I purchased my first property four years ago, a 1300 sq ft bungalow located in Regina, Saskatchewan.
My intent is to share some of the significant oversights and mistakes I made to help other new investors avoid making them as well!
Do not plan on doing everything yourself
This first deal needed a significant amount of renovations including 2 new bathrooms, new flooring throughout and a complete gut job in the basement. Since I didn't have much extra cash at the time to spend on contractors, I did most of the work myself, with some help from family.
My wife & I had our first child 1 month after we closed on this property and it took me 3 months to finish the renovations on the main floor. I started renovating the basement 1 year after we purchased the property, ended up hiring a subcontractor to hang drywall and mud and tape the basement and finished the basement renovation over the course of 2 years. I missed out on $25-$30k in monthly rent over those few years by letting the basement project drag on.
Although I shouldn't have done as much of the construction work as I did, the experience I obtained doing the work was extremely valuable. I learned which jobs I excelled at and the ones I never wanted to attempt again and it helped me to build the confidence to take on my next deal, knowing that if I did it once, I could do it again.
Get the financing right the first time
I went through a mortgage broker and gave myself 2 weeks to remove financing conditions. I initially applied for a purchase plus improvements mortgage, which in Canada allows you to use a 5% down payment for an owner occupied property and the lender will provide additional funds up to 20% of the purchase price to fund any renovations you complete when you purchase a property.
Unfortunately, the lender did not like the property due to the structural repairs needed at the property and the application was denied. The mortgage broker was able to send the application to another and it was approved, so I was content to be able to close on the property.
I refinanced the home in January of this year with a mortgage and a home equity line of credit, which allowed me to get the capital back that I invested into the house. The sooner you can get your initial investment back, the better off you will be.
Find a realtor or mentor who understands investing to help advise you on potential deals
The realtor I used was a guy I had met at the gym. He only had a couple of years of experience and did not personally invest.
I have been working with a new realtor this year who has owned rentals for multiple years and has renovated similar homes to the ones I am looking for and the difference between the two has been like night and day. We spend 10-15 minutes walking through properties, he is able to quickly ballpark renovation costs and market rents which helps me to know whether or not a property is worth pursuing.
You will make mistakes when you are starting out. Learn from these mistakes and you will continue to grow, become a better person and a better investor.
