Archives for 2015

I have seen a lot of investors over the past couple years very interested in commercial and multi unit residential properties, which is the best place to be in real estate especially in the end game.  The reason that multi tenant buildings are so desirable is that you have multiple streams of income and if you have a vacancy you do not lose out on the whole profit for that month.  There are also other great things about multi tenant buildings such as charging for multiple parking spaces as well as laundry and in some cases other amenities such as pools and gyms if they exist in the building.  One of the largest barriers to getting into these types of buildings is often the price – I recently saw a 4 unit apartment building in Calgary listed for over 1.2 million dollars! This property has the zoning to build a 12 unit building on the land but this is just an example of how high the prices can be in some of the large markets like Calgary and Edmonton.  The standard cap rate that someone should generally be looking for in an apartment building (depending on their goals of course) is around 8% and of course greater where possible.  This is impossible in the Calgary market at the current time and most smaller centers near Calgary due to the price increases we have seen over the last 24 months.  This causes a dilemma for those trying to make the move into multi tenant properties, now you could look in other provinces to be sure but there is a better bang for your buck if you are willing to open you mind to smaller towns in other parts of Alberta!  There are a precious few investors that would even think about buying an apartment building in a “small” town – why? I personally do not understand their objections: its not in a major center, there is no job growth there, what if the factory closes.  Now, the factory closing argument has some merit in some cases but only if 40% or greater of the whole town’s population works there and its closing would mean nobody could pay rent.  If the numbers make sense and the fundamentals are there such as vacancy rates being low and having more than one industry that fuels the job market then why not take a look at a small town? I know of a deal right now that is off market for a 12 unit building with an 8% cap rate that is only 83000/door and is only 2 hours from Calgary!  There are lots of these deals out there just waiting to be snapped up by savvy investors that know a deal is a deal no matter it’s location – not I know it is nice to invest in your backyard or close to a major city in your province but sometimes a major center means major prices that just don’t make sense when compared to some of the other options in the market.  That deal I mentioned is off market as well so there are deals that a lot of the conventional world just does not see so keep networking to find those pocket deals that never hit the MLS.

To your success!

Tim R

The most talked about goal in real estate and how it can make you wealthy is passive income – normally this means buying a home renting it, then collecting rents to gain your profit.  I have seen many investors over the years that have many properties and they insist on self-managing them bemoaning management companies as all being crooks and not adding any value.  This certainly true for some property management firms out there – but there are a bad apples in more businesses that you can shake a stick at! There are many very skilled and proficient management companies out there and one of the main benefits they provide which is often over looked is the screening on the tenants so you don’t have to and dealing with evictions if that ever became necessary. Finding a good property manager can take some time but once found they are worth their weight in gold so ask around your network for someone that you know uses and have used for a long time with great success, trust me it is worth the effort.  Having a bad tenant is one of the worst things that can befall a buy and hold investor – you could end up with a grow op in your home which you would be on the hook for remediation with the city so not getting the rent cheque could be the least of your worries! A great property manager lets you really focus on growing your portfolio and doing your due diligence on new properties so you don’t have to worry about slow sinks, broken washers, plugged toilets, and doing tenant interviews!  How much time do you spend on these tasks each month today? Let’s say you self managers out there spend 20 hours per month dealing with these sorts of issues, that is as much as a part time employee works in a week so you are losing a half a week each month – how much is that time worth to you? How often do you want to be doing high-leverage activities day to day? I say find a system that gets you to the place that you are ONLY doing high leverage tasks each day.

To your success!

