Monthly Archives: January 2009

Jumping into Real Estate Investing

Dave Jumping into the Ocean in Belize

Dave Jumping into the Ocean in Belize

I like this picture – not just because Dave looks totally goofy or because it was taken on our honeymoon  in Belize last year – but because it also reminds me of how we got started real estate investing.

We jumped into the deep blue waters of real estate, without looking closely at what we were jumping into. That’s what Dave is doing here!!

Unlike in our early real estate investing days though, Dave investigated the waters of Belize BEFORE jumping in.

I thought about this as I responded to about ten different Rev N You reader emails today. I found myself answering a lot of questions from people who want to jump into the water, but aren’t sure how to get in. The thing is though, instead of asking questions that would give them the ability to take the next step, most of them ask about things that they should worry about once they are actually in the water, or at least once they’ve put their swimsuits on!!

Even if I give each of these people all of the information and experience I have on the subject they are asking about, I don’t think they will have what they need to jump into the water and start real estate investing. It might frustrate some of the people who write to us, but sometimes I find myself putting questions back to them instead of answering their questions.

For example, one reader I wrote to this week said:

I want to buy an investment property to appreciate 5-10 years from now. I am not sure if I should buy a house or a condo to rent. I only know how to do small repairs. I fear if I buy a house , It will involve more repairs than a Condo. For the long term which Investment should I consider.

To which I replied:

Without knowing very much about your situation, I hope you don’t mind me saying that I think that you’re trying to solve a problem that isn’t really the main problem. The question probably isn’t should I buy a house or a condo, the question is more likely where can I find a property that will generate enough money that allows me to hire someone else to do any of the maintenance work that is required?

We take the real estate investing process one step at a time, and the question of house vs. condo almost never comes up in that form. Instead, it’s what area has the best fundamentals and what kinds of properties in that area will meet our objectives (and our objectives specify how much time and money we’re willing to put into a property in exchange for a certain return)?

I think the question of house vs. condo is a very good question. It’s one that I could write a lot about because there are definitely differences in buying a house vs buying a condo and we’ve purchased enough of both types of properties for me to have a pretty strong opinion on the subject. I didn’t say that to this reader though. I don’t think it’s really the question that this person is trying to answer. It’s definitely not the first thing he needs to figure out if he’s going to jump into real estate investing.

If you’ve never purchased a property for an investment and you’re worried about building a power team, or whether to buy a house or a condo, or how to set up your LLC, you might be skipping some crucial steps in the process. If you do end up buying real estate once you’ve answered those questions you may end up with a problem property or you’ll never get started real estate investing because you’re answering questions that really aren’t the problems you’re having right now.

The way we approach real estate investing is not the only way to make good real estate investing decisions, but it’s one that we have created to save ourselves… from ourselves!! We love real estate, and

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we’ve found it’s too easy to get excited and run enthusiastically in the wrong direction. I think it’s just as easy to do nothing when you aren’t sure what step to take next.

So, now, we start with our goals (which also act as parameters for our purchase to keep our emotions in check when we evaluate a property), and then we move into researching markets and properties. Only once we’re at the point of looking at speciifc properties do we start worrying about power teams, or property types (like house vs. condo). And, we don’t worry about putting our properties into corporations until our lawyer or our accountants tell us to.

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Third Place in this week’s Carnival of Real Estate

This post could also be called asleep at the wheel! Julie always tells me when our articles appear in places other than on our own website and blog. With her away and not in front of her computer constantly, we both nearly missed the fact that this week’s Carnival of Real Estate hosted by The Laguna Niguel Real Estate Finder had awarded us 3rd place. Thank goodness Julie is home again!! Not only is she walking the dog in the morning again, but she’s also pointing these important things out to me!

We’re honoured to be mentioned, and we’re absolutely thrilled to be awarded one of the top places! Check out this week’s carnival of real estate and you will see all of the other great submissions that were sent in!

Special thanks to Lisa Cooper at The Laguna Niguel Real Estate Finder for hosting this week’s carnival and recognizing and appreciating our work!

For more information on upcoming carnivals go to the Carnival of Real Estate website.

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Real Estate Investing with Rent Controls

Latest Real Estate Investing Article written for Early to Rise

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Many real estate investors in North America don’t have to worry about rent controls. The majority of areas in Canada and the U.S. are not restricted with rent controls, but somehow we have managed to buy all of our properties in rent controlled areas.

Most of the time, it’s not really an issue for us. But, it is something to be aware of when you’re shopping for real estate. If you find a good property with tenants that are paying rent that is significantly beneath the market rates, you may think you’ve found a great deal. It’s easy to get excited thinking about how much more rent you can generate from that property, but the reality is a bit different if it’s rent controlled. You can’t just raise their rent or even just kick them out to rent it for a higher rate. And, if the tenants are paying quite a bit below market, you can be assured that they know it and aren’t going to move unless they have to.

As I said, rent controls don’t impact all of the areas. In Canada there are only a couple of provinces that have rent controls and in the U.S. there are only a few cities and states with rent controls, but it’s important to know what you’re dealing with, and get a few pointers about dealing with what we call the Landlord’s Arch Nemesis: Rent Control. In the article I wrote for Early to Rise, I’ve given 4 tips for dealing with rent controls as a real estate investor.

