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Buying and Managing Income Properties
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Johnny Football Offline
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Buying and Managing Income Properties
Alright, since a couple people asked for this I figured I'd drop a sheet on how to Buy and Manage your Income Properties. Buying your first property is always the most difficult, especially at a young age as you have little to no credit. So, with that, here's what I would suggest for Buying and Managing your First, or early Properties.
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BUYING:

The number one thing (obviously) when buying a property is having the cash to put down the down payment on a mortgage, which I will discuss in a bit. Now there are 3 types of properties I will go over in the sheet that you should look into. These will be the cheapest and most viable options for you when starting and take the least amount of management, perfect for the traveling player. Not to say there aren't other types of properties, but these will be the easiest to get at a Young age and with little experience in Real Estate.

Small Commercial Buildings,
These are probably the easiest to get in the early stages only because, business specific banks will loan for them. They are however not my favorite because they require different zoning and regulations than Residential. Typically 2-3 Tenants, and are fairly easy too manage. The main issue I have here is the fact that when these buildings sit empty, they can sit empty for 6 months and more, which you still have to continue making mortgage payments out of your personal cash flow. Still aren't too bad if you find good solid Leases and Manage it properly.

Multi-Unit Homes,
These are typically what you would see on a show like "Income Property". Easiest to Manage of the 3, but have probably the least amount of cash flow. However if you just want to sit back and live in one of the units for free, this is probably the best route to try in Real Estate. Can be the most expensive depending on the City you live in. 2-3 Tenants make things easy on the Management side of things and you will not need to hire a Superintendent to manage (Unless you are a travelling player from RVF here).

Multi-Unit Apartment Buildings,
These are the best in my opinion and probably the toughest to find. Can be anything like an old office building with 3 or more floors. Look for buildings with high ceilings in the basements and avoid anything with old electrical unless you plan to rewire the building regardless. Try for 4-5 Units to start with either yourself living and managing in one of the Units or hire someone to live in at a discount. Best cash flow and probably one of the lowest vacancy rates. Look past all minor interior blemishes inside the property and focus on the Potential. This is where you make your cash.
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Now that I got that out of the way, these are just the properties you can buy when starting out. All of these are solid options but for the point of the sheet, ill focus on finding the two Multi-Unit Routes.

The type of properties that you are going to look for are properties that are strong structurally sound buildings (i.e brick) and have little to no signs to water damage or electrical issues. These buildings should be located in UP AND COMING areas. I wouldn't start anywhere that is already established because your margins for profit are usually super tight and that's not really what you want in the early part. Also I would avoid going too cheap because you want to be able to find good, timely tenants as this will make your life so much easier.

Things to check when reviewing a property (Reasons to avoid purchasing):

- Avoid most of serious dry rot, mold issues (Slight can be worked around).
- Always have a Phase 1 Environmental done on property before you purchase the property. I know people who have gotten raped more by finding an old unknown oil tank in the ground of their properties than they have in divorce courts.
- Check Electrical and make sure it is not old style Knob and Tube wiring, as this is no longer up to Code in Canada.
- Check for structural damage as this is a major thing you will not want to spend money on. Signs would be cracked concrete in the basement, more than slightly uneven floors on upper levels and proper beams used to transfer weight.
- Water damage around tubs and toilets in bathrooms and in basements around the walls.

I will add more to this as I think of them, but these are the big keys.

Always remember, You make money when you buy property, not when you sell. The key to this is finding properties that have tons of potential, not properties that you are buying at maxed value. So to recap, your going to want to look for properties like the following:

- Up and Coming Area
- Solid Structurally Built
- LOTS of Renovation Potential
- Under 500k.
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FUNDING

Now here is where it gets interesting. Unless you have an actual down payment for a property your going to need to find another way to come up with the cash (Actual Down Payments would be 25% of the cost of the building on average). Here are a couple of the main ways to find it.

