In this episode of Get Real Wealthy Season 4, Quentin D’Souza talks about uncovering hidden opportunities in apartment building investing.
Quentin says that real estate investing offers many opportunities. To create value, you need to increase the net operating income, which is income minus expenses before debt. He adds that there are five hidden opportunities to increase net operating income. The first opportunity is to look for properties with below-market rent. He adds that taking advantage of the spread between current rents and projected rents can benefit the buyer. Rent control in places like Ontario creates a distorted market, making it difficult for new tenants and the production of new units. Therefore, when buying rental property, finding below-market rents with the potential for a rent increase is an opportunity.
The second opportunity is to look for properties that have been poorly managed, leading to disorganization and lack of repairs. This can present an opening for you to acquire the building, come in with a professional management company and solve these problems. The third opportunity is to look for buildings experiencing tenant management issues, where the owners or property managers are not addressing illegal activities, such as drug dealing, and not handling late payments or evictions properly. A skilled investor can purchase the property at a lower price, solve the issues, and achieve a better return on investment.
The fourth opportunity is to look for properties with poor records management. This can result in difficulty finding bills, leases, and other important documents. Quentin says you can take advantage of this opportunity by finding ways to solve the problem and make more money as a real estate investor. Lastly, he suggests looking for buildings with neglected maintenance, particularly those under rent control with low rents. The building owners have no motivation to maintain the property, leading to a rundown building. But if an opportunity arises to turn over the units and create value, it can be an excellent opportunity for you as an investor.
In conclusion, Quentin highlights that these hidden opportunities in apartment building investing, from finding below-market rent properties to solving poor records management issues, present great opportunities for investors. By identifying and addressing these opportunities, investors can achieve a better return on investment. To further assist in this endeavor, he recommends two books: “Property Management Toolbox” and “Filling Vacancies Toolbox,” which offer valuable insights on creating value in buildings through effective management.
Links and Resources
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.