First Rental Property

Hello Everyone,

Most experienced real estate investors do not use any of their personal funds to purchase rental properties.  It is not uncommon for experienced investors to own dozens of rental properties, yet at the same time having never used a single penny of their own personal savings.  These investors have mastered the concept of leverage, and that is what allows them to continue to buy multiple properties. To help you understand leverage a little bit better, I have asked one of my fellow real estate investors to answer a ‘reader’s question’ for you.

Here is the question that one reader had recently submitted:

Hi Neil, great info.

RE:  First Rental Property

Most down payments come from secured line of credit or sometimes called HELOC, the question is do investors pay down the loan or leave it? 

Regards,

J

Great questions,  J!  Now to answer the question, here is a response from an experienced and trusted real estate investor, Todor Yordanov.  Todor himself has used the concept of leverage in his real estate investing career, and has some advice to offer “J” and any other novice investors thinking about using leverage…

Take it away, Todor!

Hi J,

Todor here.

This is an interesting dilemma

Many beginner investors will use money from a Secured Line of Credit as a down payment for their first or second investment property. A Secured Line of Credit, also known as HELOC (home equity line of credit) is a Line of Credit secured against your home.

Typical interest rates on these Lines of Credit are around prime plus 1%, thus making it very affordable to borrow funds. Given the fact that your equity is “just sitting there” and not working hard to make you more money and also the record low interest rate to borrow against it makes it very attractive option to use as a down payment.

Back to the question!

You already purchased a property that cash-flows positive every month. Now do you only pay the minimum, usually interest only, on your line of credit and keep the rest in your pocket or do you also try to pay down the principle as well.

This entirely depends on your objective for the property, your exit strategy and how the property performs. There are no wrong answers, but there may be wrong decisions.

Accounting, taxation and ultimately where your “pay cheque” comes from will determine the right answer for you!

Here are some things to consider:

• Your monthly cash-flow and what you do with it. If the positive cash-flow covers all expenses and you have enough left over to pay down the principal on the Line of Credit, then why not? Some investors rely on cash-flow to cover their living expenses, i.e. full-time investors.
• Taxation – Are there any tax advantages in paying down the principal?
• Your long term and short term objectives.

It is entirely possible that you are planning to retire in few short years and “just want to pay everything off” and live off the rental income. Paying down debt may be right for you.

But also look at it this way: You are using cash-flow money (profit) and in fact re-investing it back into a Line of Credit or principle pay down. Will the money work hard for you? Can you do something better with your profits? The answer will be different for each investor.

Perhaps you can split your profits. Use some to pay down debt ( mortgages, Lines of Credit, credit cards) , use some to re-invest, use some to have fun. After all you should reward yourself for working hard and creating income streams that work.

Eventually after 25-35 years the mortgage will be paid off and hopefully the value will be significantly higher, which will more than cover your original down payment. But typically after 5 years the property’s value is high enough to allow you to refinance at the new value, get a new mortgage and take your original down payment back.

Right now money is “cheap”. The borrowing costs are so low, that the more I can borrow to buy income producing properties, the better. You still have to be very careful to get into the right properties, in the right locations. The type of properties that give you:

• The highest possible monthly cash-flow
• Excellent potential for Equity appreciation
• And solid tenants that pay your mortgage every month

As long as I have a property that can service all the debts associated with it and still provide me with positive cash-flow, I’ll keep it in my pocket and re-invest it for now.

I hope that helps to answer your question, J.

-Todor.

Todor Yordanov is a long time real estate investor with a focus on long term cash-flow properties that provide superior returns to his investors. He regularly blogs on his web site www.ProactInvestments.com 

Happy Investing!

Neil

Would you Buy a Home 0-3.5% Down or find a Rent to Own Home if you could?  Or do you just need Credit help?

The H.O.P.E. Program will work hard, getting you as close as possible to getting that 0-3.5% down home loan no matter how bad your credit is from the start.

CLICK HERE to be contacted about The H.O.P.E. Program or to have your Credit Fixed!

