First Rental Property

Greetings Everyone,

Last week I had the opportunity to speak at a real estate seminar held by W & B Academy.

I was asked to speak about my experiences as a professional real estate investor.  This was a significant milestone in my real estate investing career, because by presenting at this event, I can now officially add the title of ‘real estate speaker’ to my list of credentials.

If you plan on taking real estate investment seriously, you must do things that will help to increase your credibility.  You want to be able to stand out from the crowd of other real estate investors, and demonstrate that you are a motivated go getter.  Once you have some specific knowledge on real estate investment, and you feel confident on the topic, I suggest you do the following:

1) Write an article on the topic of real estate for your local newspaper

You don’t have to be published in a newspaper.  It could also be a magazine, or perhaps a newsletter that you write for.  Just make sure that you write something, and that you get it published somewhere.  This article that you write will bring you credibility down the road.  Just wait and see…  🙂

For example, I have been featured and quoted in the Canadian Real Estate Magazine October 2009 issue and the March 2010 issue.

2)  Get a speaking opportunity or run a workshop for beginners

Getting a speaking gig on the topic of real estate investing is a great thing to add to your resume.  It brings great credibility, and you can leverage this experience in order to obtain additional speaking opportunities.

Another idea that you can do is to run a workshop for friends who are looking at getting involved with real estate investment.  This platform will benefit both yourself, and those that are in attendance.  You will benefit as you will gain some experience in speaking on the topic of real estate investment.  Your audience will benefit from the knowledge that you provide them with.

Here is a video clip of my presentation this past week for W & B Academy.  A lot of the content for my presentation came from my previous article series, How to buy your first rental property.

I am going to be making an effort to add more regular video content to my blog, just like Steph Davis.

Check out the video, and let me know what you think of it.  You can place your comments below.

[youtube]http://www.youtube.com/watch?v=Lrxe-cR-LoI[/youtube]

Greetings Everyone,

This week I had a very insightful conversation with a real estate investor.  It wasn’t just any real estate investor, rather it was a real estate investor who had been investing in real estate for 20 years.

This conversation that I had was particularity important to me, as most of the real estate investors that I know, and network with, have not been investing as long as 20 years.  The investors that I know mainly have been investing for under 5 years.

As a result of this, the perspectives of the real estate investors with under 5 years of investing experience are quite different than the 20 year investing veteran.

Here are some key takeaways from my conversation with this very experienced real estate investor.

1) He had a partner

When this real estate investor purchased a property 20 years ago, he had an investment partner.  He still has the very same investment partner today.  What I learned from him is that pooling your efforts and partnering up truly can have benefits.  If both people in the venture are equally committed to invest long term, you can achieve more together, than you could achieve alone.

2)  He paid his mortgage down

After 20 years, his investment property was free and clear with no mortgage.  He had the same tenant in the rental property over those 20 years.  As you can see, the tenant had paid off the mortgage for him.  I can honestly say that this is the first one on one conversation that I have had with a real estate investor who has had a tenant pay off his mortgage.

Now days, it is very common for real estate investors to obtain mortgages with extended amortization periods.  It is not uncommon to have a mortgage on a rental property amortized over 35 years.  This tactic is used so that the payments on the mortgage are less, and thus, the monthly cash flow on the property is greater.

The majority of the real estate investors that I know that have been investing for 5 years or less have 35 year amortization term mortgages.

It seems that the modern day real estate investor is a fan of the longer amortization periods, whereas the ‘old school’ real estate investor is a fan of the shorter amortization periods, such as 25 years or less.

There of course is no right or wrong answer as to which amortization period is better, as they both have certain upsides.

However, this veteran real estate investor got me thinking…

I would much rather pay off my mortgage sooner, with less cash flow than pay my mortgages off slowly with higher cash flow.  What do you guys think?

3) He had property management

This investor bought a bunch of properties all over Southern Ontario over the past several years.  He had quite a busy portfolio, and as a result, opted to use property management to look after his properties.

