By Eddy Boudiwan and George Hill
In the first article of this six-part series, we discussed how to assess your readiness to invest in real estate. Now we will explore the framework required to select the geographical area where you will invest and building your team.
A process is defined as “a systematic series of actions directed to some end.” This being the case, it is important to keep in mind that, when looking to select an appropriate investment property, you must allow the process to guide you, rather than deciding based on how a property “feels” to you.
Research your area of focus before entering the market. We look at real estate investments as a longer-term commitment that allows steady and sustained wealth growth, rather than a quick-buck scenario.
GDP, job growth and population growth are examples of economic indicators that signal a positive trend for investments in an area of focus. For example, a town that has shown steady increases of population and job growth can indicate a good long-term investment where you can get cash flow and also build equity. Many franchisors and big-box stores look for such indicators to determine placement of their new franchises and project these indicators for 10 to 15 years into the future.
Keep an eye on indicators, as they can tell you not only the appropriate time to enter a market, but also when to exit one, should the growth trend be reversed.
Selecting and building your real estate investment team: A good team of people in your network is an important asset in selecting the right properties.
– A real estate agent and lawyer who have experience in the neighbourhood and in dealing with multifamily property transactions.
– A mortgage broker who has significant experience in investment properties, to assist you in finding the most efficient funding for your properties. Sometimes creative lending solutions are required that only a broker with the right experience can help facilitate.
– An accountant who will assist in tax-savings strategies, eligible write-offs, appropriate filing for your taxes with the correct tax structure and preparing financial statements and bookkeeping, if necessary. Meet with them at every stage of the property acquisition and for continued counsel.
– A property inspector who has experience in general contracting will have valuable insight to real costs for potential abatements. For larger multiplexes, there may be additional layers, such as building and engineering reports and environmental studies.
– A general contractor for larger jobs and other supporting trades such as plumbers, electricians and a general handyman. During the initial visit to an interesting property, take the general contractor with you to provide a high-level estimate of needed work. This early feedback will help you adjust your analysis and structure the offer if the numbers makes sense, prior to even going through the detailed due diligence, including the official inspection.
– A property management company will assist in taking care of the day-to-day issues after a property purchase. We will address this further in part six of this series, but at this stage, you should look for a PM company that services your area of interest and has local managers. This will make on-site servicing easier and more efficient because the property manager will be familiar with the environment.
– An insurance broker experienced in recommending the right insurance for your building and who can ensure that your property has the right type of coverage such as liability, sewer back-up coverage, fire coverage and loss of rent protection.
– Educational forums/groups: Education is of paramount importance to become a successful investor.
In the next article, we will address property analysis and financing options available to you and how they pertain to different investment situations.
Real Estate Rangers is a real estate investment team that locates, operates and maintains properties for investors. Eddy Boudiwan (eddyb@realestaterangers.ca) and George Hill (georgeh@realestaterangers.ca) are the co-founders of the company. They have partnered with Taft Forward Management as their acquisition arm. www.realestaterangers.ca
Real Estate Rangers is a real estate investment team that locates, operates and maintains properties for investors. Eddy Boudiwan and George Hill are the co-founders of the company. They have partnered with Taft Forward Management as their acquisition arm. For more information, visit www.realestaterangers.ca.
