Since getting married back on September 29 2012 I haven't really done much with real estate investing. But since another business I was involved in shut down this past July I've been itching to get back in the saddle, so to speak. Luckily for me I have a wife who's very supportive and interested in learning more about real estate investment as well, unfortunately for her, her husband has been taking his sweet time to get around to it LOL :)
So I've decided it's time to light a fire and what better way than a good old fashioned challenge! I'd like to invite anyone reading this to join me. You don't have to do the same type of deals I'll be going for, and you don't need to use the same rules if you don't want to, but I hope this will inspire you to try something new for yourself, especially if you're new to real estate investing and haven't got your first deal yet.
My Challenge Rules
1. Both deals must be completed (purchased and rented/wrapped/flipped) by January 31st 2015.
2. Deal #1 must be completed without using any contacts or resources acquired before today (November 8, 2014).
3. Deal #1 must be acquired through free marketing methods.
4. Deal #2 can be acquired through free marketing or marketing paid for with the profit from deal #1.
|Map of my target market|
I'll be focusing my efforts in the Kitchener-Waterloo, Cambridge, Guelph metropolitan area of Southern Ontario Canada.
Located approximately 1 hour West-Southwest of Toronto. This area houses a population of over 600,000, hosts 3 major universities, is headquarters for several insurance companies, and countless high-tech and manufacturing businesses. All in all a bustling area with a diverse and healthy economy.
The real estate market is likewise healthy and currently enjoying a strong up trend in prices. Thankfully the market is not facing the same frothy exuberance that is surely sending Toronto toward another correction.
Although I'm not centrally located on the map above this area represents a maximum of about a 30-40 minute drive for me.
|Typical 3 bedroom home in my target area|
I'm primarily interested in purchasing nice 3 and 4 bedroom freehold homes, although I will consider 2 bedroom homes as well as condominiums if the numbers make sense. My maximum purchase price (this may be slightly flexible) will be $500,000. The average price for all residential units is $340,000 as of September 2014 and rose by more than 7% over last year.
I'll be directing my marketing toward private owners such as For Sale by Owners, accidental landlords, and expired MLS listings. I will be offering them fast and easy debt relief by taking over their payments now with the intention of closing the transaction for the mortgage balance at the time of renewal.
Likewise I will be renting or reselling (on a wrap) to private buyers who can't currently qualify for a loan.
I hope that's enough details for now about the "what" and the "who". I'll get into more of the "how" in a future post.
Good luck Doug I look forward to following your progress and maybe get some ideas for the future.
Following! Our Canadian head office is located in Kitchener, so I know the area fairly well. Interested in reading about the types of deals you find, and how the numbers play out. Best of luck.
Ill be keeping tabs sounds like fun!
@Doug Pretorius challenge accepted, this will be fun!
A couple questions on your strategy:
Your deal one requires mls access does it not? Or are you using a free source that I don't know of to see the expired mls listings?
Care to elaborate on your strategy any? Are you offering cash at closing as well as taking over the mortgage balances? The most common objections I get there are people thinking that they are just giving the house away for nothing and people worried about the due on sale clause. How are you overcoming these objections?
I will most likely end up buying a FSBO for deal #1. But for the expireds I would just market to houses currently on the MLS and buy when the listing expires. I only want them to contact me when they've exhausted their other options.
For your second question, those objections are a good indication that the seller isn't motivated. The seller's I'm going to be buying from are the folks that would lose money if they sold for market value through an agent, that's why they're trying to sell it themselves, or why their listing expired. Any equity that they have will be seen as the cost of getting rid of their problem.
So to overcome those objections I would simply say: "I don't want you to feel the slightest doubt or hesitation about selling your house to me TODAY. If you are willing to wait it out for as LONG as it takes to get your price, I want to encourage you to do that."
See what I did there? No pressure at all, but I'm not going to let them forget that I'm here, right now with offer in hand, and when I leave they could have a long wait for another buyer.
As for the due on sale, well, there's really no way to completely avoid that. But when I take over someone's payments, I go with them to their bank and tell the bank that I'm going to take over the payments. Never had a banker say anything other than "Oh." with a shrug. They don't care where the money comes from.
@Doug Pretorius good points. Do you put a clause in that you will refi or sell within so many years. If I'm making an offer this way I'm usually at 5 years so people know that they can obtain another mortgage somewhere down the line.
Why on earth would you go to the bank with the seller? Is it just a touchy feely thing to get them comfortable with you? I'd love to see a copy of your documents if you're willing to share.
Since we're only using newly acquired resources this challenge is going to get me to use new forms of marketing. Currently I'm doing signs and web leads. Maybe I'll try some direct mail and Craigslist. Happy hunting!
@Derek Carroll In Canada most mortgage loans have to be 'renewed' every 5 years. The banks put that provision into place after interest rates went to 25% back in the early 80s so that they could force people to come in and 'renew' at higher rates. Even after rates came back down the practice continued and today home owners have more or less a 50/50 chance at renewing at a higher OR lower interest rate.
So in my investing I tie the closing to that renewal date, partly for the reason you mentioned, that they have an end date to look forward to. But also partly because they may have a tough time renewing when they no longer live in the house.
I need to get the mortgage status and pay off details anyway. I could do it with a mortgage verification letter, or I can do it in person with the seller at the bank. So it serves a useful purpose in addition to just making sure everything is on the up and up.
I just use a standard Ontario Agreement of Purchase and Sale with about a half page of clauses specialized for this type of investing.
Cool! I'm glad the challenge is inspiring you to try new things! For my marketing I plan on using cold calling and Kijiji (craigslist is not very popular here) for the first deal, and add direct mail (paid for by the first deal) and signs for the second deal.
I'm a new investor so your challenge looks huge to me! How's it going so far?
I'm in Mississauga but looking to buy small multi-families possibly in Kitchener/Cambridge. Do you know of some networking groups in your area where I can learn more about the area and network with other investors? I plan to attend Mat Piche's KWC meetup group but don't know about any others.
Following this thread!
Best of luck - wish I had the capital to join this...Maybe in 6-12 months :) Keep us posted! What types of returns are you looking for in this hunt?
@Account Closed Average profit would be roughly $40,000. ROI is technically unlimited since these deals don't require any money out-of-pocket.
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