In this episode, RevNYou team member and host Doug Meyers interviews a fellow RevNYou Team Member and young-gun real estate investor: Karysa Brossoit.
At the youthful age of 25, Karysa has worked her way into an ownership position in a multi-million dollar portfolio based on Vancouver Island in Port Alberni, with a couple more properties outside of Edmonton as well.
From sports, to painting, to being outdoors, Karysa enjoys everything life has to offer. She credits the power of real estate investing for allowing her to live the lifestyle that she has created and continues to refine. To quote Karysa “The best thing about being a real estate investor is when the weather is beautiful I can head outside, chase the sun and enjoy it, even if it’s a Wednesday!”
Karysa knew right out of high school that she didn’t like the idea of picking a career, working a 9-5 job, with set hours to get paid a set amount of money for the rest of her life. After analyzing the lifestyle associated with a typical career, she realized she didn’t want to work her life away and not have time to do all the things she truly wanted to be doing.
She was observant enough to discover real estate investing through the action of friends and family close to her and decided to dive into it, becoming a skilled renovator, property manager, and investor herself.
It is with that background that we’re excited to interview her for this episode of the podcast, as we discuss:
Karysa’s real estate investing story and how she got started tips for what kinds of renovations are the best return-on-time and money for do-it-yourself renovation investors the importance of continually educating yourself the power of networking pushing through the inevitable ups-and-downs and trying times in real estate insights on developing the mindset of an investor resources for aspiring new real estate investors Sharing her story in the podcast platform was certainly a step way outside of Karysa’s comfort zone, which itself is a testament to her willingness to push herself to try new things even if they may be a little intimidating. This willingness to push the boundaries of the comfort zone is something we can all take note of and apply in our own lives.
Having created and now experiencing the results and lifestyle she has, we hope you enjoy and learn from this conversation with another successful real estate investor and RevNYou team member: Karysa Brossoit.
Thank you for listening and we look forward to welcoming you to the RevNYou With Real Estate Community!
I am a little embarrassed to admit it, but this project has been a GIANT pain in my butt.
I’m not a brand new renovator. In fact, I can’t even count how many kitchens, bathrooms and other parts of a house we’ve renovated since we started buying rental properties in 2001. It’s in the double digits. So I should be able to run a smooth operation … and if I had been documenting the last couple of projects for you, I would have had very little lessons to share. They went extremely smoothly with on time and on budget delivery and minimal hassles.
This project is not going nearly as well.
Every time I go to the house where we’re adding a legal suite (which these days is daily – and you’ll see why in the second video I have for you today), I find something that makes me say very bad words.
On the bright side, we’re on time completely with the one unit and only a few days behind on the other. I’ve had to eliminate some updates I wanted to do from my plans, but with those cut out, I’m not far off my budget either. So it’s not a failure, it’s just been irritating. For you, however, it’s been a great one to learn some things to hopefully save you time, money and annoyance on your renovation projects.
If you watch no other videos than these ones in my weekly series on Adding a Legal Suite, you’ll learn a few of the big lessons I’ve (re)learned in this project. Enjoy!
Week 8 of Adding a Legal Suite – Want to save lots of money? Buy your materials on sale … but beware!
Week 9 of Adding a Legal Suite – Not ready to check in on your project every day? Then a big renovation project probably isn’t for you.
Coming up in the next two weeks we’re cleaning and getting the units ready to show to prospective tenants.
At the same time as I am doing all of that, Dave is getting things organized to finance the property with a bank so we can pull all the cash out (or most of it!). In one of the earlier videos I explained that the key strategy we use to fund these renovations is to buy with cash and finance out once the renovation is complete.
If you’re struggling to find a deal that will cash flow in your area then it might be time that we let you in on one of the biggest secrets in real estate investing:
You don’t FIND great real estate deals – you CREATE them.
There are plenty of ways to create value and put together a great deal. We do it by mixing a variety of strategies from finding a motivated seller and solving their biggest problem to renovating right through to adding a legal suite to the property.
One of the biggest questions that we get is WHAT IS A LEGAL SUITE and WHY PUT IN A LEGAL SUITE vs an ILLEGAL SUITE.
A legal suite is when you add a rental unit to a property following the building codes of the city you’re in and doing everything from electrical to plumbing to framing with a permit. As each step in the process gets complete an inspection will be completed to make sure that it all meets the building codes for your area. An illegal suite is when you put in the rental unit without the permits.
If you aren’t sure what is involved pop into your city building permits office. In Nanaimo the city office has friendly and helpful staff who are ready to explain what is involved and what you need to do to get your permit.
It is definitely more cost and more hassle to put in a legal suite but there are a lot of reasons to do it. In the latest video from my series on adding a suite to a property I explain why we prefer to add a legal suite (and what all the other other suite types are form authorized to illegal).
