Tuesday, September 28, 2010

First time

“Greg - thanks very much for all your help in making my first home purchase an easy one! I’m loving the condo, but look forward to having everything unpacked!”


Turkey hunting

I was out at an apple orchard this past weekend and saw an older gentleman hunting turkeys.  I watched with awe the process of hunting wild turkeys, he had a box, propped up with a stick and a string attached to that.  Then he placed seeds under the box. 

Eventually, about a dozen turkeys wandered by.  I have a lot of spare time, to stay and watch all this.  Immediately, about 10 of the turkeys go under the box and start eating the seeds.  I am about to leap across and pull the string for the older fellow, but I decide to watch what happens.  I guess I am just too much of an Aesop personality (a bird in the hand is worth two in the tree).

Two turkeys leave the box.  The old man looks dejected.  I am disappointed he still hasn't pulled the string.  He still has eight turkeys, but you can tell from his expression he is disappointed.  "Pull the stupid string and catch the eight" I yell silently to myself, but he stays steadfast.  He is waiting for two turkeys to return, but in the mean time another four leave. 

He is now down to four turkeys.  He is hopeful some turkeys will return now that it is less crowded.  I am livid with his stupidity!  I am screaming at him, silently, inside myself, to pull the string, but I can tell he is thinking back to his ten turkeys.  In the time he reflects on the ten he had, he now has one as three more left. 

From the expression on his face, I can tell he now just really wants to get one more.  So he patiently stares at that lone turkey, waiting for one more to enter.  I have given up all hope on this guy and start betting inside me head, with myself whether he will get any turkey tonight.  His poor wife must end up making a ton of vegatarian dishes if this is the quality of hunter logic her husband exhibits.  The lone turkey now waddled out, none are left.  The brood of twelve turkeys disappeared into the orchard and were no longer.

The little old man now has no turkeys, instead of the ten he could have had.  He was chasing the twelve and ended up with none.

I try to remember this story when I am investing as sometimes you have to be happy with what you have, instead of chasing that ellusive last penny.

FYI - embellishment note - This is an old parable and did not really happen, but the story is better told in first person

Foreclosure property

“Hi Greg, we got the keys yesterday for our first investment property.  It is a great property, that you found from a foreclosure.  Just wanted to drop you a note to say thank you. We appreciate your help, and will definitely use your service again in the future.”


Power of compounding

What would rather get: $1,000,000 in cash or $1 doubled every day for 30 days?

Many people automatically think the million dollars is the better offer until they do the math.
One dollar, doubled every day, for 30 days, is over $530 million! Staggering isn't it?
Albert Einstein is quoted as saying, "The most powerful force in the universe is compound interest."
Now imagine, the average home in Ottawa compounds by over 6% annually.  The results are staggering, the average house in Ottawa will double every 12 years.  The average house in Ottawa is now about $330,000, so in twelve years, that house will likely be worth $660,000

Monday, September 27, 2010

Professional and personable in difficult circumstances

“I was very pleased with the service I received from Greg of the Bennett Team - they were very professional, yet personable and helped me to resolve some difficult circumstances with a potential buyer and dealing with my emotional ties to the property.  His indepth knowledge and experience in dealing with a foundation issue on the home I was selling was impressive to say the least.  The Bennett Team by far outshines any realtors I have worked with in the past and I look forward to working with them in the future as a real estate investor."


Ontario Ministry of Revenue - HST

Hello Greg,

My name is Rachael from the Ontario Ministry of Revenue. As you may already know, on July 1st the harmonized sales tax (HST) began in Ontario. Based on the focus of your website, I thought the information below might be helpful to provide your readers.

Did you know?

About 93 per cent of all homes sold in Ontario are not subject to an additional tax amount under the HST.

It’s important to note, the HST is not charged on resale homes.

In addition it is not charged on:
home insurance
mortgage interest costs

HST is charged on:
real estate commissions
legal fees
new homes

(There is a full list of what changes and what doesn’t change is available on the website (23 languages), PDF format and for free download as a mobile application. )

There are also many tax credits and incentives available that benefit homebuyers:
New housing rebate
New rental housing rebate
Providing up to $1,000 for families (including single parents), or up to $300 for single people, in Ontario Sales Tax Transition Benefits.
Creating the new Ontario Sales Tax Credit that gives each member of your family up to $260 a year.
Increasing the energy and property tax relief provided to low- to middle-income people by 70 per cent.
Delivering an additional $500 a year to help senior homeowners pay their property taxes.

For more information about the HST visit ontario.ca/modificationfiscale (FR) or www.ontario.ca/taxchange (EN).

Thank you,

Saturday, September 25, 2010

Informed - quickly

“This is to confirm that I have been completely satisfied with the professional service I have received from Greg Blok.  Greg has kept me informed of potential properties which become available on the market and has responded quickly to my emails and phone messages to enquiries on such properties. I feel very comfortable dealing with Greg and would highly recommend him to family, friends and colleagues looking for a contact in Real Estate”.


Friday, September 24, 2010

Globe and Mail ... top growth cities in Canada

Free at last! Retired at 33.

After deciding to change careers and leave my comfortable, profitable but less than stimulating business, I decided I was prepared to chase my dream of becoming a real estate investor. Although I had been educating myself for years and had a general passion for everything real estate, I knew I needed some help. After attending one of Marnie Bennett's seminars I recognized that this group may be exactly what I was looking for. I got in touch with Marnie and when she recommended I work with Greg Blok, I have to admit, I was a little hesitant. After all, I wanted to work with the Boss! The Radio personality! The self-made millionaire!! Well now that I have been working with Greg, I understand why Marnie recommended him. It's no secret in business you need to surround yourself with a great team. After starting my own business at 21 and leaving last year at 32, running a company with over 60 employees and annual sales over 100 million, I recognized early on that you can't do it all yourself and the most successful people hire even more talented people to work with them.

So I met with Greg, talked about my situation and my goals and immediately he got to work. Even when I felt like I may be asking stupid and/or annoying questions he was genuinely happy to help where I expected I might be wearing on his patience. Over the past few months he has become more of a mentor to me than an agent. (one of the reasons I wanted my agent to also be themselves an investor). Greg has shown me opportunities I never knew existed! He has been willing to share members of his own team of experts with me. Spent countless hours working on small deals. Even when nothing comes from them, he has always had the right attitude and sees the big picture in everything. He continues to impress me and has earned my confidence, which is not easy. His knowledge has been an incredible resource for me. He sees the properties we look at from an investors point of view and not just as an agent. Thanks to Greg's hard work, patience, dedication and knowledge, I am set to close on my first investment property in a couple of weeks and 6 more a month later! We continue to search together for the next one and I'm am more excited about going to work now than I was leaving work a year ago! After working with Greg, I expect this time next year to be making passively more that I was making working 80-100 hour weeks running my own business.

For helping to make my dream of being (semi) retired at 33 a reality, a sincere thank you Greg!

Free at last!

Ottawa, On



Tuesday, September 21, 2010

Just a few weeks

"It’s amazing what can happen in a couple of weeks. Thanks to your patient guidance, and a bit of encouragement from Greg, and great financial support from Lilliane, my wife and I have decided to invest in 2 condos. I truly appreciate the time you’ve taken to work with me and look forward to making more investments with you and the amazing Bennett Team. Wishing you all the best!"


What do you fix up?

I get a lot of clients asking what do I fix up, what do I get the biggest bang for my buck from?

Check out this brief blog, with some great ideas on what to do to give your house the quick make over for sale or tenant turn over - KIKI Interiors

Pleasant learning experience


“I have been remiss in thanking you for your assistance in my recent investment reconfiguration. Since our first meeting at the Bennett Real Estate Professionals seminar on the 24th of May, you have provided me with excellent advise and cautiously guided me through the process of intelligent property investment. I have followed your guidance with military precision by first equally redirecting my RRSPs into purchasing shares from two Bennett recommended organizations: Walton Capital Management; and Raymond James under the calculating and savvy outlook of Kash Pashootan. Both these investments have already yielded promising dividends.

