In this episode, RevNYou team member and host Doug Meyers interviews a fellow RevNYou Team Member and young-gun real estate investor: Karysa Brossoit.
At the youthful age of 25, Karysa has worked her way into an ownership position in a multi-million dollar portfolio based on Vancouver Island in Port Alberni, with a couple more properties outside of Edmonton as well.
From sports, to painting, to being outdoors, Karysa enjoys everything life has to offer. She credits the power of real estate investing for allowing her to live the lifestyle that she has created and continues to refine. To quote Karysa “The best thing about being a real estate investor is when the weather is beautiful I can head outside, chase the sun and enjoy it, even if it’s a Wednesday!”
Karysa knew right out of high school that she didn’t like the idea of picking a career, working a 9-5 job, with set hours to get paid a set amount of money for the rest of her life. After analyzing the lifestyle associated with a typical career, she realized she didn’t want to work her life away and not have time to do all the things she truly wanted to be doing.
She was observant enough to discover real estate investing through the action of friends and family close to her and decided to dive into it, becoming a skilled renovator, property manager, and investor herself.
It is with that background that we’re excited to interview her for this episode of the podcast, as we discuss:
Karysa’s real estate investing story and how she got started tips for what kinds of renovations are the best return-on-time and money for do-it-yourself renovation investors the importance of continually educating yourself the power of networking pushing through the inevitable ups-and-downs and trying times in real estate insights on developing the mindset of an investor resources for aspiring new real estate investors Sharing her story in the podcast platform was certainly a step way outside of Karysa’s comfort zone, which itself is a testament to her willingness to push herself to try new things even if they may be a little intimidating. This willingness to push the boundaries of the comfort zone is something we can all take note of and apply in our own lives.
Having created and now experiencing the results and lifestyle she has, we hope you enjoy and learn from this conversation with another successful real estate investor and RevNYou team member: Karysa Brossoit.
Thank you for listening and we look forward to welcoming you to the RevNYou With Real Estate Community!
Using Real Estate to Leave his Full-Time Job & Multi-family Investing
Michael Bugg is a full time Real Estate Investor based in Saskatoon, Saskatchewan. He began buying properties in 2010 while working full time as a Veterinarian. Over the years, as Michael expanded his buy and hold real estate portfolio, he continued to cut down on the amount of time he spent working as a Veterinarian. In July of 2018, he officially hung up his stethoscope to focus full time on real estate investing. One of Michael’s greatest passions is helping others take control of their financial future through real estate investing. He is currently launching several initiatives to help the Veterinary community lead more balanced and purposeful lives. He believes that real estate investing is really just the start of the journey; it’s more about the impact you can have on people’s lives.
In our conversation, Michael and I discuss:
How he got started in real estate investing The early days of building his portfolio while working full-time as veterinarian The day he realized he was DONE working as an employee! How he moved from being a full-time employee to a full-time real estate investor entrepreneur The importance of having a support team in making the jump Hiring and working with a coach, and why it was the right move for him Tactical real estate conversations around multi-family apartment investing What are the similarities, and difference, between multi-family investing and single-family investing Michael’s tips for any real estate investor who wants to grow their knowledge and portfolio Michaels’ risks & rewards that he believes every real estate investor should be aware of
Enjoy this educational, engaging conversation with the genuine founder of YXE Real Estate Group: Michael Bugg.
Our first joint venture real estate deal was the very first property Dave and I bought together in 2001. We were dating at the time and pooled our resources to do the first two deals. I had excellent credit, $16,000 in savings and zero debt. Dave didn’t have any savings but he did have money in RRSP’s, which he cashed out to invest in our properties. We both had good jobs at that time, although I was leaving mine to do my MBA.
We moved into one of the properties so we could put less money down and still qualify for good financing.
After that, we were out of cash and I was now a student in Toronto so we had to find other ways to get deals done that didn’t require cash or bank financing.
Despite the cash challenge, we still managed to add another four properties to our portfolio in 2002 and 2003. Two of those properties were our first external from us and we did a joint venture with a friend. Dave also made some money off an assignment deal – finding a great deal and assigning it to someone else for a fee (also called wholesaling).
During 2010 – 2012 when we were aggressively growing our portfolio and averaging one new house almost every month, the majority of our purchases were joint ventures.
The majority of these deals were structured so that we were the managing partners (finding the deals, negotiating them, hiring the teams and overseeing the renovations and overseeing management) and our money partners came to the table with financing capability and the initial investment capital required (e.g. down payment, closing costs, 2 month reserve fund).
It was a fabulous way to grow our portfolio quickly and reduce some of our future costs because our partners will split any future costs (and profits) with us 50% / 50%, but partners also can be limiting and always bring additional stress to handle when there are issues (more on that in a minute).
Options for Structuring Joint Venture Real Estate Deals
We look to our partners to put in 100% of the initial investment capital (typically the down payment, closing costs, 2 months of a reserve fund and minor renovations) in exchange for 50% ownership in the property. When we sell the property, their initial investment is repaid first, then any capital we have invested, and then we split the proceeds 50% / 50% as per the ownership.
As long as we can reasonably suggest our partner is going to get 10-15% per year return on their capital and they don’t have to put in any effort, we believe it’s a fair exchange for them and for us. Those are our measurements, by the way, they don’t have to be yours.
It’s about the return and the limited amount of involvement they have in the deal – not the share of the deal they own. These folks are busy – usually successful businesses or careers, families and hobbies they want to focus on. They want to be in real estate but they don’t have the time or inclination to become experts. That’s where we come in. We’ve spent thousands and thousands of hours becoming experts. While we may only put 40 hours into getting a deal done for our partner, that doesn’t account for the $100,000 in education and 10,000+ hours we’ve put into learning what to do to minimize risks and maximize returns.
Remember all you bring to the table in your own business – whether it’s your first deal, or fifteenth. If you don’t feel you bring enough to the table then you need to build on what you have – take more courses, improve the quality of your team, get to know your area more by touring more properties and walking around. One of the most critical things you can do is become an area expert.
We prefer the traditional 50% / 50% structure, but that is far from the only option. You can create whatever structure you feel is fair given what you’re bringing to the table. For example, if you are new to the game, and are not bringing a ton of experience, perhaps a 30% / 70% structure is fair with you getting 30%. This is of course if your investor is putting in all the capital and qualifying for financing. If you both are splitting the capital contribution and qualifying for financing, then a 50% / 50% deal is more fair (again if your experience is limited).
There are endless options for how you can structure a Joint Venture Real Estate Deal but here are a few others we’ve done:
• 30% / 30% / 40% – if there are two cash partners and one managing partner or maybe one person is going to be a tradesperson offering their skills to renovate in exchange for a share of the property (essentially they are putting in sweat equity while someone else funds it and someone else is the managing partner). It’s always critical to lay out roles and responsibilities in your agreement but it’s even more important in an arrangement like this. • 60% / 40% – we’ve done this two ways. Once, when we have had to put in some money and do all the work – we took 60% of the deal. Two, when we felt that someone was bringing more to the table than our usual arrangements we would offer them more equity. Perhaps they are funding a large renovation and leaving that cash in there and we need to increase their equity to ensure they get a great return, or maybe they are offering some skill in addition to the cash or if we were new, it could be how we get the deal done if we aren’t putting any cash into the deal. • 75% / 25% – We’ve done this when we put the down payment in but couldn’t quality for financing. We gave someone 25% in exchange for their name on title and finance-ability. It would not be our first choice in an arrangement but we were in a pinch and had already lifted conditions. We needed to close on the deal and this got it done. • 50% / 50% –Someone already owns the property and is unable to sell. They don’t want to hire a property manager for whatever reason. You can step in and offer to oversee everything in exchange for 50% ownership in the property. Their ‘initial capital contribution’ can simply be the equity they have in the property as of that date (get a property appraisal to determine this value relative to the mortgage owing). We did this when someone we met at a club meeting wanted to turn their property into a rent to own to sell it but didn’t know how. They also wanted to go away traveling and didn’t want any hassles.
Simple Structure Is Best
The most complicated structure we did almost completely bit us in the butt because one of the partners got divorced (the 30, 30, 40 split).
We brought two partners into one deal. We all brought money to the table but in different amounts. One couple put less in as they went on title and qualified for financing. Between us and our other partner we covered the remainder of cash. We split the deal with them 30% 30% and we got 40%.
A few years later the couple got divorced. Thankfully they were able to settle things amicably and were able to agree to keep the property. Had their divorce gone the ugly way of many, the property would have gone on the chopping block and we would have been put in the awkward position of either selling it prematurely to get them out, or having to buy them out, switch title and find our own financing. Not always an easy thing at the best of times, but we would have had the added pressure of making it fair given our other partner as well…
Thankfully it didn’t come to that and we all still own this property together but it was a good reminder that it’s best to keep your smaller deals one partner to one property. Every partner brings their own set of complications so why make it harder on yourself than you need to by mixing and matching?
Word of Warning: JV’s are Limiting and add stress – Use with Caution
One of our rent to own properties failed. The tenant buyers chose not to buy the property from us, as per their option, and rather than selling it in a slower market, we chose to convert it to a regular buy and hold rental property.
The property barely cash flows as a regular rental, but it’s a perfect property to add a legal suite to. It would potentially be one of the easiest places we’ve tackled to add a legal suite to because of the location of plumbing, electrical and the heating source. We approached our partners with the proposal to add a suite. We were going to split the cost of renovation with them, as per our 50% / 50% ownership with them because we have already owned it for several years. We would charge a small general contractor fee just to cover some of our costs of overseeing the work, but otherwise we were agreeing to take on a ton of work and time to improve the overall performance of the property. This move would have turned a neutral cash flowing property into one that is giving us at least $600 a month. Despite all the effort required to do this, it made perfect sense to us. If we owned this property on our own that is what we would do.
Our partners said no. Not because they didn’t like the idea, it was because they didn’t want to invest anymore cash into the deal.
They want to wait until the market is good enough to sell and then they want out. Getting them out now to make the change ourselves is more complicated and cost ridden than it is worth to us. It’s frustrating as we would much prefer it to be a solid holding property with strong cashflow, but it’s one of the limitations and issues with partners.
Joint venture real estate deals are a great way to grow your portfolio when you’re short of cash resources for down payments, struggle to qualify for financing, or want to work with other people who bring something to the table that you don’t have. They are long term business relationships, however, and need to be carefully considered to make sure it’s a fit and that the structure you select makes sense given what you are all bringing to the table. Hope this gives you a few new ideas.
Other Articles on Joint Ventures & Using Other People’s Money:
Brad Price is a Real Estate Investor specializing in Joint Venture Real Estate Acquisitions and Investment Management in the residential sector.
Brad has a number of real estate related businesses which he has either co-founded or founded, including Calgary based Commonwealth Home Ownership, a Canadian real estate investing education company that hosts networking events and provides tools and resources to help real estate investors build profitable portfolios. He is the President & CEO of REIBS Canada, a cloud-based bookkeeping company specifically designed to simplify and automate bookkeeping and accounting processes for real estate investors. Brad also manages BCP Coaching, a One-on-One coaching service for people looking to take that next step towards financial freedom. He highly values positive high-performance habits, a desire to breakdown the status quo, and an unwavering commitment to all of his clients.
In addition to Brad’s real estate related companies, Brad has extensive residential and commercial construction knowledge with over 17 years of experience in the industry. Brad’s most recent projects include two $100 Million commercial construction projects in Calgary and the development of $3.7 Million of residential investment properties in Edmonton. Brad’s next project is a $2.5 Million residential investment development in Calgary, commencing in the spring of 2020.
In our conversation Brad and I discuss:
The inspiration behind his start in real estate investing: “How much do you earn while you’re sleeping?” Educating yourself with the drinking from a fire-hose approach How to decide what real estate investing strategy is right for you Why he loves the joint-venture strategy for building a real estate investment portfolio Understanding what you are an expert in (as an investor) and communicating what your market has to offer Why it’s NOT all about market appreciation (in fact, why you should be hedging against downturns by holding strong cash-flowing assets) The basics of being a successful joint-venture working partner Advanced joint-venture working partner keys Highlighting the operational side of real estate that people often overlook, don’t know about, or just simply struggle with (bookkeeping, reporting, managing, systematizing) Finding joint-venture money partners – how to attract, communicate, and build relationships that lead to successful investments over time What Brad means by “people buy into you before they buy into a deal Telling, not selling, what you do The Joint-Venture Associate Program through Commonwealth Home Ownership Tips for investors looking to get started or take their investments to the next level
I hope you enjoy this comprehensive conversation with Brad Price!
RevNYou With Real Estate – helping you understand the real risks and rewards of profitable real estate investing so you can lead a life you love! RevNYou With Real Estate is your partner on the path to success in real estate investing. Through hearing the stories of in-action real estate investors at different stages of their investing journeys, to practical conversations surrounding specific aspects of real estate investing, to personal development and improving your investor mindset, we look forward to having your ears tuned in to the show. Enjoy! – The RevNYou With Real Estate Team Connect with us!
Have you ever wanted to invest in real estate but you don’t have the funds to start? We are here to tell you its no excuse! There are many ways to get started in real estate without using your own money.
#1 – Use the equity in your own home.
If you’ve owned your home for a while and you’ve paid down your mortgage and perhaps the house price went up a little bit, you might have some equity sitting there. Use what you’ve got to get what you want. You already have it, so why not put that to use? Otherwise the equity is sitting there doing nothing for you. It might giving you peace of mind, but it’s not helping generate anything for your life. So use what you’ve got to get what you want.
#2 – Do you have RRSPs?
There are two ways of using RRSPs if you have your own. You can lend it out as a mortgage through a soft direct account. And the other one is if you’re an investor, you can use other people’s RRSPs. Now there are a few rules behind this. They can’t be a parent or sibling. There’s various rules and we’ve got a video that explains about RRSP mortgages on our YouTube Channel, but you can also use other people’s RRSPs and you can have that as a first or a second mortgage on your property. Typically we will do 8 to 10% on a RRSP for someone and that’s secured against an asset. This makes sure people are happy when they’re doing it and they’re happy to lend it. We usually do that for shorter term lender, not for long term lenders, but that’s what we use RRSPs for.
