Episode 25
25 - Real Estate Investing for Beginners: Focus on One Area When Starting Out
Episode Summary
In this episode, Quentin talks with a member who has a few investment properties spread out over long distances, we cover why it is important to focus on one area starting out and becoming an expert in that area. We also touch on a blend and extend for when you are feeling stuck in a fixed mortgage.
The member, who is a nuclear engineer, started investing in real estate last year and now has three properties under his belt. He shares that his short-term goal is to get enough cash flow to cover the mortgage on his primary residence. In the long term, he wants to replace his active income of around $10,000 from his 9 to 5 job. Talking about the cash flow that he's getting from his properties, he says that they are rented under the market rate.
Quentin suggests add one of the things he should consider is doing some ‘Cash for Keys’ and offering his tenants to leave, since there is a huge difference in market rent and the rent that he is getting. Quentin suggests going through the Property Management: Key Policies and Procedures course to get a better idea of how things should be done and why to take the time to do that. Furthermore, he should be careful if he is spreading his assets all over the place, adding “it's okay to invest in different areas. It's better to focus.” The Your First Three Properties in Real Estate course identifies the fundamentals that he should be looking for in any area that he invests in.
Talking about the available equity, that member shares that he has not maximized the available equity on his principal residence about plans to do so. Quentin recommends that he can do a ‘blend and extend’ to avoid the penalty for switching from fixed rate mortgage. He further adds that the member should have a secured line of credit on his principal residence and if his income is over $10,000 a month he should also be applying for unsecured lines of credit as well, adding “even if you don't use it, it's always good to have and not need the need and not have.”
Quentin adds that the member should go to TD, BMO, CIVC, National Bank, then apply for a line of credit on usually all four or five banks at the same time, as long as he is comfortable with the debt and the numbers make sense. He also recommends asking for more than what he wants from the banks. He continues “those unsecured lines of credit, you know, the interest is tax deductible, but you have to make sure that you can service the debt, with the properties okay that everything makes sense.”
Topics Discussed
- Introduction [00:00]
- Their Background and Experience in Real Estate Investing? [1:10]
- What Are His Goals with Real Estate Investing? [02:51]
- What is the Current Cash Flow Based on His Portfolio? [03:57]
- When Did he Purchase the Townhouses? [05:15]
- How Much Equity and Access to Line of Credits Does He Have? [09:18]
Resources Mentioned
- Property Management: Key Policies and Procedures
- Your First Three Properties in Real Estate
- Raising Money for Real Estate Joint Ventures
Important Links
