Wednesday, November 30, 2011

Lot prices on the rise in the USA

USA lot prices are on the rise in the high foreclosure states - Florida, California, Nevada and Arizona.

There is still two years to three years supply on the market, which should reflect more like four to six months supply, but the numbers are dropping and prices are increasing, as builders are starting to invest in land again

In places like Phoenix, homes are still selling at fifty cents on the dollar compared to replacement costs to build a new home in the existing properties place

Click here

Thursday, November 24, 2011

CMHC gives positive outlook for 2012

CMHC forecasts for 2012 are positive for home owners and investors.  It appears 2012 will be another growth year for housing in Canada.  Interest rates are predicted to stay low. 

In my opinion, I think this is a good year to be focussing on some debt reduction and asset growth.  The great part of low interest rates is that a higher percentage of your payment goes to principle reduction.

To read full Ottawa Citizen article

Home Energy Audit

The Home Energy Audit program has been extended to the end of March 2012. 

This is a program that is used right here in Ottawa by home owners and investors to outfit their homes with energy efficient renovations on homes.  Check them out here

Canada Rebate programs

Ontario Rebates programs - Ontario — You pay $350 for the first energy audit. You will receive a $150 rebate on the cost of your first audit from the Ontario government’s Home Energy Audit program, regardless of whether you make any energy-saving renovations.

The first energy audit must take place before you renovate - if you want your energy-saving upgrades to qualify for grants and rebates.  A second energy audit must be completed after all upgrades are finished.

Wednesday, November 23, 2011

Basement apartments

I have been doing a lot of research on basement apartments.  They are confusing spaces for sure.  It is difficult to understand the amount of work that goes into building an apartment in the basement of a house.  My focus has been on houses with direct entries to the basement, so without having to dig and modify the foundation walls.

I have found that these are far pricier than I originally thought.  My first rough estimates had the basement apartment at $30,000, but recent quotes have put a fully permitted and built basement apartment around $50,000.  This is a big number, but this apartment should easily generate $1200 per month, meaning a return of your investment in three and a half years. 

Assuming a quality job with timeless decor, this should give a lifespan to the apartment of 10 plus years.  This would result in a gross return of over $93,000 in the lifespan (after costs of building the suite).  The other advantage is when the property needs to be updated, you will avoid major costs like wiring, plumbing, sewers, construction, etc.  The costs will merely be new kitchen, bathroom and flooring.

I think these are highly viable investment options to maximize returns in real estate.  In places like Vancouver, these type of suites are now becoming very common in most homes.  This is a great way for young first time buyers to get in the market, in a good neighbourhood. 

Drop me a quick line to learn what to look for an how to move this forward.

When will it end? The US housing crisis

A common question comes up when I speak about the USA housing crisis "Why did it start in 2007?"  The second question is "When do you think it will end?"
The sub-prime USA market hit late in 2007.  If you think back, that would mean these mortgages were originated in 2002, which makes sense as the policy change to bring about the "Sub Prime Mortgages" originated in 2001/2002.  This policy change was in response to the 9/11 disaster and the resulting economic slow down that occured.  Subprime mortgage lending was introduced as a method to stimulate the economy.

If you track the timelines, mortgages granted in 2002, with an average timeline of 5 years, means these mortgages would be up for renewal in 2007 (start of the global financing meltdown).  The peak lending of subprime mortgages was 2004 to 2006, which translates to 2009 to 2011 for maturation dates.  The end of the subprime mortgage fiasco was 2008, meaning the final bad debt should be washing through the system in 2013. 

With the end of 2011, we have now weathered what should be the worst of the bad mortgage financing problems in the USA.  This is meaningful, as we are starting to see strong embers of a recovery taking effect.  It is important to remember, many USA banks were leveraged over $40 per dollar of deposit money, whereas our conservative Canadian banks were leveraged to a maximum of $8 per deposit dollar.

Many economists with bigger brains and more experience predicting the future probably have some different opinions and ideas, but it seems to me that at the base, understanding the flow of the paper will predict the start and end of the real estate based financing issues. 

Does this mean magically in 2013 everything will be fine?  Not likely.  There is another factor that is at play, since 2008 the US new housing industry has been operating a highly reduced rate.  New home construction is well below pre2007 levels.  There are around 330 million people in the USA and their population grows by about 3 million per year. 

On average, across America, there are 2.87 people per household, meaning each year, the USA needs another 1,050,000 homes (approx.).  With housing construction largely silent since 2007, that means there is a short fall of close to 5 million homes by the end of 2012.  There was an epidemic of overbuilding in some cities, so through this foreclosure process many of these second and third homes have been bought up.  Eventually, new home builders will have to start building homes.  When they do, prices will have to increase.  In some centers, such as Phoenix, Arizona, houses are selling at 50% of their built prices.

Once the bad debt is "flushed" through the system and the new home construction industry starts building again, the USA housing crisis will have ended. 

Invest in Phoenix, Arizona

Many of you’ve been asking for Arizona information. I recently put together some information to pass out regarding the Phoenix market and greater area.

The Phoenix greater area is in a very very low inventory status of active homes. Less than 15,000 actives for over 2 million homes. The lowest I’ve ever witnessed. Job market and economy is booming.

These properties from Smart are great to buy and hold as the market is really starting to take off. The equity is increasing as average homes are selling for $65/sqft and replacement costs to build a home in Phoenix are $125/sqft.  Auction homes are currently selling well under market value 15-20% below- it’s just that much more equity to add to the pocket.

For more information, click here

If you wish to see the power point evidence, please email me at

Southern California Investing?

Often referred to as "the best place to live" in the USA, Southern California is presenting some excellent options for investors.

Check out this short video on "So Cal Investing"

Tuesday, November 22, 2011

CMHC Updates Ottawa Housing for 2012

OTTAWA — First-time buyers may have fuelled Ottawa’s most recent housing boom, but baby boomers are now in the driver’s seat, according to the Canadian Mortgage and Housing Corporation.

Representatives of the national housing agency told a conference Thursday that demand for homes in Ottawa is expected to remain strong thanks to continued immigration, a high-paid workforce and a growing baby boomer demographic looking to downsize into higher-end, high-density developments.

“They are really what has been driving the market in the last year,” CMHC senior market analyst Sandra Pérez Torres told the meeting at the Hampton Inn and Conference Centre. “Employment over the last year has really favoured people between 45 and 64 years of age. These are move-up buyers with more income.”

According to CMHC, more than 170,000 people in the capital region are between the ages of 55 and 74. That demographic made up more than 40 per cent of all condominium buyers in Ottawa last year. As baby boomers continue to age, CMHC expects that demographic to account for as much as 50 per cent of all condominium sales by 2016.

Condominiums could be the only market segment in Ottawa to show growth next year. CMHC expects builders to begin construction on 1,500 condominium projects in 2012, an increase over the 1,475 started in 2011. But construction of townhouses is expected to fall to 2,200 next year from 2,245 in 2011, while single-family homes will fall marginally to 1,850 from 2,000.

More than 80 per cent of all residential construction started in Ottawa in 2012 will happen in the suburbs, outside of the city’s greenbelt.

Pérez Torres said the suburbs offers buyers more affordable housing choices than they would find in the downtown core.

After two years of record sales, the resale housing market is likely to slightly soften, CMHC said. With increasing numbers of baby boomers looking to sell their larger homes, CMHC expects a record number of homes offered on the Multiple Listing Service (MLS). That in turn will see increases in housing prices in Ottawa taper off. However, high demand from people between the ages of 25 and 54 should create a more balanced market for resale homes and hold price increases in lockstep with inflation at around two per cent.