Many old school investors understand that hiring property management is a part of the business of real estate investing.  In addition, many current day investors, try to ‘do it alone’ with no property management.  This can only work when you have a limited number of properties.  The more properties you start to accumulate, the greater need you will have for property management.

4)  He purchased properties in many markets

Another observation that I made was that he did not buy just in one specific area, rather, his investments were spread out across many different real estate markets.

Many real estate investors that I know with under 5 years of real estate investing experience feel that you have to stick to one particular area, and buy all of your rental properties in that area. These investors feel this way because their theory is that you have to master a single geographical area. When you master that area, you will know what the values of the homes are, what rents are being obtained. You will also know the good and bad areas to invest in.

Clearly there is no right and wrong answer here. As a real estate investor, you can purchase all of your rental properties in the same geographical area, or you can buy them in many different markets. The choice is yours.

In summary, I really enjoyed my conversation with this veteran real estate investor.

As humans, we can fall victim to doubting ourselves, and possibly doubting our actions.  As the saying goes, “It’s human nature.”

Anyone that tells you that they have never doubted themselves is lying to you.

The conversation that I had with the veteran real estate investor made me realize that despite MY doubts, I am definitely on the right path. The path to success!

Keep reading more of my articles! All you need to do is enter your e-mail address on the left side of the blog. Or you can click on the orange RSS button on the top right hand corner of my blog.

Hi Everyone,

I will be making a change to my blog shortly, that I wanted you all to know about.

For the past few months, I have been releasing a blog post daily. Many of you have been following my daily posts, and I thank you very much for that.

I have recently decided to make a modification to the frequency of which I will be releasing content to my blog.

I have come to this decision, as I am going to be studying for the Canadian Securities Course.

This is a course that I need to get under my belt, as this will help me to advance in the banking industry.  The industry that I currently work in.

I have actually attempted this course a couple of times over the past several years, and failed it both times.

The exam is in multiple choice format, a format that was never really my strong suit.

Needless to say I am going to have my hands full studying for this course over the next several months. I anticipate that he course is going to take up the lion’s share of my spare time over the next 5 months or so.

I am still planning on releasing weekly content on my blog, however, I cannot commit to the daily blog posts that you have become used to over the past few months.

I want you to all stick with me, and continue to read my posts, even though they will be a little less frequent than you have seen over past few months.

Hang in there. It will be worth it.

In closing, I would like to refer you over to an article written by a fellow real estate blogger and REIN member.

Chris Davies wrote a very good article outlining the recent mortgage changes in Canada. His article was much better than mine.

Greetings Everyone,

Today there was a significant announcement made by Jim Flaherty, the Canadian Federal Minster of Finance in regards to mortgage rules in Canada.

The announcement outlined 3 ‘changes’ to the Canadian mortgage industry. These changes, as explained by Jim Flaherty were a proactive move on the part of the Canadian government in order prevent  a potential housing bubble in Canada.

Although I do not agree with all of the comments made by Jim Flaherty today with respect to these recent changes, I think that this is an excellent move on the part of the Canadian Government.

This announcement is yet again another demonstration of Canada’s prudent fiscal policy.  It is decisions such as these made by the Canadian Government that help to keep Canada a fiscally responsible country.

The Canadian Broadcasting Channel put out an article today that outlines the 3 recent changes to the Canadian Mortgage industry. I recommend you read this article, and watch the accompanying video.

For your reference, the 3 changes announced by the Canadian Governement with respect to the mortgage industry are:

1) Borrowers need to be able to qualify for a mortgage based on the 5 year fixed mortgage rates.  Despite the fact that they intend to obtain a mortgage for a shorter term, and with a lower interest rate.

3)  People buying non-owner occupied homes, will be required to put down 20% as a down payment.  A down payment under 20% for a non-owner occupied home, will no longer be allowed.

What do you think of these recent changes?  Will it help the Canadian mortgage industry, or hinder it?

Greetings Everyone,

Today I had to  write a biography for myself. I thought that this would be a hard task for me to complete, but I was surprised at how easy it was for me to write.

