First Rental Property

Hi There,

I hope you are doing well.

In today’s blog post, I am going to walk you through how you can make a 26.1% return on your money investing in real estate.

I recently recorded a PODCAST called, 3 Reasons Why Buying A Rental Property Is Better Than Investing In The Stock Market.

In this PODCAST, I talked about 3 ways in which you can make a ‘return’ buying and holding real estate.

These 3 ways were:

Cash Flow

Mortgage Paydown

Property Appreciation

To illustrate to you how you can make this type of return on your capital, I am going to take the same example I spoke about in the PODCAST.

Let’s assume that you are a new real estate investor and you are interested in buying your first rental property.

You purchase a property for $450,000.

Let’s assume that you are purchasing a property in the Toronto or Greater Toronto Area real estate market.

As such, you provide a 20% downpayment to purchase the home, which equals ($450,000 * 20% = $90,000)

Therefore your downpayment is $90,000.  Don’t forget this number.  We will re-visit it later…

The property produces a $500/month net cash flow. (This is on the high side for Toronto, but I am using easy math to help illustrate this example)

You annualize your cash flow by multiplying $500 by 12 months.  This gives you ($500 * 12 = $6,000)

Therefore, you have $6,000 annual cash flow from the property.

Since you have provided a $90,000 downpayment, and the purchase price of the home was $450,000, this leaves you with a $360,000 mortgage.  ($450,000 – $90,000 = $360,000)

Now let’s assume that you obtain a first mortgage in the amount of $360,000 at a 2.5% interest rate and amortized over 30 years. (What is Mortgage Amortization)

Using a mortgage calculator, we can figure out that your monthly mortgage payment would be $1,422/month.

Now here is where we use some creative math.  Let’s assume that 50% of your monthly mortgage payment of $1,422 is principal, and 50% of the payment is interest.

If you use a mortgage calculator for this, you will see that the breakdown is not actually fifty-fifty.  However, I am using 50% just to make the math easy.

As such, 50% of $1,422 is $711.

This means that the mortgage amount of $360,000 is paid down by $711 each month.

We want to know how much the mortgage is paid down annually (or at least in the first year), so we take $711 and multiply it by 12 months, which gives us $8,532.  This number is also important.  We are going to re-visit it shortly.

If the property that you purchased for $450,000 appreciates at 2%, that would mean that the property would go up in value by $9,000 in the first year.  We get this number by taking $450,000 and multiplying it by 2%.

I am using 2% as an extremely conservative figure.  The real estate market in Toronto and the Greater Toronto Area has far surpassed this figure over the past several years.   

So now we take our return on our capital from year one.

We have $6,000 annual cash flow

We have $8,532 annual mortgage pay down

And we have $9,000 property appreciation in year one.

Now we add up all of these numbers…

$6,000 + $8,352 + $9,000

This equals…

$23,532

We now take this amount (the total amount you have made in year one), and divide it by your initial investment of $90,000. Which gives us…

$23,532 / $90,000 = 26.1%

So as you can see from the math above, you can make a 26.1% return on your investment (in year one) by investing in real estate.

Happy Investing!

-Neil

Hi There,

I hope you are doing well.

If you are a new real estate investor looking to buy your first rental property, it is crucial that you make smart financial decisions as you navigate the Toronto real estate market.

It is important for you to know that buying a condo in Toronto can be a REALLY bad investment.

It can be a terrible investment if you don’t know what you are doing, and if you forget to do 3 major things…

To find out the 3 reasons why buying a condo in Toronto is the worst investment you will ever make, you can listen to my PODCAST, by pressing on the “play” button below.

Happy Investing!

-Neil.

Hi There,

I hope you are doing well.

If you are a new real estate investor looking to buy your first rental property, there are 2 things I would recommend to you:

A) Consider purchasing a condo in Toronto.

B) Listen to my new PODAST called, HOW TO FIND A TENANT FOR YOUR TORONTO CONDO.

You can listen to this PODCAST by clicking on the “Play Button” below:

The reality is that Toronto condos are a property type in which new and experienced investors are placing their money.

