Newbie to REIN Forums and Investing....

[bergerj]

Reading everything I can find including Don's book Real Estate Investing In Canada and Mark's book Investing in Rent-To-Own Property and just started looking at property. I have equity in my house that I can use for the down payment and good cash flow from my 9 to 5 job (not much debt at this time).



In looking at properties..I've started looking in Keswick as it is 1/2 hour north of where I live and seems to be a place that might have future appreciation potential. What I've found is a Townhouse listed for $239,000 (not sure yet what it will sell for but lets say $220,000) and rent is maybe $1,200. With other expenses like land transfer tax, insurance, inspection etc it is hard to see a positive cash flow if I'm financing both the down payment and the mortgage?



Can these general numbers and area provide positive cash flow if I'm financing the entire purchase or should I just consider the mortgage and other expenses as my general financial health is fine and I can probably pay of the initial down payment in a year or two...



Or maybe I should just focus on Rent-to-Own with upfront tenants.....based on other posts this might not be the time for folks to be moving to a new place unless they are forced to move for some reason?



Any advice, general comments?



Considering joining REIN but thought I'd do a bit more research and think about the best time of year to get started in REI.

 

[Nir]

As a new investor you don't want to finance the entire purchase but rather do the opposite - minimize DP and maximize LTV
Any property will cash flow (or like 99.9%) if bought cash and this includes for example Toronto downtown condos!
Based on the rent mentioned there will definitely be negative cash flow with 25% down therefore a terrible purchase unless you want to depend on value increase/appreciation to make money which reminds me of gambling or investing in stocks more than RE.
Sincerely,
Nir

 

[JoeRagona]

Welcome to the forum, the best time to get into REI is now, today ... when you are ready. Research is important and you have come to the right place.



What I would suggest is that you consider what is important to you when it comes to REI. Because you have little debt and can finance a property straight, then look at leveraging that money to buy several, building your foundational wealth (if that's what it's for).



As Nir suggested, you want to have a property that cash flow's for you after all conservative expenses are in WITH your money leveraged to the best degree.



ANY property can cash flow by putting more money in, but is that the BEST use of your money? On the other hand, you DON'T want to over - leverage either by putting the LEAST down just to get the deal, many investors get caught this way.



Take a bit of time to do some research on the investment area first, where you are comfortable, why you are comfortable. Then decide on what type of property you want to manage (ie - buy) in relation to the area, the tenant profile you are comfortable with etc. All of the answers will filter down to 4 key investment priorities:



Cash Flow

Appreciation

Tenant Profile

Area/Location/Travel Time



Of course, there are so many more fundamentals, but if you focus on prioritizing those four, it will help you decide what area and type of property is best for you.



I use this with all our clients and it's surprisingly challenging to simplify this way, but powerful as well - most people SAY they want cash flow, but are unwilling to deal with say a multi-unit and the tenant profile that comes with it as an example ... so in truth, the profile is more important to them.



Cash flow positive is VERY important, don't get me wrong, but what does "positive" mean to you in relation to all the other factors?



just something to consider.



If you would like to have a free 20 minute chat, I'd be more than happy to help set you up in the right direction.



You can email me [email protected]

 

[Thomas Beyer]

[quote user=bergerj]Considering joining REIN but thought I'd do a bit more research


Join REIN for a year or 2 .. then decide .. one mistake avoided is $20,000 easy .. 5 times the 2 year membership ..



Do a LOT more research re home purchase. Some articles on my blog, such as the early ones on "how to get started". Summary: become a specialist in one area and one property type. That takes a while to discern.



Cash-flow with 75% or more financed is very hard to find, especially when counting all costs like property management or capital costs that you will incur over a 5, 10 or 15 year hold period like new fridge, new flooring/carpet once in a while, new paint jobs every so often, new roof every 20 years, new hot water tank, the odd vacancy/non-collection.



It is a great part-time (and eventually, if you want, full-time) business whose return usually by far exceeds other investments like stocks, but also takes more time.

 

[GaryMcGowan]

Hi Bergerj



30 min from Keswick sounds like Newmarket/Aurora to me!? I live in Newmarket and if you wanted to, we could do coffee one day.

I've have focused on Rent To Own properties (check out the back of Mark's book) and I continue to buy long term hold properties.

