Well it’s taken us several years of trial and error with various financial planners, buying mutual funds or stocks directly for us to figure out that WE actually manage our money better than anyone else can.

We’ve found that no one else has OUR best interests at heart. That shouldn’t come as a really big surprise, but it took us many attempts at people saying how “they” can do a much better job than another CFP or better than “the market” or ETFs (index funds) or guaranteed funds. Everyone giving us advice, insider tips, how to do puts and calls and how to cover these calls in case your prediction doesn’t come true.

The melt down at the end of last year kind of turned into a wake up call for us. We saw things sliding and these were supposed to be some of the best fund managers on the planet. We figured at this rate it would be better for us to sell. Cut our losses and re-invest when we start to see signs of life. I don’t recall when we pulled out (what was left) of the market, but well before the “STORM” of 2008 (has anyone named this event yet or are we still in it and can’t label it until we are clearly out of “IT”).

So we sat there and wondered what would be a good indicator as to when to get back in the market. Nothing showed promise and then all of a sudden the bottom fell out of the market. I think we were the only happy people at the time. If you know my wife, she doesn’t buy anything unless it’s on sale. Now we were looking at EVERYTHING being on sale. New problem. What to buy? When? How will we know it will recover? When will it recover if ever? What has survived previous recessions?

We decided upon things that are “blue chip”. The Coke’s & John Deere’s of the stock world. Bought low and sold on the way up. The one thing we did learn, never try to sell at the top, always on the way up.

So, we made back some of our cash, but not a lot or not enough to cover the losses for the last…ew… dare I say 10 years?

We decide to look at our overall portfolio and decide what was making us the greatest return and focus on how and why that worked. Guess what we discovered. All the funds we used in our RRSP and LIRAs that were lend out as mortgages were out performing every and all things (combined?) we’ve done related to the market/stocks/mutuals.

Now if that doesn’t make you stop and think for a minute.

Let’s get this right. We love the whole concept of investing in real estate to create positive cashflow. We didn’t know what to do with our LIRA, but found out that we could lend it out as a private mortgage to people who otherwise wouldn’t/couldn’t qualify for a mortgage with a bank (forget it)/sub-prime lender.

Major risk factor, I hear everyone saying. Well, not if you look at the overall deal. There’s almost always a story. Divorce. Death in the family. Illness. Even a double bankrupt (usually as a result of one of the previous). As long as you never exceed 85% loan to value (LTV) then there always should be some equity in the deal. If there is no equity, no story or you don’t believe the story… you walk. Too much risk.

If they stop paying, you can go power of sale or foreclosure. One gives you control the other ownership. These are not exactly fun options, nor quick but you do always have that security. Unlike the stock market, the value of the property isn’t suddenly going to go to zero overnight. You can rent out the property to cover the mortgages. There are creative solutions IF you are in the right frame of mind.

This leads us to MICs or Mortgage Investment companies. What the heck is this? These are companies that pool peoples investment funds and lend them out on various mortgages (first, seconds, thirds… forths). Rates increase with the higher risk of the position and/or remaining equity. Today most only go to 80% LTV. 85% if the deal is really strong. The interest earned then goes back into the pool and can be paid out as a dividend to the investors or re-invested into another mortgage.

Little known tip. you can earn dividend income up to $40K+ tax free. I know of one smart business owner that only pays himself dividend income. Sweet.

There’s even a company in town that does something similar only instead of pooling the funds they lend out one to one (lender to borrower). They try to match up what you have and what a borrower needs. They take their cut as the middle man. Everyone goes home happy. Client gets the funds they need. Lender gets great returns on their money/RRSP.

Along the way, we have also discovered a really nifty book called the Lazy Investor by Derek Foster. This is the ONLY method of buying stock (automatically, thus no broker fees) that I’ve seen that works. We’ve started on this (bought a few bank stocks with SIP & DRIP options) and are quite happy with the results. As long as the companies declare an stock dividend, we gain. Mostly independent of the stock price which I think is the cool part as I had watching stock prices rise/fall randomly. Time will tell on this option, but the only set it and forget it method that I’ve seen that so far seems to just work. Still not as good as today’s mortgages that we hold, but this is one of those snowball things that grows over time.

And the Mac? Well that’s just me. I’m a Mac fanboy as they say. And I’ve just heard that there are a couple people who will be buying (or have bought) a Mac for the office. New iMacs were just released and I can’t wait to see how that new “super mouse” works with touch technology. Me thinks I’ll be doing a little more IT work at work getting these people up and running.