How to Buy Income Properties with the "Worst Case" in Mind

Real Estate is a tough business.

It's stressful, it's expensive and it's time-consuming.

Bloggers and media "gurus" all over the Internet have raging opinions of booms, bubbles, and busts.

There are a couple authors and bloggers who have been calling for a crash in Canada for almost ten years now.

They'll be right one day.

In the meantime, the rest of us need to figure out how to generate cash flow and make money.

We don't have the luxury of waiting for the "perfect" time.

Today, we'd like to share a very simple strategy that has served us well in real estate for almost 15 years now.

It's something that we first learned after the crash of the 1990s.

At one point in our lives, we had someone we respect tell us something that went like this...

"Without money working for you, you'll never be able to stop working for money."

At the time we were both starting to make pretty good money in our lives but we were the ones punching the clock to make it.

After reading countless biographies and financial books we decided real estate was the one asset most people with money tended to own.

Richard Branson had an island.

Trump had towers in Manhattan.

Arnold Schwarzenegger plowed his movie money into L.A. properties.

Why couldn't we own some properties in Toronto?

So we began seriously studying real estate.

Our focus became "starter homes" in good communities.

And that's the first tip we can share with you.

In good economic times or in bad economic times people always need a place to live.

A roof over all of our heads is a need, not a want.

Our family had made a lot of money and then lost a lot of money getting caught flipping homes during a change in economic conditions in the 1990's but we never forgot that during that time "starter homes" seemed to keep selling ... albeit at a slower pace...but they kept selling.

That observation had a huge impact on us.

To us, starter homes, are the most liquid piece of real estate in Canada.

Easy to finance, easy to re-finance, easy to buy, easy to sell.

And luckily, when purchased properly, easy to make money with.

Which brings us to tip number two.

We like to buy properties in communities just outside the dense core of the city ... not right inside it.

So from Toronto, that means areas like Barrie, Ajax, Kitchener, and Hamilton.

There're a few reasons for this...

1) you can buy a 3-bedroom home in Greek town in Toronto for $1 million plus.


You can buy the same size home in Kitchener, Ontario for $700K.

A whopping $300K difference.

And the rents are not that much different than in the big city.

So for $300K less we can get a great property and rent it out for practically the same amount, or very close.

Next, by buying in areas around the core of the city we're benefiting from things like:

  •  Good population growth in these communities as the city expands
  • Increase in transportations routes...expanded roads and highways, new GO routes...which make these areas more accessible and further drives their growth
  • Jobs...we're so fortunate to have relatively decent employment with real jobs in Ontario compared to many parts of the world.  And these jobs are spread around the urban sprawl.

Here's our last and perhaps most important tip...

When we buy properties we like to buy homes that have multiple options.

For example, does the home we're looking at have a separate entrance to the basement so that we can rent it out as one single family...or turn it into a duplex if we want/need to?

Is it near a University or College that allows student rentals? That way we can rent it out as a regular rental to a family or turn it into a student rental should we want/need to.

Can we use multiple strategies on the property?  Can we straight rent it, can we rent-to-own it, can we make simple changes that would increase its value and sell it?

By buying good starter homes in good communities that allow multiple options we're doing our best to protect ourselves during any economic climate.

This way when a correction hits we're not limited to one money-making strategy.

We can use one strategy that works well in today's economic climate and then change strategies should we need to.

There's no way to fully insulate ourselves from a correction, but we can do our best to minimize it.

There's another observation we've made over the years.

We believe the best way to make money in real estate is to get in...and survive.

You don't make money in real estate by "wholesaling" or by "flipping" or by "renting".

You make money in real estate by getting into the market and surviving the ups and downs over lengths of time.

By holding onto property over the long term.

By buying in good areas.

Before we buy any property we ask ourselves if we're comfortable owning it for at least ten years in any economic environment.

And if we can answer yes then we believe we're planning for the worst but expecting the best.

Here's the bottom line...

If you're not ready to own real estate for a long time...don't get into the business of investing in it.

We don't own an island yet but last year we hired a boat and a captain and cruised the Croatian islands.

Maybe next year we'll do the same in the Caribbean and stop by and give Richard Branson an unexpected visit 😉

Until next time...Your Life! Your Terms!

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