Author Topic: Please Provide Advice Not sure what to do with my money?  (Read 2851 times)

saphire_xoxo

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Please Provide Advice Not sure what to do with my money?
« on: January 08, 2013, 09:45:32 AM »
I am hoping you wouldn't mind taking a little time to help me out. In 2010, I graduated from university and went straight into a government job, and I still work with them today at age 27. About 1.5 years ago, I had an idea that I would like to open a traveler's hostel in my city. This has now became my retirement plan. I may not make tons of money off of it, but it's a living I would love. It will be quite a bit of work at times, but I personally think meeting new people from around the world would be the best job ever. Really you are travelling the world, while staying at home. Not to mention I would constantly be meeting new friends! 
I had a student loan, which I finished paying off about a month ago. This means I currently have zero debt! I'm not the biggest fan of my job, and I'm actually a survivor of the recent Stephen Harper job cuts. When I received my letter that I could lose my job, I was upset that I might not have quite enough time to save for my hostel dream. I wasn't actually worried about losing my job itself just being delayed on my savings for retirement. I ended up getting promoted, so unfortunately and thankfully I work in a cubical in a downtown office building. I catch a ride with my sister to avoid downtown parking. I still thankfully have a good paying job to support my hostel addiction. By the end of this month, I will have a total $29,000 sitting in my shitty 2% tax free savings account and a regular savings account. I can't lock this money into anything, because I require it as a down-payment for the hostel property, which after I get around all the city's red tape will hopefully be a large residential house. I plan on putting 20% down using my money, my father's money, and investor money. My father will loan me $25,000 interest free, and up to another $15,000 with interest. My investors are family and friends, who I started asking for $500 each and offering a 3% annual interest rate compounded monthly. Most everyone said yes to $500, and many increased their contribution, because I offered higher interest rates with higher investments. Instead of getting a business loan, I now have investor money to use that's very comparable to the same interest rate as my future hostel mortgage. I have about $35,000 available in investment money currently in addition to my father's money. I will not be paying any interest on it until I actually start using it, if and when I require it. I may have enough for a down payment between my father and I, so I may only need investment money for my start up loan depending on the property of course.
From past experiences, a good property potential comes onto the market about once per year that will fit the hostel requirements. I'm crossing my fingers that the property will show up this year, but it could be in 2 to 3 years. I currently rent a house, which I have crammed full of friends and strangers that have became friends to lower my rent. I currently live with 4 other people. This brings my rent and utilities to a total of $255/month. My current net income that I bring home from my government job is $3150/month, and I will be starting to teach yoga this month, so I will be netting about $160/month for that. Teaching yoga part time is also something I hope to do for retirement. This brings my total net income to $3310/month. Other expenses monthly expenses include:

Vehicle Plates: $66
Carpool: $35
Gas & Average Repairs: ~$25
Groceries: ~$150
Yoga & Exercise: ~$55
Entertainment/Going Out: ~$55
Beer (although take note, we are currently brewing our first batch): ~$30
Misc (Dog food, Clothing Item, Brewing Items, Medicine etc): ~$70
Cell Phone: $100

Total: $586
Rent: $255

Now that I'm done paying off my student loan this means I will be spending about $841/month after rent and expenses. This leaves me the ability to put away $2,469 a month in savings or at least $2400 assuming a $69 emergency or overspending comes along each month.

Now that you know my story and expenses, I'm hoping you can give me some advice on what to do with this money until the hostel property comes up? How can I make money off of my current money, but still have it liquid for my down payment?
I'm struggling with whether I should purchase a property to live in now.
Should I purchase a smaller property to shove me and all my roommates in to build equity and probably pay less than my current rent?
If I do that will I have enough money to purchase my second property?
Would it make financial sense to use a current house against a second property for my hostel?
OR
Do I just sit on my money in my tax free savings account? I know I have potential to get 3% interest on a tax free savings account, if I switch to another bank.

Perhaps you have other suggestions. I have been struggling with what to do for a while now, and Im someone can offer advice. Thanks so much for you time, and please keep in mind that I am Canadian. It may or may not change a couple things.


« Last Edit: January 08, 2013, 09:52:40 AM by saphire_xoxo »

totoro

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Re: Please Provide Advice Not sure what to do with my money?
« Reply #1 on: January 08, 2013, 09:51:54 AM »
I don't have any good short-term solutions for investing but you will likely lose if you buy an interim property if you plan to resell it shortly because of transaction costs.  In addition, many areas of Canada are currently in falling markets - not sure about yours - but this is a real risk. 

If you don't have loads of equity or can't sell you won't be able to borrow for the hostel.  Credit is limited by income and ratings.

saphire_xoxo

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Re: Please Provide Advice Not sure what to do with my money?
« Reply #2 on: January 08, 2013, 10:15:34 AM »
Thank you for your reply. No I do not have loads of equity, and I still won't after a couple years. My city is in a boom, and in the past 10 years we just about doubled our population. It would have been great to buy 10 years ago, but I was 17 then. 6 years ago the housing prices went through an incredible leap. My sister's house actually doubled in value. Today the housing prices are gradually increasing each year, but it's nothing to get excited about. They are definitely not decreasing. That being said... I guess you never know what can happen.
I think, if I purchased a house, I would not try to resell it for several years. I would continue to use it as my primary residence/rental. However, I think you may be right. It may be risky even with my excellent credit rating.

chucklesmcgee

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Re: Please Provide Advice Not sure what to do with my money?
« Reply #3 on: January 08, 2013, 03:29:17 PM »
Are you really sure you know what you're getting into? I hope you've done your research. Starting and running a hostel is about running a business first, making friends second. You don't start a business because you primarily want to make friends and feel like you're traveling the world.- You go traveling and stay in youth hostels if you want to make friends and travel the world!

If you want to earn money while doing it go work in a youth hostel as a receptionist or something similar, get a better understanding of the hostel environment, its inner workings and potential pitfalls. You'll either come out of it with an enormous amount of personal experience that will guide you in setting up a hostel or you'll decide it's not right for you.

saphire_xoxo

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Re: Please Provide Advice Not sure what to do with my money?
« Reply #4 on: January 08, 2013, 11:27:35 PM »
Thank you for your concern, and yes I've done my research. Of course research never stops, so Im always learning. I feel confident that this is what I want to do. Just wondering, if you can offer any financial advice? That's something I don't know enough about! Perhaps you can answer some of my financial questions in the post?