Landlord Education

If you’re visiting this site, you most likely found us via a search result. Although I haven’t actively posted here since 2013, there is still plenty of information for landlords buried in the 100’s of posts and articles here.

However, if you’re looking for specific information about the Eviction Process in Alberta and want to know more about either evicting tenants or simply your rights as a tenant, you should visit my site dedicated to information about the eviction process in Alberta

Alberta Eviction Information

If you’re more interested in information about being a landlord, I also have another useful site you can visit called The Educated Landlord.

Thanks for taking the time to stop by.

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It Starts At The Bottom

The Kick Real Estate May Need

Do you know where the turnaround in the housing market starts? It starts at the bottom. I’m not referring to the slums or the starter housing market, but with the rush for rental property and I have seen the change firsthand over the last six months.

The number of people moving here for work is actually rather amazing and since I provide short term furnished rentals for people moving to Calgary for work, I can see the how the market has changed over the last six months. In the early spring, a typical online ad for me would get 30 or 40 views and a call or two.

Prior to spring, many of my properties ran at only 50% occupancy, it was simply brutal. Looking at the rental market now though Continue reading

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Buy Buy! Wait I meant Sell, No Wait Rent Instead!

I’m Frustrated With Real Estate

This Real Estate market is killing me. Anyone else feel the same? Every time things start looking better in the world, up pops something to knock a table leg out and start the worldwide economy teetering once again. And this has been going on since 2008!

As soon as these fear headlines hit the major media outlets, everyone starts hunkering down expecting the bottom to fall out everywhere. And maybe it will, just not around here. Now I’m not saying it won’t affect our local housing markets, I’m just pointing out it won’t be for economic fundamentals but rather for F.U.D.

If you aren’t familiar with F.U.D., it’s Continue reading

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Paint – Why It’s A Landlord’s Best Renovation Bet

Cost Effective Rental Renos With a Big Payback

There’s something about a nice fresh coat of paint. It can help revitalize a property after just a few hours and yet, it’s something many landlords just don’t do often enough.

The problem is, we become used to the flaws in our rental properties and often don’t see the little defects that exist or we rationalize them as character. That dent in the wall is where little Johnny’s skateboard stopped, after it went careening down the stairs. Or the scratches are from the tenant’s dog, Lucky, standing up against the wall when she’s trying to peer out the front window.

Too often, we just default to “It’s just a rental”. This type of attitude can not only make your job harder when it comes to filling vacancies, but it also can cost you money as it takes longer to get tenants in and often ends up with lower rents.

The problem being, potential tenants looking to rent your property see the defects as flaws in the property. The skateboard dent is a damaged wall. The scratches under the window are neglect of the property and indicators there may be more problems they cannot see.

This is what you, as the owner, have to start recognizing before you list or rent your property. Whether it’s hiring professional painters to come in and do the work for you, bringing in a handyman or whether you need to dedicate the necessary time to get the job done yourself, you have to make this a priority if you want to rent your property quickly. A new coat of paint really can make a world of difference to a potential tenants first impression.

Once you have decided to take action and paint, and whether you are contracting out or doing the work yourself, your next challenge is choosing your paint colour. The proper paint colour can made a huge difference when it comes to the first impression of a property and this is where the obligatory warning about colours comes in.

Renter white is not a colour for your rental properties walls. It makes a great accent colour, but as a primary paint colour its turns a property into an institutional, cold bleak environment, which drives the majority of interested parties away. It should also go without saying fluorescent or extra bright colours should also be avoided. They may be cute in the eyes of a 12 year old, but they will put off prospects hoping to use the room for an office. You need generic neutral colours that are suitable for anyone.

To help you choose a proper colour, there are several places to find assistance. A good paint store can be extremely helpful in assisting you in finding some nice neutral contemporary colours for your property, so be sure to ask for assistance. If you are hiring contractors to paint, they can often be of assistance as well.

Or if you want to take it to the next level, you can also bring in an interior designer for a colour consultation. This would be more advisable if you are doing a complete repaint of the property, but is often well worth it. An experienced designer can help you choose colours that complement the home and help highlight its best features.

Whichever route you choose, paint can be a great start for you to update and renovate your property to the next level. So before you list or rent your property, take a close look at those walls and think about how some fresh paint will help improve the look.

Real Estate Investor Hot Tip

We use the same colour in all of our rental properties. We order it from the same place every time and we buy it in five gallon buckets. This gives us a consistent tint, saves us a few dollars by purchasing larger sizes and we never have to wonder what colour the property was painted.

It makes it easier and simpler to patch minor damages and when it comes to repainting an entire property, we often have to only do one coat. This saves more time, more money and gets the property back on the market faster. Win, win, win.


