Getting into the game

[JayD]

Hello people! For awhile now i've been reading real estate books and trying to find as much information as I can about real estate investing. My short term goals are to find a house or duplex to rent out, and then move on to more units. I live in windsor ontario. What i'am looking for is advice from anyone that has started out in the real estate game one house at a time. Also any other input will be greatly appreciated, such as personal stories, do/donts, what would be the best way for me to start out, etc. And if anyone is from windsor please let me know. The reason I think its best to start out with a house or duplex is because ive read that they attract a more "reasonable" tenent. Again any info will be greatly appreciated!
Thanks alot.

[PPP]

Hi,

I started out buying an apartment, doing it up and reselling it. We did think about renting but releasing the equity made more sense to enable us to go on and do more things, like buy another apartment. If you want more equity that might be a way to start out. Then you could perhaps get two duplexes or one in a better area that will generate more income.

If you're looking for tenants I would advise to try for families or professionals. It's a cliché but more responsible people take better care of your property, are better at paying rent on time and usually cause fewer problems (this isn't my experience, this comes from friends who make their living this way).

I'm personally looking at student rentals. It's recession proof, you expect them to trash the place so you don't need to put in top range stuff and they don't make too many demands. I don't know if there's any kind of market for that where you are.

On a personal note - what's Windsor like? We're looking at moving to Ontario?

[JayD]

In regards to buying a place and then flipping it, I dont really want to get into that yet, as i dont think im ready to make a flip. I do not know much about flipping nor to i have "fashion sense" when it comes to fixing up the house. Decent duplex's in decent neighbourhoods run for about 120ish give or take 10k. There is actually one just up the street for 130, that im going to be taking a much closer look at.

As for what windsor is like... It's very cold in the winter, which really sucks. It's not really a bad place though, as long as you dont live near downtown. Downtown there are alot of bars and strip clubs and what not, and its generaly louder and not as calm of an area.

[CJR_EasternHoldings]

Here are the first steps:

1. Market research, find the community that you wish to invest in best to invest near home at first to avoid midnight commutes for leaking water heaters.
2. Find all the properties in the given market area that meet you criteria (ignore asking price at this stage, part of starting out is learning the process of analyzing a property to buy), 2-4 units for you.
3. Gather the following information on every property (phone work with current owner):
1. Estimated mortgage payment (based on asking price)
2. Yearly Taxes last tax year statement preferable (also available from the county(in USA)
3. Monthly utility bills (if owner responsible for)
4. Hazard insurance rates
5. Current Rent cash flow Generation per unit
6. Past Maintenance costs
7. Cost to maintain (grass cutting, snow removal if owner responsible in your area)
8. Any expense that stems from the property
4. Perform a cash flow analysis on each property; does more money come in each month than goes out?
5. Separate your properties in 2 piles, one for positive cash flow, one for negative cash flow.
6. Take the pile of properties that will have positive cash flow and begin to make follow up calls and or visits to the owners or properties themselves. Ask more specifics like

Type of construction
Age of roof
age of plumbing system
age of electrical system
Length current tenants have been there
tenant turnover rate
tenant payment history
reason for owner selling (sick, fed up with tenants, family emergency, job relocation, all these things are clues to the level of seller motivation/likeliness to lower price)
Once you have decided you have found a property you like, make an offer and start negotiating.
Once you agree on a price with the owner, you both will sign some sort of purchase agreement.
Take this agreement to your source of financing, I use traditional bank lenders for residential <250,000. My bank has a specific title company they use to perform title/lien searches on the property to be sure it can be sold.
The title company will take care of all documents around the purchase and show up at your house or their office with about 100 documents you have to sign.
It’s yours. Now you just have to keep it rented!!!! Don’t forget about those negative cash flow properties either, in 6 months or a year those homes may have dropped in price, go back every so often and review deals that you passed on, one may pay off.
This is based on my US experiences in residential RE.

[fractional-homes]

Here are the first steps:

1. Market research, find the community that you wish to invest in best to invest near home at first to avoid midnight commutes for leaking water heaters.
2. Find all the properties in the given market area that meet you criteria (ignore asking price at this stage, part of starting out is learning the process of analyzing a property to buy), 2-4 units for you.
7. Cost to maintain (grass cutting, snow removal if owner responsible in your area).

These are all important for all property evaluation, whether it is sole home ownership or fractional ownership. Market research is critical - which includes location research. Before we decide to do a fractional home, we conduct a very extensive market research to see its past, presence and future. Our fractional ownership model has a lot to do with investment. We want to make sure our properties have good returns over years.

[Craig@rentalrealproperty]

I started out 18 yrs ago when my grandma sold me her house on a owner financing deal when I was 20 years old. I am glad that I was able to start out with a single house because I learned a great deal. I agree that a single family house attraches a better tenant. Starting out with a small home allowed me to get my feet under myself while learning the business. Later I was then able invest in other properties with more comfort and a greater understanding of the business. I found that each deal got better and better. It wasn't until I became very good repairing a house that I finally started flipping real estate. The Internet is a great resource that I never had I could only get my information from few books on the subject and other investors that would talk to me. The tenant screening tools alone are something that I only dreamed of when I started out. I think that you are right to start out with a single property. Good luck investing.

[JayD]

thanks for all the great info so far. It has been very helpfull. I have been reading mass amounts of sites and books getting as much information as possilbe. With all the info i have been reading in the last month or two i feel as though im almost ready to "take the next step", which i think would be loan pre approval so that i can start to take a more indepth look at the houses. A big problem that i see popping up is knowing the house's value. I dont want to over pay for a unit. But i guess with time i will develop a better sense of judgement. Again thanks for all the help, and to all the future replys as well, thank you!

[fliprent]

I usually recommed that new comers start off as bird dogs and get under the wings of a seasoned vet. Learn the ropes while you still have your day job. Thats is unless you already quit. Then get out there find properties and wholesale them. You will need to read and learn on the job. Keep learning. You will never know it all....

[Good Neighbor Home Buyers]

Join your local real estate investors club and network with other investors.

[Jfcal208]

Join the local club and be active as was last mentioned.

Your idea of getting into a duplex is great. The multiplex market is a great way to go because it does two things:

1- reduces impact of vacancy rates
2- Economy of scale- The cost of the property versus the number of tenants versus the amount paid out on loans all play together so that as you add more tenant base to your purchase you increase your cash flow. Of course you increase your work.
3- Make sure you can use a spreadsheet to cogitate!

Regards
Joe

[fliprent]

I also like multiplexes for newbies because they can be financed by residential lenders, and rent increases across the board, increase your income exponetially.

[JayD]

I've looked over and over again to find some type of "investors" club or real esate club around this area, and it doesn't appear as though we have anything of that nature, not legit ones anyway. As to the idea of a multiplex, I kind of want to stay away from those at first because alot of the larger multiplexs usualy have more sophisticated industrial type heating systems that cost alot more to replace than a regular residental type. One of the ideas I have thought of is to call some landlords through rental ads and what not, asking them if they are willing to take someone under their wing and kinda show me the ropes and in return I could help them with repairs or something else they need. Does that sound like a good idea?

[Codythebest]

A fourplex will be ideal to get your feet in. The rent will cover the mortgage and it's not a huge property to deal with at first. That can give you some kind of experience...