wanting to invest in real estate-no$$
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With that amount of money for investing, your best bet is to find a seller who would lease the home to you with an Option To Buy. That assumes you are absolutely dead set against JVs and the like.
You do not tell us what your real estate experience level is. Finding JV partners for someone with no experience is like asking a first year med student to perform brain surgery on you. It can be done, but is very difficult, and I would not want to be the patient, or your JV partner.
Your question leads me to think you need more real estate knowledge. Sign on for an ACRE weekend that may be close to you. Read as many books on real estate as you can, but try to make them Canadian content. An option is to take the real estate licensing course in your province. Gee, it may even lead you into a career as a Realtor. (That is how I started many years ago.)
As a general rule, you will need four or five properties under your belt before it will be fairly easy for you to find JV partners. And with no money (or insufficient money in this case), JVs is your fastest way to the top. Don`t under estimate their worth.
You do not tell us what your real estate experience level is. Finding JV partners for someone with no experience is like asking a first year med student to perform brain surgery on you. It can be done, but is very difficult, and I would not want to be the patient, or your JV partner.
Your question leads me to think you need more real estate knowledge. Sign on for an ACRE weekend that may be close to you. Read as many books on real estate as you can, but try to make them Canadian content. An option is to take the real estate licensing course in your province. Gee, it may even lead you into a career as a Realtor. (That is how I started many years ago.)
As a general rule, you will need four or five properties under your belt before it will be fairly easy for you to find JV partners. And with no money (or insufficient money in this case), JVs is your fastest way to the top. Don`t under estimate their worth.
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QUOTE (simmy30 @ Aug 10 2010, 11:18 AM) I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment?
Invest in REITS on the stock market. Examples are Boardwalk (apartment buildings mostly in Western Canada and some in the far East (of Canada) and Quebec. Or RioCan which specializes in Shopping Centres throughout Canada and is in the process of branching off.
Also you can invest in Brookfield (renewable energy, investment banking and lots of real estate through Brookfield Properties). Alternatively you can invest directly in Brookfield Properties with properties throughout N. America - lots of office buildings in Manhatten and Bankershall in Calgary). Also of interest could be Brookfield Infrastructure that invests in infrastructure rather than real estate strictly.
$5000 is simply not enough to buy real estate with. You may, as Dan pointed out, qualify for a RTO provided you have a decent monthly income.
Invest in REITS on the stock market. Examples are Boardwalk (apartment buildings mostly in Western Canada and some in the far East (of Canada) and Quebec. Or RioCan which specializes in Shopping Centres throughout Canada and is in the process of branching off.
Also you can invest in Brookfield (renewable energy, investment banking and lots of real estate through Brookfield Properties). Alternatively you can invest directly in Brookfield Properties with properties throughout N. America - lots of office buildings in Manhatten and Bankershall in Calgary). Also of interest could be Brookfield Infrastructure that invests in infrastructure rather than real estate strictly.
$5000 is simply not enough to buy real estate with. You may, as Dan pointed out, qualify for a RTO provided you have a decent monthly income.
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QUOTE (simmy30 @ Aug 10 2010, 11:18 AM) I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment?
Buy a small house or townhouse for $100,000 with 5% down. Preferably ugly .. so you can fix it up and enhance value even more over time with a new kitchen, new bathroom, new roof ... Live in it. Likely it will be worth more in 5-6 years .. say 20 to 30%.
This of course doesn`t usually work in many major cities .. but in many smaller ones !
Or invest in a publicly traded REIT or stock with real estate content !
Buy a small house or townhouse for $100,000 with 5% down. Preferably ugly .. so you can fix it up and enhance value even more over time with a new kitchen, new bathroom, new roof ... Live in it. Likely it will be worth more in 5-6 years .. say 20 to 30%.
This of course doesn`t usually work in many major cities .. but in many smaller ones !
Or invest in a publicly traded REIT or stock with real estate content !
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Save more money
$5K is enough to get into your own trailer to occupy.. Maybe...
$5K is enough to get into your own trailer to occupy.. Maybe...