You also provided me with the necessary information for me to spear ahead fearlessly and purchase not two but three rental properties in three different cities in the period of only one month. Each of these rental properties have differing but complementary attributes contributing to a balanced portfolio aiming at reconciliating long-term and short-term growth and cash-flow aspirations. This feat required a great deal of coordination and communication, and would not have been possible without the outstanding services provided by Lilianne Eid. Under the cover of an irresistible smile, she provided me with competitive rates easily dismissing her rivals; and worked with care to ensure contractual closing went as well as reasonably possible given some extenuating circumstances.

I will now slowly and wisely learn the intricacies of property management and fiscal accounting before attempting the next wave of investment. It has been a pleasant learning experience and I hope we can work again together in the future. Again, please accept my sincerest appreciation for your assistance in this endeavour.”


Thoughts on the Fed announcement

Data Release: Much of the same or is it?

· As expected, there were no major changes to the Federal Open Market Committee (FOMC) statement from their previous statement in August.
· The Fed maintained the target range for the federal funds rate at 0.0 to 0.25 percent and retained the reference that economic conditions warrant “exceptionally low levels of the federal funds rate for an extended period.” They also maintained their policy of reinvesting principle payments in treasury securities.
· The Fed did give a hint that further quantitative easing may be in the pipeline with a line that “the Committee…is prepared to provide additional accommodation if needed to support the economic recovery.”
· Another noticeable change was in their discussion of inflation, where they stated “measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the long run, with its mandate to promote maximum employment and price stability.” It also added that “inflation is likely to remain subdued…before rising to levels the Committee considers consistent with its mandate.”
· The statement also recognized that while “bank lending has continued to contract” this has been “at a reduced pace in recent months”
· Once again Thomas Hoenig dissented to both the policy to maintaining the extended language commitment as well as the policy of reinvesting principal payments.

Key Implications

· This statement makes clear that quantitative easing has not been taken off the table, but that it is not a sure thing either. There appears to be little consensus within the Fed on whether to go forward with additional asset purchases, which puts the onus on the economic data to either confirm the Fed’s expectations or push them towards further action.
· The recognition that the contraction in bank lending has eased in recent months should not be overlooked. The Federal Reserve is cognizant of the impact of financial conditions in either impairing or improving the transmission of monetary policy to the real economy. An improvement in credit growth implies less need for the Fed to step in with additional quantitative easing.
· By focusing on trends in inflation and recognizing that recent levels have moved below their implicit target, the Fed has signaled that inflation outcomes are likely to be the threshold that would move the Fed towards a second round of quantitative easing.
· It is telling that the Fed chose not to focus on downside risks to the economic outlook. This likely reflects a desire not to spook markets with disappointing expectations for future growth, while appearing vigilante in fighting deflationary expectations from becoming entrenched.
· Nonetheless, with economic growth likely to maintain at a sub 2.0% pace over the next several quarters, speculation about the Fed doing more to support growth will continue to be on the forefront of the agenda for the next several meetings.

James Marple, Senior Economist

Indepth knowledge and successful experience

“As a young professional I am constantly looking at various investment options and strategies to build long term wealth. I found the seminar hosted by the Bennett Real Estate Pros to be very inspirational as it illustrates how attaining wealth through real estate is a realistic goal for any motivated individual determined to take financial control of their lives. Since the seminar I have been working with Marnie Bennett and Greg Blok, looking at various investment properties that are aligned with my current financial and personal position.

Having recently purchased an investment condominium with the Bennett Real Estate Pros I can definitely attest to the high quality of their service. Their patience, friendliness and in-depth knowledge of the Ottawa real estate market are all factors that contributed to the positive and successful experience I had with their company. I plan to continue my business relationship with the Bennett Real Estate Pros and would highly recommend their services to any home buyer or real estate investor.”

I now own 3 properties in addition to my primary residence.


