Jacqueline Ross, CCIM

Why Women Make Great Investors

Women & Business: Too Nice to be Successful or Too Successful to be Nice?

Role Models Don’t Tell – They Do

Role Models come in many different shapes, sizes and forms and are so significant in our lives that they often have a profound and lasting impact, sometimes without even knowing it.

I am so fortunate and grateful to have a wonderful Dad in my life to look up to and love.  He may not always put into words all the things that he’s thinking or feeling but I know without a doubt that he cares deeply and listens without judging and will always be there.

In some ways, I think my Dad knows me better than just about anyone.  He knows that when I set my mind to do something, I’ll find a way to do it.  He knows that I won’t back down to a challenge or a puzzle and will persist stubbornly until I find the solution (preferably before anyone else!)   He knows that I’ll spend whatever time is needed to get something ‘just right’.  He knows that I’ll fiercely defend and protect and support those that I love, even though I might not always agree with them.

He knows because more often than not, it’s exactly what he’d do, too.

I’ve watched and learned and grown so much thanks to my Dad.  He encourages me to always follow my heart, to always seek new challenges, to always strive to be the best that I can be, even when if it means I’ll be miles away from him in another country.  He may not like it but he always supports and encourages, and makes every effort to somehow help it all work out.

I shouldn’t be surprised.  My Dad is part of a long line of great men in my life; men of character, men of strength, men of principle.  They are my uncles, my brothers, my cousins, my colleagues, my mentors, my friends, my husband.  I love and admire them, quirks and all.  Whether they know it or not, each of these wonderful men have had an impact on my life.

I am so fortunate and grateful to have the benefit and wisdom of a great Dad and many wonderful Father Figures in my life.  I am thankful that my son will also have such positive and strong role models to admire and look up to.  They won’t tell him what to do, but rather will do it, and their impact will be that much more significant for having done so.

Happy Father’s Day!

<Shared from a previous post>

Reflections & Realignment – Happy New Year!

This time of year is always a favorite around here, not just for the festivities and joy that always seem to accompany the holiday season but also for the precious extra time spent with family and friends, relaxing, catching up and just enjoying each others’ company.

The holidays offer a much-needed break from our regular routines, which in turn always bring a fresh, new perspective and the opportunity for reflection and realignment of values and priorities.  I’m always reminded of what is most important to me because of all the positive feelings and happiness this time of year brings. 

Values & Priorities

It’s far too easy to get off-track and caught up in this world of distraction and pressure.  In an effort to try to ‘do it all’ or to please others or to ‘do the right thing’ or sometimes without even realizing, many of us add items to our daily workload that really aren’t in alignment with what we value.  Moreover, we add without subtracting or adjusting to help keep our lives in a healthy balance, both physically and emotionally, at work and at home.  

Have you ever had your nose so closely to the grindstone that when you finally look up you wonder, How on earth did I end up here?!

Since we can only do so much, it’s important that what we choose to do is aligned with what we truly value.

Reflection is a powerful tool.  Taking time to think about what is and is not serving you well is the first step to designing and living your best life.  That’s YOUR best life.  Not the Jones’, not what your mother or me or some guru or anyone else thinks is best for you.  If you take nothing else from this post, remember that your life does not have to be patterned in a certain way or resemble anyone else’s life.  

Sometimes we think we want or need certain things like a particular job or car or house because it’s expected or it’s the ‘next step’ on the road to success.  Unfortunately, that’s the kind of thinking that can lead us into a vicious cycle of unnecessary consumerism and debt and general unhappiness.  Success can be measured in many ways but I believe it ultimately comes down not to how much stuff a person has, but to simply being happy.  

In a previous article, I talked about living and spending in accordance with personal values and priorities.  Spending is an important part of living here in North America.  How we choose to spend our time and our hard-earned dollars has a direct impact on our quality of life and overall happiness.  Reflecting on personal choices and making sure that our actions and spending of time and money is in alignment with personal values and priorities is, I believe, the key.

Reflect & Realign

Take some time this holiday season to really think about what you truly value:  Education?  Travel?  Independence?  Work?  Family?  Health?  Examine what each one means to you and think about its current place in your life.  Be honest with yourself and try not to think about what is ‘right’ or expected; just focus on what is important to you.

