First Rental Property

The title of this article is extremely thought provoking.
However, the content of this article can be easily implemented.

I recently had the opportunity to view a video interview of fellow real estate investor Julie Broad.

[youtube]http://www.youtube.com/watch?v=fEfNd6auWLY[/youtube]

I was able to learn something from Julie by watching this video. As a result, I felt that it was very important to share with all of you what I learned.

Julie is co-owner of RevNYou with Real Estate along with Dave Peniuk.

Julie mentions something in her interview that really opened my eyes to my own personal behaviour.

She made a comment that one of the factors that contributes to her success is that she has a purpose for everything that she does in life.

On the surface, this may seem like simple advice, or maybe even insignificant advice.

However, if you truly adhere to this advice, you become an extremely successful individual.

Hearing this advice from Julie made me realize that I do have purpose in my life, however, I can do a better job at implementing a purpose for EVERYTHING that I do in life.

By making this simple adjustment over just a few days, I can already see how much more productive I am.

This advice can apply to anyone who is in a position where they are looking to buy a rental property. As humans, we are generally inefficient, and we waste a lot of our time on tasks of little importance.

If we can always keep a mental note, that everything that we do has to have a purpose, we will start to realize tremendous results.

Here is an example to help demonstrate how having a purpose with everything you do, can lead you to becoming more efficient.

This evening I attending a meeting with fellow like-minded real estate investors. My purpose for being there was to attend one particular presentation that I had prior knowledge of before the meeting. I was looking forward to this presentation, and I enjoyed it.

After the presentation was over, I had no reason (or purpose) to be there any longer. In the back of my mind, I knew that I had to write a blog article today before the day was over.

As a result, I now had a new purpose, and that was to write a blog article before the end of the day. As a result, I left my meeting and came home so that I could write this article.

What’s the big deal you might be thinking? So what, I was at a meeting, I left the meeting, and then came home. Big deal !!!

Well, there is something significant happening here that I hope you caught onto. That is, I had a purpose of attending the meeting, and I attended. I then had a purpose of writing an article, and I did it.

Having a purpose allows us to stay focused on carrying out our goals.

Always have a purpose, no matter what it is that you are going in life.

I felt like throwing in the towel today folks…

As real estate investors, we have our great days and we have our, not so great days.

Some days you feel like an absolute genius, whereas other days you fear that your house of cards just may come crashing down on you.

The key to success with real estate investment is perseverance.  We hear that with everything though.  People tell us that we got to ‘stick to it’ if we want to succeed.

Yes, that may be true in some situations, but not all. I think that this is an old school way of thinking that does not necessarily always apply to the younger generations.

However, for the most part, if you ‘stick to it’ with real estate investing, you will win big.  After all it was our good friend Andrew Carneige that so eloquently said,

“90% of millionaires become so through owning real estate”

So, if real estate investing is such a ‘sweet deal’, why do people end up quitting after a short period of time?  Why don’t they ‘stick to it’?

Well for starters,

1)  It is not easy.

People think that it is very glamorous, but there is work involved with every rental property that you own.  Often people get the false impression that once they have purchased a rental property, all of the hard work is over. They think that the property goes up in value, and then you eventually sell it.

Although, that might be the eventual outcome, there is a lot of other work that goes into it.  This work involves, finding and screening tenants, overseeing repairs and maintenance, conducting regular inspections, dealing with any potential issues with the property and/or tenants.

Another one of the biggest reasons that people end up bailing on real estate investment, I believe, is because of,

2) Frustration

Wow, was I frustrated today!  Read this story, and tell me honestly if you would be frustrated at this.  Place your comment at the end of this article.  I would love your feedback.

Okay, so it all started in September of this year when one of my properties went vacant.  The tenants were really great people so I was sad to see them go.  Whenever there is a turn over with my tenants, both myself and my tenants contact the respective utility companies and have them switch the utilities back into my name, until there is a new tenant who ends up moving into the property.  Once the new tenant moves into the property, they switch the utilities into their name.  Simple enough, right?  Well, that’s what you would think…

The tenant and myself called the utility company in order to let them know of the upcoming move.  I usually always follow up with the utility companies about a week after the initial request in order to make sure that the request was processed.