QUOTE (ThomasBeyer @ Aug 10 2010, 08:33 PM) Buy a small house or townhouse for $100,000 with 5% down. Preferably ugly .. so you can fix it up and enhance value even more over time with a new kitchen, new bathroom, new roof ... Live in it. Likely it will be worth more in 5-6 years .. say 20 to 30%.
This of course doesn`t usually work in many major cities .. but in many smaller ones !
Or invest in a publicly traded REIT or stock with real estate content !
I would say the same, except where is the money for the closing costs?
I would want to have $5000 above the down payment, even on a $100,000 house (or espeically)
This of course doesn`t usually work in many major cities .. but in many smaller ones !
Or invest in a publicly traded REIT or stock with real estate content !
I would say the same, except where is the money for the closing costs?
I would want to have $5000 above the down payment, even on a $100,000 house (or espeically)
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QUOTE (simmy30 @ Aug 10 2010, 11:18 AM) I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment?
Dont invest in real estate invest in your real estate education. $5k will buy you a lot of that!
Dont invest in real estate invest in your real estate education. $5k will buy you a lot of that!
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QUOTE (RedlineBrett @ Aug 12 2010, 08:23 AM) Dont invest in real estate invest in your real estate education. $5k will buy you a lot of that!
yes it does .. but you still need some more $s to actually buy s.th. .. unless of course you believe you can buy real estate as a novice with nothing down as your first property !
Better to keep cost low and make some money .. but you can buy real estate below 100K with 5% down as your primary residence in many parts of Canada.
yes it does .. but you still need some more $s to actually buy s.th. .. unless of course you believe you can buy real estate as a novice with nothing down as your first property !
Better to keep cost low and make some money .. but you can buy real estate below 100K with 5% down as your primary residence in many parts of Canada.
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Another option is to find an assumable mortgage with less than $5k cash to mortgage value. Good deals on these can be rare, but if you do turn over enough stones you will find them. Have a good realtor in your area pull up all assumables listed on the MLX and start looking at them. Of course in Alberta now (and everywhere else in the country) these require qualifying, but there is still hope for you!
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QUOTE (simmy30 @ Aug 10 2010, 11:18 AM) I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment?
Hi Simmy, if you have a source of income then apply for a non-secured LOC and ask for the MAXIMUM limit the bank can approve you for. dress to impress.
let us know the result whether negative or positive so you can get advice on the next step. to be continued..
Hi Simmy, if you have a source of income then apply for a non-secured LOC and ask for the MAXIMUM limit the bank can approve you for. dress to impress.
let us know the result whether negative or positive so you can get advice on the next step. to be continued..
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QUOTE (investmart @ Aug 19 2010, 08:08 PM) Hi Simmy, if you have a source of income then apply for a non-secured LOC and ask for the MAXIMUM limit the bank can approve you for. dress to impress.
let us know the result whether negative or positive so you can get advice on the next step. to be continued..
The road to bankruptcy can be very straightforward.
Don`t even dream of this unless you want lots of sleepless nights and sh..t with one dot.
let us know the result whether negative or positive so you can get advice on the next step. to be continued..
The road to bankruptcy can be very straightforward.
Don`t even dream of this unless you want lots of sleepless nights and sh..t with one dot.
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I second Godfried`s post
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Hi Adam and Godfried, I disagree with you on this one.
First, please note I did not recommend how to use the LOC yet, just to apply. It`s a great thing to have a LOC. even if you don`t use it now you may use it in the future. as many here reminded us including Thomas and Don - apply when you don`t need the money! not when you need it as then the banks don`t "need" you!
Second, I`ve seen many discussions on this topic. looking mainly at the LTV to assess risk is just wrong. it`s the CAP or rent to price ratio that is so much more important!
Example:
Property A price: 100K, annual rent: $20,000.
Property B price: 200K: Annual rent $20,000
For simplicity lets assume everything else is the same about the properties: location, expenses, vacancy, condition etc.
Yes, with Property B I would think twice before putting zero down. might result in a negative cash flow.
