Every investors greatest fear is buying a lemon of a property. A money pit if you will.
I made that mistakes way back when I started, we were offered what every investor wants, an off market deal! We made an offer well below what the seller’s Realtor thought they could get and boom. We got ourselves a money pit. The house had a log foundation, the driveway was sloped to direct water into the basement window and onto the dirt floor of the cellar.
The water that came out of the taps was brown time to time… I learned a lot from that house.
Mistake #1 - we didn’t get an inspection. The brown tap water is a symptom of galvanized steel plumbing. An old type of plumbing known to leak hence today’s insurance companies I use won’t insure it, hence you find it, you better have a plan to replace. No insurance equals no mortgage.
So if you were going to renovate a house with galvanized steel would you get permits and update the plumbing to today’s standards when renovating the bathrooms and kitchen or would you leave the old plumbing and just replace the bathroom and kitchen?
Well as mastermind member of mine, let’s call him Brian, called me and asked my opinion. He had an accepted offer conditional on home inspection, on a nicely renovated property BUT the home inspector found some improper electrical and the bathroom and kitchen fixtures were connected to galvanized steel plumbing. The same stuff I mentioned earlier that insurance companies will not insure. There were no permits taken out obviously.
What would you do? You bought a house you thought would not need renovation with new kitchen and bathrooms now you find out the electrical is problematic and the plumbing all has to be redone. Doesn’t that feel like bait and switch?
I told Brian what I thought his options were:
A couple lessons here. Trust no ones’ renovations and workmanship, always get an inspection unless you plan on gutting the place anyways. Even brand new, I had my new construction houses in Brantford inspected, they had passed their electrical inspection but my inspector found a mistake in the arc fault circuit interrupter that should not have passed inspection. The seller fixed it at their expense. My inspector also pointed out how the step was missing off the rear patio door, something required to obtain an occupancy permit allowing people to actually move in.
Houses are a big investment, an ounce of prevention is worth a pound of cure. Get an inspection.
On the other side, when you renovate, don’t cut corners. You don’t want that as your reputation as the investor community is a tiny one.
As Warren Buffet said, It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
Our next Infinity Wealth Investment Network, or iWIN for short, meeting is here in Toronto on March 28th. If you’d like to come, you have to act fast as these events sell out.
You can grab your ticket here: https://iwinmonthly.com/optin
On to this week’s show!!
While my wife Cherry and I were on a cruise ship in the Caribbean working the whole time, we fit in a podcast with our new friends Kristy and Brady Mcdonald. With partners who contribute both the cash for down payment and renovation plus getting the mortgage, they have been able to acquire over 80 properties in just a few years. Some were flips so they only still own 60+ properties depending on when you talk to them.
Pay special attention on how they are able to manage both the acquisition, renovations and all those tenants. Also note the Mcdonalds now spend a lot of time on their 50 foot boat in Florida and the Bahamas cruising and exploring uninhabited islands. Their boat is called living the dream.
Kristy also survived a tragic boating accident as a teenager and lost her arm in the process. She’s no victim though as she practices a positive mindset.
Anyways, I give you Kristy and Brady Mcdonald.