What should I look for when structuring a deal?

You must know the area in which you are looking and also understand the market in that area. (Are you buying in a stable community? Is it a safe area? What is the age of the building?)

Take a quick glance and see if you can visualize some pros and cons with the structure. Take all of this into account and then run the numbers on the property. Use the full asking price and compare it to the expenses. Come up with how much the property produces every month and how much that property expenses every month. Don't forget to add in your financing on top of the expenses. Your answer should be a positive cash flow. How much positive? Well, in my opinion, at minimum a few hundred dollars with the expectation that it will increase over time. Anything more than a few hundred dollars is excellent. Keep in mind that while your mortgage is being paid off by the tenants - there is equity in each mortgage payment that you can look at as an unrealized gain for yourself. Your equity increases every mortgage payment.

In order to build wealth quickly - you'll want to find the deals where you make your profits at the time of purchase. Those deals are out there, even still today.

Can you give me an example of analyzing a deal?

One of the reasons why I wanted to make this website/blog is because when I started investing in real estate at the age of 24 I struggled to find the information I wanted on the internet. It seemed odd to me that with all of the "fad" over real estate investing I couldn't find detailed information on the web.

Here is my very first purchase. I hope you find it helpful.

At first I was hesitant since this place needed an extensive amount of work. It was sitting on the market for quite some time.

The building has 2 units in it (a Duplex). Each unit has an upstairs and a downstairs.

With an asking price of $199,000 I kept my eye on this property and was back and fourth with the idea of purchasing it and renting it out. Like I said above, it needed an extensive amount of work to make it an appealing rental to attract great tenants. The location was great. There was an old house being torn down near it and a new one being built so I thought that was great as it will eventually increase the prices of the surrounding houses. Since I am fairly handy and don't mind putting in some hard work I decided to go for it and buy it.
I ended up buying it for $170,000.00. Given the area in Grey & Bruce county I expected I could get $1100/mth for one apartment and $900/mth for the other apartment. This would be an income of $2000/mth.

Financing:

I used a big bank to finance the property. The interest rates were quite low (into the 2.5%-3% for fixed rates).
The bank had it appraised for $169,000. One thousand dollars less than what I paid for it.

This meant I can mortgage the house for 169,000 and I was out of pocket for the difference between the appraisal and I what I paid for it. In this case, an extra $1000. However, I was sure that it was worth more money than that. So, what I did was tell the bank what my plans were - to renovate the property and update it with new insulation, drywall, flooring, bathroom, natural gas furnace, etc. Therefore, what the bank gave me was a "Mortgage plus improvements".

What is a mortgage plus improvements? Well, the bank takes into account that you paid X-amount for the property and what your plans are to renovate and they will speculate what the new value will be. In this case the bank lent me around $200,000 to buy this property.

Since this was my first property I was able to use some of my RRSP's (up to 25K in Ontario with the option to repay of *16 years* or pay the tax on the money each year). Also, as a first time homebuyer in Ontario you do not have to pay land transfer fees. So, when it came time to close on the property I was given a cheque of around $20K. Kind of unique... since every other time you have to pay.

I spent the next 4-5 months renovating the first apartment doing a lot of the work myself. I quickly got it rented out for $1350/month plus utilities to a great tenant. Then I spent the next few months finishing the 2nd apartment. I had it rented out within a couple weeks of having it posted and was offered more than my asking price. A total of $2350.00 per month was my income after my renovations. How much money did I put into the renovation? Well, having done a lot of the work myself I spent roughly $70K. This takes the total price to $240,000.

If I remember correctly I put down 25,000 on the property, and got a mortgage plus improvements. We can look at this a couple ways but either way you look at it is this:

$25,000 down

around $20,000 given back to me.

$70,000 invested into the renovation

(70,000+25,000-20,000= $75,000 of my money)

Total of MY money into the deal: $75,000.

Total cash on cash return = $2350/mth x 12 months = $28,200

$28,200 / $75000 = 37.6% return (less taxes and expenses...see below)

28,200- 1473.86 - 2294.43 - 1691.28 - 250.13 = 18,059.08

18,059.08 / 75000 = 24% cash on cash return

The expenses I have with this property are:

Water/Sewer = 1473.86

Property tax = 2294.43

Insurance = 1691.28

Other = 250.13

Mortgage = 11,052.08

Interest =4431.22

Insurance, Property taxes, Water/Sewer bill (combined for both units), Other (the upkeep of the units, minimal since it was fully renovated).

I hope you found this useful for seeing how you can make a property work for you.

*Update*

I've recently had this property re-appraised for over $400,000.