Beginner

[Rooks]

Hi everyone, i have been wanting to get into rental properties for a while now, and i have read a few investment books including Don's Real Estate Investing in Canada 2.0. This is something i really want to get into because of what real estate can do and how it can change my life. As any other beginner, i still have that freight and the millions of questions that hold me back from moving forward.



I currently live in Windsor, Ontario (Ontario's highest unemployment city and highest vacancy rate). I have come to learn that Hamilton (about 3 hours away) is the best city to invest in Ontario. For a beginner i know many would suggest to invest in your hometown, but as most know, Windsor is the worst place to invest in. How does a beginner go about starting his real estate investment journey wanting to invest in Hamilton. Shouldn't I invest in my own city first so that i can learn as much as possible since I would be dealing with it first hand, as opposed investing in Hamilton and having a property manager taking care of my investment?



Let me clarify that i am not handy at all and i have no interest in being a landlord, i just want to own the investment and have a property manager take care of the place for me, and dealing with the property manager 2 or 3 times a month (I'm not sure how ideal that is).



I hope everyone can give me their ideas and advice, and i mean ALL is welcome, because i will have many more questions to ask and I hope all of you can keep an eye on this thread as I will be keeping active through it.



Thank you all.

 

[invst4profit]

I am personally not a big supporter of those starting out not wanting to be a landlord. You are entering into a business and are best positioned to learn everything you can in order to succeed. Success comes from knowledge and although some can succeed by simply relying on the knowledge of others it is fraught with danger.

Personally I do not believe investors have a very high rate of success if they do not know enough about the business to manage a property manager. Finding a good property management company where no one cares about a property as much as the actual owner is in my opinion no business for the inexperienced "landlord".



My advice is start by learning to be a landlord in your own city. Realising that Windsor is not a ideal location simply means your best bet is to buy a upper scale property that will attract a higher level renter and make sure you screen like your life depends on it. Never depend on a property manager to screen applicants.

Ontario's Landlord Tenant Board is highly pro tenant but 99% of the time only landlords having low end (welfare and ODSP) tenants appear before the board.



You need to study the RTA and understand the business before you buy. The regulations are somewhat complex for the uninitiated. Check out Ontariolandlords.org to get a feel for the business on Ontario before you proceed.

 

[Rooks]

How does one "screen" tenants and make sure they aren't playing the game better than I am. Are you suggesting to never go with welfare tenants? I don't consider all welfare tenants to be bad tenants, considering that new Canadian citizens usually start out on welfare before they start working and learning the new system in the country.

 

[Thomas Beyer]

Frequently 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. Thus, Hamilton in your case seems to make sense as it is only 3 h from Windsor, where you can leave at 8 am, arrive by 11 .. look at 3 or 4 properties plus 2 meetings and be back by supper, say 1x/week or 2-3 a month easy.



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.



You must know if a deal is a deal, i..e if a 3BR + 2 bath townhouse in Hamilton @ $175,000 with a south facing yard on XYZ street is a good deal or if it is overpriced, or of the north facing 2BR townhouse on ABC street with finished basement, but no garage at $135,000 is a better deal ! You must also know what either of those rent for, +- $50/month.



The
best one to start as there is plenty of supply and plenty of seller
motivation is a small house or a townhouse. Not a condo as you can't
control costs of the condo association. Not a big house either as they
are usually more expensive and hard to cash-flow.



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://www.myreinspace.com/forums/index.ph...46&hl=HELOC



The
market right now (late 2012) 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 credit you need a job. I assume you have one. What is it ? Also excel at that. More on my blog on this if you wish ..



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!



Yours Sincerely,

 

[Rooks]

so right now, i have two opinions. On that suggests i invest in my hometown as well as being a landlord to learn the business. The other suggests i invest in one of the top 10 places in Ontario and hiring a management company that will take care of the property for me.



I currently am doing very well at my job and have saved a good amount of cash because i know an investment opportunity maybe waiting for me one day. So the savings and doing well at my job is not a problem.



My main issue is figuring out if i should invest at home or away. I personally would rather invest here (Windsor, ONtario) so that i can learn the ropes of the business, but i also know that it will be painful and emotional at the same time because of the city's stats. I will eventually have to find investments out of the city once I have one or two properties in Windsor, if that is the road i choose.

 

[Rickson9]

You can only avoid being a landlord if you can buy properties cheap enough. Otherwise there may not be enough cash flow to hire a PM.

 

[invst4profit]

[quote user=Rooks]Are you suggesting to never go with welfare tenants?I don't consider all welfare tenants to be bad tenants, considering that new Canadian citizens usually start out on welfare before they start working and learning the new system in the country.




Based on my personal experience I would never again knowingly rent to any applicant on any form of government assistance. They are a higher risk, far more often have a sense of entitlement and have been deemed by the government to be untouchable. By "untouchable" I mean their government benefits are not garnishable which means they can walk away from any and all debts and can not be held accountable.