I have been invited to guest speak at a real estate investment conference on February 23rd 2010, put on by Leslie Quinsay and Rick McKinnon of W & B Academy.

As outlined on the Wealth and Business Academy website:

They are a training and educational company focused on providing their clients with the knowledge and tools they need to create lasting wealth. They provide workshops, seminars, expos, books, home study courses, and other educational products all aimed at promoting financial literacy and wealth creation.

Below I have included the biography that I have provided to the W & B Academy.

I chose to post this on my blog as well, so that you are able to gain a further insight into my background.

Further to this biography, I will also be releasing shortly my Life Story, which I will cover in a series of blog posts.

Here is the biography… And as always, you can enter your e-mail address on the left hand side or click on the orange RSS button at the top right hand corner in order to keep up to date with my blog.

Neil Uttamsingh’s Biography

Neil Uttamsingh grew up in Oakville, Ontario where he attended High School.  He was elected Student Council President two years running and was nominated by his peers as the 1999 graduating class Valedictorian.

Neil Uttamsingh was awarded the degree of Bachelor of Arts in 2003 from The University of Western Ontario where he majored in Psychology. He was voted Freshman of the year in 1999, and his fellow students elected him as the Resident’s Council President in 2000.

Neil spent 3 years working at one of Canada’s Big Five Banks, first as a Personal Banker, and then as The Regional Manager of Donations for the Greater Toronto Area (GTA).  As the Regional Manager of Donations, Neil oversaw the donations made by the charitable giving arm of the bank to various charities located in the GTA.

Neil later on went to become one of the youngest Real Estate agents hired by Re/Max Aboutowne in Oakville, Ontario.  There he specialized in residential re-sale.

Neil currently is employed by another one of Canada’s Big Five Banks, working as a Commercial Account Manager Deposits.  Neil is one of a few key relationship managers for the bank working in a city north of Toronto with the bank’s most profitable commercial clients. Neil manages a portfolio of approximately $70 million dollars.

Neil began his real estate investing career in 2005.  Since his first property purchase in 2005, Neil has raised over $100,000 in joint venture capital.

Not only a successful real estate investor, Neil also blogs extensively at, First Rental Property.com. (www.firstrentalproperty.com)

Neil saw the need for starting this blog, as various people who liked the idea of real estate investing were approaching him with many questions.  Neil noticed that these people were too afraid to invest themselves, and did not know where to begin.

As a result, Neil has geared his blog towards providing people with knowledge and confidence so that they can buy their first rental property.

Neil continues to actively invest in positive cash flow townhouses in Hamilton, Ontario, Canada with joint venture partners.

In my mind, it is very clear to me what people are afraid of when it comes to buying their first rental property.  For the purpose of this article, we are going to focus specifically on the ‘number two’ fear that people have.

…In case you are wondering, the picture of the guy with they eye patch is ‘Number Two’ from the Austin Powers movies!

You also might be wondering, why I am focusing on the ‘number two’ fear and not the ‘number one’ fear?

Further, you might also be thinking…’what the heck is the number one fear?’

Well, to answer those two questions, the reason why I am focusing on the ‘number two’ fear instead of the ‘number one fear’ is because I am going to write an article series on the ‘number one’ fear.

The article series will be similar in format to some of my other articles series, such as, How to buy your first rental property and The Evolution of a Real Estate Investor.

Now to the good stuff…

The ‘number two’ fear that potential real estate investors have when buying their first rental property is:

The fear of repairs and maintenance

• This fear is felt so strongly by some people that it scares them from taking any action.

• The fear that they have paralyzes them, and they never end up buying their first rental property.

• This fear is real, and I myself have experienced it before.

• However, as any experienced real estate investor will tell you, this fear becomes less of a fear as time goes on, and you gain more experience.

The fear tends to lessen as time goes on, if you are constantly building a network of people around you that are able to help you with your repairs and maintenance.

For the most part, most people fear the repairs and maintenance that a property may require because they are not ‘handy’ themselves and they do not know how to carry out things such as repairing an air conditioner unit, fixing a broken door, repairing an electrical outlet, etc.

