Decided to start a blog and document my learning experiences of investing in Real Estate. This is my first entry. Just got back from the Real Estate agents office (currently about 9pm). Put in offers this afternoon on two properties after looking through about 8 properties.
A little background. I am not from Regina, SK but am investing in properties there because of the amazing potential for positive cashflow AND appreciation from the whole Saskaboom(They have what everyone needs food, fuel, fertilizer). I am actually an investor from Yellowknife, NT.
Coming from out of town I basically had to build my team here from the ground up, finding people through the internet, magazines and word of mouth.
Of course to properly evaluate the value of a property you have to know the potential rents of various areas you will be buying in. For that I found a property management company that seems amazingly competent and through the references they gave me I'm confident they are a company that is experienced and has integrity. After getting an idea from them that rents vary from $800 to $1400 at the highest(for 2 to 3 bedroom homes) I knew that for single family homes I would have to stick to under 200K in order to have a chance to cashflow.
My ideal property is one that cashflows at 6.5% interest with 20% down and a 25 year amortization. This would give me a safety net (since interest rates are less than 5% for a fixed rate 5 year mortgage... I think ING has a 5 year mortgage for 3.89%?)... unfortunately I really couldn't find any properties that were in good condition that met this criteria in the short amount of time I was here (one week). There were a number of sketchy properties that had what looked like amazing cashflow... and they are still available for sale. Below is my analysis:
2041 Edgar Street ($111,500 asking)
This property looked amazing on paper... priced to sell, previous tenant rented at $875. However the foundation looked like it would need work, even though it looked like it had been braced... our agent wasn't sure it was professionally done since the bracing was uneven... though it was within the 4 ft per brace it should be. This was a somewhat major fixer upper which someone with the right contacts and skills could take on, but being a remote owner I prefer a more move-in ready unit.
119 Osler ($140,000 asking)
Currently renting for $1200 per month. This again obviously cashflows, but it was very suspicious that the owner signed a lease for 2 years AFTER listing the property for sale. Still cashflow is cashflow. So we took a second look at the property with our soon to be property manager. He pointed out a few things such as the fact the block basement would probably have to be braced soon (You could tell cracks and heaving on some walls) and though it looked like one wall was possible already reinforced because of the very thick windows... we couldn't be sure how good a job was done since it was all covered by the drywall which was not 100% "true"... Plus the eaves troughs were missing from half the house and the other half was frozen up with icicles (possible condensation). With a family staying here it would be difficult to do basement work... and refinishing would be expensive.
During this week, 2 of the properties we were scheduled to look at had conditional offers placed on them. Meanwhile in all of Regina there are only about 400 listings... only 362 single family homes excluding condos... only 299 properties outside of the Washington Park area... and of those there were probably 12 properties in the price range I was looking for.
I excluded Washington Park from our search because our soon to be property management company does not manage properties in that area. Sketchy part of town. Also General Hospital Area and downtown core. It's funny how in Regina one street down can make all the difference. Anyways there are a tonne of properties in the Washington park area for sale at rock bottom prices (that's what originally attracted me to Regina in the first place... looking at the MLS and seeing all these under 100K houses and knowing the average rent in Regina is like $863). If I actually lived in Regina and could afford to manage them myself I probably would check them out, but if the professional agency doesn't want to manage them I'd have to take their word for it that it's more hassle than it's worth. (Another agent told me there are other companies that would manage this area, but I agreed that it wasn't worth the hassle)
Anyways real estate is starting to pick up again in this city. Some listings are already getting multiple offers and selling within a day. Meanwhile there is almost no supply at the moment, though our agent expects listings to pick up here in Spring and Summer. (Normal is around 800 to 1200) There are after all about 300 agents... at the moment that means it's like 1 or 2 listings per agent... sparse.
Starting to build a good team.
Real Estate Agent - Check
Property Manager - Check
Lawyer - Check
Mortgage Broker - Check (just the bank)
Now I need an insurance agent. Would be nice to have a general contractor on the team and also a real mortgage broker who deals with multiple lending agencies. I can still work with the team I have though... and just build as I need.
I'll discuss my reasons why I chose Regina specifically in another entry. I'll also do a breakdown analysis of the properties I bought once all conditions are waived. If I don't get sidetracked and never write again... then this would become another of the blogging worlds one entry blogs. =)