First Rental Property

Real estate investing is no different than grade school.  During your school days there were always those students that learned very quickly, as well as those that picked up on concepts a lot slower.

The same difference in learning exists with real estate investors.

Just because some real estate investors learn faster than others does not mean that they are any smarter.

More appropriately, the speed at which a real estate investor learns is directly related to two variables.

These variables are:

1) Volume

2) Market

Volume

Let’s look at the following example.

2 real estate investors are new to the world of real estate, and they buy their first rental properties on the very same day.

One real estate investor goes on to buy a total of 5 properties during the course of 5 years.

The other real estate investor does not buy any more properties, other than the first purchase.

The investor that bought more properties, will more than likely become a lot more knowledgeable than the investor holding one property.

This is due to volume.

When you are an investor holding multiple properties, you are exposed to multiple issues.

In this case, you would have 5 different tenants to deal with at any given time.  You will also have 5 furnaces to maintain, and 5 air conditioner units to maintain.

Overall, you will be responsible to carry out any repairs and maintenance as well as property management on 5 different units.

Due to the higher volume of activity, this investor will learn more and become more knowledgeable in general than the investor that holds one property.

Therefore, if you want to become a more knowledgeable real estate investor, increase the amount of properties you own and manage.

Market
The second variable that effects the knowledge level of a real estate investor is the market that they invest in.

In my experience, real estate investors learn who own properties in a  high income neighbourhood, learn at a slower pace than those investors that own properties in a low income area.

It has been my experience that tenants that occupy rental properties in high income neighbourhoods generally are more independent than tenants in low income neighbourhoods.

What I mean by this is that if you own a rental property with higher income earning tenants in a nice neighbourhood, you will probably not be dealing with any non payment of rent issues, or any evictions due to non payment.

This of course is not always the case, as any tenant, no matter what neighbourhood they live in can all of a sudden not pay rent.

However, generally speaking, higher income earning tenatns are more independent.  As a result, an investors that owns in this type of neighbourhood will deal with very few tenant issues.
As you continually learn more about real estate investing, keep in mind the importance of:

volume and market

If you can get more experience dealing with multiple tenants, and you can get experience owning and managing rental properties in a wide range of markets, you will be well on your way to becoming a well rounded and knowledgeable real estate investor.

Best Regards,
Neil Uttamsingh

ps: If you are interested in real estate and want to learn how to buy a rental property, subscribe to my blog today!

[youtube]http://www.youtube.com/watch?v=_wHGXqcxcw8[/youtube]

Hi Everyone,

I hope you are doing well.

Before I dive into today’s blog post, I would like to thank fellow Canadian Real Estate Investor and Blogger Chris Davies.  I was chatting with Chris this week, and he gave me some great tips as to how I can improve my blog.  One of the blogs that he recommended to me that I am going to be leveraging in order to improve my blog is SEOmoz.  The SEOmoz blog has nothing to do with real estate investing, however, everything to do with Search Engine Optimization — which is something that I am going to be learning more about and integrating with First Rental Property.  Thanks again Chris!

Now for today’s blog post…

Today’s post was inspired by fellow Canadian Real Estate Investors and Bloggers Julie Broad and Dave Peniuk of Rev N You.

In Julie and Dave’s recent Rev N You Newsletter, they talked about figuring out your ‘why’ when you are buying rental property.

Over the past couple of years, they have met a number of real estate investors who have purchased 30 or more properties in a very short period of time.

Despite these large portfolios that these investors have accumulated in a very short period of time, they are not satisfied.  They are not satisfied because they never took the time to figure out WHY they were investing in the first place.

When I read this in Julie and Dave’s Newsletter, I knew exactly what they were talking about, because I see this happening as well with real estate investors that I know, or hear about.

It has been my observation that some real estate investors become obsessed with buying as many properties that they can.  Some investors ‘explode’ onto the real estate investing scene and buy a lot of properties REALLY fast.  Before the dust has settled, some find that they are in a situation in which they despise….very unhappy, and holding a large portfolio of rental properties.

