New Forum Member
Really appreciate you sharing all this knowledge, ThomasFrequently 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/threads/what-is-better-a-mortgage-or-a-line-of-credit.2271/
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!