Darryl Sittler made his fortune in real estate, not hockey.

RRSP home buyers planLast week, I had the privilege of attending REIN’s (Real Estate Investment Network) monthly workshop.  One of my childhood idols was a guest speaker.  I’m talking about Darryl Sittler, the former captain of the Toronto Maple Leafs.   In case you haven’t heard of REIN, let me share some details about this group of professionals.

REIN is a group of real estate investors that get together to network and share valuable information that affects real estate in Canada.   The leader of the group is Don Campbell.   If you haven’t heard of him, you should.  His approach to buying investment properties has proven to be very sound and profitable.  His “top ten best cities to invest” is legendary.

WHAT IS REIN ALL ABOUT?

I first heard of Don Campbell around 9 years ago through an associate Mortgage Broker that needed some while to service her clients while she was taking a vacation.   Usually, when someone calls with the intent of buying a rental property, there’s a learning curve.  Buying a rental property is very different from buying a principal residence.  So, I was prepared to coach and guide this client through the usual learning curve process.

This first REIN client was making an offer on a house in Hamilton.  She lived in Toronto.   Right away, I became concerned.  You see, buyers from Toronto can’t believe how less expensive Hamilton real estate is.   We are talking about 50% to 70% less expensive.   But Hamilton also has some less desirable neighborhoods.  Areas that only the experienced investors should venture into.    But this REIN buyer had done her homework.  She knew the area, the future outlook of the area, she had the cashflow worked out.  She factored in things like vacancy rates, management fees, a maintenance contingency fund, etc.   All things that I usually have to advise.

I was pleasantly surprised.   Wait, that’s not correct.  I was actually VERY surprised at how organized and knowledgeable she was.    It made the entire process much easier.   She had her personal financial documents ready for review.  She provided me a with a spreadsheet that was similar to what our Lenders use to underwrite an application.   I was really impressed.

By the way, that property was a townhouse purchased for $122,000.  Today, it’s worth $209,000 and it rents for $1300/mth.

A few days later, another REIN member contacted me for financing.   This client was buying a larger property in Kitchener.   A detached duplex for $233,000.  The experience was very similar.  The buyer was knowledgeable, prepared and organized.    That property value today?   It’s worth over $450,000.

MOTIVATED INVESTORS

Darryl Sittler is an NHL hockey legend.  I was curious to hear what he had to say.   He talked about earning as little as $15,000 per year when he first started playing hockey.   His salary would increase as the years went on but he would never see anything close the $million salaries today’s NHL players earn.   He avoided investing in failed restaurants or other ventures that have made so many athletes broke.

Darryl shared some details about how he amassed most of his net worth through real estate.  Simple purchases at first.  A house, then a cottage.. then another house.   Each purchase was the same.  Buy, hold for the long term, and when another opportunity presented itself, he would sell and upgrade.    Even in the bad times, he would hold and wait it out.   He bought a house long ago for under $100,000.  He bought a cottage with 300′ of water frontage.  He’s bought and sold several properties.

His message was that real estate has always gone up.  We may see a speed bump or a correction, but it always goes up.

REIN’S MESSAGE

The message at the meeting was the same..  Real estate should be purchased for the long term.   Real estate is still a good investment despite what you’re hearing and reading in the media.     Real estate has proven to be the best investment over the last 5, 10, 20, 50, 100 years and longer.  A proven strategy that should be followed.

Sure, you may be able to buy and sell and make a profit sooner.  That’s okay, but it’s also not to be expected.   My personal strategy is to buy and hold with a 7 year timeline in mind.

Find properties that cashflow.  A property with a negative cashflow should be avoided.  While this is good advice, I might suggest that in some situations, a slight negative cashflow is also acceptable.  It depends on how many properties you want to accumulate.   High income earners can expense any loss against their income.

Buy in growing markets or markets that are forecast for growth.  There are some cities that just aren’t good places to invest.  With all due respect to the residents there, Windsor and Welland have been poor choices to buy real estate.  Those markets have been depressed for many years.   The top cities to invest were not disclosed in the meeting, however, I have helped REIN members finance purchases so I know some of the cities that are on this list.

Once you build enough equity in that property, you refinance it and buy another.  This is about accumulating and growing your asset base.  It’a about creating an income stream.  Rents go up.   They are indexed according to cost of living.  That’s part of what makes them work.

Use professionals.  REIN is big on involved experts with your investments.  From Realtors, Accountants and lawyers, to Mortgage Brokers, Property Managers, Insurance brokers and Finance Coaches.    If you want to do this right, get the right team of professionals.   If you have a weak link in this chain, it can compromise your entire investment strategy.

MY ADVICE

I’ve been exposed to several other real estate groups.   Most of whom just want to sell you some software or an idea and move along.  None have had the same longevity as REIN.   My experience has been through actually people that are buying these properties.   If you are looking for a group of professionals that knows about real estate, consider REIN.    They are worth checking out.

Your best interest is my only interest.   I welcome your questions and comments.  Like this article?  Share it with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

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