First Rental Property

The third step that you must take in order to buy your first rental property is to determine the location in which you are going to buy the rental property.

In part one of this series, we talked about determining WHY you are buying your first rental property.

After you have established why you are buying the rental property, you then have to determine how you are going to finance your rental property.  This is the second step you must take.

Determining your location

This is the stage in which you will begin researching potential areas to invest. The first step that you should take in order to find potential investment areas is to start networking.

1) Contact your local Realtors Office

One place you can start your research is by contacting your local Realtors office. The purpose of this activity will be to speak with a Realtor in this office who specializes in buying and selling investment properties. When you find a Realtor in this office who specializes in investment properties, you can ask them the following questions:

• Where are these potential rental properties located? (You want to know if these properties are close by to where you live or further away from where you live.)
• What is the price range of these rental properties? (From Step Two of this article series, you will already know what the maximum amount is of a mortgage that you can afford.)
• You will want to also ask this realtor to give you a description of the tenant profile that lives in these properties.  You want to know at the very beginning what type of tenants you would be potentially dealing with.  You will want to know things such as, are they high income or low income earners?  Are they long term tenants or are they transient?

2) Ask your mortgage broker where he/she is investing

From Step Two of this article series, you will recall that the mortgage broker that you are using should have experience in doing mortgages for rental properties, and should as well be a real estate investor.

As a result, you can gain a lot of insight from your mortgage broker as to potential areas that you can invest in.  When I first started actively investing in real estate, I did a lot of independent research myself.  It wasn’t until I spoke to my mortgage broker in detail about where he was investing that I ended up deciding that I was going to invest in the same area.  I owe a big thank you to my mortgage broker, Kevin Boughen, for helping me determine the area that I ended up investing in.

If your mortgage broker is investing in a location that you do not necessarily want to invest in, there are many other ways in which your mortgage broker can still help you.  Since your mortgage broker will be dealing with many other real estate investors, he/she will be able to share with you stories as to where these other people are buying rental properties.

Taking it even one step further, if your mortgage broker’s other clients are agreeable, you could even contact them yourself, and ask them questions about what location they are investing in, and you can also ask them about some of the challenges and opportunities they have found in their particular location.

3) Join a quality real estate investment network

For the Canadian readers, the best real estate network that you can join, hands down is The Real Estate Investment Network, REIN. This organization is by far the best Canadian Real Estate Network, and arguably the best Real Estate Network in North America. When you are trying to determine that location that you are going to buy your first rental property, you can ask many of the action takers in this group as to where they are investing. Really helpful members of this group that would be happy to help you with any questions would be people like Chris Davies, Danielle Millar, Mark Loeffler, and Carla Johnson.

For the American readers, one of the best online real estate networks that you can join is Josh Dorkin’s Biggerpockets.com. This is a premier real estate social network. There are a multitude of very knowledgeable real estate investors associated with this network. Experts in their own different fields are John Fedro and Steph Davis. John and Steph again are two action takers that would be more than happy to help, if you have any questions.  By associating yourself with a network such as Biggerpockets.com, you will be able to speak with many real estate investors who will help you in determining what location you should be investing in.

In speaking with a specialized Realtor, speaking with your mortgage broker, and by networking with a quality real estate investment network, you should be able to creates a short list of places to invest in, or you should be able to narrow your list down to one particular City or Town in which you want to focus your effort on.

If after going through this exercise you find yourself in a position where you have a long list of potential places to invest in, it is in your best interest to pick one of those locations and stick to it.

Focus is very important.  Thus your ability here to focus on one area and one area alone is the key to getting started.

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

Step One – How to buy your first rental property
Step Two – How to buy your first rental property
Step Four – How to buy your first rental property

In this article, I am going to discuss the second step that you must take in order so that you can buy your first rental property.

In the first article of this series I discussed the first step that you need to take in order to buy your first rental property.  As a recap, this first step is determining WHY you are buying.  Once you have firmly established in your mind why you are buying, you are ready to move onto the next step.

