Appreciate advice from a mentor & professionals to invest in real estate

Learn&Grow_RE

New Forum Member
Registered
Hi everyone,

I joined this real estate community and this forum after I read some books of Don R. Campbell. Very valuable books to lean about real estate in Canada.

I’m an economist and I’m deeply interested to invest in real estate in the area of Ottawa - Gatineau.
My goal for the five next years is to have two duplexes (2 units each)


As a new investor, I believe that my key ressources are going to be the collective experience and knowledge of a mentor and a team of a professional members. I don’t like to wait until I think I have more to offer them. I would like to have the chance to get in with me at the goring floor!

I would like to start to network with a mentor with experience in real estate investing, Real estate agent, banker(s) and Mortgage broker(s) , having a list of property inspector and contractors…… in the Ottawa area.


Many thanks in advance


As I’m reading and following the housing market in Canada, I would like to share these key highlights from different Canadian economics sources.

- The house market in major cities in Canada is overheating.

- Demand is exceedingly strong, inventories are generally low, desire for more living space, and property values have soared to levels far
outside historical norms.

- A Seller's market - The sellers are calling the shots!

- The housing prices will continue to appreciate during 2021, albeit at a slower and slower pace as we get closer to 2022.

- The slightest interest rate increase could compel many buyers to exit. Any sudden, larger increase would pose a risk to the market.

-The Bank of Canada also indicated that it is ready to let short-term inflation rise temporarily.

-To date, the plunge in immigration has primarily affected the rental and, to a lesser extent, condo markets in Canada’s largest cities
though the impact could spread to other housing categories and markets.


=======
Yassine Ben K.
Economist
 

Matt Crowley

Senior Forum Member
REIN Member
Don's philosophy is fundamentally buy for the dividend and let the growth carry you on the back end. It is a bit truncated to include only more or less ready to rent units.

It depends on what your goals are for returns and the amount of risk you want to take. RE is broadly broken into 4 brackets of risk:

1. Core: class A building, this could be a SFH / duplex / towhhome in a excellent neighbourhood that is a higher demographic profile. Home needs no maintenance. Return 5-7%
2. Core plus: SFH / Duplex / TH in good neighbourhood where you have intermittent vacancies and asset is a bit older, requires some maintenance. Return 8-9%
3. Value add: similar asset but has aged and needs some major upgrades. It may need a new kitchen or other substantial renovation to bring it up to a level to attract attractive rents. You can probably purchase at some discount to what the value would be once improved. Return 10-12%.
4. Opportunistic: this is effectively ground-up development or a complete gut of a home. Returns 12%+

Those are the general ranges of returns. The lower in the risk range, the less chance you have of wiping out your equity. Real estate tends to be a highly levered asset which carries a lot of downside risk, especially with higher levels of leverage.

The number of doors doesn't matter. If you really want to massively grow your portfolio, then you need to be in something more merchant where you can get in and out relatively quickly and churn the capital. If you want to park the capital for a lower dividend, then you can choose to deploy into a safer asset class.

Bare minimum thresholds:
- cap rate should be at least 150 bps spread over the interest rate you are paying
- make sure you budget for cap ex
- your strategy needs to align with your lifestyle and time commitment
- think through property management and how you will execution on this along with bookkeeping. Downsides from poor management are massive.
 

Learn&Grow_RE

New Forum Member
Registered
Don's philosophy is fundamentally buy for the dividend and let the growth carry you on the back end. It is a bit truncated to include only more or less ready to rent units.

It depends on what your goals are for returns and the amount of risk you want to take. RE is broadly broken into 4 brackets of risk:

1. Core: class A building, this could be a SFH / duplex / towhhome in a excellent neighbourhood that is a higher demographic profile. Home needs no maintenance. Return 5-7%
2. Core plus: SFH / Duplex / TH in good neighbourhood where you have intermittent vacancies and asset is a bit older, requires some maintenance. Return 8-9%
3. Value add: similar asset but has aged and needs some major upgrades. It may need a new kitchen or other substantial renovation to bring it up to a level to attract attractive rents. You can probably purchase at some discount to what the value would be once improved. Return 10-12%.
4. Opportunistic: this is effectively ground-up development or a complete gut of a home. Returns 12%+

Those are the general ranges of returns. The lower in the risk range, the less chance you have of wiping out your equity. Real estate tends to be a highly levered asset which carries a lot of downside risk, especially with higher levels of leverage.

The number of doors doesn't matter. If you really want to massively grow your portfolio, then you need to be in something more merchant where you can get in and out relatively quickly and churn the capital. If you want to park the capital for a lower dividend, then you can choose to deploy into a safer asset class.

Bare minimum thresholds:
- cap rate should be at least 150 bps spread over the interest rate you are paying
- make sure you budget for cap ex
- your strategy needs to align with your lifestyle and time commitment
- think through property management and how you will execution on this along with bookkeeping. Downsides from poor management are massive.
Thank you Matt for these very valuable advices - Much appreciated.

Regarding the risk, my lifestyle and as a new investor, my goals are between the core classic and core class plus.
I plan to start with few to no maintenance and lean my way through ... as an entry level ! It will help me ;
- To network, built and work with my team
- Learn by acting through
- Establish my credibility (personal & financial one)
- Leverage and use properly my knowledge about the economic cycles and the RE market / submarket around my target area

I completely agree that the best is to invest for a discount / value add option (bracket 3) during a buyer market. For the short-term, it is not in my priority!
 

Matt Crowley

Senior Forum Member
REIN Member
Keep in mind that RE is very asset-driven more so than buying a stock index. There is money to be made in the asset categories in any cycle, it is all about price entry point and less about cyclical factors. Even large RE companies invest this way. They just buy much larger assets $100 MM + and have a very specific business plan to maximize the asset value.

The 'team' aspect of real estate is less critical on the scale of acquisitions you are talking about realistically.
- lawyers do very little on small transactions and are too expensive to help with due diligence. Don't overthink 'structure'. The property has insurance.
- accountants are an unnecessary expense, just hold the properties personally and do the bookkeeping yourself with Quickbooks or something similar
- property managers do virtually nothing for single family homes / townhomes / duplexes - the monthly management fee doesn't provide for anything other that watching their phone and sending you a bill. If they go out to the property you will get a separate bill along with fill fees, ect. So instead, find a property supervisor and fill the property yourself. Great gig for a handyman to drive by the property and give them all the maintenance work that happens on the property.
- mortgage brokers...on this scale, not that critical. There is a good chance you can get as good a rate going to your local bank as they can provide
- Realtor - good part of the team, but ONLY if you have run the numbers and already know the economics of what kind of renter demographic and property. Especially useful if they can pull comps, analyze and look for opportunities.
- property inspector: critical part of the team, but lots of good ones out there.

I'd say don't worry about the team, it is just not that important frankly. The important part is understanding the investment, the rents, and the strategy, which all falls on you. You are the quarterback and the idea this is a team effort is just not accurate. There are important coordinating consultants but you run the show and need to be the market expert.
 

Learn&Grow_RE

New Forum Member
Registered
Keep in mind that RE is very asset-driven more so than buying a stock index. There is money to be made in the asset categories in any cycle, it is all about price entry point and less about cyclical factors. Even large RE companies invest this way. They just buy much larger assets $100 MM + and have a very specific business plan to maximize the asset value.

The 'team' aspect of real estate is less critical on the scale of acquisitions you are talking about realistically.
- lawyers do very little on small transactions and are too expensive to help with due diligence. Don't overthink 'structure'. The property has insurance.
- accountants are an unnecessary expense, just hold the properties personally and do the bookkeeping yourself with Quickbooks or something similar
- property managers do virtually nothing for single family homes / townhomes / duplexes - the monthly management fee doesn't provide for anything other that watching their phone and sending you a bill. If they go out to the property you will get a separate bill along with fill fees, ect. So instead, find a property supervisor and fill the property yourself. Great gig for a handyman to drive by the property and give them all the maintenance work that happens on the property.
- mortgage brokers...on this scale, not that critical. There is a good chance you can get as good a rate going to your local bank as they can provide
- Realtor - good part of the team, but ONLY if you have run the numbers and already know the economics of what kind of renter demographic and property. Especially useful if they can pull comps, analyze and look for opportunities.
- property inspector: critical part of the team, but lots of good ones out there.

I'd say don't worry about the team, it is just not that important frankly. The important part is understanding the investment, the rents, and the strategy, which all falls on you. You are the quarterback and the idea this is a team effort is just not accurate. There are important coordinating consultants but you run the show and need to be the market expert.
Keep in mind that RE is very asset-driven more so than buying a stock index. There is money to be made in the asset categories in any cycle, it is all about price entry point and less about cyclical factors. Even large RE companies invest this way. They just buy much larger assets $100 MM + and have a very specific business plan to maximize the asset value.

