4L, personal business for life, you might want to build or, if you are already doing one, how you might want to develop it further.

There is one more form attached—your goals form. Have a look at it but DO NOT COMPLETE THIS ONE. We will do it together on the call ?

Last thing, can you send us your DETAILED agenda at least 3 days before our call so I can prepare? What are your burning questions/problems/opportunities?

Regards,

Bruce

[Editor’s note: the forms mentioned above are all included in Practical Magic. Please refer to the table of Contents above or search this document (if you have an e-copy of it) using ctl “F” on your keypad.]

What interests you most in real estate? 

Alright, time for you to do some more work.

Use five stars for areas you are most interested in, one star for least:
  1. Own my own home
  2. Residential rentals
  3. Industrial property
  4. Industrial condos
  5. Small shopping plazas
  6. Commercial real estate
  7. Cottage property
  8. Farmland
  9. Mini storage
  10. Land development and land ownership
  11. Green building
  12. Tech package/smart building technology
  13. Financial analysis
  14. Financing
  15.  Animating real estate/adding differentiated value
  16. Entertainment uses/adding leisure and recreational components to real estate, residential, rural, agricultural or commercial
  17. Mixed use
  18. Institutional uses
  19. Charity and NFP (not-for-profit) uses
  20. Property management
  21. Mortgage brokerage
  22. Real estate brokerage
  23. Forming an investment group/running it
  24. Becoming a home stager/designer
  25. Becoming a building inspector
  26. Understanding urban planning, zoning, severances, subdivisions and bylaws
  27. Becoming a renovator/contractor/constructor or sub-trade
  28. Marketing real estate
  29. Becoming a real estate investment or PB4L co-coach
  30. Other, please specify:
    _________________________________________________________________________________
What resources are available to you? [circle that which applies and write down the amount available]
  1. Cash
  2. RRSPs, LIRAs, TFSAs. 401(s)s
  3. Home equity
  4. Unsecured LOC
  5. Credit cards
  6. Partners
  7. Friends, family and fan funding
  8. Investors
  9. Other, please specify: _________________________________________________________________________________

 

Do you want a partner(s)?
  1. Yes
  2. No 
Do you want to—

1.    Buy, add differentiated value, animate, manage, hold and refinance like famous investor Warren Buffett

2.    Trade/flip 

I am—
  1. Very risk averse
  2. Tolerate risk well


I am—
  1. Prepared to work hard/put in a lot of sweat equity
  2. Want to do the minimum

 

I want—
  1. An operating business
  2. Passive income

 

I am prepared to—
  1. Do my own property management
  2. Contract it out


I am—
  1. Tech savvy
  2. Social media and marketing savvy
  3. A novice at both

 

I am—
  1. Very handy with tools and construction and maintenance
  2. Not sure which part of the hammer to hold

 

I—
  1. like selling
  2. hate sales with a passion

 

There is a history of entrepreneurship in my family—
  1. yes
  2. no

 

I—
  1. Want to have a PB4L
  2. Running a PB4L just isn’t for me


My credit score is _______________ 

Visit CreditKarma.ca for your free beacon score (using this site, does not affect your credit rating), it will look something like this:

In five years’ time, I would like to/I see myself doing—

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ 

My Personal Balance Sheet

 

Did you know that you can run even the largest businesses knowing just three things?

 

1.    your AR, accounts receivable, beginning and end of month

2.    your AP, accounts payable, beginning and end of month

3.    your bank balance, beginning and end of month. 

Of course, you’ve already guessed what I am talking about… these three variables are all you need to see to know what is happening to your cashposition. Cash doesn’t lie[1], but accounting statements can certainly mislead, even those prepared under GAAP (generally accept accounting principles) rules. There is lots of flexibility in those rules so financial statements can get quite creative even without being fraudulent—for example, they can push some expenses to next quarter and bring some revenues forward to this quarter so profits look better and stock price reacts too, upwards, at least in the short term.

Savvy investors track cash. So do smart owners, CEOs and presidents. Let me repeat, “Cash doesn’t lie.”