For instance, they now have a lot of additional stress with the management of these properties and with dealing with all of their tenants.

Why it pays to be self aware…

Most Real Estate Investors just like most of the general population are not overly self aware.  Due to this lack of self awareness, people do things without really thinking why they are doing it.

Fortunately, I have always had a high degree of self awareness.  This has helped to guide me through my real estate investing career.  If and when I begin to question what I am doing, I have to stop and ask myself the reason why I am investing in real estate.

As a new real estate investor, being self aware is crucially important.  Generally speaking, the more self aware you are, the less stress you will cause yourself down the road.

Here is an example of what I mean…

Some new real estate estate investors think investing is all about money, and all about how many properties you can buy and how fast.

Fortunately, I came to realize early in my real estate investing career that it is not all about that.

This past year, I  had to turn down an individual who wanted to joint venture with me.  He was a guy with access to a large amount of capital and with experience in real estate.

When he first asked to joint venture with me, I struggled slightly with the decision making process, as all I saw were ‘dollar signs’, as I did not want to turn down this guy’s money.

Being the extremely self aware individual that I am, it did not take me long to figure out that I had to listen to my gut and not joint venture with this guy.

He was someone that did not have the same core values as myself.  He viewed life and business much differently than I did.  His time horizon for investing did not match up with mine.  Due to all these factors, my decision to turn him down was very easy.

Having only been investing in real estate for a little over 5 years now, I know well enough never to venture with someone who does not share the same core values that I do.  This in my mind is a recipe for disaster.

Unfortunately, there are so many investors who do not realize this and jump into partnerships with anyone, just because that other person has money to invest.  They get blinded by the dollar signs, and more often than not, are left cleaning up a mess and/or are completely miserable.

What I have learned by observing others…

I have been fortunate to learn a lot by watching what other investors do.

What I have learned is that in this point in my real estate investing career, I would only joint venture with family members (people that I am related to) or with people who have core values that match up closely with mine. (this could be close friends, friends or acquaintances — however, there has to be an alignment of core values)

Due to this decision on my part, it may take me longer to build my real estate portfolio, however, I will be much happier and will not be adding any unnecessary stress to my life by partnering with people just because they have money to invest.

So how many rental properties do you need to retire rich?

There is no right or wrong answer to this question.

This all comes down to your own personal goals.

As you can see from my example, I am choosing to grow my portfolio more organically…

It is perfectly okay to grow your portfolio in this manner.

If you are a new real estate investor, you may only need one rental property to meet your real estate investing goals.

Let’s say for example, you chose to purchase 3 properties.   Depending on your individual circumstance, there is no reason why you cannot do this on you own.  For some it may take a number of years to acquire 3 properties by yourself.  Whereas with others, it may only take a few months in order to achieve this.

At the end of the day it is important to remember:

• There is no ‘secret’ number of properties required to retire rich.
• It is completely fine to grow your portfolio organically (by yourself)
• If you do joint venture with someone, make sure that you are not doing it just for the money, and that your partner and yourself are well suited for one another.

Best Regards,

Neil Uttamsingh

PS: To keep up to date with my blog, enter your email address on the LEFT hand side of the blog.  To receive The First Rental Property Newsletter, enter your e-mail address on the RIGHT hand side of the blog.  In The First Rental Property Newsletter, experienced real estate investors will be sharing how they purchased their first rental property.  They will also share with you some ‘tips’ and ‘tricks’ as to how to buy rental properties.

Hi Everyone,

Believe it or not, some people become obsessed with real estate investing.

This obsession often begins at the early stages when an investor is just starting out.

What does the obsession look like?

1. An individual obsessed with real estate investing may always be reading books related to real estate investing.  Not only would they be reading these such books.  These books would in fact be the only type of books that they would be reading.
2. An individual obsessed with real estate investing would also constantly be thinking about investing, and how they can increase the scope of their investing.  Once again, this would be the dominating thoughts in their head, and they would not give much thought to anything else other than real estate investing.
3. An individual obsessed with real estate investing would always be talking about real estate investing with others.  Perhaps they would be discussing their current real estate investments, or pitching joint venture ideas to people they know.  Again, the topic of real estate would be the only topic that they would want to talk about.

