After we decided we wanted to invest in real estate, we dove in fully to learn as much as we could in a period of ~8 months about investing. When we finally felt ready (but let’s be real, you’re never really “ready”), we contacted an investor-friendly realtor that we were referred to.
One of the key takeaways that stood out to me when learning about REI, was the importance of surrounding yourself with a solid team of professionals that specialize in working with Real Estate Investors. Helping someone find or fund an investment property is a whole different ballgame than helping someone find their dream home. We’re not looking for the perfect set up. We’re looking for the best layout with the most potential. We’re not looking for beautiful kitchen cabinets and LVP flooring. We’re looking for old stained carpet, ugly wall colors and old dated cabinets. And the numbers need to make sense. When looking for a dream home, perhaps overpaying doesn’t exist because the property is worth what it’s worth to you. Especially when it’s going to be your long-term home. But when you’re buying a flip or a rental property, overpaying is definitely a reality, and it could make or break you. So a realtor has to understand this in order to help you.
Our realtor was great. He was patient, always available, and very active in sending us properties that stood out to him for us. We changed our minds multiple times. Originally our plan was to flip a house (and we still want to-eventually), but he changed our mind by introducing us to the benefits of having a rental property. Looking back, we are SO glad we did not flip the first home because we are truly learning as we DIY everything for the first time, which probably would not fly in a flip. A rental doesn’t require expensive high-quality finishes. It’s a whole different set of rules.
During a period of 2 months, I spent a lot of evenings and weekends checking out properties all over the city. Patrick was up North working for a lot of this time, so we would talk on the phone as we assessed properties. Our criteria evolved a lot during this process. We were able to establish that we wanted a place with a basement suite (legal or illegal) that needed mostly cosmetic work as opposed to a full gut job. We ran the numbers on monthly rental income vs. the cost of home to figure out which communities and quadrants made the most sense.
After about 2 months, we finally found the first property we wanted to put an offer in on. It was a semi-detached home in a lake community far away from the downtown core. What drew us to the property was the decently high rent it was generating and the existing basement tenant. The property didn’t require much work at all, although I really didn’t like the idea of an illegal basement suite. I really wanted to convert the basement from 1 to 2 bedroom (the living room was massive) and legalize it to pull in more rent. So we put in a bid on the home.
This was our first experience (investment or personal) with the offer process. Most of the day went by without hearing anything until we were informed that there was another offer in on the house. And then we were introduced to the blind bidding system (I have major gripes about this system). We essentially had to guess what the other offer was, and outbid them, meanwhile, ensuring we were not overpaying. It was ALOT of stress as I tried to run the numbers to find out our max under extreme pressure. I spent all day stressing about it, barely able to talk to Patrick as he was at work until that evening. My mom helped me create a spreadsheet (she’s a wizard) to run the numbers and that was a lifesaver. Let me tell you, one of the main skills you need as an investor, aside from being rational, is to be able to make quick decisions and be sure of yourself. If you second guess yourself or sit on the fence too long, the opportunity will have come and gone.
A few hours later, I received a call from our realtor informing me that the seller had accepted the other offer. I felt this wave of emotion. Sadness and frustration hit me hard. Little did I know that investors go through MANY offers before finding one, especially in this sellers market. I was told not to let emotion get to me, this was a business transaction afterall. But it did anyways. It was a learning experience. Looking back, I am glad it didn’t work out. We would have been happy with the property, but we would have missed out on the live-in reno that we are currently doing and all of the experience we have gained from that.
So what are some key takeaways?
- Find good team members that have experience with investors. This includes a realtor, mortgage broker, lawyer, contractors, etc.
- If your criteria and goals change during the process of finding a house, that’s good. It means you’re learning and applying that information to your goals.
- Learn how to run the numbers ahead of time so you’re prepared to act quick, especially in a sellers market where time is of the essence.
- Don’t get emotional if a property doesn’t work out. It’s a business transaction and there WILL be more.