#3- Private Money.
This is sometimes called hard lending, but basically that’s somebody that has cash and they’re willing to lend it to you for a guaranteed rate of return. This can be high. I’ve done 50 to 60% of the deals that and we’re finding people that have money but they don’t necessarily have the time to put into a real estate deal. So we’ll use their money, we’ll put it in our time, and then together we will create a joint venture, then give them a return on their money. It’s secured against a solid asset. It’s in real estate. Most educated people don’t want to just put it in the bank, they don’t want to put it into a mutual fund. When the market crashed in 2007 2008 people saw the money just disappear. An example of who people may want to take it out and put it in a solid asset.
#4 – Be a Joint venture Partner.
If you might not be able to qualify for a mortgage, then we shall find my “friend Bob.” Thankfully, Bob has great credit and his ability to borrow to get the mortgage is possible. Now you and your “friend Bob” with create a joint venture agreement for a real estate deal! There are many ways of getting into a joint venture. A joint venture is you and at least one other person are going into a venture together to partner up to go purchase some real estate and it’s gotta be a win-win.
You want to make sure everybody’s happy and you want to make sure that everybody has different benefits that they’re bringing to the deal. Someone might be bringing the experience, someone might be bringing the money, someone else might be bringing the ability to borrow from a lender, are a few to name. If someone has money for example, which you may hear the terms; a private money lender or a hard money lender would be one person in the deal. Someone with no money may borrow this persons money because they’re self employed or cannot qualify. Its kind of like fitting the pieces into the puzzle or the different people into the same deal. Usually if your the one borrowing the money your skill will have to be putting in your knowledge and managing of the project. If you need investor training go to Rev N You School and see our real estate investing courses.
#5- Presenting a Good Deal.
And the final way, and this is probably one of the most important. One of my mentors said this to me very early on, they said, “Gary, if you find the right property and the right deal, the money will come to you.” Now I didn’t really understand what that meant. And then as I got further into the process of looking at properties, looking for deals, I then realized that you can’t say the wrong thing to the right person if your deal makes sense on paper and is simply a good deal! So what I mean by that is it, if you came up to me now and you were showing me the numbers on a piece of paper of this deal, and it’s a great investment. There’s lots of people I know, friends of mine, people in my narrow, they’ve all got great deals and when they show me on paper, I’m like, I would find the money for that.
For example, if I had a Porsche that was worth $150,000 you know it’s a really good one. And I said, Hey, you can have this push for $10,000 you might not have $10,000 in your pocket, but you’d find $10,000 pretty fast because you know that is worth $150,000. It didn’t matter if I was giving you the wrong information about the statistics of the brakes. It doesn’t matter how good the deal is, if it’s not the right person to invest and then not the right mindset, you could talk to them for three days. They will never invest. But if you have the right house and the right property, then the money will find you.
Finding Money Resources
BONUS TIP: Go to local real estate meetings and start to network and meet people! People are constantly connecting and finding joint venture partners by taking the extra time to go to events. It’s beneficial if you have a great deals ready to show people or talk about then follow up with them with more information.
Watch this video before you head to your next meeting.
After a handful of years real estate investing, I reached a point where I could walk into a property and know whether it was a good investment within 60 seconds. No spreadsheets required. Does that mean that I am only using intuition to guide my investing? And, how can I be sure that a deal is a good one? What if you are someone who HAS TO run the numbers to know if it’s a good deal?
Rod is an interesting and energetic guy. He’s personally managed and owned more than 2,000 units as a multi-family investor, started a $10,000,000 company out of frustration with a lack of solutions to a problem he faced, and currently spends a lot of time (and money) supporting charities and worthwhile causes around his community. When I heard about all that he does, I was pretty excited to get on his podcast show and chat with him.
He had a lot of great questions for me too. In this episode we cover a wide variety of topics … grab your pen and paper to take some notes because you’ll learn:
How to “build your brand” to attract partners, potential investors, and deals … including specific actions to take to put yourself out there so people call you with deals, money and opportunities.
How to use YouTube videos to attract money and deals.
Who is your ideal investor, and why it matters.
Building trust and authority as a professional real estate investor.
Finding the best mentors and using mastermind groups to accelerate your growth and success.
The things to know when partnering with family, and
What my best piece of advice for creating success in your life is.
As I watched Dave race up one of the many hills in St. John’s, Newfoundland en route to Ryan Mansion where we were staying, I wished I had our Flip camera handy. It felt like we were on our very own episode of Amazing Race: The Real Estate Investing version.
After months of research, property tours, and more research, we had uncovered two real estate gems. One was a duplex and the other a single family home. Neither property was distressed but they were both very solid deals.
So … we decided to buy them both. Everything was going along just fine until we encountered a little glitch with our partner. We had closed on a deal with him a few months earlier so we didn’t think there would be any problems getting a mortgage for the property with him on title. Unfortunately the entire lending landscape changed that year (it was 2009), and the main program that had been in place, the one that had worked to qualify him for deals, was no longer available.
No problem – we figured we’d just find a couple of new partners. Except the people we were contacting had less than 48 hours to make their decision before we took off on vacation. When you’re asking people for $50,000 out of the blue, they generally want more than 48 hours to think about it … even when the deals are compelling – which they were!
We worked the phones for two solid days, determined to find people to join us on these two deals. And … with only a few days to spare before we had to remove any conditions, we found two new partners with the cash to do the deals. But we were still hitting issues with the banks. We had to extend the conditions on the deals for four business days and keep working the deals. That meant we were running around St. John’s trying to get things signed, faxed and couriered to the appropriate people.
We were in St. John’s for our friends’ wedding and unfortunately didn’t really get to enjoy most of our vacation because we spent the better part of our 10-day vacation glued to the phone trying to save the two deals.
What had been working well for us in the past for many of our deals didn’t work anymore and we felt so frustrated. We decided to change our investing strategies so we didn’t have to rely on banks and other people’s money all the time.
We started to focus our attention on attracting motivated sellers. The idea was that we would find people who were willing to sell us their house creatively, using options that do not require a bank to finance the deal – options such as:
Agreements for sale
Right around the same time, a U.S. investment guru was coming to Edmonton to share his expertise. His entire program was about finding motivated sellers so you could put together creative deals, and this was exactly what we were looking for.
After his three-day course in Edmonton, we set to work. The plan we chose focused on covering a couple of select areas in Nanaimo, BC with bright orange business cards, orange and black magnets, online ads, and flyers in newspapers. The foundation of our campaign, however, was the Yellow Letter Marketing.
The only snag in our plan was cost. We were looking at a $10,000 investment to produce everything, not even counting the fact that we had to have someone to answer our phone once all the leads started coming in. We were willing to invest that kind of capital into growing our business, but our concern was how much the call costs could run us.
My Dad, an active commercial real estate investor for over 30 years, went to the course with Dave. He was pretty excited about our plans to market to Nanaimo home owners, and he offered to partner with us. Instead of us paying a company that specializes in handling these types of calls at $1 per call, plus $1 per minute to take messages; Dad offered to handle the calls on the spot and become our partner in all the deals.
Setting Up Our Yellow Letter Marketing Campaign
Once Dad agreed to be our answering service, Mom offered to coordinate the creation of the letters. Next:
We found a list company from which to purchase our mailing list. We paid $1,500 for a list of approximately 6,800 names in specific postal codes in the city of Nanaimo.
We photocopied our handwritten letter that basically said, “Hi, my name is Rick. My wife Ruth-Anne and I are interested in buying your house at 123 Lovely Street. Please call us at 250-555-5555.”
We hired a handful of people to assist with writing the home owner’s first name and their home address on the letters, hand writing the addresses on the envelopes, and sticking on stamps. We paid 20 cents for each letter and 30 cents for each completed envelope, plus the 52 cents for the stamp.
We set up a separate phone line at Mom and Dad’s house so the calls would be separate from their personal and business line.
We prepared my Dad with plenty of lead sheets to complete while chatting with the people who called in. Each sheet had a list of questions he would need to ask so that he could get the important information about their houses for us to decide if we wanted to buy them. We also set up a tracking system so we could track who responded and who didn’t, who asked not to be contacted again, and who would need to be followed up with at a later date.
Starting in early November 2009, we began mailing the letters out at a rate of 250 per week.
The Immediate Results of the Campaign
We ran bus bench ads, placed newspaper ads, ran online promos, distributed flyers through newspapers, put magnets on mail boxes, and handed out hundreds of ‘we buy houses’ business cards in a 12-month period. No other marketing method we tested came close to the response we received from the Yellow Letters. Within 48 hours of the first batch of letters hitting the post office, Dad’s phone was ringing off the hook. He walked around with a headset on and chatted happily to the curious, confused, angry or scared folks that called in. [We shot a few videos at the time – please keep in mind this was six years ago – but you can check them out here.]
From the first 2,000 letters we mailed out, we had a 30-40% response rate. That is, for every 10 people that received a letter, we were getting 3 to 4 calls!
A lot of callers were on guard when they first called. They were defensive and wanted to know how he got their name. They were scared that it was a scam. They were curious but concerned.
When someone would skeptically ask him, “What are you up to?” he would say, “I’m up to about 5’9″ and 185 pounds, but I am trying to lose some weight!” With Dad’s humour, people generally relaxed, and then he was able to find out whether they had a house they were interested in selling or not. He had some wonderful conversations with people and thoroughly enjoyed himself most of the time. He even had an invitation to come out and see a guy’s race cars, invitations to come and see homes even though they weren’t for sale, and dozens and dozens of people who said they would hang on to the letter and call us first when they were ready to sell.
It Was Mostly Fun Until the Police Were Called
Not everyone was comfortable with what we were doing. A small percentage of the calls my Dad received were from very hostile people who felt we were targeting elderly people or the families of someone who had just passed away. We began to receive the odd letter from someone’s lawyer asking us to cease and desist contact with their client. At least a dozen people called the local police. That resulted in one call from the police to investigate what we were doing and another call a month or so later acknowledging that while we weren’t doing anything wrong, they would appreciate it if we stopped because they were still getting complaints.
Of course it didn’t take long before the local newspaper got wind of what we were doing and ran a story on it as well. It was full of negative commentary about what we were doing, but it did include a statement from the police that we were not doing anything illegal.
For the most part, it was entertaining; but there were days where it was emotionally draining for my Dad. Especially when two months into it, and nearly 500 calls later, we hadn’t found a single person willing to sell their home creatively. In fact, we actually uncovered a lot of people who had paid off their home fully and weren’t moving until nature made them.
Eventually we started to speak with some folks that were very interested and willing to sell creatively. When a lead like this came in, Dave and I would head out to view the home and meet with the seller. What we discovered in each of these cases was that:
The house was in a terrible area; and/or
The home needed way too much work and wasn’t worth what they were asking, given the work required; and/or
The seller wanted at least 20% more than the home was actually worth.
In every case where we found someone willing to be creative with their deal, that person wanted a grotesque amount of money for their property or the property was one we didn’ want to deal with. We began to think we were doing something wrong! We figured we must be missing something important, so we went back over all the leads that had come in (nearly 1,000 by this time) and followed up on some of them to make sure we hadn’t missed an opportunity. If we had, we were still missing it. There were deals in that pile for the person with the right expertise and resources to handle bad areas and ugly properties, but that was not us.
It took almost four months before we found a deal we wanted to do – and even then it was not a creative deal. It was simply an awesome house in a great area that we could buy with $30,000 of equity in it. If we wanted to finance it without a bank, it was going to be through private money – not through creative techniques like an agreement for sale or a VTB (vendor take back) mortgage. But for a house that didn’t need any work, in a great and centrally located area of town, we grabbed the deal and worried about the money afterwards.
The second deal that came through our yellow letter campaign was a deal similar to the first – in that it was a good house, in a good area, and we could buy it with about $30,000 in equity in the home. We grabbed it too. We solved our financing challenges by finding joint venture partners that could qualify for financing and provide the capital.
The Return on Investment
Sticking to the initial campaign, which cost us about $12,000, and hundreds of hours of my Dad’s time, and dozens of hours of our time, our return on investment was definitely low. We didn’t do any creative deals – which is what we set out to do in the first place. But we did manage to pick up two great properties in six months with $60,000 in equity and a combined total of $900 per month in positive cash flow. Not a bad result, but not the result we were going for.
In 2012 we closed on a property assessed at $400,000. We paid $320,000 for it. The owner had received our letter and held onto it for two years until she was ready to sell. The house was in our favorite neighbourhood and was perfect for putting in suites – so that is what we’ve done. [We put a legal suite in this property, and I filmed that process. You can find that playlist right here.
The yellow letters were the only marketing we did that gave us a return on our investment. (We did receive a few calls from our bus bench ads, online ads and flyers, but the response was very small and none of those calls resulted in leads we were interested in).
Because there was so much negativity around the letters, in a later mailing that we did in mid-2010, we tried to change the wording a bit to make it clear that we were investors interested in buying their home. (Before that, the letter had only given our name and said that we were interested in buying their house at 123 Street). We also sat down and went through our list line by line and hand-picked very specific houses to send the letters to. It took dramatically more work to put together the list for mailing, and our response rate dropped to under 10%. We did not do any deals from those letters.
Lessons for Yellow Letter Campaigns
Yellow letters are a great tool to generate targeted leads and also learn a whole lot about the community you are investing in; but, as described, there are big challenges. I do not think this strategy is right for very many investors, but if you decide to tackle creating a yellow letter campaign, here are a few suggestions:
Mailing lists are expensive and they go stale fast, so get yourself organized and ready before you order the list.
Figure out how you’ll handle the calls. If you are going to take the calls yourself, set up a separate phone line that you can turn off. Some people called my dad in the middle of the night! Another option is to just set up a voicemail account like evoice.com. All the calls will go to voicemail and you may lose some leads; but if someone really wants to sell, they will leave you a message.