Joint Ventures:
This is either the easiest or toughest method depending on where you are at. Basically what a Joint Venture would typically would look like in these situations would be either You would have one partner who provides the money and funding for the properties while you do the work for a minimal cash investment or you would have a 50% split of all costs and work to be done. These are easier to find in areas where cash is common (i.e Alberta) and can be literally anyone from a guy you work with who has some extra investment cash around and wants to take a chance on you (Not really a chance as this is real estate and there is always going to be an asset that can be liquidated). There's obviously tons of ways to find Joint Venture partners and you can message me with more specific questions on this.

Vendor take back Mortgages:
These are the best secret in Real Estate. Basically how it works is the seller of the property would slowly get paid back over time with interest or they will provide cash up front to provide equity in the project on topp of your mortgage with the bank (Usually you can use this for the down payment or renos). Tough to find in wealthy areas, not as common as they used to be.

"Sweat Equity" in the Mortgage:
This is probably the best way in which you would buy a property under the circumstances that you have tons of renovations to do to a property in which you will do yourself. So instead of charging a fee, you can use the cost of this as your cost for doing the renovations. This can be done to an extent and you really have to show that the property is going to generate GOOD solid cash flow, that WAY more than covers the mortgage (two or more times). You would use the extra equity as either part of covering the down payment. Sometimes this works and sometimes it doesn't. You typically would need a good banker to do this.

Small Business Loans:
For this you usually have to incorporate your company and personally guarantee all the loans related to this (if it is your first property you will probably have to anyways). This means banks can go after your personal assets if you do fail pay on the loan. You may sometimes need to have another source of income to qualify for these as well as even a down payment. an example of a bank that would give these types of loans (however usually just for commercial property), would be BDC or other Business banks.

In my experience the main key in getting loans on these types of properties is showing that they will be more than profitable in the long term and have good solid business plans and resale values so if anything goes wrong the bank can sell the properties and not take any losses. After all, the main thing is that you pay your loans on time and in full.
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Obviously there is tons more to purchasing the properties and funding but I need to get a general overview out there first. Ask away and I will try and better explain whatever part of this you guys would like to know more about.

Just to let you know you can do this with just 10k and it can be a very profitable venture for all parties involved. There is no time better than now and can be done at any age, since I myself am under 21. If any of you guys are seriously interested in getting started with this, feel free to hit me up and I will try and help you as best as possible. Any of you older members or guys from Alberta etc. with cash to invest, Joint Ventures are perfect solid investments to have and require little upkeep once you have it in place and well managed. Any RVFers looking for partners as well I'd be fairly interested to hear what you guys have in mind. Just send me a PM.

I will do another post on Renovations and Managing the properties when I get a chance.

CHANGE IS CONSTANT
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04-02-2013 05:55 PM
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Post: #2
RE: Buying and Managing Income Properties
Wow aweome post my friend. I will save it. Thanks for taking the time to post it!

Cheers!
04-03-2013 05:57 AM
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POHammer Offline
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Post: #3
RE: Buying and Managing Income Properties
Awesome Post.

Anyone interested in investing in Central and Eastern Europe, hit me up.

I am also doing this, but am starting with quality single apartments which run from 40,000-80,000 USD here.
04-03-2013 07:48 AM
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Johnny Football Offline
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Post: #4
RE: Buying and Managing Income Properties
No worries guys, ill do the rest sometime soon.

@POHammer
Just one bedrooms? That not really feasible if you just plan on renting to one tenant to cover your mortgage. If so, combined with the time you would spending on the project doesn't seem like a good investment. You should try and look at 3+ BRDMS near universities and then living in one bedroom while your in town and having 2 hot chicks living in the other bedrooms. Never know you might get a bang or two from it, Smile.

CHANGE IS CONSTANT
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(This post was last modified: 04-03-2013 10:48 AM by Johnny Football.)
04-03-2013 10:45 AM
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POHammer Offline
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RE: Buying and Managing Income Properties
(04-03-2013 10:45 AM)PROD3GY Wrote:  No worries guys, ill do the rest sometime soon.

