Out of the Box Ways to Save Up for a Downpayment

Ivan Ciraj

Ivan Ciraj

Co-Founder and driving force behind the tech development at T.Condos, Ivan has re-envisioned how real estate is transacted. Uninhibited by the customs and...

I purchased a property as soon as I could, watching the real estate market in the GTA flourish and imagining sitting on the profit sidelines could cause me to throw up. But entering the market is difficult, not only do you have to have sustainable income for the mortgage payments, you also need a chunk of cash for the down payment and you need a great credit score to be approved for financing. This is going to be a retrospective look at some of the small strategies which were enacted to help me get to the point where purchasing a property was achievable. The aim is to get your mind thinking about more unorthodox methods to generate capital and to potentially spark some ideas as a reader.

Building up a great credit score is something that’s extremely important, but no one speaks about. A very easy way to ensure you start early is switch from debit to credit. Here’s an example; when I turned of age, I went out and got myself a $1000 limit credit card. All future purchases would be made on the credit card instead of debit. Not only did I get 1% cashback (you can upgrade to fancier perk cards down the road) but using the credit card and immediately paying off purchases started to build my credit history and therefore my score. This made obtaining any sort of financing down the road much easier. This is even more crucial if you’re planning on renting as your credit score/report is one of the primary factors that landlords use to select tenants. Typically, the score you’re aiming for is above 700.

Playing penny stocks

Please don’t use any of the specific examples or stocks as true bets in your own strategy. These penny stock plays worked well for me and the timing was everything, most of these stocks are quite junky now (could be a great buy in opportunity though?). The point I’m trying to make is that if you have the stomach for the highs and lows associated with penny stocks, you need to do some serious research on which industry can potentially yield great returns. The money made from the below example was directly used in part towards my first property purchase.

I decided in spring of 2016 to start playing with stocks for the first time. I went and opened a trading account at my bank under the TFSA (Tax Free Savings Account) category. Because this was a learning hobby for me, the amount of money being put in was only going to be a few thousand over the years. The beauty of investing in stocks under a TFSA is that you are generally exempt from paying taxes on profits. Around this time, Tesla was really starting to get a lot of media attention and it got me thinking about batteries. As a pure rookie, I started researching different niche industries within which to invest and I came across lithium. My whole belief was that the push to electric vehicles would require a lot of new batteries and one of the primary required materials was lithium. Upon further research, I realized that an area in Clayton Valley Nevada was one of the largest sources of lithium in North America, with an existing operation already present there. It seemed there were quite a few junior mining companies setting up operations there and they were all on the TSX Venture exchange (to qualify for tax exemption under the TFSA setup, your holdings need to be Canadian stocks).

I picked up around 80,000 shares in Ashburton Ventures (company doesn’t exist anymore under that name, and it further shows how risky penny stocks are) at 1.5 Cents/Share. About a month later I sold them for 7 Cents/Share. Using a $500 investment as an example at 1.5 Cents/Share, that would equate to a return of $2,333 total. Some other firms I held and then sold were Pure Energy Minerals, Lithium-X, Alix Resources (now operating under a different name), Nemaska Lithium Corp, Cypress Development Corp. These firms are currently sitting at stock prices much lower than they were back then (Lithium-X was also acquired by a private company), but the hype of electric cars, specifically surrounding Tesla lead to a surge in attention to the lithium market back then, and I capitalized on it. Maybe there’s a niche market out there right now which you can leverage.

Weed Stocks

The second, slightly less risky stock play is to find an emerging industry that already has a foothold. I’ll share an example from a good friend of mine who invested in the emerging Canadian weed market. The timing was also around the beginning of 2016 shortly after the Liberal government was federally elected. They had campaigned that marijuana legalization would take place and therefore it seemed quite solid that this would happen (here we are a few years later with it being legal). At that time, there were three distinct companies which caught my good friend’s attention: Canopy Growth Corporation (CGC ticker, now known as WEED), Aphria Inc and Organigram. I remember he purchased CGC/WEED at $1.97/Share and sold when it had risen to around $11/Share. As of writing this paragraph, CGC/WEED is sitting around $36/Share, however in October 2018, it was over $70/Share (further showing how risky stock plays can be if not timed correctly).

Just like with the lithium market example, the key here is to find an emerging industry and capitalize on it. Sure, these two strategies took place a few years ago, but the point is to get your mind thinking in a way where you use money as a tool. You work your day job and reinvest some of the funds to make the money work to earn more money.

Cryptocurrency investments

Cryptocurrencies were all the rage at the end of 2017 and beginning of 2018 with Bitcoin (BTC) having reached around $25,000 CAD. They’ve since normalized and values across the board have dropped, providing another instance of how timing for everything is of utmost importance. However, if you were keeping track of world happenings in 2017, you definitely would’ve come across news covering cryptocurrencies. Investing in them was quite simple and the ROI (Return On Investment) which people made was astounding. Personally, I purchased Bitcoin, Ethereum, Ripple, and a few other Alt Coins. I simply held them and after seeing a solid return, sold half of all holding back to fiat currency. Another trend which was popular in 2017/18 was the Initial Coin Offerings (ICOs). These essentially allowed you to buy into ventures early on and capitalize once the ventures reached the general public. Most were well marketed scams, but there are some out there with strong potential and new ventures are still being developed. Cryptocurrency values may have dropped, but the technology is there, and it will continue to evolve and integrate into the mainstream markets as we move forward, there should still be good opportunities in this niche.

The Point

These are three specific strategies that I personally, or someone I know have enacted to generate capital outside of their day jobs. When you need $25,000 to over $50,000 for a down payment depending where your target purchase area is, doing so strictly by saving earnings is difficult. The hope of this piece is to give some insight into strategies which worked well in the past and therefore could open someone’s eyes to a current market opportunity. Please don’t take the specific examples from this piece as true financial advice, but rather as a friend sharing some success stories to get your creativity flowing.

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