Canadian Fed decides to hold rates

Not surprising ... http://www.theglobeandmail.com/globe-investor/markets/markets-blog/fed-holds-rates/article1716828/

Time to think things though ...

“I commenced dealing with Greg Blok in April, 2008 and was immediately impressed by his professionalism and knowledge of the local real estate market. Greg has been highly accessible and I never feel hurried in my verbal dealings. I appreciated the fact that Greg initially seemed more concerned with uncovering my real estate investment goals than simply selling me something fast and moving on. It is evident that Greg values long-term relationships with his clients and, as such, strives to understand and meet their needs."

"I would not hesitate to recommend Greg to a friend or family member and, in fact, have done so.”


Outlook for US economy going forward ...

"I'm a huge bull on this country ... we won't have a double dip recession. I see our businesses coming back almost across the board." ....Warren Buffett, Berkshire Hathaway

"GE is now finding it profitable to build manufacturing and service centers in the United States rather than overseas, because it is more competitive to do so." ... Jeff Immelt, CEO, GE

"I am very enthusiastic about what the future holds" .... Steve Ballmer, CEO, Microsoft

Needs based investing

“From our first meeting with Greg, we felt that he was very interested in determining our particular needs in an investment property, and that helped narrow down our search ... we were pleased that he was willing to spend time researching properties and presenting us with numerous options. From our previous experience, we have found it very difficult to find a Realtor that is knowledgeable in investments, most just want you to buy something, but Greg provided us with assistance and guidance, making the process much easier and we are grateful!”


Saturday, September 18, 2010

Small Town Condos

“As an experienced investor in the stock market, I was looking at a way to diversify into the “right” real estate opportunity.  I personally had limited knowledge in the real estate field and searched out an expert who had significant experience in the market.  I researched and found Greg and his impressive resume.  He introduced us to Kyle court.  It is a great fit as the values had not appreciated as much as the rest of the smaller city they are located in.  Greg taught me about the numbers from a monthly cash flow basis, and these worked very well.

These properties are low maintenance with high demand for rents. We have not had any vacancy issues. Greg Blok has a lot of experience with investing in real estate and I found him to be an invaluable resource in helping better understand this investment. I am comfortable owning units in this building and plan on keeping them for a while to come.”

The best part, the units are well under $100,000, so we could buy multiple units, to spread our vacancy risk out.

Jaleh and Kelly

Friday, September 17, 2010

How NINJAs ruined the United States economy!

Open to a small home, in the wrong part of a large US city.  Smiling in front of the home is the new buyer.  They put $0 down and provided no documentation on their income, expenses or verification that they have a job.  This is the modern day NINJA - not some bad 80s movie with fast moving people covered in black cloth or some Jet Li movie, these are real, everyday people, who through the system's greed, got in over their heads ... so the story begins ...

In the aftermath of the terrorist attacks on September 11, 2001, Alan Greenspan, Chairman of the Federal Reserve of the United States, decided to lower interest rates to stimulate the US economy. This lowering of rates had the perfect effect on a nation that was in disarray. Consumer spending went up and household savings dropped drastically.
Resulting from this, Americans started using their homes as “debit cards”, increasing their consumer spending and then refinancing their home to pay off high credit card debts. This refinanced debt, on home equity lines of credit, was tax deductable, meaning the higher the debt, the more write offs average American households had. The tax laws in Canada are different, we are not able to write off mortgage debt on our taxes, unless that debt is used for investment purposes.

With this increased emphasis on consumer spending, mortgage requirements were relaxed further, starting the popular NINJA mortgages (no income, no job, no assets). This accounted for about 22 percent of the United States mortgage market (compared to less than 5% of Canadian mortgages). The American system also did away with requiring documentation supporting income, expenses, etc.

These no doc mortgages were doomed to fail, evidenced by the story about Alberto and Rosa Ramirez. They are the migratory strawberry pickers from San Bernadino, California who purchased a home for $720,000.00. Their combined annual income is $30,000 USD. They bought this home with $0 down. It was a miracle of 'sub-prime' - a real life NINJA in action.