Reflect on those values and on your top priorities.  How do they factor in to your life today?  Do your current goals reflect what is truly important to you?   Does your current routine reflect your highest priorities?  If you value time with family but are spending all your time at work, then your actions and choices may not be in alignment with your values.  Where might you need to make some adjustments?  

Don’t stress if you feel your life is a little ‘out of whack’ and certainly don’t compare yourself to anyone else!  Realigning your choices with your values and priorities may take some time depending on how long it’s been since you last reflected and how far off track you may have wandered.  Simply identify what needs to be adjusted, make the changes you can now and then incorporate the rest into your list of goals for 2013.

“No matter how long you are traveling down the wrong road, when you figure it out, turn around.” ~ Turkish proverb

Holidays, breaks and vacations allow us to take a step back from our everyday projects and challenges, and to really see the big picture of our life.  Enjoy this special time of year and make sure you are spending your time and money on the things that make you truly happy!

‘Long Arm of the Law’ Gets A Little Longer for US Taxpayers in 2013

US citizens and residents with funds and/or investments in foreign banks or companies have just less than 6 months before this sneaky legislation from the 2010 Hiring Incentives to Restore Employment (HIRE) Act takes effect in January 2013:

“Any funds transferred from the US to any overseas account are subject to a new tax equal to 30 percent of the total amount of the payment – unless the payment is sent to a foreign bank that has agreed to report all American-owned accounts automatically and electronically to the US government.”

The IRS provides a summary of key Foreign Account Tax Compliance Act (FATCA) provisions of 2009 which were expanded in relation to the components of the HIRE Act of 2010 intended to raise revenue to ‘off-set’ the costs involved with the HIRE Act and to enforce compliance of the additional disclosure and reporting requirements.

Stiff penalties are involved for those individuals failing to disclose and report foreign assets and financial accounts – $10,000 for the initial infraction up to $50,000 for continued non-disclosure.  In addition,  the penalty for any portion of an underpayment of tax on  non-disclosed gross income and assets increases from 20% to 40% of the understated amount.  

Tools of the Financial Trade: Real Estate Investment for Building Wealth

This is the second in a series of articles about Real Estate Investing as a Financial Tool.  Read the series from the beginning or click on the links below to learn more about each of the strategies presented.

Real Estate Investment is a versatile financial tool and can be used to help achieve any or all of these investment objectives:

• Wealth Building
• Portfolio Diversification
• Tax Advantages
• Appreciation Potential
• Cash Flow Creation
• Community Support

Wealth Building

Real estate investments can help you to acquire assets capable of growing equity and increasing investment capital.  This strategy can be applied quickly or slowly over time, depending on the project, goals, individual capabilities and appetite for risk.

Fast Track

‘Flippers’ use real estate as stepping stones to amass lump sums of equity in a relatively short period of time.  Most often, they purchase a property at well-below market price (often foreclosures or fixers), then turn around and sell as quickly as possible for a profit.

This can be a great way to build significant capital in a relatively short period of time (less than a year).  However, it can come with some significant drawbacks, notably the time, expertise and labor required to prepare the property for resale, higher taxes on short-term gains, and of course the ever-present profit-eroding ‘Unexpected’.  This includes repairs, property expenses, debt and carrying costs, market changes, purchase/sales costs, selling period, etc. that weren’t adequately planned for or anticipated.

It’s easy to get excited when calculating all the potential profits on a transaction but many people forget to also prepare a potential ‘worst-case scenario’ or a contingency plan for the unexpected or underestimated costs that are bound to come up.

Since profits from this method are usually only realized when the property sells, having to hold it even just a few months longer than anticipated can quickly erode returns, especially if financing is involved.

Similarly, many people purchase new construction homes with little or no money down with the intent to sell in a year or two as phases are added, the neighborhood stabilizes and values appreciate.  In the 2008 housing market crash, many buyers purchased without proper due diligence and adequate investment capital.  When financing froze and home sales literally came to a screeching halt, people found that they were unable to sell, unsuited to being an impromptu landlord or unable to afford the monthly costs of owning a rental home, in some cases even with a tenant in place.  Timing is a critical factor, especially when banking on future profits to make up for interim negative cash flow.

Building wealth rapidly is an exciting prospect but be sure to do your homework up front.  Inexperienced and/or under-capitalized investors can quickly find themselves in over their heads and/or with a very expensive learning experience!

