- Cheryl Egger
A *very* Beginner's Guide to Finding DEALS IN Real Estate
Are you ready to become a full-blown 'real-estalker'?! Here are a few things that have helped us find great deals for investing in real estate.
1 // Become a REAL-ESTALKER
You need to know the market in your area. Like, actually know it. Throw that "everything is so expensive in our area" attitude out the window and get that "I'm going to find a great deal in this area" game face on. Go for a walk, know the neighbourhoods. You won’t be able to spot a deal if you don’t know what properties are being listed for and selling for (I mean really know, everyone thinks they know). Get in the habit of checking zoocasa.com, it's free and it shows you what properties were listed for and what they actually sold for. I've noticed it doesn't show everything that's sold, but it's a great tool for comparables. Also, get in the habit of checking realtor.ca or other online listings in your area at least weekly. You’ll be able to notice listing trends, properties that have been sitting for a while, as well as the hot and cold areas.
2 // Learn the numbers
Becoming financially literate is a life long mission. There are a lot of numbers involved in purchasing a rental property, but here is a super quick and basic calculation I do when I'm 'real-estalking' for good deals. To get started, the goal is to collect monthly rent for profit against the mortgage. Any gain in the value of the property itself is a bonus and not included in this calculation. The average homeowners mortgage is 25-30 years. We’re looking for investment properties that will be paid for by the rental income within 10-12 years. For instance, if the property costs $220,000 and you can collect $1,575 monthly rent, the calculation looks like this: $220,000/$18,900 ($1,575 x 12 months) = 11.6 years. The closer to 10 years the better! It may seem like these opportunities are impossible to find, but I'm willing to say that I GUARANTEE that they are out there in 2019. We just secured a deal with similar rough numbers.
Buying a house for house-flipping purposes is a whole other situation of numbers. That is a market-driven game, you could end up spending too much money renovating the property and then find yourself unable to sell it for much profit, or worst a loss!
3 // Be open to unexpected opportunities
You may not want to hear this, but... we aren't looking for the glossy, perfectly staged, 3 bedroom, 2 bathroom house. We're looking for properties where the math works. Thrilling stuff, I know! Furthermore, be open to a wide range of properties, such as single-family houses, duplexes, triplexes, apartment buildings, self-storage facilities, and so on. We've been focusing on single-family houses because that is the market we are most familiar with and it seems to be where most deals are in our area, but this might not be the case for you!
4 // Make a relationship with a real estate agent
Building a great relationship with a real estate agent is crucial in securing real estate deals! These listings often go quick, unless you find a real gem that no one was looking at (rare in our area)! In our experience, if you're clear about your intentions, real estate agents are more than happy to send you listings and show you properties!
We wouldn't have secured our last deal without our awesome agent-- I was doing my daily real-estalking, saw the listing on realtor.ca, sent it to Dale--he likey the numbers, texted her if we could see it, looked at it 6 hours later, she came prepared with the offer paperwork filled out (because we were very clear on our intentions!), we signed the offer after the viewing and she advised us on a really smart offer timeline that put them in a position to secure or decline our offer before the other 10+ people were going to view it the next day! They counter-offered with super tight timelines, but we buckled up and went for the ride!
To find a great real estate agent, do some research and simply ask a few to grab coffee. Friends and family may recommend you an agent, this can be great or terrible... if you happen to not like this agent, it can get awkward real fast. I advise you to blaze your own trail! TIP: In our experience, when your building your team of experts around you, you want professionals who personally invest in real estate properties. This includes your real estate agent, your accountant, your broker, everyone. This gives them the real life experience and advice that people who have not, just simply can't offer! This can be a challenge, we're still looking for a few experts with investment property experience.
5 // Do your due diligence
That being said, you can have a great real estate agent and still purchase bad deals. Without learning how to do your own due diligence you'll never find the deals. For instance, are there two lots in the listing? What is the zoning? Can this property be split into multiple lots? What’s behind the walls? Get familiar with calling the town planner. Learn what to look for in listings. Climb into attics or check out the nasty crawl space. So many times we've been looking through a property and Dale just disappears, only to drop out of the ceiling in one of the bedrooms haha. No one is going to do these things for you.
6 // Don't get emotionally involved
We have looked at some mega turds. We've also looked at a lot of turds that have potential that I've got emotionally attached too, such as a retail shop that had a rental unit above (hello, flower studio!) and cottages on the lake (hello, family fun weekends!) It's so easy to get caught up in the emotions after checking out a property, we call it the "viewing high", but the expression "money talks" always rings true. These decisions are financial, not emotional. Keep them that way!
7// Be prepared for rejection
Ahh, rejection! Learn to love it haha. We've definitely pretty savagely low-balled offers--at our real-estate agents discretion--and been rejected! That's okay! Take it as a lesson learned. There will be another great deal. Never offer above what you think it's worth, just to avoid rejection. Get developing that thick skin and remember, you'll buy zero properties if you make zero offers!
Lastly, and most importantly, you can be doing #1 and #2 even if you aren't financially in a place to make 'money moves'. So, what are you waiting for?! Let's get 'real-estalking'!
We love hearing about other people's experiences, what have you learned along the way?