A primary considerations is not "can they pay their rent" but rather can I collect if they default. Although they must of course be able to afford the rent.



New Canadians are again a higher risk due to the fact that they have no credit rating in Canada. They can also leave the country at will or disappear into their "community" if necessary. This is again a demographic to be avoided by the novice. Your goal in this business is to avoid all possible risk therefore avoid those without a history or those known as being sub standard.



You are not a social worker you are operating a business and must always keep that in the forefront.



All welfare recipients are not bad tenants but unless you have a crystal ball or can predict the future steer well clear of all of them. Again this is why I would recommend your first few properties cater to middle to higher income tenants.



As far as making sure the tenants are not playing the game better than you are it is solely your responsibility to make sure that does not happen by being the best at the game that you can possibly be. Deciding to start as a landlord rather than a investor is step one of your educational process to out smart tenants. (you can learn most if not all the game rules on the Ontario landlord forum)

 

[Sherilynn]

[quote user=Rooks]so right now, i have two opinions. On that suggests i invest in my hometown as well as being a landlord to learn the business. The other suggests i invest in one of the top 10 places in Ontario and hiring a management company that will take care of the property for me.


Both answers are valid. The correct answer for you depends on your comfort level.



I started in my own city and self-managed to learn the business, but I live in Edmonton and there are very few better places in the world to invest. If I didn't live in Edmonton, I'm not sure which choice I would have made. I am very hands-on and wanted to better understand the business of real estate, and I would be slightly uncomfortable relying on someone without a vested interest in my investments to handle them properly.



However, the numbers must work and a town with high vacancy and low prospects would make me equally uncomfortable. Many successful investors have never self-managed and have worked with property management companies from day one. This enables them to invest wherever the numbers work.



A third option is to joint venture with a seasoned investor in a Top Town. This would enable you to be more hands-off while leaving the landlording decisions up to someone who has a vested interest in the investment. Of course, you give up a substantial chunk of equity and profits for this privilege. Plus you must do your due diligence on any partners that you take on.



Regardless of which path you choose, Thomas' post has a lot of good insights that apply to both.

 

[Thomas Beyer]

[quote user=Rooks]i have two opinions.As a real estate rookie, with respect, your opinion, while important for you, doesn't matter.



What matters are facts: where is upside ? where is cash-flow ? where do experts invest ? where do people move to ? And that is NOT in Windsor. It is in growth town in viable regions ! Is Windsor a viable region ? If yes, then invest there, based on facts, not opinions.



Here is my opinion on Windsor: with a rising Can $ and a car industry outsourcing jobs to cheap labor areas of the world, like S-USA or Asia, the car industry in Canada will shrink further. Are there replacement jobs being created in Windsor ? Are people moving there ? Maybe the new bridge will help, but it is 5+ years out. More jobs might actually move further away. Will they build a refinery there ?



My opinion: research Windsor based on facts, and try make a business case to yourself or folks such as those that frequent this forum. Otherwise, start in Hamilton, a Top 10 town in ON, or better: in Edmonton, AB, a top #3 town (if not #1) in the #1 province.

 

[Rooks]

You can find duplexes in Windsor starting at $50K+, the problem is finding good tenants i think. If houses are very cheap in Windsor, who would want to rent, why not just buy?



[quote user=Rickson9]You can only avoid being a landlord if you can buy properties cheap enough. Otherwise there may not be enough cash flow to hire a PM.




http://www.realtor.ca/propertyDetails.aspx?propertyId=12690189&PidKey=1555334243

 

[Rooks]

it looks like my decision got even more complicated.



On a side note: has anyone invested in other types of real estate other than rental housing? Such as plazas? etc?

 

[Rickson9]

[quote user=Rooks]You can find duplexes in Windsor starting at $50K+, the problem is finding good tenants i think. If houses are very cheap in Windsor, who would want to rent, why not just buy?



[quote user=Rickson9]You can only avoid being a landlord if you can buy properties cheap enough. Otherwise there may not be enough cash flow to hire a PM.




http://www.realtor.ca/propertyDetails.aspx?propertyId=12690189&PidKey=1555334243




Cheap is the price relative to the rent you can expect to get. How much is the rent you can get? Then you'll know if $60k is "cheap" or not. Price doesn't mean much by itself.



I bought a property in Phoenix for $55k and I get $850 a month in rent. That's pretty cheap.

 

[Rooks]

Rent is approximately $600-$700 plus utilities

 

[markl]

If you want to take a tour of Hamilton and have a look at what there is to offer in Hamilton. Such as prices and rents. Different areas and different types of properties my team and myself would be happy to introduce you to the world of Hamilton Real estate investment.



Regards,

 

[invst4profit]

Rooks if you decide not to buy in Windsor then where you buy is irrelevant as far as logistics of management. If this is your decision I would strongly advise you not buy in Ontario at all. Go west.