Step Two – Figure out how you are going to finance the property

Often times people put the cart before the horse. They think that they can start to look at potential rental properties, and once they have found one that is suitable, they want to buy it. They then try to obtain financing for the property, and often times become disappointed because they are not able to afford it.

People make this same mistake when they are in search of their own principal residence. They go out and find a house that they adore, and then they try to get financing for it. This is not the right process to take.

Before you even start to research any potential rental properties you need to consult with a representative in your bank or with a mortgage broker.

If bad credit is preventing you from buying a property, you need to consider The H.O.P.E. Program.  They have helped more than 12,000 people get homes who NEVER thought they could, assisting even those with POOR credit get qualified.  This is one of the best Rent To Own Programs out there as it gives access to thousands of property listings for Rent To Own homes.  CLICK HERE to enrol in The H.O.P.E. Program or to have your credit repaired.

If you chose to deal with your local bank, the person that you deal with at your bank branch should be the individual who is responsible for doing mortgages. Although your bank branch can get the job done, I am a fan of dealing with mortgage brokers. I like dealing with mortgage brokers because, if you select a good mortgage broker, their level of knowledge will be quite high. As such, they should be able to answer all of your questions.

I also highly recommend that you deal with a mortgage broker who has experience in providing mortgages for real estate investors. In addition, I also highly recommend that the mortgage broker that you are dealing with is a real estate investor, and owns at least one rental property. Not all mortgage brokers are created equally, and as a result, their level of knowledge with providing mortgages on rental properties can vary dramatically.

One of the best mortgage brokers in the business, providing mortgages on rental properties is Kevin Boughen. Kevin is my personal mortgage broker. If you have any questions regarding financing your rental property, or are in need of a mortgage for your rental property, contact Kevin at kboughen@dominionlending.ca

Determining your down payment

This is one of the important points that you will be discussing with your mortgage broker. Clearly, every person’s situation is different. People will have differing amounts of money that they can put down, as well, people will be earning different amounts of income. These variable come into play when your mortgage broker is determining your financing.

A general rule of thumb, that you should confirm with your mortgage broker is that you should be putting as a down payment 20% of the purchase price of the property.

In Canada, putting down 20% of the purchase price of the property, in most cases allows you to avoid paying the Canada and Mortgage Housing Corporation, CMHC premium.

Also, if you have plans on purchasing more than one rental property, putting down 20% of the purchase price of the property is a good strategic move. This move will be to your advantage when down the road you are trying to obtain financing for future properties.

Determining whether you should get a fixed rate or variable rate for your mortgage

There is no right or wrong answer here. This answer depends upon your risk tolerance and what you feel more comfortable with.

In simple terms, with a fixed rate mortgage, the interest rate on the mortgage that you are paying is fixed for a set period of time. As a result, the interest rate on the mortgage does not increase or decrease throughout the duration of the term. An average term that people will have for their mortgage is 5 years. It is important to note that the term is very different from the amortization.

With a variable rate mortgage, the interest rate on the mortgage can rise or fall throughout the duration of the mortgage term. These fluctuations can be unsettling for novice real estate investors. The fluctuations sometimes cause anxiety on the part of the investor, because they do not know what their exact payments are going to be on the mortgage. For example, with a variable rate mortgage, as the interest rate increases so too will the payment on the mortgage amount. This rise in price is often inconsequential if you have done your due diligence and have mitigated any potential risk to you with regards to the increase in price that you will be paying.

Get your pre-approval from your mortgage broker

There are a number of different terms that are used for the pre-approval.  Another interchangeable term is the ‘pre-qualification’.

At the end of the day, whether you call it a pre-approval or pre-qualification, it all means the same thing.

What it means is that you have the go ahead from your mortgage broker to go out and start to look at potential rental properties.

As this point your mortgage broker would have examined many things.  They would have looked at how much of a down payment you are putting down, how much income you earn, what your existing debt is, as well they would have reviewed your previous credit history.  These are all variables that effect the financing of your future rental property.

