A leading investor shares his tips to on how to excel in a struggling real estate market.
Real estate has its ups and downs, and Wayne Weum, an Edmonton-based investor, is currently experiencing the low points. But that won’t stop him from managing his portfolio and even picking up some diamonds in the rough.
“In this economy, you have to be active and attentive in your business,” Weum writes in his market plan brief, which he shared with Canadian Real Estate Wealth. “First and foremost, whatever you have in your existing portfolio must be meticulously maintained and offered to the rental market as something that stands out.”
These are some tips Weum offers to other investors who may be in a similar situation.
“We’ve spent most of the summer so far making the little fixes that have been put off becausee they weren’t a priority. Now things like painted trim, new doorknobs, plumbing upgrades, and brand new appliances are what we are on top of,” Weum writes. “Going forward, we are confident that the market will come around and the demand for housing will consequently increase.”
Choose your next investments wisely
“Find a neighborhood that offers real estate deals that will be profitable and provide positive cashflow even in the slower economic times. This is exactly why I like townhouses so much,” Weum writes. “The tenants are typically small families who work close by in retail and service industries. The love being part of a community and having close access to family entertainment and community services.”
He provides a snapshot of an area in Sherwood Park he plans on targeting to hopefully find some deals this year.
Find motivated sellers
“We pay particular attention to the expired listings, as this is where we may find an opportunity,” Weum writes. “The comparables in the area were selling for close to their list price, so it may be possible that the unsold units were mismarked or inappropriately priced.”
Weum offers a step-by-step plan to help you win some deals. Find those on the next page.
“Below is the plan we are going to follow to hopefully pick up some good deals and help the homeowners solve their dead property problem,” Weum writes.
- Have a conversation with the owner. Figure out their wants vs. their needs. Ask questions and listen closely to their answers and the opportunity will reveal itself. Prepare them for a deal in the private sale arena. Word of caution—make sure they are released from their obligations to the selling agent, often times these contracts extend even beyond the listing time frames.
- Make an all-cash offer*, with an escape clause (subject to inspection). An offer that has no financing condition carries a tremendous amount of weight to a distressed seller. By offering cash and a quick closing, you have more grounds to seek a discount on the property.
- Try and seek terms that are favourable as early possession. I found this extremely handy over the last couple of years when I needed to get my tools in there and renovate, or to show the place to potential tenants. It’s nice to have a property on closing day that your tenants (who you’ve already lined up….because this is your business!) can move into straight away.
- Offer to be of service to your seller. This may sound strange, but if your seller is sacrificing some equity to you, be the person who offers to take their ratty old furniture to the dump, or perhaps pay up to a certain amount of their closing legal fees. These little things will carry you for miles reputation-wise.
- Advertise your new acquisition on the rental market, during the pending time, like there’s no tomorrow. Step into the niche markets. “Pet friendly” in this market is a powerful boost to your unit and will manifest itself in the cash flow you will see.
- Make good on your offer. This is the most important part. You’ve entered into this deal to be the person to help solve a problem for a seller, so help them and then thank them for the opportunity to do so. Send them on their way with a thank you note and a gift card to a good restaurant where they can enjoy being rid of their property that they “couldn’t sell.”