Project-by-Project

Slower-paced wealth building usually involves a slightly longer time frame, often 3-5 years or so.  This strategy is typically used with development and construction or ‘value-add’ projects, where an investor will purchase, lease or option a project property and take specific, calculated steps to improve or add to its overall value over a certain length of time with the intent to then re-sell and realize profits.

Land development can range from working with the local city to establish zoning, permitting, platting, subdividing, etc. to putting in the infrastructure (roads, curbing, utilities, etc.) for future construction and actually building on the land.  Each step of the development process can add value to the property, with  investment capital and costs recouped through sales or refinancing.  Many developers look for ways to control the risks involved in the development and construction process, such as lining up a lease or buyer for the property before building or prearranging for higher-cost construction financing to convert automatically to a lower-rate permanent loan after a set period.

Development and construction projects can be quite lucrative but can also carry significant risk to initial investment capital and hefty up-front costs.

Value-add project improvements can include capital or cosmetic repairs like upgrading units, replacing a roof, repainting, resurfacing parking lots, as well as strategic asset management action like leasing vacant space to increase net income, restructuring or extending leases, putting more efficient management systems in place,  fractionalizing ownership, refinancing with a different/better loan product, etc.

Funds to pay for capital improvements are either calculated into the purchase price up front and/or paid for by  existing cash flow from the property.  Strategic actions usually will need a stabilization period for the property to show consistent performance at new income or expense levels.

Investors using this wealth-building model either become, joint-venture with or hire a project manager who is responsible for executing the improvement plan for adding value to the property.  Expertise is obviously an important factor and depending on the scope of the improvements, may involve a great deal of coordination with sub-contractors or other professionals.  Timing can still be a major factor in realizing profits with this wealth-building method, especially if there are heavy up-front costs or if the building is completely vacant.

A detailed cost analysis is essential for any development or improvement project, along with a healthy cushion or reserve fund for the ‘Unexpected’.

Long-Term Outlook

One of the biggest criticisms of real estate is that the investment capital or equity cannot be as easily converted to cash as liquidating a stocks and bonds account.  However, building wealth patiently over time with real estate is how many business and family dynasties were created.

‘Buy and Hold’ is a term often used with much longer investment time frames, often 10 years or more.  Long-term wealth-building can been used strategically in an investment portfolio to achieve various long and short-term objectives depending on what is purchased and how it is structured.

Land-banking is the practice of buying an empty lot or raw piece of land with the anticipation that it will become more valuable over time.  Ever hear of the phrase, ‘Dirt Cheap’?  Unimproved land is less expensive to purchase and costs less to own than property that has a building already on it.  Land-bankers strategically purchase in areas that they consider to be or will eventually be ‘in the path of progress’ as towns and cities grow and develop new communities.  This can happen quickly, take years or may never happen at all if development is slow, takes a different path than anticipated or if environmental or other challenges arise that make development difficult or cost-prohibitive.

Investment Real Estate can be any residential or commercial property purchased for growth and/or profit potential.  Many people buy a second home or break-even rental property in anticipation that eventually over time, it will appreciate in value as most real estate has done historically overall.  This is often referred to as an ‘Appreciation Play’.

Income property is purchased with the expectation that it can generate enough income through rents or leases to ideally provide a source of income for the investor or to at least cover its own expenses for property tax, insurance, ongoing maintenance, repairs and other expenses associated with ownership.  Even property free and clear of any financing will have operating and administrative costs that need to be planned and prepared for.

One of the truly powerful wealth-building abilities of real estate is the ability to leverage your initial investment and increase its earning and growth potential exponentially.

If part of the purchase price is financed there will be loan payments to account for but if those costs are also covered by income generated by the property, the tenants ultimately pay down your loan, thereby increasing your equity and building your wealth in the process.

Obviously, financing adds another variable and additional risk to the equation.  Operating costs and loan payments are due regardless of vacancy or other interruptions in income.  Highly leveraged properties and under-capitalized, inexperienced owners can be a dangerous combination.  Investors need to carefully examine the past and projected performance of the property as well as their ability to manage the asset.  Again, a reserve fund is a wise way to help manage property cash flows and avoid being prematurely forced to sell.

Leverage is simply another tool and can be used as responsibly or irresponsibly as the investor wielding it.

Bottom line:  Build wealth at a pace with which you feel comfortable and can afford.  Expect the Unexpected. Partner with discretion, integrity and experience.  Any investment or project is only as good as the people involved.

