# Million Dollar Piggy Bank---The Habit of Saving



## EvanOkanagan (May 27, 2015)

Hi guys,

First post on here and just wanted to share some insight on saving...

In order to invest (in many cases) you must have money saved.

One of the most gratifying little things I've done lately is empty my piggy bank. (Btw, I'm 28 years old and I still have a piggy bank! lol)










Anyways, I've had this thing since I was about 10 years old. And since then I've built the habit of putting money in there rather than spend it. When I was a kid, it came from my allowance.. nowadays it's any loose change I have in my pocket at the end of the day (spare cash from the bar/eating out, cashing in bottles at the bottle depot, money that I find on the ground, etc)

This habit carried over to my bank accounts when I was old enough to get one. Instead of blowing all my money from my minimum wage jobs, I'd put aside money in my savings account.

A few years ago I created a bank account and named it my "Financial Freedom Account". I would take at least 20% of money that I earned or received and transfer it to this account, and I was never to touch it unless for investments that fueled financial freedom.

Well, two years ago was life-changing for me. I finally used the money I had in this account to purchase my first rental property which led to a chain of events. I went from 1 to 4 investment properties in a short period of time and now having 8 income streams from these properties. The passive income I make off these investments now is more than the average individual Canadian income. It covers all of my monthly living expenses, essentially making me "financially free". I still do work now that I've hit that mark (I re-invest all the income towards more rentals), however, knowing that I have the choice is pretty gratifying. 

This all started with the habit of saving. Even today I still put coins I find, money from bottle depots, and spare cash into my piggy bank.


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## EvanOkanagan (May 27, 2015)

Not sure why photo didn't post


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## Ag Driver (Dec 13, 2012)

The image is not posting because you are linking from another forum -- of which you must be a member of to view. Save it to your computer, and attach it.


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## Ag Driver (Dec 13, 2012)

I made a "piggy bank" with the old man when I was a kid. Cracked a coconut, drank the milk and ate it. I sanded it down, cut a coin slot, and varnished it. 

I have since broke, raided, and re-glued a couple times. At 26, I still have it to date. It doesn't fill nearly as fast, simply because I hardly use cash any more. I hate change, so to the coconut it goes!


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## EvanOkanagan (May 27, 2015)

Nice! Haha I like it. Yeah I don't use cash much these days either.


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## the_apprentice (Jan 31, 2013)

If I were to observe your situation in particular, there are other factors that you have not mentioned. Otherwise it would seem that any 28 year old could have 8 rental properties by saving 20% of their income. Your location, salary, expenses, down payment, etc, are all important factors.

Regardless, that is very impressive. Your friends must hate you!


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## Sherlock (Apr 18, 2010)

Mind sharing what part of the country you live in? I know in my area it would be impossible for a 28 year old to buy 4 properties and even if he could they wouldn't generate enough cash flow to live on (I'm fairly certain my landlord has negative cash flow from the condo I'm renting, unless he has no mortgage). Also what kind of properties are you buying, are they detached homes or duplexes or condos or what?


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## OurBigFatWallet (Jan 20, 2014)

So if I am reading this correctly:

- bought your first rental property at age 26 after working a few minimum wage jobs and saving cash in a piggy bank
- within two years bought 7 more and now have 8 properties
- all properties are positive cash flowing
- positive cash flow is so high it's now above the average income (I'm guessing $50k per year?)

Feel free to clarify if any of the above is incorrect.

From the username I'm guessing you're in the Okanagan area (near Kelowna BC)? If so how what is your process for evaluating properties, what is your tax strategy (ie. incorporated or not, CCA, etc) and what kind of properties are they (ie. detached house, apartment condo, etc)?


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## CalgaryPotato (Mar 7, 2015)

The savings part is awesome, but yeah it sounds like highly leveraged, skilled and partially lucky real estate investing is the majority of your secret to success.

Not to hold that against you, but saving 20% from minimum wage jobs, and putting it into something moderately safe, still isn't going to turn into anything fast.


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## EvanOkanagan (May 27, 2015)

The main point of my post was to touch on how important the "habit" of saving is. The piggy bank was more of a metaphor and definitely not my main source of funds for buying my first property. lol

I bought my first property using 5% down payment (roughly 20k) coming from both my "financial freedom account" and RRSP's from a company I worked with. I actually jumped into Real Estate with zero knowledge... I didn't even really know how a mortgage worked!

I took a big risk leaving a great commission sales job to get my Real Estate license. I knew there would be a large dip in my earnings, but you definitely have to take risks and get out of your comfort zone to succeed in life, so I took the plunge. I made sure I joined a team that had successful Real Estate investors I could learn from. Being around these investors and listening to everything they had to say helped me make my first purchase after about a month of being licensed. I had also read several books on RE investing over the previous months. Some people may call it "luck", I feel we create our own luck with the effort we put in. I was definitely not the most "skilled" as well being so fresh to Real Estate... I learned as much as I could and took *action*, which is the most important part of my success. Every single property I've purchased I haven't known how I was going to get it financed but somehow found a way with enough determination. 

I live in British Columbia in the Okanagan Valley. I typically look for large homes with basement suites and detached garages. To clarify I have 4 properties total, which equals 8 income streams (2 full homes, 2 upper suites, 2 basement suites, and 2 detached garages--$300/mo each as storage).

Positive cashflow is annually $42,000-$45,000. I don't buy unless I know for sure they'll positive cashflow and typically won't do anything less than a 20% cash-on-cash return (I don't take in account mortgage paydown or appreciation). I'm not incorporated yet, but plan to after a few more properties. 

The more money I've earned, the more I save. The 20% saving was the "minimum" I would save. Now that I'm making more I still live below my means. Live off of about 10-15% of what I make and re-invest the rest.


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## OurBigFatWallet (Jan 20, 2014)

I'd be curious to know what the numbers look like on each property. Aside from the market value I would be curious to know the cost, amount owing, mortgage terms, rents from all streams etc. They must have some serious positive cash flow to be pulling in $45k per year (on top of the mortgage pay down amounts).

Does 20% "cash on cash" mean only taking into account cash flows when factoring return?


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## KaeJS (Sep 28, 2010)

That's interesting.

I avoid change like the plague. If it doesn't round to $1 then I give it away. It's such a nuisance. I wish they would just get rid of everything that is under $1.
What's the point?


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## IFITSTOBEITSUP2ME (Mar 6, 2015)

Way to go Evan, start young, do careful leverage using OPM and then try to get your equity to loan values moving in the right direction to aim for paid off properties as soon as possible before getting too greedy (that's the biggest mistake we've seen with property investors sometimes trying to run before they learn to walk), thereby increasing your positive cashflow in preparation to replace your income long term. Or reducing your risk should you hit a declining market in future years, as well it does at times, and need to adjust rents down somewhat 

Then diversify into something else outside of just real estate, although with that said and done a friend of mine that was a bar tender a quarter century ago when he started buying his first properties is worth over 6 million in today's market, got his realtor license after he bought all his SF properties, never selling any, and hasn't a clue what to invest his excess dollars in other than real estate to create diversification due to returns on other investments that match his comfort levels. He started with 9 individual single family homes for about 17 years, then bought a 10 plex about 7 years ago which shocked us all but his money was sitting in the bank earning little interest. He did the building up, increased the rents accordingly as well as the value of the property and it more than positive cashflows on the extra 10 doors he now owns. He also with extra monies has found doing private mortgages quite lucrative with only a couple of defaults right now but he's made them too his good, being careful on the ratio of equity to value he lends out. FWIW, both he and us have always bought the properties in trust for our numbered company, well that's how our accountants have handled them and at their suggestion to do so.

You are right you create your own luck in this world based on assessed risk and rewards. To each their own and everyone has a different comfort level and some are very risk adverse in certain styles of investment. What works well for one doesn't necessary fit right due to temperament or personality for another. Many of our friends over the years gave a half hearted attempt to start in revenues but couldn't commit to the dedication needed to get the right tenant, maintenance, and building up a reserve for a rainy future day. Typically most sold within a couple of years of buying their first one. Us and our other investor friend, always take the attitude we'd rather keep a good tenant than increase the rent too much and risk losing them, and we'd rather leave a place empty for an extra month than put in the wrong tenant.