HOWEVER, with property A putting zero down is a Great thing! you have like $750 net income a month. putting zero down instead of 25% would not make it significantly riskier, just increase net income from 750 to like 850/mo. but 750/mo is better than nothing for someone who does not have 25%. Again, numbers are just an example. the idea is if you find a SUPERB deal putting zero down instead of 25% (IF you even have this option in today`s environment) is a great thing to do! not a scary one you lose sleep over.
so lets not generalize about the risk of putting zero down. there are exceptions making it a much better option than the standard 25% down. you may still have nice net income plus big bonus - you kept your cash for the next deal. don`t be afraid of 95% LTV. instead, look for great deals where putting less down is a big advantage.
(the next thing I planned to suggest to Silly is to look for such a deal
Regards,
Neil
First, please note I did not recommend how to use the LOC yet, just to apply. It`s a great thing to have a LOC. even if you don`t use it now you may use it in the future. as many here reminded us including Thomas and Don - apply when you don`t need the money! not when you need it as then the banks don`t "need" you!
Second, I`ve seen many discussions on this topic. looking mainly at the LTV to assess risk is just wrong. it`s the CAP or rent to price ratio that is so much more important!
Example:
Property A price: 100K, annual rent: $20,000.
Property B price: 200K: Annual rent $20,000
For simplicity lets assume everything else is the same about the properties: location, expenses, vacancy, condition etc.
Yes, with Property B I would think twice before putting zero down. might result in a negative cash flow.
HOWEVER, with property A putting zero down is a Great thing! you have like $750 net income a month. putting zero down instead of 25% would not make it significantly riskier, just increase net income from 750 to like 850/mo. but 750/mo is better than nothing for someone who does not have 25%. Again, numbers are just an example. the idea is if you find a SUPERB deal putting zero down instead of 25% (IF you even have this option in today`s environment) is a great thing to do! not a scary one you lose sleep over.
so lets not generalize about the risk of putting zero down. there are exceptions making it a much better option than the standard 25% down. you may still have nice net income plus big bonus - you kept your cash for the next deal. don`t be afraid of 95% LTV. instead, look for great deals where putting less down is a big advantage.
(the next thing I planned to suggest to Silly is to look for such a deal
Regards,
Neil
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QUOTE (investmart @ Aug 20 2010, 04:14 PM) Hi Adam and Godfried, I disagree with you on this one.
First, please note I did not recommend how to use the LOC yet, just to apply. It`s a great thing to have a LOC. even if ........
so lets not generalize about the risk of putting zero down. there are exceptions making it a much better option than the standard 25% down. you may still have nice net income plus big bonus - you kept your cash for the next deal. don`t be afraid of 95% LTV. instead, look for great deals where putting less down is a big advantage.
(the next thing I planned to suggest to Silly is to look for such a deal
Regards,
Neil
Hi Neil,
When you use an unsecured LOC for downpayment you are basically 100% leveraged, or in Simmy`s case 95% on a $100,000 property that provides $20,000 rental income (where is that property located?)
This is just irresponsible. A minor downward fluctuation in property value and the $5000 is gone and likely more. I 100% disagree with such an approach. You need money to buy real estate and you need cash reserves to pay for unexpected maintenance. Real Estate is tough enough with such funds. No matter how nice the theory.
As a minimum Simmy would need a strong financial partner who would fund the project; probably a family member.
As to qualifying for a loan when you don`t need it. There is some truth in that, however, in Simmy`s case he would likely get much more favorable financing if he owned some assets to secury such loans. So Simmy should wait until he has sufficient assets saved from employment. While waiting he could invest in REITS trading on the TSX or in ETFs. He could also use the waiting time to study investing, in particular Stocks, Bonds and of course Real Estate.
If Simmy was extremely conservative, something I somehow doubt considering his initial question, he could invest in GICs or a short term bond fund (e.g. XSB on the TSX).
Hope this helps to state my view - but then it is only my view and as said many times, there are many opposing opinions.