The secret to helping you get past the ‘repairs and maintenance fear’ is knowing that YOU do not need to know how to fix the stuff yourself.

What you do need to know is who to call when repairs and maintenance are required on your property.   That is why, networking, and building a team of people who can help you in a time of need is crucially important.

Key people to have on this team ‘repairs and maintenance team’ would be people such as:

• painters
• handymen
• contractors
• electricians
• an HVAC specialist

The best way to build this ‘repairs and maintenance team’ is through obtaining referrals from friends or family.  For example, if you know someone who recently used a handyman, and they were happy with their services, note this down.  Take the initiative to reach out to this handyman and build some rapport with them.  Tell them who you are, and the typical things that you might be calling the handyman about in the future.

The next time you need the services of a handyman to take care of some work at your rental property, you will have someone that you will be able to call, who will be able to get the job done for you.

What are some of the other fears that you think hold people back from buying their first rental property?

Feel free to place your comments in the comments section below.

Step Seven is where the rubber hits the road.  A lot of people investing in real estate for the first time feel a lot of anxiety at this step.  If you begin to feel anxiety yourself, rest assured that this is normal.

In this step, you travel to and visit your short list of potential rental properties with your realtor and you put in an offer on a property!

The thought of putting in an offer on a property may make you feel like the picture of the monkey above!

Like I said, feeling anxiety is normal.  If you have followed Step One through Step Six thus far in this article series, you will be in a very strong position when you put in an offer on your first rental property.

After you have viewed the short list of potential rental properties with your realtor, it is up to you to pick one of these properties and put in an offer to purchase.

Since these potential rental properties are nearly identical (property type, geographical location, etc.), it is wise to base your final decision on which property to chose based on which property yields the highest monthly cash flow.

You will be able to know which property will yield the highest monthly cash flow by analyzing the property using the 10% Rule, referred to in step six.

The Holy Trinity of Writing Offers

I heard a saying not too long ago referring to ‘social media’. The saying was that,

‘The Holy Trinity of Social Media is Facebook, Twitter, and Linkedin’

I thought that this was a creative saying, and quite accurate as well.

With regards to offer writing there is also a ‘Holy Trinity’ of conditions that you must abide by.

Holy Trinity Rule #1

The Financing Condition

In your first offer to purchase that you submit, you will be entering in a financing condition into the agreement.

What is The Financing Condition?

• It is a condition built into the purchase and sale agreement that protects the interests of the buyer (you)

• It allows the buyer to arrange financing for the property. The condition is time sensitive, meaning that buyer has X amount of days in order to fulfill this requirement.

• If the buyer is not able to obtain the necessary financing for this property in the required time period, the condition is structured such that, it allows the buyer to walk away from the deal.

• This condition should be included in every single offer to purchase that you make.

Holy Trinity Rule #2

The Home Inspection Condition
As equally importnant as the financing condition is the Home Inspection condition.

• You should never skip getting a home inspection.

• I know some real estate investors who foolishy skipped this step, and it ended up costing them thousands of dollars in repairs.

• You always need to have a qualified home inspector inspect the house before you purchase it.

• Just like the financing condition, you have a set amount of time in order to carry out the inpection.  If for whatever reason, the inspection is not favourable to you, you can walk away from the deal.

• Instruct your realtor when he/she is writing up the offer to purchase to insert the home inspection condition into the offer.

Holy Trinity Rule #3

Lawyer’s Approval Condition
Before you agree to purchase a rental property, you will want your real estate lawyer to review the purchase and sale agreement.

Having your real estate lawyer review the purchase and sale agreement provides a check and balance in the process.

Not all real estate transactions are the same, and not all of them are straight forward, that is why you always want your lawyer to review the deal before you agree to it.  Good real estate lawyers have years of experience working on real estate transactions.  They have worked on many straight forward transactions, and they have seen their fair share of deals end up going sideways and upsidedown…

If there is something unusual in the deal, the real estate lawyer will be the first to notice it, and can advise you accordingly so that you are able to mitigate your risk.

