Archives for 2014

There have been many instances over the last year that I have encountered that exemplify confused investors looking for lending.  There are many types of hard money lenders out there with vastly differing criteria to be sure, but one thing they all have in common is they want to make a good return and mitigate their risk profile, after all they would not have the money to lend on your deal if they were gamblers! I have seen many new investors looking for lenders to fund their projects when they have never done real estate before, and in most cases they request that the “lender” put in both their credit and money into the deal…not let me be very clear to those investors: you are not looking for a hard money lender at this point you are looking for a Joint Venture Partner! There are absolutely experienced investors out there that would be more than happy to put up their credit/money or both into the deal if in fact you have a great deal that will give said investor a high return on their investment.  The other common mistake new investors make, is thinking that they do not need to put any money in the deal.  I do not know any investor that I can think of in my network (and the networks of other investors) that would do a JV or lend money to someone who has no personal “skin in the game” or capital of their own at risk no matter how good the deal is.  Now, that said you would be in a great position to wholesale/assign that deal to the investor interested.  The one thing that I firmly believe is that a good deal speaks for itself, and if you have a great deal and no money of your own – just pass that along to an investor that can execute and get out of their way OR take a very small percentage and let them run the project.  The concept of splitting a deal 50/50 just because you are bringing the deal to the table sounds great on paper but does not happen very often in the real world.  If you have a real deal on your desk right now, get it out to someone you know can close it and do 10 of those in a 3 month span rather than trying to take 50% of a deal that will never happen!

Tim
“If you want to change your results, first take a hard look at your habits”

I have been investing in real estate for over four years now and I have learned more things along the way than I could have every imagined.  Most of this surprise came after taking a real estate course which made it seem like I had all the answers and strategies to get started, and then seeing how far from the truth that view really was! I have spoken to a few investors recently that not unlike myself freshly out of a real estate course thought that I had all the information I needed to get out then and run the strategies that they learned.  The main thing that I see as the issue with the way these strategies are presented is that they only cover the ideal circumstances in which something would happen, and do not give the harsh truth about how rare that is in real estate investing.  For example the courses tell you to try and use other people’s money or “OPM” to do your deal and have less money out of your pocket to do the deal such as a reno and flip project.  There are many people that will lend you money out there but a lot of them may not be real estate investors and really may not want anything to do with a real estate project.  The common scenario that I get asked is if someone would lend them the money to renovate a property based on the equity in the project property itself – this creates a number of risks for the lender that would be considered higher than normal such as:

-in the event of a default the would be foreclosing on a distressed property

-in the event of a death of the lender the distressed property would be sold at a discount putting their capital at risk of not being recouped

-Renovations can be fraught with issues as illustrated by countless shows on reality TV incurring higher costs that originally anticipated which could cause the investor to sell at a discount which also puts the investors interest and capital at risk of being repaid

The courses would tell you that someone lending in this dynamic would be easy to find, and I can tell you from experience this is most certainly not the case, if you would like to know more about hard money lending in Calgary please drop contact us anytime.

Tim

I have been working in real state in Calgary for over four years now and have had the pleasure of working with a number of excellent mentors.  The value of mentoring can not be over-stated, there is always something that you do not know in real estate due to its immense size and scope as a business.  Even if one day you do become the expert at one particular thing in real estate and could become a mentor yourself, you could move a province to the east or west and your skills could be completely useless! I for one do know how large the differences can be from one end of Canada to the next, there are those from Calgary that will not even do business with people from Toronto just by virtue of their location.  These differences are the types of things that one can only learn from working with a mentor in real estate, after all you don’t know what you don’t know!

Tim

We have just launched our new Real Estate investing program in Calgary and remote classes are available for students all over Canada. I recently attended an event by a US company that was offering education services that had a different approach them many, but they certainly did not teach anything expressly useful in the free seminar which was a leader in their three-day workshop.  Surprisingly, the price for their training was much lower than expected and if what they said was true it could be a good value but more due diligence is required of course! I am very excited to launch this new program for new investors to help them get off the ground fast and not have to waste time finding their power team, trying to figure out how to structure their business, and many of the other headaches that newcomers to this world face.  Contact us today to find out how the program could help you if you are interested in getting into real estate.