Also, you may want to consider outsourcing this to a country with good English and low wage costs, like the Philippines. We work with high quality folks from the Philippines in our business and this is how we would handle a campaign like this if we were to do it today. Successful wholesalers we know in Alberta use a team from the Philippines that they have trained to screen the leads. It took them time to find good people and train them, but at least they don’t waste time on possible deals that don’t meet their specific criteria. [Here’s how to hire a great virtual assistant.]
Prepare yourself for all kinds of responses. Some people will be furious with you. My Dad was caught off guard because some people were very angry. We did not expect that kind of response and at times it was draining. Expect it, and get ready to brush it off and move on.
Be polite and friendly to everyone – some of our best leads from that campaign came via people who gave our name to a friend or family member that was selling.
Be patient. It is not overnight. Nothing in life, or real estate, is.
This is an excerpt from the International Book Award Winner and Amazon #1 Bestselling Book, More than Cashflow. You can find copies on Amazon or in Chapters Bookstores across Canada.
Two months of unpaid rent and the tenants are moving out.
Maybe I’ll be able to collect some of that money, but most likely, that cash is gone forever.
Compounding the problem is the fact that the property looks rough.
I don’t want to attract more deadbeats to the place who don’t pay their rent, so I need to make it look nice. But, I’m already quickly heading into the negative cashflow territory with unpaid rent so I have to make the rental property look all shiny and new without spending too much money.
Here are some of the ways I’ll tackle this rental, like I’ve improved past ones. You can use these tips to make your rentals look great on a tight budget too:
Low Cost Renovation Tip #1 – Kitchen Cupboards
Kitchen cupboard face lift: You’ve probably already thought of painting the cupboards – and that’s a great way to brighten up a place and make it look fresh, but you probably will have to strip, sand and prime to make that happen. You can do the work, but the time investment is pretty high for you to get a good result.
A cool, quick and low cost way to get the same result is using a great product from Rustoleum that is called Cabinet Transformation Kits which come in many different colors. The kit costs only $100 and is really easy and quick to use. Just clean the cupboards, paint the cupboards and the end result is a kitchen that looks almost new!
Note: We did a lot more to this kitchen … including changing the counter tops and appliances and switching one set of base drawers with a regular base cupboard that was beside it. Those cupboards are the same though – just used the transformation kit!
If the cupboards are at the end of their life and need replacing, a used kitchen ‘recycling’ company in the USA will frequently sell a full kitchen package, complete with all the appliances, for incredible prices.
The dropping Canadian dollar makes this option less appealing right now, but it can still be a great deal. They even have luxury kitchens. The company is Green Demolitions, and the founder is a recovered addict and all the money goes to an addiction recover charity.
Even when the exchange rates are good, the challenge for Canadians is getting the cabinets across the border. You can drive down and bring it back or try online shipping companies.
It can be worth the effort.
This is an example of a kitchen that we purchased from Green Demolitions for an executive home that we built in 2010. That impressive commercial grade stove alone is worth $10,000 new. The entire package was worth over $75,000 if we’d purchased it new. We paid $15,000 for everything; the cupboards, island, granite counter top, the 4 foot wide double oven and we even had 4 large cupboards left over that we installed elsewhere. It cost $1,000 for us to rent a cargo van and a weekend of our time to travel and pick up the kitchen in Connecticut. We paid $3,000 for installation. So, for an investment of $20,000 we had a $100,000 kitchen.
You are not going to get all that with an IKEA kitchen. Every time I go on the Green Demolition site, I want to do a renovation just to get one of their kitchens!!
Low Cost Renovation Tip #2 – Bathroom Vanity
The kitchen renovation ideas apply to bathroom vanity renovations too!
But, a quick trip to IKEA or Costco could get a brand new vanity at a minimal cost.
If you want something a little special for a low cost you can hop on the website Pinterest for inspiration. On the left are two examples of dressers that were headed for the dump that have been brought back to life as bathroom vanities. You can find old dressers like this on Kijiji or Craigslist – sometimes free with pick up. It may take a bit of creativity, but you sure can create an unmistakable charismatic vanity. You’ll find ideas like this on Pinterest for just about every room in your house.
Note: I found these vanity ideas on Pinterest … which led me to the following websites: http://www.tidbitsandtwine.com/guest-bathroom-makeover-reveal/ and http://www.hometalk.com/443163/re-purposing-our-dining-room-buffet-into-a-bathroom-vanity.
Low Cost Renovation Tip #3 – Fix the Holes Yourself
There are always small drywall repairs to be done before paint jobs. Save money and do these jobs yourself before you hire a contractor to do the rest of the work. Small holes are easy to cover with and sand and take no time at all. Larger holes are fairly easy to fix by inserting small pieces of wood in the hole in the drywall. Here’s a great explanation of what you need to do (with step by step pictures).
Fixing your own large holes can save you upwards of $200/hole … so it’s well worth your time to make these quick repairs yourself.
Low Cost Renovation Tip #4 – Hiring Low Cost Painters
Fresh paint always has a great payback. It makes the place feel cleaner and just makes a place more appealing for showings.
It’s a low skill job so you’re probably tempted to do the work yourself, but save your back and time by shopping around for the labour.
I recently posted an ad on Kijiji to hire a painter for $15/hr and had about 20 responses!. Some even said, I will beat the lowest price.
“Great,” I thought, “A bidding war, no better way to get a good price!”
Of course, you won’t just pick the lowest price. Check the references to ensure that the workmanship will be equal as well. Costs for painting 1,200 square feet with lots of trim details came in from $1,000 – $4,000 plus materials. I hired an experienced semi-retired painter who did it for $1,200 and we bought the materials at his cost at his preferred paint store.
Low Cost Renovation Tip #5 – Light Fixtures
Light fixtures are an upgrade that can really change the mood of any room. You can bring an entire space from the 70’s to the current year by changing up the fixtures. The best part is that light fixtures can always be found on sale at regular hardware stores or online.
Again, if you are handy and ok with electrical, this is a great project to do yourself to save money. Some handymen will do it for less than an electrician if you aren’t inclined to do the work yourself. An electrician can cost you upwards of $100 per hour so you can hire them to do it, but that will cost you a lot more. You can also change light switches to a new style one for a very small cost and place sensor switches in rooms that you enter frequently for short periods like a pantry, laundry room or bathroom. These are nice features for tenants and for resale.
Low Cost Renovation Tip #6 – Granite Countertops
Many think granite is too expensive, but everyone wants it. Depending on your market (it’s always important to understand your market), it could be that these kind of upgrades are expected. The younger generation wants upgrades like they had in mom and dad’s house.
If you just need a straight piece of countertop, it’s possible to do a ‘do it yourself’ granite countertop. We recently installed some of our own granite and it was very satisfying. It’s a bit like cutting plywood, except thicker and slower. You can use a regular circular saw by installing a diamond blade ($40). You get the approximate location of your line and then put masking tape down where your line will be. Then mark your line with a marker and clamp a 2×4 piece of wood onto the top of the granite, on the line you measured, with an offset of the blade to the guide on the saw. This will be the guide for the saw as you cut, so you’re not just free handing on the line. While cutting you will need another person to hold a water hose spraying water on the blade as you cut so the blade does not heat up too much.
It probably goes without saying, but you should measure several times before you cut! You want to be certain.
You will also need a friend (or, two) to help lift the countertops when you’re ready to move them, but it’s possible that with one cut you may have your counter.
A few shims and carpenters glue and install is done. Most quotes for a straight forward kitchen come in around $5,000. You can purchase granite slabs from a local supplier or you could try Build Direct and they will ship directly to your home. In the home to the right, we purchased 4 pieces that were 6 foot 6 inches of 1-1/4” thick countertop and an island top that was 6 foot 6 inches x 3 feet, 1-1/4” thick from Build Direct. Our material cost was $1,800 delivered to our door and we had five helpers lift the island top into the house! This is the before and after (minus a few walls that we removed to open it up).
Low Cost Renovation Tip #7 – Backsplash Makes a Big Splash
This is another tenant appreciated upgrade that can be very economical if you get tiles on sale and install yourself. Even if the tiles are not on sale, you are usually only covering an area that is 2 feet by 10 feet = 20 square feet of area = 20 tiles. It does take a few steps to do the work, however it is very satisfying and does not take that long.
This video is a great explanation of what to do to install a glass mosaic tile backsplash: https://youtu.be/CtursWP-Vlw.
Low Cost Renovation Tip #8 – Crown Molding
This is a high impact addition to a home to make it look and feel like a high end property. Due to the head swirling, backwards, sideways, upside down cuts required, installing crown may not be a DIY project, however the payoff in the value it creates in your home is well worth the money you spend upgrading. Using a contractor, you will likely pay per job or per foot. You can use use cheap baseboards as a layer of the crown moldings to reduce the costs. Look close at the picture below, the lower layer is baseboard to give it a larger effect.
Our labour cost for the crown molding shown was $2.80 per linear foot. It was two pieces of trim which means the carpenter went around twice. If it was one piece, the cost would have been half of that. We bought the moldings for $1.69 per linear foot which included a crown style molding and a floor molding turned upside down. So for a 20 foot by 20 foot room, this cost $360.
The example shown has a 9 foot ceiling on the edges and 10 foot in the center. Because of that, the moldings were a little larger. With an 8 foot ceiling, you would likely only go with the one piece crown molding at $1.00 per linear foot plus $1.40 per linear foot to install which would be $192 for a 20 foot by 20 foot room.
Low Cost Renovation Tip #9 – Pay Off Your Renovation with the Increased Cashflow
Home Depot will allow you to defer payments for 12 months if you purchase on their credit card and the amount is over $299.
Need a new furnace or air conditioning unit? Canadian Tire has a program where they will allow you to purchase today and defer your full payment with 0% interest for 36 months program. As long as you make the regular monthly payments, you’re good. This is a great way to pay it off with the extra cashflow these upgrades will generate.
Low Cost Renovation Tip #10 – Shop Around
If you need materials big or small, such as drywall corner beads, lights, cupboards, doors, flooring, almost anything can be located at a local used building material store. In Ontario, you can go to Restore which is a Habit for Humanity non-profit store that has odds and ends of building materials. You have to be willing to look around and call places to ask for what you need, but if you find it, the savings can be huge. You can find everything from gently used carpets, doors, sinks, to cupboards, flooring and fixtures. And you can always take the old stuff there instead of loading up the landfills.
Watch for sales on materials. If you know you have a renovation coming up – keep an eye on the flyers. You can often get great quality materials for a low price if you’re watching for them a few months in advance.
I know all of these have helped me keep costs down while keeping the style up. One or all of these ideas should help get you through another renovation and to a point of signing up a great tenant who will appreciate and take care of your investment.
Nathan Richard is not afraid to get his hands dirty to get the work done in real estate. Over the past 12 years building Colmac Properties he’s experienced new builds, Rent to Own, RRSP self-directed mortgages and flips. Nathan is a Rev N You Certified Coach with PlanSmartInvesting.com and provides training and coaching to new investors.
Commercial Real Estate Investing vs Residential Real Estate Investing
A Video Series
You know the saying, the grass always looks greener on the other side, right?
As you deal with another tenant turnover, surprise repair request or increasing tax and insurance costs, it’s easy to think that a five year triple net lease* is a better way to invest in real estate.
But, there are some really significant costs and risks associated with doing commercial real estate deals.
As we just closed on the biggest deal we’ve done to date (a multi-million dollar medical services building), we thought we’d put together a video series to help you decide if commercial investing is right for you, and how to handle some of the common pitfalls if you do it.
If you’re staring longingly at that green grass on the other side of residential investing, we hope these videos help you decide what investment vehicle is right for you today.
*a triple net lease is basically where the tenant is responsible for most of the costs of operating and maintaining the property including taxes, insurance, maintenance, and property management
You have found a GREAT property in your target market area. It fits all of your criteria but the cashflow numbers are tight … should you walk away? Or, is there something you can do to increase the cashflow and make the property work for you?
While we would never recommend you buy any property without positive cashflow, there are times when you may want to buy a property that is tight.
For us, we have a couple of properties that we bought for such a great price, knowing that they’d be high value properties in the future, that we were ok with the fact that the cashflow was tight. We also have one property that we bought with plans to develop it in the future. It barely cashflows but we have future plans for it that would boost it’s value and it’s income.
It’s not ideal to have an entire portfolio of properties that are like that because it guarantees you’ll be pulling money out of your pocket to pay for repairs and upgrades in the future. Certainly for us, it really only works because it is just a few properties in our portfolio that are like that. But, you might be in a market where tight cashflow is the norm and you’re just finding ways to make it work … or you might be faced with opportunities to buy massively under market value or hold for development like we have found in the past.
Whatever the reason you’re considering a tight cashflow property, you do have a few options to improve your situation and increase the cashflow right from the start. (And if you’re not sure how to calculate your cashflow … start here and then come back to this).
Here are six suggestions to increase the cashflow on a rental property:
1. Increasing Rents
It might seem obvious but a lot of times tenants haven’t had an increase in their rent in quite awhile. If the tenants are paying under market rents, you might have the option of raising their rents. Of course, if you’re in a province with rent controls, or the rent has already been increased recently, this might not be an option.
Even if you can do it, keep in mind that a large increase may cause them to move out, or just be unhappy tenants that damage your property.
2. Add Income from Other Sources
Things like adding storage, parking and even selling advertising space can be used to increase rents, add a new rental stream or just reduce expenses. We have a few coaching clients who put solar panels on the home for an additional income source as well. Sometimes a little creativity goes a long way.
3. Pay Less for the Property
One of the conditions we put on every offer is that the deal is subject to an inspection. This means the vendor has to give us access to the property within a reasonable amount of time to complete an inspection.
What that inspection reveals can be used as leverage to reduce the purchase price. Basically, if the inspector comes back and tells you that the roof needs replacing or that the wiring is outdated, you can go back to the vendor and ask for a price reduction because of the work you are going to have to do. Sometimes the vendor will offer to get the work done, but our preference would ALWAYS be to get it done ourselves.