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Breaking Down The Headlines

Calgary Real Estate/Business Headlines

I haven’t really touched on any of the recent headlines many of you have been reading lately, so now is probably a great time to break down some of the stories for you. There are three specific stories I want to touch on, so let’s get started with the big jump in sales for August!

 MLS sales in Calgary saw a huge increase of 22.1 percent compared to August of 2010. However, the actual prices only increased by just 2.2% from that time. What this tells us is that while the market is still a buyer’s market, where obviously people are price conscious, the amount of activity is heating up.

Sellers need to be very price conscious if they want to see their property sold quickly and those that are still asking premium prices are finding their property is just sitting there. More and more people are coming back to Alberta for work and this trend that won’t disappear any time soon.

This is partially what’s spurring the extra sales, but more Albertans are also becoming more comfortable with their job security and are willing to look at upgrading or becoming first time buyers while the market appears slower. Basically, they are comfortable, As the economy continues to pick up steam locally, watch for additional pressure to be put on first the rental market and then the buying market eventually leading to values increasing for property.

Oil heading for $130 a barrel is another recent headline that has caught people’s attention. In my opinion, this is quite optimistic and really wouldn’t be good long term for Alberta. Our biggest trading partner, the US, would essentially collapse if prices became that high and even the growth of Brazil, India and China wouldn’t offset that enough for us.

This doesn’t mean oil won’t still increase and oil companies are handsomely profiting already. When it does increase, watch for additional large project announcements from big oil companies and even more demand for workers across the province. This will put more pressure on both the rental markets and the sales market in a situation very similar to 2006, although not quite as crazy.

The final headline I want to touch on is the recent announcement of a potential condo boom coming. While this isn’t entirely implausible, we are a long ways away from it becoming a reality. The condo market was overbuilt during the last boom and the market still has a long ways to recover.

Many “investors” became stuck with units during the boom and when they found they couldn’t sell them they turned them into rental units while they waited for the market to recover. Many developers, who saw the market stall, also delayed their projects as they too wait the recovery of their market. Once the condo market does start to pick up steam, both of these groups will suddenly start moving their product onto the market again, creating a new glut yet again and stalling any potential boom.

Add in the new announcements for additional towers being built near and in downtown and it becomes quickly apparent that we will see to much product on the market for this section of the housing market to really boom. Now I can never say it won’t happen, but I’m quite sure it won’t happen for several years, which is another reason condos are way down on my list of potential investment products.

So that’s my take on the current state of the headlines out there, what are your thoughts?

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Financing Your Rental Property – Variable Rate Rocks

Cash flow is definitely king when it comes to owning a rental property, but what can you do to ensure you receive the maximum amount of cash flow out of your rental property? You can always start by looking at your mortgage.

There will always be an ongoing debate amongst mortgage holders regarding whether variable rate mortgages are the way to go or a fixed rate mortgages is better. I personally have both, but my preference has always been Continue reading

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Financing Your Rental Properties

Rental Property Financing Tips

With the recent announcement from the Bank of Canada that the prime rate isn’t changing and isn’t likely to change in the very near future, I have a nice little segue into today’s article about financing your rental property.

When you start out, it really doesn’t seem like much of a problem. You go to your bank, you get pre-qualified so you know how much you can afford and away you go. You are now ready to go find that perfect rental property and make your purchase. Except for a few minor little details, that can impact you severely later.

Now just to clarify, if you are simply looking at one or possibly two rental properties, it’s not quite as hard or problematic if you make mistakes.  It’s when your aspirations are to build a portfolio of properties that early financing mistakes can hinder you.

Rental Financing Mistakes

One of the first financing mistakes beginning investors make is dealing with someone who doesn’t understand rental properties, your goals of multiple properties and what your long term plan contains. Mortgage brokers and bankers who deal with property investors regularly, can help make the process easier for you and connect you with the lenders who will be able to help you long term, rather than just get you the mortgage you require right now.

The Ratio Game TDS and GDS

When you initially start purchasing properties, it’s quite simple. It comes down to your current debt loads and some simple formulas to determine your Gross Debt Service (GDS) ratio and your Total Debt Service (TDS) ratio. These formulas help determine what you can afford to pay based on potential costs of the property and on your current income versus your expenses. The problem is many lenders use these formulas differently and these differences can make a huge impact.

In the case of rental properties, one of the biggest factors affecting your debt servicing is the incoming rents from a property. In an effort to protect their interests, many lenders take only a percentage of the total incoming rent rather than the full amount. For some lenders this percentage can be as low as 50% of the actual rent and obviously taking away 50% of the income from a property can have a huge affect on your ability to borrow.