This is the second in a series of articles about Real Estate Investing as a Financial Tool.  Read the series from the beginning or click on the links below to learn more about each of the strategies presented.

Tools of the Financial Trade: Investing in Real Estate Makes Sense

I’ve said it once, I’ll say it again:  Real estate investment is an incredible financial tool.

Why use the term ‘tool’?  Because a tool can be used to help you do the job you want when you need it.  You might need a little instruction and practice to use it properly and with as little risk or harm to yourself as possible (ever bang your thumb with a hammer?!) but ultimately, a good tool can help leverage your time, effort and money to get a job done more quickly, efficiently and effectively.

And as any artisan or craftsman knows, having the just the right tool for the job can make a huge difference.  But a tool is just a thing.  It takes the energy and know-how of the person using it to make it work and to get the most out of it.  It’s also important to have as many different tools in your toolbox as possible – so that you can pull out just the right one exactly when you need it.

Real Estate Investment is a very versatile financial tool.  It can be used in different ways to accomplish different results.  If you can only carry or learn to use a few tools, it makes sense to pick ones that can be applied in as many situations as possible.

Investing in real estate as a financial strategy makes sense for many different reasons, including:

• Wealth Building
• Portfolio Diversification
• Tax Advantages
• Appreciation
• Cash Flow
• Community & Economy

Related articles

• Real Estate investment as hedge against inflation (craigkamman.wordpress.com)

Market Movements Make Money – Position Accordingly

Let’s face it – the Stock Market is really not for the faint of heart, especially in times like these!

Recent news and the ongoing economic uncertainty have been causing some pretty wild rides and sometimes it feels like you’re just hanging on for dear life. It can be a pretty scary place, even for the most seasoned and experienced day traders.

But without the downs, you can’t have the ups. Without the ups, you can’t have the downs. It doesn’t matter which side you’re betting on; without movement there is little potential for profit. For those players who can keep their cool during this time of fear and panic, there is money to be made.

The same essentially holds true for Real Estate. Investors want to see the real estate markets cycle because that is when real opportunities happen. Remember the old adage, ‘Buy Low – Sell High’?  It’s hard to buy low if the market is always up!

In most situations, movement means change, and change creates motivation. Sometimes perfectly good assets and real estate must be sold because of a death, divorce, partnership dissolution, retirement, downsize, loan maturity, interest rate adjustment, etc.  Sometimes the owner has simply accomplished his goal and is exercising his exit strategy to realize a profit. Sometimes the owner has just not managed the asset well. Whatever the motivation, if you aren’t expecting the change or if you aren’t properly prepared, your hand could be forced sooner than you’d like or under less-than-ideal circumstances.

Fortunately, the Real Estate markets tend to move at a much slower pace than the breakneck, minute-to-minute rollercoaster of the stock market. For those who are looking (and who actually want to see!) it’s usually a lot easier to anticipate market movement or upcoming changes and then have time to plan and prepare accordingly.  For example, information and statistics are available that show another wave of mortgages with interest rates re-setting coming up over the next few years. That could spell disaster for those owners who don’t start working on a plan to resolve the issue but it can also spell opportunity for investors who start positioning now to be ready to purchase if and when some people are forced to sell.

Ideally, owners and investors will plan and prepare to be in a position to minimize losses or to take advantage of upcoming opportunities when movements happen. Understanding your investment and the things that can affect its value are the keys to making smart investment decisions.

Smart investors are proactive, not reactive. They constantly monitor their holdings and make strategic moves to protect overall value – hedging their bets, so to speak. That way, if something changes or it the market moves in the opposite direction than what they think, the portfolio’s principal value is still largely protected. Whether it’s a stock, real estate or other asset class, every investment asset needs to be actively monitored and managed, even the passive ones. (Note: Property Management is not the same as Asset Management!)

In Real Estate, hedging or protecting your principal is often as simple as having ample cash reserves to weather through a rough spell of unexpected vacancy or repairs. The only time you really need to worry about the value of real estate is when you go to sell. Adequate liquidity can usually help you smoothly ride out a down cycle so you aren’t forced to sell at an inopportune time.

As many investors have recently discovered, a Home Equity Line of Credit (HELOC) is a poor and unreliable substitute for an actual cash reserve account. A HELOC can and will be revoked or capped by the lender at any given moment, regardless of spotless credit or payment history.