Think about it—the vendor could hire their Uncle Joe to do the roof. If it starts leaking in six months, they aren’t living there anymore. But, if you get the roof replaced and it starts leaking you can chase down the company that did it and get it fixed.
As long as what comes back from the inspector is not something that makes you want to walk away from the deal, then you can use it to reduce the purchase price. Of course, if you’re in a hot market, opening the deal back up because of something that came up on the inspection may not be a wise move. You could lose the deal to someone who is happy to pay what you’re paying, even with the issues.
4. Reduce Other Expenses
Your biggest cost relates to your financing. Spend the time to research your options and find the best financing options available to you. Lower rate and longer amortization periods will increase the cashflow. Beyond that, simple things that reduce maintenance costs or energy costs if you pay them will all save you money over the long term. While you likely won’t be able to charge the utilities to your tenants if they are not currently paying for them (as per their Lease), when their lease comes due or you place new tenants, put in your Lease Agreement that the tenant(s) is responsible for heat and hydro/electricity. You may have to drop your rent a tiny bit to do this, but then you no longer have to worry about expensive heating costs in the winter as your tenants will have to pay!
5. Put Up a Larger Down Payment
It’s not always an easy solution for many investors, but one of the options to boost your cashflow is to increase the amount of money you put down because it reduces your financing costs. High ratio mortgages also have a lot of additional fees associated with them, so getting out of that category saves a lot of money each month right from the start.
6. Allow Pets
I know I know, pets can cause damage and problems and pee on your new carpet. Yes, it can cost you. I discussed my take on whether you should make your rental pet friendly right here. But, if you are very selective about who your tenants are and you include in your Lease Agreement that they are responsible for keeping the premises inside and outside of your rental unit in good condition, then this is a great way to increase rent and/or cashflow.
MOST apartment buildings don’t allow pets (or they restrict the size of pet) and only a small percentage of Landlord’s out there allow pets. So, how does that help you increase your cashflow? Because you are providing a service (allowing pets) that is in great demand and tenants with pets are generally willing to pay more to keep their loyal companions with them!
It’s easy to let fear or excitement guide you when you’re investing. This list is not to suggest that you should buy very many properties where cashflow is negative or even tight. That’s a losing strategy over time because the fact is, even cashflow positive properties sometimes need you to spend money on them. As I wrote about in More than Cashflow, all houses will need work … and the longer you hold them, the more work they need. Single family homes are a great investment because of the liquidity, the mortgage pay down which builds your wealth and, over time, the appreciation. However, you will eventually need to put money into them so you don’t want to buy one that needs feeding right from the start. But, at least with this list, you have a few more options to make it cashflow from the first day you own it.
“It should be illegal to turn away someone because they have a pet”
It was the start of a hot headed debate in a local rental Facebook group I use for promotional purposes when we have a vacancy.
Landlords chimed in with horror stories of damage while tenants shared their tragic stories of having to give up their beloved four legged family member because there was nowhere to live that would accept the animal.
Personally I am not a fan of the government telling me what I can do in my rental business so I would MUCH prefer the choice. And, my advice to the tenants on the forum was to make themselves the best possible applicant for a property and they will find that there are more opportunities to live with your pet than you think there are. The problem isn’t always the pet – it’s the tenant’s application.
My experience is that a great tenant is a great tenant … if they have a pet it just means they will probably stay longer and pay me a little more rent.
But there is a lot to consider when you make this decision, including whether you are even allowed to say ‘No Pet’s’ in your state or province (sorry Ontario landlords – you can’t actually say no pets!).
Here are my thoughts on whether you should allow pets in your rentals (thanks for the great question Christine).
If you do decide to make your rental pet friendly, you’ll definitely want to write a great rental ad that sells that benefit. You’ll also want to focus on ensuring you screen your tenant and ask great questions to ensure get the best one.
I worried “What if I mess up and my family’s finances become a permanent mess?”, and I had to deal with the rather uninformed opinions of some friends and family who thought I was nuts to be taking on what they saw as excess risk in the form of mortgage debt.
There was simply a lot of negative noise that I knew I had to get over in order to confidently move forward with real estate.
A big part of the solution to allaying my fears and taking action was finding the right group of people with whom I could surround myself. I wanted (and needed) to be around enthusiastic, successful and active real estate investors because I knew that was where I would find the motivation, inspiration and encouragement I needed to succeed.
Whether you are just beginning your investing career or you are already on your way to becoming the next Donald Trump, finding a group of people to connect with will always move you forward, no matter where you start.
The good news is that there are so many great real estate groups across the country and with a tiny bit of detective work you can probably find a club right in your community. In most urban centers, you can find your local club listing on meetup.com. Or you can go to Google and type in “your city + real estate investing club” and you’re bound to find something great.
If you would rather not do this homework yourself, I have rolled up my sleeves and investigated some clubs already. Here are some that I found that I would recommend split out by province:
The REIN community is a dynamic network that includes individual investors, families, corporations, professionals and entrepreneurs of every kind, all sharing a desire to secure their financial futures with positive cash flow real estate. REIN members learn how to apply proven investment strategies and how to take advantage of economic events that affect real estate markets across this country.
Where: Monthly meetings in BC, Calgary AB, Edmonton AB, Toronto ON and quarterly meetings in Ottawa, ON. Online membership options are also available for those not able to attend the live workshops.
Who is it for: Anyone interested in securing their financial future through investing in real estate Content/focus: Real estate education and networking Networking time: 4 hours at the monthly workshops and continuously via our online forum.
Run by: Patrick Francey (CEO) and Jennier Hunt (President)
The REINVESTORS are on a mission to help and inspire 1 million people to become financially educated and inspired to invest in real estate so they too can live a more fulfilled life. Founders of the “GO BIG TO GIVE BIG MOVEMENT” The REINVESTORS are a For-Purpose business inspiring others to set bigger goals so they can give back more to their passions and communities.
Where: Monthly meetings in Victoria, BC.
Who is it for: Anyone looking to network with like-minded people in the real estate world. Networking time: 2 hours with a guest speaker and time for networking.
This club’s focus is on education and raising one’s level of financial knowledge; Their site explains that gaining the right information and training, ultimately leads to financial independence and freedom.
Who is it for: All levels Content/focus: Education focused Who runs the group: Geoff Lee
This club is aimed at individuals who understand the potential of real estate as an investment but who need more information about what to do, or more importantly, what not to do. The club’s goal is to provide an atmosphere for networking and fun, as well as to provide education and guidance to people who are thinking of getting into real estate investing, particularly in local BC markets (yes, you can make money in real estate in the Lower Mainland!). They also discuss investments in the USA and out of province.
Where: Surrey, BC (A second chapter in Richmond with Teresa Leung is coming soon!) Who is it for: All levels Content/focus: Education focused Networking: 30 minutes before the keynote speaker and 30 minutes after the 1-hour presentation. This group allows for a brief introduction from every member (why they are there, what they’re looking for, etc.). At the end of the keynote, 15 minutes is allotted for any member that has a deal, is looking for a JV, etc. Who runs the group: Sua Truong, Senior Mortgage Advisor @ MortgagesLab Financial (www.SharingBankSecrets.¬com) Marc Ramsay – USA Investment Specialist (Majura Properties, Majura Investments)
This group was founded just three years ago and has already grown to over 1200 members. The purpose of this group is to help individuals learn about real estate investing through the collective forces of a group. Every month knowledgeable guests are invited to speak on real estate investing as well as share with the group their experiences and personal development tips so investors can take their advice to build their real estate portfolio.
Where: Vancouver, BC Who is it for: All levels Content/focus: Education only (strict policy of no selling) Networking: Following the presentation Who runs the group: Bai Jiang
Join this meet-up to discuss properties on the market, contracts, mortgages and anything else about real estate investing and business. Meet and network with successful like-minded people with similar goals and ambitions. Whether you’re looking to buy your very first property or you’re a seasoned professional, we invite you to come out and meet others in the Real Estate industry. This is Edmonton’s longest running Real Estate Club, established in 1985.
Where: Edmonton, AB Who is it for: All levels of real estate investors Content/focus: Education as well as the ability to share deals with the group Networking: Plenty of networking time. Who runs the group: Brandon Rolheiser
SASKATCHEWAN Real Estate Investing Club:
We’re not aware of any active clubs in Saskatchewan anymore. If you’re attending or running a great club, please email below and let us know the details please.
Truly Invested is a club where like-minded real estate investors come together. This club is located in Winnipeg, but members can also join the group virtually. The group meets monthly and covers various topics related to real estate and investing. They are member-focused, and strive to create great networking and informative meetings to create opportunities for growing wealth.
Where: Winnipeg, MB Who is it for: Open to all levels of investors Content/Focus: Education only (strict policy of no sponsors, no relationships with vendors or service providers, no backroom deals) Networking time: 15 minutes before the presentation, 15 minutes between speakers, 1-2 hours after the meeting Run by: Ben Eko-Davis, Tamika Joseph, and Candice Bakx-Friesen
The Rock Star Inner Circle was founded to bridge the gap between real estate theory and the implementation that provides real life results. Not only does the group provide constant education and information through members-only newsletters, interviews, classes, and events, but the team works one-on-one with investors to help them implement the strategies to reach their goals. Its mission is to help people use real estate to live their “Rock Star Lives,” whether it is travelling the world or spending time at the cottage. Either way, it is living on your terms.
Where: Based in Oakville, ON with events in the Greater Toronto Area Who is it for: Investors looking to use real estate to live life on their terms Content/Focus: A list of classes and events focused on providing current day, on the streets information and strategies with personalized coaching to implement them. Networking time: Multiple times a month during different member classes, and three times a year at “Your Life. Your Terms.” events. Run by: Tom and Nick Karadza (two brothers outrageous enough to name their company “Rock Star”)
Founded in 2008, this club has grown in active monthly attendance from three to 100 people. Every month the Durham REIC draws in great keynote speakers and then allows ample time for networking. The three main goals of the Durham Real Estate Investor Club are:
1. Network – with like-minded people focused on the Durham Region 2. Educate – wide range of speakers on talks of interest to Real Estate Investors 3. Support – provide peer support for Real Estate Investors to help their business grow
Where: Whitby, Ontario (Durham Region) Who is it for: Open to all levels (but 90% of attendees own at least one property) Content/Focus: Education only (strict policy of no sponsors, no relationships with vendors or service providers, no backroom deals) Networking time: 15 minutes before the presentation, 15 minutes between speakers, 1-2 hours after the meeting Run by: Quentin D’Souza, Chief Education Officer, full-time real estate entrepreneur.
3- Guelph Real Estate Acquisitions Team (G.R.E.A.T.)
An educational and networking group for Real Estate investors, located in Guelph. This is a strict “no selling” group. We are simply there to learn from each other and to make connections! We are not there to sell any product or business.
Who is it for: Whether you have zero properties or one hundred properties, we would love to see you! Get inspired, learn, find a mentor, network, but most of all….grow wealthy and have fun!
What to expect: They will meet five times a year to hear the stories and lessons learned from investors. Learn new ways to profit from Real Estate. Learn from mistakes, pitfalls, and successes of others. Make connections with successful Real Estate investors!
Mr. Hamilton’s Inner Circle meetings are packed to capacity with attendees that are experienced, friendly and always willing to share their investing knowledge. The meetings are not open to the public and the average attendee already owns more than one investment property. Every month the group invites high calibre speakers, conducts a review of a real estate-related book and provides need-to-know information about investing in Hamilton and the surrounding area.
Where: Oakville, Ontario Who is it for: Anyone interested in spending time with like-minded people who are investing in Hamilton and surrounding areas Content/Focus: Education and networking. This club generally avoids beginner material and instead educates its attendees about what’s happening on the ground in Hamilton and it also provides tactical information that Hamilton investors can apply to improve their business. This group has guest speakers on a wide range of subjects from goal setting to land development. Networking time: As much as folks want until they have to lock the doors! Run by: Erwin Szeto and The Mr. Hamilton Team of Rock Star Real Estate Brokerage
This group was created to empower women all across Canada to reach their personal and financial goals as well as gain independence through the purchase of Real Estate. The goal of this club is to provide solid, comprehensive education as well as the tools and systems necessary for anyone to make sound investment decisions (whether that is the purchase of one’s first home, a rental condo, or a multifamily property).
Where: There are chapters in Ottawa, Mississauga, Markham, and Toronto. Who is it for: This group is for any woman who is looking for tools, education, resources and networking opportunities to expand her Real Estate portfolio. The group welcomes women with any level of experience, whether they are a complete novice or an advanced investor. All members are encouraged to share their experiences and wisdom with others and encourage a supportive and interactive environment Content/Focus: Content and education. Zero selling from speakers. Self-promotion by members is encouraged in a “non-selling” context. Sponsorship opportunities for people who would like to promote their products or services limited to 1 sponsor per meeting with only a 10 minute speaking spot. Networking time: 30 minutes prior to the presentation. 45 minutes – 1.5 hours after the presentation. Run by: Lena Guirguis: Lena Guirguis is a real estate coach, asset management consultant and author, managing Partner New Venture Solutions, VP of Operations NV, Property Management, Founder Stilettos & Hammers
This club was founded three years ago with three main goals in mind: to share, inspire and network. Today the club has 1300 members and is still growing. Every month one to two speakers are invited to share their own journey and to educate and inspire the group with their personal trials and triumphs in real estate.
Where: Monthly meetings are held in downtown Toronto and bi-monthly meetings are held in Mississauga and Oakville. Who is it for? Investors of all levels Content/Focus: Education Networking time: Before and after each speaker Run by: Todor Yordanov – Investor and real estate agent
7. Smart Home Choice Smart Home Choice is one of Durham Region’s largest groups of investors and it offers guidance through years of experience and understanding of the market.
