The 8 Criteria for Successfully Executing The RWA Real Estate Investing Strategy

Daniel St. Jean

Daniel: If you have been following the REITE Club, you will know that Laurel and mine's preferred strategy has been rent to own and we have set up 51 rent to own deals. The last one actually was in July of last year. And at that point, looking at the market, I decided it was my interpretation that this is not the best market for a rent to own. So we stopped doing them and we were looking at another strategy. 

Then we remembered that back in 2013, when we lived in Ottawa, we came to Niagara on the lake because we wanted to buy a house pre-construction that was going to be finished in 2014 in time for us to move here because Laurel was going to start full-time college at the winery and viticulture program at the Niagara college in the fall. So we found the place. It was a nice development. We were looking at the last phase and we decided to buy a house. 

Then over the next couple of days, we realized as we looked at all what was happening around here and decided, you know what? This might be a good investment. Why don't we buy more? So we came back two days later and we bought the whole block. We bought 12 houses. So one for us and 11 for buy and hold. The type of houses here are called executive rental. So we did that. And then the houses were all finished in the summer of 2014. 

We rented them and we still own ours and three more. So we still own four houses here, but we sold the other eight. We bought them, we paid for them in the summer of 2014. We sold them in 2018-2019 made just north of a million dollars on the eight houses. So it was a pretty good deal. 

So, last summer when we decided we're not doing rent to own anymore. At least not until the market stabilizes, what could we do? And then we went back to this idea which had been very successful for us of buying pre-construction except this time we're doing something different.

 Now what I'm going to talk about here is not news but I'm presenting it in a different way. I call it the R and A strategy. When you talk Real Estate Investing you hear about RTO, you hear about BRRR about Flipping. Now you're going to hear a lot from us about the R and A strategy, which is "Reserve" and "Assign". The idea here is you find a project that meets those criteria or your criteria, but these are mine. And you reserve condos, you put down the deposit that they want. Then you sit back, you wait for them to build it. And 45 to 60 days before, it's time to close. You assign them in some cases at a substantial increase in price. And that's what we decided to do last fall. 

We met Jason Boccinfuso and he invited us to go to a condo development, just 10 minutes from where we live here in Niagara on the Lake. The development is right on the other side of the highway in Niagara Falls. It's called Claret on St. Paul and we went there with members of the club. It's a 120 unit building. And between all of us, we bought I believe 20 units or I should say, but we reserved 20 units. We ourselves reserved five of them. 

Now, how good a strategy can it be? 

Today in preparation for this, I got the people there in the sales department to send me the price list as of August 12, 2021. Only 10 penthouses are left and nine regular units, 19 out of 120. Everything else has been sold. 

So without going into all the details, one by one, let's just say that the five units that we reserved their value when we reserved them was $2,876,000. That's what those five units came up to and in the price list today, in other words, when Joe Public now goes to the sales office to buy one of those remaining units, those units are now worth $4,063,781. So what's gone up 41%, from early in November last year to today, less than a year later. So that's a difference of 1.2 million. That's not bad. Considering that all we did was put a down payment and nothing else. 

And they are just barely starting the construction. I was there last week. They are just going to start digging probably this week or next week. So it's already gone up 41% we've already made over a million dollars on this and they have not even started. You can't even see the building yet. As the building goes up, as it gets closer to being finished and as you can take people inside the units 60 days before closing, and they can look at the view from the balcony overlooking the golf course. These prices will keep going up. 

So that's what happens if you find some good opportunities and I use my criteria for example, and decide to use that strategy also on another note we reserved to and by the way, so Katherine you got one of these condos as well, right? In Claret?

Katherine: I do, It was actually my very first real estate investment deal.

Daniel: And the second one was where we also reserved two units and that is in Costa Rica.

Katherine: Yes.

Daniel: And in Costa Rica, I made the note here. So in Costa Rica, we paid roughly $142,000 US and today paying people are buying the same units, $177,000 US. So, it's gone up 25% in what, four months they haven't even started to build yet. 

So, I love this strategy. We're going to be doing a lot more. 

So my criteria for doing this RNA strategy. 

1. We need to like the location. So basically we ask ourselves, would we live here? Really, if I know what you're supposed to, not put your emotions into something like this, but I can't get excited about a building or a place or a location. If I go, I wouldn't live here or I wouldn't have my dog live here, then I'm not doing it. 
2. Do we like the building? So, in the case of Claret, we absolutely loved the location, loved the building. 
3. That developer has a good history and reputation because if that's not the case, everything else is going to just fall apart. 
4. The project is close to breaking ground. So, we reserved those condos in Niagara Falls last November, and they were starting to work on the lot, on the space there in June. And now they're going to start digging and the building's going to keep going up. So you want to know that all the studies are done. All the permits have been received because your money could be tied up there for a long time.

Katherine: I'm going to just jump in there Danielle, because those two points, number three and number four. When I met Jason, I already knew the initial property owner. What had gone through, what the processes were and all of that with Jason's reputation, his story was what started building that relationship. That's literally, I had no qualms about knowing that was the right fit for me, for my first real estate investment property. And it was because of Jason and because of the project, I checked off the points.

Daniel: 

5. The project will be completed within two and a half, three years. Probably at least once a week, I am offered a condo development project. And most of the time they're talking five years, six years. I'm sorry. So much can happen in five years. For me, five years is a long time and five years can turn into seven. I'm not interested, but when you go somewhere and they can show you the plan, at the most three years it's going to be done and I can get my money back, make my money, and then use it to invest somewhere else. That to me is an important criteria. 
6. There will be a clean assignment clause in the agreement. Now realize that the people who are coming up the street and buying a condo in that Niagara project do not have an assignment clause in their contract. We have an assignment clause in our contract because we came there as the REITE Club and the realtor, Jason and everybody else there knew that this was going to be, obviously if we buy five cars, if we reserve five condos, we're not going to live in all five of them. So we need a clean assignment clause. What do I mean by clean? Just recently, we're looking at the condo project in Kelowna. They're building three towers. So, right now they're selling units and the first tower, there is an assignment clause, but guess what? You can only assign your unit once all the units and tower two and tower three have been sold, which means they will be finished with number one before that happens. So I will have to buy it and then sell it. So that's what I mean by being very careful when I mean, by clean means at any time at all, between now and the completion of the project in St. Paul, Niagara Falls. I can assign that condo. 
7. Get a discount on purchase price or some perks. In other words, make money on the buy. 
8. Timing is important, but timing can be very different depending on circumstances. You want to be the first people to look at the project, see the packages, before VIP's before the public. That's cool when you can do that. Sometimes you will be invited to buy a unit or reserve a unit. And it's already started in that case. What I mean by timing then is see how many, what the percentage of units that are sold because the closer you buy it to it being sold out. Let's say you buy it today, and in two months it's sold out within two months, prices jumped because as soon as something is sold out, prices go up. So you're going to realize a really nice profit increase in the value of your unit shortly.

So those are the 8 criteria for a successful real estate investment using the R&A strategy and you are going to hear a lot more about this approach.