About 3 months into our investing journey, we joined a real estate club. They had monthly meetings and there was a cross section of investors; newbies like us, to veteran investors with 400+ doors. Sitting in a room with 150 investors, hearing all the lingo that was still foreign to us, seeing all the success, feeling like the only ones in the room that didn’t know everyone else….was very intimidating and overwhelming.
At the time, we’d had a goal of getting 17 properties within 3 years. This seemed insurmountable to us. It was a goal the real estate club encouraged you to take on when you joined so I ‘agreed’ on the outside, on the inside, I was completely sure I’d fail and not even be able to buy one. The thought of buying 17, paralyzed me.
So much so, that one sweet lady that was sitting next to us at one of those meetings and we had met earlier in the evening, must have seen the fear plastered all over our pale faces as we listened. The business card she had given me was still sitting in front of me, she reached over, grabbed it and wrote some words on the back that have proven to be some of the best advice we’ve received to this day;
Just Focus on the NEXT one.
She put it back in front of me and those words immediately changed everything for me. Now instead of sitting and wondering how on earth I was going to get to 17 properties, feeling frozen by fear, I could just think about one. The next one. That for me was going from A to B. Not having to think about mapping my way all the way to Z. That, I could do.
So we did. We focused on one, then another, then another. Soon we were buying handfuls at a time, but by then, we weren’t scared, and by then the goal had moved from 17 to 50, and this time it wasn’t overwhelming.
Being given that little bit of freedom to think small, was a lifeline for me and a stepping stone to the 100+ properties that we did buy. I wish I could thank her, she has no idea how many lives she’s changed. Carla was her name. From Westlock, Alberta, Canada, I think. That’s all I can remember.
Now every mortgage broker (including mine), is going to lose it when they read this but I’m going to say it…..focusing on just one at a time, even with financing, is our advice. What do we mean?
When we started and today, a good mortgage broker will stagger who they finance your mortgages through, to optimize the number of properties you will be able to buy. The theory goes that if you set up properly in the beginning, you won’t hit that financing ceiling that we all eventually hit (where you can’t qualify for any more mortgages). And this is true, there is a way to stagger so that in theory, you use every lender to its max degree, using the most conservative options first, the more liberal options last and on paper, it looks like you could buy up to 20ish properties before an issue arises.
The problem with theories is that they are just that, until proven. And I have yet to see that theory proven for the average, everyday investor!
Now I hope someone reading this can prove me wrong and especially if you had the cash, income, credit, properties available to you and time to buy them all fairly quickly, there may be exceptions to what I am about to say. But for the most part, the ‘average’ investor, in Canada, and probably everywhere else, is going to take time to build. Know what this means?
BY THE TIME YOU BUY YOUR NEXT PROPERTY, THE RULES HAVE CHANGED!
If there is one thing that I can honestly say feels like it is ever changing in real estate, its mortgage rules. I don’t know how Mortgage Brokers keep up. Every lender has their own rules, which seem to change every few months, then every product within that lender has its rules, which again seem to change regularly, then new products come, old products are cut….it is perpetual. Then add in government and banking regulators that regulate interest rates, high ratio mortgage rules and insurance, lending qualifications and more….its is a circus…round and round we go!
Ok, Ok, I digress – what does this have to do with properties? I say finance them as you go too. Don’t get too caught up in trying to stagger your lenders so that you can maximize anything. We staggered, then had to re organize for new rules, staggered again, then reorganized again, conformed, confirmed, contorted to change…and right when we’d get done, they’d change. And I’d venture to guess that none of the extra work that went into all of that, got us qualified for one extra property.
So buy the property. Finance it the best way that’s available at the time. When you get to your next one, your lender will tell you what you have to do to qualify at that point – then do that. And for every single new property you buy, just do what you have to do to get that one closed. You’ll do whatever you have to, to make it happen, you know you will, so trust that, and don’t cross any other bridge before you have to.
Same goes for putting income properties in your personal name, corporate name, joint names, etc. When you buy a property, ask your accountant what the best way to go about it is, based on what your lender has said, and do that. Get it closed, and worry about structure for your next one, when you buy your next one.
So just buy one. Then another. Then another. That’s all.