I love both style of investments although at the moment we are really focused on buying more long term holds. Both strategies are good. RTO is a more advanced strategy as the key lies within the Tenant/Buyer.

 

[invst4profit]

http://ontariolandlords.ca/forum/index.php?sid=6c00cb48bbb3c8282e935d24dacf3d4a



http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_06r17_e.htm



http://www.ltb.gov.on.ca/en/index.htm



As a new investor you will get plenty of valuable advice on this forum to safely move you forward in that regard.

You should however be made aware of the fact that in Ontario you are entering into one of the most hostile "landlord" environments in the country.

Although you will get solid advice on how to invest you will seldom get mush advice on how to be a landlord especially in the area of difficult or bad tenants. Good tenants are great but 1 in 10 are not and all the kindness and gifts in the world will have zero impact on them. They will damage your property, stop paying rent, cause you emotional stress beyond imagination and make you think twice about whether you are cut out for this business.

Remember you may start out as a investor but the day you own your first property you are running a business.

What makes a bad tenant is difficult to explain but when you get one, as a new landlord, it will consume 3 to 6 months of your life. It is a long stressful process due to the fact that the tenants are enabled, practically encouraged, by the government to hold your property for ransom.



This is not intended to scare you off it is intended to make you aware of how important it is for you to study and learn the rules and regulations of the business you are about to undertake.

The advice on here may get you started but to survive you will need to learn what is involved in being a landlord not simply a investor.



The three links I have provided will assist you in getting started. It is imperative you read, study and understand the rules governing your business venture. They are found on the RTA and LTB web sites. The first link is a Ontario specific landlord forum that will be invaluable for you to dig deeper and hopefully provide the support you may need in the future.



Good luck

 

[bergerj]

Thanks for the information! I like the suggestion to look at multiple properties to form a good foundation and I understand cash flow is important. I'll think about the investment priorities you have mentioned Joe:



Cash Flow

Appreciation

Tenant Profile

Area/Location/Travel Time



It is a bit hard to prioritize these as they are so tied together....great cash flow with bad tenants and a place that is a couple of hours away may not be good for very long ;(



And as Nir mentioned, Appreciation is a bit like gambling if that is your only upside...especially with the talk in the media about RE and potential bubble.



Thomas I'll have a look at your blog and look at joining REIN as well as look at talking with Joe to get his feedback on how best to get things rolling. Would be nice to not make mistakes that other newbies have made in the past if possible



Gary, I live just east of Newmarket...coffee sounds great.



Thanks again for the support...I'll post a bit more once I've done a bit more research. Would be nice to hear from other newbies who are just starting out....



What research did they do?

What areas did they focus on?

How would they answer Joe's 4 key investment priorities?



Cash Flow

Appreciation

Tenant Profile

Area/Location/Travel Time



Joel

 

[briany]

Hi Bergerj,



I just joined REIN this year and have purchased several properties so far. It is important for you to set up a team of experts before you start investing. You will need to find a good real estate lawyer, mortgage broker, accountant, realtor(s), home inspector, property management (if needed) etc before buying anything. Also look for properties that have a decent cap rate (at least 8%) as it says in Don's book. Take time to go out and look at many different properties so you have an idea what's out there. Think about whether you want to purchase single family or multi-family properties. Single family will give you less cash flow but are usually easier to maintain. Multi-family will increase your cashflow and possibly your stress level as there are more things to take care of. The good thing about REIN is that you have the chance to meet many like minded people that have similar goals as you. There will be times when you may wonder what you have got yourself into but the REIN meetings help to keep you motivated. I realize you want to avoid making mistakes but they will happen despite your best efforts. The key is to try and minimize them by reading this forum and asking others to help you along the way. Of course the only way to learn is to actually buy a property and go from there. If I can be of any help feel free to email me at anytime and I will do my best to answer your questions.



All the best,



Brian Yano

investobefree



[email protected]

 

[housingrental]

Re Brian's post above - you will not find any residential property anywhere near your area with an 8% cap rate when you factor in reno costs.



There's some nice places around Keswick for cottage's. Get something on the water for personal use if you want to buy in that area.

 

[JoeRagona]

Hi Joel,



That's why TRYING to prioritizing them is important. It's too find the ACCEPTABLE BALANCE for YOU!



If you want to dive into this further, I'd be happy to schedule a 20 minute chat with you to answer all your questions as best I can.



[email protected]