If you have a projected rental income of $2,000 from a property and you are only allowed to count $1,000 of it, you can see how this can cause a problem with your ratios. Multiply this by several properties and you will require a substantial income outside of Real Estate to keep your ratios at an acceptable level to be able to continue purchasing more properties.

Bankers and mortgage brokers experienced with investors can ensure you are dealing with the right lenders to keep your dreams and goals on track, especially if your aspirations are to continue buying. Brokers also have the advantage of being able to provide you with multiple different lenders, where as banks require you to stay within their products. This brings up another potential dilemma for an investor.

If you are looking at multiple properties, dealing with one bank typically brings you to a halt after three properties. Depending on the lender, this is where banks often limit their exposure with you and subsequently cannot offer you mortgages on a fourth or fifth property. Suddenly you have to find another bank or broker to deal with and start building new relationships if you want to continue buying.

These are just a few of the caveats when it comes to buying and financing rental properties, so it’s worth your while to find someone who specializes in these transactions. It can make the process easier for you long term and help you avoid many of the pitfalls inexperienced investors initially run into.

We haven’t even explored Variable Rate mortgages versus Fixed Rates, understanding mortgage payouts and terms of mortgages or any other fun investment issues that end up being nice surprises many years after the fact. The important part is without guidance at the beginning, many of these end up being surprises and often unpleasant ones.

Do you have some mortgage stories or advice you can add to this? I would love to hear them, so leave a comment.

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How Much Is The Rent?

Crucial Steps To Evaluate  Potential Rental Properties

I still have a few more articles up my sleeve to help beginning investors and today’s topic is “How Much Is The Rent?” It’s funny, or is it annoying, how often you will get this question. Usually they find you via your ad which should have the price right there, but for some reason they would rather ask you. Which leads me to the real point here, you need to know the rents in the area before you buy the property!

Understanding Your Rental Markets!

To properly evaluate a rental property, you need to know what the average rents are for the places surrounding your potential property. This can be quite a tricky proposition if you haven’t been paying attention and is a key reason why many seasoned investors target specific neighbourhoods.

By targeting one district or several adjacent neighbourhoods, it gives you a much better understanding of that areas local rental markets. At the same time, it helps identify both upper and lower rental limits for the area. Hopefully your target area is also heavily populated with rentals as it can make determining average rents quite a bit easier.

Now some potential landlords think it’s best to avoid areas heavily populated with rentals, but they are missing the point. They look at it as being to competitive an area, but perhaps it’s wiser to instead focus on the extra prospects already living there that are looking for a landlord just like you!

Once you have determined the approximate rents, you can use these numbers to determine whether the property has the potential to be a viable profitable investment. It can also tell you whether it may drag you into a negative cash flow situation that drains your bank account each month and whether you need to avoid it.

Cash Flow Is King

Cash flow needs to be a major concern for new investors, so don’t cut corners confirming local rents, as this is your main evaluation tool! During 2006 and 2007, appreciation was the cure all for properties that broke even or lost money, investors could afford to accept negative cash flow on a property knowing they could sell it in a year and make up their losses in increased equity.

However, when the market dropped in 2007 and because it’s taken so long to recover, this strategy cost many investors their properties, their credit and for some their entire life savings. Meanwhile, investors that bought based on cash flow have thrived.

So how do you determine local rents? You can check out the competition online via the local rental sites or by simply entering a description of the rental unit and the area into Google. This will usually return the top rental sites for that area and can give you a great starting point. Or there are also the newspaper ads you can check, although more landlords are moving to online ads as they allow photos and lengthier descriptions.

The trap you need to be cautious of is many of the units that are listed are units that people don;t want and they can provide a false impression of the market. So it’s not the ones that don’t rent that you need to take note of, it’s the ones that appear and then come down reasonably quick that indicate what prospective tenants will pay for rent.

By understanding these price points you a have more accurate indication of the market and acquiring this knowledge can often be a three or four week process of watching the ads. Which again is why targeting a specific market or neighbourhood makes the process easier and allow you to make faster decisions as you have already done the homework before and if you already have properties in the area, you have one unit to compare immediately.

Another important part of checking out the competition is it establishes what you need to do to set yourself apart from other landlords. If other landlords in your target area aren’t updating their properties, budgeting for renovations to modernize your new property will set you apart from the other landlords and the other properties. Even minimal renovations in some areas allow you to charge a premium for your rents versus other properties and often allow you to attract premium tenants for the area as well.

To quickly recap, before you buy an investment property, you need to determine rents in the area so you understand the potential cash flow of your property. You also need to know your competition. By doing your diligence and understanding these factors, you can take steps to stand out from the crowd and position yourself in a place to maximize your investment and reduce disappointment.

Are you already taking these steps, or have questions about determining rents? Or do you have some suggestions to help other new investors determine local rents? Leave me a comment and tell us your thoughts!


