How Do I Get A Partner For Real Estate Deals?

Having the ability to partner on deals is one of the most valuable intangible assets out there & would be considered one of the greatest benefits of a strong personal brand. What makes a good list of potential partners so valuable is that partnering on deals diversifies your risk. For instance, if you’re planning to do 2 deals this year by yourself, to make a decent income you’d have to do two fairly risky deals & like anything overly profitable there’s a chance for disaster, so those deals may pay off greatly or they may cost you greatly. On the other hand, if you work with a partner you can now do 4 deals & you can still do those 2 risky deals with the potential for great return, but you could also buy 2 cash flowing investment properties at the same time. This way, if those investments don’t go the way you want them to you’re left with less downside & you now have cash flow to help cover the costs of the riskier developments.real-estate-partnership

This post will review some easier than expected ways to find partners and make you yourself a valuable partner in someone else’s eyes.

What do I need to do to make myself a desirable partner?

Sounds like you’re about to learn some dating advice right? To be honest it basically is dating advice, a partner needs to be trustful, have a good track record & bring something unique to the table. Trustfulness & a good track record is simply just related to how you treat people you work with currently. The best rule of thumb to keep yourself in the good book is simply DWYSYWD – Do What You Say You Will Do. If you let someone know you’ll get back to them by tomorrow, actually get back to them! Don’t make promises you can’t follow through on and people will see you as a stand-up, trustful partner. It also adds a level of professionalism to your personal brand.

What do I mean by ‘bring something unique to the table’? In Real Estate this means one of a few things: Professional Contractor, inspector or Handy man specialist, Money – Guy; can you write conditional offers or make all cash purchases happen?, Accounting Guru; do you know strategic accounting methods to save money on investment properties?, Real Estate Associate with access to MLS, Deal generator; are you able to find properties before they’re on MLS & get them under contract? Or Lawyer / contract specialist. There are tons of ways you can stand out to a potential partner but you need to market your skills or nobody will see the value in you as a partner. Many people would love a chance to go in on the deals we find but very few get the chance on truly good deals unless they’re bringing something extra to the table!

Where Can I Find Partners?

If you’ve got a valuable skill set & a good track record in the industry the best 2 places I’ve found to find partners are at networking events & through Kijiji. Networking events are great for finding capital just simply start chatting with people & eventually you’ll find someone whose skill set compliments your skill set and it’ll make that good deal all the more profitable! Do not just take someone on for the money they’ll provide, if you’re the one with a investment opportunity & the only people who will take you seriously are rookies with some capital and no experience, you might want to reconsider how good your deal truly is. Kijiji is basically the same as networking, post an ad saying you’re ‘looking for an investment partner’ and see what happens. You may find someone really great, but don’t take the first schmuck who replies to your ad! Do your homework!

So remember, partners are important to reduce your risk & help you complete more deals, they’re also important because their knowledge about different sections of the real estate game is even more profitable than their investment capital!

 

 

Will a change in Interest Rates Change The Value of My House?

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Follow Canada’s Mortgage Rates

The current interest rates for home buyers in Alberta is around 2.23 – 2.4% for a 25 year mortgage. The variance in basis points is mainly determined by whether or not you have a variable rate or a fixed rate & the length of the term. A variable rate mortgage is the lowest interest rate percentage at 2.23% but it fluctuates with the market. A 25 year mortgage locked in at 10 years would be the highest at around 2.4% it’s higher because you’re paying a premium for the security 10 years of  the same payments has to offer.

There are many strategies when buying a home to decide which one of these structures is best for you, but what does the borrowing rate mean for you once you’ve already got a house? 

The ‘cost’ of capital will affect your sale price. Like I’ve said in blog posts before, when selling, the price you’re negotiating on is cash in your pocket. To the buyer, the sale price is broken down into a mortgage payment which they not only have to afford but also must qualify for. So, to you, it does not matter what the mortgage rate is when selling but let’s see what it means for the buyer:

If your house is 550K & their mortgage rate is 2.33 APR the monthly mortgage is $1,900

What about a 3.5 APR Mortgage rate? The payment is now $2,200

That may not seem like a huge bump but it has lowered your pool of potential buyers. Higher mortgage rates will slow the real estate market and eventually lower the price of your property.

Following with our example above, to have the same amount of buyers at 3.5% who could afford your house at 2.33% you would have to re-price it at $480,000.

The moral of this story: you’ll get more for your house if you sell when mortgage rates are lower than when they are higher!

