All Forum Posts by: Michael Smythies

This is the 7 step process I use when handling tenant disputes: 

1) Open Communication: Contact your tenant in a friendly tone, acknowledging their positive qualities as a tenant.

2) Explain the Issue: Describe the problem with the unpaid electricity bill and its impact on your credit score.

3) Propose a Solution: Suggest sharing the prorated amount for the period when they were in the property as a fair resolution.

4) Highlight Timely Communication: Emphasize the importance of promptly informing each other about such matters in the future.

5) Reiterate Appreciation: Remind them of your appreciation for their positive contributions to the property.

6) Listen to Their Perspective: Be open to hearing their side of the story.

7) Document the Agreement: If an agreement is reached, document it in writing for clarity.

Hi Dave, here are a few pros and cons for investing in commercial real estate. For beginner investors, I always recommend looking into residential to begin with. This also depends on your unique situation. 

Pros of Commercial Real Estate:

1. Higher Rental Income Potential: Commercial properties typically command higher rental rates per square foot compared to residential properties, leading to potentially greater cash flow.
2. Longer Lease Terms: Commercial leases are often longer in duration than residential leases, providing more stable income and reduced turnover costs.
3. Triple Net Leases: In some commercial leases, tenants cover property expenses such as taxes, insurance, and maintenance (Triple Net Leases), reducing the landlord's financial burden.
4. Diversification: Including commercial properties in your portfolio can diversify your investments, spreading risk across different property types and markets.
5. Professional Tenants: Commercial tenants, like businesses and corporations, tend to be more professional and stable than individual residential renters.

Cons of Commercial Real Estate:

1. Higher Initial Costs: Commercial properties typically require a more substantial upfront investment, both in terms of purchase price and ongoing maintenance and improvements.
2. Vacancy Risk: Finding new commercial tenants can take longer than residential renters, leading to potential income gaps when properties sit vacant.
3. Market Sensitivity: Commercial real estate values can be more sensitive to economic downturns and market fluctuations, posing a greater risk during economic downturns.
4. Complex Leases: Commercial leases are often more complex than residential leases, requiring a strong understanding of legal and business terms.
5. Limited Residential Experience: If you're new to real estate investing, starting with commercial properties can be challenging without prior residential real estate experience.

Here is a look at the Lake Steven's market from a 40,000 ft level. In terms of median rent, we are seeing just above $3k. Of course, there will be quite a bit of various depending on where you are and what sort of home you are looking at. Can you give us any more detail on the type of property you are looking for? 

Hi Julie, 

Here are a few of my initial thoughts on your specific scenario. I hope that these options conjure up further discussion and ideas. 

Assisted Living/Senior Living Facility: Given the affluent suburb and the growing aging population, this option holds significant potential. Explore the feasibility of an assisted living or senior living facility, keeping in mind the regulatory requirements and specialized knowledge needed.

Subdivision and Mixed Use: Consider subdividing the land to develop a mix of townhomes or apartments alongside commercial spaces. This diversification can provide steady income from both residential and commercial tenants.

Partnership with Experienced Developers: Collaborate with experienced developers or investors who specialize in your desired project type. Partnering can mitigate risks, reduce financial burdens, and leverage the expertise of others in the industry.

It is my pleasure Ajay! 

Have there been any updates on your end since you made this post last year? Excited to hear how things have developed. 

Here are some further considerations for short term rental expenses: 

Consider Utility Costs: Don't forget to factor in utilities like electricity, water, and internet, which guests will likely use.

Furnishing Expenses: Short-term rentals often require fully furnished units. Include costs for furniture, decor, and maintenance.

Insurance: You may need specialized insurance for short-term rentals, including liability coverage.

Marketing and Listing Fees: Account for expenses related to listing your property on platforms like Airbnb.

Guest Amenities: Think about providing amenities like toiletries, linens, and kitchen supplies.

Regulations and Taxes: Research local regulations and taxes applicable to short-term rentals in your area.

Consider Market Demand: Ensure there's consistent demand in your area for short-term rentals.

