Investing In Real Estate in London, Ontario Correctly
This Is One Of The Best Times For Real Estate Investors in London Ontario
Home buyers may be struggling with being priced out of the market, but they’re still NOT being priced out of renting their next apartment, which is why income real estate in London, Ontario is an excellent investment despite The Landlord and Tenant Act—favouring tenants!
Whether an apartment condo, townhouse condo, single-family house or a duplex and up, run the numbers; you should be excited, and if not, re-run your numbers correctly. I know, I know, the last statement may have ruffled your feathers; you may be surprised at the wannabe investors who have tunnel vision and do not look at the big picture.
For example, if you believe the inflation rate is 8% and you have $100,000 in cash as a deposit, your thinking you have $100,000 is worth $92,000! If you believe that inflation is more than 8% as I do, then cash is trash!
Maximizing R.O.I. ( return on investment) isn’t just about buying a property and collecting rent. You might experience several events throughout the year that will increase or decrease your R.O.I.
For example, landlords can increase R.O.I. by keeping the premises in good shape and modern appliances. (fewer repairs in the long run or that emergency call that the fridge is not working!)
Tenants can decrease R.O.I. by not paying their rent, moving out prematurely, or damaging the property.
Being an investor in small real estate properties will not make you rich overnight, but you can build what I call slow wealth over time! You make money in real estate when you buy, not when you sell! All my clients do well with this philosophy that I share, and as J.P. Getty said: “Investors bank on climate, while speculators bet on the weather.”
Are Your Cash Flow Calculations All You Need Before Buying?
So many beginning real estate investors will decide whether or not a real estate investment is good or bad based on the answer to this single question: “Will the property produce positive monthly cash flow?” Basing your entire decision on the response to a positive cash flow question is a minimal way to look at an investment. Sometimes there just isn’t a simple answer for you when you’re looking to create wealth. There are several things real estate investing beginners or even experienced investors should consider.
No Brainer Real Estate Investor Tips
I have spent a lot of time studying and working with wealthy real estate investors. I am not talking about the flashy ones or the jet setters. I am talking about someone who looks and acts like your neighbour next door yet has a portfolio of 5 or more properties. They could be condos, single-family houses or multifamily homes, and whatever they are comfortable with, they take the attitude of slow and long-term growth. They do not flip; they do not take excessive risks and are great landlords because they know the secret to be successful.
Below are a few “lessons” that thousands of investors have experienced the hard way and a few tips on overcoming the consequences of poor decision-making and erroneous opinions, be they yours or the so-called experts!
- It is not as easy as it looks on TV.
The problem with TV real estate investment programs is that they downplay the work involved and accentuate the money made by the investors. These programs will show you a tidy $50,000 profit wrapped up in a 30-minute episode, and they are laughing and playing and smiling! They’re not showing you the work done to find the property under market value, build the industry relationships necessary to tackle a sizeable project, the skills necessary to manage that project, and the market knowledge to predict that property’s final sales price accurately.
2. Walk before you run.
So many “investors” decide one day that it’s time to make millions in the market and begin looking for that perfect flip or perfect rental property – with a hefty price tag. Would you walk out of your door today to run a marathon without training? Investing is very similar. You can make many mistakes, and one big mistake can sour an investment. Please remember this: “Most of the time, opinions cannot hurt you, but when it comes to any investment, opinions will hurt you!”
3. For true wealth – think long term.
Many new “investors” come to me with the business model of “buying old houses and fixing them up.” This seems the easiest way to make money, but it’s not. Flipping houses takes skill, foresight, market knowledge, and market resources. Furthermore, flipping houses is hard work and results in quick profits, and flipping houses results in short-term capital gains. (Scroll down this page, see “Flippers Aren’t Investors.”
4. Put Together a Business Plan, and Stick to It
The only time you can’t POSSIBLY lose money is before you invest it. That’s why putting together a solid business plan is the wisest action step you can take. Decide the type of property you plan to buy, what it will cost to purchase, what it will cost you to hold the property, and how much income the process will produce for you. Most investors have a “formula” for buying properties – develop, borrow, or steal one. (My investor clients get a proven formula and system that works.)
