Here’s what I really wanted the title to be: Are Buying an Investment Property Thinking That It Will Be Easy Money and Make You Rich? Fuck Off…
I was worried that might offend some people.
But then I remembered why I wanted to write this. I wanted to offend potential slumlords from reaching out for my help.
If your sole intention is to buy real estate for profit, you’ll lose.
To be clear; I don’t think there is anyting wrong with profitting from real estate. My issue is when it’s your only intention.
You won’t succeed becuase this is a business.
If you are not a business-minded person or an entrepreneur, you won’t understand what a business is.
A business, at least in my mind, is solving a problem for others.
The problem you’re solving for others when you buy an investment property is providing people with a GOOD place to live, taking care of the property AND your tenants.
If you profit from it because of your intentions, that’s the bonus.
Now I’ll name drop a famous real estate entrepreneur…
I read the books and hated them. (Not to mention I just found out his company went bankrupt; click here)
I hated them because it made it seem like it was so easy to do and the money would just roll in.
But, there is one thing that I did read from Robert Kiyosaki that stuck with me, and it’s this (I’m paraphrasing):
95% of Businesses fail in the first 5 years. This is why. Too many people go into business for money. To build a successful business you must first know how to SOLVE PROBLEMS. I’ve made it my life’s work to create more problem solvers. I want to help nurture more honest and ethical entrepreneurs that’ll help make the world a better place.
I can feel your eyes rolling as you think “how does a landlord make the world a better place, dumbass?”
You are the 95% if you think that way and I want you to get bent. Go buy an AirB-n-B condo with someone else.
The 5% that get it make “the world” a better place for their tenants.
They make sure the house or condo is taken care of.
They understand that a landlord is not what a landlord used to be.
A landlord used to simply pick up rent cheques.
A landlord used to skip out on repairs and maintenance on the property and make the tenants pay for it.
A landlord would kick you out if the rent was late.
A landlord would look tenants gleafully in the eye and smile as they raised rent to squeeze every last penny they could.
What I’ve described above is a slumlord.
A Lord of the Lands.
A landlord knows this is a business and treats as such.
If something is broken at the house, a landlord will make arrangements to have it fixed. If a tenant breaks something because of their own negligence, then absolutely, charge it back to the tenant but first and foremost, it gets fixed.
Maybe the tenant has fallen on hard times and can’t pay the rent on the day it is due. A good landlord will have already been in contact with their tenants so that if this does happen, the tenants aren’t afraid to let the landlord know ahead of time that the rent will be late but will be paid during the month.
Oh, and that problem that entrepreneurs solve that a landlord does?
Your tenants are looking for a good place to live becuase they may not have enough money to buy their own place (maybe they choose not to own), but, they can afford the equivalent of what the mortgage payment would be on your investment property.
So be careful what you buy.
Crappy Houses Attract Crappy Tenants
If you buy a property that everyone else has passed on becuase it’s a complete dissaster but you come along, with nothing but profits on your mind, buy the place, through a coat of paint on the walls and put it up for rent, guess what happens?
You get the tenants that no one else wanted.
These are the types of tenants that we all here about.
The type of tenants that skip out on the rent after the first month.
The type of tenants that never cut the lawn and leave newspapers piling up on the front porch.
The type of tenants that smoke inside after agreeing not to in the lease.
The type of tenants that have 3 massive dogs and 7 cats and never clean up after them.
The ones who rent out rooms behind your back.
The ones that don’t pay utility bills leaving you to foot the bill.
Your procious profits go down the drain as your house is now known as the house where the cops show up weekly…
Where It Went Wrong.
So, back to my point of this post; I helped someone buy an investment property a couple of years ago.
He was referred to me by a very good client of mine who had been quite successful with real estate.
She didn’t go into it expecting to make a profit. She bought a place to live in. She saved up and did renovations all while she lived there.
She bought at the right time and sold at the right time.
It was her principal residence so she didn’t get taxed on her profits.
Him on the other hand, didn’t tell me he wasn’t going to move into it.
After he closed on the condo he told me he planned to rent it out and didn’t listen to me when I explained that rents will become taxable income in the eyes of the government.
He did listen to me and bought in a great up-and-coming neighbourhood but passed on all of the good condos and instead settled on the least expensive condo with a crappy floorplan, no view and no sunshine.
He first rented to students that did a midnight move after 8 months and left the place a complete mess.
The next tenant he took on made less than $40,000 a year and hasn’t paid him rent in 4 months. When you set your rent at $2,000 a month and the person you rent to makes $3,200 per month before taxes and has car payments, well, you didn’t think it through.
For The Record
Just to set things straight on a couple of things
- I have bought, renovated and moved 5 times.
- I did profit from those houses.
- I do, as of writing this post, have an investment house in Thorold, ON that I rent out to students on a per room basis.
My student rental house is profittable.
It wasn’t at first because I had a partner who only cared about making a buck. He literally would buy dollar store batteries to put in the smoke detectors to save $60 over the course of the year.
The students hated him and would always turn to me for help. Some of the students gave up on the house and trashed it.
I bought him out a year later and made all the repairs on the house that I wanted to the year before.
I evicted the trouble makers and hired a very reputable real estate agent to find new tenants.
I decided to place good desks, comfortable chairs and beds in each room and, I provide the highest internet possible for them to use free of charge. Now the students have a good area to study in their rooms and since they stream everything anyways, they have to internet capacity to do it.
More recently, with the pademic, one of my tenants was laid off from his job. Rather than evict him, I’ve worked out a plan where he pays what he can now and the rest will be spread out over the coming months when he goes back to work.
That’s the way I’m “making the world” a better place for my tenants and you know what? I’m making a little profit every month doing it.