Hi Folks,

Did you know that, the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you?

This post is going to spark some controversy no doubt.

If you are someone who is looking to buy your first rental property, one of the things that probably freaks you out the most is non paying tenants.

Over the years, I have talked to a lot of new real estate investors.  Two of the things that make people very afraid about investing in real estate are:

1) Non Paying Tenants, and

2) Property Management

If you purchase a rental property, and hold that property for any gs rolex day date 118135 36mm mens automatic watch length of time, no matter what Country or City you are located, chances are that eventually you will encounter tenants that are late with their rent.

Like many real estate investors, if you expand your portfolio by purchasing more than one rental property, you increase the likelihood that you will have tenants that are late with their rent.

Most experienced real estate investors and educators will tell you that when a tenant is late with their rent, you have to be very strict with them and lay down the law.

Many say that if tenants are even one day late with their rent, you should send a notice for eviction.

Well, in my opinion, that is a big pile of Bullplop!

I bought my first rental property 7 years ago, and only 7 years later I figured out something very important.

I have discovered that when it comes to the vape Líquidos collection of rent, that:

“the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you.”

There is much more to this of course, however, for this post, I want to keep you with these wise words…

Once again, they are:

“the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you.”

In part II of this blog post I will share with you my findings on how NOT to be an asshole landlord when it comes to the collection of rent.

Now…Enjoy this very funny video of Pearl The Landlord.

[youtube]http://www.youtube.com/watch?v=9OVt7xEZHxo[/youtube]

ps: If you are looking to buy your first rental property, sign up to my blog today.  Simply enter your email address in the top right hand corner of the blog.  You will receive tips from experienced real estate investors on how to buy your first rental property!

Hi Everyone,

A major reason why people do not invest in real estate is because they have many questions that go unanswered.  In an effort to answer questions from my readers, I have implemented, Priceless Tips From An Experienced Real Estate Investor.

Already we are on Part 2 of this series.  I have no doubt that this article series will continue on for a long time, as the questions from you the readers will continue to come in.

As time goes on, I am going to have other experienced real estate investors take turns in answering your questions.  However for now, it is I who will be providing the feedback on these questions.

So here we go.

I got an email yesterday from another reader.  This reader wanted some direction on how to move forward with real estate investing.  Once again, to protect their confidentiality, i am going to be referring to them as, ‘Reader’.

Here is the question that the Reader sent.  I have included their question in BLUE Text.  My answers to their questions are in RED Text.

Here we go…

“Hey Neil

Reader, I hope this information helps to answer your questions.  For those of you with questions, please keep them coming.

Until next time…

Neil.

ps: If you know anyone who would be interested in reading my blog, please tell them about it.  Feel free to Tweet the article using the icon above or share the link on Facebook.

pps: don’t forget to read part one of this series titled, Priceless Tips From An Experienced Real Estate Investor

Hi Everyone,

If you really wanted something, and you were able to get this “something” for free, would you take it?

Take a moment and think about that.  I am not trying to trick you. I would hope that your answer would be an astounding….”YES!”

You are in for a treat because I am going to give you this ‘Something’!

This ‘something’ is advice!

Not any old advice, but advice on real estate!

This post will be the first of many posts devoted to answering questions from you, the readers of First Rental Property.  Moving forward, I will also be asking some experienced real estate investors to provide their answers to your questions.  This will allow you to have a diverse array of opinions.

Below is an email that I got from one of my readers today.  They were asking for my opinion on a number of topics.  I thought that it would be best to publicly answer all of these questions so that more of you could benefit from reading these answers.

So here we go.  Here is the email I got today…

To protect their identity, I will be referring to them as….”Reader”

Hi Everyone,

There is a secret to investing in real estate that you need to know.

Chances are, if you have been investing in real estate successfully, you have figured this out.

If you are new to the world of real estate investing, you probably don’t know this by now.

The advice that I am going to offer in this article is straight forward and seems like common sense.

