Monday, November 29, 2010

Teaching money smarts to your kids, your never to young to start!

I have been researching gifts this year and one has come across my desk that is really interesting. The kit is based upon the children’s book. “The Four Little Pigs”.

The kit contains a copy of the book and four separate piggy banks each with a different name (spending, sharing, saving, schooling). Any money your child/grandchild receives is divided into the four banks.

“Spending” piggy bank is money that is put aside for “pocket money” to make small purchases like candy, stickers or baseball cards.

“Sharing” piggy bank is for donations that are both gifts and giving back to others. These can be large or small donations, but teaches the value of giving an hand up to others in need.

“Saving” piggy bank saves for more costly purchases. Saving teaches your little ones that they do not always getting what they want right away. It teaches them the value of delayed gratitude and working towards a goal.

“Schooling” piggy bank helps start the process of saving for post secondary education. Actively involving your children helps them understand the value of an education and promotes hardwork in school. Currently, a year of post secondary school is approximately $9,000 dollars, it is never to early to start!

Monday, November 22, 2010

Hot List

Pre-Construction Opportunity
In the very popular WESTBORO neighbourhood, there is a new condo launch happening in the coming two weeks.  It will be the most unique new building in Ottawa's history.  It is a pre-designed community with quaint "courtyards" and a 35,000 sqft community ammenities center.  There will be units starting below $200k.

Income producing triplex
I have found an income producing triplex, about 1 hour from Ottawa, in a picturesque community, that after all expenses and mortgage payments should net a positive income of $1,100 per month.  The purchase price on this property is $220k and contains 3 two bedroom units. 

Kanata Town Home
In Kanata, I have found some new build townhomes for less than $300k.  The announcement of DND moving to the Moodie campus of Nortel means an influx of new people to the Bells Corners/Kanata market in the near future.  Currently town homes in Kanata rent easily in the $1500 plus per month.

Alta Vista Duplex
Found a great duplex in the Alta Vista area with a top notch top floor unit with four bedrooms and a brand new designer renovation.  The basement has two bedrooms and is currently tenanted at almost $1100 per month.  New steel roof just installed and has a lifetime warranty.  With 25% down, it will produce approximately $1000 per month and costs $495,000

Flipping in the USA
I have secured access to the home auction in Phoenix, Arizona.  Through this auction, you can purchase homes for approximately 30% below currently MLS prices.  These homes are foreclosures, before they go to the open market, hence the great savings.

Wednesday, November 17, 2010

Using Demographics to invest

I find it fascinating to look at the demographics of a nation or of a particular city.  The census growth of Canada over the past 70 years is pretty interesting - click here to see the table.

Demographics can help us with our investment ideals as well.  People do generally the same things, at the same ages.  Most people select a mate between 18 and 35, so expenditures on clothing and grooming products are at their highest in those years.  Young males between 16 and 25 tend to be the biggest buyers of motor cycles.  Over 55 people, without children, tend to be the #1 buying segment for condominiums.  What age buys family homes?  What will happen to that market?

Understanding demographics will help investors to be able to plan and understand where the new trends are in investing.  Knowing the relative age of the population in the coming decade can help shade you in the correct direction.

I am going to use the following rough guidelines for talking about different age demographics. 

BABY BOOMER - 1941 to 1966
GENERATION X - 1966 to 1986
GENERATION Y - 1966 to 2001

The baby boom generation is aged 44 to 69.  They are the largest generation comprising 8,460,000 people.
Generation X is aged 24 to 44.  They are the smallest generation of only 6,134,000
Generation Y is aged 0 to 24, with a total number of people being 7,793,000

As you can see the massive baby boom generation is going to exit the work force in major numbers over the next decade.  Estimate have it that in North America, a baby boomer retires every 8 seconds.  This causes a major effect on the work force. 

The Generation X, often referred to as slackers, cannot match the Baby Boomers due to sheer number.  There are 2,326,000 less Generation X members than Baby Boomers.  This is a decline of over 27% from one generation to the next.

The positive news, is that Generation Y, the Echo Boomers (children of baby boomers) are a huge generation as well.  They are 1,659,000 people larger than the Generation X before them.  That is an increase of 27% in size. 

