DIY and Real Estate Investor Profile – Maria from Handful of Thoughts

DIY and Real Estate Investor Profile – Maria from Handful of Thoughts

Long-time readers of this blog are well aware common stocks that pay dividends and low-cost, diversified Exchange Traded Funds (ETFs) make up the one-two punch for what I’ve coined our “hybrid” approach to investing.

This approach to financial independence continues to work rather well albeit there are always a few surprises on our road!

Financial Independence Update – October 2020

But like I’ve mentioned in other investor profiles, there are other ways to invest.

Location, location, location – investing in real estate

Unless you’ve been living under a rock – real estate values in Canada are up. Way up in recent years. In a pandemic in many locations no less!

Which means, if you are or have been a real estate investor for some time now, you’ve probably faired rather well.

Enter in Maria from Handful of Thoughts.

I’ll let her answers speak for themselves below of course but by executing a long-term plan to be more mindful with her money, after paying off her sizeable six-figure mortgage in less than five years, she and her partner now own a very impressive real estate rental portfolio. A rather large one in fact.

I suspected Maria had more than a handful of thoughts about money to share, so we took some time to understand her relationship with money, how she amassed so much wealth as a millennial to date, and what advice she has for other investors on their financial independence journey.

Maria, welcome to the site – thanks for doing this!

Thanks Mark and it’s great to be on your site. I enjoy your articles and your journey!

Maria, understanding money seems to come naturally to you. Can you tell folks a bit about yourself before we get into some details?

Sure Mark.

By day I am a high school teacher and by night I am the founder of Handful of Thoughts, a resource dedicated to helping moms take control of their time and money. I live in Alberta with my husband and toddler and have been interested in personal finance for as long as I can remember.

I’ve always wanted to be a writer so I started a blog as a way to write about what I’m interested in – money. As a new mom, I quickly realized that a lot of my mom-friends did not have a good understanding of their own personal finances. So I’m writing for all the moms out there who want to be better with money.

In 2009 we bought our first home and made a plan to pay it off as soon as we could. In total, we paid off our $342,000 mortgage in just under 5 years before I turned 30. This helped us set our investing foundation and put us on the path to financial independence.

Geez, no doubt. Well done. So, how did you get started with investing? What do you invest in?

 The first investing that I ever did was in mutual funds through the bank.

(Mark – me too! I wrote about how and why to ditch any expensive mutual funds here.)

I didn’t know what I was doing, but I had a job and heard that I should be investing in an RRSP so that’s what I did.

Eventually, I moved that money into segregated funds on the advice of a financial advisor who turned out to have her interest in mind over mine. Then, my husband and I moved our RRSPs out of segregated funds and into some managed funds with lower management fees.

I’m still not 100% sure that I’m happy with that decision but it is one we plan on reviewing at the end of this year. That money has now been actively managed for a few years and has stayed that way due to complacency on our part.

How did you learn more about investing over time? What is in your portfolio now?

When I first started investing I knew nothing about investing. I invested in mutual funds because that is what my parents did and was the thing to do at the time. As my interest in investing evolved so did my knowledge.

I always thought I needed a financial advisor because it felt prestigious to brag that I had enough money for someone else to manage it. But the more I learned the more I realized having someone else manage my money was not the best choice for me. 

I’ve learned so much from blogs, books, and podcasts. Now I am a self-taught DIY investor when it comes to investing in the markets. 

Currently, we have part of our RRSPs actively managed and part is self-directed by us in ETFs. We don’t have a lot invested in our TFSAs now but plan on eventually topping them up. The majority of our portfolio is invested in rental properties that we self-manage.

Our current investment portfolio is a real mixed bag of investments: rental properties, private equity, actively managed, self-managed, ETFs, it seems like we have a little bit of everything.  And that doesn’t include my defined benefit pension and my husband’s defined contribution pension.

Although our portfolio seems a bit haphazard, we do have a plan for our investments. The more we learn the more strategic we are becoming on our journey to financial independence.

Wow, a lot going on and impressive. How much of your portfolio is in real estate? What made you gravitate to real estate as your preferred choice?

The majority of our portfolio is invested in real estate. We own 9 rental properties that we self-manage.

(Mark – whoa…that’s quite a few..)

Even though we have investments in the market, our real estate is our end game.

