Archives for March 2015

Building relationships in real estate investing is just as profitable as building houses and selling them.  The value of each new relationship you cultivate can not really be measured by simple metrics like dollar value.  Think to yourself how much could your next Joint Venture Partner be worth – 50,000, 100,000, over 7 figures?  These partners in your real estate career should not be looked at for just the deal you could work on today… but in terms of all the deals you could do together (or refer to each other) over the lifetime of your real estate investing business.  Often, when we have a deal on our desk either 1 of 2 things happens: first, we could send that deal out to our mailing list and see what happens (sort of the throwing spaghetti at the wall to see what sticks) or secondly we could start sitting down with all the contacts that we think could be interested in the deal – which I think would be a much better option.  However, all of those coffees or lunches will only be possible if you are constantly in close, engaged, contact with your network and you know what they need and when they are looking for it.  Harder said that done – but this type of knowledge of what your contacts are looking for will shorten the average time to deal close like nothing else in your real estate toolbox. Making a habit of reaching out and meeting with your contacts in person also helps your mind-share from their perspective as well so you start to become the investor that they call when they are looking for help or a deal of their own – which you might just have sitting on the corner of your desk forgotten about!  There are invaluable insights into marketing strategy, deal structure, what to watch out for with tenants, that your network will share with you once they are on the other side of that coffee table…you never know what you might learn that is working for them that could work just as well for your line of business in real estate. I also think that you should never be doing all the work in your real estate business and working with your contacts will lessen the load on complex deals that take a lot of due diligence, extensive renovation projects, owning multiple single family rentals, evictions (who wants to be in court anyways?) and many other areas that having a second pair of hands/eyes will make your days a lot smoother.  Having partners that you know well, like, and trust can be challenging because those investors are people just like you and I and they make mistakes – this could cause issues, but how these problems are dealt with is what matters.  If your partner and you have built a friendship as well as a business partnership then you are more likely to get to the other side of the obstacles relationship intact – this is the true value of creating “sticky connections” with those that are willing to stick it out with you when the project isn’t going well as well when things are all aces!

To your success!

Tim R

Right now in Calgary there are a lot of people scared about what the market has done and what it might do over the next 12 months.  There are a lot of investors out there waiting to be able to capitalize on what generally seems like a downward trend in prices, renovation projects will be cheaper, buy and hold more attractive with higher cash flows – but how far will the prices drop and how fast?  Nobody can know for sure, but with oil prices where they currently sit and new oilfield projects being put on hold, if history has anything to say about it the prices should slowly decline as inventory goes up and the influx of new people and jobs in Calgary and area goes down.  This is the natural order of prices in a commodity backed economy, however the DNA of the job market in Alberta is not the same as it was in the 80’s and the impact will be different this time but what that means for investors will remain to be seen.  Those that are considering selling their homes at this time might want to re-consider that option unless they are certain that they could reduce their list price to get the sale as the buyers in the market are doing a lot of “wait and see” right now to see where the market goes.  If you need to sell for whatever reason then the best thing to do is price the property competitively based on comparable SALES not what other properties are listed for – listen to your realtor’s advice on this one they see the sales and know what your house should sell for in a short period of time. I do feel that prices are going to drop, and we have seen the beginnings of this in the market but they have not come back to earth compared to the sky-rocketing prices we saw over the last two years leaving a lot of sellers hopeful that they can still get a high price for their home in the current market place.  Unfortunately many of those sellers will see longer waits for the offer as buyers are able to take back the advantage due to the uncertainty in the economy.  The big banks have also just lowered their interest rates-which is typical for spring time to encourage people to sell their homes and initiate new mortgages which could buoy prices for a few months leading into summer.  This will put a lot of pressure on those that have not reached the end of their term on their current mortgages to hold onto their homes to avoid the dreaded IRD or interest rate differential.  The rates have dropped a few times over the last two years and everyone with a newer closed term mortgage could be in for some serious sticker shock if they pay out early.  Make sure you check with your mortgage lender if you plan to/have to sell over the next few months to make sure you do not incur some costly fees.  Those that have seen great appreciation in their longer term investments in Calgary and area might have longer waits to sell like the rest but won’t have to worry about penalties being at the end of their current terms.  Those who hold rental properties in Calgary will still enjoy higher rents and low vacancies and I would say the best move is to hold on tho those cash flowing properties until the next uptick in the market after all the oil panic subsides.

To your success!

