Sourcing Good Investments
Many people new to investing find out the hard way that they really don't know how to source good deals and often find out afterwards that they overpaid on a property, or got into an investment that they really were not suited to own or manage. How can you source a deal if you don’t already have some objective way to approach the analysis of different opportunities?
Comparing one opportunity to the next can be difficult as there are a lot of factors to consider when purchasing different types of properties (single family houses/condos, duplex/multiplex, buildings with commercial components), along with the different neighbourhoods, and cities to look at- oversights are bound to happen when trying to make an investment analysis (financial performance). Common mistakes from new investors are:
1. Did not accurately asses the financials
a) Did not do due diligence on numbers given from realtor/seller of the property
b) Did not amount for the cost and time management
2. Did not accurately asses the condition of the property
a) Did not do a thorough inspection, missing required items that need replacement or repairs
b) Did not estimate the cost of replacement or repairs accurately
Knowing how to effectively analyze opportunities is a prerequisite to finding good deals. Once you are confident in being able to identify good opportunities, we need to have some process for searching through the volume of investment opportunities available to find the fit for you.
Negotiating and Offer
Once you have found a good deal it is imperative to act quickly and to know the climate of the market you are in, to effectively negotiate not only the best price but also the necessary and best conditions and clauses to provide you with more control, flexibility, and exit options (equally if not more important than price). Just closing on the optimal days of the month can reduce your required capital at closing and save you tremendous headaches and loss of revenue in the first few months as you stabilize the property through the ownership and management transition.
This is where people run into significant challenges. Many times people are focused on types of properties or locations that make it very difficult to get started in their investing. Even some experienced investors who have a few properties seem to hit a brick wall when looking for financing from traditional lenders for their next investments. We need to explore creative and non-traditional ways to finance these opportunities to be able to buy more with less and really improve our Return on Investment and build our portfolio. Sometimes we see ‘would be’ investors get stopped before getting past the first conversation with their banker or broker. It could be something as simple as looking at a different class or property that is financed differently…but their lender did not give them that advice because it wasn’t the property they came in looking to qualify for.
Too many new investors purchase properties in their personal name and end up with a tremendous amount of exposure to liability from tenants, staff, and of course – CRA. Many people are told that structures are too expensive to set up and manage the extra fillings. That can be true, but in many cases, you will wish you had a solid business structure set up if you end up accumulating a number of properties and end up holding them for many years.
Dealing with the challenges of damage and repair as well as ongoing maintenance to a property are usually much more than people anticipate. When you add into the mix tenants that don’t pay rent, damage the property, and cause disturbances to other tenants can all have a dramatic effect to your bottom line. Simple things like checklists, a clear understanding of the process, using the correct forms and contracts, and ongoing training and support in this area will help you from becoming that motivated seller that is dying to get rid of their property because of all the headaches.
Exit & ReInvestment Strategies
There are lots of strategies and avenues to approach real estate investing – but knowing the exit plan before your start is critical in choosing a strategy and a market that will currently support that strategy. All too often people assume that real estate in a buy and hold game. While it very often is, understanding market cycles can help us capitalize on when selling and changing strategy is a better option in certain markets as conditions change so you can reinvest in other markets that are at a different and more advantageous part of the cycle for you as a buyer. We also cannot discount ways in which we can access equity through different sources by refinancing a property to free up capital to increase holdings and improve Return on Investment.
Our Objective is to Train & Support
These are the areas we focus on at Mackally. Our objective is to train people on how to navigate these 6 stages by actually walk you through actual case studies from our clients or our own portfolios. Beyond training from actual recent transactions, our advanced program is focused on walking you through this 6-step process on prospective deals that you will have the opportunity to close on yourself. We've found there is no better way to learn – and no more satisfied client than when we focus on doing actual transactions from start to finish so you can learn the process and then repeat!
Qualify our clients- to make sure they are not just excited about change but they are ready to take steps now (otherwise nothing will happen now, and we would rather work with you when you are ready to take the action necessary to achieve some measurable success and not regret spending time and money on something you really were not prepared to do the work on).
Give homework and expect it to be completed. We hold you accountable to the actions necessary to get the results…one small piece of homework at a time.
We are hard on our clients not easy. It doesn’t help you if we let you slide on your assignment deadlines and if we don’t tell you the things you need to hear. We assume you are looking for support and results – not someone who wont tell you the things you need to hear most!
Once becoming a client, we work with you to get results…kicking and screaming if we have to – We both will be making commitments to your goals. We go through an intake session to identify your goals and make sure they are within what we are able to assist you with, equally important, within what you resources of time and capital will allow you to reasonably achieve over the next 12 months – now we have something to commit to. We commit to assisting you to achieve specific measured goals of acquisition and management – you commit to the time and assignments we give that will lead you to those results.
Our programs are designed to assist our clients with step-by-step support through the entire acquisition and ownership transition process. We have a variety of programs available at different price points to assist people ranging from passive investors right through to people who are managing and operating commercial/residential buildings and complexes.
We highly recommend you attend one of our weekend basic training events to get a complete overview of the strategies we teach and employ as well learning the essential fundamentals of investing that few investors truly embrace or apply. This will open up opportunities to purchase Real Estate in such a way as to get double and triple the returns that you see typical investors achieving.
Below outlines some of the essential segments that we must cover in order to prepare people to successfully participate in the Real Estate arena: