From the desk of Matthew Shantz:
When looking to start investing in Real Estate it is very easy to get caught up in the excitement. We read books, listen to podcasts, take courses, talk to friends, go to open houses, speak with realtors and spend hours browsing through MLS and listings. We ask everyone “how did you do it?” or “what are you investing in?” or worst still “how much money did you make?”. I get it, I have been there. We just want to do something, anything, because not doing something feels like we are wasting our time, missing out on the next big opportunity and have let another chance to ‘get rich’ slip through our fingers.
Over the past 15 years I have attended more seminars, read more books, listened to more speakers, interviewed more experts and walked through more houses then I could count. I figured that I was doing all the right things, I was learning and looking and researching everything I could get my hands on. It was exciting, I was pumped, I couldn’t wait to get started. I realized I was missing something.
There is a boring, dull and uneventful side to real estate investing that no one wants to talk about. There aren’t really any flashy presentations on it, there aren’t really all that many speakers talking about it, and it definitely does not involve getting your boots on the ground and just getting out there. We don’t talk about it because it isn’t fun. But, oh boy is it important.
When I first started getting interested in real estate investing at 19 years old, I thought that “planning” was as simple as “I will buy a house, I will rent the house, I will make money from the house and I will retire at 25”. It wasn’t a bad plan – or so I thought at the time. Today, I look back at it and shake my head. Poor, little 19-year-old Matt had no idea what the next 15 years were going to teach him, and had he known, he likely would have stayed in school a lot longer.
A Plan, a good plan, has five(5) distinct components to it, they are: Who, What, Where, Why and How (‘When’ is also an acceptable part of this plan – but like any good Real Estate Investment Coach, my quick answer will be ‘Yesterday’ – that being said I will address the question of ‘When’ at the end).
Who [Who are my Team of Experts that will advise me and guide me along the process] – This is SUPER IMPORTANT, if you think that you can invest in Real Estate without a team to support you, you are deluding yourself. We all need a Team, I need a Team, and my Team is amazing! It is made up of the following people:
My Realtor(s) – I have 3 incredible Realtors that I rely on, they know my what I am looking for, where I am looking for it and are experts in their individual areas. The thing to know about good Realtors when it comes to investing is that they are Specialists. They have a market they know inside out; they have a property type that they have studied religiously, and they actively invest, buy, and sell within those markets. I have a Realtor for London, ON (my hometown), I have a Realtor that specializes in Downtown Toronto Condos (where I live) and I have a Realtor that specialized in Mid-Town/Up-Town Toronto. If I have a question about any of those areas, I will reach out to the Realtor that specialized in that area. They are friends, mentors and guides and I trust them thoroughly after years of working and learning from them. They know me, my interests, and what my goals are. They are SO important in my strategy, and I respect their guidance and opinions. Why do I have 3 Realtors that I work with? Because I don’t expect my London Realtor to be an expert on Downtown Toronto Condos, just like I would expect my Downtown Toronto Realtor to be an expert on Up-Town Toronto or my Up-Town Toronto Realtor to be an expert on London. Simple. Let them all excel at what they are best at.
My Mortgage Broker – yes, I am a Mortgage Agent myself. And yes, I have a bit of an advantage in this area that I am able to look at my own deals with an educated and an ‘insiders’ eye. But I have a Broker as well that I rely on their expert advice and opinion. I am very fortunate, I have Tracy Valko – my friend, business partner and mentor to fill this role for me. The job of the Mortgage Broker is ensure that I have a solid financial action plan, that I am financially positioned to make an investment, and that I know what tools and resources I have available to me – BEFORE – I ever start looking at properties to invest in. My Mortgage Broker does not come into secure financing for me after I have found a property, she comes in before I even start looking. Not knowing what you can afford to buy, not knowing how you will buy it, and not having a short- and long-term plan for what you are buying is a sure recipe for failure. Tracy knows my plans, my goals, and my current financial situation and advises me accordingly.
My Lawyer – at then end of the day you need someone that you trust watching your back and fighting for you. My Lawyer is my last line of defense, that person who is will read the small print for me and make sure that the decisions I am making are not filled with unexpected surprises. My lawyer doesn’t get involved at the end of the transaction; they are with me throughout the transaction. Yes, their services primarily happen at the end, and yes, my Realtor and my Mortgage Broker and protecting and working in my best interests all the way through. At the end of the day though, my Lawyer is the one that is charged with ensuring that I don’t get sued. I love her for that.