Here’s how it works—if your bank balance during the month has gone up, and your AR and AP are unchanged, this is a sign that your business is doing well, growing. If your cash balance during the month has gone up, and your AR is unchanged and your AP has gone down, this is a sign that your business is doing really well—your revenues and profits are growing and you are using that to not only increase cash on hand but to pay off debt…

However, you can have a situation where your cash balance is going up but your AP has gone up even more, which means that the only reason you have more cash on hand is that you are not paying your bills, which is bad.

… 

The above discussion about cash and balance sheets is one of the reasons why we put so much emphasis on only buying property that cashflows. It gets old in a hurry having to reach into your jeans every month to subsidize a real estate investment. This is just as for from businesses, including hockey teams so make a real, cash profit… every month if you want to be HAPPY.

You know what they say about the NHL? 

  • The 2nd happiest business day of your life is the day you acquire an NHL team
  • The happiest? The day you sell it…

Even though balance sheets can lie, it’s still very useful for you to create a PBS, personal balance sheet (see example below). This is a surefire way to keep track of everything and, if you study yours from time to time, you will find things you own, you probably should divest, and others where you should double down—renew your focus and increase your efforts.

Produce this and look at it with us to see how it can be improved. 

Now have a go at your own: 

Summary of Assets Owned or Controlled

My name ………………………………………………………………………………………….                             

Quarter: Q1 Q2 Q3 Q4 [STIKEOUT THAT WHICH DOES NOT APPLY]

Year: 20__           

ASSETS                                                                           

Cash & Marketable Securities

$…………………………………………………..                                                   

Registered Pension Assets, LIRAs & Pension Entitlements

$…………………………………………………..

Furniture

$………………………………………………….     .                                                                                  

Real estate 1:

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

Real estate 2

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

Real estate 3

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

Real estate 4

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

Real estate 5

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

Real estate 6

address …………………………………………………………………………………………………………………………

FMV, fair market value

$…………………………………………………..

Mortgage amount

$…………………………………………………..

NOI, net operating income

$…………………………………………………..

Purchase price including closing costs, renovations and repairs

$…………………………………………………..

PB4L FMV

$…………………………………………………..

Tools and Equipment

$…………………………………………………..

Vehicles

$…………………………………………………..

OTHER ASSETS

$…………………………………………………..                                                   

Total Assets

$…………………………………………………..                                                              

                                                                                                    

LIABILITIES                                                                              

Real estate 1:

MORTGAGE    $…………………………………………………..

Real estate 2

MORTGAGE    $…………………………………………………..

Real estate 3

MORTGAGE    $…………………………………………………..

Real estate 4

MORTGAGE    $…………………………………………………..

Real estate 5

MORTGAGE    $…………………………………………………..

Real estate 6

MORTGAGE    $…………………………………………………..

Credit card 1       $…………………………………………………..                                                           

Credit card 2       $…………………………………………………..

Credit card 3       $…………………………………………………..

Credit card 4       $…………………………………………………..                                                                                               

HELOC                 $…………………………………………………..

Car loan               $…………………………………………………..

Personal loans    $…………………………………………………..

Business Loans  $…………………………………………………..

Other liabilities   $…………………………………………………..

Total Liabilities           

$………………………………………………...

                                                                

Net Assets                                                         

$…………………………………………………..

                                                                            

Contingent Assets                                                                                                         

                                                                                                    

     Life insurance                                               

$…………………………………………………..

                                                                

Contingent Liabilities                                                                                                    

                                                                                                    

     3rd party loan guarantees                

$…………………………………………………..

CONFIDENTIAL                                                                                                 

E&OE                                                                                                                                 

My Real Estate Goals for the next 12 years

Now this gets a bit trickier.  Study the table below.

In column 0 (time zero): insert properties you currently own; eg, your own home, land or lot, residential rental property, commercial or industrial property.

In columns 1 to 12 representing years 1 to 12, indicate what type of property and their expected costs (purchase price plus closing costs plus financing fees plus renovations) for properties you plan to add.