Once you have put in your offer, and all three of the Holy Trinity Conditions have been satisfied…

Guess what?!

You have just purchased your first rental property!

Take some time to click your heels and celebrate!

So now, all of the hard work is done, right?!

Not really.

The easy part is over.  Now the hard work begins…

Stay tuned for Step Eight of How to buy your first rental property…

To keep up to date with my blog, you can enter your e-mail address on the left hand side of the blog.  Or, you can click on the orange RSS button on the top right hand corner of the blog.

Related Articles:

Step One – How to buy your first rental property

Step Two – How to buy your first rental property

Step Three – How to buy your first rental property

Step Four – How to buy your first rental property

Step Five – How to buy your first rental property

Step Six – How to buy your first rental property

In this article, I will explain to you how you can pick the best rental property to purchase.

We have covered a lot of ground thus far in this article series.

In Step One we discussed the importance of determining WHY you are buying a rental property.

In Step Two we talked about financing the property.

In Step Three we changed gears a bit as we talked about how to pick a location that you will invest in.

Step Four examined how you should examine the economic influences of the area you chose to invest in.

As well, our most recently discussed step, Step Five outlined the importance of picking your property type.

In this article we are going to examine how you filter your potential rental properties.

Filtering potential rental properties

Believe it or not, this step is quite easy. At this stage, you will have picked the location that you are investing in, as well you will be focusing on a particular property type.

At this point you should have established a relationship with a local realtor who is knowledgeable about the local market, and who specializes in buying and selling rental properties.

If you have not formed a relationship with this type of realtor yet, this should be your number one priority before you do anything else. You can refer to Step Three in order to see what types of questions you should ask the realtor. These questions should be asked, so that you can determine the realtor’s level of knowledge and comfort in dealing with real estate investors and with rental properties.

There are other methods that you can use to find potential rental properties, however we are not going to get into these methods at this stage.  At this point, my goal is to make this an easy to follow process for you.  Working with a knowledgeable and quality realtor who specializes in rental properties, will help you tremendously, and make this process easy for you.

The 10% Rule

When your realtor is bringing to you properties of interest that match your property type, you must use the 10% rule when examining the property.

What is the 10% Rule?

• The 10% Rule is an incredibly important step that you cannot skip.

• It is a formula that you have to use in order to filter properties.

• If the property passes the 10% rule test, you put this property on your list of ‘properties of interest’.

• If the property fails the 10% rule test, then you want nothing to do with the property. Move onto the next property, and start to analyze that one.

• You must perform the 10% rule test on every single rental property that you review.

The 10% Rule Formula

• You get from your realtor the monthly current rents of the rental property

• You multiply this value by 12

• You take this new value and divide it by the total purchase price of the rental property

• When you calculate this, if you get a number of 10% or greater, you should put this property on your short list.

• If you get a number below 10%, please forget about this property and move on.

The 10% Rule in Action

Here is a practical example of the 10% rule in action.

• I recently purchased a rental property in Hamilton, Ontario, Canada. The rental property was a 3 bedroom townhouse.

• The current rents on the property are $1250/month.

• If I take the value of $1250 and multiply by 12 (months of the year), I get a value of:

$1250 * 12 = $15,000

• I purchased the rental property for $150,000.

• Therefore, I now divide $15,000 by $150,000…

$15,000 / $150,000 = 10%

As you can see, with this example, I obtained a value of 10% after completing the 10% rule. This is a good thing, and these are the types of properties that you want to research further.

Had the rents on this property been only $950/month.

The 10% Rule Test would have looked like this…

$950 * 12 = $11,400

$11,400 / $150,000 = 7.6%

If this was the case, and I obtained a value of 7.6%, I would not have been interested in this property, and I would have moved on to analyze the next property.

At this stage, do not fret too much about understanding the intricacies of the 10% Rule formula.  Just remember that if a property passes the 10% Rule test, it is a good property that you need to further research.

To keep up to date with my blog, enter your e-mail address on the left hand side of the blog.  Or, you can click on the orange RSS button on the top right hand corner of the blog.