The only way to make sure that you don’t become obsessed with real estate investing is to obtain balance in your life.

How do you obtain balance in you life?

The only sure way to obtain balance in your life is to find something that you are equally  passionate about as real estate investing.

If you love real estate investing, find something that you love just as much.

How do you find something that you love just as much as real estate?

This is the tricky part because this ‘something’ is sometimes not easily found.  The only way that I believe you can find this other ‘thing’ is to try many different things.

Perhaps you like to draw.  If so, focus some time each and every day to drawing. Try to become better with each passing day.

If you like sports, spend some time each day playing a particular sport, until you find a sport that you really, really enjoy.

If music is your interest, allocate some time each day to listen to music, or learn how to play an instrument.

Maybe you like to garden.  If so, spend time working in and improving your garden.

Why do you need balance in life?

I have concluded that being overly obsessed with real estate investing is not good.  I see a lot of people, both new and experienced investors who are obsessed with real estate investing.

In my books, this is not a good idea.

It is not a good idea because these people tend to derive their sense of self worth from their real estate investments.

If one day, they lost all of the rental properties they had, they would be left feeling very empty inside.

This void would be felt because they would have nothing else left in their lives that brought them the same level of fulfillment that their real estate investments did.

They would feel lifeless and discontent simply because they had put all their eggs in one basket.

The benefit of having balance

When we learn to put our eggs in more than one basket, we become happier and more focused.

For example, if you learn to both enjoy real estate investing and painting art work just as equally, if one of these interests departed your life for good (your rental property burns down in a fire), you would have another interest to fall back on (painting artwork), which would be able to bring you the same amount of joy.

If you don’t have balance in your life currently, search for something that brings you joy.

To keep up to date with my blog, enter your e-mail address on the LEFT hand side of the blog.

To sign up for The First Rental Property Newsletter, enter your e-mail address and name on the RIGHT hand side of the blog.  In this Newsletter, you will be able to read about the experiences of seasoned real estate investors, as they will take you through step-by-step how they bought their first rental property.

Onwards and Upwards!

Neil Uttamsingh

What’s up Everybody?

If you are new to real estate investing, and are looking to buy your first rental property, there are many things for you to consider.

One very common question that new real estate investors ask is,

“Where should I buy my first rental property?”

I recently polled experienced real estate investors who each owned multiple rental properties.  I asked these investors if they had purchased their first rental property close by to where they live, or far away from where they live.

These investors revealed that there are generally 2 schools of thought as to where a new investor should buy their first rental property.

As you may have guessed, the results of the poll were split.  Half of the experienced investors had purchased their first rental property close by to where they lived, and the other half had purchased their first rental property far away from where they lived.

How Far is Too Far?

The furthest distance that one of the investors ended up purchasing their first rental property, ended up being thousands of kilometers away from where they lived.

Are you surprised?

If you are, don’t be…because this is not uncommon.

A number of real estate investors actually do start out with their first rental property very far away from where they live.

Why would someone purchase a rental property so far away?

Often times, people end up buying a rental property very far from where they live because of a better opportunity.  Not all cities and towns make for good places to invest.  As such, if you find yourself living in a place where there is no upside to the real estate market, it is very wise to invest in another city or town.

Once an individuals begins to research the different cities and towns in their respective country, they may find a much better opportunity to invest many kilometers (or miles) away!

The Key to Success if you buy ‘far away’

If you end up purchasing your first rental property thousands or hundreds of kilometers (or miles) away from you, you better be well organized…otherwise your investment could end up being a disaster!

The experienced investors that took my poll spoke about one very important key to success with purchasing a rental property far away from where they lived.

