Are you interested in real estate investing in Calgary or other centers in Canada? Have you watched one of those many shows on TV and think that this investment vehicle could be the one that changes the trajectory for your financial future? If so, then you are in the right place – I will be writing over the next few weeks about the fundamentals of the flipping strategy.  This is actually one of the most difficult strategies there is in the real estate business because it has so many moving parts and variables.  That said, it is one of the fastest ways to build your capital base to be able to execute the other strategies in real estate such as rent to own and buy and hold.

The first thing to consider is your real estate market, this means the area that you intend to flip houses is – often your own back yard when you are starting out because building a power team and sourcing professionals (trades and others) that you can trust to keep your best interests in mind can be a challenge. After doing your homework, you may find that your own back yard may not be the easiest place to flip houses.  The strategy does work in all markets at all times in all areas – but real estate is very cyclical and there are certain parts of the cycle where flipping is the primary strategy that works well.

The first rule in all real estate is to make money in the BUY, which means you need to purchase the property substantially below market value, so that part of your profit is built into the deal.  This also allows for more contingency in your project budget to account for unexpected costs as you work through your renovation.  In markets that are currently showing a large number of foreclosures, divorce, economic downturn you will have more success negotiating below market value prices for homes.

You will need to check with stats Canada, local governments, and other resources to find out as much information as you can to determine what part of the real estate cycle your target market looks like it is headed into (or out of).  Employment is a good metric, and in-migration VS out-migration which will answer the question of: are more people moving into this area or out? We certainly want more people to come in!

The overall key to flipping is to be able to add maximum value (forced appreciation) to a property for the lowest cost, and then be able to turn that inventory as fast as possible – no matter what it takes. Once a system is built around these core fundamentals, you can scale hour business up to as many homes as you want for the year – also once you have the system down you can copy and paste it into another market to give you more options to operate in the most profitable area dollar for dollar!

Respect The Hustle

Tim Reid

There are many people in our society today that have followed the standard pathway of school-degree-career to find success, just like I did after listening to my mom (love you mom!) does that sound familiar? I eventually found myself on the slow ascent of the corporate ladder and it was not going as fast as I would have liked. So, I decided that there had to be a better or different way to earn an income (other than getting a second job) – reading countless books I found real estate as a common theme in all these wealth building books.  What I found was that there are 3 pillars of wealth that have been the common denominator for all highly successful people:

1. Real estate (the most common – think Trump, Marriot hotels, Hilton)
2. Stocks (warren buffet)
3. Businesses (Microsoft and bill gates, Steve jobs)

I didn’t know squat about picking stocks, however I had a small business before college so I decided that real estate was the pathway to greater wealth/financial freedom.  During my reading I got invited to a 2 hour seminar about real estate, which led to a 3 day bootcamp that showed me all the ways one could make in real estate.  Excited and a little scared I ventured off into the woods waving my flag around saying “look at me I’m doing real estate!” At this point I had some successes to be sure, some failures to go along with them and had a hell of a lot of learning and fun along the way.

I had not done a lot of personal development, mindset work, or seminars to support the most important thing in business/entrepreneurship – the 6 inches between my ears!  Once I put a bit more work into this area I realized that my real estate business was not doing as well as it could of because I did not have a well defined direction or WHY. Let’s be clear: I had financial goals, things that I wanted, life experiences that I wanted to achieve but a lack of a solid reason for why I was in business.

After attending a mastermind group and working with a coach I stumbled upon the true reason behind why I was doing what I was doing, what truly drove me forward and could help me stay motivated even during the harshest of storms in the business—- helping other people reach their financial goals so they can have the lifestyle they have always wanted and have more time off.  Coming to this conclusion has changed my business and life forever! I get up every morning excited to help people learn how to invest in real estate (and now other businesses as well) to get killer returns, and show those that want to get their hands dirty how to build a successful real estate business from the ground up faster and with less mistakes than they can on their own.

