Van Tran and Quan Doan, who've been married for 7 years, had a common goal.  They wanted to be able to retire comfortably, and provide for their children.  This is what has driven them to persevere and invest in real estate.

"We were hoping to generate a passive income while still working," says Doan.

It was Tran who initially came up with the idea.  Financial stability was a must, and he realized that purchasing and investing in real estate was a great option.  It would allow the two to continue working fulltime, while acquiring additional rental income on the side.

In December 2003, Tran and Doan purchased their first property, a triplex in Ottawa, Ontario for $138,000. 

"Our first rental property purchase was obtained from using the equity on our primary resident home," says Doan. 

The unit of choice was in great need of a makeover.  "We prefer to purchase properties that are in distress so that we can fix them up and increase the value," she says. 

Winning properties
Being bitten by the real estate bug, Tran and Doan looked forward to adding more properties to their portfolio.  They purchased two properties simultaneously, a semi-detached, and a duplex semi-detached in October 2004, each for $80,000. 

Though each property was a great bargain, they both required a few repairs.  They spent $5,000 per property to fix them up, and did all of the work themselves.  "What we put into the property was lots of sweat equity but we save on gym memberships," jokes Tran.

The hard work has paid off since each property has doubled in value.  With the success of these buys, they invested in a triplex in July 2006 for $120,000. 

Tran and Doan saw this property as a challenge since it had been on the market for quite some time and required extensive renovations.  "We were able to see through the condition of the rental property and see a vision of how we could make the property valuable and desirable for rental."

Now, a few years later that property is their most valuable at $275,000. 

But selling is not their aim.  Instead, Doan and Tran prefer to have a solid monthly rental income.  When combining all of their properties, they have a 19 per cent return on rental income for a total of $81,000 per year.  The majority of their tenants are university students, or couples without children since the properties are better suited for these individuals. 

The formula for their success is that they always use the equity from their previous investment as a down payment for their next purchase.  Tran notes that they never put anything down, and collect the rent from their tenant to pay for the mortgage and expenses.

Team work
The couple uses their unique expertise when investing in properties.  While Doan handles the business aspects and maintains tenant relations, Tran takes care of renovations.

A background in engineering gives Tran the necessary credibility to tackle the technical renovations, such as heating, wiring, and electrical repairs.  He performs all renovations himself except for paving and landscaping.  Typically he replaces existing items on the property, therefore he doesn't need a permit.  But if he were to add something new, then he would have to get a licensed contractor, obtain a permit and get the job done.  

"We always try to conserve costs, and the best investment that greatly increases the value is simply cleaning out the unit, painting it and adding new flooring," says Tran.

The couple suggests that if you're new to the real estate game, or don't have the qualifications to do-it-yourself, then you should hire a professional.  Though it might be tempting to save that extra dollar, you could damage the property and end up paying much more in the long run. 

Bumps in the road
The experience hasn't been without obstacles.  Doan notes that they have had their fair share of problems, especially when they first began investing. 

"Most of the issues have been tenant related," she says.  "In one situation the tenant didn't pay their rent.  Another one was more serious because the tenant didn't care for the property."

Doan recalls the latter situation because they had to take the tenant to court in order to pay for the damages that occurred.  Since it is clearly stated under the Residential Tenancies Act for Ontario that the tenant is responsible for the repair or damage of a rental unit when it is caused willfully or by neglect, Doan and Tran won the case and the tenant was eventually evicted. 

Now the couple always performs thorough background checks before accepting a tenant.  They use a standard application form from Canada Mortgage and Housing Corporation (CMHC).  The "Application to Rent" requires the applicant to fill out information including employer, banking institutions and references, and can be found on the CMHC website.  Once the prospective tenant signs the application form, Tran and Doan complete a background check.

The biggest difficulty renovation wise came with the purchase of their latest property, a triplex on the outskirts of Ottawa.  The basement was particularly problematic due to plumbing and wiring issues, and a cracked sewer line, which caused a flood. 

"It wasn't just cosmetic concerns, and instead there was a lot of skeletal work to be done," says Tran.

He spent almost a year repairing the basement, and though the job didn't cost much, it was extremely time consuming.  Now, Tran hires local students to help him with the grunt work so that he can concentrate on the plumbing and electrical issues.  Tran states that he keeps a close eye on these students by periodically checking their work, and never allows them to perform difficult tasks, or more than one task at a time.  

Lessons learned
Tran and Doan rely on their gut instincts whenever they invest in a property.  The two don't believe that any property is unprofitable, and that sometimes the simplest renovations can bring about maximum returns. 

"We purchased a property once for $80,000 and people told us not to purchase it because it would take $25,000 to fix," says Tran.  "I spent only $5,000, and now it's been rented for three years and we've made $30,000 on it through rental income so far."

At present, the couple is expecting their second child, and Tran is proud that they have the financial stability that allows his wife to take time off. 

"It's a really nice feeling," he says.  "Most people dream of retiring early.  We're still young, and we actually have the opportunity to retire in the next 3 years as long as we live within our means and have monthly income from our rentals."

From the July/August 2008 issue of Canadian Real Estate