The key to success of the investors that purchased far away from where they lived was that they had a very good property manager, and a strong real estate team.

This variable was absolutely critical to the success of these real estate investors.

Why purchase a rental property so far away, when you can purchase close to home?

On the flip side of the coin, many real estate investors who purchase their first rental property, end up buying a rental property close to where they live.

Sometimes these investors are fortunate in that they live in, or close by to cities and towns that have great real estate markets and a very solid economic future.

As as an example, many real estate investors living in Southern Ontario in Canada, are located in a great location.  This is a great location as there are at least 10 strong cities and towns to invest in all within about an hours drive.

The disadvantage to buying close to where you live

With the good there is also the bad.

Sometimes people who end up buying a rental property close by to where they live, obsess about it too much.  This obsession is not beneficial because at the end of the day, it does the real estate investor no good.

This obsession can take on the form of… constantly driving by the rental property.

During these drive bys the real estate investor often can become too concerned about the physical appearance of the exterior of the property.  I have known real estate investors to grumble that their tenants had not cut the grass, or that they had not picked up the flyers from the front porch.

The funniest story I every heard about an obsessed landlord/real estate investor was quite scary actually.  This landlord was always so concerned about the physical upkeep of the property, that he came by one afternoon without notifying the tenants and started to sweep with a broom the outdoor porch, that was connected to the property.  The tenants came out of the house, as they heard some noise on the porch, and they saw their landlord there standing with a broom.  The funny part is that the porch wasn’t even dirty at all.  The landlord had some explaining to do…

If you own a rental property close by to where you live, there is no need to obsess about the property.  This will do you no good.

So there you have it.  There is no simple answer as to where you should buy your first rental property.

It can be close by or far from where you live.

If you do buy the property far away from where you live, please make sure that you have a very good property manager and a strong real estate team that you can rely on.

To keep up to date with my blog please click on the orange RSS button at the top right hand corner of my blog.

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Onward and Upwards!

Neil.

[youtube]http://www.youtube.com/watch?v=emN0qGCjtIw[/youtube]

What’s up Everybody,

So often we hear about the real estate buzz word ‘leverage’.

Leverage is a very important concept when it comes to real estate investing.

Leverage is a great thing because, ‘leverage’ allows you to buy real estate.

To those that do not know, simply put, leverage is using money (other than your own) in order to assist you in purchasing a piece of real estate.  ***This is not an official definition, rather, my own definition off the top of my head.

In order to see leverage at work, let’s check out an example…

Let’s say that you are purchasing a house valued at:

$100,000

If you have $100,000 cash saved and you use up all of this cash to buy this house, you are using no leverage, as you have used up all of your own money to buy the house.

Now let’s say that you purchase this same house valued at $100,000, but this time, you use your own personal savings in the amount of:

$25,000

Since you have put down $25,000 towards this property, you will need to get a mortgage in the amount of:

$75,000

This is an example of using leverage.  You have used leverage here because you have used money other than your own (mortgage) in order to buy this piece of real estate.

Why do people use leverage?

One can argue that there are a number of reason’s that people use leverage.  However, the main reason I believe people use leverage is because of the higher Return on Investment (ROI) that is generated when leverage is used, as opposed to when it is not used.

If we look at the examples above, the eventual ROI would potentially be greater when you put down $25,000 in order to purchase the property, as opposed to using the full amount of $100,000 in order to purchase the property.   This is because you have used less capital in order to purchase the same property.

When is it time to de-leverage your portfolio?

If you own a number of properties, when is it time to de-leverage your portfolio?  When I say ‘de-leverage’, I mean…when is it time to get rid of some of that leverage by potentially selling a property or two that are over leveraged?

If you do not own a portfolio of rental properties, and you are looking to purchase your first rental property, when should you decided NOT to use any leverage?

These are important questions to ponder, because if you do not pay special attention to how much you are leveraged as a real estate investor, you can become over leveraged quite easily

Who cares if you are over leveraged?