First, please note I did not recommend how to use the LOC yet, just to apply. It`s a great thing to have a LOC. even if ........
so lets not generalize about the risk of putting zero down. there are exceptions making it a much better option than the standard 25% down. you may still have nice net income plus big bonus - you kept your cash for the next deal. don`t be afraid of 95% LTV. instead, look for great deals where putting less down is a big advantage.
(the next thing I planned to suggest to Silly is to look for such a deal
Regards,
Neil
Hi Neil,
When you use an unsecured LOC for downpayment you are basically 100% leveraged, or in Simmy`s case 95% on a $100,000 property that provides $20,000 rental income (where is that property located?)
This is just irresponsible. A minor downward fluctuation in property value and the $5000 is gone and likely more. I 100% disagree with such an approach. You need money to buy real estate and you need cash reserves to pay for unexpected maintenance. Real Estate is tough enough with such funds. No matter how nice the theory.
As a minimum Simmy would need a strong financial partner who would fund the project; probably a family member.
As to qualifying for a loan when you don`t need it. There is some truth in that, however, in Simmy`s case he would likely get much more favorable financing if he owned some assets to secury such loans. So Simmy should wait until he has sufficient assets saved from employment. While waiting he could invest in REITS trading on the TSX or in ETFs. He could also use the waiting time to study investing, in particular Stocks, Bonds and of course Real Estate.
If Simmy was extremely conservative, something I somehow doubt considering his initial question, he could invest in GICs or a short term bond fund (e.g. XSB on the TSX).
Hope this helps to state my view - but then it is only my view and as said many times, there are many opposing opinions.
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QUOTE (gwasser @ Aug 20 2010, 05:19 PM) This is just irresponsible. A minor downward fluctuation in property value and the $5000 is gone and likely more.
why are you generalizing? Who cares about a property price fluctuation when you have a nice net income and don`t want to sell in the next 10 years!?
with some properties/strategies ensuring LTV is less than say 80% when you can get LTV of 95%, just does not make sense. if you`re into flipping yes. long term hold - no. in fact with long term hold the opposite is true: the higher the rent to price ratio is the LESS you want to put down! again, in today`s environment you usually have to put more than 5% anyway but it is a bit surprising you would put more regardless
cheers.
why are you generalizing? Who cares about a property price fluctuation when you have a nice net income and don`t want to sell in the next 10 years!?
with some properties/strategies ensuring LTV is less than say 80% when you can get LTV of 95%, just does not make sense. if you`re into flipping yes. long term hold - no. in fact with long term hold the opposite is true: the higher the rent to price ratio is the LESS you want to put down! again, in today`s environment you usually have to put more than 5% anyway but it is a bit surprising you would put more regardless
cheers.
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QUOTE (gwasser @ Aug 20 2010, 06:19 PM) Hi Neil,
When you use an unsecured LOC for downpayment you are basically 100% leveraged, or in Simmy`s case 95% on a $100,000 property that provides $20,000 rental income (where is that property located?)
This is just irresponsible. A minor downward fluctuation in property value and the $5000 is gone and likely more. I 100% disagree with such an approach. You need money to buy real estate and you need cash reserves to pay for unexpected maintenance. Real Estate is tough enough with such funds. No matter how nice the theory.
As a minimum Simmy would need a strong financial partner who would fund the project; probably a family member.
As to qualifying for a loan when you don`t need it. There is some truth in that, however, in Simmy`s case he would likely get much more favorable financing if he owned some assets to secury such loans. So Simmy should wait until he has sufficient assets saved from employment. While waiting he could invest in REITS trading on the TSX or in ETFs. He could also use the waiting time to study investing, in particular Stocks, Bonds and of course Real Estate.
If Simmy was extremely conservative, something I somehow doubt considering his initial question, he could invest in GICs or a short term bond fund (e.g. XSB on the TSX).
Hope this helps to state my view - but then it is only my view and as said many times, there are many opposing opinions.
I agree. the guy has 5K. I can`t believe people are suggesting that he begin investing with 5K. Any vacancies, major repairs, downturn in the market would put him in a very uncomfortable position.
My advice, save more. be patient. Buy a principal residence that needs repairs. Build equity and in a few years re-examine your readiness.
