On The Beach Education Corporation

Life has certainly been unpredictable and that’s the way it should be. I am living in Thunder Bay managing 243 units and spending Christmas with new friends. Life is about change. Change is what gives us strength, flexibility, vitality, resourcefulness, resilience. I look back at some of the most challenging times in my life. They are what defined me. These devastating events made me who I am today. I learned to appreciate my depression, anger, despair, anguish, hopelessness; to celebrate my capacity to feel the length and depth and breadth of these intense emotions. That’s what makes us human. Emotions are energy in motion. They are meant to be felt and then to move forward. It is the intensity of these emotions where magic and miracles reside. I learned to transmute this energy into manifesting my new reality. Because the truth is this: the Universe has a grand plan for you. These experiences are what you need in order to take you to the next level. After you have survived the ordeal, you begin to see with clear 20/20 hindsight. This is part of the initiation process called life. Because the Universe sees you as a diamond-in-the-rough (polishing is not a pleasant process) so that you may become a brilliant light for the world.  For I know too well that the holiday season may not feel like a great time for many people. Regardless of how you feel, you are so very precious. Your life is a masterpiece. This season of your life is an exciting one. Enjoy it while you can because you may never feel the intensity like this again. Like a volcanic eruption, it will go extinct, leaving its mark and a wiser stronger you. Celebrate your life… in your despair… in your joy… because either way you are loved and cherished. My blessings go with you.

CHRISTMAS BLESSING
I would like to save some trees this year instead of sending out cards. You are all, every one of you, a special blessing to me.
http://www.jacquielawson.com/viewcard.asp?code=2007134554829&source=jl999

MAKE A LIFE CHANGING DIFFERENCE
Can you spare $25 this month? Perhaps drink less Starbucks? And give an entrepreneur at KIVA.org an opportunity to thrive. When that loan is repaid, you can recycle the donation to another entrepreneur.

DATE WITH DESTINY
This is an awesome event put on by Anthony Robbins.  Amazing. Transformational. Words cannot describe. It is to be experienced. There are 6 human needs: Certainty, Significance, Uncertainty, Variety, Love/Connection, Growth. At DWD you learn how all relationships are based on these 6 needs. Tony gives you the tools so you can use it for your own personal growth and to help others. He has also incorporated new relationship material that is fascinating. You can read more about the Meadow Report on my Blog. My caveat: as with all of his events, there are no official breaks so come prepared with water, snacks and food.

MY NEW LOGO

I love it and I hope you do too. The On The Beach logo has been eluding me since 2003. Finally, thanks to my brilliant media designer, Bojan (pronounced “boy-yan”), he intuited my description into this wonderful logo. Bojan is the head of our new OTBEC Media Group. He does graphic and web design, newsletter templates, videography, audio engineering, photography, storyboarding, image manipulation, business cards, brochures. He’s one talented boy (pun intended) and he is available to serve your needs if you are looking for unique and creative design work. He can be reached at bojan@otbec.com for a consultation.

PRO-ACTIVE PROPERTY MANAGEMENT – PART 3

Training tenants. It starts at the beginning from that first phone call to when they vacate the premises. Be aware of your voice; the timbre, inflection, tonality speak more than your words. If you end your sentences with a vocal inflection going up as you would ask a question, this creates uncertainty in the listener. Consciously choose to end your sentences with a downward inflection as this creates certainty. For this reason, I hired a vocal coach, Jesai Jayhmes, before I launched my first seminar. It’s all about communication. Make sure that your expectations are understood and that the tenants are made aware of the consequences for non-compliance. Verbal communication alone is not enough. You must have your expectations written down on paper and explain it to them. Even something as simple as paying rent on the first of each and every month must be reinforced. Get them to sign a separate addendum that they promise to pay on time. When tenants are ready to vacate, give them a move out checklist including instructions on what to clean, how much it will cost if they don’t clean it, where to dump their unused furniture, instead of leaving it behind for maintenance to clean up. (to be continued next issue)

Money is like manure; it’s not worth a thing unless it’s spread around encouraging young things to grow. Thornton Wilder.

July Ono

If you have investments that you are depending on for retirement, then the book “Conquer the Crash” by Robert R. Prechter Jr. is a must read. Today’s financial world is not for the blithely ignorant passive investor, you will lose most or all of your money if you are. The financial world is no longer static, you can’t just leave your money in a savings account, GIC, Stock, commodity, forget about it and prey it’s there for you when you retire. Those days are gone, never to return. You are empowered to take control of your money. Start today. Read a book. Hey, I don’t profess to understand everything in Robert Prechter’s book. I’m intelligent and I can study. I’m learning for my sake and for my investors. It’s pretty scary when you see “206 trillion dollars of US based notional amounts of derivative contracts and 800 trillion dollars tethered to the global financial system… with total US savings at 700 billion dollars. Keep in mind that all paper money systems in history have failed!” Exert from Hillier advisers December update. As dire as all this may be there are solutions and strategies you can take to mitigate your future losses and prepare for a buying spree at 10 cents on the dollar when the dust settles. It starts by educating yourself so you can take the right action for your financial goals. Be a smart investor.