However, you must know that this is not common sense.

This realization has taken me 7 years to fully understand.

It has been close to 7 years since I bought my first rental property.  Luckily, my first rental property purchase was a  great success.  So much so, that I still own that property today despite temptation to sell due to the increase in value that it has experienced.

If you can follow the advice presented in this article, you will be a successful real estate investor, no problem.  All you need to do is focus on the follow 3 principles when you are buying your first rental property.

Here are the principals in no particular order:

1)   Buy in an area experiencing above average appreciation.

When I bought my first rental property, I understood this concept completely.  I purchased a  property in a town with above average appreciation compared to surrounding towns.  This was the smartest move I have made in my real estate investing career as this property will double it’s value within the next 5 years from the time I purchased the property. (property was purchased for $250,990 in 2005.  The estimated value of the property in another five years will be approximately $500,000)

For the most part when people buy a rental property, they are motivated to do this due to two reasons.  The first reason is to build wealth through property appreciation, and the second reason is to generate an income stream.  Speaking of income streams…

2) Your property should cash flow

Notice that I use the word, ‘should’ and not ‘must’.  Here is the reason why…

My first rental property did not cash flow when I first bought it.  In fact, it was a negative cash flow property by about $200/month.  I bought the property because I knew that it was going to appreciate.  I knew that the appreciation of the property would cancel out any small loss I was incurring on a monthly basis.

This was back in the year 2005.  Clearly things have changed since then with our world economy.  As such, we are not experiencing the same levels of property appreciation year over year in many real estate markets.

I say that the property ‘should’ cash flow because it does not ‘have’ to cash flow.  I think it ‘should’ cash flow because you need that cash flow to pay for any operational costs associated with  running the property.

Here is the reality…

If you own a rental property for any given period of time, there will be some repairs and maintenance that you will have to take care of.  Whether it is replacing the furnace, air conditioner, or updating to new wood flooring, there will be some additional cost that you will incur down the road that you have to take care of.

The money required for your repairs and maintenance will either be coming from your own personal funds, from borrowed funds such as a line of credit, or from the cash flow being generated from the property.

A rental property that you purchase ‘should’ cash flow because you will need this cash flow in order to pay for expenses related to the property.

I have used cash flow from my properties to pay for Christmas gifts for my tenants, as well as Welcome Baskets for tenants when they first move in.  The money required to pay for these gifts has to come from somewhere.  If it is not coming from out of your own personal funds, the second best place it can come from is the cash flow generated from the property.

3) You need tenants making an above average income that are low maintenance

This last point is going to spark some controversy no doubt.  But here is the reality.  The controversy that will result from this statement, will be generated from people who own or who have some sort of interest in properites in low income areas.

The plain truth is that, if you have a tenant profile that is making an above average income, chances are is that they will be low maintenance.

Low maintenance meaning that you will not be faced with tenant and landlord issues such as evictions.

I have experienced owning properties with tenants earning below average incomes as well as above average incomes.

If I had the choice (and I do) I would chose to have tenants making an above average income.  Knowing this, in return I would be rewarded with an easy property to manage.

Generally speaking, I believe this to be true because tenants earning an above average income for the most part experience less social problems.

On the flip side, tenants earning below average incomes are peppered with social problems.  (this is not everyone of course.  However, if you stick around as a landlord long enough, you will see what I am talking about)…How is that for a controversial statement?

So in summary, when you are buying a rental property, and especially when it is your first rental property, stay focused on the following:

Buy for appreciation

Remember, you need ‘cash flow’

and…

Get above average income earning tenants!

Until next time.

Regards,

Neil

ps: sign up the First Rental Property Newsletter by entering your email address on the top right hand corner of the blog.  In the First Rental Property Newsletter you will get advice from experienced real estate investors on how to purchase your first rental property!

I wish I knew all of the answers 6 years ago.  If I did, my real estate investing journey would have been a smooth one.

Wait.

Let me take that back.

The journey would not have been ‘a smooth one’.  Rather, it would have been much ‘smoother’.