Having clarity around the purpose behind your business/career/life’s work filters down through everything you do, your marketing, how you interact with clients, customer service – love your customers! Taking a page from Scott schilling “Learn to love people or you shouldn’t be in business!” I agree with this statement 100% you have to adopt a customer first mindset to create true win-win outcomes.  What is your why? Email call or post to our socials and let us know what your why is! I would love to hear your stories.

To your success,

Tim Reid

Having a property that cash flows enough is a tricky proposition in the Calgary marketplace – specially now with the depressed economy rents are down and that is a fact. So what do you do? Get creative on how you can generate extra revenue streams in this article https://www.biggerpockets.com/renewsblog/earn-more-money-from-rentals/?utm_source=newsletter the writer on bigger pockets provides some interesting ideas to get the creative juices flowing.  The parking idea I have seen for a lot of years when I was younger going to flames games near the saddle dome where parking was scarce during game nights.

There are a lot of creative things that you can do to offer add-on services to your tenants, many will pay more for perks such as dry cleaning, landscaping, housekeeping, think of new and innovative ways to help you tenants with things they need such as tax planning, or partner with a chef and offer a tenant cooking class – the sky is the limit.

To your success,

 

Tim Reid

Entrepreneurs have an almost mystic- risk loving, 9-5 schedule smashing persona in the eyes of the majority of regular society. What do they really DO when they are staying up late toiling away on the next big new idea?

The basic fundamental result of what Entrepreneurs do with all that risk taking and effort is this:
transfer VALUE to the marketplace. Most would say that they “run businesses” “create products/services” – while that may be true they are ultimately providing value to their clients in the market. After all, if that product or services does not create consistent value for the client – then it won’t last very long in our highly critical/competitive market place.

The value that business owners create could be something new, something innovated, or a new method of delivering a product, or even the product of someone else in a unique way (affiliate marketing).

Value is not just the result that the product brings to the customer – it also encompasses a host of other things (to name a few):

1. service
2. customer experience
3. trust and loyalty (starbucks reward card a great example)
4. value exterior to the product result (confidence from a new suit)
5. Entertainment or piece of mind

Modern Entrepreneurs have to provide all of these things and more – working 60-95 hour work weeks while making their best effort to have health/happiness at the same time.

Large companies make a lot of great products – but they have over the last number of years started lacking in some of the areas listed above.

Value means something different for everyone – the Entrepreneurs our there are listening a lot closer than most large corporations out there.

What is the Value you are really looking for? Let us know: We are listening!

To your success,

Tim Reid
-Respect the hustle

The phoenix group was very excited to be asked by GlobalTV News to do an interview to discuss the foreclosure increase in Alberta recently! We are seeing an up-tick in foreclosures up in the great white north in Edmonton. This follows the historical trend where the volume of foreclosures will be highest in Calgary due to the exploration/engineering/geological positions being the first to go in an oil downturn, then the front-line jobs are at risk 6-9 months down the line.  The most important thing to remember – is that there is help out there for struggling home owners, before the banks get involved companies like ours can help with:

1. Education on your options
2. provide foreclosure rescue
3. pay back payments/provide a quick sale
4. help with moving costs+ first/last months rent
5. many other services to help you move forward in a positive direction

Full article and video here:

Foreclosures in Alberta up about 25% annually for past 2 years

We were honored to be Interviewed by CBC news to get an update on where foreclosures are going in Alberta recently. Indicators show that the market in Calgary has likely reached the lowest point (no one can really know for sure) and that there is still a long way to go before things are business as usual in the Alberta market. Recently we have seen a month-month difference of 10-15% in foreclosure bases requests to our firm, further details here to read full article:

http://www.cbc.ca/news/canada/calgary/foreclosures-alberta-calgary-rising-2017-1.4108646