The Toronto real estate market is a great place to invest.

I have personally invested here, and plan to continue investing in the City of Toronto.

I hope you enjoy the PODCAST.

Happy Investing!

-Neil.

Hi There,

I hope you are doing well.

I always get asked by new real estate investors where they should buy their first rental property.

There are many cities and countries you can potentially invest in.

My favourite city to invest in is Toronto.

Here is why:

A)  Lack of Supply

If you are not familiar with what is going on with the Toronto real estate market recently, let me tell you.

Prices of properties have been going up at record levels.  This is especially true of “detached homes” both in the City of Toronto, and in the Greater Toronto Area.

Due to the fact that prices are going up with Detached homes, this is now having an effect on the prices of condos in Toronto.

Fewer people can afford the price of detached homes now, so more people are gravitating toward condos.

The lack of supply with detached homes, will cause condos to increase in price as well.  There will be more and more people looking to buy condos in Toronto as the real estate market continues to rise.

Which means that a condo that you buy today will be worth more in the future.

B) People Are Coming

If you don’t know this, let me tell you.

People are coming from all around the world to live in Toronto, and the surrounding areas of Toronto.

Toronto is a beautiful and vibrant multi-cultural city.

As more people continue to come to the Toronto area, this will cause there to be more demand on the housing in Toronto.

With more demand, come increasing prices.

Which again means that if you buy a condo today, it will be worth more in the future.

C)  Toronto Has Jobs

Toronto is the financial “capital” of Canada.

Major banks, Insurance Companies, and Hospitals are big time employers in Toronto.

Not to mention, start up companies, and marketing firms…

Anyone that is familiar with Toronto knows that people commute from all over Ontario to come into Toronto to work.

People drive or take the train to enter the city.

Due the fact that there are so many jobs in Toronto, and that people travel into Toronto to work, this proves to be favourable for the real estate market.

Often people want to ‘ditch’ the commute, and live closer to their jobs.  Especially younger generations.

Lots of people don’t like spending so much time in the car, and want to have more free time.

This is the reason why people move into Toronto, to be closer to their jobs.

This in turn, increases demand for Toronto real estate, as more and more people want to live in the City.

Once again, with increased demand, prices of condos will be going up in price.

Which means that a condo that you buy today, will be worth more in the future.

What Do You Do Now?

We know that people are coming to Toronto, and there is a lack of supply of housing.

We know that this is going to cause condos in the City to rise in price.

So what do you do with this information?

You can:

a) Do nothing about it.

b) Buy a Toronto condo as your first rental property.

The choice is yours.

I know what I would do………….

Happy Investing!

Neil

Hi Folks,

I hope you are doing well.

With real estate prices rising to record levels in the Toronto area, some people are beginning to speculate that condos will soon be priced so high, they will soon be out of the reach of the average buyer.

Could this actually happen?

Seriously, could condo prices rise high enough, that the majority of people will not be able to buy one?

In my personal view… it could happen.

Daniel Tencer of the Huffington Post writes,

“Single-detached home prices in the city of Toronto jumped by 32.3 per cent in a year, and now average $1.35 million. In the surrounding 905 region, detached homes jumped 25.5 per cent and are now on the verge of hitting the $1-million mark, at $957,517.”

For those of you that are not familiar with the Toronto area, the “905 Region” consists of cities surrounding the City of Toronto.

In his article, Daniel mentions that as real estate prices continue to rise, single detached homes remain far out of the reach of most of Toronto’s first time buyers.

Further, Daniel states that:

“Prices for condos in Toronto jumped 13.5 per cent (since 2015) to $471,256.”

Not only did condo prices jump in Toronto, they also went up in price in the “905 Region”.  According to Daniel:

“…the average condo there (in the 905 Region) jumped 18.9 per cent in price in the past year, to $374,792.”

So what does this all mean?

It could mean that Toronto’s home ownership rate is going to start to drop, as some experts have predicted already.

Just take a look at this.

This is the “Average Annual Toronto Sale Price” dating back to 1970.

If prices continue to rise in this manner, as you can see in the chart above, this will result in more people becoming renters for life, unless a major correction in price occurs.

This is where the opportunity lies.

If there is one piece of advice I can give you, it is this…

BUY A CONDO IN TORONTO NOW !

Condos are still affordable and they are a great investment for new real estate investors, looking to buy their first rental property.

Or, they can be a smart investment for the veteran real estate investor, looking to purchase his/her 4th property.

The tenant profile (as long as you do your due diligence) is excellent in Toronto.

I own condos in Toronto myself, and they have been a fantastic investment.

But Remember…

Don’t delay.

Buy now and prosper.

If not, you may become a statistic.

You may be priced out of the Toronto real estate market, like so many other people who did not take action.

Happy Investing!

Neil

Hi There,

If you are looking to purchase your first rental property, the location where you buy it is extremely important.

I recently had a conversation with an aspiring real estate investor who was interested in purchasing his first rental property.

He was asking my for my opinion on a location that he had heard about that was a good place to “buy” a rental property.

I had a lot of advice for him.  Here are 5 GREAT tips I gave them:

TENANT PROFILE

I asked him how WELL he knew the city he was interested in investing in.  His answer to me, as “not very well”.  This is one of the first questions I ask aspiring real estate investors because I want to get a sense of if they are being realistic or if they are living in “FANTASY LAND.”

The reason I ask this questions is because I want to gain an understanding from them if they know anything about the types of people in the particular city they are interested investing in.

In this potential investors’s case, he was not familiar with the area at all.  As such, I explained to him that the City that he was looking to invest in was very different from the city that he was currently living in.

The city that he was living in has high demand for rental properties, and there is a large tenant pool of young professional tenants, with excellent credit, and high paying jobs.

The city that he was interested in investing in, has a large population of multi-generation renters with poor credit and lower paying jobs.

He had no clue that there actually was a difference in the tenant profile from his city versus the city he was interested investing in.

This is one of THE most important factors when you are looking to buy your first rental property.  You have to have a very good understanding of the tenant profile that will be renting from you.

CHEAP HOUSE VERSUS EXPENSIVE HOUSE

This aspiring investor was attracted to the city he wanted to invest in because the prices of houses were CHEAPER than the city that he lived in where the prices of rental properties were more EXPENSIVE.

I told this new investor that just because the price of homes are lower, does not mean that they are a good investment.

There are other thing to consider, such as:

a) What is the future potential for property appreciation for the rental property

b) Why is is so cheap?  Is the property location in an undesirable area, or is the property in poor physically condition?

c) Does the property cash flow on a monthly basis, despite it being lower in price?

BEING ON A BUDGET

Everybody is a on a budget, no matter what it is that you are buying.  Purchasing a rental property is no different.  You are also on a budget.  However, you have to be realistic with your budget.

Meaning that, if you are looking to purchase a rental property in City A, and the average cost to purchase a rental property is $100,000, however, you have only been approved for a mortgage of $50,000, and all you are willing to spend is $50,000, how are you going to buy a property in City A?  The answer is, you are not going to buy a property in City A, because you are not being realistic with your expectations.

If you budget is $50,000, and the average cost of rental properties in City B is $50,000, you will have to re-shift you focus and look at buying a rental property is City B, where you can afford it.

WINNING THE APPRECIATION GAME

In a number of cities across the country (not all) there has been good property appreciation.  Who doesn’t like it when you buy a rental property and it appreciates in value from the moment you purchase it, to the moment you sell it?  That is fun and exciting and a great way to make money.  No one wants to buy a rental property that will depreciate from the moment they purchase it, lose value, and that sell it for a loss. That is not fun at all…

My point here is that no one has a “Crystal Ball” as to how much a rental property is going to appreciate from the time you purchase it to the time you sell it.

If people could predict the future, they would not be purchasing rental properties, they would be buying lottery tickets.  (Buy One Lottery Ticket, Get One FREE! Buy Now!)