Once all of these items have been reviewed by your mortgage broker, they will give you a price range in which you should begin looking in.  In most cases, they will give you the potential mortgage amount that you should not exceed.

For example, your mortgage broker may tell you:

“Neil, you can afford a mortgage up to $200,000 on your next rental property”

If this is the case, I know that once I begin my search for a rental property, I cannot purchase a rental property over the $200,000 mark, as I would not be able to afford it.

In summary, once your mortgage broker gives you a pre approval, this is essentially a ‘green light’ for you to go out and begin researching potential rental properties.

Happy Investing!

Neil

PS: The H.O.P.E. Program has helped more than 12,000 people get homes who never thought they would be able to, assisting even those with POOR credit get approved.  This is one of the premier Rent To Own programs as it gives access to thousands of property listings for Rent To Own Homes.  CLICK HERE to enrol in The H.O.P.E. Program or to have your credit repaired.

Related Articles:

Step One – How to buy your first rental property
Step Three – How to buy your first rental property

I first became interested in real estate investment around the year 2003, just after I graduated from The University of Western Ontario.

Before, I begin my story, I would like to thank Stephani Davis for giving me the idea to write this article. Stephani wrote a similar article on the premier real estate social networking site, BiggerPockets.com. I really encourage you to read her article as well.

I made a lot of mistakes when I purchased my first rental property. However, looking back upon my experience I have learned from these mistakes. So much so, that I feel that I will never make these same mistakes again.

Mistake #1

I did not know why I was buying the rental property

When I purchased my first rental property in May of 2005, I did not know why I was purchasing it. I did not know if I was going to live in the property as my principal residence, or if I was going to rent it out. Not being clear on this caused mistake Number #2 to occur.

Mistake #2

I wasn’t sure if the property was going to cash flow

Because I did not have a focus, I had no idea if the property was going to cash flow if I decided to rent it out. I was just so excited at the fact that I was buying a property, that I did not even do my due diligence. At the end of the day, I figured that if it did not cash flow, the worst case scenario would be that I would live in the property for a set period of time and then sell it and buy another property. In my mind, I had things ‘planned’ out. However, as time passed and as I gained more experience and knowledge, I realized that it was not a very good plan.

Mistake #3

I was speculating, not investing

I purchased the property with the hope that the property would go up in value. It was my plan that the property would go up in value, and that I would be able to sell it shortly thereafter in order to make a profit. There is no guarantee that a property will go up in value.

Mistake #4

I took the wrong amortization period

When I purchased this property, I took an amortization period of 25 years. I should have taken an amortization period of 35 years, which was the highest amortization period available in Canada at that time. If I took a 35 year amortization period, this would have resulted in my mortgage payments being much less.

Mistake #5

I got my mortgage through a bank, instead of a mortgage broker

Knowing what I know now, if I could go back in time, I would have got my first mortgage on my rental property through a mortgage broker as opposed to a bank.

The reason for this is because…

…I could have obtained a lower interest rate on my mortgage. Since mortgage brokers deal with many different lenders, they have a variety of interest rates and mortgage terms to chose from. By getting a mortgage from a bank, I was forced to taking the interest rate and the terms of the mortgage from that particular bank.

Despite making these 5 huge blunders, my first rental property has turned out to be the strongest performing property in my portfolio of rental properties.

In 2008, I had a bank appraisal completed, and the value of the rental property came in at $315,000. Bank appraisals are extremely conservative. As such bank appraisals come in well under the market value of what a property would sell for on the market.

As an example, in 2009, there were some comparable homes sold for between $330,000 to $350,000.

I always like to be conservative with my estimates, so even if we assume that the value of the property today is $315,000 as per the bank appraisal, that means that the property has appreciated approximately $65,000 in less than 5 years. If we take a look at what the market value of the property would be as opposed to the appraised value, then the appreciation level would be much higher.