Tim R

There are times in my real estate ventures that I have thought to myself “man it’s really hard to find good deals in Calgary” and at some points that has been true – but only for certain investment strategies.  During those days I had to take a step back and look at the whole forest of real estate deals and not just the skinny little sapling that happened to be my current focus.  In real estate there are ALWAYS deals to be found for the strategy that you are working on as well as others, they may not be in your back yard in the city that you live but they are out there for sure.  We can become so focused on trying to find that next rent to own/renovation project that we overlook the great rental property or commercial deal that we would be able to make great returns on if we took a second the think more creative about the deals that come across our desk.  Other investors out there that do things differently than you do are an excellent resource to be able to wholesale that deal to so long as you give the potential deals that don’t fit your current line of business more than 30 seconds of time and effort!  Hands down the easiest way to make money in Real estate or any other business is referrals – sending business to another real estate investors will put cash in your pocket with less work than any other activity.  This can also lead to Joint Venture opportunities that you never saw coming looking at your tiny saplings in that forest of deals!  Other markets are something that  highly encourage new and seasoned real estate investors to consider – there are not always that many deals in your own back yard and thinking outside the borders of your local area can reap huge profits if you are daring enough to step outside your comfort zone.  Working outside of your city does require some extra work in the beginning to set up a team or draw up and agreement with a partner in that area, however that work will pay off 10x by not missing out on a deal.  The velocity of money is very important in business because what is really important is not how much money you make deal-deal it is how much money you can make how fast – think of what missing an opportunity could cost your business : 50,000?100,000?1,000,000?  Keep those eyes open, look in all the corners you come across especially when your current digging isn’t coming up with any gold!

To your success!

Tim R

I just saw a foreclosure in northwest Calgary today and while I was waiting for my team to arrive at the house I finally figured out how to get the Nav in my car to stop thinking the car is in the US! I know that has nothing to do with real estate but that item has been on my list of things to do for a long while – nothing better than scratching a long standing item off your list!  The property that we went to see today is an excellent deal and I think that my partners will agree that we should jump on it – there is about 50K to be made in this house in about 3 months of renovations are required.  Foreclosure homes are almost always in need of repairs and a lot of them are very dated but if it has good bones this is a renovators dream project! There was a long period in Calgary that I did not even think about foreclosure properties due to the banks being stubborn on the prices, but there are still deals out there if foreclosures at all times of the real estate cycle.  When considering a foreclosure in Calgary and other markets there are some things that you do need to be careful of for sure.  For instance, when you purchase the home from the time you get the accepted offer until you take possession and get your own insurance the bank will not cover damage to the house such as vandalism but they do cover catastrophic damage such as the house burning down so don’t worry about that.  Some of these homes also have the water shut off and the plumbing cleared of all water and this can cause some issues with pipes leaking and other water related problems.  Just like any other property that is older foreclosures will be rough around the edges with older fixtures, lighting, laminate flooring from the 70’s and sometimes asbestos around pipes or used as insulation.  This type of repair is not the end of the world but does require some special attention to make sure the home is safe for the contractors you are using and your end buyer. Be sure to check your local regulations on how these things need to be remediated, some areas have strict rules on how asbestos and other hazards need to be dealt with.   Being able to look past the dated interior and the fact the roof needs replacing is something that your every day buyer and even a lot of investors are not able to do – if you have the right perspective to see the potential in foreclosures then you could make some large profits on houses that nobody else wants.  The best part about foreclosures (if priced right from the bank) is that you can negotiate a significant discount due to the repairs needed by making a strong offer – no conditions is best but if you have a great renovation team you may not need an home inspection condition or you could use private financing and not need that as a condition.  With lower prices and less competition you might want to consider starting your real estate fortune in foreclosures both in Calgary and Abroad!

To your Success!

Tim

In real estate courses abound they give you the general 1000 foot view of how to do marketing for your real estate business.  Further, there is a lot of advice out there given by American-focused educators that advise you gain access to lists of your target market from public records – which will not work for Canadian investors due to the freedom of information act.  These courses also offer some conflicting information such as shoot-gun marketing as well as laser focusing on a certain target market.  Well using the shotgun approach to marketing in any business is only something that large companies can do with enormous marketing budgets and frankly all this really does is boost their mind share in their potential customers heads.  The simple fact is this does not work very well in real estate (and most other businesses) you need to focus your marketing efforts at your ideal prospects and propel them to your offers through engagement and quality content.  Gone are the days where interruption marketing (commercials, flyers, telemarketing) will get your results you need to get your customer’s  interest first and get them to know, like, and trust your company before you have a fair chance at having them open their wallets no matter how good your offer is.  Think of how many advertizing messages that we see on a daily basis now having smart phones in our pockets – the din of marketing noise is getting louder and louder by the day and you need to stand above that crowd drawing your prospect’s interest to your content first and the offer second, third, or eighth on your list of activities. In real estate planting bandit signs and broadcasting direct mail letters to random parts of your local area will cost you a lot of money/time and likely meet with poor results without first doing some homework into what your clients are really after – this is using the sledge hammer to pound in the marketing nail… when a well placed strike from a standard issue ball-peen hammer would do the trick just fine.