Why We Add Legal vs Illegal Suites in Rental Properties
As I discussed in the video there are some really important reasons why we prefer to add legal suites to our rental properties. From risk reduction right through to better tenant relationships – we find it’s worth the extra expense. Another thing that is usually worth the extra expense when adding suites to properties is creating laundry facilities for each suite. Knowing that it’s the best situation to have in-suite laundry for each unit is simple but figuring out where to put it can be a little more complicated. I shot a different video in week 3 of our project to discuss how we solved the problem for both units in the house.
Where to Put Laundry in Rental Units
Every week I’m shooting a new video as we work on the suite. If you want to make sure you catch all the videos make sure you’re signed up for our Real Estate Investment Newsletter.
One way to boost your rental income on a property is to add a suite to a house.
The cost of adding a suite is often a small investment compared to the returns it generates. When you add a legal suite you’ll often find it also adds a ton of value to the property. The hard part, we’ve discovered, is finding a house where it’s going to be relatively cost effective to add the suite.
We searched for months to find a property where it made sense for us to add a legal suite. The perfect property for suiting finally found us. Someone who had received our yellow letter several years ago had saved the letter and just contacted us now – ready to sell her property.
We thought it was PERFECT for suiting. It was in our target area, untouched since it was built in 1980, and fit our criteria for adding a suite. We closed on it last week and demolition is nearly complete.
We’re chronicling the adventure for you in a video series.
In the first video I explain the 5 things to look for when you add a suite to a house.
You’ll have to watch the video for all the details, but the 5 things we look for when we’re searching for a house to add a legal suite to are:
Entrance Points: How do the tenants get into the suite and the main home?
Heating Sources: Is there a furnace that has ducts that need to be closed off or is it baseboard heating?
Flow of the property and how the suite can flow when added in: So many suites lack flow because it’s awkward to put it into an existing home. Considering how it’s going to flow is important which is why we are removing 3 walls in this project and adding one.
Where are your plumbing and electrical systems relative to where you’re putting in the kitchen, appliances and any bathroom changes you need to make. One of the most significant costs of suiting revolves around electrical labour. The easier it is to separate the units the less you’ll pay. And can the electrical system handle the added load or does it need more?
Where will the laundry be for each suite?
There is more to consider, like purchase price, rents, location and condition of the property but generally speaking if those things are great (And in this case this property is in our #1 focus area and is in great shape – just needs cosmetic love) then the other items are the important ones on our checklist for finding a property to add a legal suite to.
Buying a money pit is one of my greatest fears. It’s a fear I have because we’ve done it.
Looking back there were so many red flags about this triplex in Toronto that we ignored because we had a motivated seller on our hands. We had very little money when we purchased this property but the seller pulled some strings with his bank, our realtor gave us a private loan, and we scraped up the rest of the funds we needed to do the deal.
The property held together ok for about a year but then everything began to unravel. And over time we’ve had to deal with many surprises:
Clay pipes that had totally disintegrated leaving only tree roots to guide the sewage and water out of the house;
Telephone wires that had been used as electrical wires deep within the walls … which began to catch on fire before they shorted out completely (took us $5,000 to find the problem and another $20,000 to fix it);
A leaky roof which is still not resolved even after having the roof redone; and
Shoddy bathroom renovations that had tile on top of tile and an elevated toilet done for no other reason than the person who did the work was lazy and cheap.
Unfortunately these were in addition to the things we had expected which included replacing the garage, landscaping the front and back yard and updating 2 of the 3 kitchens.
And when we tell people the stories they all smugly say “Well I guess you get all your houses inspected now don’t you?”
Sorry folks but we had that house professionally inspected too!! The reality is that inspections don’t tell you what’s going on behind the walls or beneath the surface of the home. All of the problems we mentioned above were not visible to the inspector. We knew the home needed some work but NONE of those things were identifiable by the inspector. I have already written about the red flags we should have recognized that would have told us to expect more surprises but the reality is that a home inspection doesn’t tell you everything about the condition of a home.
So why bother with a home inspector if they can’t find these problems? I am still a big fan of home inspections even if they aren’t going to tell me everything and here’s why:
Home inspectors know the kind of problems to look for in specific areas. For example, the house we just purchased has an oil tank and an oil furnace. That is our first. He explained the challenges, benefits and things to watch out for with an oil tank and oil furnace.
Home inspectors go through the home methodically and with a level of detail I just can’t tolerate. I was exhausted watching the home inspector test all the outlets and taps in the house we just had inspected.
The inspection report gives you an excellent starting point to plan any updates and renovations you might want to do. It also can identify other professionals you might want to bring in. Provides a learning opportunity for you. Every time I sit with an inspector or I read an inspection report I learn something. And now when I look at potential purchases I carry that knowledge with me.
The inspection report gives a lot of comfort to prospective tenant buyers when you are doing a rent to own.