Write EVERYTHING down on paper and analyze every possible expense. Plan for the worst and anticipate how you will avoid the worst. Once you’ve put together your business plan and investing “formula,” – Stick to it!!! Execution is key to successful investing.
5. When You See Something That Looks Good – Act!
I’ve worked with many investors that have excellent business plans, and great formulae, but can’t pull the trigger. How many times have you said to yourself “I should have __________________________________?”
6. Failure to Determine Your Time Need
Cash flow, capital appreciation, tax benefits, equity pay-down and pride of ownership are just some things that need to be addressed before making that investment. Still, most forget about the time required to manage their properties. (I have a client with ten properties and spends less than 10 hours a month on them, and I know of some investors who spend 10 hours or more a week chasing their tail!
There is no need for that if you prepare correctly, get greed out of the way and accept good advice!
7. Not checking out the Seller’s numbers
Claims of extremely high rates of return run rampant in real estate investment. Don’t get caught up in the excitement – check everything: rents, payment history, taxes, expenses, deposits, future modifications…everything! Make sure you have an experienced real estate professional helping you. It’s like having a good insurance policy against overlooking seemingly insignificant but vital details.
8. Charge Fair Rents
Vacancies are your most significant expense. Charge fair rents, treat your tenants respectfully and respond as quickly as possible to their needs. It’s much less costly in the long run to take care of minor problems before they become big ones. Vacant property is your Achilles heel. If the area supports it and the property is $1,895 in the current market, you can lose/waste a couple of months’ income chasing $1,995. How many mortgage payments are you willing to make to get a “home run”? Most home run hitters bat 300, which means they fail seven out of ten tries!
9. Select Qualified, Good Tenants From the Start
Take the time to check references. Previous landlords, employers, financial references and credit checks are vitally important. If there are any red flags, investigate thoroughly. Most evictions are the result of a poor or inadequate screening process. By extension, that means most repairs, vacancies, and legal expenses are also due to approving the wrong tenant. This is an area where you MUST do your homework and not rely on first impressions or instinct. Looks can be deceiving. Unless you have money to burn, screen well and know when to say NO. A little work up-front can save tremendous problems later on down the line.
10. Don’t Spend Positive Cash Flow
Successful investors end up having free and clear properties. Be sure to re-invest your cash flow into the property payment and speed up the amortization schedule. This decreases your debt load and increases your equity…which builds your net worth.
Want Your Income Property Sold?
When selling your income property in London, Ontario, be it a house, apartment, townhouse condo or a duplex or larger, you have a choice of 1,900 + Realtors. We sell properties; we don’t just list them for sale and hope! Hope is not a strategy.
Investors Who Flip Homes Aren’t Investors. They Become Employees!
Everything you read or see on those reality shows is about buying properties to fix and resell. Very seldom do you hear about buying a property and holding it as a long-term rental property? The question is:
Do you want to be a fixer-upper and every day you are doing, doing, or would you prefer to eventually sit back and receive income for the rest of your life? A fixer-upper fixes up a place and makes a profit if all goes well. Once the transaction is complete and they have collected a cheque at the closing, they are done and go back and repeat the same thing repeatedly or try to. There is no additional income or profit available. To make any more money, you have to fix up another place.
Work & take a risk… get a cheque. Work & take a risk… get a cheque. Work & take a risk… get a cheque No work… no cheque
Flipping houses is a job; you don’t get paid unless you work.
Even worse, the profit on a flip is fixed based upon the home’s final sale price. No matter what you do, you won’t make any additional profit on the deal. Sadly, this profit can disappear quickly if you encounter unforeseen problems in your renovation. Who wants another job?
The investor who focuses on investing for the long-term in rental properties enjoys annual income for life. They work to buy a property and rent it to a quality tenant, then sit back and collect rent cheques each month. This is the same as a writer who writes a book and then sits back and collects royalties from their book sales or a songwriter or movie actress, who does it once and keeps getting paid!
Work & take a risk… get a cheque once. Work once & take a risk… keep getting cheques!
