The Renegade Real Estate Investing Newsletter
"Cutting Through the Real Estate Investing B.S."
This FREE Real Estate Investing Tips newsletter is your window
into the world of real estate investing. You will never get closer
to the real action than learning straight from two Canadian brothers,
Tom & Nick Karadza, who are actually implementing the strategies they
In this weekly publication you will get access to our real world guides,
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"on the streets" with real people, right here in Canada.
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Thursday, June 12th 2008
In this Issue:
- Renegade Commentary: Venturing Out...
- Featured Article: Buying Rental Property "Step-by-Step"
The next FREE Real Estate Training Workshop
Our next real estate training class is TONIGHT!
It's the very first time we're venturing out of our own offices to do this.
If you're interested in meeting us here are the details:
925 Dixon Road
(Dixon Rd. between the 427 and the 401)
Time: 7:00pm sharp tonight
Room Name: Eatonville
In this class you will learn how to profit
from Real Estate without having to rehab and renovate distressed
homes and create steady monthly income for yourself.
You'll also learn about actual real life success stories of investors doing
this right here in your own backyard.
If you haven't reserved a seat for this class we can't guarantee you a spot but should be able to squeeze you in tonight. There are 3 spots available.
We've finally decided to go out on the road! After many requests to take our investing approach on the road we're giving a class tonight in Toronto.
All the details are above. Both of us will be there, along with a couple of suprise guests and a few members of our team.
We recently just had an investor we work with have a tenant agree to give him $10,000 plus rent just to have the opportunity to rent the home.
He had attended many "seminars" in the past but really didn't know how to put it all together until meeting us.
Are we touting our own horn...yeah, maybe a little bit! :)
Until next time...be a Renegade!
Tom & Nick Karadza
"The Real Estate Renegades"
Real Estate Investing Step-by-Step:
To learn more about our investing approach and the system we use
with our members you can request a copy of our FREE Report to be
mailed to you. In it you will learn:
- How you can turn 3 Single-Family homes into 24 homes without
investing any additional money by having homes buy homes. EASY WEALTH!
- How you can create Income for Life in just ONE hour of spare time
a day! This means NO FIXING UP DISTRESSED HOMES!
To request your own complimentary copy of our investing in "Nice Homes
in Nice Areas" report go to www.LeaveWorkOneDay.com and fill out the form
at the bottom of the page.
Buying Rental Property Step-by-Step
Here's the first part of a new article we're starting...
Buying rental property doesn't have to be the mysterious and confusing process that it can seem to be.
It's really not that difficult. It's like anything else, until you've done it a few times it can seem like a daunting task.
The goal of this guide is to give you useful information in a simple step-by-step process. Once you grasp the big picture using this guide you'll have much more confidence with your decision making.
Ready? Let's do it!
STEP 1: Education, Goals & Types of Investing
I'm a big believer in taking action and not wasting time. A friend of mine once said, "Don't think, just do" and it's good advice. But you can get yourself into a heap of trouble quickly without some preparation on your part.
Buying rental property is a simple process AFTER you've spent some time gaining some knowledge.
The best knowledge is going to come from a mentor or coach. Someone who has already successfully done what you're looking to do. If you can't find one then your next best thing course of action is to read.
Read everything you can and focus on the fundamentals of buying rental property.
The fundamentals of buying rental property are not simply "location, location, location". You want to buy rental property in the proper location for the proper reasons. The core fundamentals are of the location you want to buy into are: increasing economic activity in an area, increasing population in an area and increasing amount of transportation options in an area.
It's important to outline what you are trying to accomplish.
When you build a house you use a blueprint right? Well, when building your empire you should use a blueprint too.
Do you want steady cash flow or do you want to try and make a lump of cash quickly? Do you have experience in renovating or are rental properties more suited to your strengths? Deciding the results you want will naturally lead you to a certain type of real estate investment.
Remember this: Buying rental property, or any real estate investing, is a process. You need to begin, you need to make some mistakes, you need to go through the process. Making money is more about your personal development than anything else. It's a process. There is no get rich quick. Read that last line again.
Most common mistake during this step: Spending too much time reading books, going to seminars, listening to conference calls and not actually doing anything. The money is in the "doing". After four or five months of some serious education you're ready to start investing. Any longer and you're likely wasting time.
