Tuesday, 7 January 2014Investor Pitfalls
Avoid these 3 beginner investor pitfalls
Are you looking for homes below market value ? They aren't always a deal . When I began looking for investment properties I took it upon myself to search the MLS for deals. I would find out what a 5 plex was going for . Then find one an hour away for half the price. then I looked at a Tri-plex in a small farming community . I chased the deals all over southern Ontario. And time after time I discovered why they were listed well below market price. From a lake in the basement, to a residency for rats to the middle of nowhere , my realtor and I drove . You get what you pay for , as the saying goes.Buying a solid investment property you don’t have to sink a ton of money into, is going to go for close to market value. If it’s at a steep discount buyer beware !
Know what you want and go and get it . I ‘d gotten one property under my belt and was ready for another. So my Realtor Terry and I set out looking at another single family unit. After looking at a few , I did some calculations . I figured if one unit got me a $ 150 cash flow, a duplex must be double . The same logic applied to a triplex and then a 5-plex . We drove around and looked at them all . In the end I wound up purchasing a single family home in a nice area. What a waste of time . If I only stayed focused and knew what my goal was I would have been in the game sooner. Thank goodness Terry is a very patient Realtor.
Another lesson , Don’t get greedy ! It was 2009 when I came across a decent duplex for sale . The rents brought in $ 750 downstairs and $ 500 up . I knew that after the recent housing crash I could “low ball” this investor . After chipping away at his purchase price I got him within $2000 of the price I decided I wanted it for . Neither one of us budged after the last offer and I let it go. I still regret walking away over that . If I would have come up a bit more that duplex would be one of my better cash flowing properties. If the numbers work (and you should know those before hand) then ask yourself is this worth walking over ?
To sum up, it's very easy to get caught up in finding the best deal possible. Have a direction, at least know where it is you want to be. Ask yourself these questions “why am I doing this, and where do I want to be ? Happy house hunting .
As with all advice offered on this site, it is recommended to get professional legal advice before proceeding.
Glenn Brown is owner of My Rental Unit property management and has enjoyed success with multiple unit investing.