Is smoother even a word??  I am not sure.  It is late and I have been knocking on doors non stop for my friend Max these days.

What I am sure about is this…

If you are a new real estate investor, you need to read this article!

Without question, new real estate investors have false beliefs about the reality of managing rental property.

It has been my experience, speaking to countless new investors, that they all panic about the idea of managing their own rental property.

If you are a new real estate investor, and you are reading this, you may think that I am speaking directly to you.  The truth is that I am.  I am speaking to all new real estate investors.  So please listen up!

The Secret To Managing Rental Properties

My property manager friends and property manager readers are not going to like what I am about to say…

If you are a new real estate investor, and you have just bought your first rental property, you must manage your rental property on your own.  That’s right… on your own!

There is one caveat to this however.  If the property is too far away from where you live (several hours drive) then it is acceptable to use a property manager.  However, if the property is closeby to where you live, you must manage it yourself.

Too often I speak to new real estate investors who think that they can simply outsource the task of managing their property to a property manager.

If you do this at the very begining of your real estate investing career, you are in for some serious trouble.

Serious Trouble

The serious trouble I speak of occurs when you simply do not know how to manage your property.  When you are managing the property on your own you are in constant contact (or at least should be) with your tenants.  In addition, you periodically should be visiting your property as well, in order to monitor the upkeep of the property.  If you outsource these taks to someone else, like a property manager, you are making 2 big errors at the very begining of your real estate investing career.

Your Two Big Errors

Your first error is:

A non existent relationship with your tenant

Real estate investing is a misleading term for buying investment real estate.  The act of buying investment real estate should be called ‘tenant relationships’ or something to that effect. The faster you can learn that you have to have  great relationships with your tenants, the more successful you will be, and chances are the longer you will keep at it.  (investing in real estate)

Your second big error:

A lack of property inspections

Plain and simple:  No one will care for your rental property like you would.  This includes property managers.  As  a new real estate investor, it is YOU who has to take the responsibility of inspecting your properties now and then, and making sure that the property is being taken care of.

If you are not keeping your eyes on your property, the smallest maintenance issue can slowly become a major repair.

Example, after a recent inspection at one of my rental properties, my handyman and I noticed some water damage in one of the bathrooms.  We are being proactive and taking care of this issue by doing some repairs.  Had we not noticed this, and if this problem was left for too long…it would have turned into a major problem and a major repair, costing several thousands of dollars.

New Investors: Take Note

I am not writing this article for fun.  I am writing this article to hopefully help some new real estate investors understand one thing.

Manage your rental property yourself!

Do not rely on anyone else to do this.  Your life will be much less stressful if you manager your properties on your own.  How do you think I know this?

Onwards and Upwards,

Neil Uttamsingh

ps: New real estate investors, sign up to my blog today.  Through reading my blog you will get hints, tips and tricks to help you buy your first rental property.

The mission statement of this blog is to, “provide knowledge and confidence to help you buy your first rental property.”

If you have been following this blog for some time, hopefully you are gaining the necessary confidence to help you take action toward buying your first rental property.

If you are still struggling with your confidence, I have the perfect solution for you.

Before I present you with this great solution, I am going to make a quick comment.

Neil’s Quick Comment

In all my years of investing in real estate, I have noticed that those individuals who DO NOT invest in real estate, however truly want to, fundamentally lack confidence.

There are of course other factors that come into play as well, however, if you are not confident, nothing else matters, and you will never end up investing in real estate.

My friend and fellow real estate investor Brian Persaud once planted a seed of thought in my head, that helped me to understand further the dynamic of people, real estate, and how people can increase their confidence with respect to real estate investing.

Brian said that sometimes people can increase their confidence by coming out of their comfort zone by doing things such as martial arts. (These are not his exact words, rather, I am interpreting and paraphrasing some of his dialogue)

His idea here was that martial arts generally gets people out of their regular routine, and provides them with something new and exciting that they have never done before.