@POHammer
Just one bedrooms? That not really feasible if you just plan on renting to one tenant to cover your mortgage. If so, combined with the time you would spending on the project doesn't seem like a good investment. You should try and look at 3+ BRDMS near universities and then living in one bedroom while your in town and having 2 hot chicks living in the other bedrooms. Never know you might get a bang or two from it, Smile.

I doubt I could get a bank loan in Poland or Ukraine, but I might look into it. I was thinking about buying property with family money, sort of like a bank deposit. Ex 50,000 property and then renting it out for 200/month. (Thats what local rates are.)

There is also commercial property. Retail space at the market can be bought for 20,000 and rented out at 200-400/month (but that requires maintaining the booth such as cleaning and repairs, while a merchant uses it to sell stuff from).

These are better investments than bank deposits and very safe, but not insane profits. A sensible investment for the long term.

I'm still not sure what the deal is with loans is. In Europe you need a full time job and considerable income.

PS. PM me if you want info on the commercial or residential real estate. If you are in the region I could give you a hand with contacts, translations in Rus/Pol. Personally, I'd just like to see how the buying process unfolds by observing someone do it first.
(This post was last modified: 04-03-2013 11:23 AM by POHammer.)
04-03-2013 11:13 AM
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Johnny Football
Johnny Football Offline
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Post: #6
RE: Buying and Managing Income Properties
(04-03-2013 11:13 AM)POHammer Wrote:  
(04-03-2013 10:45 AM)PROD3GY Wrote:  No worries guys, ill do the rest sometime soon.

@POHammer
Just one bedrooms? That not really feasible if you just plan on renting to one tenant to cover your mortgage. If so, combined with the time you would spending on the project doesn't seem like a good investment. You should try and look at 3+ BRDMS near universities and then living in one bedroom while your in town and having 2 hot chicks living in the other bedrooms. Never know you might get a bang or two from it, Smile.

I doubt I could get a bank loan in Poland or Ukraine, but I might look into it. I was thinking about buying property with family money, sort of like a bank deposit. Ex 50,000 property and then renting it out for 200/month. (Thats what local rates are.)

There is also commercial property. Retail space at the market can be bought for 20,000 and rented out at 200-400/month (but that requires maintaining the booth such as cleaning and repairs, while a merchant uses it to sell stuff from).

These are better investments than bank deposits and very safe, but not insane profits. A sensible investment for the long term.

I'm still not sure what the deal is with loans is. In Europe you need a full time job and considerable income.

PS. PM me if you want info on the commercial or residential real estate. If you are in the region I could give you a hand with contacts, translations in Rus/Pol. Personally, I'd just like to see how the buying process unfolds by observing someone do it first.

Send me a PM, I'd be interested to chat with you and hear your opinion on the market in the areas of FSU, Russia.

CHANGE IS CONSTANT
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04-03-2013 11:32 AM
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BIGINJAPAN Offline
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Post: #7
RE: Buying and Managing Income Properties
Some EE countries will grant you citizenship if you buy a property in the country. I believe Lithuania is one of them and Estonia. Simon Black has a list I believe on his blog.

" I'M NOT A CHRONIC CUNT LICKER "

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04-03-2013 11:53 AM
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Johnny Football Offline
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Post: #8
RE: Buying and Managing Income Properties
(04-03-2013 11:53 AM)BIGINJAPAN Wrote:  Some EE countries will grant you citizenship if you buy a property in the country. I believe Lithuania is one of them and Estonia. Simon Black has a list I believe on his blog.

I don't know if Cyprus is considered EE but they also offer this, I wouldn't get involved in that market just yet as it's probably still got some moving to do.

CHANGE IS CONSTANT
U of Roosh Class of 2420
04-03-2013 11:59 AM
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