The first step is to consider what area interests you the most; it’s always easier to choose something that you have some degree of interest in because you will be more likely to best absorb the materials and take action.
If you’re a beginner and not sure what area interests you most I recommend you read one of the following blogs I’ve written that are geared for beginners on these topics:
Taking the time to inform a realtor that you will not bid on a real estate investment opportunity and presenting him / her with the reasons why is an important step in the communication process for a number of reasons. It helps you to create a relationship with the realtor based on trust, transparency and shows a respect for his / her time.
Showing a realtor that you are experienced and have a set of investment guidelines that you follow while also informing that the property doesn’t cashflow provides the required information for him /her to discuss with the seller and assess their flexibility.
Performing your due diligence when considering a real estate investment opportunity is the single most important step to ensuring an investment that meets your expectations.
Unfortunately most real estate investors that I’ve mentored have shared with me countless tales of errors and assumptions that have cost them severely. For this reason I am sharing an email that I sent this morning to help novice investors to learn.
The following email with attached cashflow analysis asks the questions required to ensure that I can make an informed decision without assumption. It also shows the realtor that I am serious, experienced and respectful of his time.
So can you keep great tenants from leaving in the first place?
“Definitely,” says Brent Mondoux, who has been investing in the Ottawa area for a number of years. “Some of the keys to holding on to our great tenants are by going back to the basics and simply treating them with respect.”
Moudoux has had a relatively low turnover in properties himself, and has forged good relationships with most of them, although he’s quick to point out that business is business when it comes down to things like missed or late payments. He recommends having a preventive system in place that will make payment a straightforward process for tenants and yourself, such as collecting post-dated cheques ahead of time and accepting rent via direct debit or e-transfer. So what are some other tips?
Be present. Tenants are unlikely to renew a lease for an absentee landlord, and they’re unlikely to be very quick to report breakages and structural issues as well. If you neglect your tenants, chances are your property will pay the price.
“Respond to all reported issues within an hour,” advises Mondoux.“Set expectations in terms of estimated resolution timeframe, and don’t lie. If it’s urgent, don’t delay. Set the wheels in motion immediately to resolve the problem in a timely manner.”
This is what a real estate cashflow analysis looks like. It informs you of your up-front costs, assesses cashflow positivity with current and potential future scenarios, budgets appropriately for vacancy/repair/contingency and accounts for overhead costs even if they may be unrealized (e.g. property management, accounting, bookkeeping, etc.). It is also vital to highlight any assumptions and verify them in writing, absolutely no exceptions.
By the end of 2011, I had completed nine years of real estate investment courses. Acquisition, cashflow, buy & hold, flipping, landlording, rent to own, taxation law… the list goes on and on.
Despite my educational knowledge, I still had not yet purchased a single investment property. Even though I had successfully run my own company for the previous fifteen years with positive cashflow in each and every year, I was still afraid to take the plunge.
I kept asking myself “How could I take so many calculated risks but be afraid to take this one?” I was stuck in a state of fear commonly coined as “analysis paralysis”. I would look for the perfect deal but before I would pull the trigger I’d make up excuses as to why each potential deal wouldn’t work. The truth is there’s no such thing as a perfect deal. The human mind can be our own worst enemy and I was battling against nobody other than myself. Trying to psyche myself into taking the next step, but for some reason I kept backing down, convincing myself as to why each opportunity wasn’t optimal.
In mid-2012 I booked vacation. I decided to stay home and relax. The previous two years’ vacation was spent repairing the house after extensive water damage which had nearly depleted all of my savings. It was early afternoon and I grabbed an ice cold Corona from the fridge and went to sit in the yard and do some reading. As I hunched down in my lounge chair I continued to read my latest real estate investment book. My attention was drifting in and out and I found myself reading and re-reading the materials. I felt frustration growing within me as I thought to myself “I know this s&%t. I’ve read it a hundred times in other books.” I stood up and blurted “That’s it! I’m going to buy a property or I’m going to stop reading about real estate investing.” That was the catalyst, the last nudge through the barrier of procrastination, the trigger required to break through my analysis paralysis.
Days become weeks, weeks become months, life begins to blur. We settle in and accept the status quo. “It is what it is” we tell ourselves because it’s all we know. We follow routines. There are slight deviations but for the most part the pattern is nearly identical. We are bored. We daydream about the future – our next vacation, our next evening out, even our next weekend. We fail to enjoy the present. Seize the day, carpe diem, YOLO – these are buzzwords that we say but rarely that we do.
Every few months we vow to change things. We pledge to live each moment like it’s our last. We go out and do something we’ve been wanting to. We call up friends and make plans. We escape the routine with a getaway. But then we let the normal sink back in and life continues to blur by us.
Earlier this week I had a meeting with one of the local startups that I am mentoring. Over the last year his company’s bank account has been reaping the rewards of their hard work and so he has been considering his best option to invest the returns from his compounding successes.
Knowing that I am an active real estate investor he wanted to learn about how real estate makes money. He had performed a number of cashflow analyses, but, was failing to find lucrative returns. I could sense his frustration mounting in each additional word that he was saying. “The best cashflow I’ve been able to find is approximately 8% on a real estate investment and that’s just… well average”. He frowned. I smiled and excitedly said “That’s fantastic, you should put in an offer, do your due diligence and buy this property if everything checks out.”
A few months ago I was asked a very interesting question by one of my financial freedom students. She asked “If you could only give me one single piece of advice, what would it be?”
I sat there quietly pondering my response for what was likely several minutes as she looked on waiting. In my mind I was considering the path that I’ve taken towards financial freedom. I took time to contemplate the challenges, consider the obstacles and reflect upon the successes along the way.
Alas I broke the silence with my response, “Invest now“.
“That’s it?” she blurted out, “that’s the best advice you can give me?”
Over the last few years I’ve been blessed with the opportunity to mentor dozens of small business owners. Helping entrepreneurs to monetize their passions is extremely exciting. I learn a lot about various industries while helping entrepreneurs leverage their strengths and recognize their weaknesses.
One of the most troubling weaknesses that I’ve been helping entrepreneurs with is their lack of personal financial awareness. Most entrepreneurs have very little savings and no idea how to get started. This creates a significant risk for the majority of our small businesses, which more than 77% of all businesses fail due to lack of financial responsibility and awareness*.
Why should I start now?
Every business owner I’ve ever met has numerous tales of seemingly insurmountable challenges. These challenges typically share a common theme, one of a financial nature. This is one of the most difficult challenges to deal with – it causes stress, challenges…