What [What the heck am I actually buying?] – You might answer this with something as simple as ‘a property’. Great. Cool. Of course, I am buying a property, but what kind of property am I buying? Is it a Single Family Detached, Townhouse, Low Rise Condo, High Rise Condo, Mixed Use Residential-Commercial, Commercial, Agricultural, Undeveloped Land, Pre-Construction, Conversion Property? Is it a Flip, a Sale on Assignment, a Rent and Hold, a Vacation/Recreational Property, a Land Development Project?
It is important to figure out what kind of property type you are comfortable with, and what kind of strategy you are going to employ with that property. Ask people that have invested in these kinds of properties before, what the good and the bad of each kind is. Then make a priority or preference list.
Mine is pretty simple:
1. Pre-Construction Condos (I LOVE THESE)
2. High Rise Condos; Rent and Hold
3. Townhouse Condos; Rent and Hold
Where – Where you are going to be investing, is almost as important as what you are going to be investing in. Know your market and know what to expect from it. Who lives there, what are the demographics of the market, how is it expected to change over the next 3-5 years, what developments are happening. You can find all the important demographics necessary online, and in your primary market you know almost take the time to memorize them. The more you know about where your investments are located, the less surprises and the less risk you open yourself up to. Also, when I say ‘where’ the incorrect answer would be using the city name – be specific.
Mind looks like this:
1. Fort York, Toronto
2. Yonge & Finch, Toronto
3. South West, London
Why [To make Money of course] – Sure, the ‘why we invest’ question is pretty easy, or so I thought. Making money is not as simple as actually putting money into your bank account. It is definitely not as simple as ‘to retire young’ or to ‘be debt free’ or any of these other things. Beware the Real Estate Investment Coach that answers this question with ‘to get rich’ just a heads up, they mean for themselves to get rich, not you.
Why is a far deeper question then we typically give credit to and sure, you can use the blanket answers that I just said not to use as an END RESULT. The ‘why’ I am really interested in answering is ‘why this property?’, and ‘how does this property fit into my big picture plan?’.
So what does that look like, well, let’s assume that we all share the end goal of “To Get Rich”, I don’t think it is much of a stretch to make that assumption, or at least “To be comfortable” for those who are not fond of using the ‘R’ word.
Well, in my case, one of the major steps to ‘Getting Rich’ requires that I am mortgage free on my principal residence. My favorite investment type is pre-construction condos that I will sell on assignment. Why I do that, is because I want to make large, periodic lump sum payments against the mortgage on my principal residence. That is one of my “why” answers. Sure, I have a lot more ‘why’s’, and they change for each property I look at. But the important part of this is that I know “why” I am buying each property before I buy it.
How – How am I actually going to afford to buy this property? Great Question, each property type has a different answer and there are different suites of products available for each different situation. Figure out ‘What’ you are going to buy, and ‘Why’ you are going to buy it, and ‘Where’ this property should be located first. Then, go back to your list of Advisors, look up your Mortgage Broker and give them a call. The conversation is pretty simple, because they already know what your plan is, what your goals are, and what your current financial situation looks like (we have had all these conversations and run some numbers before we started looking – right?). The conversation is really quite simple, it goes something like this “Hey Tracy, so you remember how we were talking about me wanting to invest in Real Estate? Great, I found a (property type), located in (where) listed for ($$$); how do you think we should best go around securing the financing for this? What do you recommend?” I can guarantee you now, that conversation is going to be far more productive and far better for you in the long run then if I picked up the phone and went “Hey Tracy, I bought a house built in 1909 in downtown Toronto for $2.1M, I know I only have 5% Down Payment, which I have borrowed from my Mom, but I really want to buy this property, fix it up and Rent it out. But I just lost my job last week and my Condition for Financing expires tomorrow.” I know that both these examples are extreme situations respectively, but I hope it is clear which one is positioned to be successful and which one is doomed for failure (or at least an incredible amount of stress and expenses).
So, to sum it up – Know how you are going to pay for something before you buy it.
That sums up my 5 major steps for successfully Investing in Real Estate. This was just a quick overview of how to get started, and I highly recommend not just reading this and saying to yourself “Great, now I know everything”. I would also recommend participating in my upcoming talks where we break down each of these points into further detail, because I did oversimplify a lot of stuff here. As for the last question/step we need to ask ourselves, “when” – the answer is pretty simple – “When you are ready” and how will you know you are ready? Because you followed the previous steps that I have given you and feel confident in your knowledge, have a plan and feel a hunger to get started!