I ended up renting this property out shortly after I took possession of it. For the first 3 years or so, it was a negative cash flow property. In 2008, I re-negotiated the terms of the mortgage. As such, the monthly cash flow on the rental property increased dramatically. This small change enabled me to move forward and purchase additional rental properties. I was able to do this thanks to the great advice of an outstanding mortgage broker, and friend, Kevin Boughen. Kevin specializes in investor mortgages, and works with real estate investors all across Canada.

Here is a short video, and quick tour of my first rental property taken in December 2009.

[youtube]http://www.youtube.com/watch?v=__fESpm7HAw[/youtube]

Are you a sincere person, or are you as phony as they come?

Most people are pretty good at detecting if someone is genuine or if they are a ‘fake’ person. On the whole, I think that women are better than men at detecting whether someone is genuine or insincere.

In the above paragraph when I use the word, ‘fake’, I mean it in the context that someone is behaving very differently than how they would naturally behave. These fake people often tend to do this in social situations, where they want to project to their audience a sense of enthusiasm. Or, this phony act can be used in an attempt to impress an audience as well.

Unfortunately, the phony person does not realize that most people have the ability to detect this fake behaviour.

Now I could stand to be corrected here, and I would appreciate your comments if you see things differently. I say in the above paragraph that, ‘most people have the ability to detect…fake behaviour.’ I have always been able to detect insincere people, so perhaps it is not ‘most’ people who are able to detect it, rather, ‘some’ people. Either way, I would appreciate some thoughts on this in the comment section at the end of the article.

Since I consider myself to be a very sincere person, and I appreciate the sincerity of others, I have listed below some key points one can adopt in order to become more genuine.

1) Be Real

This is quite simple to do, but many people fail at it. When you are being real, you are behaving exactly how you would normally behave and you are not altering your behaviour in any way. For example, I am a very honest person. When I speak to people I tell them the truth if they ask me a question. I am especially honest if the question is unexpected. This sometimes shocks people, as they cannot believe the answer that I gave them. This is an example of me being real. Me being real here helps to contribute to my genuine nature. If I was being fake here, when a person asks me a question that I don’t really want to tell the truth about, I could lie. Lying in this scenario is NOT how I would normally behave. As a result, people can detect when I am lying here, and at this point, I would come off as very insincere. My honesty in this situation creates a sense of sincerity.

2) When you ask someone, ‘How are you?’ Be TRULY interested in their response

During the course of a single day, have you ever counted how many times you have asked someone, “How are you doing?” If you work with people, then perhaps you ask this question multiple times a day. If you don’t work with people, then perhaps you only ask this question of loved ones and/or family members.

This activity will only work with people that do not know if you are a genuine or insincere person.

When you ask someone how he or she is doing, instead of just ‘going through the motions’ of asking the question, take a different approach this time.

Listen for their response. Keep eye contact with the person. Let them tell you how they are feeling. Process their response.

Then ask yourself, “What sort of energy did that person just project towards me with their response?” Was it a positive, warm energy? Were they upbeat and smiling when they responded, or did they project a negative, cold vibration toward you with their response?

By taking some time to process the energy or lack thereof that they projected towards you, you will now be adequately equipped to respond accordingly.

When I respond to someone, after I ask the question, ‘How are you doing?’, I match the energy, and the energy level that they have projected towards me.

The benefit of doing this is to make the other person feel that you are truly interested in how they are feeling. It makes a big difference, if you take the time to practice this.

Here is an example:

I was out to lunch today with a co-worker of mine. We were at a local pizza parlor, and it was packed full of people! There was a huge lineup to order and the lady working at the cash register looked tired and unhappy with the current state of the restaurant. When we approached the cash register, I simply asked the lady how she was doing. In a quiet, defeated voice, she said, ‘Okay’. At this point, I almost got ahead of myself, and forgot to take the time to listen carefully for her response, and interpret her energy level. I had my mind on ordering my pizza to be frank!