I just read an article today that stated the CMHC leader wants to raise the minimum down payment for insured mortgages to further ease the demand for homes.  I feel that this would put the dream of homeownership even further away for most families.  The tendency for people to borrow more than they can afford has been going on for hundreds of years, regulations that attempt to stop this behavior are not likely to meet with much success.  I agree with the 10% requirement for more expensive homes (500K+) which will help first-time buyers to look at more affordable homes and not bite off more than they can chew.  However, raising the bar for first time home buyers to need to save more than 5% for their first house will squeeze many young families out of the market, which MAY reduce prices but it could just as easily have NO effect on pricing – just like the most recent tax in BC on foreign buyers.  The demand for homes is not going down, we have a growing population both locally and via immigration – especially in this case being that one of the many appeals of moving to Canada is the ability to have your own home for your family.  Real estate markets can be affected by many factors, but at it’s core the issue of a home buyer taking on too much mortgage debt is a matter of financial education – someone taking on too much debt is caused by a lack of education around how debt is structured, obtained, and paid back.  I feel that more study/work effort should be spent here rather that knee-jerk reactions such as raising the down payment requirement to attempt to legislate the behavior you want.

 

To your success,

 

Tim Reid

Recently I read an article that stated some eccentric star is now renting their apartment our for 40,000-60,000 per week (not including gratuity and taxes!).  This highlights a not often mentioned real estate investment possibility that I like to call the “private time share”.  We have all heard about going to some “presentation” where you can win a trip to Vegas or some such thing to sit through a sales pitch for a new fractional-ownership development.

I know many that have been happy with these investments and just about as many who felt they wasted their money…the jury is still out on this one.  I for one would like to have full control over my investment rather than leaving those reigns in the hands of  a large faceless corporation.

If you decide to buy a luxury apartment/vacation home in a trendy vacation spot (that you also like of course!) then you can have a professional management company rent out the weeks that you don’t plan on being in the house yourself.  This will pay for the property and all it’s costs with the added bonus of giving you cash flow in between your personal vacations!  This strategy is not new, basically the old-school AirBNB for the sophisticated real estate investor.

Granted, you may not be able to get the 40,000/week that a celeb can for their property – but keeping your prices lower than a hotel in a good location you can command very lucrative rates for your property and the housekeeping/management fees/maintenance could all be deductions on your taxes – make sure you ask your tax team to confirm these details. Imagine having your annual share holders meeting for your real estate corporation at your favorite vacation spot? ( I can see you on that beach now)

To your success,

Tim Reid

– Respect the hustle

 

Great Article that lays out the basics of wholesaling in real estate source:

https://www.biggerpockets.com/renewsblog/2016/08/04/what-is-real-estate-wholesaling/

What Exactly is Real Estate Wholesaling (& What Does a Wholesaler Do Every Day)?

 

For today’s post, I want to address a topic for all the newbies out there. You know, there are a ton of resources on BiggerPockets about the “how” to do this or that strategy, but I wanted to provide the “what” today, especially when it comes to real estate wholesaling.

What exactly is a wholesale real estate business?

What exactly do wholesalers do every day?

It is these two questions that I want to address for you. So let’s do it!

Real Estate Wholesaling is…

When you look up the definition of the word “wholesale” in the dictionary, you get the following:

The sale of goods in quantity, as to retailers or jobbers, for resale (opposed to retail).

In real estate, we know that “retail” properties are those sold on the MLS through agents representing buyers and sellers. In opposition of that, we have “wholesale” properties that are typically sold off-market at a discount and “in quantity” to “retailers” or investors who use these properties to turn a profit.

In the retail market, it’s typical for a person to maybe buy one house every seven years or so, but when it comes to investors, it’s common for them to buy one or more per month.

So, a real estate wholesaler is someone who simply gets extremely cheap properties that are good investments for investors.

They sell the property slightly higher than what they purchased it for, while still leaving plenty of margin for the investors to make a great return.

Kind of cool, huh? You just get a cheap deal and then turn around and sell it for a quick profit. It’s that simple!

Now, there are three different “types” of wholesaling real estate. They are:

1. Assignments

This is the most commonly known method of wholesaling in real estate, and some even think it’s the only kind!

Essentially, when you wholesale through assignments, what you do is get a property under contract, and then you go find an investor who you can sell “the rights” of that contract to.