I’d love to hear from you if you’ve been an investor in an area with rent controls. Did it impact you? How’d you deal with it?

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Real Estate Market Downturn Not a Big Deal

photo by Jason Floyd

photo by Jason Floyd

I’m behind on my reading these days – we’ve been busy putting together a real estate investing course for beginner real estate investors. With Julie away in Austin for a few days though, I’ve finally been able to catch up on some of the articles I had flagged for review! And I was delighted to find this one in the Vancouver Sun:

Real estate downturn no big deal for homeowners

Sales dropped 35 per cent last year to the lowest level since 2000, and the price of a typical home in Metro Vancouver fell by 15 per cent from its peak.

But before you pull out your calculator to figure out how much equity you’ve lost, reflect on the reasons you bought your home. Did you buy it to flip it and make a big profit in a hot market?

Or did you buy it because it had a fenced yard for the kids, a deck for summer entertaining, large windows that let the sunshine in, beautiful hardwood floors, a gourmet kitchen, the right number of bedrooms for your growing family, a playroom in the basement and a fireplace in the living room?

Finally, someone is making some sense in the media!

When our friends and family ask us how we’re doing with our investments, concerned that we’ve lost everything in the downturn, we shrug it off.

We don’t try and figure out what our property is worth everyday (like some people do with their stocks). The thing that’s important to us is that we have renters in each unit that are paying their rent and covering our costs. If the property drops in value this year, it means we aren’t growing our equity that can potentially be used to buy other properties, but otherwise it’s not a big deal. We’re certainly not going to panic.

As long as the reasons we bought the property still exist, we’re happy.

That is, as long as the area the property is in hasn’t changed fundamentally from when we bought there  and we’re still achieving our goals on the property (which is usually just as simple as having neutral or positive cashflow from the property), then we are happy. We will keep holding that property and wait until the day arrives where the market is doing better, and we want to cash out (by either selling or refinancing to pull equity out).

I cheered when the article went on to say this:

In Richmond, prices are down 4.8 per cent over a year, but up nearly 58 per cent over five; in Port Coquitlam the one-year decline is 4.8 per cent and the five-year gain is 64 per cent; in Maple Ridge the year-over-year drop is 9.7 per cent, the five-year advance is 31 per cent; in Burnaby prices are down 14 per cent for the year, but up 47.5 per cent over five; and in New West the one-year drop is 10.4 per cent, while the five-year gain is 59 per cent.

It is clear that real estate has held up far better than stocks, which have seen price declines of 40 per cent from the peak on average. To be sure, real estate sales are down, listings are up and prices are falling. But the market will recover — yes, it will — so owning your own home continues to be a sensible financial goal.

I sometimes sound like I’m anti-stock investing – and I know I am about to again. But, I just don’t get why real estate investing scares so many people more than stock investing does.  Do you ever really know what is happening inside of a company? Not really. But, with your property, if you are doing a good job of being an investor, you always have a good idea of what is happening. And, you have the control to improve things that aren’t quite going as well as you’d like them to.

I’m not anti-stocks, but I haven’t done that well with the investments I’ve made.  I know I just never took the time to properly research and select the stocks I purchased. I spend a lot more time researching my real estate. So, for me, it’s good to see it stated that real estate values have held up so much better than stock prices in the last 12 months.

Real estate investing is not an easy way to get rich quick, but it is a wonderful way to create massive wealth over time. I think that some people forgot that in the craziness of the last few years, and started to believe that real estate will always go up. When, in fact, it won’t.

So make sure you buy properties that are in solid areas that WILL recover from downturns, and buy investments that will bring in enough revenue to cover the costs, and then hold on to them! Don’t panic when the rest of the world is… remember why you bought the property in the first place, just like the Vancouver Sun article says!

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Real Estate Mash Ups to Check Out

There are so many fantastic resources hitting the web these days. We’ve talked about a few of the ones we’re excited about in past blog posts. What Customers Say is one website we’re looking forward to having all across Canada. But, it’s not a mash up. It’s a forum where people can write reviews about their real estate agents. Simply stated, a mash up is when data from one place is mashed with a program or data from another. There are dozens of google map mash ups. One of the ones we like is Housing Maps – mashing Craigslist rental data with Google Maps. But, recently we read of a different tool that is better called MapsKreig. Julie wrote about this tool, and why a real estate investor would use it, in a recent article for the health, wealth and wisdom e-zine Early to Rise. You can check out her article called The Ultimate Real Estate Match Up here.

We’ll probably write more on this later, but for now,  here’s some tools you may or may not have heard of that are well worth a look.