This blog will be of interest to anyone who owns real estate in Ontario. I’ve been noticeably absent because I have been living in Ontario, having taken over active management of 243 units.

I mentioned in my July News in October newsletter that one of our decision making questions is whether we would be willing to move to where the portfolio is located as a worst case scenario. This decision is not made without adequate research first, about 60 to 80 hours worth, in order to determine the area’s demographics, economic fundamentals, amenities, etc. When our answer is yes, this means we are committed to the successful operation of that building. So far we’ve only had to spend a few weeks here and there to oversee renovations with buildings in Northern BC.

Between November 2008 to May 2009, we purchased seven apartment buildings in Thunder Bay, Ontario. Buying real estate is just the first step in the real estate investing process. The real business of real estate is in property management … pro-active property management.

It soon became clear that the property managers handling the portfolio had poor systems and controls. It became necessary to take extraordinary measures. This decision meant that we would be living in Thunder Bay for several weeks or months to stabilize the portfolio, establish clearly defined systems and controls, implement and enforce policies and procedures, create a maintenance schedule, streamline administrative protocols for everything from the rent roll, deposit procedures, move-in reports, move-out reports, auditing all tenant files, create a property management manual with all forms in a template format. The idea is to create a system that requires as little thinking as possible. This has been my job for the past four weeks.

The first order of business after firing the managers is to do an audit because the first order of priority is getting the money process under control. You must double check all of their information to ensure accuracy. I created a simple rent roll audit in Microsoft Excel with 36 columns, starting with the building, suite numbers, tenant name, tenant phone number, gross rent amount, discount rent amount, net rent payable, rental supplement portion, tenant portion payable of rent supplement, last month rent deposit in, last month rent deposit out, description area, move-in date, assigned parking spot, twelve months to schedule 90-day notice to increase rent, new rent increase amount, difference of rent increase, effective date of rent increase, and when to deliver the rent increase notice.

Review the entire contents of every tenant file individually and verify. Note the discrepancies and update any new information. Create a task list for every file. Trends will start to emerge. This template becomes your new master rent roll.

One of the trends I noticed immediately was something the property managers did not do. In Ontario, there is no security deposit or damage deposit. Any damage done to the suite must be invoiced separately. Landlords can only collect a last month rent deposit that must accrue interest according to the legislated amount effective January 1st of every year. According to the Residential Tenancy Act, Landlords are permitted to issue a 60 day notice to use the last month rent accrued interest towards their rent payment, instead of paying it out.

This may seem like a small amount on a yearly basis when you consider a 1.8% interest accrual on a $700 deposit is $12.60. I just issued a cheque request to refund the LMR interest to a vacating tenant in excess of $100. This refund amount could have been used to offset previous rent payments if previous management had chosen to implement it.

Once the rent roll is verified, the next step is to create a system for handling non-payment of rent. Our corporate policy is to issue a Form N4 Notice to End a Tenancy Early for Non-Payment of Rent on the second day of the month. You must train your tenants to pay rent on or before the first day of each and every month. When a Form N4 is issued, the Landlord must wait 14 days after the N4 is delivered before they can apply for an eviction. So if you issue an N4 on Day 2, the soonest you can apply for an L1 Application to Evict a Tenant is on Day 17. The L1 Application costs $170 and the Landlord Tenant Board schedules a hearing. Hearings occur every 2 weeks. By the hearing, you are already near month end. At the hearing, the judge makes the ruling. And it’s here where you really need your paperwork in order.

There are other forms at the Landlord’s disposal such as a Form N5 which can be used when a tenant disturbs the peaceful enjoyment of the community for others or willfully damages property. The delivery of two N5’s within a six month span is grounds for an automatic eviction. Or a Form N8 can be used to evict a tenant for the consistent late payment of rent. This information is available at www.ltb.gov.on.ca.

Your property management tools should include a copy of these files in binders: the Province’s Residential Tenancies Act, the local area’s city by-laws, animal/pet by-laws, Smoke Free Act, Landlord Tenant Board forms, and a binder with tenant forms.

The most common tenant complaint is excessive noise. There is a noise by-law in effect from 11pm to 7am. A Form N5 can be issued for tenants who disturb tenants during these hours. Registration of pets is mandatory. For example, the penalty for an unregistered cat is $155. The Smoke Free Ontario Act prohibits smoking inside public buildings. Fines start at $305 for tenants caught smoking in the hallways. There are fines imposed for pet owners who do not adhere to the local Poop and Scoop by-laws. My desire is to stop these nuisance calls coming in to the manager’s office and empower the tenants to call the appropriate enforcement office.

It is your responsibility to familiarize yourself with the local rules, regulations and laws. There are parts of the Residential Tenancies Act that the local property managers were not even aware of, which we are implementing. Just because you hire a property management company or manager(s) does not relieve you of your fiscal responsibilities.