After she responded with the answer of, ‘Okay’ to my question, I took a few seconds, looked at her and said, ‘That is good to hear.’ I didn’t just say this, but I meant it. She could tell that I meant it as well. This brightened her mood and after my co-worker and I placed our orders, she began to talk to and joke around with us, as we waited for our pizza. Her change in mood was significant from the moment we first approached her.

Clearly, by taking a few extra seconds, and listening to her, and matching her energy level, I was able in my mind to project a degree of sincerity, which she appreciated.

Here is the best YouTube clip on ‘being genuine’. This is brought to you by Russ Small, a Calgary Alberta Life Coach. Check him out.

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

So, how does this all relate to the topic of real estate investment?

I was asking myself this same question, the moment I thought of this article topic.

There is a strong connection between being genuine and real estate investment.

It all comes into play when, as a new real estate investor, you are looking to build your network of professionals around you.

In order to be successful with real estate investment, you need to associate yourself with a number of key people such as a real estate agent, mortgage broker, real estate lawyer and home inspector, just to name a few.

The laws of attraction would believe that you would attract to you those professionals that are similar to you in nature. As such, this could mean that you are drawn towards a real estate agent, mortgage broker, or real estate lawyer with the same values or beliefs that you have. You will be attracted to work with people that you are similar to you in some regard. In addition, you will be repelled away from those professionals that are fundamentally different from you.

So, by being real, as mentioned above, you will project to people the exact type of person that you are. As a result, those professionals that you are compatible to work with will begin to surround themselves around you, and you will begin to seek out those professionals as well.

If you liked this article and are also interested in the topic of real estate, subscribe to my blog. 

Best Regards,

Neil Uttamsingh.

In the words of the Great Vince Lombardi:

“Perfection is not attainable, but if we chase perfection we can catch excellence.’

In 1959 at the age of 45 years old Vince Lombardi accepted the position of Head Coach and General Manager of the Green Bay Packers of the National Football League. In the previous season in 1958, Green Bay had lost all but 2 of it’s 12 games (with one tie and one loss).

Lombardi created an absolutely punishing training regime and demanded absolute dedication from his players. As a result of this change, the 1959 Green Bay team was a significant improvement finishing with a 7-5 record. 7 wins and 5 losses.

In his second year, Lombardi led the 1960 Green Bay team to the NFL Championship game against the Philadelphia Eagles. However, in this big game Lombardi’s team came up short within the final minutes of the game, and ended up losing to The Eagles.

Lombardi was outraged at the defeat and vowed that this would never happen again under his command. This turned out to be Lombardi’s first and only loss in the post season.

Lombardi went on to accomplish an incredible record of 105 wins, 35 losses, and 6 ties as a head coach, while never suffering a losing season. This equated to a .750 winning percentage.

Lombardi led his Green Bay team to a still unmatched 3 consecutive National Football League Championships in 1965, 1966, and 1967, winning the first 2 SuperBowls and solidifying himself as arguably the all time greatest NFL coach in history.

Players under Lombardi’s command became winners primarily due to two reasons.

1) They had a strategy

Lombardi taught his players to start thinking like winners. In order to reach the next level as a Football team, the players needed to start thinking differently and start behaving differently. Lombardi taught that winners have a strategy and don’t get distracted by things that are unimportant. Part of a winning strategy is the dedication to always hone one’s skills, Lombardi would teach.

In addition to teaching the importance of having a strategy, Lombardi also spoke of:

2) Being consistent

Winners consistently execute towards their strategy. Practicing the same tasks and the same drills over, and over, and over again is what helps to create a winning mentality. Winners never lose sight of their objective because they are constantly focused on it. Consistency is the key to success.

[youtube]http://www.youtube.com/watch?v=w4kWiRjLbGQ[/youtube]

As an aspiring real estate investor, it is vitally important that you as well have a strategy and that you are consistent.