The 'team' aspect of real estate is less critical on the scale of acquisitions you are talking about realistically.
- lawyers do very little on small transactions and are too expensive to help with due diligence. Don't overthink 'structure'. The property has insurance.
- accountants are an unnecessary expense, just hold the properties personally and do the bookkeeping yourself with Quickbooks or something similar
- property managers do virtually nothing for single family homes / townhomes / duplexes - the monthly management fee doesn't provide for anything other that watching their phone and sending you a bill. If they go out to the property you will get a separate bill along with fill fees, ect. So instead, find a property supervisor and fill the property yourself. Great gig for a handyman to drive by the property and give them all the maintenance work that happens on the property.
- mortgage brokers...on this scale, not that critical. There is a good chance you can get as good a rate going to your local bank as they can provide
- Realtor - good part of the team, but ONLY if you have run the numbers and already know the economics of what kind of renter demographic and property. Especially useful if they can pull comps, analyze and look for opportunities.
- property inspector: critical part of the team, but lots of good ones out there.

I'd say don't worry about the team, it is just not that important frankly. The important part is understanding the investment, the rents, and the strategy, which all falls on you. You are the quarterback and the idea this is a team effort is just not accurate. There are important coordinating consultants but you run the show and need to be the market expert.
Thank you again Matt - Your tips and advices are very valuable.
I do agree that it is all about price entry point.

The cycle factors and economics trends, in my view, should help me to follow up the key indicators to target the right price entry!
We make more money on the buy ! right! The cycle taught us that there is seller's market, buyer's makers and blanced market. By looking into the right cycle through many indicators, we have a good idea that the buyer's market is the best opportunity to move on and buy the RE asset with a discounted price entry ! This is my take about this step.

Regarding the teams tips, I should focus and network more with a great realtor and property inspector to start building a solid and valuable team. I think mortgage broker would be the third in the list!
 

mirandasd

New Forum Member
Registered
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Thomas Beyer

Senior Forum Member
REIN Member
How much money do you have to invest ? Assuming an avg house in Ottawa is $600,000 or more you will need 20% down plus closing and holding costs, so $130,000 minimum. You got that, or will shortly ? If not start with a 1.2 duplex or townhouse, maybe for $300,000 ie roughly 60 - 70,000 only required.

Do you own a home you live in ?

Start here with common thoughts on how to get started

How much are you willing to spend on a mentor ?
 

Learn&Grow_RE

New Forum Member
Registered
How much money do you have to invest ? Assuming an avg house in Ottawa is $600,000 or more you will need 20% down plus closing and holding costs, so $130,000 minimum. You got that, or will shortly ? If not start with a 1.2 duplex or townhouse, maybe for $300,000 ie roughly 60 - 70,000 only required.

Do you own a home you live in ?

Start here with common thoughts on how to get started

How much are you willing to spend on a mentor ?
Thank you so much Thomas for you advices and the how to get started link - Much appreciated.

Regarding your questions ;
- I don't have that much cash for now ! I have a line of credit cash available but not used (emergency fund in case !) I could ask for a HELOC !
- I own a house "estimated worth" 380 K and the balance to pay is around 140K

I like so much your comments on how to start a RE investment and here my takes in regards to my situation;

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

To start, I'm researching mainly the submarket of Ottawa area and I read about the pros and cons of each area and property. I was planning to start with a condo but I declined this choice for many cons such as condo do not offer the best rate of return compared to other type of property. condo does not have much of the upside in future value as other property. Instead 2 unit complex offer the best choice !

"Then spend a TON OF TIME BECOMING AN EXPERT the property type in an area."
I do many research mainly linked to economics / stats indicators of Ottawa's area - As an economist, I could leverage very well my knowledge accordingly. Again, I will keep always learning and growing ....

How much are you willing to spend on a mentor ?
It is a tricky question - Remind me how much to ask for a salary ? And frankly I don't know.
Don't like to under-value the expertise / skills of a mentor!.... Any proposition ?

Again many thanks Thomas
 

Thomas Beyer

Senior Forum Member
REIN Member
Consider to refi the house. Then you have clear cash which you need to get another mortgage !

Work on your career, too. Is it maxed out ?

Did you read my book esp the chapters
“5 ways to make money”
“buy the biggest house you can afford” and
“the cash flow myth” ?

The book is on kobo, kindle or Amazon. It’s called 80 lessons learned on the road from 80,000 to 80,000,000 and is specifically designed for folks like you. That’s $20 well spent and will likely save you $10,000 in mentoring expertise or on your next RE purchase. Based on (my) real life lessons, business lessons and real estate lesson.
 
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Learn&Grow_RE

New Forum Member
Registered
Consider to refi the house. Then you have clear cash which you need to get another mortgage !

Work on your career, too. Is it maxed out ?

Did you read my book esp the chapters
“5 ways to make money”
“buy the biggest house you can afford” and
“the cash flow myth” ?

The book is on kobo, kindle or Amazon. It’s called 80 lessons learned on the road from 80,000 to 80,000,000 and is specifically designed for folks like you. That’s $20 well spent and will likely save you $10,000 in mentoring expertise or on your next RE purchase. Based on (my) real life lessons, business lessons and real estate lesson.

