Investing in real estate without a down payment? A warning !

With rising house prices, the formation of ” coaches real estate” have become as popular as bitcoin tricks to get rich. Typing the words ” trainer Real Estate Canada” on Google, we get over four million results. You will notice at the top of the list a number of self-taught people whose practices are not controlled by official oversight bodies and established institutions. Even in such a successful industry, don’t let your guard down. It is better to have significant liquidity and be accompanied by trusted professionals.

The story of Bertrand, 38, a trucking company employee and father of two young children, certainly serves as a cautionary tale to those who believe that investing in real estate is anything but rocket science. (All potentially identifying information has been redacted to keep the participants anonymous, but the story is real.)

When I met him 10 years ago, Bertrand had just got his job and was in seventh heaven. Finally a permanent position with “a salary that is not worse,” as he said. Salary around $40,000, overtime pay, insurance, pension fund, etc. In short, a bit of stability after ten years of odd jobs for this man who dropped out of school at 16.

In 2016, Bertrand started reading books written by inspirational motivators. He revels in the lessons of Tony Robbins, the American who built an empire of thirty companies and a net worth of over half a billion dollars. Those owned by Robert T. Kiyosaki, author Rich dad, poor dadand Rhonda Byrne, whose bestselling book Secret translated into 52 languages. The success of these motivators robbed Bertrand of all opportunities. He dreams of a villa in the West Indies, a Porsche Cayenne and a Veuve Clicquot.

New gurus

Bertrand is in such a mood when he sees a Facebook ad from Vicki, a motivational speaker who recently turned to real estate investing. His suggestion: to invest in real estate without a down payment with Vicky and become financially independent in less than three years. He clicks on a link leading to books sold through the site.

He has just started the mechanism of a well-oiled marketing machine. Obviously, Vicki is a master of the art of the hook (teasers), search engine optimization strategies, motivated sales and funnels.

Interest rates 75%

The first book on the mentality needed to succeed is only $19.99. But soon Bertrand will buy at a bargain price in a hasty resale (i.e. somersault) at a price of $139.99. In a week there will be a training in 12 videos to become ” Wizard Real Estate Negotiator” for “five simple payments of $499.95,” as they say. He does not give the impression that he is consuming, but rather advises and professionally accompanies in order to succeed in this area.

A month later, Bertrand signed up for a weekend of conferences and seminars on real estate investment that Vicki and her business partners were holding in Lawrence. He’ll come out of it nearly $3,000 drained, but pumped up and motivated like never before. He finally feels ready to experiment with his first acquisition: a cannabis-turned-uninhabitable triplex spotted over the weekend. ” Big deal ”, tell him “experts”!

Everything is calculated, courses coaches often more expensive and riskier than vocational or college education recognized by the Organisme d’autoréglementation du Courtage Immobilier du Québec (OACIQ) and the Quebec Ministry of Education. The last one, which lasts seven months, covers real estate law, real estate mathematics, brokerage law, valuation, business management and construction basics. In addition, he may qualify for state financial assistance.

For a down payment, trainer in financing met this weekend, advises Bertrand to take out a $100,000 temporary loan from a private lender, who, as he later learns from a friend, gives Vicki an interest on every client she introduces to him – at 32% per annum. rather than withdraw money from their RRSP.

The lender may offer such an interest rate, but since it is more than 22 percentage points higher than the official discount rate of the Bank of Canada, it must have approval from the Consumer Protection Authority. Whether or not the lender has this permission, the borrower must still be able to repay the debt.

Before doing business with private lenders, you should read the warnings of the Office de la Protection du Consommateur. And contact official mortgage experts, mortgage brokers. Their training is supervised by the Autorité des Marchés financiers.

“I already thought that the interest rate of 32% was quite high, but in the end it turned out to be much higher: 75%. With the costs of file study, administration and insurance, this bridge [prêt à court terme] added $75,000 to the $100,000 I borrowed,” Bertrand says today. And I had to get it all back in less than a year. »

Though ” coaches en rénos” told him on that famous weekend, he had failed to repair the triplex in less than six months and make the expected profit of $200,000. Overpricing, buying without verification or legal guarantee, labor shortages, and the high cost of materials needed to furnish his triplex prevented him from profiting from his financial hole as he describes it today. And the height Vicki doesn’t call me back.”

To pay off his creditor, Bertrand emptied his RRSP and TFSA, his wife’s RESP, and his children. His dream of building housing has evaporated. He recently made an offer to a consumer to avoid bankruptcy. To get there, he has to go to the food bank in his area once a month.

And became a tenant again.

Bertrand did not have the financial resources to succeed in such an adventure. Since Vicki’s work is not controlled by the Order of Chartered Professional Accountants of Quebec, the Autorité des Marchés financiers or the Organisme d’autoréglementation du Courtage Immobilier du Québec, he had no opportunity to seek help.

Before you take an online course that promises you “get rich quick”, you need to do some research. There are dozens of good, friendly trainers with credible certifications. When you’re careful, you’ll find engineers, CPAs, CPAs, notaries, mortgage and real estate brokers… who have the experience and structure to help you and act on your behalf. Also, and not least, these professionals carry multi-million dollar liability insurance in the event of errors or omissions.

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