Q: What made you decide to become a real estate investor and what is your preferred investment strategy?
Wally Janzen: I started investing in 1998 and it was just something that I’d always wanted to do. I used to have another business in the agriculture industry with a partner, but once that deteriorated I began educating myself in investing. I bought a single-family home in the Niagara, Ont. region and wanted to rent it to students. It didn’t go as well as I had planned at the time and all I can say it was the right price, but in the wrong location. I learned my first lesson about how important location is when investing.
Initially, I specialized in student rentals and other strategies such as land developments. I ended up taking a few losses. However, I’ve actually learned what my favourite strategy is and that’s buy-hold or buy-reno-flip. I prefer buying an apartment building, tweaking it and then selling it. You have to play to your strengths and mine are in renovation and management.
Q: Describe one of your most successful investments to date.
WJ: I purchased a single-family home in St. Catharines, Ont. I had a purchase and sale agreement on the investment property for $65,000. It was listed for $89,000 and had been on the market for some time. I couldn't find anything that I wanted so we put a lowball offer in and it got accepted. When it came to the closing date, the lawyer called and said that the seller couldn't close due to the fact that the title was encumbered. However, I’d already rented it to students for $1,200 per month. The lawyer said I could walk away, or lease it short term while they cleared the title. (The mother had passed away, left the house to the father, who also passed away, and he left it to his son and 10 other people.) We agreed upon $300 per month until it was settled and closed.
It took three years to clear the title and in the interim, I was profiting $750 per month ($1,200 per month in rent, minus $300 lease, minus $150 per month utilities, equals $750). Upon closing, the students had finished their term, moved out, and I renovated (new kitchen, repainted) and put it on the market for sale. It sold for $129,000. This process took three months. I made a net profit of $28,500 ($129,000 sale price, minus $65,000 purchase price, minus $1,500 legal fees, minus $7,000 bank fees, minus $2,000 carrying costs, minus $25,000 reno costs, equals net profit $28,500), plus the $27,000 in cash flow ($750 x 36 months) while I was waiting to purchase the house.
Q: Why, in your opinion, was this investment so successful?
WJ: It’s because I kept looking for the positive to make the deal work. I could have walked away and left the students stranded. However, I negotiated a lease and then after three years I was able to obtain private financing and make the deal happen. I never gave up, just kept trying different avenues.
Q: What are the greatest lessons you learned from that experience?
WJ: Things don't always have to be done the conventional way to make money. Networking and finding solutions within my network was important for me. The key is to always keep trying to find the solution. If you believe in the deal, then you will find the solution.
Q: How can you spot a good investment?
WJ: There are always properties to be bought. Check out the fundamentals and work the numbers. Make a plan and have a strategy. This is key in assuring whether the investment is profitable. You should always have more than one strategy. If you can buy it and hold that’s good, or look to buy, renovate and sell. Make sure the property can carry itself.
Q: What advice would you give to aspiring investors?
WJ: You need to network with other people and learn from their experiences. If you think you’re going to do this on your own, you won’t get anywhere. In the beginning financing is very easy. After that, it becomes tricky and you may need to search other options or get money partners. Most importantly, don’t get emotionally attached and remember that this is a business first.
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