Finding my first deal in SW Ontario
Hey BP,
I'm on the hunt for my first investment property. Although I own one rental, it was originally our main residence and not intended to be a rental. I am focused on SFRs or small MFRs, particularly in the Windsor, Niagara, and Kitchener-Waterloo regions.
I wanted to create a thread to contain all the questions that I've been having, and to run some numbers by the community for analysis and recommendations. If a good deal presents itself during the course of this thread, I would be open on going in on the project with a partner with more experience. I have time, energy, and capital that I can commit, but lack the experience.
I'll get it started with a few very basic questions that I have.
1. When a property is listed on the MLS with a realtor, is it even possible to try to contact the owner directly to negotiate a deal without realtor commissions, or is that property locked up to the sellers agent? Would you need to wait for this listing to expire to get around using realtors? How do you know when this expires?
2. Can I use RSP or TFSA money to invest in Canadian real estate, similar to what I've read about Americans using IRA money?
3. I recently reached out to my current mortgage lender to see what I can get in terms of a line of credit, based on my current equity and home value. They told me they would give me $28k, at prime + 8. I feel that this money is very dangerous for me to touch for a long term buy and hold. I have not looked at other financing options yet, because I don't know how much money I need yet, nor do I want the credit inquiries hitting my credit report. Should I line up my financing first, or wait until I have a deal in front of me? I do have cash as well.
Here are a few types of properties that I am l looking at:
http://www.realtor.ca/PropertyDetails.aspx?Propert...
http://www.kijiji.ca/v-house-for-sale/windsor-area-on/under-50k-good-central-windsor-area-warren-rutgers/1030920769?enableSearchNavigationFlag=true
My thought process would be to:
1. Call the realtors and visit the houses, to get a good idea of the area, and a feeling for the property. Discuss possible seller motivations, how long the properties have been listed for, and identify if the sellers want out ASAP and get a feel for the price they'd be willing to go to. I consider myself very apt at negotiation, and am not as much concerned about my capability to get the right price.
2. Understanding what the rehab costs will be. Bringing in a trusted contractor or two, to estimate the rehab costs to get the unit into good rentable condition. I want my tenants to be proud of their home, and since I plan to hold these properties long term, things like installing forced air, tankless water heaters, etc, are important to me. I consider this area my weakest. I can personally do demo work, roofing, and painting, but struggle with small handyman fixes, trim, plumbing, electrical, stuff like that.
3. Researching comparable rents in the area. Get a good understanding of what this property should rent for once it's fixed up.
4. Setting my "number", and going back to the realtor to negotiate. Be willing to walk away if we can't come to an agreement, but use the occasion to let them know what I am looking for, and to think of me if they come across something else.
5. Pull the trigger!
6. Make the improvements, get the property tenanted, and refinance to pull my cash out for deal #2? I'd like to keep this thread about closing the first deal rather than getting into screening tenants and managing the property, so I will end here.
All suggestions are welcome. Thanks,
Tyler