For example, say there is a house where the seller wants $15,000 (very common price point in Indianapolis). You run your numbers and see that the comps in the area say the property could sell retail for around $60,000 and that it’ll take a $20,000 rehab — which is a pretty good deal.

Related: The Best (And Most Honest) Way to Wholesale Properties in Any State

You write a purchase agreement with the seller at $15,000. During your “due diligence” period, you then turn to your buyer’s list and offer to assign that contract for a fee of $5,000.

So, out the door, the investor-buyer would be getting this property for $20,000, potentially put $20,000 into it, and make $20,000 when they sell it at retail.

The pros to this is that you have very little money into the deal (if any at all), and you have little risk because you can normally find a way to back out of the deal, if needed.

However, I personally don’t like this type of wholesaling for a couple of reasons:

I feel like it’s a gray area legally.

It could be argued that you’re essentially acting as a real estate agent without a license because you’re brokering a transaction between a buyer and a seller for a fee. If you’re marketing a house for sale that isn’t yours, technically, you could run into fraud. If you have your license, then it’s cleaner, but you still could run into some trouble depending on your state legislation.

I feel like it could be perceived as dishonest.

If I’m telling a motivated seller by contract that I’m going to buy their house and then I turn around and don’t buy their house but someone else does — or worse, I back out altogether — I feel as though that could easily make people angry.

Likewise, if I tell an investor-buyer that I have a property for sale and then the motivated seller decides to back out, I’ll make the buyer angry because they were interested in this deal. I would come across as a major flake.

There are ethical ways to do assignments, using full disclosure and having it clearly spelled out in the contract that your intent is to assign. However, I strongly encourage you to have a lawyer in your market write up this type of contract for you and advise you on the best way to structure your business based on this strategy. The “strictness” of assignments varies from state to state.

It can easily become complicated.

If you assign contracts, especially if you get into the whole “wholesaling a wholesale deal” — where another wholesaler has the property under contract with the seller, and then you enter into a contract with that wholesaler and go turn around and find a buyer — it can get really confusing, fast!

The name of my company is  “Simple Wholesaling” because frankly, I just like having full control of my inventory. I like to keep things as simple as possible, for myself and for my buyers. When you assign contracts, there just seems to be more hoops and hurdles involved because, frankly, there are more people to deal with!

2. The Double Close

The next type of wholesaling in real estate is called the “double close.” A double close transaction is when you purchase a property from a motivated seller, and you simultaneously sell it to another investor. At closing, you first sign all the documents with the seller and then, maybe fifteen minutes later, walk into another room and sign all the documents with the end buyer.

Related: The #1 Thing You Need to Automate Your Wholesaling Business

Sometimes the end buyer will fund the purchase of the property between you and the motivated seller, and then add your fee into the transaction between you and them. Other times, you can get “transactional lending,” where a lender will give you a loan on a one-day basis, where you can purchase the property from the seller and then turn around and in selling it, pay off your loan and make a profit with a slight increase in price.

Obviously, you really need to get your timing down in order for this to work. In the case that something goes wrong at the closing table, you can easily get in a pickle, but if done correctly, this can be a great strategy.

Again, you have very little personal investment involved in this type of wholesaling, but the risks are a little higher.

You also need to be careful how you market properties while they are still under contract. Again, marketing a property that’s not yours could potentially be considered fraud. The key is learning the most ethical way to do it for your specific market, as state laws vary.

For me, I have done quite a few double closings, but as a full-time strategy, having to plan everything just right is far too much of a headache. I’d rather just have more control of the transaction. This leads us to the third type:

3. “Traditional” Wholesaling

This is based on what’s typical across the majority of all wholesale industries. You manufacture or purchase a large quantity of product, own it as your inventory in-house, and then turn around and sell it at a “wholesale” price to retailers.

So, in like manner, as a real estate wholesaler, you purchase a property from a motivated seller for a steep discount, close on it, then market it and sell it once you fully own the property.

This is the model that I run my company on.

Now, the downside to this type of wholesaling is that it takes a lot of working capital to function at scale. (My company averages buying and selling eight to ten properties per month, and at an average of $15-35,000 a piece, you can imagine that this can get pricey!) It may take you a while to build this up.