Many real estate owners make the mistake of cannibalizing their investment by draining every drop of the operating cash flow or overleveraging the asset. Then, when something unexpected comes up or something changes, they blame the market or the real estate itself for a problem that they created by not carrying sufficient reserves. You WILL have tenant changes, you WILL have some repairs – these are eventualities that can and should be planned for by all real estate owners.

Bottom line:  Know your assets, know your investments, keep your eyes open and plan ahead. These market movements are creating a lot of opportunity and it doesn’t look like it’s ending any time soon. Batten down the hatches of your solid performers to ride out the turbulence, cut loose the dead-weights and position yourself to take advantage of the opportunities created by these market movements.

Money & Kids: Kids DO Listen When Parents Talk about Money But What Are They Hearing?

If you’re a parent, at some point you’ve probably wondered if your kids ever listen when you speak.  Then you hear some of the same words and phrases being parroted back (often some we don’t necessarily want repeated!) and you know that those ears are wide open and taking it ALL in!

Parenting groups encourage us to talk about not doing drugs, not smoking, staying safe, etc. because the mantras we hear over and over again as kids tend to stick with us throughout our lives.  The same is true when it comes to money and finances.

But what are your kids hearing from you as a parent about money?  Quite possibly, you’re repeating some of the same things you may have heard growing up without really thinking about the messages you’re sending or the way your kids will interpret them:

• We can’t afford it / It’s too expensive
• Money doesn’t grow on trees
• Debt is bad
• Money is the root of all evil
• Rich people are snobs

Kids are capable of internalizing and processing some pretty complex ideas.  They may not engage in direct discussion or they might take time to mull things over but kids see, hear and listen, and they make sense of their world by processing all the information and cues around them based on their own limited experiences.

As parents, we are in a unique position of influence that shapes the way our kids think about and treat money.  Kids listen to what we say and look at what we do.  If we don’t dialogue with them, though, those verbal and non-verbal cues are open to interpretation and the conclusions that your kids draw may not be the ones you intended.

For example, you might think your kids will see you working long hours every day and, by that example, develop a great work ethic and commitment.  However, they might interpret it as work/money is more important than family and resent that field/job/industry/you/etc.  Discussion is a vital part of communication to ensure that the message intended is indeed the message received.

People need to talk more about money.  Not the ‘How-much-do-you-make?’ kind of talk, but conscious conversation, real talk about money, like how you think and feel about it, what it can and can’t do, how to get and how to make more of it.

Although not the main idea of the blog, I read this great post on New Methods that to me, really underscores the importance of talking to your kids about money on an everyday, spontaneous basis.  The kid asks his dad how he’s able to go fishing in the middle of the day when most of the other people he knows are at work and dad explains that by owning a business, it can keep working even when he isn’t there. Just a 30 second exchange can have a significant impact on an 8 year-old kid, how he thinks about money and how it can help to shape his life (be sure to read about the author at the end of the post!)

The post also made me think about Robert Kiyosaki’s Rich Dad, Poor Dad, which distinguishes between the mindset of an employee vs that of an owner.  The parent in the blog is sending an owner-mentality message about money.  Instead of the typical ‘work hard, get a good job’ message, the advantages of being the boss or owner are communicated.

Does that mean that we all have to be business owners to talk about money to our kids?  Of course not.  Talking about financial alternatives and options just lets our kids know that there are many different ways out there to make a living.  It also doesn’t give a free pass from talking about money to those who are well-off.  In fact, financially successful people who don’t talk to their kids about money and fiscal responsibility often end up with a very short legacy indeed!

The first step is to be aware of your own thinking and what you’re saying about money.  After reading this article, I’m willing to bet you’ll start hearing yourself all the time!  Once you realize how you communicate about money, you can decide if those really are the messages that you want to share.  If not, you can alter the phrases to convey a different kind of message:

• We’re choosing NOT to spend our funds on X because it isn’t a family priority or goal right now
• Money can grow on ‘trees’ – referral trees and networking that brings more customers/business/revenue
• Some debt (like credit cards) can be dangerous but some debt (like a mortgage) can be a helpful tool to build wealth
• Money is just a tool; the person using it decides how it will be used
• People of character do good things regardless of the amount of money they have

Older Son:  One day I’d like to manage a nice restaurant like this.  I could do a great job.

Younger Son:  Great!  You can work for me because one day I’m going to own a nice restaurant like this!

Related articles

• Straight Talk with Kids About Money (psychologytoday.com)