There's an old saying, "If you build a better mousetrap, the world will beat a path to your door." That's just not true anymore. There are plenty of wonderful mousetraps out there that no one will ever buy because nobody knows they exist.

And you don't have to mount some expensive marketing campaign to get the word out. The truth is there are plenty of ways to market that mousetrap even if the only thing in your pocket is lint.

Cash flow is the lifeblood of any enterprise from a street stall, corner shop or charity, right through to a trans-national conglomerate. When cash flow plummets (or isn't there right from the word go), then the enterprise faces, at best, challenging times.

The same applies to property investment. We may delude ourselves into thinking that as long as capital growth is attractive, we are willing to take a hiding on cash flow. Many people don't even mind having negative cash flow (being negatively geared) if the capital growth is high enough. However, usually these people seek to offset their operating loss (the cash flow loss) against other earned income, thereby reducing their overall tax-liability. In effect, the government subsidizes their loss from the property. The point to note, however, is that overall, these people still have a healthy cash flow situation. If the only income you have is from property, and it is negative, then you need to take action.

Even if you are not negatively geared, improving your cash flow can have the wonderfully beneficial effect of improving your current account and increasing your reserves, enabling you to reduce debt, buy more property, or simply spend more money.

Let's then explore some of the measures you may take to improve your cash flow.

The most obvious way of increasing your cash flow with property investment is to increase the rent. This need not necessarily make you a rapacious racketeer! Frequently, properties are acquired with low rents in place (in other words, these rentals are already well below market rentals for similar properties in a similar area). Increasing the rent under these circumstances to market levels does not make you a bad person.

Similarly, the rents may have been at market levels when you acquired the property, but over time, you have simply neglected to monitor market rental trends, and now, eight years later, you are 50% below market rentals. Bringing the rent up to market levels would be a very smart move.

As a realtor, you’re seen as a trusted advisor and often called upon to give advice on various aspects concerning the housing industry. What happens, though, when you get clients whose real estate interests – investors, for example -- are beyond your scope of knowledge?

You bone up. You ask fellow colleagues. You read everything you can get your hands on. And you learn. So in an effort to broaden your horizons and in honour of real estate investors everywhere, we put together this primer on mistakes to avoid when renting out properties.

As a real estate investor and landlord, Jarek Bucholc believes one of the biggest mistakes investors, especially green investors, make is miscalculating the expenses generated by their investment property. Landlords often overlook expenses such as property taxes, insurance, maintenance and the cost of having no rental income because their rental unit is vacant.

Bucholc advises investors to be prepared for such inevitabilities as a leaky roof or a tenant who skips town by thinking ahead. Landlords should plan or put aside two month’s rent for the yearly maintenance of their property, he says. Also, be aware that tenants tend to move on average about once a year so you could be faced with no income for a period of time.

He also recommends that landlords not subsidize their investments by using their own money or outside income to pay for the investment. The mortgage, maintenance costs and taxes should be covered by the rent.While doing that can be tough in markets with high and rising values, Bucholc says inexperienced investors will do so with the hope that their property rises in value. “Often, people want to rent out their properties out of desperation and then they get in trouble because they haven’t prepared for these expenses,” says Bucholc, a Calgary resident and founder of Canada Real Estate Investors Club (www.canadareic.com). A common mistake made by landlord is that they conduct sloppy or inappropriate screenings of potential tenants. Not only should you get a credit check and previous landlord check but to be extra safe think about getting a criminal check as well. To suss out whether a renter is serious or not, consider charging them a $20 fee for the credit check.“If they pay the $20 they are serious about renting,” Bucholc says. “If they don’t, they’re tire kickers.”

If you’re suspicious that the renter lied and has given you a friend’s phone number instead of a previous landlord’s try this tip, advises Bucholc. Call the number and ask if they have any properties or apartments for rent. That ought to trip up anyone who isn’t a legitimate landlord.

Landlords also need to be sticklers when it comes to drawing up contracts with their tenants. Will you charge late fees when a tenant is late paying their rent? Do you want your tenants to be responsible for taking their garbage to the curb side? Should you inform tenants of the need to obtain contents insurance? Again, Bucholc recommends investors prepare for any and all inevitabilities.“This is to avoid future conflicts, misunderstandings and possible court cases,” he says. “Try to cover every possible situation where the tenant can say I didn’t know about that or I didn’t think I had to do that.”