In Ontario the RTA and LTB are too heavily stacked against small landlords to make it worth while for someone with the flexibility of investing where ever they chose. Find a partner out west and get started.



Ontario landlords need to understand that the LTB operates as a extension of the Government Social Services. The LTB has a mandate to insure that welfare and low income tenants remain housed by private landlords. In order to prevent tenants from falling on the government to house once they are with a private landlord the LTB will not evict. This is the primary reason to avoid welfare, low income and high risk tenants. The LTB would force landlords into bankruptcy before granting a eviction other than in cases of clear cut non payment of rent. In cases of non payment expect to ultimately lose 3-5 months rent before succeeding at an eviction in most cases.

 

[Wahta]

Seems like your issue with Hamilton is the three hour drive. Fair enough. Some people don't like driving and I would hate to do that trip on the 401 in winter myself (and I drove professionally for YEARS!). Maybe something outside of Windsor, but a little closer? I'm thinking that London might fit the bill. There are positive signs for that city and it's half the distance. Just a thought.



Cal White

 

[Hutchym]

Have you entertained the thought of a University Rental in Windsor? I personally have had success with school rentals in Sarnia, ON. It is a very similar market, unemployment of >8% . There too you can find low cost units (3 or 4 bed townhouses for $75,000). Windsor is even better!

It was nice that the rentals can be near your home and risk can be lower of no payment (Students will pay 4 months at a time, in advance).

Sometimes they can be somewhat harder on your unit, but this can be mitigated with the right renovations decisions (laminate instead of carpet is major). Vacancies almost non existant when you create a "better" student space than other landlords. You can do many things that may not be considered streamline. I purchased a projector for the unit and created a movie space in the basement. Damage can be limited by using a plain white wall for backdrop and putting speakers in the ceiling for surround. This alone got alot of attention and most likely fetched me the extra $30 per bed I charged over general area rents.

The only thing about it is the potential for high turnover. However, You'll master finding good renters!

Being on the border you know your increased benefits of purchasing power that you can use. Windsor is an amazing area for student rentals. Don't write the idea off!



Mike

 

[smallfry]

Hi Greg:

I think your advice is very solid and well said. A new investor needs to be prepared to be a landlord because that is just part of the game. Rental properties do not run themselves, just ask anyone who has tried this.

Windsor is definitely not an ideal location, I know investors who are losing money there every month and can't get out. Middle class tenants are a much better option than low end especially for someone who doesn't want to be that involved.

I just sold off my last property in Winnipeg after 7 years of investing there in low end properties. Living in Vancouver, the distance was a nightmare. Staying closer to home definitely has huge benefits and if more cash flow is desired, invest in rent to own properties instead.



Kelly Fry

 

[Rooks]

[quote user=Hutchym]Have you entertained the thought of a University Rental in Windsor? I personally have had success with school rentals in Sarnia, ON. It is a very similar market, unemployment of >8% . There too you can find low cost units (3 or 4 bed townhouses for $75,000). Windsor is even better!

It was nice that the rentals can be near your home and risk can be lower of no payment (Students will pay 4 months at a time, in advance).

Sometimes they can be somewhat harder on your unit, but this can be mitigated with the right renovations decisions (laminate instead of carpet is major). Vacancies almost non existant when you create a "better" student space than other landlords. You can do many things that may not be considered streamline. I purchased a projector for the unit and created a movie space in the basement. Damage can be limited by using a plain white wall for backdrop and putting speakers in the ceiling for surround. This alone got alot of attention and most likely fetched me the extra $30 per bed I charged over general area rents.

The only thing about it is the potential for high turnover. However, You'll master finding good renters!

Being on the border you know your increased benefits of purchasing power that you can use. Windsor is an amazing area for student rentals. Don't write the idea off!



Mike






Hi Mike, I have entertained the thought of getting student rentals. Matter of fact, if i decide to get rental properties in Windsor, it will only be student rentals as those are more guaranteed to be filled rather than family rentals. But i really like your idea of the projector you placed in the basement, that is very wise.

 

[Rooks]

[quote user=smallfry] Hi Greg:

I think your advice is very solid and well said. A new investor needs to be prepared to be a landlord because that is just part of the game. Rental properties do not run themselves, just ask anyone who has tried this.

Windsor is definitely not an ideal location, I know investors who are losing money there every month and can't get out. Middle class tenants are a much better option than low end especially for someone who doesn't want to be that involved.

I just sold off my last property in Winnipeg after 7 years of investing there in low end properties. Living in Vancouver, the distance was a nightmare. Staying closer to home definitely has huge benefits and if more cash flow is desired, invest in rent to own properties instead.



Kelly Fry








Correct me if i'm wrong, but the message i got from your post basically says that i'm in no position to be investing. You mentioned that Windsor is definitely not an ideal location to invest, so that's out of the picture now, and you also mention that i should be a landlord because it's part of the game and to learn the game, and that means investing out of town is also out of the picture since i can't be a landlord to properties 3 or 4 hours away?