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Creating Multiple Streams of Rental Income Goodness

My Favourite Type of Rental Property

In today’s article about investing in Real Estate, I finally get to talk about my favourite type of rental investment, investing in single family homes. So why is it my favourite? It’s all due to the multiple streams of income.

In previous articles I had addressed condos and townhouses as investment options and although slightly more affordable, the biggest negatives is you only have a single rental income. If the tenant leaves, or worse stops paying, you have no money coming in to cover your costs and until you get that tenant replaced, all the costs are completely out of your pocket to operate the property.

I also discussed buying duplexes. These potentially get you into two streams which helps make the process easier. Of course, from there you also have triplexes and four-plexes which can provide you with multiple income streams, but now with higher costs! That is why Continue reading

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The Best Type Of Rental Property To Invest In Is….

Investing In Rental Property

Can you believe we are already on our fourth article in this series of Real Estate investment articles? This post will cover my thoughts on what I believe are the best type of rental properties to invest in. Realistically, there is no definitive answer to this as it can vary depending on your needs and requirements, but hopefully I can make a nice argument for my decision!

We’ll start the ball rolling by talking about condos. Some investors feel that investing in condos is the best opportunity going. They have minimal maintenance requirements, no worries about yards and often even the ability to become part of a rental pool to help lower the risk of vacancies. They are also one of the cheapest ways to get into property investing as condos tend to have lower starting price points and require smaller down payments because of this. Which brings me to rental pools.

Rental pools are often an enticing feature for new investors who are just starting out. If you haven’t heard of rental pools before, they are simply a collection of condo units in one complex that are managed for you by the pool manager and all profits (and losses) are pooled together.

So now, instead of losing 100% of your costs when your unit is vacant, the cost is split across all the units in the pool. Conversely, instead of receiving all the profits when your unit is full, you share it with the other units. It ends up being a great way to reduce your risks, but it also really cuts into your potential profits.

These can be a great option if the property you are buying is a recreational property with shorter rental terms and is being run a distance from you, like in Scottsdale or Invermere. Personally, I would stay away from both rental pools and condos. When we first started they looked incredibly attractive and a fairly simple way to enter the market, but over the years my opinions have changed. Condo fees and condo boards have caused me so many issues over the years that I have found other types of properties to invest in, that are much more profitable with far fewer headaches.

Another common focus for investors are townhouses. I personally know property investors who have accumulated a considerable amount of wealth from buying townhouse after townhouse after townhouse. They’ve actually built their whole business model on them. The positive again is the lower cost of entry when it comes to purchasing properties. Townhouses are typically going to be more affordable to buy for new investors.

However, depending on what type of units these are though, you often end up with the same difficulties associated with a condo, that’s being the monthly fees to cover common areas and costs and condo boards to deal with. Fees that directly eat into your profits and that you have almost zero control over.

If you can find units that are not part of a condominium plan, you may be slightly better off, but I feel there are even better options available. The big plus is they are one of the most cost effective places to start. I have owned multiple townhouses over the years and the benefits are, they typically provide nice cash flow as they are not too expensive, but the problem is when they are vacant, they drain your bank account as they only have one revenue stream, just like a condo.

Which leads me to duplexes, triplexes and other various plexes. Finally, we are talking about the properties that start to show you the joys of multiple streams of rental income! With a plex, you suddenly have two or more units that you are renting out, so now if one unit is vacant instead of being completely out of pocket to cover expenses, a portion is covered by the other unit(s).

In the case of a triplex or four-plex, the first two units may actually cover all your costs and units three and four can translate into pure profit. So now if you have one vacancy, it doesn’t drain your bank account, it just doesn’t increase until you fill it!

While it’s true they cost more, the extra overall revenues more than offset this. Again, instead of a single rental income seen in a condo or simple townhouse, you receive two or more incomes depending on the property for much less than double the cost.

Granted, this also increases the opportunities for tenants to have conflicts and may result in extra work in managing the properties, but the benefits definitely outweigh these slight hindrances. Of course, when purchasing these properties it’s always advisable to make sure it is properly zoned for this as many of these units were converted to multiple units illegally, which can cause issues down the road.

Now the downside of buying plexes is that when it comes time to sell them, you are typically just limited to selling to other investors. Though there is never a shortage of investors buying rental properties, it is definitely a much smaller market. Oh and we tend to be a much more demanding/cut throat group, so whatever your selling price, you can expect a fun bit of negotiating.

This now leads me to my favourite type of Real Estate investment property, the single family home. I have so much to talk about this type, that it requires its own article, which you will have to wait until next week to read!

Tell me your thoughts!

Shout out to us below!