Hamilton realtor Robert Morrow, who specializes in buying and selling student housing (www.emailhomes.ca/studenthousing.php), says the lack of knowledge of the Landlord Tenant Act causes him great dismay.  He believes the Act is designed to favour the tenant but a good landlord--who follows the rules to the letter--will always be treated fairly both by the tenants and the legal system.“I see a lot of investors cutting corners to save money short term,” Morrow says. “In the long term, however, they usually lose money via unhappy and therefore transient tenants, or expensive repairs once ordered by the court.”

One big mistake landlords make is that they are tardy when responding to tenant concerns and building maintenance issues. Morrow recommends investors treat their property as if they were living in it and wanting to fully enjoy the space.“Does that make it harder to earn profit?” he asks. “Sometimes in the short term, yes. But long term, you won't have as much turnover and the quality of tenant will be superior. One conclusion to draw here is that short term rental investment is not a good idea. The investor should consider a 5 to 10 year investment minimal to be profitable.”

When it comes to student housing, aesthetics take a back seat to functionality. Meeting fire and safety codes is much more pressing than the colour of the living room. But often investors don’t recognize this and end up prettying up their investment property not for the 20-year-old student who will be renting there, but for themselves. That is a mistake, says Morrow.“As long as the stove top works, the fridge is large and relatively clean; the kitchen has utensils, dishes, and cookware supplied; the bathrooms are updated (to accommodate up to 8 people showering every day); and there is common space to put a TV for gaming--and of course, the internet is lightning fast-- then the student tenants are happy to pay top dollar rents.”

Oftentimes, parents purchase student homes for their own kids who are attending college or university and they upgrade the homes to their own living standards. This is also a mistake as professional investors see no value in the improvements and won’t pay extra for them. Unless they sell to another parent, chances are they will lose what they spent on renovations.

Other common errors made by real estate investors centre on inappropriate inspections. When it comes to assessing the damage to a rental unit it’s important to have clear evidence and nothing is better and more binding than photographs, says Bucholc. Make sure your tenant signs the inspection sheet, which in effect, means they’ve agreed to the damages found and any dents and scratches made subsequently will be on their tab.

Make sure your unit is rental ready when potential tenants are viewing it. Bucholc has actually seen a property that had dog poop on the floor. You want it to be clean and tidy otherwise how can you expect tenants to take pride in their home?

“If it’s dirty that builds bad karma,” he says, “and the tenant will not take care of the house and will not consider it as their own home.”When marketing your rental property, go outside of your immediate area to market it. Remember, says Bucholc, as a landlord, you’re in the relocation business.

Don’t overprice your rental unit as – surprise, surprise – no one will want it. And even if you do find a tenant, they won’t last. You’re driving them out with high-priced rents.Finally, says Bucholc, don’t rent to family or friends.“This is business,” he says. “If they have a problem and can’t pay the rent it’s hard to say no to family and friends.  Don’t mix business with pleasure.”

What advice do you offer your clients who want to invest in real estate? Do you have any pointers that we missed? Please share them.

Source: propertywire.ca

In order to be able to negotiate a perfect real estate deal you must make sure that your negotiation proceeds in line with the under mentioned principles.

1. Always get the other side to commit first - When you are into serious negotiations you will be better placed if you steer the talks in a direction that makes the other party commit their position before you are required to make a commitment from your side. There are many valid reasons for this. You may find their first quote more advantageous than the offer you intend making from your side. You gain the advantage of being aware of their position before disclosing your position. It allows you to split the difference between your price and their price and close the deal on terms suited to your advantage rather than put yourself in a position that lets the other party gain control over the negotiations to let it end to their advantage by revealing your position first.

2. Always make sure that your first offer is less than what you are finally prepared to pay- When negotiations reach a stage where you are required to make an offer be careful to quote a price that is below the actual price that you are willing to pay. This will ensure that you have enough space for bargaining to close the deal.

3. Maintain a dumb facade- This is important as people feel comfortable when dealing with others less intelligent than themselves in matters concerning real estate. In short, the dumber you appear, the greater are your chances of clinching the deal. Therefore avoid projecting a personality that can be credited with a sharp intellect. In fact, appearing helpless may very advantageous for you in a real estate negotiation.