In the case of demographic research, size does matter!  It is important to get out in front of the largest segments.  Marketers look like geniuses by positioning their clients in front of the wave, as opposed to behind it.  Investors should as well study the demographic waves that are hitting the real estate market.

For instance, if sporty cars are the bought mostly by young male demographic of 16 to 30, a car manufactor with hot styles and high performance automobiles will do really well in the coming 20 years as there will be 27% more buyers in their demographic.  Whereas, if you are marketing expensive furniture, you will see a decline in your market for the coming decade and a half as the much smaller Generation X enters the expensive furniture buying age.

1940 - 11,382,000
1941 - 11,507,000
1942 - 11,654,000
1943 - 11,795,000
1944 - 11,946,000
1945 - 12,072,000
1946 - 12,292,000
1947 - 12,551,000
1948 - 12,823,000
1949 - 13,447,000

1950 - 13,712,000
1951 - 14,009,000
1952 - 14,459,000
1953 - 14,845,000
1954 - 15,287,000
1955 - 15,698,000
1956 - 16,081,000
1957 - 16,610,000
1958 - 17,080,000
1959 - 17,483,000

1960 - 17,870,000
1961 - 18,239,000
1962 - 18,583,000
1963 - 18,931,000
1964 - 19,291,000
1965 - 19,644,000
1966 - 19,967,000
1967 - 20,500,000
1968 - 20,701,000
1969 - 21,001,000

1970 - 21,297,000
1971 - 21,963,000
1972 - 22,219,000
1973 - 22,494,000
1974 - 22,809,000
1975 - 23,143,000
1976 - 23,449,000
1977 - 23,727,000
1978 - 23,964,000
1979 - 24,203,000

1980 - 24,517,000
1981 - 24,821,000
1982 - 25,118,000
1983 - 25,367,000
1984 - 25,608,000
1985 - 25,843,000
1986 - 26,101,000
1987 - 26,449,000
1988 - 26,798,000
1989 - 27,056,000

1990 - 27,512,000
1991 - 27,945,000
1992 - 28,377,000
1993 - 28,682,000
1994 - 28,997,000
1995 - 29,303,000
1996 - 29,611,000
1997 - 29,965,000
1998 - 30,158,000
1999 - 30,404,000

2000 - 30,689,000
2001 - 31,021,000
2002 - 31,373,000
2003 - 31,676,000
2004 - 32,048,000
2005 - 32,359,000
2006 - 32,723,000
2007 - 33,115,000
2008 - 33,506,000
2009 - 33,894,000

Real estate implications make the forecast for the next decade more logical.  As we have an abundance of Baby Boomers, they are likely to be buying downtown condominiums, bungalows on acreage and vacation properties in the South.

Generation X is a smaller generation, they are not going to be able to pick up the slack from the Baby Boomers who are downsizing.  There is a good chance that many Baby Boomers will want to/be forced to, sell their homes to their children, the very large Generation Y. 

Immigration will play a part as well in helping Generation X take over the homes from the Baby Boomers.  Remember there are 2,326,000 less Gen Xers than Baby Boomers. 

Generation Y is an interesting group.  Their first home is likely a condo, as they are not interested in a lot of maintenance and upkeep.  Since jobs will be more scarce for the Generation Y, they are likely to put off children of their own into later years (early 30s), so the condo market should stay strong longer term, as the front end of Gen Y is only 24.

There also is a high chance Gen Y will rent a bit longer until they are firmly established in having a career, this will create many happy returns for property owners.  Less jobs, more competition and wanting a lifestyle of living in the right neighbourhood with little to no maintenance is a recipe for lots of renters. 

An area I do not see growth in, is the retirement homes.  Baby Boomers are generally speaking vain and will try to stay "young" as long as possible.  They will avoid the retirement home as long as possible, so with the next decade, front end baby boomers will be reaching 75, I think that retirement home investment is at least a decade to a decade and a half too early.

CMHC Forecast for 2011

The annual CMHC forecast for the Ottawa housing market came out yesterday.  Sandra Pérez-Torres did her insightful presentation predicting the future of the local marketplace.  I have had the pleasure of meeting Ms Perez-Torres in the past and she definitely does her research and understands the marketplace. 