Once people partake in this new and exciting activity, their comfort zone will have expanded, and they may feel more inclined to do something now (invest in real estate) that they were once afraid of doing in the past.

Plain and simple, if you lack confidence and you want to increase confidence, you have to do something that is going to take you WAY out of your comfort zone.  You can do martial arts or you can do door to door canvasing for a political party…

Enter The 2011 Federal Election

If you are Canadian, you are reading this article in April 2011, and you are looking to improve upon your confidence, I highly recommend that you do door to door canvassing for a political party or candidate.

There is an upcoming Federal Election in Canada on May 2nd 2011.  Any candidate who is looking to run a good campaign and who is looking to win needs volunteers.

The quickest way you can get a crash course on how to improve your confidence is by becoming a door to door canvasser.

Speaking to people door to door is not an easy thing to do.  You will find that by doing this, your confidence level will automatically increase, the more you are speaking to people in this fashion.

The end goal of course is to increase your overall confidence level so that you can take action and not be afraid of doing other things such as investing in real estate.

Confidence is a funny thing.  It is funny in that when you increase your confidence levels in one area of your life (for instance through door to door canvassing), it can have a very positive effect on other areas of your life.  (for instance your comfort level with real estate investing)

In Summary

If you are looking to invest in real estate, however you are too afraid to take any action at this point, you need to improve upon your confidence.

If you are in Canada, get out and start volunteering for a political candidate or political party during this federal election.  You have just under a month left, so get out there right away!

You will be surprised how much confidence you will gain by speaking to complete strangers door to door.

Do something to increase you confidence today!

Best Regards,

Neil Uttamsingh

ps: If you want to buy your first rental property and don’t know where to begin, subscribe to my blog.  I will help to improve your confidence and knowledge so that you can buy your first rental property.

Every real estate investor has a TSN Turning Point. If you are Canadian, and if you are a sports fan, you may know what I am referring to when I say, ‘TSN Turning Point‘.

If you have no idea what I am talking about, not to worry.

Here is what I mean…

For many years TSN had been Canada’s leading sports network.

After each televised sports game on this network, the sports commentators covering the game would review the highlights of the game as well as what they called the ‘TSN Turning Point’.

The TSN Turning Point was the time in the game where the momentum shifted for the winning team.  It was a time in which the winning team took stride.

It was a point in which the winning team made a key play that helped them win the game.

All Real Estate Investors Have A TSN Turning Point

Every experienced real estate investor can tell you when their own personal TSN Turning Point occurred.

A TSN Turning point for a real estate investor is a time in which they gained momentum, confidence, and belief in themselves.

For myself and many other real estate investors that I know, The Real Estate Investment Network ACRE Event was The TSN Turning Point.

Today I have a treat for you. The Real Estate Investment Network and Don R. Campbell have a guest post for you. In the post Don and the Real Estate Investment Network refer to the real estate investing space in Canada as well as the upcoming Toronto REIN ACRES Event.

Enjoy the post and feel free to leave your comments for Don in the comments section below.

Best Regards,
Neil Uttamsingh

ps: Don’t forget to subscribe to my blog if you are a new to the world of real estate investing. You will find very valuable information on this blog that will help you to buy your first rental property.

—————————————————————————-

A Canadian
Real Estate Market

Doesn’t Exist in 2011,

So Don’t Be Fooled

What does 2011 hold for
Canadian Homeowners and Real Estate Investors?

Almost a quarter of the way into the new year, many
people are still looking for ‘predictions’ of what 2011 will hold. That’s why
you see so many pundits come out of the woodwork to share their insights. I do
find this a bit strange as nothing about the market really changed from December
2010 to January 2011 and through to March 2011, other than a few new pictures on
your kitchen calendar. Those who pay close attention to the underlying economic
fundamentals aren’t struggling with what is coming next.

But having said that, let’s take a look at what the next 12 to 18 months hold
for Canadian real estate.