As a result, I called in a week later in order to see if the change had been made.  When I called in, they said that no change was made, and that the utility bill was still in my tenant’s name. So,  I kindly asked them to make the change again.

Having depleted confidence in this utility company, I phoned in a couple of days later to make sure that the change had been made.  Sure enough the change was not made.  So I then asked them for the third time to kindly make the change, and ensure that the bills were no longer in my tenant’s name, rather that they were now in my name.

Guess what happened when I called in a few days later to check to see if the change was made?

You guessed it.  No change.

At this point I obviously realized that the people that I was talking to either did not care what they were doing, or there must have been some sort of gap in the training of these people, as they were not able to process this change for me.

After I called in for the 6th time and no change was made when I checked in a few days later, I physically went to one of the head offices of this utility company to see if I could talk to someone there that would be able to make this change.

I was told that there was no one there that would be able to help me, but I was given the telephone number for the ‘Office of the President’.  Sounds impressive, right?  Well not really, especially since I called the ‘Office of the President’, 3 more times to request the change.  The first time I called, I did not get a call back.  The second time I called, I talked to some guy that was getting confrontational with me (great customer service, eh?!) and then the third time I called they said that they would make the change but I never got a call back.

I did some of my own independent research and found out that a portion of this company got outsourced to another company. So, being the resourceful individual that I am,  I called this other company today, and they were much more helpful. The first person that I talked to was able to answer my questions properly.

It turned out that my information was not switched over at all by the other company.  It was a complete nightmare for me dealing with this previous company.

This issue is still not fully resolved, however, I now have some increased confidence dealing with this new company.

As you can see, by reading my uncharacteristic rant, real estate investing can be very frustrating at times. You deal with a lot of unnecessary B.S.

However, if you have the ability to endure this nonsense, you are going to be okay.

Buying your first rental property is not a difficult thing to do relatively speaking.

The key things that you need are a down payment and a mortgage. Your personal debt level is also taken into consideration when you are applying for the mortgage on your first rental property. If your ‘house’ is in order with regards to your personal debt, you should not have much trouble in obtaining a first mortgage for your first rental property.

When a real estate investor begins to acquire multiple rental properties, the financing of these properties becomes increasingly difficult.

As an example, the first purchase could be easy to do however, the 2nd, 5th, 8th, or 13th property purchase could prove to be a little bit more challenging.

If real estate investors are purchasing their properties in their own name (their name on title), it is only a matter of time that they hit a roadblock, and thus are not able to obtain financing (get a mortgage) from any financial institution. People tend to hit this roadblock at different stages, as each real estate investor’s situation is different with respect to their personal debt level. The roadblock will eventually occur.

This is because the Total Debt Servicing Ratios of the real estate investor have reached a certain limit. Because of this, mortgage companies and banks will no longer lend out any funds to the investor.

This means that every real estate investor will at some point in time, hit the brick wall, and will no longer be able to purchase properties. It is only a matter of time, but it will happen to all active real estate investors who are putting the wheels in motion and continually adding properties to their portfolio.

Enter the mortgage partner…

A real estate investor who has mortgage partners is able to continue to purchase rental properties, with no end in sight. Theoretically, a real estate investor could purchase an unlimited amount rental properties, using this mortgage partner strategy.

The relationship with the mortgage partner is as follows.

A real estate investor purchases a rental property. In this example, let’s assume that the real estate investor is working with a joint venture partner. The joint venture partner would provide the real estate investor with all of the money required to purchase the property, and the real estate investor would do all of the work. Let’s further assume that this scenario is a classic joint venture. As such, in a classical joint venture, the real estate investor and the joint venture partner would split the monthly positive cash flow 50/50. In addition, the real estate investor and the joint venture partner would split the proceeds of the sale of the property 50/50, after of course, the joint venture partner’s initial investment is returned.

A mortgage partner is used when the real estate investor can no longer be approved for mortgages by banks or financial institutions. So, in the above example, instead of the real estate investor’s name on the mortgage, it will be the name of the mortgage partner. Meaning that the mortgage partner is the one who qualifies for the mortgage. The mortgage is never in the name of the real estate investor here, because they have already reached their absolute limit with regards to the amount of mortgages they can qualify for.