In the row highlighted in green, write down your target cap (capitalization) rate for each property. If you are not sure how to calculate a cap rate or what it is, see the next section.

In the row highlighted in yellow, multiply the cost of each property by the cap rate to show how much net operating income (NOI) you are currently receiving from your portfolio or expect to earn from your portfolio after you retire all your mortgage(s).

Add all the numbers together to show your total passive NOI from your portfolio in year 12, and write it in the turquoise space.

above discussion about cash and balance sheets is one of the reasons why we put so much emphasis on only buying property that cashflows. It gets old in a hurry having to reach into your jeans every month to subsidize a real estate investment. This is just as for from businesses, including hockey teams so make a real, cash profit… every month if you want to be HAPPY.

 

0

1

2

3

4

5

6

7

8

9

10

11

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

%

%

%

%

%

%

%

%

%

%

%

%

%

$

$

$

$

$

$

$

$

$

$

$

$

$

 

TOTAL NET OPERATING INCOME FROM MY PORTFOLIO

BY YEAR 12 = $__________________ PA

 

To put this in perspective, I would need to save $____________________ in cash to generate the same income from a 1.7% return on my financial investments…

 

I hereby agree to do my utmost to reach my real estate goals,

 

__________________________________________________ (signed) ________________________ (date)

 

 

If you aren’t 100% clear on the concept, read this micro case study.

Taha came to see my shortly after his 71st birthday.

He told me, “Prof Bruce I’ve done everything they told me to do. I own my own home in Ottawa for $650,000 with no mortgage on it and I’ve saved $750,000 in RRSPs. I just got back from a visit with my financial adviser. He tells me I have to turn my RRSPs into a RIF (retirement income fund) this year, which will provide me with a guaranteed income for life of somewhere between $18,000 and $22,000. I can’t support my family on that. What am I going to do?”

So he went through my coaching program and decided he didn’t really like residential rentals so, apart from adding a legal basement apartment to his principal residence, he decided to purchase a mini storage business.

His legal basement apartment has a 9.5% cap rate and he eventually got his mini storage business to an (amazing) 12.25% pa cap rate.

So his retirement income (from his two real estate holdings) ended up being $100,900 per year after he retired his mortgage on his mini storage biz, a big improvement wouldn’t you agree?

Taha’s wife certainly would. Not only is there future secure, their kids and grandkids will benefit too. Why? Because their exit strategy is to die. I’m not kidding. More on that later.

She would also agree because Taha built himself a mancave and is now out of their home from 7 am til 1 pm Tuesday to Saturday.

She also finds he is energized by the work, by meeting potential clients, by thinking up and implementing new animations and programs for his small business. He is also much less stressed over their financial future.

Now you might think 71 is too old to be coached but the age range for this type of Prof Bruce coaching is around 25 to folks in their 80s, many of whom are still doing cool things.

You want to know what the difference between an old person and a young one? Well, it isn’t the number of times you’ve traveled around the sun that matters—it’s whether you are open to learning new things. I know old 30-year olds and young 93-year olds. The difference? The young person thinks, I know everything, no one can teach me anything cuz I know everything. The moment you think like that, you’re old.

I learn new things every single freaking day from my clients. Sometimes it’s overwhelming. And I’ve said it many times: “It’s so much fun, it should be illegal!”

 

Now how the heck did Taha get his cap rate that high?

He did it in two main ways: 1) he is on-site a lot and nothing beats having a living, breathing, caring owner on-site in terms of closing sales, improving client retention and customer satisfaction, and 2) by being focused, present and mindful, he discovered ways to animate the place; ie, he added new revenue streams.

 

“Never invest in a business you cannot understand,” Warren Buffett

 

What types of animations?

 

-he converted one mini storage building into a successful flea market (with car storage in winter time)

-he graveled his vacant land and started parking (and charging for) RVs, trucks, loaders, dozers, semis, excavators, boats and other equipment

-he started accepting tires for storage 

For Taha, the harder he works, why the luckier he gets…

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