Because of this, we plan on withdrawing from our investment accounts before we reach the traditional retirement age. By the time we reach 65, we will be in a higher tax bracket because our rental properties will be paid off by then.

We plan to leave our “day jobs” and withdraw from our investment accounts to pay for our daily expenses while our rental properties continue to get paid down by our tenants. This creates a marginal tax rate gap which is a huge advantage to the RRSP.

(Mark – your readers may already know this but a marginal tax rate gap is the difference in tax rates from when you contribute to your RRSP to when you withdraw from it. That is really the power behind the tax-deferred RRSP.)

(Mark – yes, when it comes to the RRSP vs. TFSA vs. other debate I’ve shared some thoughts with readers for years on that.)

Managing the refund well is the linchpin in the RRSP vs. TFSA debate

Real estate was our preferred choice because it is tangible and at the time something that we understood.

Before buying our first rental property we had taken an online course on investments and the market and it completely confused me. 

If I didn’t understand it, I didn’t want to invest in it.

We feel understanding rental properties is simple – buy a property and rent it out – but it’s far from easy.

No doubt. We used to have a rental as well – just one – but sold it almost 10 years ago and never looked back.

How has COVID-19 impacted your financial independence plan when it comes to real estate – anything keep you up at night?

When the pandemic first hit there was a lot of uncertainty. We didn’t know what the long term outlook was for our jobs. Because of this we halted paying down debt and investing and put all our extra income into savings and to beef up our emergency fund.

We had 5 properties turn over this year which is more than a typical year for us. Thankfully we were able to rent out most of them without any vacancy. 

One tenant just up and abandoned the property so that created some stress for us. We had to empty the property, clean and fix up the property, and then scramble to get it rented. We did have some vacancy with this property which is something that never feels good.

Thankfully we have a built-in buffer with our rental properties. Even though rents have come down from when we bought the properties all except 1 are still cash flowing. The property that is not cash flowing is a unique case and will not be cash flow negative forever.

What have you learned about yourself, as an investor, or as a person during these trying times?

My first instinct was a bit of panic in wanting to increase our emergency fund. But as time went on I wasn’t comfortable having all that money just sitting there earning next to no interest (high-interest savings accounts have taken a hit lately).

So we were faced with a decision on what to do with this extra money we had saved. After talking about it, my husband and I decided to pay down our mortgage again.

Even though we were mortgage free for 5 years we now have a mortgage again after buying a new home last year.

The math may say that investing in the market is the better long term plan, but paying our mortgage off is the right choice for us. 

(Mark – you’re right of course, I wrote about the definitive answer to paying down your mortgage vs. investing here.)

The definitive answer to paying down your mortgage or investing

Without a mortgage, our monthly expenses drop dramatically. This gives us more options in terms of transitioning away from our day to day jobs.

In closing Maria, what advice do you have for other investors on their financial journey?

Do what works best for you but have a plan. 

There are so many different ways to achieve financial independence that there is no one size fits all.  Having a clearly defined plan can help you stay the course when times get tough as they inevitably will.

Sometimes it can be appealing to do what other people are doing but that may not be the right choice for your situation. Before getting caught up on what to invest in, it’s important to have a plan of where you want to go.

For people further along their investing journey – like you Mark – I would say don’t feel like you have to wait for things to be perfect before making a transition to work optional. Those few extra years that you are waiting for perfection in your plan or investments are years you can never get back. (Coincidentally this is something I’m often reminding my husband of too!)

A big thanks for Maria for sharing her insights.

I second her comments about creating your own plan and charting your own path. The genesis of this site is all about that.

While many paths to financial independence will always exist, the common themes that will apply to you and me are to have a plan, save and invest the difference in assets that accumulate in value over time, and continually revisit your plan to ensure you’re meeting your objectives.

I’m looking forward to sharing the elements of a financial plan this week actually. Lots of great information coming so stay tuned!!

Thanks for reading and I look forward to sharing more investor profiles to help you tailor your own get wealthy eventually approach.

Other investor profiles definitely worth reading:

DIY and Private Equity Investor Profile – Matthew Wilson

DIY Investor Profile 2018 Update – Susan Brunner

There are also a host of retirement and early retirement success stories on my dedicated Retirement page.

Read on, enjoy and fire me any questions including those to Maria in the comments section.

Happy Investing!

Mark