Tim

There are many Real estate courses out there (I will not single any out) that teach that this is one of the best strategies to get started within Real estate if you have no money.  In some ways, I would agree with that but in many others, I would wholeheartedly disagree with the “gurus” who preach this dogma.  I will relate this to the Calgary market in which I have seen more than 4 rent to own companies either greatly reduce their operations or close up shop! I think that the strategy in and of itself is a great one due to the following:

-You are helping normal people get into homeownership/back into homeownership

-You get higher than average rent/non-refundable deposits

-Owner minded tenants when qualified properly

-POSSIBILITY to execute the strategy with very little money

That said, in practice in many of the Canadian markets you do in fact need money to execute this strategy even if you are working the sandwich lease option strategy.  The reasons for this are: if you are new to the Real estate you still need to create your legal contracts from scratch, find a lawyer willing to execute the close, market to tenant buyers/homeowners.  Some would argue that you need very little money to market to these two sides of the equation and in some markets that may be true but at least in Calgary that task is VERY difficult.  The market in Calgary has continued to gain steam over the last three years and at the current moment, you could likely hire your neighbor’s dog to sell your house and would not have to wait long to get an offer! (just kidding to the realtors out there) Alberta by and large has a lot of people making higher than the Canadian median income and they have little issues qualifying despite the recent changes the government has made to the mortgage rules.  I speak from experience here being at one time a new investor that was cold calling, posting ads on Kijiji, placing bandit signs trying to get the calls to come in for buyers/sellers and it is extremely difficult and time-consuming strategy to execute properly.  I found that often the owners who may have been motivated to sell their property often had many debts to take care of and they needed cash from a retail sale and the tenant buyers were generally in the same boat and never had a reasonable down payment for the option consideration.

This may work well in other markets that have different demographics in terms of income/motivation levels to get out of their mortgages, but in Calgary, it is a tough mountain to climb.  There is one option for Rent to Own that I see working in Calgary at this time and it is one that does require a LOT of money or a large number of partners that can qualify for mortgages/put down payments into the homes to execute the tenant-first side of the Rent to Own strategy.  This entails finding and qualifying a tenant-buyer who can afford X purchase price and then they get to pick the home they want to buy on the retail market and then the rent to own company buys the home and then gives them the option to purchase the home in 2-3 years depending on the buyer’s circumstances.  As you can see, this strategy will burn up a lot of credit/down payment money in short order with the average house prices in Calgary being what they are hovering around the 480k mark.  This is the only viable way of making a run at the rent to own business in Calgary at this point to be able to close deals month after month, which is certainly not something a new Real estate investor would be able to do unless they are very high net worth individuals. I feel that a lot of the gurus out there do not fairly illustrate how difficult this method of doing Real estate deals is in the courses and they do not highlight how important it is to consider your market when choosing a strategy.  I would at this point like to make something very clear: ALL Real estate IS HARD! there are no “easy” ways to make money in Real estate even though the courses would make it sound that way at times.  There are many ways to make money in this business but they are not without all their unique challenges, and they all need to be considered carefully in the context of the market you are looking to try them in.

In general, based on the above my opinion is that rent to own is a crap strategy for new investors in Calgary unless you have large amounts of capital getting started and in that case, I would recommend you explore other options that would get you higher returns faster such as hard money lending/bridge loans.  If you have any questions about rent to own, how it works, how to get help as a tenant-buyer, or anything else related to the topic please visit my website or contact me directly or comment on this post!