So what are your thoughts? I know many of the readers here have investment property already, while some are just learning the ropes (and others are eagerly just waiting to read more stories about my unique tenants and have no intent on buying property!). So why don’t you share some of your experiences. If you are having great success with condos tell us what’s working for you, if townhouses are your thing tell us why! I’m looking forward to your comments.


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Choosing Great Investment Areas

Choose a Great Investment Area

Not Necessarily a Great Area

We are carrying on with our series of the basics of investing in Real Estate this week and in this article, we move on to finding great investment areas to purchase in. Last week we talked about creating a strong team around you to make the process easier, but without knowing where to buy, you can grind to a halt or worse yet, end up buying in areas that are less profitable and/or more problematic .

Determining what district, town or area to invest in can be the biggest challenge for many initial investors and the biggest issue is often emotional rather than logical. The emotion in this case is typically a bias towards perceptions of what that area is like versus what the potential is longer term. A common area this pops up in, is a bias towards many of the rental districts and this can be both a fatal flaw and missed opportunity.

After all, if you are buying a property you intend to rent out and hold long term as an investment, wouldn’t it make the most sense to have it located in an area where there are plenty of renters looking to rent? There is already plenty of demand there and you already have many potential customers just waiting for you to provide a safe reasonable home for them, so why not cater to those customers?

Yet instead, many new investors purchase a property nearby them to start, in predominately owner occupied areas, and wonder why a) they are having a hard time filling their rental and b) their tenants rotate through every year as these types of tenants tend to go buy their own properties more often. Sound familiar?

So step one is determining these rental areas, but it doesn’t end there, as not all areas are equal. Which leads us to step two.

What’s The Upside?

Step two is determining which of these areas have the most upside. Long term you make money on property from three sources, 1) cash flow, 2) paying down the mortgage and 3) hopefully appreciation. By completing your homework on an area before hand , you can discover areas where opportunities for better or increasing cash flow and appreciation exist. This especially holds true, if you are look at the longer term outlook for an area.

Great examples of this would be areas near pending transportation changes or areas which are currently undergoing transportation changes. Areas where perhaps a new interchange is being created, connecting a formerly secluded area with easy access to a main thoroughfare. Or perhaps the extension of a train or subway system to a new district which previously was only served by bus? These features can be extremely attractive to potential tenants and help increase the values of those districts more than other areas as they suddenly become more desirable.

Another example would be districts currently or about to go through change. These would be areas going through gentrification or revitalization, usually due to their locations. These are districts commonly near city centers that although older, have started to become attractive due to their great locations and proximity to services.

It’s quite common place to see headlines in the news and in the papers telling us of these upcoming changes months and even years in advance and this can be the equivalent of insider trading to an observant investor. As these districts go through their various changes, they become more desirable and with that rents increase and appreciation becomes higher than the norm, creating a great environment for you the owner.

These changes and increases seem to often catch many people by surprise, but by doing your diligence they can be quite easy to see in advance. Do you know of any areas that will suddenly have access to a new ring road whee there was nothing before? Areas close to new hospitals being built? Districts soon to receive train services where there as none before? I’m willing to bet you know of these areas, but perhaps overlooked the possibilities or more accurately, the potential.

A couple caveats can accompany this though.  There is a vast difference between proposed changes and approved changes and these changes may initially be detrimental. With projects like trains or interchanges, there may be extended periods where the construction causes initial traffic issues and congestion making the areas temporarily less desirable (which also may make them even more affordable at this time!).  This is where a longer term vision allows you to see the future growth and potential that’s coming versus the current turmoil.

When you have a longer term vision for properties and districts and start to think in terms of multiple years or decades versus days, weeks and months you will see more opportunity. Simply put, if you are planning on investing in Real Estate it’s a long term buy and hold strategy versus the day trading mentality that will provide you with long term wealth.

Next week I will move into the various types of property and what I feel make the best investment opportunities. SO I will touch on condos, townhouses and single family dwellings. Until then, if you have some feedback or thoughts for me, I would love to hear them. Additionally, I have added Google’s new +1 option to the site, so if you like any of the posts, be sure to click the icon at the beginning or end of each post to help spread the word. You don’t have to be a Google +1 member to click, so don’t hold back, please.

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Creating Your Real Estate Dream Team

Steps To Becoming a Great Real Estate Investor

This is the continuation of a series of articles about being a Real Estate investor and this week we tackle your Real Estate Dream Team. The premise behind creating a dream team to work with, is to maximize the strengths of the people around you to make your job easier as an investor.

While it’s important for you to have a basic idea of the process of buying a property, getting financing on a property, legal implications and even renovations on a property, you simply do not need to know the intricacies of all of these processes. This is where your team comes in.