STEP 2: Funding, Financing & Mortgages
Finding the money to invest in real estate can be an interesting adventure. Most people I know with equity in their home are strategically using that equity as the source of fund to buy rental property.
There are ton of financing options available to you from Canadian banks. And if they won't finance your purchase there are mortgage brokers willing to lend you 'hard money' (hard money is money from a private individual and has higher interest rates associated with it, anywhere from 12% to 16% depending on your situation).
Over the last two years there have been many new options popping up for investors. The main mortgage insurers CMHC and Genworth in Canada have some competition coming from large U.S. players entering the Canadian market.
Companies like AIG and PMI have decided they want a piece of the Canadian mortgage insurance market and are establishing roots here. I can't say his officially, but it seems that since these two companies have entered the market CMHC has become more aggressive in its mortgage insurance products.
Now when buying rental property in Canada you can put as little as 5% or even 0% down. These products have higher than average mortgage insurance rates but can still be used profitably in the right situations.
What if you don't have 10% down or even 5% down and you can't qualify for the 0% down investment property programs because your credit score is a tad low? Well, here's something I've learned. I had read this a lot but didn't really believe it. If you find a good rental property deal the money will come to it.
For example, lets say you find someone willing to rent a property and you know the home they would like to rent. If the numbers work (positive cash flow is possible) then by advertising your situation in the local classifieds or even online at www.Kijiji.ca you will find someone willing to A) pay you a decent referral fee for putting together the deal or B) Joint Venture with you on the transaction. Money is attracted to good deals, it really is. I've seen this over and over again.
Most common mistake during this step: Not speaking to a mortgage broker. Even if you have an excellent relationship with your bank it can't hurt to speak to an experienced mortgage broker. Together you'll be able to lay down a long term plan together. Too often beginners are interested in getting the lowest mortgage rate possible and don't think long term. Even if your bank can beat the mortgage broker's rates it's always worth getting a second opinion and working with a residential mortgage broker doesn't cost you anything. Also, never go bank to bank applying for mortgages. Each bank will pull your credit and it can lower your credit score. Go to one bank and one mortgage broker, that should be more than enough.
Want More Information On This Step?
STEP 3: Finding The Property
Buying rental property sounds so simple until you get out on the streets and try to find a good home. Do you buy a single family home? A duplex? A triplex? What about a ten unit building?
Do the mortgages for each of these properties work the same? (They don't).
Are there tenants already living inside? Is that good?
Most experienced investors are looking for either:
1. A property that has been managed poorly where they can make some improvements and over a period of time get higher rents. This increases the value of the property allowing them to sell it for a profit or refinance it and extract a sizeable sum.
2. Or, find a single family home that can be turned into a great rental property. Ideally, a nice home in a nice area that will appreciate well.
Finding a good piece of rental real estate is a massively time consuming task. Large commercial properties with good rents in the Greater Toronto Area aren't advertised. Brokers have a list of local and foreign money lining up for them.
And finding a decent single family home in the right area, that will produce positive cash flow often requires super human skills. Especially with home prices at historic highs.
If you want a big commercial property start asking around for a commercial broker that works with new clients.
Or, if you're looking for a single family home, duplex or triplex try to find a residential real estate agent that has actual experience buying rental property.
I once bought a single family home that was producing positive cash flow but after I purchased it I realized that because of the condition of the house I would need to spend $25,000 over the next year fixing it up. Otherwise, I wasn't going to attract new tenants because compared to other homes in the area my home needed work.
It's because of this experience I cringe when I hear, "Investing is all numbers". It can be, just make sure you're looking at all the numbers.
A good real estate agent with investing experience should be able to tell you how fast the property will rent, what features of the house are critical and what the fundamentals of the community look like.
Most common mistake during this step: Most beginners buying rental property incorrectly believe that buying a bigger property leads to bigger and faster profits. Incorrect. Sometimes a bigger property just means bigger problems. If you know what you're doing a single family home can be the best way to go.
Every investor is going to have strong opinions on this so let's just leave it at this: don't run and buy any multi-unit building before comparing it to the returns possible on a single family home rental property and vice versa. Find someone who has invested in both and pick their brain. Also, many beginners just want the cheapest property they can find and end up buying a rough property in a rough area. Those properties will often appreciate very slowly and trying to collect rent may be a bit of challenge. Go for nice homes in nice areas instead (it may be harder to figure out how to make a nice home cash flow but it can be done).
Want More Information On This Step?