I am in line with her thinking, I find the below summary to be a very well researched prediction of what the coming year will have in store for local investors.

No boom, no bust, no bubble — Ottawa’s housing sector in 2011 is expected to be a model of stability.
For builders and buyers, investors and sellers, that’s good news, even if it doesn’t prompt the buzz that accompanied the post-recession runup that is expected to push average resale prices up 7.6 per cent this year.
“Sales will not reach the peaks we saw early this year and late last year,” warns Sandra Pérez-Torres, the Canada Mortgage and Housing Corp.’s senior analyst for Ottawa.
But the slip shouldn’t be accompanied by any drop in values, she told the CMHC’s annual Ottawa Housing Outlook conference Tuesday. The agency expects prices to increase at the rate of inflation, about two per cent, as the sector moves to more balanced territory from a buyer’s market.
Stability is also forecast in the new homes sector, with a slight increase in starts this year over 2009, followed by a 3.4-per-cent drop next year. Multiple-family units will continue to outpace single-family dwellings, with townhomes leading the way.
Keeping Ottawa on the real estate level is a diversified economy (public administration, though the most visible local employer, represents just 22 per cent of jobs) and steady — if moderate — population growth.
Employment growth in 2010 has wiped out recession job losses, and further gains are expected in 2011, CMHC said in a report.
As well, average weekly earnings should rise 4.1 per cent next year after remaining flat in 2010.
“Ottawa is definitely the best place to be,” Pérez-Torres said.
The income growth will keep the housing sector healthy, though more sales could come early in the year, driven by the prospect of increased borrowing costs.
CMHC’s forecasts aren’t infallible.
Last year, for example, it predicted an average 2.3-per-cent rise in resale prices in Ottawa in 2010.
Pérez-Torres said continued low interest rates spurred more first-time buyers to enter the market, contributing to an average increase now expected to reach almost eight per cent.
Similarly, unexpected layoffs in Ottawa could make the 2011 market behave far differently than predicted, she said in an interview.
Even with this year’s increase, CMHC predicts an average price of $328,000 for a home sold through the Multiple Listing Service in 2010 — well below the cost of a comparable home in more volatile markets like Vancouver or Toronto.
For new construction, the average detached home is expected to reach $422,750 this year, up 4.0 per cent from 2009, while the average semi-detached unit will slip 1.9 per cent to $375,000.
In the rental market, an already low vacancy rate is expected to drop even further next year.
CMHC predicts an October 2011 vacancy rate of just 1.2 per cent, down from 1.7 per cent in October 2010.
In three previous Octobers, the rate varied from 1.4 to 2.3 per cent.
Average rent for a two-bedroom apartment reached $1,065 last month, up 3.6 per cent from a year earlier, and is expected to rise another 3.8 per cent to $1,105 by October 2011.

Read more:

Monday, November 15, 2010

Investing in the United States

"I tried bidding on one property and it was so easy and profitable, that I have now bought and sold 7 properties. Easy and fast paced, rehab has been minimal, and no problems, just profit. I love the photos of the properties prior to the bid." - Larry

"I bought a home and sold it back to the original home owner and profited $19,000. It took 3 weeks. The homeowner was happy because he never even had to move out. Wow, this was an easy one!" - Hal

Sunday, November 14, 2010


Construction firms in Ottawa usually take 12 to 18  months to build a high rise building.  In China, the new ARK hotel in Changsha was built in just 6 days!  A 15 storey building in SIX days!!!  Check out the link to this story....

Saturday, November 13, 2010

How you like to earn your return?

I just finished a poll on the blog, asking what is the most important area of a real estate return.  The four areas are

1 - Cash flow
2 - Mortgage reduction
3 - Equity growth
4 - taxable advantages

60% are looking for cash flow
36% are looking for equity growth
4% are looking for tax deductions

Wednesday, November 10, 2010

Ottawa Fourth in Canada

Ottawa was ranked the fourth most popular city in Canada to invest in, after Toronto, Vancouver and Calgary ...