There are other professionals you can hire to investigate the plumbing, electrical and furnace issues that may be lurking behind the walls. Plumbers have cameras they can send into the pipes to see what is going on. Electricians have ways to test the wiring and furnace folks have the right equipment and expertise to look inside a tank to tell you how much life it has left.
Now I’m not an inspection expert by any means but I can tell you the questions I ask an inspector. And if the inspector doesn’t know I try pretty hard to find out before I buy a house:What kind of wiring is in the home? If you have knob and tube wiring you’ll find it VERY difficult to get insurance when it’s a rental property so this is an important question.
Are the outlets properly grounded?
What is the water supply? Is it private or public? If it’s private there are a lot of other issues to sort out like the location of the well, tank size and condition. These are issues I prefer to avoid.
Is the piping copper or galvanized or PVC? Galvanized pipes were used a long time ago and can cause you some grief as they corrode and have been said to leak lead into the water. Copper is probably ideal but I know PVC is cheaper and easier to work with. I am far from a plumbing expert though!
Is the sewage private or public? As with the water source I am not a fan of dealing with septic tanks so I prefer public sewage disposal.
Hot water tank type and condition?
Heating source and it’s condition?
Strength and life of the foundation?
Any drainage issues and/or water stains in the crawlspace/basement?
Roof type and number of years left?
The inspection report covers way more than these issues but these are the issues I concern myself with once I know the house has good bones. In other words, there are no signs of moisture, the foundation is good and the structure of the home is solid.
These are the issues that arose with our money pit. And to this day we have yet to solve the leaking roof problem. Everyone says it’s someone else’s issue … and all we know is that we’ve had to redo the ceiling in one of the rooms twice already and we still don’t have the source of the water identified!
But we love our money pit! It’s in such a high demand rental area that we’ve had bidding wars over our basement suite! It’s steps from a subway station, less than 10 blocks from the University of Toronto, minutes from a major hospital and it’s less than 5km to downtown Toronto. This one single property generates nearly $5,000 per month in rent!! And now that we’ve replaced nearly every major piece of the home we just have to find that darn leak and we’ll be sitting on some seriously wonderful positive cash flow each and every month from this place.
And thanks to this triplex we’ve learned what you can and cannot expect an inspector to know. And we’ve become very savvy buyers … hope you will too!
I was so excited to get out there and build up my positive cashflow from rental properties. Fresh from a real estate investing course from one of those late night gurus, I was motivated, armed and very dangerous. I bought a triplex (Money Pit!) in Niagara Falls, ON for $113,000. I got it cheap and I put down only 10% because the vendor was willing to give me a promissory note for a small loan (there weren’t 90% loan-to-value mortgages from lenders like there are now). They teach you at these courses to find the motivated sellers that will “hold paper” on the property, and I found one!
It was an older building with tenants on disability or other forms of government support. It looked a little rough, but it seemed to only need cosmetic touch ups. When I bought it, the numbers indicated that I would earn about $400/month after expenses and financing so I figured that I would be able to afford the odd repair.
As I set out painting, replacing carpets and putting in things like new doors, I uncovered some serious problems such as:
a leaky roof
electrical wiring was not safe
plumbing was old and falling apart
mould in the bathrooms
rotten wood.
On top of all of that, I received complaints regularly from a tenant that thought everything should be fixed overnight. Inside his unit I discovered a complete mess. He’d destroyed the walls, had cats that had urinated throughout his unit and destroyed all the window ledges. This tenant eventually called the city of Niagara Falls who then inspected the unit and ordered me to make a variety of repairs to his suite – most of which were directly caused by the tenant or his cats! Because the laws in Ontario do not allow landlords to collect a damage deposit, the only recourse is to use last month’s rent or take the tenant to Small Claims Court to recoup your costs. It’s just not worth the effort to take a tenant with no money to court.
After weighing my options (and my costs and time), I decided rather than spending several thousand dollars repairing the money pit, I would try to sell it “as is”. If you have ever seen “as is” in a sales listing, be careful. This often means there are conditions of the building that are less than stellar and require a thorough inspection and/or repair.
Because I had the orders from the city to repair the problems with the unit, and because I was stressed out dealing with the tenants, I sold the property for $104,000. Yes, that’s $9,000 less than I what I had paid 2 years earlier in an appreciating market and after spending about $10,000 in repairs. To throw even more money away, I had to pay legal fees and the sales commission to my realtor. All in all, I lost about $25,000 in 2 years! That’s why I called it the Anti Investment.
The good news?
* A good portion of the loss was a tax write-off; * I will NEVER purchase a property like that again; * Hopefully you will learn from my mistake and be very careful in your future purchases.
Although I lost a considerable amount of money, getting rid of the property at a loss (and as fast as possible) was the best thing to do because I got my life back. The stress of dealing with money pit properties (and problematic tenants) is so draining. l was ecstatic once it sold. I could breathe again – even if my wallet was a LOT lighter!
Buying a money pit is one of my greatest fears. It’s a fear I have because we’ve done it.