From Canadian Real Estate Magazine Article- June 2010
It can be quite enticing to get swept up in the incredible profit potential that the world of real estate investing can offer. Real estate has arguably made more people millionaires that any other money generating medium. It has also lured in many by its alleged promise of charm and fortune, only to suck the unknowing, under educated investor into a vortex of frustration, time consumption and financial loss.
There are two typical scenarios for most Canadian real estate investors. The first is to buy a property and rent it out. The challenge associated with this is twofold. Number one; holding properties can eat your time if you are property managing and your bottom line is affected by vacancies and repairs. Secondly, there are a finite number of properties you can own before Mr. Bank says they won’t lend you more money because your debt ratio is too high.
The second scenario is to buy, fix it and “flip” it. This can be a time consuming, expensive experience if you are not continually checking in with your contractor and crew, not to mention unforeseen repairs which are often uncovered during the renovation process.
The downfall with the previous two examples is: your precious time is involved, your hard earned money is involved, and because you signed on the dotted line for these properties….you have full LIABILITY!
The key to major success as an investor is to create a steady flow of deals that don’t require huge amounts of time, little to no money and zero liability.
Becoming an educated investor in a sea of non educated investors can give you a distinct advantage, both as a source for deals and a place to send your deals.
Find the need
To create a successful business, we must understand what the “need” is. It is then easier to fulfill that need and create a customer base that is looking for what you have to offer.
If we can find great deals for the types of investors mentioned above that want rental properties, buy and flips or rent to own properties (not mentioned here but a great strategy for another time), we can find those and get paid for being their “supplier.”
Create a buyer’s list
We can develop a buyer’s list by placing ads on Craig’s list, Kijiji or through print ads describing the fact that we get properties discounted significantly under market value. Investors and some end buyers will call. You must then screen them by asking what type of property they are looking for, where they are looking, their affordability and their time line, meaning how quickly they can pull the trigger if you have a property available. You then categorize these people into those who want rentals, flips etc.
Create a bird dog list
Concurrently you must be gathering a list of people who find you deals outside of your own sources who are rewarded as a result. These people are professionals in and outside of the real estate business. (I have a number of articles on creating a bird dog network)
Check out: Flipping a Property with NO Liability – Part 2 where I talk about finding the deal, getting it under contract and what key clauses to use.
Flipping a Property in Canada with NO Liability – Part 1