Where: Ajax, Ontario Who is it for: This group is to educate all level of investors to ensure they have the required knowledge and resources to allow them to make informed decisions in their investing strategies. Content/focus: Their primary focus is education. However, they do allow presenters to promote their website, materials and other content focused on providing education to all levels of investors. Networking time: 1 hour for networking: 15 minutes at the beginning, 15 minute break between presenters and 30 minutes at the end of the meeting. Who runs the group: Gary Hibbert – Real Estate Agent, Darlene Hibbert – Mortgage Agent
Thornhill Wealth Forum is dedicated to helping people build wealth through real estate investing. Beginning investors can connect with active real estate investors and prosper through knowledge sharing and networking. Through monthly meet-ups, participants get direct access to prominent investors, practical resources, local real estate deals and financing strategies to help them leverage their time and efforts.
Where: Thornhill, Ontario Who is it for: All levels Content/focus: Proven beginner strategies for building wealth, getting started with or without money, diversification and getting to the next level How much time for networking? 40% Who runs the group: Rachel Oliver — active investor, best-selling author, trainer and leading expert on Rent to Own.
The Brockville Real Estate Investment Club is a new but growing club, focused on education, networking and support in the Brockville community. Each meeting has a different theme and includes a segment on the latest news impacting the real estate world, such as a discussion of current property listings, tools and resources available to investors, a book review or legal and accounting tips. Each meeting also has an invited guest speaker whose presentation is related to the theme.
Where: Brockville, Ontario (on the first Thursday of every month) Who is it for: All levels – The club is open to new investors as well as seasoned pros. Content/Focus: The content of the presentation is education-focused. Networking: 30 minutes at the end of the presentation. This is the only time that members can discuss their respective business services. Otherwise, there is a strict “no selling” policy. The focus is on education, networking, and support. Who runs the group: Jeff Patry
9. The GTA Real Estate Investors and Professionals Networking Group
This is one of the longest running groups in the GTA and now has over 700 members. The purpose of this club is to hold networking events where real estate investors can meet, mingle and form joint venture partnerships with other real estate investors and professionals in the real estate industry as well as expand their knowledge base and stay current with trends in real estate.
Where: Thornhill, ON (at The Bayview Golf and Country Club) Who is it for: All levels Content/Focus: 1 hour educational component featuring star guest speakers as well as regular sponsors with informational booths set up at every event offering the best services and wealth creation opportunities to attendees. Networking: 1 hour of mingling Who runs the group: Monika and Vaughan Jazyk, owners of Real Property Investments, helping REAL people build REAL wealth through REAL Estate
The Ottawa Real Estate Investors Organization is a non-profit organization dedicated to providing education, networking, and support to new and experienced Canadian real estate investors in the Ottawa and surrounding areas. At the monthly meetings, guest speakers educate attendees on how to invest in real estate, how to manage their properties, how to attract joint venture partners and much more.
Where: Ottawa Who is it for: All levels Content/Focus: 1 hour educational component featuring star guest speakers as well as regular sponsors with informational booths set up at every event offering the best services and wealth creation opportunities to attendees. Networking: Plenty of networking prior to and following the speaker Who runs the group: John Walsh
QUEBEC Real Estate Investing Clubs:
1. Montreal Real Estate Investors Group
Local Meetup This group is dedicated to supporting the beginner real estate investor. At every event attendees can expect announcements about other real estate events, updates on relevant real estate articles, guest speakers and access to support. Where: Lachine, QC Who is it for: Beginner investors Content/focus: Education How much time for networking? Ample time for networking Who runs the group: Jennifer Lynn Walker
Where: Montreal, QC French investment club with mentoring, courses and club meetings. If you speak French check out their extensive website for more information. They have 20,000 members in Montreal and Quebec.
Moncton REIO is a non-profit organization group of professionals dedicated to encouraging and promoting ethical real estate investing in the Greater Moncton Area. Every meeting consists of a networking session, “positive action stories”, sharing deals and listening to guest speakers.
Where: Moncton, NB Who is it for: All levels Content/Focus: Education and members are able to share their deals. Networking: Plenty of networking time Who runs the group: Darlene Smith
This is a friendly and ambitious group of seasoned and new real estate investors interested in meeting, learning, sharing and networking with one another in order to achieve optimal results with Real Estate investing. The meetings are FREE and the club guarantees that by the time you leave you will have made new friends and increased your network of professionals as well as taking action on the path to wealth and financial freedom.
Where: Halifax, NS Who is it for: All levels Content/Focus: The content of the presentation is education-focused. Networking: 30 minutes at the end of the presentation. This is the only time that members can discuss their respective business services. Otherwise, there is a strict “no selling” policy. The focus is on education, networking, and support. Who runs the group: Richard Killeen Payne
This is a group for anyone interested in meeting like-minded people investing or planning on investing in Real Estate. Affordable real estate education is the priority to the community and different speakers present every month on the six vehicles of real estate wealth generation. This group strongly believes that real estate investing is the best vehicle toward wealth creation and it is their desire to help their members reach their goals faster.
Where: Dartmouth Private Board Room / Metropolitan Tower of Boyne Clarke LLP Who is it for: All levels of Real Estate Investors Content/Focus: The content of the presentation is education-focused (mostly on the six vehicles of real estate Investing), networking, support. Networking: 15 minutes at the beginning of the meeting for people to network and to introduce themselves and make their goals known. Another 30 minutes are allotted at the end of the presentation. Who runs the group: Nick Harvey-Pearson
By attending any one of these clubs, you will most certainly find a community of individuals filled with energy, enthusiasm and passion for real estate investing. Surrounding yourself with the right people is critical for any real estate journey, whether you are just starting or are a seasoned pro.
I am sure I have missed some really great clubs. If yours was somehow forgotten (or you attend a really great club that isn’t on this list), please let me know, as I will update the list regularly.
Gillian Irving of InvestInStudentRentals.com likes to say she was an “accidental investor”, when buying a duplex in downtown Toronto in 2009 with little planning or preparation. Luck was on her side though, and she was able to ride the value up and refinance to get capital to keep growing. At that point, she wasn’t going rely on luck and an “H&P” (hope & pray) strategy if she wanted to leave her job and provide long-term financial security for her disabled son and three other children. Gillian became a serious student of real estate investing and combined what she learned with her professional skills as a market research analyst to purchase 35 doors in Southern Ontario in 18 months. Today, Gillian is a full time investor and entrepreneur, focused on student rental investing with joint venture partners. She’s also going to be opening up a fabulous Sky Zone Trampoline Park in the Toronto area in 2015.
Standing at the front of the room of the workshop I was teaching for Canadian Real Estate Wealth’s Investor Forum, I jokingly said “Dave’s not here so I can totally blame this one on him …”
Everyone laughed as I shared a quick snippet from More than Cashflow about our two lemon properties we owned in Niagara Falls. I was making a joke, but it wasn’t even a little funny at the time. Those lemons were one of several major issues that we’ve faced together that nearly tore us apart.
Investing together as a couple has tremendous rewards. You can accomplish far more together than you can apart. It’s not just that there are two people so you can do twice as much work (although that really helps too!). It’s that most couples are made up of two people with very different skills and approaches. That’s a big advantage. It’s also an enormous challenge.
Dave is highly analytical. When he has a problem to solve he busts out the Excel spreadsheets and runs numbers for hours. He’s naturally driven to understand all the finer details. I’ve never had to understand weird mortgage clauses or all the ridiculous insurance requirements because Dave painstakingly goes through them all. Give him a problem to solve and a good reason to solve it, and he will get the job done. Period. In coaching our clients he methodically goes through their issues – especially if there are numbers involved – and gives very thoughtful and detailed advice. He wants to run the numbers himself to make sure something wasn’t missed.
I’m a bigger picture person. I quickly get bogged down in details. When Dave tells me about all his analysis I can quickly lose patience. I am organized. I’m also a fast decision maker. I see bottlenecks and potential pitfalls quickly. I am not always right, but most of the time my sixty second decision is the same conclusion as Dave’s four hour analytical session. I know what’s most important to do and will just go do it. I understand people. I’m highly focused on communication so I am fairly particular about marketing, negotiation and anything that we do where we have to influence others. I’m also a stickler for rules. Oddly, despite a propensity for details, Dave hates rules. When I coach our clients I am focused on the overall picture – where does this person need to go and what do they have to do next?
Together we’re a pretty incredible team. We have all the major skill sets covered when it comes to investing in real estate successfully. We also tackle challenges in totally different ways and think different parts of the problem are the most important.
After coaching many real estate couples over the years I know we’re not alone. Opposites tend to attract … which is kind of cool but also kind of challenging. Not properly understood or appreciated these differences can lead to fights and massive frustration, but it doesn’t have to be like that. If you’ve ever had a fight over something only to realize you were fighting for the same result… just going at it in totally different ways, this is for you!
Real Estate Investing as a Couple: 7 Tips to Stay Happily Married While You Build Your Wealth With Real Estate Together
If at first it seems totally out of alignment, your goal is to understand and appreciate what the other person wants. You’re not going to convince your spouse of anything they don’t already believe, so there’s no point trying to sell them on having the same ideal typical day. Instead, find common ground and create a shared vision of what you want your life to look like together. With that vision firmly in place, you can then figure out how you can get there together.
For example, maybe your wife wants to spend most of her day painting pictures and you want to be negotiating deals and renovating rentals. You don’t need to do the same things. Find where you do want the same thing, like having a schedule you control where both parents can pick up the kids from school or where you take advantage of a last minute vacation deal without counting vacation days. Then, talk about what you can do to create that. The cool thing is that a lot of dreams can be reached with real estate investments, but you need to understand what you’re creating together and why.
With that shared vision, you now must stay focused on it. Every major decision you make comes back to ‘does this move us closer to that shared vision or not?‘
Tip 2: Make Each Other Feel Important
It’s easy to take other people for granted and for some reason it’s even easier when you are married to each other. One of the easiest ways to keep your relationship strong as partners and as spouses is to really appreciate each other and make each other feel important.
Recognize and acknowledge all you’ve got in your partner.
Sure, there are times where you may have handled something differently, but because you have that person on your team you didn’t HAVE to handle it at all. They did. Thank them for it.
Tip 3: Use Your Differences To Make You Stronger
When I walk into a property, I know within two minutes if it’s one I want to own or not. It helps that we buy in the same neighbourhoods, but I’m still a fast decision maker. There’s still due diligence required to ensure it’s a good deal, but I won’t buy anything I don’t get a good feeling about.
That’s not a solid investment strategy though. Imagine telling your private lender, JV partner or mortgage broker “It’s going to be a great deal because my wife thinks it ‘feels good‘”?
That’s where Dave comes in. He’s got the details covered. He makes sure dozens of potential scenarios are accounted for and that we haven’t missed a surprise expense or some other issue with the financial aspect of the home.
The trick is to understand and trust in the strengths of your partner.
Some couples end up with one person on the gas pedal and the other firmly on the brake. That’s not going to get you to your ideal typical day. That’s just going to make you spin in circles.
Acknowledge and appreciate what the other person is bringing to the table and know you are stronger because of it. Listen to what they say with an open mind to make the best decision for you – as a couple. You each have to lift your foot off the pedal a little to get where you want to go … a little less gas and a little less brake and you’ll move forward! If you trust in your partner’s strengths this will be much easier to do (and your approach will probably be pretty rock solid because all angles are covered).
Tip 4: Divide & Conquer – Roles & Responsibilities
If I read every email Dave sent to tenants and partners I would lose my mind. “Why in the world would you say that? Wording it that way can result in them doing this …”
I also get annoyed when Dave doesn’t follow landlord tenant rules to the letter.
I mentioned I am intensely focused on how things get communicated and I am a rule follower, didn’t I?
Those things aren’t my job though. I would do it differently, but I can’t do it all. And, I don’t want to.
To make it work, we have split up who is in charge of what. We have regular meetings to discuss the things that the other person needs to be up to speed on. And, by the way, dinner time is not when you discuss these things if you want to have a strong, loving and long lasting relationship. Set a REAL meeting. I’ll talk about this in a second. First, let’s finish with the roles and responsibilities.
Tasks to consider assigning to one person or the other? Financing, insurance, partners, marketing, renovation project management, deal finding, tenant placement, property purchase, property sale, property management and bookkeeping. And if nobody is good at it (in our case – bookkeeping) for the sake of everyone, hire someone to do it for you. Then, choose who is in charge of communication with that hired professional.
If you’re fighting about something neither of you wants to do (especially when nobody is very good at it) ask yourself when is saving money more important than your relationship? I hope the answer is never.
Those large roles break down into smaller tasks. Some tasks can wait. Some need to be handled in a timely manner. But, if I am away or Dave is unavailable, we each step in to get the job done if it can’t wait.
If you’re in charge of something – do your job. If you’re not in charge of something – let your spouse do their job.
It sounds simpler than it is. There’s a bit of control freak in most of us. But, if you can’t count on your spouse to do what they say they are going to do, you have bigger problems to discuss.
Tip 5: The Dinner Table is Not the Boardroom Table – Set Business Meetings
When you work full time, the only time you sit down with your spouse may be dinner. That doesn’t mean it’s the best time to talk about your real estate portfolio. There’s little point in working so hard to create your ideal day together if your relationship doesn’t survive to enjoy it.
There ARE times where you have to talk about something urgently but most things can wait until you have a designated meeting. That meeting might be over dinner but plan it in advance. Have an agenda. Come prepared to discuss the problems with potential solutions. Planning ensures it’s one dinner in the week that becomes a real estate dinner. For us, we usually book a lunch meeting and go out somewhere for the meeting. That way our kitchen table does not become our meeting space. Plus, lunch out is a business expense so we can get our sushi fix and write off 50% of it.
If you find yourself turning your couple time into business time, help each other by gently saying “I can’t wait to hear about that at our next meeting. Are we still meeting tomorrow?”
Other things you may want to consider: • No real estate talk after 8pm, • Phones off at meal times unless there’s something important going on that has to be dealt with immediately, • No real estate talk with friends or family when you’re socializing as a couple unless they start and keep the conversation going on real estate, and • Designate real estate free days.