You should care, and in a major way. Being over leveraged can cause you to be making payments on a mortgage or on borrowed money that you cannot afford.  Some might argue that you become over leveraged when your payments going out for a mortgage are greater than the income coming in.

But seriously, how do I know if I am over leveraged?

If you are looking for conventional wisdom here, you are not going to get it.  Personally, I have learned that people know how much leverage they can tolerate by listening to their gut instinct.  Further, people have different levels of tolerance for leverage.  As such, some people are able to stomach a lot more ‘leverage’ than others.

This may not be the the answer that you were looking for, but it is the truth.  At least, it is the truth that I have come to realize.

If you have a gut feeling that you should not take on any more debt with respect to real estate, or if you feel that you already have too much real estate debt… you will know this — just listen to your gut.  No one can tell you this.  This is something that you will realize for yourself.

If you push the boundaries and try to over leverage yourself, and if you don’t listen to you gut instinct, this is when you can get into trouble.

Debt can be manageable…no question.  Many successful real estate investors have tonnes and tonnes of debt.  However, the super successful ones are able to carefully manage this debt, a.k.a. leverage very effectively.

Is leverage good or bad?  What do you think?  Leave your comments in the comments section below.

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Greetings Everyone,

Welcome to my sixth installment of my ‘Business Life Story’ Article series.

You can read my previous installments here:

Business Life Story Part One
Business Life Story Part Two
Business Life Story Part Three
Business Life Story Part Four
Business Life Story Part Five

In this article, I am going to outline the time line of my property purchases, as well as some general thoughts on real estate and rental properties.

As you may already know, my first property purchase was a freehold townhouse in my hometown of Oakville, Ontario.  You can read about some of the details on my About the Author page.

This first rental property purchase was made in May 2005, and I ended up taking possession of the house in February 2006. This purchase has probably been the single smartest financial decision I have made thus far, as everything has worked out perfectly with this property —Knock on wood! (*knock*knock*)

The property has experienced very good appreciation over the past 5 years. The property is located in a very nice neighbourhood of Oakville with high income earners. There are new schools and a new hospital is being constructed very close by. I have been fortunate in that, I have always had quality tenants in this property.

When I first started blogging, I wasn’t sure how much of my personal information I wanted to share. As time went on, I realized that the more honest I am, the more people will want to read about what I have to write.

So here goes…
This first rental property was purchased in May 2005 as I mentioned above for $250,990. A few months ago (this article is being written in April 2010), a neighbour to this property (who owns a comparable property) sold for $365,000.

The next property purchase occurred in October 2008. With this property purchase, I was very much trying to re-create the same type of purchase as the first rental property, in that I was hoping to buy in an area that would see some solid appreciation over the long run.

My first rental property purchase was an emotional purchase, in that, I purchased the property with the belief that there would be good long term appreciation of the property.

Rental property number two was purchased with the same intent. It was definitely an emotional purchase again. Fortunately, I have made two very smart decisions on the first two properties, because I bought in areas with promise. These two areas that I bought in are also areas that people want to move to.

This second property that I purchased again was pre-construction (bought off of the plans of the Builder). This property is a condominium in the heart of the Toronto neighbourhood, The Junction. The Juntion is an up and coming neighbourhood that is receiving a lot of ‘buzz’.

The Junction has been talked about in many newspaper articles, including The New York Times.

This property is a one bedroom plus den condominium that was purchased for $223,245. This price includes a locker and a parking spot. The property is scheduled to close in September of 2010. The square footage of the condominium is 665 square feet. My long term plan for this property is to eventually have it as a rental property. I want to hold onto this property long term because I know that it is going to experience very good appreciation.

I am very confident that the price that I bought it for was a very good one. As many of the comparable one bedroom plus den units in Toronto that I have been looking at are selling anywhere from $265,000 to $320,000. Therefore, I believe that once this property closes, there will be instant equity built in. I am anxiously waiting to see what units start selling for on the resale market, once this property closes.

What do you think of my investment strategy thus far on my first two properties?  Please leave your comments below.