Greetings Everyone.

We are now on step five of ‘How to buy your first rental property’.  In this article series, we have examined:

Step One:  Determining WHY you are buying a rental property

Step Two: How to figure out your financing for this property

Step Three:  How to pick the location that you will buy in.

Step Four:  The ecomomic influences of your location

In step five, we examine the importance of picking your property type.

What does ‘property type mean’?

The phrase ‘property type’ refers to the ‘type’ of rental property that you will be buying.  Examples of property types can be:

• detached homes
• semi detached homes
• townhouses
• condominiums, and
• multi-family buildings (such as duplexes, triplexes, etc.)

It is important to know what your property type is before you begin looking at potential rental properties to purchase.  This is important for a number of reasons.

Reason Number One

Defining your property type provides you with direction.  Knowing what type of property you are going to buy will make your search more efficient.  It will save you time with your search. If you don’t know what property type you are buying, you will be bouncing all over the place with no focus. One day you might view a potential rental property that is a townhouse, the other day you might view a potential rental property that is a multi-unit building.

Reason Number Two

Since a townhouse and a multi-unit building are different property types, you might possibly have different tenant profiles as well with these property types.  This is an important factor to consider, as it is always wise to know your tenant profile.  It is good to know your tenant profile because it is good to know what you are getting into.  For instance, if your tenant profile consists of people that are ‘rough around the edges’ that don’t pay rent on time, this is crucial to know.  You don’t want to have a rude awakening the first time you have a bounced rent cheque.  This is a risk that you can mitigate by knowing your tenant profile.

Reason Number Three

Also your required down payment for these 2 property types might be very different. Your bank or lender might have different criteria in terms of downp ayment for the purchase of a townhouse versus the purchase of a multi-unit building.  Since the two properties will probably vary dramatically in purchase price, there is no question that a different amount of funds would be required as a down payment.

For example, if you are purchasing a $150,000 townhouse and you are putting 20% down as a down payment, you will need $30,000.

Versus, if you are looking to purchase a $1,500,000 multi unit building with a 20% down payment.  In this case you will need $300,000!

As you can see, there is obviously a big difference between a $30,000 down payment and a $300,000 down payment!

A question for you!

If you are investing in real estate already, what is your favourite property type? Why?

If you are an aspiring real estate investor, what property type do you want to invest in?  Why?

Feel free to place your comments in the comments section.

Step Four – How to buy your first rental property
Step Six – How to buy your first rental property

Ladies and Gentlemen, what a great blog post I have for you to read.  It is not one of my own, rather, it is a post that I read from a fellow real estate blogger.

The blog post appeared on Josh Dorkin’s premier real estate social network, Biggerpockets.com

The author of this article was Shae Bynes of Good Faith Investing.

The article that I am talking about is called, Your Significant Other Hates Real Estate Investing – Now What?

In my books, here are the reasons that made this article so good.

1) It was a list article

A list article is an easy article to read. List articles often have a lot of bold headlines or

• bullet points

Bold headlines and bullet point when incorporated into an article, make the article easy to read, as your eyes tend to focus on the bold headlines
and

• bullet points

As a result, when someone is reading a list article, they are able to easily absorb the information in the article, because it is easy to follow.

2)  It discussed a common problem

Successful real estate blog posts often discuss a problem that people face.  These types of blog posts tend to be very popular as the problem that is discussed is experienced by many people.

3) It provided a solution

Real estate blog posts that discuss a problem are good. However, if there is also a solution provided to the problem, the post is even better. Shae’s article did in fact provide some solutions to the problem that she was discussing.

4) It promoted discussion

Good blog posts because they are well written, result in people leaving comments in the comments section. A blogger knows when they have written a particularly good blog post when there are multiple comments left by their readers.  Shae’s article had a lot of comments from the readers, meaning that her blog post definitely struck a cord with many of the regular readers.

To keep up to date with my blog, you can enter your e-mail address on the left hand side of the blog. Or, you can click the orange RSS button on the top right hand corner of the blog.