I can think of many reasons why realtors should own some rental properties, not least because, if you represent or coach investors the way I do, one of the first questions they’ll ask you is this: “Do you walk the walk or just talk the talk?” If you have your own successful portfolio, well, this goes a long way to establishing your credibility with them.
Then there’s this–most Americans and Canuckleheads–don’t have a defined benefit pension plan so a real estate portfolio as small as 4, 5 or 6 residential rentals can provide you and your family with an independent (net operating) income for the next three generations of anywhere from $10,000 to $15,000 a month after you retire all your mortgages.
That’s quite a bit more than than the average social security payout of around $1,210 USD a month in the US and an even more pathetic $555 CAD in CPP (Canada Pension Plan) payments (supplemented when you are old enough by your OAS, old age security).
But there’s another (secret) reason why it’s important–your rental portfolio is a dependable source of buyer rep leads.
As long as you: a) you keep in touch with your tenants, b) you have a good relationship with them and c) regularly remember to ask them if they’d (one day) like to buy a property, you’ll be like a good farmer–plant some seeds today, wait a bit, then harvest them.
I used to do that back in the day with Terrace Corporate Centres Limited (TCCL). It was the largest mini office operator (what would be called co-working spaces today like WeWork) in Eastern Ontario with 120 fully-furnished, totally equipped downtown offices and 44 more in the west end of Ottawa.
You could sign a lease and move in within an hour. It was a great business (which we sold before bidding for an NHL expansion franchise, the Ottawa Senators).
It was great for four main reasons:
1) it made money every month,
2) it operated at 92 to 96% occupancy,
3) if one tenant left out of a total of say 164 leases, it didn’t dent cashflow much (so we weren’t too dependent on any one tenant) and
4) many of our mini tenants grew into large leases in other parts of our commercial office and retail portfolio–it was like triple A ball, lots of players graduated to the BIGS.
Make sense so far?
Now, if you are a landlord and a realtor and you’re afraid of gutting your own tenant roster, don’t sweat it. Why? Because if you don’t do it, another realtor will happily harvest your tenants for you and you’ll get nothing. So, cannibalize your own portfolio before someone else does it.
You know the Golden Rule, right? Do unto others before they do unto you.
How stupid was it for MSM (main stream media) not to match services like Craigslist and Kijiji in the early days of the internet thinking thereby to protect their cash-cow–their classifieds–only to find out that there are no sacred cows. MSM is a lot smaller today and a lot less powerful after letting their primary source of revenues melt away.
How about the Yellow Pages losing out to Google? Ouch.
I was also in the mini storage biz (with a firm called Blue Heron Storage). Same deal. If one of our tiny mini storage tenants wanted their own industrial condo or warehouse, no problemo. We’d happily graduate them to the next level up.
It’s Pac-Man sure, but it’s also heads I win, and tails I win.
postscript: while you’re here, these are the buyer rep questions I ask folks who are residents in buildings I own to gauge if they’re ready to buy and, if so, what:
Buying a house is a big undertaking. Can you try answering a few questions for us so we can help point you in the right direction?
-what price range are you looking at?
-where would you like to live?
-what type of home do you want: single-family detached, half double, townhome, condo, apartment, rural, farm, other?
-would you consider building a home?
-if so, where—rural or urban?
-what factors are important to you on a scale from 1 (not very important) to 5 (very important): close to schools/universities/colleges, close to shopping, close to employment/where you work, walkable community, close to transit, close to major roads/highway, close to parks, close to hospitals and other services, close to airport, close to fitness club, close to bike and walking trails, close to other (please specify)
-how many people in your family?
-what are their ages?
-do you expect extended family members to live with you?
-if so, how many?
-do you want to have any rental income from say a basement apartment, in-law suite or backyard coach house?
-do you or any member of your family work from home or have a home workshop or office?
-if yes, how big is it?
-do you have any employees coming to the home?
-how important (again on a scale from 1 to 5) are: carport, garage, storage shed, garden plot, 0-step entry, treescape
-how many bedrooms do you want?
-how many bathrooms do you want?
-how much traffic and noise are you willing to put up with?
-do you want your home to face east, west, north or south or you don’t care?
-do you know what your credit score is? [you can get your credit score for free from creditkarma.ca]
-have you ever previously purchased a home?
-do you have a mortgage broker?
-do you have a realtor?
-do you have a real estate lawyer?
-how long do you plan to live in your home?
-how important is home technology and green tech to you?
-is there anything else you can think of that’ll help with your home search?
Try answering these as best you can and send it back to us…
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
ROYAL LePAGE Performance Realty broker
Ottawa Senators founder
-MAKING IMPOSSIBLE POSSIBLE
-FREEDOM VIA REAL ESTATE INVESTMENT AND PB4L, PERSONAL BUSINESS FOR LIFE
-FEHAJ, FOR EVERY HOME A JOB
-MAKE YOUR HOME WORK FOR YOU, INSTEAD OF YOU WORKING FOR IT
-HIGHER ROI NOT JUST FOR OWNERS AND INVESTORS, BUT FOR TENANTS, GUESTS, VISITORS, NEIGHBORHOODS, COMMUNITIES, TOWNS, VILLAGES, AND CITIES TOO
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