The Ramirez's make $300 per week each, which totals $2400 per month in income. Each of these people make approximately $15,000 per year. In Canada, regulations state that approximately 1/3 of our earnings could go towards housing debt, or in this case $10,400 per year in principle, interest and tax payments ($867 per month). In Canada, this couple could likely purchase a home in the $180,000 range (assuming they have limited other debt and a 5% minimum down payment). A far cry from $720,000!

For this property that was purchased by the Ramirez's, the mortgage payments would work out to approximately $5378. The taxes are approximately $750 per month. The couples monthly income does not even cover their housing expenses. They bought the house with a two year teaser rate, with negative ammortorization, meaning the value of the mortgage grows each year, instead of declining. At the end of two years, the idea was to re-finance the property and pay out the balloon payment due and get another super low teaser rate.

In many parts of the United States mortgage debt is handled differently than in Canada. Mortgage deficiency judgements (failure to pay your mortgage and entering into repossession) are handled differently in Canada than those states. In Canada, a lender can go after other assets you own if the proceeds from the sale of the property do not cover their losses. In many States, this is not the case, so if a person defaults, they keep their other relevant financial assets and only lose the house.

Where things became catastrophic, is that these mortgages were sold to Wall Street in bundles. Traditionally, mortgage debt was considered rock solid debt, as it was backed by an asset and had loan to values in the 80% of better range. This sub-prime debt was sold under the same assumption, but in many cases, the majority of these debts were ‘C’ level debt, not the ‘AAA’ that Wall Street thought they were buying.  So Wall Street was overwhelmed by the NINJAs, never a good situation!

As the market fell, large companies that bought these portfolios for income, were now losing millions and millions of dollars. This spidered through the economy and cast a destructive path through the whole US economy.  These NINJAs became responsible, in part for the collapse of Wall Street giants Bear Stearns, Lehman Brothers and others.  The underlying greed of Wall Street magnified the problems caused by these deadly NINJAs.

Thursday, September 16, 2010

Grass roots Ontario

I have been investing in real estate since my early 20's, I started doing this at time when money was scarce, and against all of the advice of the people close to me. At the time, I had limited funds available, and the real estate values in Ottawa were out of my reach. I had a difficult time qualifying for a mortgage that was high enough to purchase a reasonably good quality property.

I had a friend at that time who lived in a grass roots community approximately 45 minutes outside of Ottawa. He told me that values in his community were far more reasonable, and that rents were comparatively high in relation to Ottawa. Before long, after some due diligence, I purchased my first triplex in the town of Smiths Falls for $118,000. My cash flow at the time was approx $750 per month, and the rents were slightly below market. Through turnovers and renovations, I have managed to get my cash flow up to the $1000.00 mark.

At that point I began to realize a great opportunity for myself, I was making money in a place where the average investor from Ottawa wouldn't think about going. I didn't have any bidding competitions for the properties I was purchasing, I was able to afford to invest there, and it really wasn't a big inconvenience to own property out of town, I managed to make good contacts with people who could do repairs for me, and go to my property when I needed them to.

This opportunity in grass roots Ontario is what sparked my real estate investing career. From there I began purchasing investment real estate in Brockville, Prescott, Cardinal, and Newington. After 6 years of experience, cash flow, and knowledge, I began to invest in Ottawa real estate. Until this day however, my primary focus is still on small town Ontario "if it makes sense once, it makes sense 100 times." So today I own close to 100 doors and growing, and approximately 90% or more of my assets are within a 1 hour drive from Ottawa.

I just want to say thanks to Greg and the team at Bennett Professionals for all their help in building my business and helping me retire in my early 30s.


Wednesday, September 15, 2010

Perpetual Cash Machine - is $745k the same as $2 million?

Being a bit of a science geek, and I guess having a BSc qualifies that way, I have known about the contests to create a perpetual motion machine.  Throughout history, people have tried, unsuccessfully to create the perpetual motion machine.  This is a machine that goes in motion and never stops and never requires any additional force to be applied.