This leads nicely to my next point…

BUY FOR CASH FLOW

The truth is that most new investors have no idea what they are doing.  The fellow I was speaking with, simply wanted to buy a property to rent out, in a City that people (with no real estate investing experience) had told him was a great place to buy.  So far, he was unrealistic with his expectations in what he could purchase in that City.  His budget was $50,000, however, the average price of rental properties in the city was $100,000.

Having said all of this, even if he could afford the $100,000, he did not even know whether the property, once rented out to a tenant would Cash Flow or not.

Take a minute and stop and think.

Why would anyone buy a rental property, that does not cash flow?

For the property appreciation maybe?

But what if you cannot predict how much a property is going to appreciate?

What then is the purpose of buying a rental property?

Here is a hint…

Actually, here is the answer:

CASH FLOW

As a new investor, if you act on impulse and purchase a rental property in a City that people have told you is a great place to buy, you are unfamiliar with the tenant profile, do you think you are making a wise decision?

Let’s say you get lucky and you obtain a tenant that is paying you on time every month.

If you have not done the numbers in advance, and if your rental property is NOT cash flowing (property expenses are greater than monthly rent provided by the tenant), how long do you think you are going to be able to sustain this, and continue to keep this rental property by providing money out of your own pocket in order to pay for the monthly expenses?

The reality is for many, not very long.  I see a lot of new investors make this mistake, and then find themselves in a position where they are forced to sell their rental property within a year’s time.

SUMMARY

If you are looking to purchase a property, but don’t have enough money, or if you have bad credit, you should consider The H.O.P.E. Program.  The H.O.P.E. Program has assisted more than 12,000 people get homes who NEVER thought they would be able to to.  The Program has even helped those with BAD credit get qualified.  It is one of the best Rent To Own programs as it gives access to thousands of listings for Rent To Own homes.  CLICK HERE to enrol in The H.O.P.E. Program or to get your credit fixed.

Happy Investing!

Neil

Hi Folks,

I hope you are doing well.

Over the years I have been asked a lot of questions from new real estate investors.

One of the most popular questions that newbie investors ask me, is:

“How many rental properties do I need to buy?”

In my mind, the anwser to this is simple.

Most new real estate investors don’t realize that all they need to purchase is ONE rental property.

At the beginning of a real estate investor’s “investing career”, it is easy to get caught up with aspirations of buying multiple properties.

Few real estate investors will be able to do this successfully.  Most will only end up buying one property.

Over the years I have observed some limiting factors that have prevented investors from buying more than one rental property.  Here they are in no particular order:

1.Limited Capital

The reality is that most people who purchase their first rental property, will only have the capital to buy one property.  There is always the exception, and a select amount of investors are able to purchase more properties.  These investors utilize their cash savings, or they leverage existing real estate, in order to buy multiple properties.

2.  Lack of Ambition

Lots of people do not want to own multiple properties.  They are content with what they have.  They have no desire to take on joint venture partners.  Life is easier for them with only one property, and they want to keep life that way…Easy.

3.  Lack of Knowledge of The Real Estate Market

People might be interested in buying more than one rental property, however, they may not know much about the market they are interested in investing in.  As a result of the lack of knowledge of the market place, people decide to pass up on the opportunity to buy another rental property.

4. Tenants win the battle

Being a good landlord is not easy.  Anyone who has been a Landlord for over 10 years, knows that there are many ups and downs, many great tenants and many horrible tenants.  When a landlord encounters a horrible tenant, it can be enough to break that landlord’s spirits.  Landlords have to deal with non payment of rent, damage to their rental property, just to name a few things.

Having dealt with these difficult situations myself, I have seen first hand how it can take the ‘wind’ out of a landlord’s ‘sails’.  Investors can become ‘deflated’ and nervous to buy another rental property, due to their difficult challenges dealing with a problem tenant.

5. Limited Cash Flow

An investor needs to have cash flow generated from their rental property, in order to make it over the long term.  If an investor owns a rental property that is generating a positive cash flow (Rent is greater than expenses), then this investor is putting themself in a strong position to succeed.

