Frequently the issue of any new investor is: where to start ?

First of all you should assess your CASH situation. CASH is a combination of "real" cash, committed friends and family's cash and a HELOC (Home Equity Line of Credit) or short: LOC. On a LOC you have to pay interest only on the portion you use, which is good. So don't use it all immediately to buy a yacht or a fancy condo in Hawaii.

Research the market, decide what AREA of the world you wish to invest in and then what type of property.

This is a big world, so is it Lower Mainland, Edmonton and area, S-Alberta, rural SK east of Saskatoon, Northern Manitoba, Florida, Phoenix, Vietnam, Singapore, Venice, Turkey, ... ?

Any area takes time (and a little bit of money for driving time, flying there, donuts, lunches, research material ..) to research. The bigger the area the bigger the time commitment .. BC takes more time to research than Lower Mainland which takes more time than Greater Vancouver which takes more time than North Shore which takes more time than North Van east of Hwy 1 which takes more time than Deep Cove.

I suggest you start with a VERY VERY small area .. say a suburb of one of the Top 10 REIN towns in BC, AB or ON.

Then, decide on a TYPE of property: townhouses ? condos with oceanview ? single family homes older than 50 years ? new sub-divisions ? pre-sales ? acreages ? horsefarms ? trailer parks ? office buildings in crappy parts of town ? high end luxury condos with high end finishings ? land with sub-division potential ? strip malls ? defunct shopping centres ? warehouses ? storage facilities ? fixer upper homes ? ANY of these property types allow you to make money once you know what you are doing.

Then spend a TON OF TIME BECOMING AN EXPERT the property type in an area. THEN AND ONLY THEN should you start writing offers and buying.

And yes, better several smaller properties than one huge one. Many properties allow you to sell one if you have to. One mistake in a big project .. and this could be the end of this property and possibly the one securing the HELOC.

More on why an HELOC (vs. a mortgage) is such a good vehicle is here:

http://myreinspace.com/public_forums/Real_Estate_Discussion/62-2302-What_is_better_a_mortgage_or_a_line-of-credit_.html

The market right now (late spring 2008) is NOT so hot in most markets .. so take your time ! Better to pass on a "deal" than realizing 6 months in your paid too much for it and it is both a money and time drain.

For each piece of real estate you have to hang in financially and emotionally.

This means realistic assessment of cash situation (inc. closing costs, vacancies, upgrades required in addition to "normal" expenses like: mortgage payment, taxes, utilities, condo fees, insurance, management fees ..). It also means realistic assessment of mental "toughness" or time commitment. Vacancies will arise. Basements will flood. Tenants occasionally have to be evicted. Maybe the police gets involved. Boilers break .. sometimes at mid-night. Get used to it .. or anticipate it. Be prepared to handle those things yourself, or preferably, hire a property manager that does it for you, but then be prepared to pay this person or company well. So, ask yourself: who will manage this property impeccably ?

Cash to close comes in 2 forms: real cash and a mortgage. To get a mortgage, you need various documents including property documents and personal documents showing the bank that you are credit-worthy. REIN calls this the "networth binder". Spend A LOT OF TIME preparing this document, find a mortgage broker to get you a mortgage, or at least tell you what kind of mortgage you can get roughly, depending on the type of property listed above. Horse farms are treated differently than trailer parks than condos ..

Before closing ensure you have someone in that market to manage the property impeccably. That could be you, yourself, although a professional with in-depth market insight, knowledge of legalities and local knowledge is likely better. Spend some significant time finding that special someone, as good property managers are VERY hard to come by.

Once the deal makes sense .. you got the money (cash + mortgage) .. and the manager .. ask yourself if you will be able to hang in emotionally and financially .. if so: CLOSE.

Happy Hunting !


P.S.: many hours are wasted when hunting and walking through the mud or underbrush .. many more hours just waiting in the right spot .. but then one day: BAMM .. ! Hopefully you were awake then ... as sometimes that moment is short .. and perhaps the opportunity passed or a better prepared hunter got to the target first. So, be prepared .. and ready when you should be ready!

Hi Thomas:

Just received your information. Thank you very much and it would appear that I am on the right track. Thank you and have a wonderful day.

Lurline

FOCUS IS KEY !!

Hi Thomas,

First I'd like to say I'm a big fan of your postings. You're always very insightful with lots of great information to offer. Its obvious that you are very passionate about this business!

