Photo Left: Stefan Aarnio and Award Winning Investor Nik Fast with his trophy earned at the West Coast Top Investor Awards.
One of my favourite things about being a real estate investor is the opportunities to meet extraordinary and interesting people. I had the pleasure of meeting Nik Fast of 2nd Story Investments this week. Nik is a local Winnipeg investor with an accomplished track record. He was recently the winner of the West Coast Top Investor award for "Best Deal of the Year" and he is a local celebrity in the investor community.
I have known of Nik for some time in the Winnipeg market, but had not had the chance to sit down with him to get to know him better. Upon meeting Nik, I found him to be a very humble guy, he speaks well and has a very pleasing personality. All traits of a shrewd real estate investor.
Nik has earned himself some local press for doing absolutely beautiful renovations, but the deal that he won the West Coast Top Investor award for was not a cutting edge, high design renovation that would earn a spot in the newspaper. The deal that won Nik a national award was actually a very simple deal based on seeing what others had missed.
Nik's award winning deal was a small house in the Weston neighbourhood of Winnipeg (a low to mid income blue collar neighbourhood.) Weston is notorious for having a very mixed base of inventory and it is very difficult to price out comparables in the area because the houses drastically range in builds and values.
Nik's "deal of the year" was a very simple concept. It was a "missed opportunity" and a house that had scared off too many buyers. It was sitting, getting old and racking up "days on market".
The small starter house that Nik is known nationally for was originally marketed at $109,000. No one bought it, and it sat...
Next it was reduced to $99,000. No one bought it, and it sat...
Next the house dropped to $89,000 and after 2 large price cuts, Nik sensed a motivated seller and an opportunity: it was time to take a look.
PRO TECHNIQUE: Nik was very smart in that he kept his eye on mis-marketed "problem houses". These are often houses with fatal flaws (like badly damaged foundations, or severe mechanical deficiencies), however, they can sometimes have problems that irrationally scare off retail buyers and are relatively easy to fix: These types of houses are money makers.
Upon seeing the house, Nik was very impressed with the cosmetics, the kitchen, the bathroom etc. It was a pristine house on the surface. However, after venturing into the basement, he found a basement absolutely FULL of mould.
PRO TECHNIQUE: Mould scares of many retail buyers and for smart investors, it can be one of the easiest ways to buy equity because it can be cleaned up for a couple hundred dollars and irrational buyers and irrational sellers are both terrified of it. Mould houses can be purchased for huge discounts and fixed quite easily. This is a profit generating technique to keep in your mind at all times.
THE PERCEIVED PROBLEM: When Nik inspected the basement, his agent told him that the foundation was "cracked" and that water had run into the basement creating mould.
THE ACTUAL PROBLEM: Upon further inspection, Nik found that the dryer vent was not hooked up and had been blowing hot and moist air into the basement for years creating mould! Also, the house had no eavestroughs, which made all of the rainwater run into the basement to create moisture and mould. In addition, the plumbing for the garden hose was leaking down the foundation and into the basement creating moisture and even more mould!
Nik was able to inspect the foundation walls and sure enough, there were no cracks!
PRO TECHNIQUE: Find a problem house and find a way to solve the problem creatively and on a boot strap budget. The more creative you are, the more you will earn.
After the house had sat for 90+ days on market (which is unheard of in Winnipeg), Nik wrote an offer for $81.5 and it was accepted. Nik had the mould quickly cleaned up and had the house immediately appraised for $120,000. All of this was done WITHOUT RENOVATIONS - Instant margin, instant equity and instant profits! Some people would call this "money for nothing".
With nearly $40,000 of instant equity created, Nik was able to pull his funds immediately out of the house and purchase another house immediately.
PRO TECHNIQUE: Velocity - when evaluating an opportunity consider the velocity of your investment. If you can get your money out of the deal fast, it's high velocity. If a deal takes years to return your principal, it's low velocity. Stick to high velocity deals if you are an active investor and keep your money moving. In Nik's case, his money moved at lightning speed.
The biggest lesson I learned from Nik is to be consistent and persistent in your local market. Keep tabs on houses that have "problems" and when they get to a high number of "days on market" go in and take a look. I don't like to buy off of MLS and prefer private deals, but I have used this technique in past and it works. Find the "deal killing problems" and find a way to fix them quickly, but take a steep discount for your problem solving abilities. Missed opportunities and mis-marketed houses have the potential to be the highest velocity deals and the highest profit earners.
Amateurs cannot spot the gold hidden in most opportunities, but professionals like Nik can! Congratulations on the deal of the year Nik!
Thanks for reading,
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