 REIN Members in Toronto Star - January 22, 2006 Cashing in on the real estate boom
By: ELLEN ROSEMAN
Jan. 22, 2006. 01:00 AM
Raymond and Angelina Wu live in Toronto. He works in pharmaceutical sales and she's a regional sales manager with a women's clothing chain.
The couple also has a sideline business, buying and selling real estate in the fast-growing bedroom communities outside Toronto.
In just two years, they have bought five rental properties in Hamilton and Kitchener and have sold one at a profit.
"Before getting into this, I was a renter myself," says Raymond Wu, 29. "I know about abuses and horror stories.
"But I'm learning how to screen tenants and give them incentives to stay longer."
He credits the Real Estate Investment Network, a paid-membership group, with providing the skills, confidence and contacts needed to succeed.
"I've been to other seminars and courses, paid thousands of dollars, and never gotten anything out of them," Wu says.
"I came upon REIN and found the first meeting was mind-blowing."
When real estate markets are hot — as they are in Toronto and environs — it's a dangerous time for rookie investors.
Networking clubs proliferate and experts write bestselling books, explaining how to buy properties that pay for themselves.
Don Campbell is a self-taught real estate investor and consultant who started REIN 14 years ago in Calgary. He visits Toronto each month to lead courses and meet members.
His book, Real Estate Investing in Canada (Wiley, $34.99), has been reprinted five times in the past year. With 27,000 copies sold, it's breaking records for real estate guides.
But Campbell is no get-rich-quick guru with a giant ego. He comes across as modest and anxious to share his hard-won knowledge with others.
Moreover, he's donating his book royalties to charity. So far, he's raised $50,000 for a house — to be built by Habitat for Humanity, using only women's labour — for single mothers in Edmonton.
The book combines motivational thinking — "you must change your actions to change your results" — with checklists, scorecards and formulas to analyze properties.
He uses a simple rule to screen properties: The annual gross rent must be at least 10 per cent of the purchase price.
If a property rents for $925 a month and you can buy it for $100,000, is it worth checking out? Yes.
Gross annual rent adds up to $11,100, which is more than 10 per cent of $100,000 (or $10,000).
But if the purchase price is $200,000 for a property with gross annual rent of $11,100, don't waste valuable time investigating it further.
Another rule is to avoid "alligators," or properties that generate too little income to cover their costs.
If you go into debt each and every month to feed these black holes, how long before you exhaust your monthly job income? And how will you afford to buy more income properties?
"Negative cash flow properties can eat you alive — that's why we call them alligators," he says.
Campbell says you can learn enough from his book to go out and start buying real estate. But there's barely any advice about finding and keeping good tenants for your properties.
That's a curious omission, one that is offset by ubiquitous sales pitches for Campbell's self-help networking group.
REIN membership costs $199 a month (plus GST), with a one-time $200 fee to join. You have to stick around for at least 17 months, which brings the minimum cost up to about $3,500.
Why 17 months? He wanted to tie people up for three years, but felt it wasn't realistic or saleable.
"Veteran real estate investors will tell you that it will take at least three years of real estate investing before you will start to see the real fruits of your labour," he advises in the book.
Make sure you're emotionally prepared to wait that long, he says. Find a system and don't deviate from it. Your investments should be boring and you should find your excitement elsewhere.
In an interview, Campbell throws in tips about how to treat tenants with respect.
Think of them as your customers or clients. Provide a welcome basket when they move in. Bring along a box of donuts with you each time you visit.
At monthly meetings, Campbell emphasizes economic and market research. He invites respected bank economists, such as Benjamin Tal of CIBC and Carl Gomez of RBC Financial.
He gives out lists, updated every two years, of the top 10 Ontario regions where members should invest.
His number one choice is Simcoe shores (Barrie and Orillia), followed by the tri-city area (Kitchener, Waterloo, Cambridge).
Brampton/Orangeville is third, Hamilton is fourth, Markham and Stouffville-Whitchurch are fifth.
Durham region (Pickering, Ajax and Whitby) is sixth. The Highway 404 corridor (Newmarket and Aurora) is in seventh place, followed by Oshawa and Ottawa.
Toronto is in last place, but only for areas in transition from rough-edged to genteel.
Two examples are the Junction in the west end (Dundas St. W. and Keele St.) and the area south of Danforth Ave. and east of the Beaches.
He keeps a running tab of the number of properties purchased by REIN members. Last week, it was up to 14,000 properties, with a value of $1.29 billion.
Members I spoke to enjoy the monthly meetings, which linger on close to midnight. They get useful information and make good contacts.
Bob Tracz is on his third career. He started as a veterinarian, then went into sales and marketing.
Anxious to avoid travel to the United States and stay closer to home, he and his wife Pam joined REIN in October 2004.
"I became active right away, buying 11 properties and selling three. I won an award for being a top producer last year," he says.
Four of the eight properties he owns are in Calgary (another of Campbell's favourites), two are in Barrie and two in Hamilton.
Some are joint ventures with family members, including his daughter, a sister and a niece.
Last month, he hooked up with a couple he met at a REIN meeting. Miki and Ronny Bukovsky have deep roots in real estate and focus on buying apartment buildings.
"We have more than 200 doors," Miki says, referring to units in buildings she and her husband own.
The Bukovskys came to Canada just four years ago from Israel. They needed help with marketing, while Tracz wanted to hitch his wagon to more experienced investors.
It was a match made in real estate heaven, they say, with REIN acting as informal matchmaker.
How long will Ontario's economy and real estate markets hold up? Campbell sees the good times stretching to 2012. Others aren't so sure.
Next week, we'll look at economists' predictions about the prospects for real estate investors.
Posted January 22, 2006 by Ellen Roseman |