Some nobody in history, a rather insignificant name, you might not have heard of, Sir Isaac Newton, came up with a series of laws that dictate how motion is governed.  His 3rd law states

For every action, there is an equal and opposite reaction.

In the case of a perpetual motion machine, this opposite force is usually friction.  In the physical real world, this perpetual motion machine is impossible, but in the financial world, this is a possibility.

What is a perpetual cash machine?

I mentioned this idea to a collegue and for them it conjured up ideas of their own ATM machine, that never ran out of money.  Although that is a pretty cool thought, it is not what I am talking about.

Conventional financial wisdom states - get a couple million dollars in an RRSP, project a conservative 5% return and you will have $100,000 pre-tax dollars upon retirement.  This money sits in a stock portfolio that grows during your working years and leaves you retirement ready.  I guess this is top down planning, you look at a big number and work backwards to a result.

This $100,000 results in about $65,000 after tax dollars.  Then you live your life based upon a $65,000 lifestyle.  Simple, right?

It is also important to remember, there are no taxable advantages to the money coming out of the RRSP program.  There are some going in for sure.  For every dollar you contribute you save $0.46 meaning over a working life of 30 years these tax advantages could be significant.  In numbers, 30 years to save $2,000,000 you would have to make $66,666.67 per year in contributions/return to reach the goals.

I, personally, follow a different path.  But remember, the road less travelled is exactly that.  In life, I have always tried to go the opposite direction of the "herd".

I have developed my own bottom up investing idea, that is a perpetual cash machine.  I like to start with an accurate account of what it costs you to live your life.  I would suggest taking a yearly total, working backwards from today and figuring out what the previous 12 months have cost you to live.  Include necessities - heat, hydro, etc and of course extras - vacation, clothes, alcohol, whatever. 

Take that 12 month total and figure out an average monthly cost.  Add 10% for a safety margin. 

For example
- last year, your total was $60,000.00
- add 10% = $6,000.00
- total needed is $66,000, so you need to gross a total of $100,000 (same as above)
- your monthly needs are $8,333.34

This means for the same lifestyle as $2,000,000 provides, you need to earn $8,333.34 per month. 

A step further now says we need to build in a margin of safety for vacancy and renovations in our portfolio.  Experts suggestion 10%.  So, we need to add an additional 10% to our figure, so our adjusted cost of living each month needs to increase by $4,668.40 to a total of $13001.73

To create this type of income, I can show you today, three buildings that produce a combined monthly income of $13,339.15 after all expenses and mortgages payments are made.  This gives you an annual surplus of $4,049.04 - a very nice family trip?

In this case above, you have achieved the following:
Paid yourself - $66,000
Paid your taxes - $34.000.08
built a reserve fund - $56,020.80 (per year)
extra monies - $4,049.04

How much did all this cost?  $745,000.00 + closing costs

So in this case, $745,000 has done the same job as $2,000,000.  Sometimes, all it takes is a paradigm shift in your thinking!

My US Investment - part 1

I have decided to start a series of posts on my next endevour, investing in the USA.

To date, I have been doing significant research and have decided on a market and a product type.  I have looked a various states and home styles, so this has been a bit exhaustive.

The method of purchasing is new to me, so I am excited to get started.  On Thursday, I am meeting the bank to free up some cash to send to my US trust account.  Once my money arrives, I will begin shopping online for my investment property.

I am looking over the next year to "flip" a number of properties to build a cash reserve then start buying and "holding" some properties for the longer term when the market begins it's recovery.

Step #1 has been establishing a line of credit that I can buy homes for cash.  I suggest you use lilianne.eid@td.com

Wish me luck!

Tuesday, September 14, 2010

Legal secondary units

With the exception of Rockcliffe Park, the City of Ottawa now allows secondary suites. So a home owner can build one (with a building permit) or get the city’s stamp of approval on an existing one, provided the home owner brings it up to building and fire code standards.

This is often a basement apartment, but the more correct description is “secondary suite” or “secondary dwelling unit”. If not built in the basement, a secondary suite can only take up 40% of the overall upper floors. A suite can be built in a garage, and each half of a semi-detached can have its own secondary suite.