Referral for sound advice

Hello Greg,

I met him on Monday and he said he was looking for investments in rental properties with cashflow, naturally I thought of you since you have always given sound and valuable advice with professionalism.


Thursday, November 4, 2010

Some interesting tips for Landlords

I attended a seminar yesterday entitled "A Landlord's Rights & Obligations in Ontario"

The Residential Tenancies Act (RTA), 2006 is what governs Landlord/Tenant relations.

- 80% of rental units owned by Landlords in Ontario are by "small investors" with less than 6 units
- 32% of people in Ontario are renters (1.35 million renters)
- 2% of the tenants in Ontario are considered "professional tenants" who seek to profit off unsuspecting landlords (27,000 tenants)

Tenants are provided free representation under the RTA, Landlords are expected to have "higher level of understanding".

You cannot have more than one month's rent in your possession.  If you rent to a tenant, you get their last month's rent, ask for a certified cheque on the day you provide the keys.

NOT COVERED under RTA - Living units in which the roomer/boarder does share kitchen/bathroom facilities with the owner/landlord (includes the landlord's spouse, child or parent)

A rental complex or building of which no part was rented for residential purposes before November 1, 1991 is not subject to rental controls under section 6 of the RTA.

Landlords must provide to each tenant with an information pamphlet on the responsibilities of Landlords and Tenants.  It is advisable to get the tenant to sign an acknowledgement of receipt of this document. 

There are NO rental increases allowed to be carried forward.  For 2011, the rental increase is 0.7%, if you do not increase the rent by this factor, it is lost, there is no carry forward.

Landlords cannot demand 12 postdated cheques.

When giving notice, if you send through mail, the accepted timing is it will take 5 days for notice to arrive, 3 days if done by courier.

Landlords can increase the rental deposit each year by the allowable rental increase.

Each year, landlords must pay the tenant the interest on their last month's deposit.  Interest is calculated by using the number for the Consumer Price Index.  If you do not pay annually, it is compounded interest, not simple.

Landlords must provide their full legal name and address to the tenant within 21 days of their taking occupancy.  If you do not want the tenant to have your home address, you can provide your lawyer's office as an address. 

All paperwork signed by tenant must be provided to them, including the rental application form.

1 - not harrass the landlord
2 - pay the rent
3 - pay for any repairs for any damage they have done
4 - cannot change locks without giving landlord a key

On a rental application, make sure you verify all details, do not use their information, get the information direct from the source. 

Previous landlords, not current landlords are the best source of information.  In an independant survey, 80% of landlords in the Middlesex county, said they would give an dishonest reference for a current bad tenant.  Get minimum 3 years and preferrably 5 year tenancy history.

Check their drivers license to verify their information.  People can use aliases and give nicknames, not proper legal names.

On student rentals, get parental guarantees.

Under RTA, landlords can give upto 3 month's rental discount per year, without dropping the rent.  That allows the annual increase on the actual rent, not a lower rent.

You cannot charge late fees, but you can give 2% prompt payment discount.

If tenants are not paying rent, you can refer them to the "rent bank" (Minstry of Community and Social Services).  They can also help tenants with utility loans, rather than the landlord taking over the service.

Properties have to be kept at 21.1 degrees

For common information and forms -

Condos to provide good investment in 2011, report says

Another article out in the Financial section with PriceWaterhouseCoopers endorsing real estate.  Interesting read.   

Condominiums and greenbelt space will provide among the best investment opportunities in Canadian real estate next year, with the overall outlook remaining positive as long as U.S. woes don’t spill over the border, a report found.

It may also be the time to consider selling low-yielding assets in favour of buying properties in the U.S. as the market there recovers, the report by PricewaterhouseCoopers and the Urban Land Institute found.

Apartments, if any are available, offer the best security, it said. Investors should also look for underperforming retail or commercial space to redevelop as condos as Canadian cities grow vertically, it said.

A separate report by RE/MAX released on Monday found that condos are the number one choice for first time home buyers as the price of a detached home is unaffordable.

Condos represent one in every three homes sold in the Greater Toronto area, it found.