If a property is generating ‘cash flow’, this cash can be used towards paying for:

• Repairs on the property
• Paying for vacancy when there is no tenant
• Carrying the property when a tenant is late on rent, or stops paying

Investors get into trouble when they have limited ‘cash flow’.  Meaning that they do not have enough funds to pay for repairs, vacancy, or paying the expenses when a tenant is late on rent or stops paying.

If an investor’s cash flow is tight, and they are struggling with their first rental property, chances are, they won’t be too thrilled to take on another headache and buy a second rental property.

Having said all of this, do investors successfully buy more than one rental property?

Absolutely.  Many investors do this, all the time.

With some discipline, and running your first rental property like a ‘business’, you too can also manage to buy more than one rental property.

Happy Investing!

Neil

ps: For tips on how to buy your first rental property, please sign up for my First Rental Property email newsletter.

Hi Friend,

I hope you are doing well.

Over the past several years I have helped many people buy their first rental property.

During this time, I have also noticed that there are a series of common questions that are asked by new real estate investors.

One of the common questions that always comes up by new real estate investors is:

Do I need to check the tenant’s credit?

The answer to this my friend is, yes.

Any experienced real estate investor will tell you that if you are not careful with determining a tenant’s credit history, you can find yourself in a world of trouble.

In the early days, I made the mistake of not checking a tenant’s credit once, and it did not result in good things.  The tenant did not pay rent, was troublesome, threw parties at night, smoked weed, disturbed neighbours, piled up garbage in the yard, and swore at me.  Needless to say, I ended up evicting the tenant.

All of this could have been avoided had I simply checked the tenant’s credit before hand, as this would have given me a further insight into the tenant’s previous habits.

Beginners make mistakes.  I have made mistakes myself and I know countless experienced real estate investors who have made these same mistakes.

I run a lot of workshops for new real estate investors and I have found that the question regarding ‘checking a tenant’s credit’ always comes up at these workshops.

A while back, I had to take a step back and ask myself why this question kept on coming up.

After some careful thought, I concluded that this question came up time and time again by new real estate investors simply because:

They did not KNOW HOW TO check a prospective tenant’s credit.

The fact that they did not know how to check credit, prevented them from even attempting to check credit.

The bottom line here is that people are generally lazy.  If there is an easy way out of doing something, people will take that easy route.

The easy way out for a new real estate investor to NOT check the credit of their tenant is by NOT CHECKING IT!  Simply put.

The good news here my friend is that checking a tenant’s credit is not difficult.

Now, there are countless Credit Check companies that you can search online via Google.

You can try finding credit check companies by typing in things into the Google Search bar like:

• credit check companies for tenants
• credit check companies in {your country}
• how to check a tenant’s credit

Hi Friend,

I hope you are doing well.

If you are looking to purchase your first rental property, you may have a question or two about rent collection.

If you do, that is normal.

A lot of new real estate investors have questions regarding this topic.

I often get asked by new landlords how they should be collecting their rent from their tenants.

There of course is a variety of ways in which you can do this.

In this blog post, I am going to outline for you a number of these methods as well as some of the potential pros and cons of collecting rent in these various manners.

Here are the methods in which you can use to collect rent from your tenant.

1) Post Dated Cheques

When your tenant first moves into your rental property, you can ask them at the beginning of their lease term to provide you with a series of post dated cheques.  Many landlords do this, because this is a method that works.

This mode of rent collection is both easy for the landlord and easy for the tenant.

It is easy for the landlord because, they do not have to make monthly trips to the rental property to pick up the rent.

It is easy for the tenant because they do not have to arrange their schedule and make time to meet their landlord each month.

There is also a big downside with collecting rent in this manner.

Since the landlord is not travelling to and meeting with the tenant each month to pick up rent, there is reduced opportunity to meet the tenant face to face and build a strong relationship.