Quick 2010 Overview – Multiple Levels of Confusion

In order to look forward, we do need a quick review of
2010. The year in real estate turned out to be exactly as predicted in January
2010. It was a year of turmoil and confusion (the big economic ‘W’) and those
who were unaware that we were riding this 2010 ‘W’ allowed themselves to be
shaken out of the market (right at the wrong time!)

The economic ‘W’ does have a real cleansing effect on the market as it always
chases out most of the speculators (those who profit only when market values
increase dramatically) and leaves the market to the real professional investors
and landlords.

This confusion was especially felt by those using housing market numbers to
analyze the market. Investors understand that:

If You Are Making Decision based
on Housing Market Numbers

… You are Driving By, Looking In The Rear-view Mirror, and are Bound To Crash!

Government Meddling Led To
Unsustainable Mini-Boom

More confusion was thrown into two very large markets
(BC and Ontario) with the announcement of the HST. Despite some limited efforts
by both provincial governments, how the HST was going to affect real estate
purchases and sales was not clear – into this vacuum sped confusion and an
almost breathless panic to get purchases done before July 1st. This caused a
higher percentage of purchases to be pushed into the first half of the year than
would normally be expected. Due to their sizes, these two markets hold such a
high percentage of the Canadian real estate transactions that this activity made
the Canadian average price and activity jump despite most other markets
underperforming.

This cursory analysis led some housing analysts to predict that a bubble was
forming. This, of course, turned out to be false as markets slowed down again
later in the year. Those of us who analyze the real estate market by looking at
underlying economic conditions knew this boom would be short lived and was a
product of desperation rather than true market sentiments.

A ‘Canadian’ Real Estate Market Does Not Exist

Overall, 2010 proved to investors and homeowners alike
that a ‘Canadian’ real estate market doesn’t exist in and of itself. The
Canadian real estate market is actually a series of very regional markets all
which perform relatively exclusive of each other.

In fact, in 2010 and in 2011 the market really will be a ‘Goldilocks’ story.
Some markets will be too hot (compared to underlying economics), others will be
too cold, and some will perform just right. As our regions continue to detach
from each other economically this trend will continue for many years to come and
will compel investors and homeowners to ignore national real estate numbers and
trends. They must focus on what is happening in their region.

2011 Market Predictions

To make it easier to predict what is going to occur in their
local real estate markets, investors can use the formula shown below. Long term
increasing prices of real estate stem from economic (GDP) growth. Without
economic growth, a real estate market is not sustainable. Sure there can be
upward and downward blips not attributed to economic growth (such as when the
governments meddle as in 2010), but these are just short-term unsupported blips.

Figure: The Long Term Real
Estate Formula

GDP Growth = Job Growth = (12 months later) Population
Growth = Increased Rental Demand = Decreased Vacancies = Increased Rents = (18
months later) Property Purchase Demand = Increase in Property Prices

This cycle works both ways, over roughly the same time lines. Sustainable real
estate price increases occur approximately 18 months after a region’s economy
begins to grow and they drop approximately 18 months after the economy in a
region begins to shrink.

We can use Alberta’s markets as the perfect illustration of this formula in
action. Alberta’s GDP grew so quickly for years in a row and the real estate
markets skyrocketed over that time and even after the economy began to slow
down. This set up a number of high expectations and assumptions by people not
understanding this formula and scared a lot of people out of the market. Even
today, despite the fact that Alberta is going to lead the nation in economic
growth in 2011, those who experienced the 20% annual increases in the past are
sitting on the sidelines waiting for the market to come back. Smart investors
who understand the inevitability of this formula are quietly picking up pieces
of Alberta cash-flowing real estate, positioning themselves for the inevitable
increase in demand 12 to 18 months from the start of the strong economic growth.

Because Canada’s 2011 market is going to be even more regionally fractured than
in 2010, it is imperative that investors and homeowners understand this formula
and they make their investment decisions based on it, rather than the
fluctuating housing market numbers.