Also, please keep up to date with my blog.  You can do this by entering in your e-mail address on the left hand side of the blog, or click on the orange RSS button at the top right hand corner of the blog.

Greetings All,

I am back with another blog post.  Sorry it has been so long.  The studying for my Canadian Securities Course is in full swing, and as predicted is taking up much of my spare time.

Regardless, I am going to keep the blog posts coming.  Once my studying is over, I will post more frequently.

Now on to business.

Today I want to talk to you about Emotional Investing and Gut Instict Investing.

My fellow real estate blogger John Fedro, a.k.a. J-Fed wrote a very good article discussing emotional investing. You can read his article here. It was posted last week on Josh Dorkin’s premiere real estate social networking site Biggerpockets.com.

Last week I was having a detailed conversation with an experienced real estate investor on this topic.  It was a good conversation as we were both in agreement on this topic.

Here is a summary of what we talked about.

Emotional Investing

As you may or may not know, emotional investing is the worst type of investing you can do. If you are emotional with real estate investing you will definitely screw up many a deal.

What does emotional investing mean?

Emotional investing essentially is when you make decisions based on your feelings, and not based on logic. When you are investing in real estate you have to ensure that you work out all of the numbers on a particular rental property, and make a decision on whether to buy the property based on these numbers.

If you find that your emotions are taking over on a particular deal, this is the time where you need to pause and take a step back. More often than not, if real estate investors make emotional decisions with regards to purchasing rental properties, they are bound to make errors.

It is commonly believed by experienced real estate investors that all emotion MUST be removed from your decision making process. I agree 100% percent with these real estate investors. This is age old advice, so I will leave the explanation at that…

However, here is where the interesting, and perhaps controversial opinion comes into play.

Sure, we all know that we need to remove our emotions from our real estate investing decisions. Fine. Done and done.

However, how many of us know that we always have to invest according to our gut feeling?

The Gut Feeling

Whenever I am making a decision, and I go against my gut feeling, I can always feel it. I always know at that particular time that I am in fact, going opposite of what my gut is telling me to do. And guess what???

My gut feeling always is correct.

I cannot recall a single time in which my gut feeling has been wrong.

With regards to real estate investment, we need to always go by our gut feeling and invest in rental properties using this strategy.

For example, you may be considering a potential rental property that you want to purchase. The numbers and your analysis may look absolutely great. The cash flow could be awesome as well. Despite all of this, you have a funny feeling, a gut feeling that you should not invest in this property.

Your gut could be telling you this for a number of reasons. Perhaps you do not feel comfortable about the location that the property is located. Also, you could be concerned about your ability to find and locate tenants. Further, you might be concerned about your reserve fund, in that you feel that you do not have sufficient cash reserves in place in order to fund the property in the event of vacancies.

If there is ‘something’ that is holding you back from moving forward on the deal, you have to pay attention to this feeling. Often times, it could be your gut instinct ‘talking’ to you.

Listen to your gut people, it is always right!

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Greetings Everyone.

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

Step One:  Determining WHY you are buying a rental property

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

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

Step Four:  The ecomomic influences of your location

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

What does ‘property type mean’?

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

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

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

Reason Number One

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

Reason Number Two

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

Reason Number Three

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

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

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

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

A question for you!

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

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

Feel free to place your comments in the comments section.

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

So far in this article series, we have discussed the first three steps that you must take in order to buy your first rental property.

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

In Step Two, we described on how to finance the rental property.

In Step Three, we talked about methods that you can use in order to determine what location you will invest in.

In step number four, we examine the economic influences of the location that you have chosen to invest in.

This is a crucial step because if the economic fundamentals are not strong in your chosen area, you have picked the wrong area.  If you have picked the wrong area you need to go back to the drawing board, and pick a different area.

Step four is essentially a check and balance in place in order to make sure that you are on the right track, and that you have chosen a location to invest in that has has a future.