4. Downplay your authority level -When things appear to be heading for a deadlock on some particular point you can stall the negotiations to prevent them reaching a no return position by saying that you cannot take a decision all by yourself and would need to check on the issue with your wife/other family members or your partner. This may be more acceptable to the other party as it is easier to accept that you are helpless in doing something rather than take your unwillingness to do it.

5. Try to know the seller's deadlines and use them to your advantage during negotiations- The other party may be under pressure of certain deadlines, such as a time deadline because he wants to move his child to some school at a new location and wants everything finished before the commencement of the new school semester. As the seller's deadline approaches, he will want the deal closed. This is when you press to get advantage important for you. For example, price may be your highest priority in the deal. Now your quoted price will invariably be subject to inspections of the property, which usually takes a lot of time. Therefore, you should work on all aspects of the deal, but let the inspections linger. When the seller wants to close, you can tell him that you are ready to close the deal in the absence of the inspections but the price will have to be readjusted and quoted the price you want to pay. More often than not, the seller will agree under pressure of meeting his deadline.

Networking is an important skill in any business if the goal is a profitable business. The same holds true for real estate investing, at least on behalf of those who are serious about pursuing real estate investing as a business rather than a part time hobby. Either way, in all honesty, the ability to network for potential business partners, investors, and join ventures along the way can be critical to providing the type of diversity your real estate portfolio needs in order to be solid in a market that is nothing short of volatile.

 With the current situation of  lending market, networking has become more essential than ever before for real estate investors. Networking can not only lead you to potential properties that might prove profitable but also to people who need your specific specialty or may be looking for a property you have access to. Even if you share your profits, as long as you are also sharing the workload, you can find a very favorable working environment when you join someone else in a venture such as wholesaling properties, offering lease options, or even working together on a quick flip situation (though caution and clearly defined parameters are best in any of these situations it is critical when flipping a property).

Whenever you have the opportunity to network with other real estate investors it is in your best interest to do so. Don't limit yourself to only networking with those who engage in the same sort of investing you are most comfortable with as diversity is important to all real estate portfolios and you never know when an ideal flip will come across your desk that you can pass along, while making a bit of a profit from the transaction of course (to a flipper) or a perfect buy and hold unit will catch the eye of someone who generally purchases properties with the intent of flipping. Contacts work both ways and you can all stand to profit from the eyes and ears of others, whether as a joint venture, equity sharing project, or simply acting as business partners on specific projects for quicker results and an extra set of hands and eyes on the job.

If you aren't a part of a real estate investors networking group in your area, take the time to find them and join. The contacts you will make are invaluable if you intend to make real estate investing your primary business now or hope to make it your primary source of income in the future. Join as many groups as possible today (locally and within a reasonable driving distance) and see what a difference they make in the volume and scope of your real estate investing business.

If you have decided that a mortgage broker will best suit your buying needs, you will want to ensure that you know how to make your broker work for you. Getting the most from your mortgage broker is relatively easy, but you must make sure to ask all the right questions.

To begin, let's talk about your money. You have probably heard about those dishonest brokers that manage to wrangle extra fees and rates from unsuspecting customers - don't wind up one of these victims. Instead, make sure that you are getting the most from your mortgage broker by asking them to list all fees up front. This way, if your broker is adding on a few fees here and there, you will have evidence that the new fees are unjust.

Also, make sure that your broker provides you with a detailed listing of all the lenders that they work with. At this point, go over the list of lenders and make sure that you are not missing out on a loan that you broker does not have access to. Of course, during this time you should also be aware of any lenders that your broker is constantly trying to thrust in your face, which should automatically be a sign that you need to switch brokers.

Once you are sure that all fees and lenders are disclosed from the beginning, treat your broker in much the same way that you would expect a psychologist to treat you - in short, make your broker match your loan personality to that of a great bargain. Some brokers are simply lazy, and they have no interest in spending the time to make sure that you needs are fully met. If you choose to allow a broker to simply select a lender for you without asking you any detailed questions, you are not getting the most from your mortgage broker.

When it comes down to it, your mortgage broker is really working for two people: yourself, and a lender. Lenders generally tend to have much more to offer a broker than an individual does, but that doesn't mean that there are some very reputable brokers out there. You will simply have to shop around when it comes to finding a broker, and when you do find one make sure that they work to your advantage.

Getting the most from your mortgage broker is not a difficult task, but it is one that requires a bit of know-how. Remember that your mortgage broker will be finding you a loan that will likely stick with you for some time, so make sure that your broker really knows what you need.