I am in a unique position – as well as being the editor and content manager of Real Estate Weekly newspaper and REW.ca, I am also a would-be Vancouver real estate investor.
I am in the fortunate position of having a good down payment from inheritance. And of course, because of my job, I have great contacts to help me land the perfect rental unit and find a great tenant. Otherwise, I am subject to the same highs, lows and vagaries of the property-purchasing process as all our readers.
Here I chronicle my journey and share all the lessons I learn along the way. I promise not to hold anything back, although names will be changed for anonymity!
In parts one and two, I recounted the first stages in my process of becoming a real estate investor – getting financing in place and then starting to find and put offers in on condos. The latter explained that I was having a hard time with so many people vying for so many units, in way-over-asking multiple-bid scenarios, and I had put in several offers with no success.
This week, I’m very happy to report that I’ve had an offer accepted! It’s on a small studio in the heart of downtown, in a seven-year-old building with great amenities, and a tenant already in place.
So then, why was this offer accepted where the others weren’t? Well, it’s certainly not because I bid a huge amount over the asking price.
With this particular unit, it suited a real estate investor more than a home-hunter, as there was already a tenant in situ (and you have to give tenants three months’ notice and pay their last month’s rent if you’re going to evict them). So that cuts out a certain amount of competition from other buyers.
The current owners are overseas investors who are clearly just looking to offload the unit for whatever reason, rather than being home sellers who are looking to buy another local property – so that likely made them a bit more easygoing, in terms of what they would sell the place for.
Another factor was certainly that it’s a small studio, just shy of 500 square feet, and not especially well furnished currently (although, smartly furnished and with a frosted-glass sliding wall in place, it could be a chic little one-bed). In fact, at the time of viewing the property, I was quite indifferent about putting in an offer at all, as I didn’t find the unit especially inspiring. But I also knew that at a certain price, the financials made sense, considering the current rental income. And my agent Bob and I scoured the strata documents and found the building to be in great shape, with a huge contingency fund.
My agent Bob and I had settled on the price that would make it worth an offer, and waited for the bid deadline. Just ahead of time, Bob called the listing agent to find out if any other offers had been placed (the listing agent is legally obliged to divulge this information). We discovered there were no other offers yet on the table, although the agent was expecting two others by deadline.
However, interestingly, the listing agent also revealed to Bob that the vendor would not be entertaining offers below the price that the unit directly above this one had sold for in December. So she pretty much gave away her hand on that.
With nothing to lose, and plenty more places to view if this didn’t pan out, Bob and I revised the sum down to the exact price the upstairs unit had sold for, and submitted it as a best and final offer. Bob explained to the listing agent that we felt the studio was worth the same as the upstairs unit because, even though the market has moved on since then, the upstairs unit had been owner-occupied (therefore much more desirable to home-hunters) whereas this one was tenanted.
We also took the risk of going in with a subject-free offer – best avoided if possible, but adding subjects would likely have been a deal-breaker, and it seemed to be relatively low-risk in this scenario. I was confident in the building, I was already pre-approved for a mortgage, and I didn’t feel that getting final approval for financing would be an issue as we weren’t offering a huge price.
In addition, we were also able to promise the quick turnaround the vendors wanted, just three weeks until closing. The vendors are going back overseas next week, and nobody is moving in or out, so there was no reason to delay.
And the offer was accepted! Phew…
Lessons learned from this stage in my journey?
- Investors need to be able to separate their buying choices from the kind of unit that they love and would like to live in themselves, and just stick with what works financially. As long as the math stacks up and the building is sound, that's all that matters. You're not going to live there.
- It would be a lot harder if I was looking to buy a place to call home, and I would almost certainly have to move to a cheaper area.
- It's not always about bidding the highest sum possible – sometimes it's about turning a particular situation to your advantage.
- Working with a real estate agent is absolutely essential – without Bob, I would have put in a higher offer for that unit, needlessly wasting many thousands of dollars.
Now comes the mortgage appraisal and approval (hopefully – otherwise I’m in trouble!) and all the closing documentation. Watch this space for how that goes…