CREA & Competition Bureau
Settlement Leads to Unintended Consequences in 2011

As with any structural changes to an industry, the settlement
imposed by the Competition Bureau on Canadian Real Estate Association’s MLS
website will have many unintended consequences on the health of the Canadian
real estate market. We are currently completing a full report and analysis of
these consequences (some of which are OK and some of which are not good news).
Here are some preliminary conclusions that will affect the overall market:

1. Housing metrics will indicate incorrect readings of the
   health of the market, leading to inaccurate analysis by some market
   commentators during the year
2. Often used metrics such as ‘sales to listings ratio’,
   ‘days on market’, and ‘overall number of listings’ will be impossible to use
   as comparisons to previous year’s performance. This is because under the new
   rules, there will be many more listings being posted by people just fishing
   the market at very little cost (many poorly priced, poorly managed listings
   left in the system too long).
3. These additional listings will lead to average price
   increases being softened more than the underlying economics would usually
   lead to.

The complete Unintended Consequences of the CREA
Settlement with the Competition Bureau report will be publically distributed to
all who are subscribed to
www.myREINspace.com.

Finally, the distinction between real estate “investors” and real estate
“speculators” is created by one thing – a sound and unbiased education in real
estate fundamentals. Done properly, real estate investing produces results in
any market conditions because it incorporates economic fundamentals, proven
business practices, and a long-term vision. On the other hand, real estate
speculation requires perfect timing, lots of hope, and a strong enough stomach
to ride out the cycles in the market!

By far the quickest, least expensive and most engaging way to become a
sophisticated real estate investor is to set April 16th and 17th aside to attend
the

2011 Toronto ACRE™ Live event. Now in it’s 19th year, the ACRE™ system
continues to be where Canadians go to receive an unbiased real estate investing
education that works – not because if focuses on the “Canadian” market, but
because it teaches investors to drill down into the economic fundamentals that
drive regional real estate markets.

Due to popular demand, guest posts have returned back to First Rental Property.  It has been a while since our last guest post, however, the wait has been well worth it.

Today I have for you a very well written article compliments of Phil Wiper of Family Lending.

In today’s article, Phil discusses 5 important factors that every new real estate investor needs to consider when they are buying their first rental property.

Enjoy the article, and please leave your comments in the comments section below.

Also, don’t forget to check out the article I wrote for The Family Lending Blog titled, Here Is A Method That Is Helping Home Owners Save Thousands On Their Mortgage.

Best Regards,

Neil Uttamsingh

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5 Items to Consider When Purchasing Rental Property

If you are ready to purchase your first rental property or still sitting on the fence wondering if you are making the right decision, I am here to tell you that the decision to purchase your first rental property is never an easy one but once you have done so, you will never turn back.
You’re probably wondering why should you listen to me, but I have bought and sold over 10 rentals in the last couple of years. I am here to say that if I just looked out for these 5 items that I am going to share with you, I would have been a much happier camper. Instead, I had to learn the hard way, one building, and one tenant at a time.
These 5 important items include:

1. What is the expected cash flow from the rental property?
•    First lets say that you are looking at a duplex for $200,000
•    Through your market research and the information you obtained from your appraiser, you have determined that the market rents for your area are X.
•    Next you should have been given a pro-forma of expense for the property which includes the mortgage, insurance estimate, property tax amount, utilities (if the tenant is not paying them) and the property management costs.
•    Your objective is to have this property putting POSITIVE CASH FLOW in your pocket from day ONE.
•    Not all areas of the city can support the rent required to cover the mortgage and the expenses. My suggestion, do not purchase in the areas where you know that this will not work. You are looking for areas where you can have positive cash flow, after all you are in this to make money right?

2. Pick a neighborhood with low vacancy rates in comparison to the rest of the city.
•    From my personal experience, it is best if you look to purchase a rental home in a healthier neighborhood. There are a couple of reasons for this; one is that you will be looking at a higher rental payment and two, the vacancy rates tend to be lower.

3. Take your time in picking a qualified tenant.

–  Taking your time to select the right tenant will help you reduce risks in the future. A better qualified tenant also means lower costs and problems down the road for you, the owner.

