What was the first investment property you acquired?
Our first investment property was a threebedroom, twobathroom townhome in a great location in Edmonton, Alta. We purchased this property in 2004.
What led you to buy that specific property?
We spent about a month researching Edmonton and felt the city had strong economic fundamentals which we hoped would lead to potential growth. After our research, we looked at several towns that we felt showed the best opportunities for population growth, had easy access to major current & future transportation routes and close proximity to schools and parks so we can target our ideal tenant which were families.
We chose this specific property because we secured it $10,000 below market, it had good cash flow and the overall condition was very good making it rent-ready at day of possession.
What's the status of the property now?
We still own it. The property is fully rented and it's currently producing over $600 a month positive cash flow. The townhome is in great condition as we regularly update the property in between vacancies which helps us attract better quality tenants and gets us above average rents.
What was your next step as an investor?
Well after the first property things seemed to snow ball from there. We bought another two units in the first year, seven more in the next year and currently we own over 50 units and continue to look for quality investments to purchase. The properties we've purchased over the years have been a mix of townhomes, suited houses, four-plexes and apartment buildings.
What made you decide to become a real estate investor?
At first we were looking for ways to get better investment returns then what our mutual funds were providing. We've always been interested in real estate investing but were extremely scared about buying our first property. When we finally purchased and rented our property, we realized shortly after the power of real estate investing especially when monthly cash flow was coming in. Since the purchase of our first property, our lives have positively changed as this once part-time investment has now turned into a full-time investment company where we both work from home.
Did you come to the decision by yourself?
It took some time to make the decision as we were extremely nervous in getting started in this new venture as we didn't know many people that invested in real estate. We spent a few months researching, networking with other investors and getting ourselves educated by joining REIN which helped encourage both of us that we were able to do it.
In a nutshell, what's your investment strategy?
Our investment strategy is to buy and hold. We plan to hold our properties for a minimum of five years with a focus of continuing to increase the value of our property by updating and maintaining the units and increasing rents to improve its cash flow position. After five years, the plan is to evaluate the market economics to see if we should sell, refinance or pull the equity to purchase another property.
Our buying strategy also helps ensure a good return by only purchasing properties that have equity and show strong cash flow potential from day one. This way if the market does go south we have a buffer in our equity to help cushion any negative market conditions.
What were the biggest lessons learned from your first property experience?
Great question! The one lesson that we learned from our first property was having a good property manager in place before buying... especially if you're buying away from your home town. We bought our first property in Edmonton thinking we could easily find a property manager but to our surprise many of the property management companies weren't taking on any new clients.
We had to settle for someone that didn't necessary have the best credentials because we were desperate. What a mistake that was! They never followed through on any of the commitments they made and their screening of tenants was non-existent.
The first tenants they brought in started a puppy mill business in the basement of the townhome which caused significant damage. We had to kick out the tenants and fire the property manager after only four months. Make sure you take the time to interview, screen and check the references of your investment team as they are extremely crucial to the success of your real estate business.
What did you find was the hardest part about real estate investing?
The hardest part about investing was buying our first property. It was difficult to keep your emotions in check and fear was constantly getting in the way of making rational decisions. If your due diligence is positive, your property analysis shows good cash flow and the property will help get you closer to your personal goals, this should be the basis of your decision to make the offer.
Do you have any real estate investm ent goals going forward?
Absolutely. We plan to add more properties to our portfolio by continuing to work with joint-venture partners, expanding our RRSP program and using existing equity from our other properties to acquire larger apartment buildings.
What advice would you give newcomers to the property investment industry?
My advice to any new investor is don't let fear hold you back.... anyone can do this. You need to start by understanding your goals and building a plan to help you attain them. Take some time to educate yourself by taking some courses, joining an investor network or working with someone that's been successful in real estate investing and would be willing to mentor you.
When investing in real estate, make sure you have a solid team (Realtor, mortgage broker, property manager, lawyer) to support you and ensure they clearly understand your investing objectives so they can help you achieve them. Commit some time to researching an area before you buy and only invest in areas where there are signs of strong economic growth and properties that show positive cash flow.
Don't invest with your emotions it's all about the numbers. Accept that mistakes may happen and it's best to learn from them and continue to move forward. Real estate investing is a journey ... enjoys the ride.
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