I have derived the majority of the information for step four from Don R. Campbell’s Property Goldmine Scorecard.  Don R. Campbell is the President of the Real Estate Investment Network, REIN.  I have used the information contained in the Property Goldmine Scorecard in order to assist me in purchasing rental properties.

Many other successful real estate investors and REIN members have also used the Property Goldmine Scorecard to varying degrees, in order to help them with the purchase of rental properties. REIN members that have a very good working knowledge of the Property Goldmine Scorecard are members such as Wade Graham of Higher Ground Real Estate Investment Inc., and one of the guys I know behind the scenes at The Rentables.com

With step four, we begin our examination of the location that you have chosen by asking property specific questions.

Property Specific Questions

1) Can you change the use of the property?

This is an important question to ask.  If you can change the use of the property, you can potentially increase the income you are generating from the property.  For instance, if you are dealing with a single family home, are you able to easily convert it into a legal duplex?  If that is the case, you may be able to dramatically increase the income potential from this property.

2) Can you buy it substantially below retail market value?

Many real estate investors live by the rule that you can only make money when you buy a property.  They put emphasis on always buying below market value.  Whenever you can buy below market value, definitely do so.  However, buying below market value is not the only way you can make money investing in real estate.

3)  Can you substantially increase current rents?

You would be surprised how many landlords have rental properties, and on their properties they are charging the wrong rental amount. Many landlords are too lazy to increase their rents with their tenants on a yearly basis. As such, a landlord could own a rental property for many years, and never once increase the rents on the property. If this landlord ends up selling their property, and you buy it with the existing tenant still occupying the property, the rent that the tenant is paying will be well below what the market rent should be.  If this is the case, you now have the opportunity to increase the rents substantially.

4) Can you do small renovations to substantially increase the value?

It is amazing how little effort is required in order to dramatically increase the value of a property. To increase the value, you have to focus on all of the right things. Some cost effective things that you can do to increase the value of a rental property would be:

• Freshly paint the property
• Replace worn carpets with a neutral tone carpet or with laminate flooring
• Re-finish old looking kitchen cabinets
• replace outdated appliances with new, slick looking appliances

In the next article of this series, we are going to conclude Step Four.

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Step Four Continued – How to buy your first rental property

If you want to be a results oriented real estate investor for the long term, you can’t do it alone.

There is a saying, ‘It takes a village to raise a child’.

Well, with respect to real estate investment, ‘It takes a team to make an investor’.

I have discussed in previous posts some of the key members that you will need on your team of professionals, a.k.a. Real Estate Team.

The list does not stop with these people.

There are many more people that you will have on your team, that will all serve a very important function.

It is very important to assemble a great team, because you will have to rely upon these people in a time of need.

If you have a collection of great people working with you, they will unknowingly help to alleviate a lot of stress from your life.

Speaking of stress…today I had a situation arise where I realized that I needed to have one of my newest rental properties painted and painted fast. When I closed on the property, I did not spend any time or money upgrading the interior because I thought it looked fine. Although the existing paint job wasn’t THAT bad, looking back, I should have had the unit painted right after closing. Luckily, I have a very good painter on my team of professionals that I was able to call.

Because I know him, and I am comfortable with him, he is going to go check out the property this week by himself.  He will access the property through a lockbox I have at the property.  Once he takes a look around he will send me a quote for the paint job, I will approve it, and should he should start and finish the job within a few days time.

Having someone like this on my team, who is so responsive and willing to jump into action when called upon is a great help for me.

It wasn’t always like this though, I had to go through a really brutal painter to get to this good one. The first painter that I had was lazy and tried to rip me off on one of the jobs that he did.

The moral of this story (and this article) is as follows…

Assemble a team of professionals. As a real estate investor, you will need to rely upon these people. You will not become a successful real estate investor all by yourself. When you do become successful, you will be successful because of all of the contributions of the people on your real estate team.

Fellow real estate blogger Shae Bynes wrote an article called The 7 Day Plan for Aspiring Real Estate Investors. This was a well thought out article, that I would like you all to check out.

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