This arrangement is truly a sweet deal for the mortgage partner.

The mortgage partner will often receive a substantial share in the property. A 10% share in the property is not uncommon.

The joint venture partner will receive their 50% share.

As a result, given the numbers stated above, the real estate investor would retain a 40% interest in the property.

Many experienced real estate investors who own large amounts of rental properties use this strategy.

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Real Estate Investors, it is time to step up to the plate.

I have a call to action for you.

Your help is needed more than ever right now.

As you know, on January 12th 2010, Haiti was struck by it’s most powerful earthquake in 200 years.

Damaged communication channels have made it very difficult to know how many people have died. However, it is estimated that thousands of people have lost their lives.

3 million people have been affected by this devastating earthquake. This is one third of Haiti’s population.

Photographs and television coverage of the devastation have been seen around the world. The images are awful. We can see with our own eyes that homes and hospitals have been destroyed.

There is not enough fresh drinking water, food or medical supplies. Diseases like cholera are at risk of growing. Many children are especially vulnerable to these such diseases.

The Haitian People need our help more than ever right now. So, let’s put our best foot forward and help out in a big way.

Here is what I propose:

A large percentage of you that read this blog are real estate investors.
I challenge and encourage all real estate investors that own at least one rental property to donate:

One month’s worth of positive cash flow from one of your rental properties to The Haitian people.

For example, one of my rental properties cash flows $136/month. As a result, tonight, I donated $136 to a charity that is doing relief work in Haiti.

If every real estate investor that reads this blog post can do this, we will be able to raise a considerable amount of funds for The Haitian people.

Our goal is to raise $10,000 immediately.

I have full confidence that we can do this. This can be achieved by forwarding this blog post to all the real estate investors that you know, and ask them to make a donation.  Even if you have not purchased your first rental property, donate an amount that you think is reasonable.

Here is what we need to do in order to keep track of our efforts:

Once you have made a donation, post a comment in the comments section telling us that you have made a donation.

Since we will have no way of tracking the amounts that people donate, as people will be donating to different charities, post your amount in your comment if you are comfortable with this.

Post your name in the comments section.

My hope is that this blog post goes VIRAL and spreads throughout the online real estate community. There are enough people out there in the online world, that we should be able to hit this goal of raising $10,000.

I have posted my first comment in the comments section. Check it out.

Please donate. Share this blog post. Let’s raise $10,000 in support of Haiti.

Let’s make this blog post go VIRAL

Here are four links to charities that you can donate to online:

1) The Canadian Red Cross

2) World Vision Canada

3) American Red Cross

4) Emmanuel International Canada

After you donate, don’t forget to post your comment here!  🙂

Networking is an art that not all people can master.

If you are involved in real estate investment for any period of time, you will have to rely upon other people. These other people will be members of your real estate investment team.

In order to be a successful and effective real estate investor, you need a team of professionals behind you. These team members can include people such as real estate agents, mortgage brokers, and real estate lawyers, just to name a few.

Chances are that if you are somewhat serious about real estate investing, you are constantly networking in order to ensure that you have the best team of professionals working for you.

There are many factors to consider when selecting someone to be a part of your real estate investment team.

Experience and knowledge of the subject matter are two very important factors to consider when selecting professionals for your team.

Meeting these people through word of mouth or through networking events are two ways that I would recommend you build your team.

I caution you here, as some networking events don’t always live up to the hype.

There is nothing more funny to me, than meeting Googly Eyed people at networking events.

What is a Googly Eyed person?

A googly eyed person is someone that you meet at a networking event, however they have one distinguishing feature. You begin talking to them, as you normally would do with anyone that you meet at these such events. The characteristic that distinguishes this person is how incredibly shifty their eyes are when you are talking to them. Their eyes are so shifty, they look like googly eyes.

In my mind, it is clear why their eyes go googly.

They are not focused on the conversation with you. They are looking around the room, to see who else they can speak to next. They do not perceive you as being an ‘important’ person. They want to stop talking to you and move on to talk to someone more ‘important’.