Your strategy can simply consist of a time line that you have committed to yourself in which you are going to buy your first rental property.

If you have committed this, you then have to be consistent in executing towards this strategy.

Consistent execution can consist of things such as building your team of professionals around you that will be helping you with the purchase of your first rental property.

Consistently work towards finding a suitable Realtor, Mortgage Broker, Real Estate Lawyer, or Real Estate Mentor.

Have a strategy and be consistent. If you do this, you are setting yourself up for success!

Hola,

Me Llamo Neil y me gusta real estate. Vivo en Toronto, Ontario, Canada.

Okay…

That is about all the Spanish I can remember from my high school Spanish teacher! (Sorry Miss D)

Unless you have a good working knowledge of the Spanish language, most of you probably read the heading of my article as well as the opening line, and had no idea what it meant.

In English it reads:

Hi,

My name is Neil and I like real estate. I live in Toronto, Ontario, Canada.

Now that I have got your attention, here is the point wholesale lemon tart e liquid flavour concentrate diy vape juice 0mg of this article:

People new to real estate investing often cannot understand the language that experienced real estate investors speak.

There are a lot of terms, and some acronyms that are very confusing to new investors. Sometimes when I am speaking to someone interested in real estate investing, I forget sometimes that they do not know all of the terms that I know, and what happens is that I will use a word or a term that will completely confuse them. This is when they will stare at me with a blank look on their face.

So let’s cut to the chase. I have put together a little glossary of some key terms that I feel that all beginning real estate investors should take the time and learn. Here they are.

Hasta Luego! (See you Later!)

LTV or Loan To Value – When someone says this phrase, they are referring to the ratio of the loan in comparison to the value of a property. For example, if I say, “My rental property has a LTV of 80%” This means that the loan (more specifically the mortgage) is 80% of the value of the home. In this case, if my rental property was valued at $100,000, since my loan (or mortgage) is 80% of the value that means that my mortgage amount is $80,000.

First Mortgage – People generally understand what a mortgage is, however, when you throw the word ‘first’ in front of the word mortgage, this can cause some confusion. Simply put, the first mortgage is usually the largest mortgage (in terms of dollar value) that is placed on a property. A large institution, such as a bank or credit union, often issues the first mortgage. The mortgage is in first position, which means that upon the sale of the rental property, this mortgage has to be paid back FIRST before any other debts are repaid.

Second Mortgage – If you understood the concept of the first mortgage, then you should understand the second mortgage as well. The second mortgage is usually smaller in dollar value than the first mortgage. A private finance company, or a private individual can offer the second mortgage usually. The interest rate of the second mortgage tends to be higher than the interest rate of the first mortgage. This is because vaporesso osmall replacement pod cartridges the lender that offers the second mortgage is taking on more risk that the lender that is offering the first mortgage. There is more risk to the lender because upon the sale of the rental property, the second mortgage lender is in second position. This means that they get paid back after the first mortgage has been paid back. They are lower on the food chain, compared to the first mortgage lender.

Lender – This phrase can refer to any institution or individual who lends funds in the form of a mortgage or loan. Examples of lenders can be major banks, credit unions, private lending companies, or private individuals.

Mortgage Broker – I have noticed that people do not understand the difference between the services offered by a mortgage broker, and the services offered by say, a major bank. A mortgage broker represents their customer (you or I), and deals with many different lenders. When they are working to obtain a mortgage for your rental property, your mortgage broker will speak with many different lenders in order to find the mortgage with the right terms and conditions for you. A mortgage broker has a network of lenders that they deal with.

Amortization or Amortized – This phrase refers to the life of a mortgage. In Canada, it is very common for mortgages to be amortized over 25 years. This means that if you consistently make your payments over the next 25 years, once 25 years is up, you will have paid off the entire balance of your mortgage. Real Estate investors often amortize the life of their mortgages over 25 years in order to maximize their monthly cash flow. Currently, mortgages can be amortized in Canada up to 35 years.

