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. Thus, Hamilton in your case seems to make sense as it is only 3 h from Windsor, where you can leave at 8 am, arrive by 11 .. look at 3 or 4 properties plus 2 meetings and be back by supper, say 1x/week or 2-3 a month easy.
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.
You must know if a deal is a deal, i..e if a 3BR + 2 bath townhouse in Hamilton @ $175,000 with a south facing yard on XYZ street is a good deal or if it is overpriced, or of the north facing 2BR townhouse on ABC street with finished basement, but no garage at $135,000 is a better deal ! You must also know what either of those rent for, +- $50/month.
The
best one to start as there is plenty of supply and plenty of seller
motivation is a small house or a townhouse. Not a condo as you can't
control costs of the condo association. Not a big house either as they
are usually more expensive and hard to cash-flow.
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://www.myreinspace.com/forums/index.ph...46&hl=HELOC
The
market right now (late 2012) 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 credit you need a job. I assume you have one. What is it ? Also excel at that. More on my blog on this if you wish ..
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!
Yours Sincerely,