2) E-mail Money Transfer / Bank Transfer

In this day and age, technology is awesome!  There are new options available to us in the world of banking than ever before. An example  of this is the email money transfer.    Tenants can now transfer to their landlords their monthly rent in the form of an email money transfer.  This is an efficient way to collect rent and it saves time for both the landlord and tenant.  Scheduling a time to meet to pick up rent in person can sometimes be challenging.  This mode of rent collection solves that problem.

3) Pick Up Rent In Person – Cash or Cheque

Although not practical in every case, this is my favourite mode rent collection.  This is my favourite mode of rent collection because it allows you as the landlord to build a strong relationship with your tenant on an ongoing basis.

Not only does it allow you to build an ongoing, strong relationship with your tenant, this strategy allows you to check on the property on a monthly basis.  If you have great tenants, you get to see each and every month how well they are taking care of the property.  On the flip side, if you have tenants that you are not too sure about, this method allows you to carefully observe the condition of the property.

So there you have it.  These are three modes of rent collection.  There are other ways in which you can collect rent, however, as a new real estate investor, you should focus your efforts on one of these 3 methods.

Happy Investing!

Neil Uttamsingh

ps: If you are looking to buy your first rental property, sign up for the First Rental Property Newsletter.  You can do this by providing your name and email address at the top right hand corner of the blog.  If you do, in the Newsletter you will receive tips and tricks from experienced real estate investors on how to buy your first rental property.

pps: I am a Licensed Realtor in Ontario and I help people like you buy their first rental property everyday! I personally own Hamilton real estate, Oakville real estate and Toronto real estate.   If you need help purchasing your first rental property or your next rental property, write to me at NEIL@FIRSTRENTALPROPERTY.COM. I will help you negotiate the best price, terms and conditions on your rental property. Buying in the US? No problem!  I will refer you to one of my trusted partners.  Happy Investing!  🙂

Hi Friend,

I hope you are doing well.

In today’s blog post, I am going to share with you the most important secret that all new real estate investors NEED to know.

However, before I reveal this BIG secret, Let’s take a step back and go over a few items first….

ITEM NUMBER ONE

If you are just starting out as a real estate investor, I would like you to know that investing in real estate is NOT EASY.  

Many people talk about it, but very few people ever end up taking action and buying a rental property.

Over the years, I have coached and guided many people as they purchased their first rental property.

You may be surprised to know that probably 1 person in 100, ever end up buying a rental property.

Of those people who end up buying a rental property, many are under prepared or not prepared at all.

When the going gets tough, they end up selling their rental property.

They may encounter difficulty with their tenants or they may be faced with repairs and maintenance to the property that they haven’t planned for.

The conflict with their tenants may be unsettling and the best way they know how to deal with it is by selling the property.

The repairs required on the property, may cost them more than they have available.  As such, they might be forced to pay for the repairs and maintenance to the property by using leveraged funds.

Using these leveraged funds to repair the property makes them nervous. They become so anxious that they end up selling the property as a result.

So as you can see, purchasing, owning and effectively managing rental property is not easy.

However, it is not that hard either.

It is not that hard if you:

Never sell you property!

This indeed is the number one secret that you need to know.

If you never sell your property, you win as a real estate investor.

From the time in which you purchase your rental property, there is a good chance that you may face  conflict with a tenant or have to perform unplanned repairs and maintenance on your property.

That is a given if you are a real estate investor.  These things are going to happen.  There is no avoiding them.

The reality is that many people will sell their rental property when things become difficult.

They key thing for you to remember is to never sell your property.

That is the number one secret to buying rental property…

Never forget that…

Happy Investing!

Neil Uttamsingh

ps: If you are interested in buying your first rental property, sign up for the First Rental Property Newsletter by entering your name and email address in the top right hand corner of the blog.  If you do, you will receive tips and tricks from experienced real estate investors on how to buy your first rental property!

pps: I am a Licensed Realtor in Ontario and I help people like you buy their first rental property everyday! If you need help purchasing your first rental property or your next rental property, write to me at NEIL@FIRSTRENTALPROPERTY.COM. I will help you negotiate the best price, terms and conditions on your rental property. Buying in the US? No problem!  I will refer you to one of my trusted partners.  Happy Investing!  🙂