Sometimes we’re all our own worst enemies.
And that’s definitely the case with all sorts of investing.
How many times have you bought a stock at the top and sold it at the bottom?
Anyone remember Nortel? Don’t even get us started on that one.
If you’re reading this blog you’re likely a real estate investor already or are looking to get into the game.
You’re also likely past the idea of “make millions with no-money-down” and you’ve even dealt with your first bounced rent cheque or two.
You know real estate investing is an active business and you’re active with it!
With all that said … none of us are perfect and mistakes can be made.
By identifying some of our own mistakes we hope to you’ll be able to take steps to improve your own investing.
Let’s jump in…
You’ve taken “investing is a numbers game” just a little bit too literally.
We messed up pretty badly like this and still can’t shake the memories of it – likely because we still own the property we messed up on.
Both of us had spoken to some questionable “mentors” who told us to just “run the numbers” and that real estate investing “is purely a spreadsheet game”.
They told us that Realtors, Inspectors and Property Managers did all the “on the ground” work for us …. and that as long as the numbers looked good that’s all that mattered.
Well, we can tell you that’s not always the case.
Our very first rental property in Hamilton, Ontario was a student rental a block away from McMaster University.
The numbers looked good. Monthly rents were $2,450 and the property was priced at $250,000.
That’s pretty darn close to the infamous 1% rule.
We snapped up the property only to realize after closing that:
a) To keep the property competitive with other properties in the area we would have to spend $25,000 upgrading the place within the first 12 months.
b) Leases expired mid-way through the school term leaving us with a possible vacant house for half of the school year.
Admittedly these are pure rookie mistakes.
But we were so caught up with “the numbers” we forgot “the obvious”! LOL.
We survived it all, the property is a great income producer for us today and has tons of equity but it taught us to go and look at properties before we buy.
Numbers are NOT the whole story.
Today when we see people jump up and down about a great cash flowing property in a community they know nothing about and don’t plan on visiting … we get scared, very scared.
You accept what your Banker or Mortgage Broker’s “best offer”.
Our father renewed a mortgage every year on a property of his by simply accepting the renewal terms every five years.
I can’t tell you how much money he just handed the bank needlessly.
If you own a rental property or two, often investors are so happy to just get the financing … that they don’t challenge the mortgage renewal at the end of the term of the mortgage. Instead, just allowing it to renew automatically.
Each time your mortgage comes up for renewal the bank typically offers you the “posted” rate or slightly better.
If you do a little research, call a few other banks, call a few mortgage brokers … and find out what the “best rate” on the street is – you can then go back to the bank and push them for a better ready.
Every single time we’ve done this we’ve received a better rate than the one that was first offered with the renewal.
Every single time.
This has saved us tens of thousands of dollars in unnecessary interest payments … perhaps hundreds of thousands by now.
Never accept the first rate offered to you on a mortgage renewal.
Your living your life on your tenants’ terms instead of your own.
We vividly remember one tenant in particular that smiled to our face and then called us a coward over email for not reducing his rent.
We laugh now but at the time it wasn’t so funny.
And looking back on the situation, we’re responsible for letting it get out of hand.
It all started with this tenant being late every single month and us allowing it.
Each month his rent came in later and later.
Because it eventually came in we didn’t bother with it too much.
But we were setting the incorrect expectation with this tenant that we didn’t need the money.
He then had a repair request on the property that was totally ridiculous.
And instead of nipping things in the bud I said I would discuss things with my brother and perhaps we could do something about this unnecessary repair.
I then followed up and ended up debating with him how much such a repair should cost and if it was really necessary (even though I knew it wasn’t).
This left a bad taste in his mouth and he proceeded to follow-up with several other rather ridiculous requests including a reduction in his rent and even a partial refund for a few months because of the first repair that we didn’t agree with.
If we had been more diligent in following up with the late rent issuing N4 forms each time he was late.
And being very clear on the first call about the needless repair that it was in fact needless … things would have run differently.
We know this for a fact because that’s how we do things now.
Both of us have had to be firm (but fair) on several occasions with new tenants and it’s changed how they treat us.
Looking back one of the main reasons we let tenants walk over us a little when we first started in this business was that we didn’t know what we could and couldn’t do.
What was right to say and what wasn’t.
What we were responsible for and what we weren’t.
That’s all changed because I think we’ve seen it all by now.
Including one tenant who told us Environment Canada was shutting down our property because it needed $100,000 in new siding.
So when dealing with rental properties always try to have your facts straight and your responsibilities clear.
If you don’t know how to handle a situation the absolute best resource we’ve found is the Ontario is the Landlord Self-Help Centre.
They’re fantastic and it’s free to reach out to them.
We can’t tell you how many times they have given us confidence in going back to a tenant after we’ve been asked something strange.
If you email them they’ll respond to you in 48hrs or less.
None of these three items above are huge game changers for you but we can all do things a little better than we are.
There’s always a little room for improvement and the idea here is to give you some food for thought.
Until next time …. Your Life! Your Terms!