When the writer wants more cheques, they write another book. They work again for a few months and then start collecting two cheques each month. These cheques tend to compound on top of each other. The reason is that every time they work, they get paid multiple times for their effort. They’re still getting paid for their first book as they write and complete their second book.
Even better, the profit on a long-term rental is unlimited as you collect more and more income with each passing year. One rental home that pays you $5,000 a year can ultimately generate $100,000 of income in 20 years and $200,000 in 40 years. And here is the best part; your tenants are paying down your mortgage!
You can even leave your rental property to your children, and they’ll collect cheques each month throughout their lives. You can’t compound home flips because you’re not still getting paid from your first flip when you’re working on your second flip. This means investors who flip homes aren’t investors. Instead, they become employees and have to continue working on getting paid.
Flipping is a j-o-b, and your boss will want you to work evenings and weekends for months!
Hello Ty, We just wanted to take the opportunity to thank you for introducing us to Michael. What a wonderful man! From the very moment we met, he genuinely took the time to understand what we were looking for. So quickly tuned in to what we were interested in, even as we were learning ourselves. The process of finalizing our first investment property deal has been a bit of a roller coaster or perhaps somewhat of a scavenger hunt as we searched for the information we needed to accomplish the purchase.
And that is truly how Michael seemed to approach it… not with frustration and impatience with people who were not helpful and creating roadblocks but as a treasure hunt that with persistence, optimism, and determination, he would find the right puzzle piece would to open the lock…. and he did! He was able to get what we needed, and we are on our way! What a kind and genuine man; we are lucky to have had the chance to work with him.
Thank you again for making that connection for us,
Hello Michael & Ty, Roz and I would like to thank you both for the effort you put into finding us tenants on such short notice. We realize the process may not have started that well while the other folks were still living in the unit. We appreciate your patience and faith in us very much to bring the condo back up to standard to allow you to do your job properly. It worked out well in the end, and we hope these new folks will spend a while in our place and treat it with respect. Thanks again for your hard work. Have an awesome day.
Sincerely, Joel & Roz
Thank you! Ty your help has been invaluable. We are returning to Toronto tonight and really appreciate all you have done to help us.
Hey Ty, thanks, great work, appreciate all your time and effort, and keep us on track. Gregory
We very much appreciate the work you have done in helping us to achieve a portfolio of ten rental properties, and in disposing of Pond Mills. We would not have known where to start were it not for having the benefit of your expertise.
I have been busy leasing xxxxxxxxxxxxx. It took six weeks to find someone decent, and I rejected seven applicants in a row, but I finally found a great candidate. All his references describe him as reliable and his landlord says he pays rent like clockwork. The lesson in leasing is not to compromise with a weak tenant and keep marketing like crazy until the right one comes along.
Dear Mr.Lacroix Thank you for helping my client’s estate dispose of the seven properties. I and the family are quite pleased with the prices we received, we now have one more property to go, which is a private residence; see the details below and thank you again.
Ty The place is going great!! We have an incredible tenant that pays early every month and she’s super quiet. We have been really pleased with the location and neighbourhood and how everything has been with the house. We walk right downtown in minutes and never have to worry about parking! I would suggest this location to anyone, although we keep looking for similar properties for ourselves in the same neighbourhood for the future…. Nothing was really wrong with the sewer system other than large root buildup but once we got a competent plumber in that had a large enough root cutting machine we were back in business! Thanks so much for all you did to get us this place and for the wisdom and experience you had to guide us into making a very attractive offer to get this house. Taylor and I really enjoy it. Anna was an incredible resource for us as well. We were really happy we went with her and look forward to working with her again in the future. We will definitely be using your office in our future home buying process!
Thanks for the follow-up! Derek & Taylor
Hi, Ty Just a brief note to thank you for selling my two-income properties by Western. I know the six-bedroom was a nightmare and thanks for taking the time with the Fire Marshall, the electrician, the drywallers and getting the garbage guy out to clean up. I thought the deal was off a few times; thanks for keeping it on track. At times I thought I would lose money on it but in fact, I did far better than expected. I have included a little token of my appreciation for what you did for me and my family, and my father has asked me to offer you any of his various timeshares for a week.
Let him know, it’s yours.