  • http://www.hometrader.ca/ Brand new Canadian tool for house hunting.
  • http://www.propsmart.com/: U.S. Real Estate Community and Search  Tool with Google Maps.
  • http://hotpads.com/:  U.S. map-based real estate search engine, listing homes for sale, apartments, condos, and rental houses. It also has a buy vs. rent calculator in case you’re interested!
  • http://www.findmeacondo.com: Toronto, Canada Re/Max sponsored website for searching for Toronto Condos. I really like the Top Ten list they have for searching for condos.
  • http://www.trulia.com/: U.S. site we use all of the time. It has listing, comps and maps all in one place plus stats and other number goodness that I love. I really wish we had something like this in Canada.
  • http://www.programmableweb.com/mashup/maiom-italy-real-estate#: An Italian site that seems to be ahead of even my favourite site Trulia. Check this one out just for fun. It’s a real estate application using Google Maps with live completion geocoding, google earth integration, starrable posts, RSS feeds, lightboxed images, and YouTube videos.

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_your spare time. Get the Rev N You with Real Estate Starter Tips Guide free when you sign up for our complimentary Rev N You with Real Estate e-zine.

Get started with real estate investing today.

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Rent vs. Buy as a New Real Estate Investor

Rent Vs Buy

We received a handful of emails over the holidays from our Rev N You with Real Estate Newsletter readers asking about
renting vs. owning. Here’s one of the emails and what I had to say:

Hello Julie and Dave,

I’m looking forward to your newsletters and appreciate the welcome
email.  This is the style of investing I hope to be doing in a
couple of years.  I do have an initial question though: buy or rent?

Allow me to elaborate.  I will be graduating with a software
engineering degree in April and will start work <company removed
for his privacy> in July.  I don’t want to throw money away on
renting, but will have next to nothing as a down payment initially.
I will be living with my long-term girlfriend who will be bringing
in some additional income as well.

What I am having a hard time deciding is when is the right point to
stop renting and buy my first place.  Once that happens we can
focus on improving our place and saving up for an investment
property.

So once again, rent or buy?  When do you make the switch?

Thanks again and I look forward to your newsletters.

Sincerely;
Ryan

Here’s my response to Ryan:

Hi Ryan,

Thanks for your email, and thank you for joining our Rev N You with
Real Estate readers!! We’re happy to have you in the group.

As for the Buy or Rent question you have… I think you’ve just
given me a new topic for our blog! I don’t think we’ve ever really
written about this subject.

The answer really is – it depends! It depends on your objectives,
it depends on how long you think you will be living in the city
you’re in right now, and of course, how much it costs to rent vs.
own in the city you’re in (lots of good tools online to help with
this: https://www.vancity.com/MyMoney/Tools/Calculators/RentvsBuy/ ).

Have you read Rich Dad Poor Dad? We credit Rich Dad Poor Dad with getting us started in real estate. (http://revnyou.com/March_22_2007_The_book_that_got_us_started.html)

Read the book. I think it will help you figure things out a bit.

Also, think about your objectives.

Our first purchase together was not a home… it was an investment. We both continued to rent our separate places at the time. The next place we purchased was for us to live in, but we bought the place
with the intentions of renting it out after a few years (and that
is what we did).

However, because it was to be our home first, we spent more money
on it than we would have if it was to be an investment property
from the beginning. There’s an emotional aspect involved in the
decision when you are going to live somewhere. Because we spent
more on the property than we had planned it didn’t quite cashflow
when we turned it into a rental.

That said – (in Canada) there are first time home buyers programs
that are worth taking advantage of. Talk to a mortgage broker or an
accountant about this. You may even find that you want to put your
name or your girlfriend’s name on your home purchase and then use
the other person’s name to buy the investment.You’ll have to think
about your objectives and then discuss your situation with a
professional to get the best advice though.

At the end of the day, I believe that a home is not an investment.
You can do the math on whether it’s better to rent or buy in the
area where you live, but really, buying a home is an emotional
decision you will make to achieve a desired lifestyle. It’s not a
bad thing, but just know that you will ALWAYS spend more money on a
home (whether it be the initial price or just the money you spend
on paint, furniture, finishings) than you would on an investment.

You’ll have to crunch some numbers and do some thinking to make the
decision about when and what to buy.

Hopefully this helps at least a little bit! All the best in 2009!

Regards,

Julie
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Search for Foreclosures Nationwide.

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New Article in Early to Rise: What Clayton Makepeace Knows About Selling Your House in Today’s Market

Many real estate agents disagree with me. And, I’ll be honest in saying that these aren’t tried and true ideas, since we haven’t sold any properties in today’s market. But as a life long student of marketing and a passionate real estate investor, I can’t help but want to combine the two constantly.

To me, so many ads for houses miss the mark in today’s market. There are still people who want to buy houses, but they are afraid. Price is not the only issue in selling a home. I still believe you have to price your property within a reasonable range, but I really can’t believe that price is the only thing that matters. Even as a real estate investor, where the majority of our decision is based on the numbers, price is still not the only thing we look at.

In this article that I wrote for Early to Rise, I talk about the emotions involved in buying a house, and what I think good copy could do for a sales pitch. Specifically, I talk about what veteran copywriter Clayton Makepeace knows about selling your house in today’s market.

Go ahead – tell me I am wrong. I am fully open in saying that I am not experienced in selling houses. It just makes sense to me.

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Learn the secrets to becoming a millionaire real estate investor…in your spare time. Get the Rev N You with Real Estate Starter Tips Guide free when you sign up for our complimentary Rev N You with Real Estate e-zine.

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