I started with only $5,000 and within a year was operating as a full-time wholesaler, so it is definitely possible!

Why I like this type of wholesaling over the others is because I have full control of the property.

I don’t have to worry about the motivated seller backing out, the investor messing up my loan arrangements if they back out, or the law — because I’m simply selling my own houses.

Both the motivated seller and investor-buyer are treated fairly, and everything just runs so much more smoothly.

So, these are the three different types of wholesaling. Now, I want to briefly describe the different components of what you need to do every day regardless of the type that you choose.

2. All Aspects of Real Estate Wholesaling

When you are a real estate wholesaler, there are three aspects of your business:

1. Getting inventory, or “acquisitions”
2. Selling inventory, or “finding buyers”
3. Managing transactions, or “understanding purchase agreements and closing processes”

It’s really that simple!

A few pointers on these is that for acquisitions, you need to know how to run comps and determine rehab costs for your market.

The easiest way to do that is to learn the 65% rule and then hire three to five contractors to give bids on every house you look at for your first month or so. That way, you can get an average of costs for the market for different items that you run into.

You also need to learn how to find motivated sellers. The easiest way to do that is through direct mail marketing, but there are other “cheap” ways of doing it as well.

For finding buyers, the easiest way is to post all of your inventory on Craigslist and attend local investor meet ups in your market. You simply need to find a way to get the word out. This is what I do in my business, and it works great!

Finally, when it comes to understanding and managing the transactions, the best place to start is by getting a purchase agreement and reading it through. Then you can call up a title company and ask them what to expect in the closing process and what’s needed to make things run as quickly as possible.

With time, transactions will become second nature.

With that, I hope I helped clear up what’s involved in this type of real estate strategy. Every strategy has its pros and cons, but for me, wholesaling has been a true Godsend. I love my business, and if done well, it can truly provide the life of your dreams.

The mobile home business In Canada is different than in the US for sure due to lower density of parks and the pricing is a bit different but not as much as you would think in context.  These little homes are like ATM’s that you can buy at the right price and get them to spit out money for you every month.

 

Mobile homes are generally overlooked by many investors because they want the single family homes in good areas or multiple streams of income (which I am all for don’t get me wrong) however these properties are a lore more expensive and your creative finance options are a lot more limited.

This all is aside from the fact that the average price for a single family home in Canada can run from 400k-1 million plus in sectors like Toronto and Vancouver.  Mobile homes in Calgary and other areas in Alberta could be an excellent way to break into the cash flow or flipping strategies without having a large amount of investment capital to start with.

Don’t forget you can always use Joint Venture Partners for your deals on these homes as well which would reduce your money in — possibly down to $0.00 if you are willing to do all the work. Just think what your cash flow would be if you bought a mobile home for 35,000 and fixed it up for 10K and now you have a 35,000 asset that could rent out for 1500-1800/month?

Things to consider here are the following:

1. Mobile homes are depreciating assets (just like cars) so you can’t count on appreciation like single family fixed home

2. They are mobile! So you can find desperate sellers that need to move the home from it’s current location and get great deals then move it to a new park in a good location to rent it or to a property such as an acerage

3. There are many families and single folks that can’t afford the rent in a downtown apartment or a large single family house – you can still charge lower rent and get high cash flows because your purchase price was so low

4. Forced appreciation through renovations is a lot cheaper in this space because the square feet to renovate is much lower

5. You can do seller financing for the mobile home for the new owner and be like the bank and charger interest and collect a down payment

6. Financing is available for these units but the big banks will not fund them ask us if you need a great mortgage broker.

7. Extremely low competition for deals in this space due to the stigma around trailer parks

8. Comparables can be tougher to find if sales have been low in the park

9. Lots are owned by the part sometimes and sometimes you own the land with the unit – owning the land is preferred because you have less restrictions on what you can and can’t do with the sale/financing

10. These units can be a great way to make a lot of money if you are willing to step outside of the box!

To your success

Tim Reid

-Respect the hustle!