Market Rent – This phrase refers to the estimated rent that a rental property should be able to get. For instance, let’s say that you are looking to rent out a 3 bedroom 2 bathroom townhouse in your hometown. Over the past 6 months, there have been 10 townhouses similar to yours that have rented out between $1250/month and $1350/month. Therefore, the market rent for your townhouse would be between $1250/month to $1350/month. This is because it is the estimated amount that you think your rental property will end up renting for.

Actual Rent – This phrase refers to the actual rent that you collect on your rental property. If you are looking to rent out a rental property and the market rents for your property are between $1250/month and $1350/month, and you end up renting your property for $1200/month, this means that $1200/month is your actual rent.

Cash Flow – This phrase has many definitions, however, in the context of real estate investment, someone might say, “My rental property cash flows.” What they mean by this is that their total expenses on their rental property are lower than their total revenue on the property. This means that they have a surplus of funds available. Real estate investors often refer to the cash flow on their rental properties on a monthly basis. For instance, if real estate investor says, “My first rental property has a cash flow of $500 a month”, this would mean that after subtracting the total monthly expenses on the rental property from the total monthly rent on the property, there would be a surplus of $500/month.

More often than not, when the calendar year is coming to a close, we think ahead to the next year, and all of the goals that we want to achieve during the following year.

Why not take some time between Christmas and New Years day to establish some goals to achieve before the end of the current year?

This essentially will give you 7 days, December 25th through December 31st, in order to set some goals and take action on achieving these goals.

If you are looking to purchase your first rental property, there are a few key goals that you can establish and achieve before years end. Here they are:

1) Determine what area you are going to invest in

If you have already started your research as to what geographical areas you want to invest in, now is the time to make up your mind. Pick an area that has strong economic fundamentals and stick to that area. Don’t flip flop with your decision. When I was first determining what geographical area I was going to invest in, I did a lot of flip-flopping myself. I had about 3 different cities that I was looking at where I wanted to buy a rental property. One day, I finally made up my mind, and stuck to my decision. This is important to do. Make up your mind and stick to that area if it a strong city or town with solid economic fundamentals.

2) Determine where you are going to obtain your financing

For the financing on your rental property, you are either going to get your mortgage from a bank or through a mortgage broker. If you are opting to go through a bank, pick the particular bank that you are going to deal with, identify what branch or location you will visit. Furthermore, if you can establish who at your branch location will be taking your mortgage application, even better. Once all of this is determined, you have a definite plan of attack and you know what your next steps are.
If you are using a mortgage broker for your financing, finally pick which mortgage broker you are going to use, if you have not done so already. If you do not know a mortgage broker, talk to a friend or family member that may know one. Here, I highly recommend that you use a mortgage broker who is knowledgeable in working with real estate investors. Not all mortgage brokers are created equally, as some are much more knowledgeable than others.

3) Determine where your down payment is going to come from

Know for certain where your down payment is coming from for your rental property purchase. If your down payment is coming from a Line of Credit, great. If you are speaking to potential joint venture partners over the holiday season, and you know that they are going to be the money partner who are going to provide the funds, excellent. If you are using your own personal savings, good for you. The point here is to have this planed and mapped out. You have to be crystal clear as to where the funds for your down payment are coming from. When you are crystal clear, you have a clear action plan and can move forward to achieving your goal.

4) Determine how you are going to find a rental property

If you do not have an existing relationship with a Realtor, now is the time to forge one. Since many people and Realtors are off on vacation between Christmas and New Years, perhaps you won’t be able to get in touch with some Realtors. This is okay, as you just need to have a clear sense of which Realtor you are going to work with to find a rental property. If need be, contact them when they are back from vacation. However, also note that a lot of realtors do not take vacation during the final week of the year. Now could be a very good time to contact them. If you do not know any realtors who are experienced in working with investors, you can ask family or friends if they know any that they would recommend. If this doesn’t work, I recommend the following strategy. You can call the Broker of Record or the Broker Owner of a real estate company, and have them refer you a realtor who has experience working with real estate investors. To get in touch with these Brokers, you simply just need to call into the real estate company that you are dealing with, and ask to speak to the these specific Brokers. This is a good strategy that I have used before. The Broker Owner or the Broker of Record should have a vested interest in referring you the appropriate Realtor. This is because if the Realtor that is referred to you eventually succeeds in finding you a rental property that you purchase, the real estate company, namely the Broker Owner and Broker of Record win as well.