If you’re new to investing, new to each other, or both – it all feels exciting and you may not feel it’s having a negative impact on your relationship. However, over time, the lines blur and you may not see where you stop being business partners and start being loving and supportive spouses. Plus, you may find, over time that your interests and priorities shift. It could be really hard to talk about or even see it, if you’re not used to separating your business relationship from your marital relationship.
You never know … there could come a time when your spouse wants to pursue a totally different career, like being an actor in film & TV. There’s really nothing cooler than watching someone doing something they absolutely LOVE doing. And, that’s a discussion that can’t happen unless you’re supporting each other as a husband and wife team first.
For me, the most important things in my life are my health and my family. I can’t enjoy anything if I am not healthy and I will enjoy things much less without the people I love around me. Put things into perspective once in awhile and you’ll appreciate having a few ground rules to help you be husband and wife first and business partners second.
Tip 6: Renovations and Relationships – Making it or Breaking It
The single greatest endurance test for every relationship is how you manage a major renovation.
The surprises – there are always surprises (see Adding a Legal Suite to a Rental Property) will test you like few other real estate problems will. There’s a tight time frame, money (often a lot of it), pride and your investment goals all on the line. It’s not a small thing.
Good planning goes a long way. Plan that things will take longer and cost more than you think they will. Build in buffer time and buffer budget.
Put one person in charge of handling contractors. That person should also be good with the big picture and know the overall plan for the project – understanding where the bottlenecks are – because when the electrician doesn’t show up your entire project could get sidelined and someone needs to understand what other tasks must be delayed and if anything else can get done in the meantime.
Someone has to be in charge of shopping for the materials – the person who can figure out if the paint and flooring will look good together. Someone has to be in charge of the plans, the budget and paying the bills.
There’s a lot going on. You might make a mistake. Your spouse might make a mistake. The person who makes a mistake will feel bad enough about it without you adding to it or saying ‘I told you’. It’s a lot of pressure and there’s a lot to learn. Be kind and supportive to each other.
You don’t know what surprises will pop up but you can expect to be surprised. Try to laugh about it. It’s not anyone’s fault that there are three layers of flooring to get through, that the pipes weren’t where you expected them to be or that the electrical behind the walls is a mess. Nobody could have known. That’s part of the fun of renovations – you really never know what you’re dealing with until the walls come down. Deal with it and move forward.
Tip 7: You Win Together and You Lose Together
Celebrate your ‘team’ wins!!
Years ago, we coached a couple that wanted to fire their property manager and take over management of their property themselves. The biggest issue we faced in helping them was their own issues as a couple. They didn’t have established roles and responsibilities, and worse, it seemed like it was a contest regarding who was doing more work and, therefore, who should do the next task required. They were fighting about who should clean, who should show the house to tenants and who was booking the carpet cleaning. The thing they weren’t realizing is: you lose together or you win together – there is no in between.
There are times you have to pitch in and help your partner. Maybe they are away, sick or just overwhelmed. There will be times they do that for you too.
If it were a hockey game, you could put this into perspective. Sometimes there’s an injury. It’s not possible to say ‘Well, he’s out. We’ll just stop playing until they can play again.” Other people on the team have to step up. Same with a mistake. Someone on the team might lose the puck to the other team. Remember it may have been a bad pass to begin with or possibly he was tripped. It’s not always so simple as to say it’s ‘all their fault’ and it doesn’t matter anyway. The most important thing is to rally together and get back in the game.
Real estate investing is not always easy and it definitely can add stress to a relationship when something goes wrong (and something will go wrong – that’s just how it is). You’ll need the support of your spouse to get through the tough times even if they aren’t your partner. If they are your partner, you need to know how best you’ll work together to create a life AND business you love to be in together.
Side Note: One of the greatest gifts we gave ourselves as a couple to improve how we communicated with each other and how we work together was attending a Couples Retreat run by Philip McKernan. It’s not for everyone, but it is for couples who love each other and want to be stronger together. This is not a paid endorsement … I’m just a really happy and grateful client.
Whatever it was, you moved yourself closer to creating that ideal typical day you want to live.
That’s a cool thing. You should pause and pat yourself on the back for a moment, but the work is not done.
If you are ok with where you are at – you are living your ideal typical day and you feel fulfilled – cool. But if you aren’t happy in your job, or there is more you want from your life … if there are things you need to do to still get there, your work is not done.
There’s a danger in celebrating progress that isn’t goal achievement. You can run into motivation problems if you pat yourself on the back too much for a step that moves you forward but doesn’t get the goal achieved.
Let’s take this to an example to explain. I will use a subject that I know personally – book publishing (see More than Cashflow).
Let’s say you too want to be a published author and sell your book on Amazon.
At what point do you celebrate your achievement?
There’s a massive amount of work that goes into research and preparation before you even start writing. It’s exhausting.
Then, you start writing. Every chapter feels like an accomplishment.
If you successfully push yourself to write almost every day you might have a first draft after a few months. (Even with over ten thousand words pulled from articles I’d already written, my book still took me eight weeks to write.)
A draft is complete. Surely it must be time to celebrate?
Nope … you’re still a long way from selling that book.
You still have to go back and forth with the editor …. you have to rewrite many of the chapters. You have to read that book so many times you’ll never want to read it again. At long last, you have a final fully edited version – surely you can celebrate because you’re done writing, right?
Well, there still isn’t anything you can actually sell to other people yet. You have to get it into a layout that is Kindle and print compatible. You need an ISBN number, a cover, a way to sell it, marketing descriptions, accounts so you can have listings on sites like Amazon and then, most importantly, you still need people to sell it to.
Sure, you’ve come a long way but there is still so much work to do.
You haven’t achieved your goal until you’re receiving money in exchange for your book. That’s when you celebrate.
I’m not saying you never look at how far you have come.
In fact, when you feel discouraged and you feel you’re getting nowhere, that can be the best thing you do. Take a quick look back. And then get back to work.
We all ride a roller coaster of emotion when we’re pushing ourselves to achieve new and cool things in our lives. It’s scary. Once in awhile something really positive will happen and you will feel like you can do anything. It’s a rush! It’s confirmation that you’re on the right track. Most days you just have to keep pushing forward. You might feel tired, and you’ll probably question whether this is going to work.
You will most certainly wonder if you are doing the right things.
Then something will go wrong and you will wonder if it’s even worth it to keep pushing. In those moments, it’s helpful to give yourself credit for what you have achieved. You will gain confidence from realized the obstacles you’ve over come. But you should only pause for a moment because it’s even more important to know that there are still many more steps to take to go forward to reach your target.
We as humans have a tendency to count things as achievements when they aren’t really. Yes, it was hard work, but if it’s not the results you set out to achieve, you’re not done yet.
Add to that tendency, we are the most motivated when we start something and when we are near completion. We are not motivated in the middle.
What does that mean?
It means there’s a real danger in taking your foot off the gas for very long when you haven’t reached your destination. When you’re tired from working so hard, it’s easy to tell yourself you have worked hard and deserve a rest. Call it a rest. Call it a break. Call it whatever you want.
Your intention is that the pause is temporary. You mean to get back to it … you really do. But, you don’t.
It’s not your fault that you feel that way. It’s human nature. It is your fault if you don’t recognize it and push past it. Because now you know.
If you’ve ever done a running race like a 5km road race, you know what I am talking about. When the starting gun goes off … you feel great. You leap off that starting line like you’re going to be first across the finish line. Your legs are fresh and you’re excited! It feels like all the people on the sidelines are cheering JUST FOR YOU.
2km in there isn’t anybody cheering and the effort it takes to keep running starts to weigh on you. Your legs are feeling heavy … 3km in you think about taking a walking break but you keep going. When you hit 4km … there’s only one little kilometer left. Suddenly you realize you can do it. You round a corner and see the finish line coming into site. You start to hear the people cheering. You start running faster. You forget about your legs feeling tired and you race to cross the finish line feeling exhilaration and pride.
The problem is you have to get yourself through that pesky middle. You have to push past kilometer 3 when you want to take a rest and probably quit.
People are the most motivated when they first start something or when they are almost done. What are you going to do to push through that pesky middle?
One part of the solution is in knowing what should be celebrated and what you should focus on.
I think there is a danger in telling yourself ‘good job’ for the wrong things. You can say ok cool I’ve signed up for the race. Ok cool I’ve done 30 training runs. You can congratulate yourself for showing up for the race but you MUST finish the race, or you’re not done.
So what can you do differently?
First, set your goals in terms of what will occur.
Set your goal in terms of something you have full control over.
For example, many investors will set their goal to get two deals done by June 1st. That might happen but there are so many factors that you can’t control that could prevent that from happening (the right property doesn’t come up, the seller wants to close on May 20th, you get outbid in a bidding war…). So instead think in terms of what you WILL do to move yourself toward that goal. What are things you can certainly do? You can walk around your neighbourhood every Sunday to identify new opportunities. You can make offers on every deal that fits your criteria. You can spend 15 minutes a day reviewing MLS listings and sales in your area. You can hire a new realtor. There are many things you can most certainly do to move yourself forward.
Aggressively do 3 things each week to move forward. Period. You WILL do those things. Set your goals in terms of what you CAN do.
A good goal is not to ‘find two new private lenders in the next 30 days’. A good goal is to speak to the next 10 people on my list about getting referrals, follow up with my best lender to see if he wants to do another deal, get a speaking gig at the local investment club to share tips and let folks know I am looking for investors, and submit three article proposals to local newspapers (by the way, if you’re not sure how to do any of this, the Ultimate Money Raisers Mastermind could be the perfect thing for you). You have 100% control over all those items and every single one moves you towards your goal achievement. Those are good goals.
And if you’re a full time investor you should be AGGRESSIVELY doing three things every day to move yourself towards the important goals that are going to help you create that life you want to live.
People will quit when the website is complete because it felt like so much work. They won’t do what they need to do to actually get traffic to the website and attract new investors or clients because it was so much work just to set that sucker up.
People quit after they master their ‘5 Why’s’ to raise money for their real estate deals.
The work that matters is getting people to see your website. The work that matters is ACTUALLY having those conversations with people who could be the perfect fit to invest in your deals. Everything else FEELS like work but it’s not goal progress.
And, now you know it too! See you at the finish line.
Credit for the concept of goal achievement goes to Kevin Hogan. I'm not sure if I read it in one of his books or heard him speak about it in one of his CD programs, or at his Influence Bootcamp, but I am certain it was him I heard first discussing it. Thanks Kevin.
“Getting information off the Internet is like taking drink from a fire hydrant.” – Mitchell Kapor
I have a confession to make. I hate the Internet.
Okay, well maybe that’s not totally true. But I certainly have a love-hate relationship with it.
On the good days, I marvel at how quickly I can put my finger on a precise fact or figure or locate an invaluable resource for my real estate business. I count my lucky stars at just how available access to great information is.
Then there are the bad days, when the Internet is like a giant black hole that sucks me in but only spits me out after precious minutes – and sometimes hours! – have mysteriously vanished.
As a real estate investor, access to information – especially info from reputable, trustworthy sources – is a critical part of my toolkit for helping me make informed, strategic decisions about my business. I need good, reliable information, and I can’t afford to waste a single minute finding it.
Armed with a desire to improve my productivity (and encouraged by my coach, Julie Broad, from RevNyou.com), I have compiled a list of real estate websites and blogs that will hopefully save real-estate investors from the clutches of the dreaded Internet black hole.
Think Tanks/Due Diligence for Canadian Real Estate Investors
Savvy real estate investors know that a lot of homework and due diligence goes into buying the right house, in the right location, at the right time. To make that ideal purchase, having access to a variety of reliable economic and financial data is a must.
myreinspace.com provides the latest global real-estate news, market updates and unbiased economic research. REIN reports are designed to keep investors informed and ahead of any trends so they can make the right decisions about where and when to buy – and, just as importantly, when to sell.
conferenceboard.ca delivers authoritative economic data on the business cycle, labour demand and trends, and several barometers of consumer and business confidence, including the widely quoted Consumer Confidence Index and the leading economic Indicators.
theglobeandmail.com, especially the Friday Real Estate Section, is filled with timely, relevant articles describing the various real-estate markets across Canada. “Done Deals” is a personal favourite, as it showcases local homes and reveals both the asking and selling price and the number of days on the market.
cmhc-schl.gc.ca is another resource offering objective housing research and advice to Canadian consumers.
statcan.gc.ca If you need to put your finger on projected population growth, migration or household income trends to help determine whether the timing and/or location of your next investment is right for you, Statistics Canada is the go-to site for these or any of your stats-related queries.
The big banks all have useful economic data information, but RBC is particularly reputable in this department (see #4 above). So is CIBC, and especially anything by Benjamin Tal, as the IMF calls him “one of Canada’s leading experts on the real estate market.”
canadianmortgagetrends.com This site has plenty of up-to-date information, articles and videos that discuss the current state of affairs and long-term trends in the mortgage world.
housepriceindex.ca. I think this site is super-cool. Even if you aren’t a numbers-geek like me, the charts showing year-over-year (or month over month) appreciation by market are pretty awesome. Or maybe I just like this site because it shows how incredibly strong my investment towns (Toronto: +7.32%) and Hamilton: +7.97%) have been relative to last year!
landcor.com With access to 77 unique characteristics on each of British Columbia’s 1.9 million properties, landcor.com provides up-to-the-minute valuations on everything from a Vancouver condominium to a ranch in the Kootenays.
MORTGAGE COMPARISON TOOLS
The mortgage on your rental property is its single biggest expense, so getting the best possible rate is critical to your bottom line. Use the tools below to shop around and to compare what’s being offered by a multitude of lenders. Knowledge is power, so knowing the mortgage landscape will help you decide whether to sign on the dotted line or walk away from a lender offering uncompetitive rates.
ratehub.ca will allow you to compare just about any kind of rate you are interested in – mortgage rates, credit-card rates, GIC rates or USD rates – with the click of your mouse.
ratespy.com utilizes a network of assets to monitor virtually every Canadian lender that publicly advertises mortgage rates. That includes 345+ banks, credit unions, trust companies, insurance companies, wholesale lenders and online brokers.