4. For your 1st rental property or two, the home that you purchase should be in move-in condition.
•    Since you will be busy making sure the home is fully rented out when you take over, the best thing that you can do is buy a unit that is move-in ready. Now I am not including the minor jobs including making cosmetic changes such as cleaning or maybe painting a room or two but the changes should not include major repairs.

5. Buy low and sell HIGH – always be on the look out for homes that are priced under the current market value.
•    Low sale price does not mean low value or low rents
•    How do you find these deals? Ask. Ask everyone you know. Take the time to get to know the area you are looking for.
•    Be on the look out for pre-foreclosures, foreclosures, and homes that have been on the market for a year.
Now what do you do? Go buy a rental unit of course. Still need help calculating what you can afford? Try our handy mortgage calculator canada which can help you calculate payment options, schedule of payments and much more. Also, follow FamilyLending.ca on Facebook and Twitter!

Check out the folks at Family Lending today!

The most important thing that you can do while you are dealing with an eviction, is to actually  know the process.

Not only do you need to know the eviction process well, you need to know it better than anyone else.

I can’t stress these words enough.

Know the Process!

You need to know the process better than your tenants and better than your property manager if you are working with one.

If you do not know the process better than everyone else, you are going to be in for trouble.

You are going to be in for trouble because this means that someone else, other than you knows the eviction process better.  This could be your tenant, or this could be your property manager.

So what if they know the eviction process better?

You better be concerned if you do not know the process better than others.  Having a misunderstanding of or having a lack of knowledge concerning the eviction process is what causes a lot of pain and suffering.

This pain and suffering is felt by you, the real estate investor.

The pain and suffering manifests itself in the form of missed deadlines and misinterpretations of the eviction process.

Missed Deadlines

As we have covered in previous posts, the ruling body responsible for overseeing your hearing requires you to submit documentation at different times throughout the eviction process.  Paperwork needs to be submitted either to the tenants directly, or straight to the ruling body itself.  Keeping in mind that rules and regulations concerning evictions vary between jurisdictions.

You have to have an in depth understanding of when all of the deadlines are.    This is important as failing to submit documentation by a certain date can delay the eviction process and in some cases void the eviction process altogether.

If you do not have a good understanding of these deadlines, plain and simple, it is going to be very easy to miss them.

If you lack knowledge with regards to these deadlines, you may depend on information provided to you by other people as to when these deadlines are.  For instance, you may ask a friend or your property manager when a certain deadline is.  Your property manager or your friend give you the information and you do not question it whatsoever.

Now consider this…

What happens if the information that someone gave you  is wrong regarding the eviction process?   For instance, someone can give you the wrong time frame in which you are supposed to submit paperwork to your tenant.

Here is what happens as a result…

What happens in most cases is that people will take the information at face value and not question the information at all.

This is dangerous as this can result in a delayed eviction process.

For example, there are certain time lines imposed by the ruling body in your jurisdiction.

You may get a certain amount of days in which you have to serve your tenants with specific paperwork.  If you fail to serve the required paperwork to your tenants during the necessary timeline, this can cause the eviction process to be delayed.

Time is of the essence during the eviction process.

If your tenants are not paying, as a real estate investor and landlord, it is in your best interest to get non-paying tenants out of there as quickly as you possibly can.

In the next installment of How to Evict a Tenant, I am going to talk about a secret weapon that every landlord should have with them, as they battle their way through the eviction process.

Best Regards,

Neil Uttamsingh

ps: Spread the word about First Rental Property.  Sign up for The First Rental Property Newsletter to get great tips on how to become a successful real estate investor!

pps: Don’t be afraid of the eviction process.  Keep positive and you will get through it!

How to Evict a Tenant Part One

How to Evict a Tenant Part Two

How to Evict a Tenant Part Three

How to Evict a Tenant Part Four

How to Evict a Tenant Part Five

How to Evict a Tenant Part Six