Best Laid Plans.... Different Outcome

In Early 2008, I was financially crippled by credit card debt and a car loan, and the best course of action appeared to be refinancing my very first investment property. Not only would I be able to pay off all the stuff that had been purchased on credit, but there would be enough left over to grow our Real Estate Portfolio. I remember thinking to myself that buying another condo would probably be the best path because I had already been down that road and had a pretty good understanding of how to go about selecting the right space, what my price ceiling would be, and of course how much rental income I could expect. I mean, if it ain't broke why fix it? Do what you know! Especially when the results of my first foray into Real Estate had turned out so marvelously.

I have ALWAYS LOVED Real Estate and been sold on its ability to create wealth in anyone's life, and for as long as I can remember I always had a copy of the current "Condo Guide" in my backpack or on my coffee table, I just never get tired of it. In fact one of my favorite things to do is pick up a copy of a local Real Estate magazine when I'm in a new town. Ottawa was no different, it has always been my home away from home, a place I spent many, many vacations as a young child, and even today love to visit.

Maybe it was how "Expensive" Downtown Toronto Condominiums had become between 2002 and 2008. I know to some, that statement is laughable now, considering the price has continued to rise, pretty much without pause, since 2000 and it is now 2020, but I just didn't find the amount of cash flow I would be getting in Toronto to be all that appealing at the time.

Ottawa was such a great idea! It fit my thesis! It is a large metropolitan with great employment, and the condo developmemt I had my eye on was just a 6 minute walk to Parliament Hill (Bank and Laurier for those who are curious). Not only that, but condos suites were nearly $100,000 cheaper than a comparable property in Toronto and the rents in Ottawa were virtually the same as Toronto! This was a can't miss in my mind. So early one morning, I packed some dress clothes into my back seat, threw on my favorite pair of track pants and headed down the 401 to purchase a home in my new favorite development.

5 hours and several Timmies later, I was changing in the back seat of my car- for fear of being judged for not being dressed for business- meeting with the sales representative, picking my suite, and the rest quickly became history.

In the coming 18 months, while I eagerly waited for the building to be completed, one memorable moment was picking out the finishes for the home, and the designer asking me if I wanted undermount sinks in the kitchen, embarassed, I asked Jodi (my wife to be at the time) if " I wanted those" she nodded yes, then, after we left, had explain what undermount sinks actually are .... Man I was such a novice to decor lol. Or another story, which still makes me laugh today. I had a cheque that was about to clear for several thousand dollars in my wife's account for the finishes we selected a few months earlier. I say her account, because at the time of purchasing the decor and finishes, I didn't have any cheques in my own name, I thought I could charge them to a credit card.... The Cheque came due, as mentioned, and I really had no cash to cover it because all my cash was tied up with the builder, so my good friend Steve offered to lend me the money. It seemed really normal to me, and to Steve I suppose, we were professional waiters working for the MLSE at Air Canada Centre and having a lot of cash on hand was just the way it was, although as shared, that was not the case with me at the time. We walked into Scotiabank early one morning and Steve handed me what had to be $5000 in cash in $100 bills all rolled up in elastics. I went to the teller thinking it was no big deal to deposit this kind of cash into the account of my girlfriend, and shortly thereafter the manager appears and asks where all this cash came from?! I point to my boy, sitting in the lounge wearing his sunglasses, he proceeds to give the manager the thumbs up, like "ya, I'm Steve, and I gave him that money". Seems so prepostrous looking back, I am surprised that cops didn't show up. I explained what the money was for, and why I was deposting it and all was well, but for a few moments there, I swear we were going to be arrested.

Fast forward to early 2009, the property is finished. A beautiful 1 bedroom, with gorgeous concrete ceilings, and a true loft feel, not to mention those undermount sinks ;-). I found a tenant quite quickly, and low and behold was collecting over $400 per month in free cash flow after all the expenses for "The Mondrian" (The name of the new building) were settled out.

Looking back, I will never truly understand how the next 18 months went the way they did. If I had to explain it, I would say part of the reason I made bad financial choices was depression. By now, it is late 2010 and Jodi and I had begun the process of starting a family, a period in the lives of most that I believe to be joyus, full of anxiety and celebration, but that was not the case for me at all! I was terrified, depressed and most days completely paralyzed by fear. So making long term financial decisions was probably not a good idea, as I was not thinking clearly.

I say that depression was only part of the reason, because the other half was greed. Between our two rental units we were pulling in over $600 per month in cash, not bad for passive income at 31 years old. With the birth of our first child Carter, being imminent, I felt we needed to be creating even more passive income because lets face it, children are expensive! It became so clear to me in that moment, we should sell the condo in Ottawa, pay off what is left of our debt, including my wife's student loans, and begin life as a family with a child and no debt to speak of. Not only that, my Uncle, who had always had success in the rental market in Niagara Falls was raving to me about the amount of cash flow we could be getting with a rental in Niagara. I was SOLD!

The above event became known to me as the biggest financial blunder of my adult life. I took the Ottawa condo, a low maintenance, high performing asset in terms of cash flow and capital appreciation and turned it into a money pit in Niagara Falls.

Even though I recovered financially from that decision some time ago, I am clearly not done kicking myself. The wound has healed but the experience has stayed with me.

With Love

Chris