The next area to tackle is to create a seamless move-in process. You can pretty much estimate how many turn-overs your building will have. Prepare a Tenant Move-In Folder with these 19 forms created in a template:
1.    application form
2.    credit check consent form
3.    lease agreement (2 copies)
4.    tenant rules and regulations (2 copies)
5.    memo: rent cheques made payable to …
6.    pet application
7.    pet registration
8.    move-in welcome letter
9.    tenant insurance requirement letter
10.    information for new tenants from the Landlord Tenant Board
11.    memo: no tampering with safety devices (required by fire marshall)
12.    memo: managing moisture in your suites (to reduce/eliminate condensation)
13.    animal by-laws hand out
14.    Smoke-Free Ontario Act hand out
15.    Form N9 Tenant’s Notice to Terminate the Tenancy
16.    suite condition prior to vacating
17.    tenant move-out check list
18.    end of tenancy report
19.    inspection report
20.    rewards program

Every tenant file is prepared with these forms ready to go. You will have noticed that the move-out forms are included in the move-in file. Prepare your tenants in advance of your expectations for when they eventually move out and how much it will cost them if they do not clean the suite according to your instructions. One copy will be the tenant file copy. The other copy will eventually become the tenant’s copy. There is a hard copy version and an electronic version.

Now that these systems are in place, I am writing up step-by-step instructions for the new manager(s).

Once this is done, our next assignment is to conduct a suite-by-suite inspection of all the units (again) and note any deficiencies, repair items, replacement items for a longer term maintenance project. This is something we do right after acquisition so we can schedule and prioritize our maintenance items and budget.

Your property manager is your business partner. The operation of any multi-family residential apartment building or complex requires partnership with many players. Keep documentation on your communications and monitor results. Poor performance can mean lack of understanding, lack of skills, lack of human resources or apathy. However, I’ve noticed that attitude is everything. The right attitude can overcome miscommunication, can acquire new skills, can attract the right manpower. The right attitude can create happy tenants, happy contractors and a well run building.

I’ll be here in Thunder Bay for a couple more months streamlining the systems we’ve put into place, hiring and training the right managers for the property, before I look at buying more property.

p.s.  I may be here working but I am here by choice. The few weeks of effort that we put in now will pave the way for a lean, mean, passive-income, money-making machine.

November 17, 2009

I receive a fair amount of email from people asking me to support this or that charity. Due diligence is due diligence whether you are researching real estate investments or charities. One of my first due diligence tasks is to Google the charity. My second task is to Google the Federal Charities Directorate or to go their website at http://www.cra-arc.gc.ca/charities/ and type the name of the charity in their search bar. All legitimate charities have a Federal charitable number that is 9-digits long followed by RR0001. It looks like this: 123456789RR0001.

The following excerpt is taken from an article in The Toronto Star newspaper so you can understand how charities work:

“One of the challenges in regulating charities is that they fall between federal and provincial law. The federal government operates the Charities Directorate, part of the Canada Revenue Agency. Charities are tax exempt and can issue federal tax receipts to donors. Provincial authorities, usually through the Public Guardian’s office, also have the power to step in and take a charity to court if it is doing something wrong. The guardians across Canada rarely take action. The Star found the primary regulator, the federal Charities Directorate, is virtually powerless to deal with problem charities. To begin, tax law forbids it from warning the public about bogus or wayward charities. The directorate, which is part of the Canada Revenue Agency, treats charities the same way the taxman treats personal taxpayers. So, even when auditors have found a charity is doing little or no good work at all they cannot tell the public. Each year about 800 to 1,000 charities are audited and half are told they have done something wrong, but the public can’t find out, even if it would be of major importance. Kevin Donovan can be reached at 416-869-4425 or charity@thestar.ca”

This excerpt from The Earth Times posted August 10, 2009:

“Registered charities in Canada perform valuable work in our communities, and Canadians support this work in many ways. The CRA regulates registered charities through the Income Tax Act and is committed to ensuring that charities operate in compliance with the law. Where a registered charity is found not to comply with its legal requirements, the CRA may apply monetary penalties or may suspend or revoke the charity’s status under the Income Tax Act.

The CRA is reviewing all tax shelter-related donation arrangements (for example, schemes that typically promise donors tax receipts worth more than the actual amount of the donation), and it plans to audit every participating charity, promoter, and investor. For more information about tax shelters, go to the CRA’s Tax alert Web page at www.cra.gc.ca/alert. For more information about the registration of Canadian charities, go to the CRA’s Charities and Giving Web page at www.cra.gc.ca/charities.

Contact: Canada Revenue Agency, Noel Carisse, Media Relations, 613-952-9184.”

To read the full article, http://www.earthtimes.org/articles/show/the-canada-revenue-agency-revokes,921485.shtml.

Under the Canada Income Tax Act Article 188.1 Undue Benefits explains what does not qualify as a charitable deduction.

There are some 80,000+ charities in Canada. It is impossible for auditors to review all these charities on a timely basis and can take up to 7 years to stop a fraudulent charity. It is up to you and your due diligence to determine where you wish to donate your hard earned monies.