To your success!

Tim R

There are a lot of Canadian and international investors that have bought properties in the US since the downturn of 2007-2008.  However, there is a lot of uneducated money buying up properties in “sexy” markets such as Florida, Phoenix, Las Vegas that are only buying in these areas based on the hope that the properties will appreciate and then they can sell for a profit.  This was certainly the case in phoenix about 2 years ago and those that bought in saw over 30% in appreciation – however this is not something that you can count on, what the market will do and when is something that no one can know for certain.  There are always the fundamentals that can be monitored such as job growth, transit projects, population changes but no one can know for sure when exactly the changes are going to start.  In real estate the speculators are the first to go broke when the tides of the market change, having properties that cash flow very little or not at all hoping for the market to go up.  There is a lot of money to be made in US real estate but you have to pick the right markets where you can get quality properties for a good price such as Atlanta, Texas, and Kansas just to name a few.  These two markets have very strong economic fundamentals which is what you need to ensure your properties cash flow both now and in the future.  Many Canadians are afraid to invest south of the border worrying about taxes and liability issues.  I can tell you for sure that these two things are nowhere near as hard to compensate for as people think, but you do need to have a excellent team on the ground to help you invest from abroad.  Properties in Calgary need a down payment of around 80-90K for investment property and in Houston Texas you can buy a whole house for cash for the same amount! Doesn’t that kind of perspective make you wonder what it could be like to invest in the US? In Houston you can buy tax lien properties for as little as 8000.00 and at that price the property would cash flow around 500-700/month there are not many places in Canada where you can get 1 unit to cash flow that well.  There are places in Canada that make a lot more sense than Calgary and Vancouver for buy and hold – if you are looking in Canada places such as Ontario and Winnipeg and Saskatoon are worth a look for sure.  I highly suggest that if you are afraid of investing in the US for whatever reason give us a call to answer all your questions about how you could get started and put those fears to rest!

To you success!

Tim R

There are a lot of stories about the oil prices tanking, the dollar dropping, and a lot of general doom and gloom over the economy in Calgary and area making a lot of investors fearful of what is to come.  Many would say that now is not the time to invest – that holding off for right now would be a better ideal.  Did you know that more millionaires were created during the great depression than any other time during north American history?  Someone can always think of a lot more reasons to NOT to invest as opposed to reasons to just do it!  The market fundamentals still need to be considered to make sure that your exit strategy (or strategies) is sound, but there are new ways to make money in every part of the real estate cycle.  Fearful people generally make poor decisions, therefore you could capitalize on sellers panicking and selling their properties to you for a huge discount, at a minimum far cheaper than they would could get when they feel optimistic.  Sellers will want out faster so you can get quicker closes, legal fees paid, all sorts of new negotiation tactics are in play when people are afraid.  For those of you that buy and hold there will be an influx of renters when those panicked sellers sell and have to live somewhere possibly driving rents up in areas where rentals are already scarce. I am not sure if those of you outside of Alberta remember the great flood of 2013 but I can tell you that finding trades people for anything in this city and area as almost impossible for about 8 months, and if one could be found many were gouging customer on price making it impossible for some investors to make a profit on their renovation projects.  When the market dips and the housing starts and uneducated investors stop doing renovations due to fear – those trades offer lower prices and faster turn around times because they are now looking for work and need to pay the bills.  There are always advantages to a declining market – you just have to look at things a bit more creatively and compensate for the changes as they happen.

To your success!