Tim R

Wholesaling is by far the most popular real estate strategy for new investors (with sandwich lease option being a close second) because it seems like one of the least complicated routes to make some money in the start when you don’t have money for down  payments, renovation costs, or like many that take their first real estate course – often do not even own their own home.  I would disagree in many ways that the wholesaling world is the best thing to foray into right out of the gate.  There is no doubt that on paper it would be one of the simplest ways to get some cash in your pocket – find a great deal, get it under contract, and then sell that contract to another more experienced investor for a profit.  There are some inherent issues there however – you would need to have some experience with other investors and analyzing deals to make SURE it’s a good deal before you run out there and get that home under contract.  Having a contract is great, but if you make great claims to the owner of that property that you will be closing on it in two week or less and you never remove conditions (which is fine in concept) letting the deal drop this could annoy them – which again in theory is fine but if you do this to a hundred people in the first 3 months of doing real estate you may be building a reputation and image that you don’t want for your company long term.  The image and brand that you have in business is one of your most important assets and its very difficult to repair once damaged.  Some mistakes are going to happen in your first year in real estate and that’s OK, but it is very important to have a strategy to make sure you have a winner of a deal before you tie it up with a contract and have a buyers list  of whom you know exactly what they are looking for before sending them deals that will waste their time and yours.  Is this an excellent strategy? Yes – is it an easy one to execute in the beginning? I think not – network like crazy with experienced investors in your local market, pick a few that have similar profiles then find deals that suit them.  One of the most important things I feel you should remember in the wholesale game: don’t try to be all things to all people – focus your due diligence on 1 type of deal then go from there!

To your success!

Tim

There are many strategies that can be used to make money in real estate, some days it seems like there are more than you can count if you have an eye for creativity when looking at a deal.  In the Calgary area with everyone panicking about the oil prices and fearing that the Alberta economy is going to crash – changes the landscape for some exit strategies but not all.  One of the strategies that I like the most is renovations which works in any market: up, down, declining, rising, sideways you name it – if your plan is to buy/fix/sell then you can do that in any market conditions because you are adding value through repairs/updates.  Of course, this only works if you due your due diligence properly and know your numbers to a T while keeping your costs under control. With all the panic in Calgary there could be some more motivated sellers on the market in the coming months which would open up the door to things like lease options being a bit more feasible than they have been with prices soaring and competing offers being the norm over the last 12 months.  There is always a strategy that will work well in your local market but depending on the fundamentals in that area some may be better than others.  For example I would say that buy and hold in the residential space (non commercial/multi tenant) would be a poor bang for your buck in Calgary right now due to the price surge we have seen and low inventory, Edmonton or some of the US markets would get you a lot more properties for your dollars.  I also think that Edmonton will be a strong lease option market now and in the future, I know of a few investors that execute on that strategy alone to run their whole real estate business.  Wholesaling of deals will work in any market to be sure, but the types of GOOD deals that you will be able to find will depend on the same fundamentals such as job growth, new transit expansions, factories being built or large government projects in areas such as Ontario/Quebec.  What is your favorite strategy? Please feel free to contact our team and let us know what your challenges are in your niche in real estate today – we are here to help!

Tim

There are a lot of courses out there that tell you that marketing is important, and that you have to find a market and target that market. The most basic marketing advice out there to be sure – you do need to pick a market and target it but the bulk of the things that they are telling new investors (and old) to do just do not yield the results that they used to. One example is bandit signs being posed around you local area that say “we buy houses” and the like, these can be effective some times but only if they are uses systematically and not just in high traffic areas. The way that I would agree that this is worth your time is to have a crew of people put up multiple signs in an area with high traffic and then have them taken down at the end of the day to avoid bylaw issues with the city, I know in Calgary at least the officers are pretty vicious and take them down all day long. This is just one example of how a system can help you become successful with your marketing efforts. The area of marketing does not matter: online, offline, print, radio, magazines/trade publications- they all need systems to leverage time/effort to get you he returns you want. Once you have a target and you run off into the woods of marketing to try and get leads/clients or sales depending on your segment of Real estate you need to implement plans, timelines, goals, and most importantly schedules with defined deadlines to keep things on track. We are all busy people some full time in Real estate and many who have day jobs as well as they are building their businesses to replace that income – without a scheduled plan the best of us have a hard time getting the marketing done day after day without fail. These are some of the things that our company helps investors with, engage and get in touch with us if you would like more information. While you are vetting deals, doing, renovations, vetting RTO tenants or whatever other tasks your daily calendar is full of in your Real estate business – the marketing could be lost in the weeds! The system that you have in place must be as automated as possible so that you only need to spend 15 minutes/day doing your marketing tasks – this is of course the ultimate goal after all your systems are put into place. If you are unable to find 15 minutes in your day to do marketing/manage your marketing engine then you may need to work on your time management to make sure you are always doing high-leverage activities in your day and nothing else!