By surrounding yourself with experienced, knowledgeable professionals, you leverage their experience to increase your own. The question that pops up though, is where to find these team members? It would be handy if they all met at a certain bar or coffee shop on Tuesday at 7, but if it was that easy, anyone could do it!

The quickest route to finding them is to become a member of your local Real Estate investment groups and network with other members about who they use and recommend, from here you can create a short list of potential professionals you need to meet and interview. Or if you already know other investors, why not talk to them and ask for their recommendations.

An interesting side note, it’s far better to extol the virtues of your favourite team members whenever possible, than to keep it a secret. By providing them with additional clients and opportunities to contribute to their success, you not only improve your relationship, but also help ensure they succeed along with you. I never could understand why some people felt they needed to keep their contacts a secret, as it actually penalized their partners rather than helped them grow.

Once you have your shortlist, it’s imperative to talk to them and preferably meet them in person. If you are going to be working with these people and trusting them as partners in your business, you better be sure you like them and trust them. This can only be accomplished by actually talking to them and finding out if, you are compatible. Think of it as a first date.

If the people you have found are good, typically they are quite busy as well, so respect their time and make sure they know why you are contacting them and why you want to meet. From there it’s a matter of going in with some pre-prepared questions. Now these questions vary depending on what field the particular professional is in and how you will be dealing with them, but there are some you can ask any group.

First would be, have you worked with Real Estate investors before (common sense here, if you were referred by an investor, well …..). You just want to be sure they do work with investors, are currently working with them and tend to have longer relationships with them. You don’t want to find someone with a high turnover rate of these clients as it is an indication something isn’t working.

Second, would be, are there any of these clients I can contact and talk with? Again, if you were referred by one of their investing clients, you are already partially there, but if possible, it’s great to reach out to others and find out more, plus you can make some new contacts!

Third, what is the hardest part about working with investors? This one is very valuable as it helps you understand their concerns and puts you in a position where you can be mindful of the potential problems they have to deal with. By understanding issues they have run into before, you can prevent or minimize them occurring in your relationship with them, which goes a long ways towards growing a strong relationship!

These basic questions should give you enough insight into whether they are someone you want to work with and would enjoy working alongside. Ideally, you will have additional questions related to each industry, but this will get you started.

Next week I’ll go into basic rental properties and break down the different varieties. If you have questions or comments, be sure to leave me a comment!

Investors Perspective

You are only as good as your team, so why would you cut corners? Imagine building a house and hiring the cheapest contractors you can find and telling them to just go build something for you and as cheaply as possible. You can imagine the corners that would be cut and the mess you would be left with.

Yet it happens every day with Real Estate investors (and house builders too actually, but that’s a different story!). Any money you save eventually comes back to bite you. The discount Realtor may have cut corners and not accurately measured the property you just sold leaving you open for a lawsuit, along with the Realtor. The family lawyer  who doesn’t really understand Real Estate, may not have followed through with all the details leaving you with surprises on the title years later, potentially costing you a sale. Starting to get the picture?

What do you want to be remembered for? All the lawsuits because of mistakes along the way, or the string of successes you had that your support group helped you achieve?

Just to close off, here’s another source for finding professionals to work with. Ask your current team members who they recommend. If they already have other people they like working with and recommend, it can make the process even easier for you to find the people you want to work with.

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Becoming a Real Estate Investor

Getting Started With Rental Properties

Have you ever thought about owning a rental property? Just a single property that you can use for cash flow, perhaps make some money from appreciation and maybe long term use it as part of your retirement package?

Well that’s how we initially started, although we never intended to limit ourselves to a single property. Our goals were a bit more ambitious and we wanted to buy and hold as many properties as we possibly could and then to use the cash flow to create the life we wanted now, while the equity built for our retirement later.

It’s been a nice little plan that received a huge bonus during the massive boom years of the mid 2000’s and then provided us with a pretty significant kick in the pants during the last several years, but overall it’s worked out pretty darn good. Of course, with hindsight, there are many things we would change and do slightly differently than we did (like selling almost everything at the peak!), but hindsight is just part of gaining experience.

So now that I am armed with this experience and these insights what can I do with it? One route has been for me to write about it and provide stories and experiences to readers here and on various other web properties I provide content to. Information that usually tells of these experiences, but never gets down to the basics of how to get started, what types of properties to look for, what issues to be aware of and generally how to get from A to B.

Over the next few weeks, I’m hoping to change that. I’d love to say this will be a three part series, but I’m not sure if I can cram it into three parts, even if I just touch on the basics, so for the next little while I’ll just create a series of articles for you that will just walk you along the pathway towards purchasing a rental property.