RENTAL RATE COMPARISON TOOLS
Rental income IS your business. Price your rents too high, and you might find your unit vacant. Price them too low, and you will leave cash on the table. As a real estate investor, you need to be an expert on rental rates in your area. In addition to commonly used sites such as Craigslist and Kijiji that allow you browse rental listings, the following site helps you easily compare your rent to other areas:
rentometer.com: Paying too much for rent? Charging too little? Rentometer is the easy way to compare your rent to other neighbourhoods.
LANDLORD SUPPORT SITES
ltb.gov.on.ca. Understanding your rights and obligations as a landlord is extremely important from a legal perspective. Every province is different, so be sure you find the landlord tenant board in your particular province. This link is for the Ontario site.
Don’t know how to write a letter to your tenant to complain about excess noise, garbage, or late rent? This site has lots of free documents, forms and templates and also includes a lease builder that is customizable for your province. www.ezlandlordforms.com/documents/free-landlord-forms/
landlordselfhelp.com provides information, advice and referrals on a variety of topics related to residential rental relationships in Ontario. It’s geared toward the needs of small-scale landlords. (Note from Julie – In BC, we’re members of https://www.landlordbc.ca/. They are an excellent service and also have all the documents you need for every step in the process working with your tenants).
FINDING THE PERFECT PROPERTY
There are lots of great resources out there to help you find the ideal property or agent.
realtor.ca will help you find residential real estate for sale or rent by agents anywhere in Canada, while www.icx.ca is a listing and search site that features commercial and business properties for sale across the country.
rew.ca (Real Estate Weekly) has a variety of interactive maps showing open houses and houses for sale in the Vancouver and the lower mainland areas. This site also has an information-rich news section.
zoocasa.com offers an agent matching service and an extensive listing database for residential listings across Canada.
theredpin.com specializes in home, condos and townhouses for sale in the Greater Toronto Area.
This is where the black hole always gets me – in the blogosphere. There are just so many great, smart people to follow that it’s hard to know where to start (or my case, where to stop). I didn’t want to reinvent the wheel by creating my own list, so instead I am including a link to a list compiled by Toronto realtor Jamie Sarner. He’s done a really thorough job of ranking the 50 best real estate blogs in Canada in 2014. It is very comprehensive and includes a good representation of blogs/websites from across the country.
mrhamilton.ca: The realtor behind the successful Mr. Hamilton brand, Erwin Szeto, rocks. He is crazy smart and has a great blog in which he posts regular articles about the state of the real estate market in Southern Ontario.
biggerpockets.com is a social network for the real estate investing community. Here you can learn about real estate investment, get free tips & education, make deals, and grow your real estate business.
It’s always important to stay current with the most up-to-date real estate news, and these sites will help you do that. Many offer an online sign-up that will deliver daily news highlights straight to your mailbox. That’s what I do, and it makes me feel like I always have my finger on the pulse of the latest real estate news.
There are zillions of cool sites, and I couldn’t possibly list them all. What I will do, though, is regularly include cool sites that I discover through my newsletters (so be sure to subscribe at Invest In Student Rentals). Here are a few great ones to start with:
Virtual staging for your property. Yes, you read that correctly. Instead of renting expensive furniture, you can have furniture digitally added to your online photos. So, even though the house remains physically empty, the online photos show your house with its best foot forward.
walkscore.com. Is an awesome, useful site which could also easily have found its home in the “due diligence” or “rent comparison” section. A home’s “walk score” gives a great indication of how walkable (read: desirable) the property is to local amenities, attractions and transit.
The best networking site by far in my opinion is meetup.com. On this site you can find any type of group under the sun. It doesn’t matter whether you’re looking for other real estate investors or palm readers. You can find these and any other hobby or interest group you can think of.
UP-AND-COMING REAL ESTATE INVESTING SITES TO WATCH FOR
There are lots of new sites out there, and below are some of my faves. Yes, the last site on the list is my own site, www.InvestInStudentRentals.com. Be sure to join my online community, as I will be offering regular articles and video blogs to keep my subscribers up-to-date and informed.
I hope this list proves to be useful to you! My goal is to save you from being sucked in by the Internet whenever you’re seeking important and relevant information for your business.
If I’ve forgotten a site that you find particularly useful for your real estate business, please leave a comment on my website at: http://investinstudentrentals.com/contact-us/ and we’ll take a look at adding it to this list or I’ll publish it in one of my upcoming newsletters.
Gillian Irving likes to say she was an “accidental investor”, when buying a duplex in downtown Toronto in 2009 with little planning or preparation. Luck was on her side though, and she was able to ride the value up and refinance to get capital to keep growing. At that point, she wasn’t going rely on luck and an “H&P” (hope & pray) strategy if she wanted to leave her job and provide long-term financial security for her disabled son and three other children. Gillian became a serious student of real estate investing and combined what she learned with her professional skills as a market research analyst to purchase 35 doors in Southern Ontario in 18 months. Today, Gillian is a full time investor and entrepreneur, focused on student rental investing with joint venture partners. She’s also going to be opening up a fabulous Sky Zone Trampoline Park in the Toronto area in 2015.
“What if my investor wants out of the joint venture deal?”
Our worst partnership was created when I was more focused on my new career after graduating from my MBA than I was on our real estate portfolio. It was 2004. Dave had begun to dream really big and had met someone to work with on these big plans.
This guy was a creator and innovator. He had started a company that was growing rapidly and was already winning some business awards. He was an idea man and was well connected to a lot of people with money who would be keen to put it into real estate.
The two of them thought that they could create a syndicate with this guy’s contacts and Dave’s expertise. Dave spent hours and hours meeting with him and planning the syndicate. They did a couple of deals together and planned to do a lot more.
I was busy with school and was not interested in a syndicate. I also didn’t think this was the guy to do it with. He was controlling and yet scattered. He insisted on being involved and yet was hard to get in touch with.
Dave was frustrated with the challenges he faced in working with this guy but continued to push forward as he saw the potential. When they had the first two under their belt, Dave found a couple of other ones. Dave made offers but Dave could not get him on the phone. He had to let those deals go (those deals promptly doubled in value so Dave was pretty upset he’d relied on this guy instead of doing them without him).
He couldn’t even get in touch with this guy to discuss the properties they already owned. Sometimes it would take 2 weeks before Dave would hear back from him.
Eventually Dave accepted it wasn’t working. So he needed to break up the joint venture.
This is the only time we’ve had to break up a joint venture. We quickly realized how important it was to only work with our ideal investors. So what are your options?
First, prevention is the best medicine.
You may pursue Joint Ventures (JVs) for flips, big deals like apartment buildings or commercial developments and your specifications of what you’re looking for may be different than what we do (see structuring real estate Joint Ventures). For us, we tend to look to private lenders for money for anything outside of buy and hold residential deals and rent to owns. There are a lot of reasons for that but the biggest reasons are the increased risks and the increased need that someone has to be on the same page as you for the future financial requirements of a deal (we’ll be teaching you how to find private lenders and joint ventures in April in Toronto). We prefer to handle those issues on our own and work with a joint venture for the more stable investments like small multi unit or single family buy and holds and rent to owns.
In those cases you want to make it clear that you are looking for a minimum of a five year commitment. You want this even for rent to owns because if the deal doesn’t close as expected it likely will be a property you hold for close to five years (or longer) (see why rent to own investing can stink).
In our agreement we state a minimum hold of 5 years or an increase in value of 25% before either party can exit.
Despite the prevention measures, life happens. If it’s time to exit, someone needs out or the relationship is challenging and you want out, what are your options? These need to be spelled out in your joint venture agreement, but here’s a few options for you:
Right of First Refusal – if the term has completed and one of you wants out the other partner has the right of first refusal to buy them out. This ensures that either party doesn’t turn around and try and sell the property from under the other party. It gives the other partner a chance to buy the person out before they sell it to the market (a third party).
What does that process look like? Your agreement needs to spell out how you determine fair market value. For most people you will get an appraisal done and if both parties agree with the appraisal or the value then the one party may buy it from the other for that price. We allow for the average of two appraisals to be taken to determine fair market value in the event that the parties don’t agree on the value of the first appraisal.
Splitting the Chocolate Bar – Now, if you have not reached the five year term, if that is what you agreed to, (or the value hasn’t increased by 25% as per our agreement) and one partner wants out, our approach to this is something we call “splitting the chocolate bar”. Other people might call this a shot-gun clause.
If one party wants out before the contractual time frame this is how we handle it.
Imagine you have a chocolate bar. One party breaks it in half and the other one picks which side they want first. If I am breaking it to share I am going to split it as close to the middle as I can so you don’t take a bigger piece from me.
If, however, I am a crazy person that doesn’t like chocolate, and I don’t want to end up with the chocolate bar, I should break the bar so that there’s a bigger piece for you to take so you are more likely to take it.
Taking this to the property to explain the concept: the person who chooses the value would be the one that wants to break the contract. The other person determines if they will buy the property at that price or sell it to you. If you want me to buy you out and you’re choosing the value, you would be wise to offer it to me at a slight discount so I am motivated to buy it from you (or it’s attractive for me to bring someone else in to replace you in the deal). I basically get the choice of whether I buy it from you at that price or sell it to you at that price. If you get too greedy I can tell you to buy it from me.
For example, I know the property is worth $240,000 but I want out. When I decide the value of the deal I might say $220,000 to give the other person an incentive to buy from me. If I say $240,000 there is a good chance the other party will say “Ok I’ll sell it to you for that!”
If you are in the position where it’s favourable to buy out your partner but you can’t qualify for financing or you don’t have the cash then you can consider bringing in a new person to replace your investor. If they have made the price attractive enough and it’s a good asset, you should be able to find someone to take their place. You could also look at private money if the cashflow is strong enough to cover the higher cost of a private mortgage. And, if all else fails and you can’t buy them out when they want out no matter how attractive they make it for you, you’ll have to put the property on the market.
How Do You Determine Fair Market Value?
It’s easy for us to determine fair market value for most of our properties because we are hands on and very active in the market. We know what is selling and for what price. But for the purposes of splitting off a partnership or where fair market value needs to be determined, we spell it out in our agreement how the valuation will be done.
You should include something in your agreement that spells out how fair market value is calculated. Our agreement typically states that each party hires an appraiser and take the average of the two appraisals.
We have a term in our agreement that says that the property will be held until the property appreciates by 25%, or we’ve held the property for 5 years. When one of those conditions is met, either party has the right to sell – and the other partner basically can’t refuse. This is when the right of first refusal kicks in.
If one of you wants out before either of those conditions is met, for example if your partner wants to sell after three years and the property has only gone up in value by 5% it’s probably not advisable to sell. In that situation you would use the ‘splitting the chocolate bar’ method to separate.
One of the questions most people will ask you is when they will get their money back. As we’ll discuss shortly, the most important thing for you to do is align your investments and your strategy with the right people. In our case, buy and hold real estate investing, we’re always holding for the longer term. Our ideal partnerships are those that really don’t have a need for the cash anytime soon. We want to hold for as long as possible to maximize the return and profit. That can take more than seven years depending on where you bought in the real estate cycle. We would prefer someone who is continuing to generate income and is using this as part of their overall income strategy to grow their wealth. As a result they won’t need their money out until we believe it’s the best time to exit. But regardless, everyone wants to know when they will get their money out so having something in your agreement that shows them there is, in fact, a way to end and get their money out will give them comfort.
And since we’re talking about breaking up a joint venture, let’s talk about a darker subject.
What Happens If Someone Dies? The incapacity Event
This is a subject nobody likes to consider, but it is important.
For your own comfort and that of your loved ones, you should know what is going to happen to your properties if you pass away. For your partners assurance they need to know you have a plan.
For your assurance you need to know your partner has a will so the property doesn’t get tied up in probate hell for years.
We spell this out in our agreement and you should too. It outlines what happens if someone can’t make decisions anymore or they pass away.
In our case, if Dave or myself were to be incapacitated, the other would just take over. We run our business together and while Dave handles more of the day to day operations, I am capable of running the entire business. If we both were to pass away, we have a real estate experienced lawyer who is our executor and he would take over the managing role.
We have it spelled out that he would contact the JV partners and review the options.
One of my coaching clients was concerned about what would happen if she passed away. Her husband is not involved and she fears the amount of stress it would put on him if he had to manage the properties himself. My suggestion to her was to hire a property manager for at least one of her properties so that she built a relationship with someone who could take over all of the properties if something were to happen to her. I also suggested she create a spreadsheet that outlines all the important information for each property (including bank account numbers and passwords). Keep that locked in a safe and up to date.
It’s not a foolproof plan, but it’s much better than no plan at all.
If something happens to your JV partner and they’ve qualified for financing what is going to happen to their side of the deal? Does it transfer to a spouse? Do they have insurance that will pay out the debt? Just like you have to cover your side of the deal, you also need to understand they have their side covered.
In most cases, in the event of death, you’d probably sell the asset or the surviving party would buy out the estate of the passed partner. The important thing is that there is some commentary around that. Ensure you have that conversation with your JV and with your lawyer.
As with every legal document there are a lot of areas to cover and this is not every single detail. I am also not a lawyer nor have I had any legal training. This gives you some critical elements to discuss with your real estate specializing lawyer when you get your own document drawn up but should not replace the advice of legal counsel.
Joint ventures are a great way to grow your portfolio but it’s a business relationship. It’s important you treat it like that and consider the ways to exit the deal as well as all the ways you’re going to find people to enter a deal with.
You are about to become a compelling conversationalist that attracts money right to your door. Eliminate the fear you have around asking for money for your deals – forever.
Natural born salespeople need not apply – this is for folks who aren’t sure how to structure their joint ventures and lending agreements. This is for people who feel uncomfortable pushing their money raising agenda in front of people. And, this is absolutely for people who want to learn how to be comfortable AND confident when they talk about their deals with other people.
There’s no fancy techniques or slick selling tactics. What we teach is what we do … We don’t teach weird sales tactics. We teach you how to have people COME TO YOU!
