The Shiny Penny

[wgraham]

Well I must admit I hesitate to put this latest blog post on here as it about to bash a few investors

but I honestly think this is the road block holding up most people from being "successful" in real estate! So please don`t take offence

I posted this article on my website a couple of weeks ago and we got some good feedback. Enjoy and I hope it helps all of you become better investors.

The Shiny Penny - Why Picking a Niche is so Important!

Lease-to-owns, buy and holds, foreclosures, flips, renovations, development, land, multi-family and commercial. There are a thousand ways to make (and lose) money in real estate.

I was at a multi family investing seminar last weekend with 700+ investors attending. The Real Estate Investment Network always puts on top notch events and this one was no exception. The idea behind multi-family is economies of scale. One roof but with many doors lowering your overhead and therefore keeps the business nice and efficient. But the entire weekend I kept looking out at the crowd. Most people owned some property and some were looking for their first buy but only a few had the means to actually pull off a multi-family investment. So I asked myself, why where all of these people here? Why was I there? The fact of the matter was this....it was just another distraction. A shiny penny.

Real estate is really no different than any other businesses. Those who pick a niche and then become the best they can be at serving that niche succeed. Those who dabble here and dabble there dilute themselves and the business and sooner or later succumb to failure.

Ask most investors what their specialty is and most can’t tell you. They might give you some vague description that really means they haven’t got a clue. But ask a successful real estate investor, businessman, or athlete and they will give you the clearest concise no b.s. answer you have ever heard. “I focus on single family buy and holds in NW Calgary with double detached garages.....” Or “I service mountain bike enthusiasts who need the latest and greatest. We don’t sell cheep junk. High end only!” Or “I am professional climber who climbs big mountains alpine style and prefer to go fast and light”

Unfortunately we tend to find a niche but don’t fully commit to that niche. Sooner or later, we come up against some problem and because we are not fully committed we look for a “better way.” However, the harsh reality is that all niches have their strengths and weaknesses and real estate is no exception. Give me ten reasons to invest one market and I can give you five reasons not too.

One of the most frustrating things for junior investors is the fact that no one will tell them to “invest this way”. No one will tell you what to buy or how to buy it or how to manage it. You have to pick a market that works for you, plays into your strengths and is part of your vision. Figure those things out and then figure out an investment style that fits. For me it was buy and holds but for you it may not be. This is a key ingredient to your success so spend a lot of time working on this area.

Once you pick a niche commit to it. Become the greatest you can be at servicing that niche. Have the perseverance to work through the issues and ignore the shiny penny distractions. When you are coming up against your next challenge in life, work, business or investing ask yourself how committed you are. If it isn’t 110% find out why that is!

 

[LAndersen]

QUOTE (wgraham @ Sep 14 2010, 09:49 AM) Well I must admit I hesitate to put this latest blog post on here as it about to bash a few investors

but I honestly think this is the road block holding up most people from being "successful" in real estate! So please don`t take offence

I posted this article on my website a couple of weeks ago and we got some good feedback. Enjoy and I hope it helps all of you become better investors.

The Shiny Penny - Why Picking a Niche is so Important!

Lease-to-owns, buy and holds, foreclosures, flips, renovations, development, land, multi-family and commercial. There are a thousand ways to make (and lose) money in real estate.

I was at a multi family investing seminar last weekend with 700+ investors attending. The Real Estate Investment Network always puts on top notch events and this one was no exception. The idea behind multi-family is economies of scale. One roof but with many doors lowering your overhead and therefore keeps the business nice and efficient. But the entire weekend I kept looking out at the crowd. Most people owned some property and some were looking for their first buy but only a few had the means to actually pull off a multi-family investment. So I asked myself, why where all of these people here? Why was I there? The fact of the matter was this....it was just another distraction. A shiny penny.

Real estate is really no different than any other businesses. Those who pick a niche and then become the best they can be at serving that niche succeed. Those who dabble here and dabble there dilute themselves and the business and sooner or later succumb to failure.

Ask most investors what their specialty is and most can`t tell you. They might give you some vague description that really means they haven`t got a clue. But ask a successful real estate investor, businessman, or athlete and they will give you the clearest concise no b.s. answer you have ever heard. "I focus on single family buy and holds in NW Calgary with double detached garages....." Or "I service mountain bike enthusiasts who need the latest and greatest. We don`t sell cheep junk. High end only!" Or "I am professional climber who climbs big mountains alpine style and prefer to go fast and light"

Unfortunately we tend to find a niche but don`t fully commit to that niche. Sooner or later, we come up against some problem and because we are not fully committed we look for a "better way." However, the harsh reality is that all niches have their strengths and weaknesses and real estate is no exception. Give me ten reasons to invest one market and I can give you five reasons not too.

