Basically, a lot of theory on Canadian real estate investments. And I'm guilty of writing these things myself.
But when you're starting out sometimes real stories from real investors give you the most insight.
And it's because most people spinning out these real estate investing articles don't actually work directly with any investors...so there's a gap in the information. I'm not 100% certain they even work with any Canadian real estate investments at all.
I think that feeling comes from the first person that was going to sell me some Canadian real estate investments. His advice was this, "Buy them, real estate appreciates". And because I didn't know any better at the time I missed out on asking a ton of other stuff.
Let's park the theory and get to the real stories of real investors in the real world working with real Canadian real estate investments.
The stories that come from only working "in the trenches" and "on the streets" and getting things done.
Ready? Let's go...
Canadian Real Estate Investments: The Case Studies
We were working with one investor who purchased a great single family home investment property just outside the Greater Toronto Area and wanted to sell the thing darn thing two weeks after buying it!
I think here words were something like this,
"I'm done with all Canadian real estate investments. I don't think this is for me!"
If she tried to sell it at that moment she would likely have lost at least $15,000 because of the commissions and closing costs involved, no laughing matter.
See...when the real emotions of fear and anxiety kick in all those great books that teach real estate investing (think Rich Dad, Poor Dad or Millionaire Next Door) get thrown out with the trash.
Emotions are powerful things and you need to fight to keep logic from escaping you when this happens.
This investor closed on the house and then didn't do very much of anything to get a tenant to rent out the place.
Buying any Canadian real estate investments is only part of the process. You need to keep going and get your property rented if you're going to profit from the thing.
She actually did place one classified ad for one day, but that's it.
Well, I can tell you from direct experience that one classified ad for one day is a better than nothing but it's not enough.
The crazy part is that off that single little ad she had a call from someone interested in the home but she turned them down because they didn't "sound" like a good fit. The decision wasn't based on any facts.
The fear of having a mortgage payment approaching and not having a tenant in the house was apparently too much to bear and she started acting irrationally.
So we stepped in and settled her down. Asked her to focus on the little things.
Forget the big picture for a moment. Forget building your empire. Forget buying 15 other Canadian real estate investments. Forget equity build-up, possible appreciation, tax deductions, cash flow, forget it all.
We just asked her to focus on one baby step at a time.
Place an ad for your house. Answer the calls. Get people to the house. Get applications. Accept a tenant.
Don't focus on the mortgage payment. Don't focus on any "what if" scenarios that are likely not going to happen.
Don't go and shovel the driveway 7 times a week (shoveling doesn't make you money - getting a tenant into the house does).
And as soon as she focused on the little important activities things began to flow.
Calls came in from her ad. She met people at the property.
And you know what...within one week of "re-focusing" on the activities that make money, she got a tenant.
She even managed to collect a few thousand dollars right up front.
Job well done.
WARNING: What you are about to read is not PG rated. Stop here if you only watch G-rated Disney flicks.
Have you ever seen a chicken running around with its head cut off?
A foreman that used to work for my dad's drywall company used to say he was working like a chicken with its head cut off.
I never really understood it until I visited my Aunt in Europe and she actually cut off the head of a chicken and let the body of this thing take off running in all sorts of directions.
Kind of like real estate investors running from one networking group to the next.
OK, the not so appropriate analogy is over.
But it serves a point.
So many investors get caught up in the hype of the next "big idea".
We worked with one investor recently who was distracted by every new investing idea ("shiny object").
I should invest in Alberta! And then he would go off and research Alberta for a few weeks.
I want to buy 15 Canadian real estate investments next week in BC with all the money from Asia landing on its shores!
I should invest north of Toronto in cottage country! And then he would go off and spend time looking at cottages.
I should invest in the U.S.! And then he would go off looking for a lawyer to setup up Nevada corporations for investments that they haven't made yet.
I should buy a house and flip it or assign a contract for quick-easy-cash! And then he would go off and network with other investors who are all trying to assign contracts to each other.
I should invest in condo conversions! And then he would run around looking for condo conversions in Cambridge, Ontario.
After a few months of this, he still hadn't made a single purchase of anything.
Zero Canadian real estate investments to his name.
In the meantime, another investor that started investing at the same time as him had purchased three nice single family homes and had them rented out. And because he was actively investing other opportunities just started popping up. For his third home, someone had found him and asked him to buy them a property that they could then rent from him.
They picked out the property and gave him first and last month's rent up front to show they were serious, he then went out and purchased the property for them and had them move in on the day of closing. No advertising, no lag between closing and the time someone moved in. Pretty neat stuff eh?
Because that investor was not distracted by every shiny object that pops up he was able to start creating his asset base that will create long-term wealth.
Shiny objects are great and we're all guilty (myself included) of being drawn to them.
But the way to get ahead is to pick a course of action and stick with it.
You buy one investment property, then another, then another and before you know it you have a stable of Canadian real estate investments working for you.
You can make money right in your own backyard using proven real estate strategies.
Don't get distracted by shiny objects and fall victim to the "chicken with its head cut off" investing strategy. It doesn't work very well.
One investor recently got so caught up in how much his monthly carrying costs would be on a property that he wasn't willing to negotiate anything.
He ignored all the other benefits he would be receiving as part of his Canadian real estate investments and just focused on one thing.
He wanted to get $1,700/month in rent.
He had a couple of great tenants come through the home and sticker shocked them with the price. Other homes in the area were renting out for $1,500.
Then he had someone offer him $1,600 a month and they could move in the very next month.
He turned them down!
He then finally got someone to agree to $1,700 but they needed to give 60 days notice at the beginning of the next month...so they couldn't move in for about 10 weeks.
And now enough time had passed that he was started to get desperate, so he accepted them.
If hadn't been so firm in what he was looking for he could have accepted the people for $1,600/month and had them paying him in a couple of weeks.
He would have been down $100/month but over 12 months he's actually ahead because the house wouldn't have been sitting vacant for three months!
Find common ground with your tenants.
Your Canadian real estate investments should be treated as a business.
And business requires constant negotiation, get used to it.
Recently an investor working on her Lease/Option investment property was growing concerned about how much she had to spend to advertise her property.
ASIDE: A lease/option is when you lease out a house and the tenant who moves in also has the option to buy the house from you at some point in the future. Kinda like leasing a car.
It was going to cost about $245 to run a classified ad in the paper for a week.
She didn't lock anyone up for the property after that first week and resorted to free classified ads online to "save" money.
Now, in our past experiences with Lease/Options clients have been getting $5,000 or higher as the an option payment plus rent money. Several have gotten $10,000 plus first and last month's rent.
If you have to spend $500 or even $1,000 to get back $5,000 it's not a bad investment.
So she wasn't looking at advertising as an investment, she was looking at it as an expense.
Dangerous mistake (a mistake that's made in most business by the way).
With a little push, she started advertising again and got $4,000 up front plus first month's rent.
That's a lot better than a vacant house!
Advertising is an expense to the tax man but it's clearly an investment to you and your business of real estate investing.
Remember, the key to getting what you want is almost always looking around and doing the opposite of what everyone else is doing. Especially with your Canadian real estate investments.
She looked around and saw everyone advertising with free classified ads. So she did the same.
Never follow the crowd.
When you're starting out you don't see the big picture.
It can feel like you're putting pieces of a puzzle together in the dark.
Stick with it...when you commit to getting it done things fall into place - every time.
And with proper patience your Canadian real estate investments, when bought properly, will become a foundation of your wealth.
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