Congratulations on taking the first steps in your real estate investment journey! Leveraging a HELOC for your initial down payment is a smart move, and you're already on the right track. Here's how you can continue to leverage your assets to acquire additional properties:

1. Maximize Your Primary Home Equity: With significant equity in your primary home, you have a powerful asset at your disposal. Consider these strategies:

• HELOC Stacking: If your primary home's equity is around $2 million, you might explore the possibility of increasing your HELOC limit. If your current HELOC is $500k, you could potentially obtain additional HELOCs or request a credit line increase.
• Cash-Out Refinance: Another option is to explore cash-out refinancing on your primary home. This involves refinancing your primary home at a higher loan amount than you owe and pocketing the difference in cash. This cash can be used for down payments on future properties.

2. Use Your Current Rental Property: Your first rental property can be a stepping stone to acquiring more properties:

• Build Equity: As you continue to make mortgage payments on your rental property, you'll build equity. This increased equity can be tapped into through refinancing or by taking out a second HELOC on the rental property.
• Cash Flow Optimization: Consider ways to increase the cash flow from your current rental property. This might involve raising rents, reducing expenses, or making strategic improvements that increase the property's value and rental income.

3. Explore Creative Financing: Don't limit yourself to traditional financing methods. Consider these options:

• Seller Financing: Look for sellers who are open to providing financing for their properties. This can be a win-win, as it might allow you to acquire properties with less upfront cash.
• Private Lenders or Partnerships: Explore the possibility of partnering with private lenders or investors who can provide funding for your real estate ventures in exchange for a share of the profits.

4. House Hacking: If you're open to living in one of your investment properties, consider house hacking. You can purchase a multi-unit property, live in one unit, and rent out the others. This can help you acquire additional properties while generating rental income.

5. Continuous Learning and Networking: Stay committed to learning about real estate investing. Attend local real estate investment clubs, network with experienced investors, and seek mentorship opportunities. Learning from others who have successfully scaled their real estate portfolios can be invaluable.

6. Diversify Your Portfolio: As you acquire more properties, consider diversifying your portfolio by exploring different property types, such as multifamily units, commercial properties, or short-term rentals, to further spread your risk.

Remember that real estate investing is a long-term game. While leveraging assets is a powerful strategy, it's essential to carefully assess each investment opportunity and ensure that it aligns with your financial goals and risk tolerance. Continue to be diligent in your research, seek expert advice when needed, and gradually scale your portfolio as you gain experience and confidence in the real estate market. Best of luck on your journey!

One additional aspect worth considering is the role of mental biases in analysis paralysis. As humans, we often grapple with cognitive biases that can impact our decision-making. One such bias is the "confirmation bias," where we tend to seek out and give more weight to information that confirms our existing beliefs or preferences. This bias can exacerbate analysis paralysis because it keeps investors stuck in a loop of finding information that validates their initial inclinations.

To counter the confirmation bias and further mitigate analysis paralysis, here's an additional strategy:

Diversify Information Sources: Encourage investors to deliberately seek out information that challenges their initial assumptions. This might involve reading opinions and data from sources with different perspectives, attending seminars or webinars, or engaging in discussions with professionals who hold differing views. By actively seeking diverse viewpoints, investors can gain a more comprehensive understanding of a potential investment and reduce the chances of making decisions solely based on their preconceived notions.

Furthermore, I'd like to emphasize the importance of maintaining a long-term perspective in real estate investing. The fear of making mistakes can indeed lead to analysis paralysis, but it's crucial to recognize that real estate investments are typically long-term endeavors. Mistakes and setbacks are a natural part of the learning process, and they often provide valuable lessons that contribute to future success. Encouraging investors to view these experiences as opportunities for growth can help alleviate the fear of making mistakes and encourage them to take calculated risks.

Welcome to the exciting world of real estate investing! It's fantastic to hear about your journey into diversifying your portfolio through real estate. The decision to explore this field can be both rewarding and challenging, but it's a great step towards financial growth and independence.

Regarding your anecdote and question about learning a skill, it's a wonderful perspective. In real estate, one skill many wish they had acquired earlier is networking and building relationships. The power of a strong network in real estate cannot be overstated. It can open doors to partnerships, funding, and valuable advice.

Curious to know what your next goals are in real estate? Where do you look to invest? 

Hi Julien, 

Great post! Thanks for sharing. 

Out of curiosity, you mentioned gaining property management experience while living on-site. What were some of the most valuable lessons you learned in tenant relations, maintenance, and repairs during this time?