Whilst many right now are naysayers regarding real estate, we've heard often over the last 35+ years at various times "don't you think the prices are too high right now" whilst we still continued investing, building, renting, flipping (rarely but sometimes the market was too good to resist doing so) renovating and selling properties. I've never regretted any single family property we've bought but definitely regretted selling all those we have in the past, when we see what their values would also be today! The exception is the regret on one new build condo ordered in Apr 2006 delivered Jul 2008. We still have that condo waiting for it to go up more than $15K over break even where conservatively it's currently at after realtor fees/legals. With that said and done that specific and only condo we've ever owned, has gone from us minor subsidising it the first couple of years to now positive cash flowing after all expenses at over $700 a month, so sometimes we win on roundabouts what we lose a bit on the swings. Personally for us we would never touch another condo again. SF homes have always given us a positive return and enabled us to build our retirement nest egg by starting very young as encouraged by my parents who were house rich and cash poor most of their lives. Even our youngest daughter just graduated after 4 years at Uni, bought a house when 20 and rents out rooms to other students/teachers on contracts. She has paid down her mortgage substantially in that time, stayed student debt free, drives a reliable paid for 2010 Escape and even realized a little positive market price increase. She has a 2 year teaching degree to finish and then she will sell and buy two good revenues in a larger economic centre. 

Readying for retirement involving lots of travelling, keeping revenues would detract from our travels if having to deal with tenant change outs or issues so we have sold most of the properties already in preparation. We have possession this week of our third to last revenue we are selling, have a USA property up for sale, and we will be renting out our acreage until about another 4 years when it will likely be sold to our daughter and her fiance as they hope. 

Then comes our major dilemma on moving into unchartered waters for us of where to invest the monies on the right risk to reward ratio to hopefully get a half decent return, hence how I ended up visiting this forum initially. We are thinking of following the Canadian Couch potato portfolio but are far from clued in on really what we should do to avoid losing all that we've worked hard for and built over more than a third of a century. All we know is putting it in the bank earning a measly 1 to 2% ain't gunna cut it for us in our 50's to last us into our 90's should we be spared.

Anyway congratulations to you Evan on finding a way to build wealth for your future - Rinse and Repeat.


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## daledegagne (Apr 6, 2015)

EvanOkanagan said:


> Well, two years ago was life-changing for me. I finally used the money I had in this account to purchase my first rental property which led to a chain of events. I went from 1 to 4 investment properties in a short period of time and now having 8 income streams from these properties. The passive income I make off these investments now is more than the average individual Canadian income. It covers all of my monthly living expenses, essentially making me "financially free". I still do work now that I've hit that mark (I re-invest all the income towards more rentals), however, knowing that I have the choice is pretty gratifying.
> 
> This all started with the habit of saving. Even today I still put coins I find, money from bottle depots, and spare cash into my piggy bank.


Well done & Great post.

I did a similar thing with rental properties but made the mistake of quitting my day job too soon. I was 28 at the time and didn't have the foresight to think that a work free lifestyle might cost me more, or that one day I might want to start a family. So props to you.

If I may say, the habit of saving is actually a prioritization of the future and sets a baseline for consumption (which curves over consumption). While it's great you started that habit early, do you have any tips for people your age who haven't ingrained those habits early?


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## daledegagne (Apr 6, 2015)

IFITSTOBEITSUP2ME said:


> Whilst many right now are naysayers regarding real estate, we've heard often over the last 35+ years at various times "don't you think the prices are too high right now" whilst we still continued investing, building, renting, flipping (rarely but sometimes the market was too good to resist doing so) renovating and selling properties. I've never regretted any single family property we've bought but definitely regretted selling all those we have in the past, when we see what their values would also be today!


It's easy to look back at property prices from 35 years ago and see just how much money we "could have had" if we had of held on. The reason we do this more with properties (or at least, it hits home harder with properties) is because it's more tangible than the charts you see of $10000 invested in the markets after 1978 (the bias of choosing that as a start year does not escape me). 

The decision to hold onto mortgages is highly a hedge against home currency value. I can't link here, but google "Financial Mentor Should You pay off your mortgage". While aimed at home owners (not investors) the principals still apply. 

I hear you on the over-leveraging and running before you can walk bit. One of the keys to my success was that my mortgage broker put a pretty good leash on me. Contrast that to when I got started and other brokers were giving my friends 100% financing. They grew so fast that their learning couldn't keep up and they either had a fulltime job with most of the profits going to the banks or were back at the banks with a consumer proposal in hand.


That said - The value of leveraging OPM and carrying reasonable mortgages (80% or less) over reasonable time frames (25 years max) give cash on cash returns of anywhere from 15% to 25% for me. Hard to justify putting too much into equities (I do put some) when I can get stable returns like that.


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