You don’t have to register today, but you could miss out if you don’t.
Nice properties in nice areas with good cash flow were getting harder and harder to find in my home town of Ottawa. Frustrated with the lack of inventory, I decided to look deeper into my native province, Saskatchewan, thousands of kilometers away.
At the time, a particular small town in Saskatchewan was hopping with work and had the highest average rent in the province. That really got my attention.
I realized years later that booming small towns can be a good place for investment, but you really need to know your market and what you are getting into.
It was 2011. I decided to invest in the small town of Estevan, Saskatchewan, two hours outside of Regina. It had a population of 11,000 people and the average house price was in the low 200,000’s. There was so much work in Estevan that housing couldn’t keep up and people were literally turning down jobs because there was no place to rent in Estevan. I was mesmerized by the inexpensive prices and the prosperity and growth of Saskatchewan. It reminded me of how Alberta started out a decade ago.
Estevan real estate was attractive because of its low vacancy and high rental rates, supported by various energy employment sectors. At that time, a two-bedroom apartment in the low $200K range could easily fetch $1800+ per month with no property taxes for five years.
The numbers were perfect and I knew the town well enough as it was close to where I grew up. Plus I really needed a turnkey investment considering I had other properties to manage, one year old twins and a career to juggle. I decided to pull the trigger and buy a brand new two-bedroom condo. It rented out immediately.
For two years, things were great. The market value of the unit increased almost immediately after I purchased it and the cash flow was excellent. The peak rent was $2400 per month and it was property tax free for five years. Even with the cost of an occasional $600 trip to visit the town, it was worth it. It still netted close to $1000 dollars in cash flow per month after all expenses.
Then things changed.
First, crude oil dropped. At first it was slow, then it fell 50% in just six months.
All other energy sectors followed and so did the housing market in Estevan.
The party had officially ended in Estevan.
The morning after a big party the last person you want to be is the one left holding the garbage bag in charge of clean up. But, that was who I was.
If you find a booming town is catching your eye like Estevan caught mine, make sure you do it with eyes WIDE open. During the oil crash, my tenants left due to changes in employment and the unit wasn’t attracting much interest in the rental market. I managed to come out losing only two two months rent to vacancy because I changed property managers and dropped rents substantially. Thankfully even dropping the rents, it still cash flowed.
It was a tough situation and not what I thought it would be, so here’s what you need to know before you invest in a small town.
The Good, the Bad, and the questions you need to ask yourself before pulling the trigger investing in small towns.
Let’s start with the ‘Good’ about Investing in Small Towns:
Low entry price. Properties can be significantly cheaper than in larger cities, which makes it very enticing to any investor. This can mean greater cash flow and return on investment, a win-win situation from a financial perspective.
Less competition. With a small town, you might not have a lot of competition with other real estate investors in town. For example, you could be one of very few rental properties that provide rental units to executives and transient workers. Additionally, you could benefit during the purchase of the property by not having to worry about multiple bids and losing deals!
High rental rates. Sometimes rental rates can be much greater than the average rents in bigger cities. In a booming small town, transient workers are given a lot of incentives to work there, including generous allowances for housing costs supported with high paying salaries. This drives the rental market, with incredible rents and generous cash flow in your pocket!
Rental property incentives. If the housing market is hot and there is a shortage of rental units, the City may be more flexible in their regulations or building permits and possibly offer tax incentives for real estate investors. For example, in some cities, property taxes are waived for five years if you commit to holding the unit for that time frame.
Sounds great, right? Be careful. Small towns can be a pain, too. So, let’s continue on with the ‘Bad’ about investing in Small Towns:
Slower appreciation. Property values typically don’t grow as fast in small towns as they do in larger cities, so you need to really think long term when investing in small towns, at least five years if not more!
Smaller employment market. When the employment sector is hot, rental demand is high; but when the employment sector is a bust, rental demand goes. All of the transient workers leave and the town becomes stagnant, which equates to higher vacancy rates and longer hold times between tenancies. This is coupled with a decrease in property resale demand, meaning you could be stuck holding a vacant and illiquid asset. This really hurts if you need your money back and that is your only exit strategy.
It’s a boom and bust town. Small town real estate can be quite volatile. Oil and energy rich cities are affected significantly by the volatility in commodity prices in the financial markets. Things can go south quickly with any economic change, as shown in the drop in the oil price over the last six months.
Limited services. There is a general lack of services in small towns. Property managers, home inspectors, lawyers, handymen, and realtors may be sparse or non-existent. If you need an appraisal to finance a property, the bank may require someone from a nearby City (that maybe a couple of hours away) because the one person in town is on vacation. This happened to me! Same goes for property insurance, home inspection and property management firms. These conditions can make upfront purchasing costs significantly higher.
Now that the Good and the Bad are out of the way, I encourage you to use your common sense filter and simply ask yourself these questions before considering investing in a small town:
Can this area grow in the future – adding jobs and creating demand for housing – or will it go down in value due to declining population, economic changes, and/or loss of jobs?
How long can these high rental rates last? Will it last for the time frame that you are looking to hold this unit?
What are the main employers in this area and what is the likelihood that they will increase in size or decrease in size in the future?
Do you have a big enough real estate portfolio to absorb any shortfalls when the market goes bust and/or do you have a generous contingency fund for this property?
Do you have multiple exit strategies if the market turns sour and you have trouble renting the unit out? Can you lower the rent, provide incentives like shorter term leases, furnished options, or rent-to-own options to give you an edge in a slow rental market?
If you are an out-of-town investor, do you have a team backing you up to make sure that your property is managed well and you can trust to do whatever they can to market your property in a downturn?
If you are an experienced investor, it is important that you go into any investment with your eyes wide open. Investing in small towns can be attractive for cash flow, but as quick as that comes, it can go! Just be ready, and have your contingency plans in place. Tracy Ma is a mother of twins, mentor, engineer, and real estate investor in Ottawa, Ontario. Connect with her at her website www.financialnirvanamama.com where she shares free tools, videos and articles on managing your real estate portfolio. Her mission is to empower women on investing to reach their financial nirvana.
“I’m interested in starting a real estate investment club – what should I do?”
That’s a question I’ve been asked many times from realtors and mortgage brokers who want to create more business for themselves, and new real estate investors who want to create a place to network and learn.
Since starting the Durham Real Estate Investing Club in 2008, I have a few tips that will help you to grow your club and help you avoid some of my earlier mistakes. (Note from Julie … this will also give you an idea of what kind of clubs to look for when you want to find one to attend!).
I started the Durham Real Estate Investment Club in a coffee shop in early 2008. I didn’t have any friends or family that invested in real estate and I was looking to create a peer support group for the properties we had. The very first Durham real estate investor club meeting was four people that showed up, drank coffee, talked and shared information about real estate investing.
In December 2014, the Durham REI meeting had two amazing keynote speakers, a panel discussion of five full-time real estate investors that collectively owned hundreds of units, and local infrastructure and economic updates. We had close to 100 members and guests attend that meeting, and the club continues to grow every month.
The very first thing that you need to do is create a vision for your club. By creating a vision, you actually help to identify the key goals of the club. This is easy when you can answer a few questions.
What is the reason to have the club in the first place?
What do you want people to get out of coming to a meeting?
What are you hoping to help them avoid by coming to your meeting?
What do you want to get from giving many hours of your time each month? Or will it be worth your time?
Why start a club in the first place? Are there other clubs you can help to grow?
How big do you want it to grow – be specific?
There are many different components of running a real estate investing club:
Finding, screening and organizing speakers,
Booking and organizing the facility,
Ensuring that the speakers show up and deliver a positive message,
Facilitating question and answer at meetings,
Welcoming members when they arrive, ensuring they have name tags and feel comfortable enough to network — the list goes on and on.
There are systems and processes that you can setup that help with all of these components. But, one thing that will change how a person feels when they come to your club is based on your leadership style.
There are two main leadership strategies that I see people use – one is to lead from the front and the other is to lead from the back. Both types of leadership styles offer good opportunities for members to learn but how you feel after going to the meeting will be a little different.
Many real estate investment clubs are places where a person leads from the front. Usually, it is a place where a particular real estate investor, has established themselves as the expert in a particular area within real estate investing. They impart their wisdom to you as someone who is leading the charge. They present themselves as the ultimate expert in real estate investing and they or their associates will help you on your journey. Their goal is to help you to learn and to grow by working within the business model or service they offer.
This approach isn’t ideal for all investors because it doesn’t clearly present the options that they need to achieve in their own personal objectives. It’s also often bias towards the experience and methodology of the speaker. And sometimes, the person leading from the front is speaking about what the members should do without having the experience to back them up, and people can see through this.
My preference is to run and attend clubs where the leader does so from the back.
A club where a person leads from the back is organized a little differently. This is almost like what Stephen Covey would describe as servant leadership position. It is actually a leadership strategy that I learned while taking my principal qualification courses (I spent many years working for a School Board).
5 Tips for Leading a Real Estate Investing Club from the Back
Focus On Helping Others To Develop Their Real Estate Business – The focus should be on coaching and supporting others, rather than controlling or pushing a sale.
Listen To What People Want – Pay attention to what people are saying. Really listen to them and find out what they want and need. Then try to offer it to them through sharing some knowledge or inviting a specific speaker.
Cultivate A Culture of Trust – Invite other experienced investors to share what they are doing by being open and honest about what you are doing.
Act With Humility – Don’t think that you are better than everyone else, but act in a way that shows that you care for others.
Develop Leaders In Your Group – Help others to lead in the community that you build within your club.
One important clarifying point needs to be added. Leading from the back does not mean that the people leading the club have limited real estate experiences. In fact, the best clubs are run by someone that understands the most fundamental part of the rental house and apartment business. That person must understand that the business has nothing to do with bricks and mortar – it is about people. And the relationships that we develop over time help us all to succeed a little better.
Many of those who lead from the back have a depth of understanding that supports the others in the club.
The idea behind this leadership strategy is almost to be in the background helping people to grow and as a result you improve the community that you serve. This leader shares the stage with multiple people, and helps others to rise.
One such organization that I think exemplifies this model of leading from the back is Rock Star Real Estate in Oakville. I’m not sure if they would refer to themselves as a real estate club, but Tom and Nick Karadza do a wonderful job running great meetings – helping their team to grow, and their members to flourish. Their events have grown to a massive size as a result (their last one had over 400 people in attendance!). Here is just one simple example of what they do. Most people refer to real estate agents as Realtors, but at Rock Star Real Estate, they are referred to as “Coaches”. In their day to day language they use the word “Coach”. This simple change in title of the real estate agent to a coach, indicates the person is there to help you to grow, not to sell you a property.
In a club where a person leads from the back you will not hear about the hundreds of real estate properties that they have purchased or the myriad of businesses that they own in order to position themselves as an expert. They will often lead by sharing information that will help other people in their real estate investing. The way that you hear about the leader’s expertise is from other people in the group, one on one conversation, and your own interactions with that club’s leader.
I hope to meet you one day at the back of a Durham Real Estate Investor meeting. Or you can start your own club, where I hope you to, will lead from the back.
How to Set up Your Bank Accounts with a Growing Real Estate Portfolio
We answer a submission from Gary around banking and what we do with our bank accounts when our real estate portfolio is growing. When you have multiple properties and you have multiple joint venture partners, there’s lots of different things going on. In Gary’s case, he actually has what I deemed as a fairly complicated system of sub accounts of the sub accounts. And it got rather confusing for me. So this is for anybody out there that has more than one property and in most cases, if you have joint venture partners that you own the property with. We will be following the system that we use and that we generally recommend to most people.
A disclaimer, this does not include anybody that manages other people’s properties. They are only for properties that you own or you co-own with other people. I just want to make sure that you’re aware of that its not for property management.
What we do with our bank account systems:
It’s a main business checking account with a bank. It could be any kind of bank that you can do checks with, email, money transfers, that sort of thing.
Then we set up specific property accounts for each property. Example; property one, two, three, four, as many as you want. Each of those property specific accounts are just basic personal checking accounts.
I am personally on the account and his joint venture partner is on that account. We both have access. The key is making sure you explaining to your joint venture partner that they’re not to do anything with that account without checking with you first because you’re the managing partner, I assume you are in most cases. It’s not an account for you guys to play around with to transfer money whenever. You want to specifically only give them access to it so they can see what’s going in, what’s going out.
Any bills coming in and money going out. Each property specific account you put your rent check into, transfer the money in or however it works for that specific property. The mortgage comes out of that account, whether the mortgage is in your name, a business name or your joint venture partners name. The money comes out of that account.
To write a check for a tradesman or some somebody that doesn’t take a a visa card, we’ll write the check from our main account. We’ll track what the bill was for, right on the receipt, which property it’s for, and then we will transfer the funds from that property back to pay ourselves back. And we just track that with, QuickBooks, Excel spreadsheet, whatever you use to track your expenses. For instance, if there was some job that had to be done at this property, say some plumbing went and I had to pay a plumber with a check, I’d write the check from my main business account that go to him or her, the plumber, and then I would just transfer the funds from our property that we did the work on to pay myself back.
I have a business credit card and that business credit card basically acts like this as well. So the business credit card, I’ll pay for any number of these things and then I just pay directly online from the specific properties account to pay back that credit card.
That is how the flow of money works. The key thing to all of this is that these are just personal checking accounts and you set them up, you get your joint venture partner added on with you so they have access to it too. When it’s time to pay them out, your going to pay them cash flow from it, what I do, I don’t write them checks. I tell them how much money they can take out of the account and then it’s on them to take that money out. This is the system that works for us, we control everything, but our JV partners do have access to it.
In terms of banks, there’s no one bank that’s better than any others. We actually have several accounts with one bank. We have another several accounts with another bank. We have about four different banks that we deal with. There’s no one bank that’s better than any others, but that’s our system. That’s how we work. We found it works really, really well. It’s great for tracking purposes and I highly recommend you do something similar with your own system. I hope this gives some advice to a variety of other people that are looking for how do you do your banking when you have multiple properties and partners.