5) Establish a time frame for your purchase

This last point is an important one. Establish when you are going to purchase the rental property. Be as specific as you can. The more specific you are, the more likely you are to follow through with this goal. For instance, you can tell yourself that you will be putting in an offer on the rental property on January 15th of the following year. This goal setting of determining an actual purchase date is a very powerful practice. Using this method can actually force you into taking action.

When you are looking to buy your first rental property, the first step you must take is to find a mortgage broker that you will be able to work with. When it comes to financing your rental property, financing can be obtained either through a mortgage broker or a bank.
I am a fan of doing your financing through a mortgage broker, as good mortgage brokers have an ability to put often times complicated deals together. Sometimes dealing with banks can be restrictive, as they do not have the same flexibility in finding solutions as a mortgage broker might have.

However, not all mortgage brokers are created equal. There are some very good ones, and there are some very bad ones. I have outlined 4 useful tips for you for when you are in the process of selecting your mortgage broker. Here they are:

1) Your mortgage broker should be a real estate investor

You want to be working with someone who is experienced in the field that you yourself are trying to get into. If your mortgage broker is a real estate investor, then he or she has experience in purchasing rental properties, and they have inevitably at some point purchased their first rental property. Since they are investors themselves, they would be able to offer you advice along the way. Make sure that your mortgage broker is a real estate investor. Experience counts!

2) Your mortgage broker must know your five-year investment plan

At the very least, your mortgage broker should know what your investment plans are over the next 5 years. This is very important because you are looking to build a long-term relationship with this individual. They (your mortgage broker) is going to be a very integral part of your real estate investment team. By knowing your five-year plan, they are able to advise you accordingly every step of the way. For instance, if your plan is to only buy one investment property over the next five years, they need to know this. This is because, the terms of the mortgage, would differ if you had plans of purchasing more than one rental property over the next few years. With mortgage financing for rental properties, good mortgage brokers are looking at how you can obtain financing for not just your first rental property, but also your second, third, or maybe even your 20th rental property, if that so happens to be your goal. Your mortgage broker must know your five year investment plan, as such they can set you up with the appropriate financing on your first rental property.

3) Your mortgage broker must keep up to date with what is happening in the mortgage industry

The mortgage financing world is ever changing. Interest rates often times change, and so too do the offerings from Banks and Lending Companies with respect to mortgages. Since there are so many changes, this creates opportunity for an individual looking to purchase their first property. When a good offer comes along from a Bank (such as a nice low interest rate), your mortgage broker should be up to speed of the changes as soon as they happen. That way, they can make you aware right away of all of the competitive offerings in the marketplace.

4) Your mortgage broker must have experience providing financing for other real estate investors

Often times, the more real estate investors that your mortgage broker works with the better for you. This is good for you, because your mortgage broker will have lots of practice in putting together deals for real estate investors. They will be proficient at this task, and will be able to deal with any roadblocks that are thrown in front of them. For instance, the reputation of your mortgage broker goes a long way when they are speaking to and negotiating with the mortgage underwriters at the banks or Lending companies. The mortgage underwriters are essentially the people who would review the particulars of your mortgage application. If the underwriter had any questions or concerns, they would converse directly with the mortgage broker to get the answers. If your mortgage broker has a solid history of putting together good deals, having a good relationship with the underwriters and the banks and Lending companies, then you are in good hands. The reputation of your mortgage broker is significant. They must have a track record of working with and putting together mortgages for other real estate investors.