Tips and Tricks for Successful Real Estate Investing
Angelo Aceto is a long-time client of Team Broady, an all-around great guy, and a very successful real estate investor. Angelo lives with his family in Beaconsfield, where he purchased his home in 2008. Not long after buying his principal residence, Angelo knew that he wanted to get into the investing side of things. Here we share Angelo's story as well as his tips and tricks for successful real estate investing.
Mark Broady: Angelo, can you tell me how you decided to purchase an income property?
Angelo Aceto: I grew up in a triplex that my parents owned. Our family lived in one of the units, and we rented out the other two apartments. That background might have influenced me, but my parents never went on to buy more buildings. That was just a practical and affordable solution for my parents to own their own property. I suppose I just knew that it was an idea worth exploring, and so I did.
M: Did you know what type of property you were looking for?
A: Yes, back in 2010, multiplexes in many parts of the city were still relatively affordable. It wasn't hard to find one that generated more revenue than it cost to own. So I had my sights set on finding a multi-family dwelling with at least 3 units or more.
M: Why 3 or units or more?
A: There's less risk over the long run than a single-family unit or even a duplex, for example. It's not a concern when the rental market is as hot as it is now because the chances of having an empty, unrented apartment are pretty slim. But when the rental market shifts and vacancy rates start to go up again - it's essential to have your revenue coming in from multiple sources. If you own a duplex and one apartment sits vacant - that's half your income gone... whereas if you own a 6-plex and you lose one tenant - you're only missing out on 17% of your revenue. That's important if you plan to be in the game for a long time.
M: What was your first acquisition?
A: I found a 6-plex in Verdun with excellent rents for that time and that location. It was still competitive, and I was up against at least 4 or 5 other buyers - but luckily, I came out on top. I was already pre-approved, and I remember that having my letter from the bank showing I had 20% cash gave me a lot of credibility than those who had nothing in writing. I think I paid $550,000 for it!
M: Where did you find the money to invest? How did you cover the down payment?
A: I had purchased my family home in Beaconsfield in 2008. By 2010 I knew that the market had gone up, so I asked the bank for a valuation. The value they gave me was high enough to allow me to refinance my mortgage. That provided me with enough equity for my down payment.
M: In other words, you didn't have to use any of your own money, is that correct?
A: Yes, that's correct. And that's one of my fundamental principles when it comes to investing... always leverage other people's money - never your own! M: So, what was your next investment after the 6-plex? A: Well, as you know, I kept a very close eye on the market in Verdun, which was experiencing great appreciation at that time, between 2010 and 2012. So after having owned the 6-plex for 2 years, I went to see my bank again to re-evaluate it. The numbers came back favourable, which allowed me to refinance the mortgage and provide me with enough equity for the down payment on another building.
M: That was when we found the 4-plex on 4th Ave. And if I recall correctly - that also sold in multiple offers.
A: That's right - but we managed to knock off quite a bit after the inspection. Hence, the purchase price ended up being pretty reasonable for the rental income it was generating. That building was also cash-flow positive from day one.
M: And you bought the 3rd building in 2018, but this time you went off-island. What was the reason for that?
A: Well, I was always looking for the next good deal in Verdun, but that time, the prices had risen so much that it became impossible to find a building that produced positive cash flow - unless you were putting 40% - 50% cash down. So we started looking elsewhere, and sure enough, there were still properties out there where the numbers made sense, so I picked up that 7-plex in Ile Perrot, and it's still doing quite well.
M: Have you had any problems collecting rents since the COVID-19 crisis hit?
A: Fortunately not. All of my tenants are still paying rent on time, except for one who I'm in the process of evicting. But that problem is not related to COVID-19 or a job loss... It's just a case of a bad apple, which is bound to happen from time to time.
M: Can you offer any parting advice for someone considering buying a multi-family dwelling?
A: My advice would be to follow these basic principles:
1. Never use your own money to invest
2. Be patient, study the market, and hire a good realtor.
3. Make sure the numbers make sense. Never try to fudge things in your favour.
4. Treat your tenants well. Show them respect
M: I'm glad you mentioned that last one. I think a lot of landlords make this mistake. It's important to remember that if they're your source of revenue, the more respect you show them, the more likely they are to show it back.
Are you thinking about getting into real estate investing? It can be challenging in today's seller's market. However, by speaking to a professional real estate broker, you'll have better chances of finding a building that works for you. So don't hesitate to contact Team Broady. We’ve helped several clients secure their first investment property and we understand exactly what it's like managing a rental too. Schedule your appointment today at 514-612-1127 or email us at firstname.lastname@example.org