Also, each (legal) duplex is allowed one secondary unit – effectively making it into a triplex. If, for example, a secondary unit occupies 40% of the upper floors and generates rental income, then 40% of expenses as such roof or furnace replacement and 40% of the city taxes can be deducted from that rental income. (Verify this, but since the secondary unit is in one’s principal residence, there may be NO capital gain upon sale).

• All of this does not apply to a condo or row house.
• Conversions require building permits but no rezoning application is required.

Wednesday, September 8, 2010

Bank of Canada Announcement

OTTAWA, Sept 8 (Reuters) - The Bank of Canada raised its benchmark interest rate for a third consecutive time on Wednesday by 25 basis points to 1 percent, but cautioned that a weak U.S. economy would hamper Canada's recovery.

The central bank gave no explicit guidance on its next interest rate move in October, saying rates remained "exceptionally stimulative" but keeping the door open to standing pat if necessary due to doubts about the U.S. and global recoveries.

"Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook," it said in a statement.

The language was similar to that used in its last rate announcement on July 20 but omitted any reference to weighing any further rate hikes "against domestic and global economic developments."

Although the bank now sees the Canadian economic recovery as slightly more gradual than it predicted in July, it sees consumption growth remaining solid and business investment rising strongly.

Tuesday, September 7, 2010

Outlook for the Housing Industry in Canada

To much fanfare, this week there was a report out on the "housing bubble" in Canada.  If you look back in my blog you will see BOLD predictions like this one that were featured on MacLean's magazine and Time magazine from the 1940s until recently.  This is a common prediction in the housing market.

I look at a few statistics that give me comfort. 

Roughly the average income in the federal government in 1980 was $17,000 per year and a house cost approx. $100,000.  Now the average income is $60,000 and the average house is $325,000.  If you do the math, the correlation is eerily similar.  The number are just bigger. 

Canadians never had a subprime mortgage market.  Our fundamentals are much stronger than the US market.  If you look at the underlying problems with US financials, some of them are still much weaker than Canada.  For instance a conventional mortgage is Canada has a loan to value of 75% whereas in the United States it is 90%.  The lowest deposit you make on a home in Canada is 5%, in the US, it is 3.25%.

Subprime is a strang word, as they are what we in Canada would call "High Risk Mortgages".  Most were 0% down, 40 plus year ammortorizations, with superficially low "teaser" rates for an introductory 2 year period and then a balloon payment and a much higher monthly payment in the following three years.  For example, a person would pay $500 per month for 2 years, then have to make a $5000 payment at the end of two years, and their monthly payment would jump to $1000 per month. 

Subprime mortgages comprised about 22% of the US market, whereas a paltry 5% in Canada.  It is essential to remember that those mortgages in the US were usually no document mortgages, whereas Canadians who got "subprime" mortgages had to still qualify with the GDS and TDS.  My wife and I were turned down on a zero down, 40 year amm. mortgage as our beacon scores were not over 700 at the time.  What this means is in Canada, only the best candidates were every offer a subprime mortgage unlike the US where everyone could get access to a mortgage, whether employed or not!

Many mortgages were also negative ammortorization mortgages, meaning each month, instead of you paying down your mortgage (by making a small principle payment), the monthly payments in the US were not even covering the actual interest charged on the loan.  For instance, imagine you have a $300,000 mortgage - in Canada, after 5 years, your mortgage would likely be $275,000, but in the US, the same mortgage after 5 years would be $325,000. 

As fate would have it, CD Howe release their report a few days later to much less fanfare - care to read it, click here!


"Success does not consist in never making blunders, but in never making the same one a second time."