STEP 4: Writing The Offer
When buying rental property writing the offer can be stressful. I am over paying for the property? What if there are multiple offers? Will my financing come through if the offer is accepted? What about a home inspection?
Here are the basics:
1. The Price: If you've looked at enough properties 10 properties of the same type in a community you should be able to pick an accurate offer price. If you're buying a multi-unit building then the offer price is typically dictated by the income so it can be even easier.
Most beginners are trying to buy properties for "a steal" because that's the only way they know how to make money.
Experienced investors have multiple ways to make money on any property so the purchase price isn't nearly as big of an issue and isn't nearly as stressful for them. For example, on a single family home, if the only way you know how to make money on the property is to "flip" it after you make some improvements then the purchase price is critical.
But if you know how to sell an option on the home, get higher than average rents and negotiate the sale price of the home years in advance of actually selling it then the risk is lower because you have multiple revenue streams.
I'm not saying that you shouldn't get the best and lowest price possible for your purchase, you should. It just becomes a lot less stressful when you have multiple ways to make money with the property.
2. Conditions: Always make a residential property purchase conditional on your financing getting approved and on a property inspection.
You really don't need much more than that unless you are buying a commercial property that may have zoning, soil, tax, and appraisal issues that need addressing.
You can ask for the survey of the property but with Title Insurance being used it's often asked for much less than in the past.
3. Chattels & Fixtures: Are you asking for the washer, dryer, fridge and stove? Make sure you include them on the offer. And if there are any fixtures that you want (a painting, a special light fixture) list them on the offer.
It may be a good idea to write down the serial numbers of the appliances so they're not swapped out on you before you close on the property. I've never had that happen to me but better safe than sorry right.
4. The Closing Date: When buying rental property if you close on the third of the month they you get credited for that's month's rents because they've already been collected and technically they belong to you. It's a little tip that may save you from coming up with thousands of dollars to close on the property.
Also, ask your bank or broker what happens with the mortgage on certain times of the month. If you close on the 3rd of a month some banks won't make you pay a full mortgage payment for 60 days. But if you close on the last day of a month or on the first of a month you'll likely have your first full mortgage payment within 30 days.
5. The Actual Offer: In Ontario real estate agents will use a standard Agreement of Purchase and Sale. If you are writing your own offer make sure it's something that has been reviewed by a real estate lawyer.
Even if you are making a private offer and not using an agent you can use the OREA Agreement of Purchase and Sale for the transaction. You're lawyer is the best person to ask for this stuff.
HUGE DISCLAIMER: When writing any offer it is always wise to have it reviewed by your lawyer. Do not take what you read here and try to draft your own offer. Get an opinion of a qualified professional. We love writing this stuff but definitely do not take any responsibility for your actions. Seek and use qualified agents, lawyers, home inspectors and other professionals before making any purchase. And you'll definitely want a professional opinion on Title insurance, what it covers and what it doesn't. OK, with that said we can continue...
Most Common Mistake During This Step: Losing a profitable investment over $1,000 difference on the purchase price during negotiations and counter offers.
This article is going to have 15 steps when all done...watch out for the next installments shortly!
Exposed: Successful Canadian Investors "Spill the Beans"
If you want to eavesdrop on how people are making money in real estate right
in your own backyard visit www.MyDaddysTeleseminar.com and
you'll get instant access to a recording of the call right now!
Three real Canadian investors discuss how they extracted maximum cash flow, managed to get thousands of dollars returned to them days after closing and how they created an "auction like" environment at thier properties!
About The Real Estate Renegades
Tom Karadza & Nick Karadza are authors of the book "Income For Life for Canadians",
available on Amazon.com by clicking here (not Amazon.ca just yet!),
and work with a select group of real estate investors throughout the Greater Toronto Area.
They actually do what they talk about it.
They have been called 'Real Estate Renegades' because they are implementing
real estate investing strategies that were once thought to be impossible by
many 'industry professionals'. They are part of several mastermind groups in Canada and in the USA and publish a monthly 12-page real estate investing newsletter and audio series exclusively for their clients.
They also offer real estate investing classes, reports, coaching
and mentoring, and other resources to help both beginner and experienced
real estate investors achieve ultimate success. Learn more now at:
You can meet them in person at their next FREE Real Estate Investing Class, "How to Invest in Nice Homes in Nice Areas" by signing up here: www.CanadianRealEstateTraining.com
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