Tim R

I recently had a conversation that had me answering a lot of questions about US real estate, normally that would be great because I love talking about real estate in Canada or the US and even abroad.  However, in this case the person asking all these questions had just weeks before told me they wanted to do renovations in Calgary.  I think that a lot of new investors can get excited by an article or by flipping back through their notes from the last seminar they were at and want to change directions or add a new line of business to their current real estate activities.  I was guilty of this at one point in my real estate business for sure – but I got over it and decided to focus more on what I was good at rather than trying to learn something new every few weeks.  There is a different marketing strategy, tools, pitfalls, capital requirement, for each and every strategy that you can use in real estate to make money so constantly changing course is a lot of work and takes a lot of time to re-adjust everything to suit the new line of business.  I got some good advice from my business coach that verified my new pathway of focusing on no more than 3 lines of business at any given time.  Once a certain line of business can be totally (or almost) systemized where it just about runs itself, then you can start looking at what other ways you could make some money.  The things we focus on in life and in business turn into a reality but only if you TRULY FOCUS on that thing.  Real estate investing no matter what the strategy – is hard enough without taking your eyes off the prize and fracturing your efforts.  Imagine that you are doing a renovation project and you have to be on regular calls with trades/suppliers and you constantly have rent to own tenant buyers calling you to get more information about your program – when your marketing stated a 24 hour response time…that could be a bit frustrating both for you and the customer.  Focus in business is just like focus in life, if you are planning to run a marathon you have to train like crazy to get ready and if your trying to learn fly fishing at the same time putting a lot of effort into that then it’s likely that your race may go less than stellar!  Pick a couple strategies and focus on those until successful – you will be happy that you did.

If strategic accountability in your business needs hand-up contact us today for a free consult to see how we could help.

To your success!

Tim R

Today I am going to come right out and say that most people are terrible with their money.  There was a time in my life where I was part of this very large herd of Canadians that spend just about everything that they make.  I have come a long way since then becoming VERY Finicky about my finances.  One of the things that I recommend that people should do is save every receipt for anything you buy no matter how small to see where your money truly goes each month – the results will be surprising.  Often in life when an opportunity comes your way you may look at the price tag associated with that investment whether it be in training, tools, a new rental property and say “I would really like to get involved but I don’t have the money right now” – well there is likely a reason why and that exercise mentioned can shed some light on the path that got you to “no money”.  I read in an article recently that statistically more Americans own cats than they own stocks, that is very telling on how well us north Americans are doing with investing for the future instead of buying TV’s and cars.  I am not a huge believer in paper assets but I think they have a place in a well balanced investment portfolio.  Clearly, there are a lot of Canadians that could be a bit more finicky about where they spend their after tax dollars. Some might want to consider putting a bit more money into tax deferred assets such as RRSP’s.  There are a lot of people that have lost a bunch of money in their RRSP’s in the last few years… and if they were a bit more finicky about how their money was being invested and not just trusting the banks/financial firms they might have considered Arms-length mortgages which are secured by real estate – one of the most common ways the bank makes their money in the first place! If someone is willing to inquire about what their options really are to invest they might realize that they could be just like the banks in a number of ways such as hard money lending for real estate projects.  Real estate provides a lot of opportunities but you need the right education to be successful in it because the profits are high in real estate but the mistakes can cost you big as well – make sure your being finicky with your finances to make sure you can invest in the next opportunity that comes your way.

To your success!

Tim R

There are those that might say you should not be “anal” about things or finicky in life for a variety of reasons, now in some contexts I would agree (and in general) you should not sweat the small stuff.  However, in terms of how you should finance your real estate deals you should be as finicky as possible! There are a number of reasons why – firstly knowing your numbers inside and out on any deal is imperative to be able to mitigate your risk and turn a profit.  Thus, you need to be as meticulous as a spider weaving a web to be able to nail those numbers down so being fussy here is a really good thing.  Also, the rates that you get from the bank, hard money lender, credit union may or may not work for your deal the way you wanted to execute, and if the numbers do not give you enough options to have a plan A and B then you are greatly increasing your risk profile having the 1 exit strategy – which is never a good thing.  In real estate no matter how well you plan and how much you focus on having your first strategy work, things could change in the market/economy that prevent that plan from working out with a good profit margin.  For example: you plan to do a renovation project and sell the home in 6 months for a profit but prices drop by 25% over that 6 months and now you have a house you can’t rent out for enough money to cover its expenses.  The way you could avoid this would be to make sure that the property will cash flow if you had to hold it, there is always more than one way to do a deal and make money you just have to think creatively enough to see all the options. Having the negotiation skills to make sure you are able to get seller financing is also a way where your finicky nature will ensure you realise greater profits than those that just accept their fate and have to constantly spend the full down payment to get into every property that they buy – eventually they will run out of money and a lot sooner than the picky investor! When talking with your mortgage broker (who uses just the bank to buy real estate anyway?) being “anal” over getting an open loan/variable mortgage is essential if you plan to flip any properties, otherwise you could be slapped with an IRD (interest rate differential) and trust me when I say that WILL eat into your profits in a big way.  Those investors who are very finicky about the renovation budget they set not being exceeded will always make more money than those that just say OK and pay the contractor’s bill that was over the quote but within scope.  There are a lot of things you should not worry too much about such as: spilt milk, bad weather, hangnails — but in real estate I am of the opinion that being finicky is just fine!

To your success!

Tim R