Josh Billings

There’s a new kid in town

Looking for a holiday destination?  Check out Flat Creek Lodge

Open now for nearly five years and having made huge strides towards creating the South’s best cheeses, micro-dairy Flat Creek Lodge is thrilled to welcome a new head cheese maker. The honor goes to Keith Blok, world champion cheese maker, who brings with him the title of Scientific Cheese Technologist and more cheese competition trophies than can fit on the tiny dairy’s shelves. Mr. Blok has arrived in Swainsboro with two specific goals – to win more gold medals in Flat Creek’s name and to double the dairy’s cheese production within the year.

“Flat Creek Lodge has produced some fantastic cheeses during the past few years,” says Blok. “We’re going to keep the focus on what the dairy is already doing well, make sure all of the cheeses are at a consistent high-quality and increase production.” Mr. Blok is just the man for the job in more ways than one. Hailing from Canada, he specialized in aged cheddar for more than 25 years, winning Best in Show...

For more of this story, click on or type the URL below:


Sunday, September 5, 2010

How to improve your credit

As I mentioned in a previous blog, credit is more important that cash to a real estate investor.  Having poor credit can be rectified.  The first step of course is to know your credit scores.  You can request these online from the two major credit companies (Equifax and TransUnion).  You should check your credit at least once per year and get an updated score.  Make sure the report does not check your credit, that it merely shows your scores.

A few tips to help you out:

Check your report for inaccuracies.  This is very common to have things on your report that are no longer valid.  We all made a mistake with a consumer card in University, but without addressing it, it could keep you out of the investment market longer term.  Know what is on your report and make sure they are valid charges.  I found a car loan on my credit report that was paid a year earlier and erroneously not discharged from my credit report.

•Always pay your bills on time. Although the payment of your utility bills, such as phone, cable and electricity, is not recorded in your credit report, some cell phone companies may report late payments to the credit-reporting agencies, which could affect your score.

Stop digging the hole.  When you feel you are getting over your head, don't apply for more credit and focus on paying off the credit you have.  Start with a simply strategy - take the monthly minimum payment and divide it by the total amount owning.  Pay off the highest number first.  Once it is paid off, re-assign those debt dollars to the next highest debt.

•Try to pay your bills in full by the due date. If you aren't able to do this, pay at least the required minimum amount shown on your monthly credit card statement.

•Try to pay your debts as quickly as possible.

•Don't go over the credit limit on your credit card. Try to keep your balance well below the limit. The higher your balance, the more impact it has on your credit score.  Try to stay below 70% loan to value, meaning if you have a line of credit with $10,000, try to only borrow $7,000.

•Reduce the number of credit applications you make. If too many potential lenders ask about your credit in a short period of time, this may have a negative effect on your score. However, your score does not change when you ask for information about your own credit report.  Reduce the number of credit sources you have.

•Make sure you have a credit history. You may have a low score because you do not have a record of owing money and paying it back. You should maintain a minimum of two credit sources. For people starting out, get two credit cards borrow some money and pay it back immediately. This will show a level of responsibility to the credit companies.  You can build a credit history by using a credit card.
For more information on credit, please click here.

FYI - New Condo Development Alert

Don't have much in the way of details yet, but new condo development starting from approximately $235k near the Canal coming in October.  Will include a roof top terrace with views of the Canal, fitness center, party room, outdoor garden area.

This building will be mixed use, likely 6 stories with ground floor commercial including a coffee shop.  Great location, walking distance to Elgin and the Byward Market, as well as great Queensway access.

Email me now to get on the priority list

Thursday, September 2, 2010

First one is the hardest one!

Hi Greg,

I'm happy to report that I just deposited my very first cheque from my first investment property! You were right in that acquiring the first investment property is always the toughest one. Once I saw that first cheque though, I had encountered a flush of happy and thankful feelings.

I want to thank Bennett Pros and especially you for helping me find a suitable property that made sense. You stood by me while we looked at many potential properties. I appreciated the fact that you stood back while we looked at the properties and didn't try to force any quick sales tricks.

You were there when I had questions and answered them so that a first time property investor like me could understand. Your expertise is clearly demonstrated from the fact that you practice what you preach.

I wouldn't want to deal with someone that didn't.

I hope you and the family are well and still having fun.

Looking forward to my next investment opportunity.