One of the most frustrating things for junior investors is the fact that no one will tell them to "invest this way". No one will tell you what to buy or how to buy it or how to manage it. You have to pick a market that works for you, plays into your strengths and is part of your vision. Figure those things out and then figure out an investment style that fits. For me it was buy and holds but for you it may not be. This is a key ingredient to your success so spend a lot of time working on this area.

Once you pick a niche commit to it. Become the greatest you can be at servicing that niche. Have the perseverance to work through the issues and ignore the shiny penny distractions. When you are coming up against your next challenge in life, work, business or investing ask yourself how committed you are. If it isn`t 110% find out why that is!

A good reminder for all of us. Thank you.

 

[ChrisDavies]

So true! I buy three bedroom townhouses in Millwoods (Edmonton), and I make myself learn quite a bit about a new area before I buy anywhere else (and I think I know the city pretty well).

I actually have a long list of things I look for in a property, including half-baths which can be made full, distances from major intersections, schools, and more.

 

[bizaro86]

Great post! After I bought my first property I started looking all over the place. I looked houses, and duplexes, and recreational property, and considered a tenant-first renant-to-own.

Then I realized with all the time and energy I was spending doing research on all sorts of things, I could be looking at properties of a type that I understood.

So since then I`ve been buying two bedroom apartment style condos in Calgary neighbourhoods walking distance to either downtown or a c-train station.

Michael

 

[housingrental]

Great post

I specialize in student housing in Waterloo

I`m continually baffled from meeting investors who own 10 properties in 10 cities

It took me almost ten years to develop expertise on a PART of the city on a street by street basis and be able to evaluate potential rent and sale values with ease (if I add X features to property it`ll be worth Y, cost me Z, and rent for R, etc..) .... PART of the city of a bit over 100,000.... working full time on this....How can someone truly be an expert in all of Hamilton, London, Cambridge, Waterloo, Milton, Oshawa, Etc..??

 

[Thomas Beyer]

QUOTE (wgraham @ Sep 14 2010, 08:49 AM) .. So I asked myself, why where all of these people here? Why was I there? The fact of the matter was this....it was just another distraction. A shiny penny. ..
Indeed Wade .. indeed !

Multi-family should not be attempted with less than $250,000 in cash and some sound life and other real estate experience.

One reason why so many folks showed was the reason it was free for REIN members and it was not mentioned that some serious cash is required.

Having said that, I think it is important to educate oneself about the many potential avenue to wealth (or ruin) in real estate, as it is not so apparent initially which road one should take.

As you stated, land development, commercial, hotels, trailer parks, lease-to-own .. they all make sense IF YOU KNOW WHAT YOU ARE DOING .. and that takes a while to learn. Hopefully the learning also includes earning .. and not bankruptcy as many (would be) condo converters in Edmonton found out in 2007 to 2009 !

There really are two ways in real estate to make money: do it yourself .. or do it with others (who have the expertise in a chosen space) !!

 

[bizaro86]

QUOTE (ThomasBeyer @ Sep 14 2010, 12:35 PM) One reason why so many folks showed was the reason it was free for REIN members and it was not mentioned that some serious cash is required.

It makes perfect sense to attend a free (or included) presentation on an investment class by acknowedged experts, even if your only goal is to determine whether that asset class is for you or not.

I would attend a full day seminar on anything from haircutting franchises to emerging market bonds if it was complimentary and hosted by world-class experts (as I understand the REIN multi-family was, at least to REIN memmbers). You never know what you`ll pick up.

Michael

 

[RussellWestcott]

QUOTE (wgraham @ Sep 14 2010, 08:49 AM) I was at a multi family investing seminar last weekend with 700+ investors attending. The Real Estate Investment Network always puts on top notch events and this one was no exception. The idea behind multi-family is economies of scale. One roof but with many doors lowering your overhead and therefore keeps the business nice and efficient. But the entire weekend I kept looking out at the crowd. Most people owned some property and some were looking for their first buy but only a few had the means to actually pull off a multi-family investment. So I asked myself, why where all of these people here? Why was I there? The fact of the matter was this....it was just another distraction. A shiny penny.
Thought I`d give another point of view... statistically speaking, plus ask a few questions.

First of all, I am, and always will be, a niche investor. However the question to be asked is? When and how do you expand and grow from your current paradigms? Every big business (Apple, Microsoft, Warren Buffet, Prestigious Properties, 10 year+ REIN™ members), started somewhere and were small businesses at the beginning. When and at what point did these businesses/ people take the step up to the next level and leave behind the old ways and start to think bigger or thinking in a different direction?

Without progress, and the pursuit of new challenges, life can become quite dull and boring.

A couple of assumptions were made about the people attending the event, we might want to look at a few facts.

All attendees were asked to fill out a pre-event survey before attending. 19% of the attendees filled out the survey (I don`t know if this is statistically significant... but it seems like a significant number).

62% of the attendees have been investing for more than 2+ years.
21% of the attendees have been investing for more than 5+years.

72% of the attendees own 3 or more single family properties.
16% of attendees own 9 or more single family properties.

Looks like a very high quality room, serious action takers and people who might at one point expand into Multi-Family. Does it have to be 90 unit buildings? Nope... might just be a 8 plex, but the point is, they are taking the time NOW to educate themselves for the future. As I`m sure that most investors can agree, having the knowledge to take the next step, before actually needing it, is a nice place to be.

You, I, or anyone cannot say to what the `means` the people attended the event have, their available resources, and their willingness to do whatever it takes (ethically and legally) to buy a multi-family property. Perhaps we should ask the question how we can help people accomplish their Multi-Family investing goals.

Finally, even if I did not own one piece of real estate, and looking to buy my first property, what a great place to surround myself with the best of the best. Where is the best place to learn how to buy your first property... surround yourself with the people who are active investors. There was no doubt plenty of single family talk going on at the Multi-Family event...overall a great place to be for any investor period!

Some questions to ponder... when do you take the next step, and what is required to help you get there?

I better get back to work... we have an ALIFE event coming up, and I`m sure there is going to be another group of serious action takers, looking to take their investing up to another level, attending that event too.

 

[EdRenkema]

QUOTE (RussellWestcott @ Sep 14 2010, 03:01 PM) Thought I`d give another point of view... statistically speaking, plus ask a few questions.
First of all, I am, and always will be, a niche investor. However the question to be asked is? When and how do you expand and grow from your current paradigms?

Russell`s got it bang on.

Here`s a question, if you are an athlete would it be more beneficial to train with and learn from other athletes that are below your skill level or above your skill level?
Right - you get the point, in athletics or investing I always try to surround myself with people who are more successful than me or if not at least they aspire to be and that is what this event was all about, and as Wade correctly pointed out it was a top notch event.

To me this wasn`t about a shiny new toy it was about recognizing a well used peice of machinery that just keeps running.

 

[GarthChapman]

On April 19th of this year the Federal Gov`t lowered the ceiling on how many single family properties one can buy, and made it tougher to finance those you can buy, or refinance.

So it`s really pretty simple, commercial and multi-family properties are what one can buy without worrying about the new low ceiling. Now that`s not to say there aren`t other barriers, and other skills to learn and knowledge to acquire. By the way, the quality of presenters at that MF event were all top notch.

So I for one am glad REIN put on this event - it will make my job of securing financing for my clients now turning to multi-family purchasing much easier, as they will have been somewhat pre-educated by having attended this first-class event.

So thanks Don, Russell, Patrick and the whole REIN team.

 

[wgraham]

Thanks for all of the comments and feedback everyone!

A few points.....

Education is always beneficial but it becomes invaluable when actually put to use!! I have been a REIN member for many years and will continue to be as I am always learning new techniques and tools to make my business more profitable, effective and efficient. Not only do I benefit from this but so do my investors! So I no way shape or form am I saying that learning about multi family or creative sales techniques or any other training that any one puts on is not valuable (especially when it is free to members). It most certainly is!

I don`t believe however that multi-family or commercial or any other style of investing is "the next level". They are just different. As mentioned there are a thousand ways to make money in RE and everyone has pros and cons. Multi Family and commercial are no exception!

Niche Investing is the key to success in my humble opinion! Thomas is great at multi family....he doesn`t own too many student houses in NE Calgary. Russel is great at town houses. He doesn`t own any multi family. Wade Fenner is great at foreclosures and flipping. He doesn`t own any commercial. Etc etc...

I believe the clearer you get about your niche the more success you will have. I buy this type of property with this type of financing in this area of town and place this type of tenant in it with this sort of lease. I don`t do blah blah blah.

But again....those who dabble here and dabble there are doomed to failure!

One of the big "mistakes" I made was buying in multiple cities. It makes my entire business more complex! As mentioned you CAN NOT be an expert in multiple cities!! (Thomas may argue this one) If I was to do it all over again I would have gotten super specific early in the game.