I doubt he is even around anymore.
When you use an unsecured LOC for downpayment you are basically 100% leveraged, or in Simmy`s case 95% on a $100,000 property that provides $20,000 rental income (where is that property located?)
This is just irresponsible. A minor downward fluctuation in property value and the $5000 is gone and likely more. I 100% disagree with such an approach. You need money to buy real estate and you need cash reserves to pay for unexpected maintenance. Real Estate is tough enough with such funds. No matter how nice the theory.
As a minimum Simmy would need a strong financial partner who would fund the project; probably a family member.
As to qualifying for a loan when you don`t need it. There is some truth in that, however, in Simmy`s case he would likely get much more favorable financing if he owned some assets to secury such loans. So Simmy should wait until he has sufficient assets saved from employment. While waiting he could invest in REITS trading on the TSX or in ETFs. He could also use the waiting time to study investing, in particular Stocks, Bonds and of course Real Estate.
If Simmy was extremely conservative, something I somehow doubt considering his initial question, he could invest in GICs or a short term bond fund (e.g. XSB on the TSX).
Hope this helps to state my view - but then it is only my view and as said many times, there are many opposing opinions.
I agree. the guy has 5K. I can`t believe people are suggesting that he begin investing with 5K. Any vacancies, major repairs, downturn in the market would put him in a very uncomfortable position.
My advice, save more. be patient. Buy a principal residence that needs repairs. Build equity and in a few years re-examine your readiness.
I doubt he is even around anymore.
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Hi Neil,
I understand what you are writting.
I`ll stick with Godfried`s (and now Gerry`s) points.
A few things of note to directly comment on your post:
1) In 2010 in Canada there are very few purchases available at $100,000 that require no repairs and have current rent at $20,000 per year. Very few. This would be well under 1% of possible purchases from investors, and likely less than 0.1% if even close to that. This just isn`t a realistic assumption to make.
2) The stability of the revenue source is being ignored. $20,000 isn`t guaranteed. It`s potential rent if:
There is no vacancy.
There is 100% collection from occupancy within the 12 month period.
This will continue on in future years.
There are few, if any, properties with this rent to purchase ratio that meet the above three criteria.
3) The few places that offer this generally are:
In poor repair - If you purchase a $100,000 property the needs $40,000 in work in the first few years after purchase you should be looking it as a $140,000 purchase and you need the extra $40,000 in cash or working capital. For the original poster this would be a challenge.
In small towns - it can take a LONG time to find tenants on change overs
In declining area`s - Rents are generally falling and vacancies are generally high. Collected rent the next year and in future years will likely be low.
In declining area`s - When tenants lose there job your long term leases don`t mean too much - you can litigate for damages once crystallized but are unlikely to collect until a potentially well into the future date.
4-6 - The reasons listed in the prior posts
I understand what you are writting.
I`ll stick with Godfried`s (and now Gerry`s) points.
A few things of note to directly comment on your post:
1) In 2010 in Canada there are very few purchases available at $100,000 that require no repairs and have current rent at $20,000 per year. Very few. This would be well under 1% of possible purchases from investors, and likely less than 0.1% if even close to that. This just isn`t a realistic assumption to make.
2) The stability of the revenue source is being ignored. $20,000 isn`t guaranteed. It`s potential rent if:
There is no vacancy.
There is 100% collection from occupancy within the 12 month period.
This will continue on in future years.
There are few, if any, properties with this rent to purchase ratio that meet the above three criteria.
3) The few places that offer this generally are:
In poor repair - If you purchase a $100,000 property the needs $40,000 in work in the first few years after purchase you should be looking it as a $140,000 purchase and you need the extra $40,000 in cash or working capital. For the original poster this would be a challenge.
In small towns - it can take a LONG time to find tenants on change overs
In declining area`s - Rents are generally falling and vacancies are generally high. Collected rent the next year and in future years will likely be low.
In declining area`s - When tenants lose there job your long term leases don`t mean too much - you can litigate for damages once crystallized but are unlikely to collect until a potentially well into the future date.
