Team - Realtor

Having a Realtor on your team is pretty well mandatory for RE investors. This person is usually an expert in the retail side of buying and selling residential or commercial properties. 

Ideally you will attract a realtor who understands you and your needs. Their personality and yours must be compatible at least in the business sense. If you can be their friend, so much the better.

Here's what they will do for you (if you ask):

• send you listings of properties for sale
• supply Comparitive Market Analysis's (CMA) for properties you have for sale
• after you get to know them, they may give you early leads on properties coming up for sale
• handle most aspects of the buy and/or sell transaction for your properties
• provide expert guidance on preparing your property for sale, pricing it and marketing it

Realtors are trained to take care of all the details, technicalities, legalities of buying/selling properties. They take on a large amount of responsibility for correctness, legalness (sp?) and dealing with wacky people. 

A few realtors understand RE investing and I recommend you deal with them only. Keep searching until you find a good one. Do NOT get loyal to a realtor unless they prove their talent to you. 

Make sure your realtor gets paid well for the work they do. They deserve it. Ask your realtor if they offer incentives for pointing business their way. Mine offers home-made cookies.

Some transactions do not require their help (you find the deal, you negotiate, you deal with the other party yourself) AND you will need a realtor's help even on you own deals for their market expertise.

Ask other investors to recommend a realtor then interview them. Let them interview you too.

Real Estate Investors Clubs

A great place to learn the craft of RE Investing is at an RE Investors Club. 


These entities live in most cities in North America (do a google search, these guys are everywhere!).


Many clubs are started by folks who believe that networking is the best way to keep their investing moving ahead AND they know that having like-minded people in their lives is the way to success.


I've participated at three clubs. All of 'em had education and networking as primary focus. Attracting folks to interesting RE investments was a secondary focus in two of them. They were all worth participating in because: the folks who showed up were great people, the education was always good and sometimes great, the folks who ran the club were VERY helpful.


Usually the clubs have a monthly meeting (entrance fee) with a speaker (or speakers) who provide the education, a networking piece and many opportunities to meet other investors and share interests. There was also some form of email newsletter, and maybe cookies and coffee.


Here's the best way to get value from these clubs, in my opinion: 

• Show up a bit early and chat with someone you've never met
• Pay for the VIP membership and take advantage of it
• Hang around after the meeting and chat with someone you've never met
• Arrange to speak with the speaker(s) and by them coffee/lunch and see what you can learn from them
• If you are creating a team, ask everyone you meet for referrals (contractor, lawyer, accountant, realtor, etc)
• Go to the mid-month breakfast meeting (if there is one) and learn as much as you can there
• Collect business cards from everyone and put them in your contact database (give 'em a category so you can find 'em later)
• If there's an announcement section to the meeting Announce Something every time! Active RE investors are always looking for something or someone. When you stand up and tell everyone your name and what you're looking for, you get extra points for participation and people start remembering you.

What if you don't have access to an RE investor club? START ONE! It's easy. Open the yellow pages and start cold-calling mortgage brokers, RE lawyers, handymen, accountants, realtors, etc. Tell 'em you're starting an education and networking RE investor club and the first meeting is on this date at this location at this time and do they know anyone who'd be interested in attending that you could call or that they could pass the word to. After 20 calls you'll have your spiel down and be having great conversations with interesting people who've been wondering when someone was going to start a club. IT WORKS! I did it in 2005 and my club is still going strong in 2012.


Gord
www.victoriarei.com

Due Diligence - JV Partners

If your potential RE investment includes having a partner, use due diligence on them too. You might be in the deal for 5 years with them. Are you sure they're going to keep the terms of your agreement for all that time? Do your personalities match up well enough so that if something goes sideways you'll both agree to stay the course?



Do you know them well enough?


I suggest you get to know them socially. See how they do life outside of business. Ask them if they will agree to have a criminal record check done, of course you'll have to do it yourself if they ask. Have a look inside their car and their house. Offer to do the same. Will they do what they say they'll do? 


What have they been up to?


Some people have a public persona (whether they know it or not). Type their name (in quotes) into a google search and look closely at what comes up. Check if they have a Facebook, LinkedIn, Google+ or whatever account. It's fun to see what people do online these days. Oh by the way, check yourself too.


What's their track record?


Have they done this kind of transaction before? Is there anyone who can vouch for their performance in business? How's their work record? If the deal needs more money injected, are they ready to help out?


Are they going to be around for the whole project?


If you look at the big picture, what are the prospects for these potential partners in the near and far future? Are they steadily employed?



It's inconvenient and intrusive to do the above. If you've got $50k on the line in your deal, it's probably worth it IMO.

Due Diligence - Go Look at the Place

One can buy a property without ever looking at it. It's easy and is done every day - by experienced investors. It takes quite a while to become "experienced".


I suggest you go look at properties at every opportunity if you want to become a well-grounded RE investor. After a while you'll notice some interesting patterns. There is a relationship between what's written in an MLS listing and what a property is, but it's tenuous. Realtors want us to feel excited about their listings. I want you to see it for what it is.


To understand a property's worth, one has to use one's senses and discover these things:


how does it smell, look, feel
has it been kept maintained
how much life is left in it's systems
how can it be changed to add value (this is a big one)


We can pay an expert to report all the above but the last one is our responsibility because that's where the money is really made.