You mentioned to focus on a very small area. I am from Toronto (been here for the past 6 years) but from my understanding Toronto is a slow/flat market. I rent a condo here for convenience to work however I don't want to buy a condo here as the numbers don't seem to make sense.

I'm looking at the Waterloo-Cambridge area since its much smaller and more manageable, one of the top REIN towns and the area has tremendous growth potential. The catch though - I know NOTHING about that area. I've never even been to the town. What are some action steps you would suggest in getting to become an 'expert' in that area?

Just thinking out loud I would - check out the town, drive there and just get a feel of the place, go to local Realtors there and start talking to people, building connections, view listings of places, talk to people who live in the area (ie. university students - I know a couple who went to school there). Is there a particular order I would approach this at? Are there things that I can in Toronto before travelling there?

Thanks

Chris

flat is a description that fits most of RE in Canada these days ..

yes, smaller towns usually make more sense .. especially ones with a university, life-style, diversified industry base .. so yes Waterloo-Cambridge make sense ..

drive there once at least .. get a map .. talk to some REIN folks .. do some open houses .. check the paper .. find a realtor or better: 6 .. then narrow down the area .. a suburb or 2 MAX .. then ONE type of home, say a townhouse or a up/down bungalow .. as you must know if a TH for $200,000 in suburb X is a good deal or an average deal or a lousy deal .. and this is a street by street knowledge that takes weeks to acquire .. no rush .. as the market is not going to pop up 20% in a week ..!!

then do more research from afar .. MLS and off-MLS .. set up showings for a weekend or 1-2 days when you come back .. 4-6/day .. then do that 3-4 times .. so after the 6th visit you will be somewhat of an expert so you can start writing offers ..

There's probably some REIN members there that you can shack up with or get the lay of the land over a beer (or 5) ..

Happy huntin'

Excellent post Thomas.

Your posts always present in a well thought out and smooth manner as opposed to my often short erratic statements.
You tend to fill in the spaces I lack the patience to address.
Maybe due in part to the colour of our collars.

The above posts covered this well

Chris give me a shout if you want my thoughts on any places or areas in Waterloo region

Pretty much for residential rentals there's a few segments

Student rentals - High rent to purchase price, high collection, low vacancy - More management intensive and time consuming, easier to mess up, often best return if done right.

Single family houses and condo's - Low rent to purchase price, easier to manage, periods of vacancy and non collected rent periodically, occasional tenant damage.

Non student multi-family plex's - same as above with higher rent to purchase price but worse tenant profile / harder to manage. Good segment to be in only if you have big $$$ to purchase large unit count and have on site super... ie triplex = 110k + / door, twenty plex maybe only 70k/door ....even then would rather own student rental...




For area's - Check map. Draw line from King and University to Lester and Columbia - Some of the surrounding streets and on other sides of universities can be good too - Check out every place for sale in area that you can afford.

Chris,

My company works with investors looking to invest in the Grand River region (KWC, Hamilton/Brantford). We have done the research, have the relationships in the area and know the market. We also manage properties in the area.

Please let me know if you are interested in learning more.

Thanks,

Thanks Thomas,

You have provided me helpful info for the second time this weekend. Either REIN is a small world (NOT) or you are a very helpful person!

I have been setting my sights on Cambridge for the reasons you have mentioned. I will definitely take the approach you suggest. I'd also be interested in hearing from any successful single-family home investors in that location.

Margaret

Thomas,
I could not agree more!! Property Management lasts the lifetime of the real estate property!
I am learning this right now as I grew from 2 rentals to 11! I am trying very hard to hire the right ppty mgmt firm in Barrie/Newmarket without paying through my nose!

Cheers,
Eddy

I just acquired a student rental in Barrie - bad timing I know - will be posting on Kiji and Places4Students.Com. Can you offer any help as to what steps I should be taking right now. The property doesn't close until August 28th but vendor allowing me to have open houses for students to come in and look. Also, would like to use a property management so no late night phone calls because I am at least half an hour away from the property. Were you successful in finding one you would like to share with me?

Hi Rose
Contact all local schools - they should have off campus housing postings and should be able to give you thoughts as to where else to advertise and approximate rates.

Thanks so much Thomas for sharing your wisdom. This is a fantastic post for us newbies.

Hi Eddy:
I just joined the forum and found your posting. Just wonder if you have found a ppty magt firm in Newmarket area.

Thanks.

Roger

Welcome "newbie" .. you will find REIN inspirational, educational and motivating !!