WHERE TO START?!

Question

Hey Guys!I'm a 22 year old student from Ottawa, Ontario that has recently gained a lot of interest in the real estate world. I've been soaking up a lot of information about real estate and I am still a little confused as to where I should start. With not much capital saved what are some options that I should be looking at to start investing in properties? Any advice helps!

Thanks in advance!

Matt Geerts · Answer

@Emmanuel K. Welcome to BP.

I'm guessing by your message that you don't currently own your own house, and you're very ambitious.

Wholesaling in Canada is a major pain, which explains why none of our Canadian members has met a highly successful wholesaler that is always flush with deals. It isn't like the USA where there are hundreds of active wholesalers on BP every day. We just don't have the same freedom of information they do to find those deals.

Here is a super simple strategy for you to implement IMMEDIATELY. It will change your life in 6 months:

1. Stop spending money on anything. Become SUPER cheap for the next 6 months.

2. Pour EVERYTHING that you have into an RRSP account. Do this with extreme aggression. If you need to sell a BMW and buy a Geo, do it. Hustle for side money any way you can.

3. Submit your tax return and get a big chunk back because you just lowered your taxable income due to massive RRSP deposits.

4. Use the first time home buyer's plan to get all of that money back out of your RRSP tax-free, plus use the tax return that you got for putting it there to put a 5% down payment on a duplex.

A quick look at Realtor.ca shows a handful of sub-200k duplexes. 5% of 200k is 10k. You'll need to pour about 7k into your RRSP to get 3k back in tax returns and you'll have 10k. Rent out the other side, rent a room on your side to a roommate. you're now living completely for free and building equity.

Put down your laptop and go do this today.

(I'm not a tax accountant, lawyer, broker etc, my advice is just "some guy on the internet" advice).

Hai Van Nguyen · Answer

Hi Emmanuel,

Just to add a point of "where": Choose the right market, jump in and out at the right time can help you to have good capital gain in addition to operating income (monthly rent). Hope this helps a bit: www.marketcycles.info

Chris S. · Answer

@Emmanuel K. given that you are a Full Time Student I assume that you pay roughly 8k in tuition and make roughly 20k a year. If these assumptions are close to correct than you will not be taxable and on making an RRSP contribution will not result in any tax refund.

Andy Welmers · Answer

House Hacking would be a great start. Talk with a mortgage broker, to determine what / how much you would need to put into the initial purchase. They can give you names of other professionals (lawyers, realtors etc).  Don't forget about closing costs / land transfer (first time home buyer discount) etc. Mortgage broker should be a great resource to discuss implications of various purchase methods.

House hack while you are young, and able to. When family and kids show up in the picture, it is a lot harder to convince the other half to move.

When you find a place, build up equity / cash flow, and re-invest this into your next purchase (an other duplex, triplex quad?) move there, as that would be 5% down again. and repeat.

You may even be able to add value to the place, renovate your side as you live in it, re-finance to pull out funds.

Emmanuel K. · Answer

OK thanks again! @Matt Geerts

Matt Geerts · Answer

@Emmanuel K.

The number was a ball-park and the actual number you'd need depends on your income situation (and hence, your tax bracket). The important part is that it goes into that account before the RRSP contribution deadline (end of Feb 2017? Please confirm for yourself) so you can claim it on your tax return. It doesn't matter if it is a lump or not... but I'd recommend just constantly dumping any money you don't NEED into it on a regular basis, like after every payday. This locks it up for this purpose so you can't mess with it :)

For me, my marginal tax rate is like 42% (unless I'm grossly mistaken) so if i deposit 10k, then I'll get a 4200 tax return. (unless 10k would put my marginal lower, of course).

It is my non-accountant non-legal opinion that this is the absolute best way that anybody can save for their first house with our tax/rrsp system.

Emmanuel K. · Answer

@Abel Curiel @Ayodeji Kuponiyi Thanks a bunch for the great advice guys and the quick response. Much appreciated.

@Matt Geerts With regards to the RRSP would I be depositing 7k all at once or keep accumulating till I hit 7k or does that even matter?

Natalie Treasure · Answer

@Matt Geerts Great advice.

Ayodeji Kuponiyi · Answer

@Emmanuel K. Welcome to BP and that great news that you're in a better place. Best/first thing to do is get educated. Read read read! Read books on investing in real estate, listen to the podcasts, attend webinars and stay active on the forums while connecting with other investors in your area and pick a niche. Best of luck!

Abel Curiel · Answer

Good morning Emmanuel,

Where you should start has a lot to do with where you want to go... What are your goals with respect to REI. Think about your short and long-term goals. Most people new to investing want to build a rental portfolio for passive income, others want to flip houses for a faster buck and to avoid dealing with tenant issues. Research the ins and outs and I'm sure you'll find what best suits you.

As far as getting started with limited capital, many newbies (including myself) explore the option of wholesaling. This does require some capital for marketing costs up front and EMD but there are options for people with limited resources. Brandon Turner's book on getting started with little or no money down is a great source of info on this topic.

Best of luck to you!

-Abel

WHERE TO START?!

Most Popular Reply