Control Your Canadian Real Estate Investments
May 28th, 2009
When investing in Canadian Real Estate we have options right?
Of course we do!
And one of those options is to hand over your money to someone else because they showed you a spreadsheet of some numbers that look attractive to you. This person or company will then invest your money for you, sometimes with a fixed rate of return, or sometimes in a property that you will own outright.
It’s almost like handing your money over to a mutual fund manager…….maybe not the best thing.
I dive into this a bit in the video below.
- Nick Karadza
Posted in 
Personally I would prefer to control the property and provide a fixed rate of return to the investor that provided the capital.
This way I would control the cash flow and maintenance of the property without having someone else look over my shoulder.
Without a track record this can be a bit harder to do. You may want to try to reach out to people you who know and trust you already to build your reputation. Then once you have success you can use that to market to other potential investors.
I think the rate you offer them will have to be higher than the REITs or there is no advantage to them dealing with you.
On the other side another good way to break into things is to share the cash flow and equity with the investor. You can also include a small monthly payment to them for their capital contribution as well. This would be a very attractive setup for the investor and may allow you to get started building your track record. In this arrangement you will be doing all the work for only half the potential profit at the end of the investment while the investor gets a fixed return, half the potential profit, and the money is secured.
I think either approach can work for you.
The key to all this is in the beginning you will likely have to make the arrangement more beneficial to the investor. But as you prove yourself and build your portfolio you will have more negotiating power.
I am not sure if this answers your question or not, let me know
Nick
Ok, to answer your question about my status; I am a beginner real estate investor. I’ve been spending a lot of time getting training in this field and I want to be certain of my approach to investors in order to get the right “fit” as you would put it. Most of the other larger REITs are advertising for private funds at a set rate (say 8% to 10%) with the money secured by real estate. I would be offering the same, or to be competitive, I suppose a little more. If I am looking for money partners who want to be true co partners in that the cash flow and eventual equity gains would be shared; then I could see this process differentiating myself from the other competitors for private money. I think marketing for co partners would be an easier sell; however I would prefer to borrow the money at a set rate so that I have full control of the process and eventual equity gains. So which way would you suggest a beginner investor like myself should position myself for success?
thanks, Hummer.
Just to clarify from my last post: These are my competition for other peoples money. 1. REITs which offer anywhere from 8% up to 15% (which includes equity gains). 2. Companies which invest in real estate and private projects like waterfront hotels, and borrow money from the public at set interest rates of approximately 9% to 10%.
The question then is, how as a private real estate investor do I convince the same person who wants to invest, to invest with me who is a sole proprietor real estate investor? I hope this clarifies the question.
Thanks Again. Hummer.
Hey Richard,
Great question. I don’t really think there is a magic answer to this one.
Some investors will prefer the security that a REIT provides. Large, proven, established REIT’s can offer a sense of security that many people are willing to take in return for lower returns from their investments. My goal is always to educate people and then let them make their own decisions.
I think any investor likes to see the profit potential broken down in detail and they also like (or at least should) to see a proven track record.
It may not be as much about ‘convincing’ the investors you are speaking with rather than helping them understand all their different options with the benefits and downfalls to each.
Do you have any investment experience yet or is this something you are just getting started with? we may have to approach things differently depending on your experience so far.
If any investors are looking at providing funds to companies that invest in private projects I would really try to get them to learn as much as possible about the company. I know of some of these projects that did not turn out anywhere near what was expected.
So the same thing applies to both situations for me. I would really try to help people understand as much as possible and let them decide what works best for them. Not everyone is going to have the desire for the same type of real estate investments as you and that is a good thing. Because it means the ones that come on board will have a greater chance of working well with you.
Nick
Tom and Nick,
I totally agree with your comments in this video about growing as a person, and learning business techniques that can be repeated over and over.
Sometimes it does seem tempting with all the offers of REITs recently here in Victoria offering anywhere between 8% to 10% return on money.
Problem now is how do I convince other investors that they should partner up with me if they want to invest. Yes, it should be effortless for them
but there is no guarantee of money like some of the REITs, only the potential for greater profits. So what do you suggest I tell potential
investors to persuade them to come over to my camp. (assuming I get up to speed with education and a good team).
Hummer