 

[MKBridge]

If there is one thing I finally figured out after a year and a half of being with REIN is specialize! For me that means stick to one city (Edmonton) and learn it well. I am not going to limit myself to one type of real estate at this point, because opportunities always come up if you don`t have blinders on and only look for one type of unit. I went to the multi-family event just to learn more about real estate. While there I visited a couple I met in the summer in Nakusp BC (she is a sister of another friend), and low and behold they know of a fellow who passed away and owns several multi-family units in Edmonton, and the executors want to sell them off. We went and visited one of the units even before the event started! If I said no I only by condos, this would be a great missed opportunity. But instead I am ready to give the executor an offer and have secured $300,000 for a down payment. Wish me luck.

 

[bizaro86]

I think the amount of focus required depends on the amount of resources you are willing/able to bring to bear on the situation.

For example, if you invest in real estate full time, and have a full-time staff of people raising money and doing research for you, your area of expertise could be larger. (IE. Thomas Beyer and W.Canada+TX)

On the other hand, for me and my wife, as two people who also have full-time employment and are capital constrained, spending a bunch of time travelling to Edmonton or Toronto or Phoenix or wherever probably doesn`t make sense. We have more great opportunities in the niche I defined above than we have the time and money to take advantage of, so why look elsewhere?

Michael

 

[wgraham]

QUOTE (MKBridge @ Sep 15 2010, 09:40 AM) If there is one thing I finally figured out after a year and a half of being with REIN is specialize! For me that means stick to one city (Edmonton) and learn it well. I am not going to limit myself to one type of real estate at this point, because opportunities always come up if you don`t have blinders on and only look for one type of unit. I went to the multi-family event just to learn more about real estate. While there I visited a couple I met in the summer in Nakusp BC (she is a sister of another friend), and low and behold they know of a fellow who passed away and owns several multi-family units in Edmonton, and the executors want to sell them off. We went and visited one of the units even before the event started! If I said no I only by condos, this would be a great missed opportunity. But instead I am ready to give the executor an offer and have secured $300,000 for a down payment. Wish me luck.

I think I could make a solid argument that specializing in Edmonton is much much too large for most investors! Yes, if you focus on a specific niche some "deals" may pass you by but by focusing you know absolutely what is a good deal and what is just a distraction. If you know Millwoods townhouses as a Rent-To-Own investment better than everyone else I can guarantee that over the long term your risk will go down and your profits will go up! Yes a buy and hold steal of a deal in calgary may pass by every once in awhile but by getting involved with that investment your risk is substantially higher as you do NOT know that market.

Good luck with your apartment! I hope it is a quality long term investment the treats you well!

 

[housingrental]

I second Wade`s above post

 

[RedlineBrett]

The real estate world is so vast that many investors need to try a couple different things before they find out what they like and what their `niche` will be.

Are you doing the same thing now that you were planning on doing when you left high school?

The REIN presentations can`t really be much better - I agree they are stellar - but they have no control over the intentions of those who sign up. I dont think it`s any small piece of knowledge that the `lure` of real estate wealth and the idea that anyone can build it regardless of their background is what is truly being sold at nearly every event.

 

[RebeccaBryan]

When I attended the Multi-family Bootcamp I already intended to buy a Multi-family.

Having managed both types of properties, I see the benefits of moving to Multi-family. It completely fits into my plan. When I joined REIN, I never intended to change my focus from single family, however, having gained expereince in multi-family through managing my Mom`s business, it is an obvious next step for me and completely makes sense.

I`m not losing focus on the end result which is attaining financial freedom. I listen carefully when attending meetings, and I don`t think I`m smart.
I do think I have vision and guts, but I use the smart people in REIN to guide me. Before I joined REIN I knew the WHY, WHEN and WHO. I just didn`t know the WHERE, WHAT and HOW. Especially the HOW? And that`s what REIN has provided for me. So thanks REIN, I wouldn`t have done it without you, you gave me the confidence.

At this point I absolutely have no intention of investing outside of Edmonton and not likely outside of the specific areas that I know. It`s going to be difficult enough dealing with the situations that come up with the purchase of the new building, therefore I want to keep the things that I can control familiar. eg. (chosen area/tenant profile, size of buiding, size/bedroom suite mix, etc.)

I agree with becoming an expert in an area and for the most part a specific type of property. I agree with repeating the same thing over and over.

I wouldn`t have ever decided to do multi-family, but the right circumstances presented themselves so therefore I am very glad that the multi-family event took place.

NOTE: There is much more info in the binder that we took home from the event, so I reccommend reading it. It is a complete guide, and if you have any questions you can just pop them on myreinspace and VOILA! Thomas will be there to guide you.

Even if the event helped only 1 person move forward, it was a success, and it helped me.