Here's what a personal inspection reveals: what needs fixing, what can be improved and/or brought up to date and who should I talk to to help figure out how much all that will cost. 


If the roof / furnace / electircal / kitchen / bathroom / paint / rugs / floor etc looks old then if I fix them, how much will I increase the value of the property for re-sale? Or, if I'm going to rent it, what do I have to fix so that it's liveable for tenants? 


Inspection Checklist


Roof
Exterior
Plumbing
Attic
Electrical
Ventilation
Heating
Cooling
Interior
Garage
Appliances
Basement/Crawlspace

Due Diligence - What Value?

Here's some more thoughts on being diligent in one's research before acquiring a property.

How does one decide the value (price) of a property?

If I'm a flipper, I want to get a property at a low price, fix it up, and sell it at a higher price. If I like to do long-term-holds then the price isn't as important as how much income the property can generate for me.

Who decides the dollar value? Are there any other values I should know about?

If a property is for sale, it has a selling price. It's likely that a realtor assisted in figuring out the sale price. If it's a single family home up to a four-plex, the way that's done is relatively simple. Find similar properties in the area that have sold recently, account for differences in age, size and amenities then assign a sale price An experienced realtor will also use a bit of gut-feel to tweak the final price. That comes from watching the market trends and having experience with the selling process. Notice that on MLS listings there is an asking price and a sold price. The seller may want $450,000 AND the sale price may end up being $425,000 or even $475,000. It all depends on what happened during the selling/buying process.

There's an assessed value associated with all properties. This is a dollar value assigned by the local assessment authority, using a complex formula, that is used as the basis for taxation. As an investor, the assessed value can be useful if you're comparing two or more different properties that look the same. Other than that, I don't find assessed value all that useful.

On the property, the land and the improvements (buildings) each have their own value according to the assessor. If on a $500,000 property the land value is $450,000, guess what the actual building is worth? Not much, comparatively. In that case, the dirt is expensive and the buildings might be eligible for tearing down and re-building. If you build a $200,000 house on the land, will the property now be worth $650,000 (450+200)? You better check with your realtor before you build because the comparable properties in that area might be selling for $600,000. Building in that case is not a good idea.

If I'm a flipper then there's my selling price, ie: the price I'm going to sell the property at when I'm done fixing it up. Again, my realtor can help me decide if fixing the place will get me enough increased value that I can make a profit. The realtor uses local selling price comparisons as before. There are many factors that influence that price, which is one of the main reasons we are learning about due diligence. Understanding how the realtor does all that will help you choose the correct property to invest in more efficiently.

Do you see a pattern developing here? There appears to be a realtor involved in many of the value decisions. I can't emphasize enough the advantage of having an experienced realtor on your team.

Due Diligence - Legal Factors

Every property in Canada (that I know of) is somehow registered with a local government. Let's assume it's a province.

In BC, there's a piece of data called "Legal Name". It's kept by the Land Title and Survey Authority of British Columbia (LTSA). It's the ultimate name a property has for legal purposes. It's the kind of data that you don't want to fool with. It points back to the results of a survey map of the property. All legal contracts must have this field on it or it's not legal IMO. If you misspell it on a document, the document it worthless. You'll see it on the Contract of Purchase and Sale. Don't EVER misspell it, it's too important. If you're using a realtor, get them to deal with it.

Every property has a title. "A title is evidence of the registered owner's interest in the lands" I stole that directly off the BC LTSA website. The title is stored on the Automated Land Title Office System (ALTOS) in BC. Anybody can get a title report on any property in BC. There's an automated retreival system call BC-Online which anybody can get an account with, and for a small fee, get title reports. The title contains REALLY IMPORTANT information about the property. The important data is: Registered Owner, Taxation Authority, Description of Land, Legal Notation, Charges Liens and Interests, Mortgage and Easement.

As an investor, I want to know if the property I'm looking at is real and if anybody besides the owner has an interest in it. From the above we can see that a taxation authority wants taxes paid or they can take the property away. As well there may be liens against the property and the lien holders can influence things. If there's a mortgage then the mortgage holder is in first place to get paid if the property is sold. Easements are things like rights-of-way that governments have legally registered against the property. They can invoke their right-of-way any time they want. It's a little burden that comes along with owning the property. If you can't interpret the Title report, find someone who can. Your lawyer should be able to give you all the details. Your realtor can get you the report and interpret most of it. If you don't have a title report, you haven't been diligent.

When you want to talk to the local government (city perhaps) about a property, you merely have to mention the Property Id and they can get you all kinds of information about local taxes, utilities, location, etc. The property id is on the Title Report. Some local governments keep a file on a property if there has been complaints, inspections or whatever about it. If you ask nicely, down at city hall. they may tell you if there is a file and what's in it. This historical information can be pricelss when deciding things like - what amount to offer, are the upgrades legal, is the property a nuisance, etc.

BC-Online can get you a report of who's owned the property over the years. The reason an investor might want to see this is to check if the buyer is telling the truth about their ownership. Also, if the property has been sold every year for the last five years then there must be something fishy about it. Follow your nose and find out what's going on.

The above data is easily obtained and is a must have for every investor.

The Critical Importance of Rental Property Inspections

The Critical Importance of Rental Property Inspections:

'via Blog this'