4-6 - The reasons listed in the prior posts
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Hi Adam, the purpose of the example was to explain why high LTV should not scare REIN members as much as it does. low rent to price ratio should!
there is no significant increase in risk when going from LTV of 80% to LTV of 95%, the increase in risk is close to zero especially when the investor is buying a good property and is into long term hold. I just saw so many comments on this topic and finally have the chance to help reduce this ridiculous fear.
there is no significant increase in risk when going from LTV of 80% to LTV of 95%, the increase in risk is close to zero especially when the investor is buying a good property and is into long term hold. I just saw so many comments on this topic and finally have the chance to help reduce this ridiculous fear.
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QUOTE;
“ I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment? ”
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If do not currently own your home and willing to live in the property, some Lenders still offer “Zero” down payment mortgage options for owner occupied purchases. It is structured with a 5% down CMHC mortgage with the Lender providing 5% cash back at closing to cover the down payment. Some Lenders provide cash back of up to 7%.
All other Lending criteria must be very good, such as;
• Stable, consistent income history
• Excellent, established credit history
• Excellent income/debt ratios
“ I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment? ”
-----------
If do not currently own your home and willing to live in the property, some Lenders still offer “Zero” down payment mortgage options for owner occupied purchases. It is structured with a 5% down CMHC mortgage with the Lender providing 5% cash back at closing to cover the down payment. Some Lenders provide cash back of up to 7%.
All other Lending criteria must be very good, such as;
• Stable, consistent income history
• Excellent, established credit history
• Excellent income/debt ratios
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QUOTE (simmy30 @ Aug 10 2010, 01:18 PM) I would like to invest in real estate but don`t have much to invest only about $5000 saved at this time that I can use. Don`t want to go into joint venture partnerships. What can I do to finance a first time investment?
I was a bit surprised that nobody`s mentioned Russell`s JV Package. He had one that could work well here - I think it was called the No-Hassle-Tenant strategy. I know you mentioned that you don`t want to go into a JV, but, like pretty much everyone else on here, I can`t see how you realistically can invest in RE without money or experience. (This strategy assumes that you don`t currently own your own place, though.)
This strategy is pretty simple in its concept. Basically, you find a JV partner that
1) likes and trusts you
2) has access to money
3) wants to invest in RE, and
4) doesn`t want the hassles that go along with owning rental properties.
The two of you partner up. They provide the money for the downpayment, you live in it, maintain it, take care of all the expenses, repairs, etc. (So, some of your $5 000 would go towards that, and the rest would go towards getting more education.) Then, after a set amount of time, you sell it (or one buys the other out) and split the gains. The way you divide up the gains would naturally be determined at the start, and stipulated, along with everything else, in the JV agreement.
This lets you get your foot in the door now, lets you start accumulating capital for future purchases, and (really important) gets you a letter of reference (in a few years, of course) from a satisfied JV partner.
Anyway, food for thought!
Have a good one!
JohnS
I was a bit surprised that nobody`s mentioned Russell`s JV Package. He had one that could work well here - I think it was called the No-Hassle-Tenant strategy. I know you mentioned that you don`t want to go into a JV, but, like pretty much everyone else on here, I can`t see how you realistically can invest in RE without money or experience. (This strategy assumes that you don`t currently own your own place, though.)
This strategy is pretty simple in its concept. Basically, you find a JV partner that
1) likes and trusts you
2) has access to money
3) wants to invest in RE, and
4) doesn`t want the hassles that go along with owning rental properties.
The two of you partner up. They provide the money for the downpayment, you live in it, maintain it, take care of all the expenses, repairs, etc. (So, some of your $5 000 would go towards that, and the rest would go towards getting more education.) Then, after a set amount of time, you sell it (or one buys the other out) and split the gains. The way you divide up the gains would naturally be determined at the start, and stipulated, along with everything else, in the JV agreement.
This lets you get your foot in the door now, lets you start accumulating capital for future purchases, and (really important) gets you a letter of reference (in a few years, of course) from a satisfied JV partner.
Anyway, food for thought!
Have a good one!
JohnS