Pérez Torres said the large 25-through-54 demographic contains a variety of potential buyers. Some of its younger members will be looking for their first homes, while mid-range to older members will be seeking larger houses for their growing families.

Another factor that will help drive home sales in 2012 is the continuation of interest rates at their lowest in 60 years. CMHC said rates will likely remain at record low levels for most of next year.

In 2011, Ottawa resale home prices increased by around five per cent, according to CMHC. The average selling price of a home sold though MLS in Ottawa this year is $345,000.

CMHC also said that residents of the capital shouldn’t be worried about a housing market bubble. With strong employment numbers, decreasing debt levels, low vacancy rates, steady rental rates, stable price increases and a balanced market for home sales, Ottawa’s housing market looks rock solid.
“Those are the things you look for in a housing market bubble,” said Mathieu Laberge, CMHC’s deputy chief economist. “There is no empirical evidence of a housing market bubble.”
© Copyright (c) The Ottawa Citizen

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Sunday, November 20, 2011

How do I rent properties?

At this point, I do not manage or rent my properties.  I use professionals to take care of this part of the process.  When I used to rent properties, I used the following processes:

The best place to advertise is Kijiji and Craigslist. Pictures are very important for people to see and stress the items you think are important in the property, what caused you to buy it? If it has 3 bathrooms and 2 of them are ensuites state that in the add.

When you are showing your property we suggest that you book the showing approximately 10 minutes apart. When potential tenants see other people looking at your unit, it will illustrate your property is in demand - potential tenants may be quicker to complete the application.

When you have the application completed contact their references,
• a good idea is to call the main number of their place of employment and verify their employment history, then speak with their supervisor;
• when you contact their previous landlord ask first, 'Do you have any apartment for rent?', if they are a landlord they will react appropriately, if they are a friend or relative they will respond with - I don't have properties for rent. Once you have established you are speaking with a landlord, you can ask them pertinent information- how were they as tenants, how did they keep the property, were they prompt with their rent, etc.  Always put more stock into the previous landlords comments rather than a prospective tenants landlord, as the current landlord might be trying to rid themselves of a "problem tenant"
• Once you have verified that these candidates are people you would like to have as tenants, then you want to complete the credit check. As a Bennett Pros client this can be done through our partners.

When signing the lease, it is essential that you obtain last months rent up front. I would recommend giving the tenant your bank account number and have them deposit the rent automatically into your account rather than post dated cheques.

Thursday, November 10, 2011

City of OTTAWA set to embark on infrastructure spending binge

The city of Ottawa is about to embark on an infrastructure spending binge to prepare the city for Canada's 150th birthday.

The city has proposed spending $340 million in road investment over the next three years. It will be the biggest construction project in the city's history.

"We want to take advantage of the low interest rates to do some catching up on things that we should have done years ago," said Coun. Marianne Wilkinson.

The "Ottawa on the Move" project will cost about $340 million. The city will have to borrow about $125 million to fund it.

The project has been approved by the transportation committee. City Council still has to approve the entire budget on Nov. 30.

If it passes, several roadways across the city are set to benefit from the project, including the east end's infamous Highway 174. Two hundred kilometers of the road will be resurfaced.

"Sometimes you go along Highway 174 and I feel like I'm back at SuperEx because you're on this roller coaster there," said Mayor Jim Watson.

Other projects include sidewalk improvements in Sandy Hill, sewer and water upgrades along Main Street, and a new bike path to connect Scott Street and the Ottawa River Parkway. Billings Bridge will also be repaired.

Overall, there will be 28 road, sewer and water projects, 120 roads resurfaced, and 27 bridges and sidewalks repaired. Over 40 sidewalks and pathways will also be renewed.

The infrastructure investment will also ensure a good transportation network during the construction of light rail in the city. It will also prepare Ottawa to host Canada's 150th birthday bash.  "We have to start now planning for that," said Watson. "Get our act together—2017 is not that far away."