Hey, Ty Just like you said, we are now into the 11th condo that we have bought through you and you know, as I teach this, your systematic approach was the same as our first one. The only change is we did not know what or how to do anything when we bought our first one. Thank you for your patience and for setting us straight on the numbers; you have saved us I don’t know how many headaches or thousands. We are now preparing to buy our 12th at the end of the year, of course, with your guidance. Oh, and thanks for the name of the furnace guy; he’s great; we even had him come to our house and look at our A/C.
Hi Ty: Thank you for your follow-up email. We are very pleased with Paul’s help in finding and buying the property. Paul was very efficient and effective on each step of the buying process. He was also very helpful to us in finding a home inspector, a mortgage agent and a lawyer for closing the deal. It was a pleasant journey for us, and I am sure we will have more opportunities to work together shortly. Thank you for your excellent help.
Best regards, Wenqin
Fiona Douglas has recommended your work as Broker of Record & Owner at Envelope Real Estate Brokerage Inc.
I’ve written this recommendation of your work to share with other LinkedIn users
Details of the Recommendation: “Ty has been a pleasure to work with over the past couple of years, on a least two major projects we have had on the go. He goes above and beyond and has never disappointed us, and his calm demeanour goes a long way toward keeping us focused when dealing in our very volatile real estate market. We have no qualms about recommending Ty’s services highly, and with pleasure!”
Service Category: Real Estate Agent
Year first hired: 2011 (hired more than once)
Top Qualities: Personable, Expert, High Integrity
Hey Ty, When I was looking at places with you last year you mentioned purchasing gift cards for your tenants at Christmas time. I took your idea and bought a couple of gift cards and the tenants seemed to love it!! Inexpensive and pretty simple, but they felt it was very thoughtful and like you said…how many landlords give tenants gifts?? All is well with the properties so far, I really appreciate the education you helped provide me in 2012…nothing beats the gift of knowledge. It’s hard to believe I went from never owning a property only six months ago to now having two income properties in London running!! You really emphasized the philosophy that if you keep your place proper, and treat your tenants well, then you will have success (as opposed to the slumlord philosophy lol). Thanks and best of luck in the new year!! I will definitely be using Envelope for all my future purchases!!
Scott ps…If any exciting properties or places pop up, I’m always interested in new ideas!! lol
Ty, We finally closed the deal yesterday with Dan. Vanty and I would like to thank you for your professional service and help; we felt confident that we were in good hands. The tenant is more than happy to sign another one-year lease agreement for the condo highrise apartment. It’s almost like happy-ending Hollywood stuff for now, but Vanty and I are aware that there will be a steep learning curve for us in real-estate investment ahead. We believe it will be challenging and rewarding for us. We’ll be in touch again after our vacation.
Best Regards, Jerry and Vanty
Dear Ty, I reviewed all the statements and the invoices, and everything looks clear to me; you did fantastic work; I really thank you for your effort and appreciation. Now I am planning my booking to London Ontario, on the third or fourth week of October, please let me know which time is more suitable for you.
Subject: Re: Another Tenancy agreement
Hey Ty, Just wanted to let you know that everything worked out with the couple I showed my place to. They provided two references, both of which said they wished all their tenants were this good. The guy is doing a fellowship at the hospital, so he has a fantastic job and they just come across as very respectful, quiet people. I used the lease you provided, and they signed on Tuesday. I asked them to bring along a rent deposit for last month’s rent, and they could pay the first month’s rent on Sept. 1. Instead, they gave me a bank draft for the entire first and last months upfront!!! I got $____________month, just like you thought would be reasonable and which covers my costs each month, and I only had the place for one week before finding tenants!!
…Things have gone so smoothly, that it looks like I may have to come in and see you again to start planning my next move!!! lol Here is a testimonial, in case you would like to ever use it: Ty, I am very happy with all the service you have provided. As a first-time buyer, you were extremely helpful in researching, viewing and purchasing processes. And even after I bought my condo in Pond Mills, and you had already earned your commission, you have promptly responded to every question I sent you regarding tenants, leases and the entire rental procedure. I can’t thank you enough for everything. I will definitely be coming back to work with you again!!
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