What do you meant by : is it maxed out ? There is always way to improve my carrer as an economist !
My carrer is not linked directly to RE market but I'm deeply interested to follow up the RE market indicators/trends in Ottawa area and across Canada. It is super helpful.

Sure - I will buy your book from amazon. Very eager, open and very curious to read, to learn and leverage your life, business and real estate lessons. Actaully, I'm always eager to read books about Canadian RE market. The books from USA are good but not enough to reflect the Canadian RE reality!

Could I ask questions if I need or clarification after reading your book ?
My thought that I believe in : Those who achieve things and goals don't do it by accident. It's a matter of studying first and practicing second.

Thanks Thomas
 

Thomas Beyer

Senior Forum Member
REIN Member
Ask away any time ...

When the student is ready, the teacher will appear !!

Keep in mind that in theory there’s no difference between theory and practice. In practice, there is !!


Sent from my iPhone using myREINspace
 

Learn&Grow_RE

New Forum Member
Registered
Sounds great ! Much appreciated

These days, I have a brainstorming question :
Is worth it to invest to become a real estate agent to become knowledgeable about RE... For the skill and knowledge that will benefit me.
Even-though, I will never sell anything to an outside party, It will give me an unrestricted access to MLS
OR
Buying a REIN membership ?

Many thanks Thomas
 

Thomas Beyer

Senior Forum Member
REIN Member
A realtor is only a great career for sales oriented folks. Is that you ?

Better for you to buy a 1/2 duplex or a TH, rent it and learn from the experience.

Yes REIN a good group to join to learn and network .. great incubabator for folks like you

Once you know what you want to buy, in what price range, find an investment oriented realtor of which there are a few in the Ottawa area. Or just write offers but some help is in order for the first few offers.

Smart people, like aneconomist, tend to over analyze. That may be you. I have a section in the book called “ready, set, set, set, set ...” you have to GO at some point ie first write offers (which is very easy) then waive conditions (which can be intimidating). An offer is an option to buy, but an obligation to sell.
 

Learn&Grow_RE

New Forum Member
Registered
A realtor is only a great career for sales oriented folks. Is that you ?

Better for you to buy a 1/2 duplex or a TH, rent it and learn from the experience.

Yes REIN a good group to join to learn and network .. great incubabator for folks like you

Once you know what you want to buy, in what price range, find an investment oriented realtor of which there are a few in the Ottawa area. Or just write offers but some help is in order for the first few offers.

Smart people, like aneconomist, tend to over analyze. That may be you. I have a section in the book called “ready, set, set, set, set ...” you have to GO at some point ie first write offers (which is very easy) then waive conditions (which can be intimidating). An offer is an option to buy, but an obligation to sell.
Thanks Thomas for your prompt and efficient response. It makes sense!
I pretty conscience that action is the key to learn the experience - Still analyzing in my case is a great leverage/tool.
Curious to read your book !

Have a great week
 

Learn&Grow_RE

New Forum Member
Registered
A realtor is only a great career for sales oriented folks. Is that you ?

Better for you to buy a 1/2 duplex or a TH, rent it and learn from the experience.

Yes REIN a good group to join to learn and network .. great incubabator for folks like you

Once you know what you want to buy, in what price range, find an investment oriented realtor of which there are a few in the Ottawa area. Or just write offers but some help is in order for the first few offers.

Smart people, like aneconomist, tend to over analyze. That may be you. I have a section in the book called “ready, set, set, set, set ...” you have to GO at some point ie first write offers (which is very easy) then waive conditions (which can be intimidating). An offer is an option to buy, but an obligation to sell.
Hi Thomas
I just received your book from Amazon
I'm curios to read the lessons !
I'll learn and leverage my knowledge from your experiences - Awesome!
 

Learn&Grow_RE

New Forum Member
Registered
A realtor is only a great career for sales oriented folks. Is that you ?

Better for you to buy a 1/2 duplex or a TH, rent it and learn from the experience.

Yes REIN a good group to join to learn and network .. great incubabator for folks like you

Once you know what you want to buy, in what price range, find an investment oriented realtor of which there are a few in the Ottawa area. Or just write offers but some help is in order for the first few offers.

Smart people, like aneconomist, tend to over analyze. That may be you. I have a section in the book called “ready, set, set, set, set ...” you have to GO at some point ie first write offers (which is very easy) then waive conditions (which can be intimidating). An offer is an option to buy, but an obligation to sell.
Hi Thomas,
Is the email address in the Epilogue of your book still valid ? if I want to drop you some lines or a specific question !??
So far I found the first pages very interesting and inspiring for me. Sure - I will let you know why !?

Thanks,
Yassine
 
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