Tim

There are many real estate courses out there (I will not single any out) that teach that this is one of the best strategies to get started within real estate if you have no money.  In some ways, I would agree with that but in many others, I would wholeheartedly disagree with the “gurus” who preach this dogma.  I will relate this to the Calgary market in which I have seen more than 4 rent to own companies either greatly reduce their operations or close up shop! I think that the strategy in and of itself is a great one due to the following:
-You are helping normal people get into homeownership/back into homeownership
-You get higher than average rent/non-refundable deposits
-Owner minded tenants when qualified properly
-POSSIBILITY to execute the strategy with very little money
That said, in practice in many of the Canadian markets you do in fact need money to execute this strategy even if you are working the sandwich lease option strategy.  The reasons for this are: if you are new to real estate you still need to create your legal contracts from scratch, find a lawyer willing to execute the close, market to tenant buyers/homeowners.  Some would argue that you need very little money to market to these two sides of the equation and in some markets that may be true but at least in Calgary that task is VERY difficult.  The market in Calgary has continued to gain steam over the last three years and at the current moment, you could likely hire your neighbor’s dog to sell your house and would not have to wait long to get an offer! (just kidding to the realtors out there) Alberta by and large has a lot of people making higher than the Canadian median income and they have little issues qualifying despite the recent changes the government has made to the mortgage rules.  I speak from experience here being at one time a new investor that was cold calling, posting ads on Kijiji, placing bandit signs trying to get the calls to come in for buyers/sellers and it is extremely difficult and time-consuming strategy to execute properly.  I found that often the owners who may have been motivated to sell their property often had many debts to take care of and they needed cash from a retail sale and the tenant buyers were generally in the same boat and never had a reasonable down payment for the option consideration.

This may work well in other markets that have different demographics in terms of income/motivation levels to get out of their mortgages, but in Calgary, it is a tough mountain to climb.  There is one option for Rent to Own that I see working in Calgary at this time and it is one that does require a LOT of money or a large number of partners that can qualify for mortgages/put down payments into the homes to execute the tenant-first side of the Rent to Own strategy.  This entails finding and qualifying a tenant-buyer who can afford X purchase price and then they get to pick the home they want to buy on the retail market and then the rent to own company buys the home and then gives them the option to purchase the home in 2-3 years depending on the buyer’s circumstances.  As you can see, this strategy will burn up a lot of credit/down payment money in short order with the average house prices in Calgary being what they are hovering around the 480k mark.  This is the only viable way of making a run at the rent to own business in Calgary at this point to be able to close deals month after month, which is certainly not something a new real estate investor would be able to do unless they are very high net worth individuals. I feel that a lot of the gurus out there do not fairly illustrate how difficult this method of doing real estate deals is in the courses and they do not highlight how important it is to consider your market when choosing a strategy.  I would at this point like to make something very clear: ALL REAL ESTATE IS HARD! there are no “easy” ways to make money in real estate even though the courses would make it sound that way at times.  There are many ways to make money in this business but they are not without all their unique challenges, and they all need to be considered carefully in the context of the market you are looking to try them in.

In general, based on the above my opinion is that rent to own is a crap strategy for new investors in Calgary unless you have large amounts of capital getting started and in that case, I would recommend you explore other options that would get you higher returns faster such as hard money lending/bridge loans.  If you have any questions about rent to own, how it works, how to get help as a tenant-buyer, or anything else related to the topic please visit my website or contact me directly or comment on this post!

Tim

Well here we are almost at the end of the first quarter of the year and those that are analytical in their business goals are staring that the profit/loss statements trying to distill what went wrong (or right) over the first four months of the year.  I for one am looking at the numbers and activity that I have seen in new leads/deals and am not happy, I can admit when things have not gone the way they should and take action to start to correct the issues have came to light in the last while.  I have finally finished my long term renovation project in Calgary and it is up for sale and long last see listing here: http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14227588

This is both a great relief and a great time to reflect on the lessons learned from the whole experience which will be detailed in the real estate tips posts to follow over the coming weeks.  I have looked back over the last few months and realized how much of a challenge that they have been both financially/personally and there are many changes that I plan to make moving forward in the business as well as live in general to make everything smoother, more efficient, and just plain more fun than the last stint has been! There are many marketing ideas that I have extracted from the last few books I have read that will be put into place in the coming weeks and there is much research to be done on markets, customers, and of course my competition and the partners that I have to learn as much as I can about what they are doing right and in my not-so-humble opinion what they are doing that could use some improvement.  There will be a lot of school-like nose to the grindstone research sessions needed to complete these tasks but as have been reminded recently- the task or goal may seem like huge mountain to climb but it can be broken down into many smaller steps that are easier to manage that will add up to the end result.  In the start up of a strategic marketing strategy the whole landscape can seem a bit intimidating with social media and the “internet of things” being talked about all overt the place but as stated above each of these marketing areas can be sliced and diced into little projects that anyone with a bit of motivation and some consistency can accomplish!

Feel free to comment and throw up your marketing tips, ideas, tricks or general thoughts on what real estate marketing should be or even marketing in general.

Until next time,

Tim