To get started, let’s talk about some of the basics and some of the topics I will go over. Perhaps the first realization for many investors is they cannot do this all on their own. If you are just planning on purchasing a single property, it’s a little bit easier, but if you plan on purchasing multiple properties, you need a strong team of people around you to make this work. I’m not talking about employees; rather I am referring to the people who will help you get to where you want to be. These would include Realtors, Mortgage Brokers, Lawyers and Contractors.

The biggest mistake that usually occurs with new investors is they choose their partners or team members poorly. You may already have a great residential Realtor. One who helped you buy your home even, but do they know about zoning or other issues with rental properties? Having someone experienced in this can provide you with great leverage and advice for picking winning properties and avoiding money pits or future problems.

Then there’s financing. Many people simply deal with their bank for their personal mortgage, but the majority of banks don’t understand investors. If they manage to put you into the wrong mortgage now, this can impact financing a couple years down the road and make expanding your portfolio much more difficult and often more expensive for you. This is where having a mortgage broker who is experienced with dealing with investors can point you to the right path that will allow your portfolio to continue expanding.

Choosing the right people to work with can make a huge difference for you and you really need to choose wisely. This can even include finding the right mentors to advise and guide you along the way. It’s all part of the learning curve as you move along. Upcoming articles will go a bit further in depth with the people you want to make up your team and from there we will move along to other fun topics like financing, choosing properties and even renovations.

If you have specific questions that you would like to see answered in these articles leave me a comment and let me know. And as always I would be very interested in your thoughts on these posts, so feel free to leave me a comment because often the questions or points you make can help others.

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Lessons From The Real Estate Boom

Surviving a Real Estate Boom

Real Estate Booms Don't Last ForeverIt was pretty heady times during the last Real Estate boom in Alberta. The economy was cooking, companies were hiring anyone who could breathe (and some who shouldn’t be breathing!), the malls were stuffed with shoppers, shiny new pickups, BMW’s and just about every other vehicle abounded. For those of us in the Real Estate market, values seemed to jump thousands of dollars in just days and money was being made everywhere.

Everything was looking so good; it looked like it would never end. Then, like anything else that was too good to be true, the good times suddenly ended and many people in the province had to start cashing reality checks. And some of these checks were quite painful!

When the economy stalled, jobs were lost, homes were lost, money became tight and people went through some belt tightening. It felt like we went from one extreme to the other. Of course, what people in Alberta don’t realize is how lucky we were, as other regions of the country were hit much harder than us.

Anyway, now it seems we are through the worst of it and we have so many positives in front of us, perhaps it’s time to look at some of the lessons we learned from our last boom, before we start repeating our mistakes.

Booms Don’t Last Forever

Booms Don't Last ForeverFirst and foremost, and this is the most obvious, booms end. Booms are cyclical in nature. It never looks like they will end as they are happening, but sustained growth can only last for so long before it needs to reset. Unfortunately by the time it hits this reset state, its’ too late for many people.

For a Real Estate investor the reminder from this is to be conservative with your evaluations and don’t base your business growth only on appreciation.   The reminder of this is the latest large local Real Estate investment company that is currently under investigation by the Alberta Securities Commission.  They advertised huge returns on investments and it was a model that couldn’t be sustained. In the end, it appears most of their return estimates were based on appreciation and not necessarily good business.. In the end, it appears millions of dollars of investment money has been lost by investors. The big question now is whether it was due to  fraudulent actions or not.

Have an Exit Strategy!

What's Your Exit Strategy?The second lesson many Real Estate investors miss on is creating an exit strategy. Again, when things are going well, it’s easy to exit from properties, you just sell it as the market is going up and make some money, but what’s the plan if the market changes?

The last several years left many investors in tough situations. Many of them over leveraged, some stuck stuck in ugly mortgages with horrible payout options and often with no plan to move forward. By creating an exit plan before you go in, it can make riding through tough times just a bit easier.

Create Great Relationships

Build Great RelationshipsThe final lesson, at least for me, has to do with relationships. When times are good, the number of great relationships you have can be overwhelming. Everyone wants you to work with them and everybody is eager to get things moving because it’s exciting and it’s an opportunity to make money.

When times aren’t so good, it’s amazing how suddenly people disappear and how attitudes can change. We were fortunate to have built a very strong team of realtors, lawyers and mortgage brokers around us that have all stuck with us from the good times to the bad. This doesn’t mean we came through the downturn unscathed though.

I’ve also been exposed to various business partners who we started with, prior to the downturn, who have ended up being less than stellar over time. The single important lesson from this is any partnerships or Joint Ventures that involve business and/or money, need to be properly written out, documented and signed by both parties. This documentation has to cover the good and the bad and should also include how to dissolve the agreement, in effect it’s a business pre-nup.

Whether it’s a contract, a business plan or any variation of the two, it can help provide you with a bit of protection if things do go sideways or if people’s ideas and motivations change.

