A few years back, I had the privilege of hearing one of my childhood idols – former Toronto Maple Leafs captain, Darryl Sittler – speak at a Real Estate Investment Network (REIN) meeting.
In case you haven’t heard of REIN, let me share some details about this group of real estate investors that gets together to network and share valuable information affecting real estate in Canada. The leader of the group is Don Campbell. His approach to buying investment properties has proven to be very sound and profitable. In fact, his “Top 10 Best Cities to Invest” lists are legendary!
WHAT’S REIN ALL ABOUT?
I first heard of Don Campbell years ago through an associate Mortgage Broker who needed some help servicing her clients while she was on 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 than 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 much cheaper Hamilton real estate is compared to Toronto. And Hamilton also has some less desirable neighbourhoods – areas that only more experienced investors should venture into. But this REIN buyer had done her homework. She knew the area, the future outlook of the area and she had the cashflow all worked out. She factored in things like vacancy rates, management fees, a maintenance contingency fund, etc – all the 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 streamlined the entire process. She had her personal financial documents ready for review and provided me 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 $390,000 and it rents for $1,585/month.
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’s value today? More than $600,000!
Darryl Sittler is an NHL 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 to the millions of dollars in annual 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, a cottage and then another house. Each purchase was made with the same strategy in mind: Buy, hold for the long term and, when another opportunity presents itself, sell and upgrade. Even during 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 has 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.
The message at the meeting was the same: Real estate should be purchased for the long term. Real estate has proven to be the best investment over the last 5, 10, 20, 50, 100 years and longer. It’s a proven strategy that should be followed.
Sure, you may be able to buy and sell while making a profit sooner. That’s okay, but it’s also not to be expected. My personal strategy is to buy and hold with a seven-year timeline in mind (click here for more on this strategy… and how the math speaks for itself).
Find properties that cashflow. A property with a negative cashflow should be avoided. While this is good advice, in some situations, a slight negative cashflow is also acceptable. It all 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. Pat attention to the top cities to invest lists.
Once you build enough equity in a property, refinance the mortgage and buy another property. This is about accumulating and growing your asset base and creating an income stream. Rents go up. They’re indexed according to cost of living. That’s part of what makes them work.
Use professionals. REIN is big on involving experts in your investment activities – from Realtors, Accountants and Lawyers to Mortgage Brokers, Property Managers, Insurance Brokers and Finance Coaches. If you want to do this right, you have to assemble the right team of professionals. If you have a weak link in this chain, it can compromise your entire investment strategy.
I’ve been exposed to several other real estate groups, most of which just want to sell you some software or an idea and move along. None of these groups has the same longevity as REIN. My experience is through actual people who are buying properties. If you’re looking for a group of professionals that knows about real estate, consider REIN.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; firstname.lastname@example.org
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.