Invest in real assets early in life

Buying a rental property in university paid off

By Steve Proceviat

Globe Investor Magazine Online, May 15, 2009

The investor: Grant Rasmussen, president and chief executive officer, UBS Bank (Canada), and president and CEO, UBS Investment Management Inc.

My best investment: When I was in university, I took $12,000 and invested it in a rental property. I was actually going to school in Kingston, Ont. at Queen's University. It was 1985, and I was 19 or 20 years old.

I had grown up in Markham, and I got a two-apartment rental there. I put $12,000 in, paid $112,000 for it, took out a $100,000 mortgage on it, and then sold it four years later for $219,900.

I grew up in a frugal family and, quite frankly, my parents had invested in a rental property, and it seemed to have worked pretty well for them. That inspired me to do the same thing.

We had to make sure we put good tenants in there, and they looked after the place and maintained it. It's a good lesson, as well - you give up a little in rent in order to find the right kind of tenants, and they'll look after the place and it will appreciate more.

What you're really looking for is safety and protection of your principal and your capital, and by having good tenants, we were very, very fortunate.

I graduated in 1987, and was engaged in 1988, and actually moved into the property in July of 1989. We then sold it by December of 1989. That was my first house with my wife.

The return: So I made $108,000 on a $12,000 investment, and had someone else pay for it while I was off at school.

That's a 10-bagger in four years. Quite frankly, then being able to use some of that money and then fund other things, for me in my life, there's obviously been a return on that, as well.

I think that helped inspire my interest in investing, and in understanding investments and understanding what you can end up doing with it - and understanding risk.

I had fun at university, but worked a number of summer jobs in order to pay for school. It made me a little bit extra, and that allowed me to put that extra into something else. I think there was a lot of temptation when I was in high school and university to buy that first car, or go put it into something that was potentially going to depreciate in value, and that just wasn't appealing for me.

The takeaway: I'm a numbers guy. I like things that will go up in value, as opposed to things that will go down in value.

If I take a look in terms of Canada right now, obviously we deal with the ultra-high-net worth in Canada. If you take a look at the Top 100 list of the ultra-high-net worth, and you tried to guess what percentage made their money through real estate, it's the No. 1 trigger to those people on that list. I think it's 19 out of the Top 100 are out of real estate.

Here's my simple little example - can anybody go and do it? Is anybody kept out of that market? Not really. So we encourage people to manage risk at the right age, and as they get older and later in life, where they potentially have $10, $20, $50 or $100-million-plus, then they try to manage money in a different way - then they go through us.

Special to the Globe and Mail