The Canadian market for real estate investment has held up better than the U.S. because of strong bank balance sheets and a sound economy. That said, while many investors say it’s a good time to buy, few are willing to sell at these levels.

The report was based on interviews with 875 of real estate experts, including investors, developers, lenders, brokers and consultants in both Canada and the U.S.

Tuesday, November 2, 2010

Condominium market heating up: report - By Derek Abma, Financial Post, Ottawa Citizen, November 2, 2010

Each week, a new report is released that either supports or is against the notion of the Canadian real estate market being overvalued.  This article, taken from the Ottawa Citizen, is another example of the undervalued side of the equation.

"As one of few affordable housing options available to first-time buyers, the condo concept is poised for dramatic growth in years to come," says Michael Polzler, executive vice-president for Re/Max's Ontario-Atlantic Canada operations.

OTTAWA — Condominiums have become a hot sector of the Canadian real estate market, particularly as an option for first-time homebuyers spooked by high prices for single-family homes, says a report released Monday.

Real estate-services firm Re/Max says affordability, lifestyle, investment opportunities and urban renewal efforts are among the reasons condo sales have spiked over the last year in some Canadian markets.

"As one of few affordable housing options available to first-time buyers, the concept is poised for dramatic growth in years to come," Michael Polzler, executive vice-president for Re/Max's Ontario-Atlantic Canada operations, said in a statement.

Re/Max said condo sales in the Greater Toronto Area are up 10.4 per cent, year-to-date, as of September, and now represent one out of every three homes sold there. In Ottawa, condo sales are up 11.9 per cent.

"The lifestyle has also gained a foothold with younger, hipper audiences as the definition of home ownership evolves with the changing demographic," Polzler added. "Dreams of the small home with a white picket fence are being replaced by the funky loft apartment in proximity to shops, restaurants and entertainment."

Price comparisons provided by Re/Max for Ottawa showed the average price for condominiums had risen 12.9 per cent to $252,641 over the last year, but was still more than $100,000 cheaper than the average price of $366,587 for a single-family home.

While the Re/Max report focused specifically on Ontario and Eastern Canada, Gregory Klump, chief economist for the Canadian Real Estate Association, said condo sales are becoming a bigger share of more expensive housing markets across the country, such as Toronto and Vancouver.

"(Condos) have been accounting for a greater percentage over time of all sales activity," Klump said. "Condo units are an affordable alternative to single-detached home ownership."

The Re/Max report said other factors driving the condo market include urban redevelopment that favours intensification over urban sprawl, empty nesters seeking low-maintenance retirement properties and investors hoping to sell when prices appreciate, the report said.

Re/Max said the "vast majority" of newly built condominiums in Toronto are purchased by long-term investors from Asia and the Middle East, who will often rent them out until they find their desired sales price.

Ottawa Resale Market Becomes More Balanced

Members of the Ottawa Real Estate Board sold 1,042 residential properties in October through the Board's Multiple Listing Service® system compared with 1,197 in October 2009, a decrease of 12.9 per cent. Year to date, the number of properties sold has declined 2% compared to the same period last year, a record setting year.

Of those sales, 221 were in the condominium property class, while 821 were in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, stacked etc.) which is registered as a condominium, as well as properties which are co-operatives, life leases and timeshares. The residential property class includes all other residential properties.

"Six months ago we were in a strong seller's market, now we have moved into a more balanced market position," said Immediate Past President Rick Snell. "Some properties are still receiving multiple offers but this is happening much less often than was the case in the spring."

The average sale price of residential properties, including condominiums, sold in October in the Ottawa area was $340,719, an increase of 6.8 per cent over October 2009. The average sale price for a condominium-class property was $263,292, an increase of 13.4 per cent over October 2009. The average sale price of a residential-class property was $361,560, an increase of 5 per cent over October 2009.
“Source: OREB”

Remove HST from Hydro Bills

Below is a link to the petition circulating to take HST off Hydro bills.  With the winter coming, hydro bills have already doubled for most Ontario residents, so those with electric heat could be facing astronomical bills heading into the cold months. 

For landlords, raising electric charges have already changed properties performance, a little relief would be very nice.

Just click on the link and fill out the survey on the right hand side!!