How To Pick The Right Realtor

realtor-home-value-397x223Realtors are the life blood of the Real Estate market and I work with them everyday. A good realtors knowledge about the market and homes in general makes them an invaluable resource. On the other hand, I’ve talked with many homeowners who feel cheated by realtors they’re currently using or have used in the past. The choice in realtor can mean the difference in so many important factors when selling your house I thought it was necessary to mention some important signs that will tell you if the realtor giving you his/her sales pitch in your living room is a good or bad choice!

Personal Brand

Does your realtor have their own website? Many do but if you find one that doesn’t this is a red flag. Just because a Realtor is middle aged it does not mean they have been working in the market for long. Always ask your Realtor how long they’ve been working for. A realtor who has been working for a while will have the name brand and personal connections to get your home sold fast, they will also understand & price your home the most responsibly. If they are on a team rather than working as a singular realtor this is just as good but ask them what their team specializes in. I cannot stress this enough, realtors will take listings no matter what, but if you’re a Condo owner in Millwoods listing with a realty team that sells bungalows in the west end you’re unlikely to get the quick sale you desire.

Sales Pitch

Realtors work off a 7% commission for the first 100K and a 3% of the rest in Edmonton Alberta. This is normally split between 2 realtors; your realtor and the buyers realtor. If you’ve got a realtor coming to you saying they will sell your home for a flat rate commission of 2% or 3% this usually means a few things (all of which are not good). 1) this realtor is hoping to sell your house without another realtor involved on the buy side, this means they’ll just market it through the web which is a slow & ineffective way to sell real estate. A greedy realtor on the buyers side may even ignore the listings with a low commission. 2) The realtor is new to real estate & does not want you going with a better prepared realtor who would expect the normal fee’s. Be wary of cheap realtors!

Side Hustle

As surprising as it may sound, you want a realtor who has another ‘job’ in the real estate industry. Some of the best realtors I know are also developers, investors or renovators. So please ask your realtor what they do besides sell houses! This is an important questions because many realtors will say “your house is a perfect for _______  and I could sell it instantly to eager investors!” but unless they’re actually connected to the market from the other perspective this statement could be completely false or a misunderstanding of the current market or important aspects of your property like zoning!

These are a few key signs to help understand whether you’re getting paired up with a quality realtor or someone who’s making a lot of promises they cannot follow through on. Lastly, never sign more than a 60 day contract many realtors will have you believe they need 90 days, but if it is not sold in 60 then it’s your realtor who’s at fault! (Edmonton average days on market is currently 48).

Is Your House built for a Basement Suite?

image_6483441This morning I walked through a house with a few investors who focus primarily on ‘Fix n Flip’ investments. The house was priced seemingly low, but the property had some serious maintenance requirements. The saving grace of this deal was the homes design as it was a 4-level split with a door connecting from the garage to the 2 bottom levels while the main & upper floors could use the main entrance.

If you think of it from a creative perspective, this 2,400 SF (total) house was actually 2 homes in one!

The homes layout allowed the original owners to walk away with 288,000 for their dilapidated property while the renovators were happy to sink the extra 20-40 grand it would take to repair the deferred maintenance on this home, as they new they could still make money! Below I’ve listed important aspects of your homes layout that would make your house perfect for a cheap basement suite reno!

2 Entrances: Does your home have a back door? or even better a door directly into the basement? A personal entrance is the first step to a quality basement suite. Even if you have a mud room with 2 entrances, 1 leading down stairs & 1 leading to your main house, that area can be blocked off with a door & used only by the renters.

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Dual Furnaces

2 Furnaces: For your basement to legally qualify as a suite you need to have a secondary furnace (one heating upstairs the other heating the basement). This is an expensive renovation and it can cost anywhere from 10 – 15 thousand dollars. If you are unwilling to pay this expense you can always risk a illegal basement suite, or not create a full kitchen in the basement but rather kitchenettes for the tenants. By having kitchenettes the renters are actually not defined as living in a basement ‘suite’ but as roommates.

Windows: Each sleeping space needs to have at least one window in it to fit with windowsgovernment safety regulations. On top of that, Alberta has decided that the area of basement suite windows needs to be greater than 3.57 feet.

Plumbing: Do you have capped plumbing in your basement? This is important as plumbing is fairly cheap unless ground needs to be broken to install extra plumbing attachments. A way to cheaply install new plumbing if you’re creating a new bathroom is to do the plumbing above the concrete level then build a wooden box above it, creating a small step before the bathroom begins.plumbing

Odds your house is perfectly fitted for a basement suite are low; although in my experience, if even a few of these needed improvements are in place you’re in a good position! My last word of advice is to understand your rights and your tenants rights. If you’re living in the house while maintaining the tenants the Alberta Tenancy Act does not apply to you, but if you do not reside in the house, I suggest reading the Act to better understand the type of relationship you must maintain with your tenants.

If you have any questions please get in touch!