I was at a networking event today. I walked into the room. With the first person that I made eye contact with, I walked over and introduced myself. As we both started talking, this person’s eyes started shifting all over the place. It was getting so distracting for me, I had to pause and wait for him to make eye contact with me again, so that I could continue my sentence. It was clear to me that this guy did not perceive me as being important. He was looking around the room to see who was entering into the room.

I believe that if you notice a person having googly eyes as they talk to you, it can serve as a clear indicator towards their character.

I continued my conversation with this guy for a few minutes longer. Just as I was wrapping up my conversation, his googly eyes made eye contact with another person that he knew that was standing close by. Once she walked over, I used this as my reason to exit the conversation.  I said goodbye and walked away.

After speaking to this guy for such a short period of time, I was able to read so much into his character.

My thoughts were that:

1) He was annoyed talking to me
2) He wanted to speak to someone more important
3) He found no value in our conversation

I could tell all of this, just by watching his googly eyes shoot all over the place as I was talking to him.

Later in the event, I was seated at a table with 6 other people. I was having a conversation with one gentlemen, who was very focused on our conversation. He consistently looked me in the eye, and did not shift his attention, despite numerous conversations happening around us. I could tell this guy was focused and locked into our conversation.

So what does all this mean?

Who cares if someone is googly eyed, or not?

I care, and I will tell you why.

As a real estate investor, when I am assembling a team of professionals to work with, I often find myself in networking situations.

When I am speaking to people in these environments, I want to only talk to and focus my time with those professionals that are focused 100% on our conversation.

I don’t like it when people are shifty eyed, because this tells me that they have some sort of other agenda, and that they don’t want to be talking to me.

As a result, I only focus my time talking to those people at networking events that are focused and passionate about the topic of the conversation.

You can tell a great deal about someone if they have googly eyes!

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I have met a lot of weirdos.

I started to meet some of these weirdos when I began investing in real estate almost 5 years ago.  Over this period of time, I have met a lot of real estate investors.  The personalities of these investors have been extremely varied.

I have met really nice and sincere investors, and on the flip side I have met insincere and disgruntled investors.  I have met veteran investors who are happy to mentor new investors, and I have met veteran investors who secretly hope that newer investors fail.

I have learned that just as real estate investor’s personalities differ, so too do the reasons that people invest in real estate.

I have listed 9 different reasons that I believe people invest in real estate.  Here they are in no particular order.

1) Status

I have seen some people invest in real estate, and continue to invest in real estate over many years, in order to ‘show off’.  They invest because they feel that the more properties they have, the more other people will be impressed.

This guy here is a show off…

2) Fear of Poverty

People invest in real estate because they are afraid of poverty.  They might be afraid that if they do not invest in real estate, that they will end up in a difficult financial situation down the road.  As a result, because they are afraid of poverty, this gives them the motivation to pull the trigger and invest in real estate.

3) Increased Net Worth

People invest in real estate because they want to increase their net worth.  Said differently, people invest in real estate because they want to become ‘rich’.

4)  They are opposed to the financial markets

I have seen some people that hate investing in the financial markets.  As a result, investing their money in real estate is the only other option for them. It is either real estate, or stuffing their money underneath their mattress.

5) People want to buy things

Some people are motivated to invest in real estate because they want to purchase material things.  The cash flow provided through real estate investment allows people to buy the things that they want.

6)  They want to go on vacation

Some real estate investors that I know are motivated to invest in real estate, because it allows them to go on regular vacations.  They use the cash flow, or the appreciation from properties to pay for their trips and vacations.

7)  Trying to find a sense of self worth

Some people do not know what their purpose is in life.  They feel that they have no direction, or no guidance.  As a result, I have seen some people invest in real estate, and obtain direction through these actions.  They have become more focused and they feel that they have a purpose in life.

8 ) A sense of competition

Some real estate investors have a competitive nature.  They invest in real estate, and try to acquire as many properties as they can, as a personal challenge.

9) Follow the crowd

People invest in real estate because they see others doing it.  They watch from a distance and come to the conclusion that it cannot be too difficult to do.  As a result, they jump feet first into the real estate investing game by watching others and just by simply following the crowd.