Investor Perspective

I covered most of the perspectives from an investor’s standpoint above, I’ll touch on the viewpoint from a want to be investor here and a lesson they should be aware of.

This last lesson is jumping on the bandwagon. This is the one that hurt the most people in the last boom and is seen in every boom in every market and business. These are the people who bought the stock at it’s peak and lost when it dropped 50% the next day, the people who  jumped into the gold market when it broke $1,500 and watched it drop to $1,400, the people who bought property at it’s peak in 2007 and then saw it drop in value.

So many people were making money so quickly and so easily during the Real Estate boom, new investors were jumping on the bandwagon without understanding the basics or knowing where to begin and ultimately getting caught in very scary scenarios. Without No More Bandwagons!having an understanding of the first lessons (booms don’t last, have an exit strategy and create great relationships), the bandwagon game can become very dangerous as you are playing with real money.

To get into the Real Estate investing game, create a plan for yourself and then stick to it. Spend time learning how the basics work and then move forward armed with some knowledge. Don’t just jump on board because everyone else is making money.

What are your thoughts about this, were you ready for the boom? Did you build great relationships? Did you have an exit strategy in place? Leave me a comment about it and tell me what other lessons should be learned from the boom.

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Condos – The Good, The Bad and The Ugly

Condos As An Investment

apartment style condominiumsIt’s been a while since I’ve written about condominiums and my thoughts about owning them personally really haven’t changed although I do understand why they are attractive to so many people. They provide a lifestyle perfect for people just starting out.  They allow people to spend lots of time away traveling or at work and the yard maintenance and shoveling all gets taken care of by someone else.

Many of the nicer places have additional facilities like pools, gyms, tennis courts and group rooms. You have to attend a few meetings a year, but the majority of the work most homeowners have to deal with is taken care of for you. This is the good.

The bad is a bit less glamorous. This can be the prospect of having to deal with the condo board. Now I realize not all boards are like this and I apologize for the great ones out there, but I’ve been on some condo boards filled with the wrong people. There is nothing like bumping into a control freak condo board president who may be a good business person, but has little concept on how a building needs to be maintained and how reserve funds work.

Perhaps there needs to be an aptitude test created by condominiums to see if someone is suitable to be on the board? It could be a huge success for someone and could relieve some headaches on many boards!

One other concern with condos that is a long term bad issue is condo fees. You often have one group of owners who want to keep condo fees down while you have another group who understand condo fees have to increase to maintain services levels for the buildings. Short term it causes stress and disagreements, long term it causes very expensive cash calls or repair bills when the reserves start to dwindle. This can be very bad and leads me to the ugly.

The ugly was some recent news in Calgary about a condo that had huge issues regarding the building itself. The builder claims poor maintenance as the culprit, the owners claim substandard workmanship and rubber stamped city building inspections. In the meantime, owners are facing special assessments between $50,000 and $187,000 per unit to get the repairs done.

We’re talking a total repair bill right now of $5.5 million on a building that was only built in 2002; it’s just ten years old! Now that’s ugly.

The positive to be taken from this is that there will likely be changes to building codes and builder’s warranties and liabilities, but these will only apply to new buildings and won’t help current condo owners. There are not a lot of positives to be taken from this ugly, but it should be a huge reminder to buyers to be aware of what they are getting into.

If you are planning on purchasing a condo, it can really pay off to do some homework on the developer prior to purchasing. Some simple checks online using Google, checking with the Better Business Bureau, even inspecting some of their older properties can all go towards giving you a much clearer picture of what you may be setting yourself up for and how much you will enjoy your future property.

Investor’s Perspective

As an investor starting to get into Real Estate condos can look like a great place to start. They are considerably cheaper than houses, you don’t have to worry about the maintenance and many investment groups have formed condo pools where your property is professionally managed.

However, if it was really that simple, everyone would be doing it. The condo fees often make the units too expensive to rent profitably, the condo boards often have specific rules in place limiting the number of rental units, you may have to provide extra deposits to the condo board for having tenants in the building and condo boards can be a nightmare to deal with if your tenant causes problems.

If you are looking at a condo as an investment property, you really have to pay special attention to the rules that are in place, the history of the condo fees and your calculations when it comes to projecting your returns. With the current state of the market by simply moving up the scale from a condo to a suited single family home you can often double or triple your cash flow making the investment that much more pleasurable at the end of the day.

Now, I’m not saying they won’t work, and for some people they do great with them. I personally feel there are just so many more better options out there for you. So do your homework, make sure you understand what you are doing and be smart about your investment!

Do you have some positive stories about renting condos? Or some nightmare stories? Leave us a comment and tell us how it worked out for you.

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