In this episode, Quentin talks with a couple who are just getting started in real estate investing. We explore the difference between getting a fixed or variable rate mortgage, and why variable rate might be a better option.
The couple shares that while both of them have corporate jobs, they are looking at real estate investing as a way to achieve some level of financial freedom. They purchased the property in Burlington four years ago. Quentin shares that he started real estate investing in a similar manner, and while it was a big step, it worked out well for him, adding “because I had rental properties that were paying every month, and it allowed me to do other things give us flexibility.” He recommends going through the “Your First Three Properties in Real Estate” course, to get a better idea of fundamentals of choosing an area with where to invest in.
He adds that if they’ve owned the property in Burlington for four years, they probably have some equity built up in the property. A lot of people who start off investing in real estate, and how Quentin and his wife and started as well, is by using the equity in their property to get started. Talking about the available credit Quentin suggests that they should go back and see if the lender will allow them to free up more of their home equity line of credit, so to reassess the property in order to access it, that will give them more funds to work with.
Quentin continues by saying that the numbers have to work, adding “so, if you’re buying a single-family home, it’s not going to work because you’re the mortgage, your property taxes, your insurance, like the rent that you collect is not going to be not going to pay for that. So oftentimes, you’ll have to look at different areas that make more sense for you in order to purchase them so that the rent is higher than the property taxes, insurance and mortgage payment.”
Talking about the investing in smaller markets he adds that oftentimes, they’ll go up, and then they’ll go flat for a while, as well as other challenges. They can also buy single family homes, which are easier to manage so they can offset each other. He also adds that they will have to be a little bit more creative to access funds, such as unsecured lines of credit. Those lines of credit can be used for renovations, where you can refinance, and then pay back the high lines of credit, and then hopefully pay back some of the lower line of credit to like their HELOC.
On the subject of fixed and variable mortgage, Quentin suggests that they should try to see if they will flip it to a variable rate mortgage. This will give them more flexibility and will allow them to able to access more funds on from the home equity line of credit when they do the refinance. He adds “educate yourself on what is a good real estate investment, and how to work with those three team members, and when you do that, it’ll make it a lot easier for you when you’re talking to them about picking the right property.”
In conclusion, Quentin says that investing in real estate can really change your life, and he encourages them to continue down this path, as it’s well worth it. It can be life changing because it can create a stream of income each month, and then there are big chunks of net worth increases, because of the properties that owned. He adds that real estate is not about houses, it’s about relationships, you create a good relationship with other people, then they’re willing to help you and what goes around, comes around.
Quentin D’Souza is the Chief Education Officer of the Durham Real Estate Investor Club. Author of The Action Taker's Real Estate Investing Planner, The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords, The Filling Vacancies Toolbox: A Step-By-Step Guide for Ontario Real Estate Investors and Landlords for Renting Out Residential Real Estate, and The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate.