Tuesday, March 26, 2013

Magic of rental increases

Often it is viewed as a negative when a tenant moves out.  There can be a silver lining, when you own an apartment building.  The increase in rent can reap huge dividends, but be aware, that a decrease in rent is also potentially damaging.

Recently, a tenant gave notice that they are moving out.  They were paying $663 for an apartment.  The current market rent for the space is $895.  That means, monthly, there will be an increase of $232, which over a year is $2784.  A nice little bonus in rental income. 

The real magic happens when you consider that apartment buildings are sold on a cap rate basis.  In Ottawa, most cap rates are now in the 4 or 5% range, so for conservative analysis, let's use 6%.

$2784 divided by 6% = $46,400

What this simple calculation tells you, is that your apartment building is now worth $46,400 more, because of the higher rental amount.  On the other hand, if you owned the building and dropped your rent from $895 to $663, the value of your building has dropped..

In income real estate, it is important to remember that what properties in the area have sold for is only somewhat important (for establishing the cap rate), the most important aspect is keeping your rents high and your expenses low, to create maximum NET OPERATING INCOME.

U.S. Home Sales Move Up Hit Highest Level Since 2009

The U.S. housing market continues to show signs of recovery, with February existing home sales rising 10.2 percent from a year earlier, according to data released today by the National Association of Realtors.

NAR reported 4.98 million transactions in February, the highest level since 2009, when a tax credit was available for purchases. The total compares to 4.94 million in January and 4.52 million in February, 2012.

The national median price rose to $173,600, an 11.6 percent increase from February 2012--the largest gain since November, 2005.

The latest data affirms "a healthy recovery" for the market, NAR reports. Sales have been above year-ago levels for 20 consecutive months, while prices show 12 consecutive months of year-over-year price increases.

"Job growth in the improving economy and pent-up demand are causing both home sales and rental leasing to rise," NAR chief economist Lawrence Yun said. "Though home prices are rising much faster than rents, historically low mortgage rates are still making home purchases affordable." But there are "headwinds," including limited housing inventory and "credit conditions that remain too restrictive.

Sales of distressed homes accounted for 25 percent of February sales, up from 23 percent in January, but down from 34 percent in February 2012, NAR reports. Fifteen percent of February sales were foreclosures, and 10 percent were short sales. The foreclosure properties typically sold at an 18 percent discount from market value.

Although there have been reports of dwindling supply in many markets, the overall housing inventory at the end of February actually rose 9.6 percent to 1.94 million existing homes available for sale, representing a 4.7-month supply at the current sales pace, up from 4.3 months in January, the lowest supply since May 2005, Listed inventory is 19.2 percent below a year ago when there was a 6.4-month supply.

U.S. Housing Starts Hit Five-Year High March 25, 2013

Housing starts rose 27.7 percent in February from a year earlier, providing further evidence of the return of the U.S. housing industry.
The number of housing starts increased to 917,000 in February, up from 718,000 in the same month of 2012, according to data released today by the Commerce Department. Housing starts were up 0.8 percent since January.
The bulk of the housing starts were single family homes, which were up 31.5 percent from a year earlier, the highest number since 2008.
Building permits, a sign of future growth, are also up. The number of permits issued for privately-owned housing jumped 33.8 percent from a year ago, according to Commerce Department data.
The numbers are the latest good news for the U.S. property industry, which has noted several signs of recovery. Last week data from RealtyTrac showed a decline in the number of foreclosures. Data from Zillow also confirmed a steep drop in the inventory of homes available.

Friday, March 22, 2013

3 Foreclosure-Rescue Tactics Used By Fraudsters

By Sarah Parr

Foreclosure-rescue scam artists are some of the most misleading businessmen in North America today. They abuse, profit from and give concerned homeowners who are behind on mortgage payments a false sense of security. Scam artists typically target low-income homeowners from areas known as centers of foreclosure activity. They use common and familiar advertising methods to attract clientele.

Foreclosure-rescue scams are hard to decipher, but there are three general tactics used by unethical companies.

Pocketing fees
It is free to qualify for specific government programs that aid in foreclosure defense or the loan modification process. Speaking with a government agency-approved housing counselor is also free, according to PreventLoanScams.org. Yet, homeowners frequently report unethical companies that charge clients for access to government foreclosure-rescue programs and housing counseling. A company could be a deception if it asks for a pricey upfront fee for access to the latest government program or a recent mortgage settlement. Consumers can easily find information on the latest government program or government agency-licensed housing counseling on the Internet. Homeowners should also be suspicious of companies that advise homeowners to pay mortgages to them and not to the loan servicer.

Making guarantees
Foreclosure relief or the modification of a loan should never be promised, and access to specific government programs may only be available for some borrowers. Unfortunately, mortgage relief scam artists will attempt to convince consumers that a loan modification or foreclosure defense handled by their company is guaranteed. A scam artist may also pose as a member of a legitimate organization approved by, or affiliated with, a government and state that a homeowner qualifies for a specific government program that aids in mortgage relief.

Posing as official
In order to appear official and dependable, scam artists will do anything. Non-attorneys often pose as attorneys who only offer loan modification services, according to the New York Times. Consumers should be careful when dealing with these lawyers, since most law firms provide loan modifications as one of many services. Some law firms even pretend to be non-profit consumer advocate groups that offer loan workouts or forensic loan audits.

Another kind of fake professional, the “foreclosure rescuer,” may convince a client to transfer the title or sell his or her home, and then stay in the home as renters. They will assure the former homeowners that they will be able to reclaim the house once they’ve recovered financially. However, the scam artist will have the power to evict the victims and claim the home.

People who risk losing their home should watch out for the common tactics covered above. Also, homeowners who would like a loan modification or who are at risk of foreclosure should never avoid any communication from their lender. Alleged scams can be reported to the Better Business Bureau, or to the Federal Trade Commission or Canadian Fair Trade Commission.
Sarah Parr is a writer who blogs about issues surrounding foreclosure and the mortgage relief industry

Friday, March 8, 2013

Was your home a grow operation

Here are 12 physical signs your home may once have housed a marijuana grow operation:

1 - Modified ductwork that doesn’t seem to make sense.
2 - Circular holes in floor joists or roof trusses from venting (look for holes that have been patched).
3 - Chunks of brickwork on the exterior that have been replaced
4 - Brown stains in soffits (the exposed undersurface of a roof eave) from the grow-op venting to the outside, or brand-new soffits.
5 - In the winter, bald spots without snow on the roof from heat loss.
6 - Stains on basement floors from pots that sat there for long periods of time, or stains in laundry tubs.
7 - Modified wiring and electrical panel. Sometimes live wires can still be in the insulation.
8 - New plumbing for water supply and drains.
9 - Foundations and concrete walls cored or breached to get wiring around the hydro meter.
10 - Warped/rotted wooden structures (staircases, floors and window cases) due to moisture damage.
11 - Toxic moulds form/spread poisonous spores in the open, within wall cavities, inside window frames, ventilation systems and attic spaces.
12 - A musty smell or, in the case of meth labs, odour that smells like cat urine.

The unofficial 13th way, is if someone with the munchies keeps knocking on your door, asking "are you cool, man?"

Wednesday, March 6, 2013

West Central Ottawa - No TAX real estate opportunity

I have been to the sales center today. They have some nice plans.
In the condo building there is a special with
No property tax for one year
no land transfer tax
no tarion fees
legal fees paid upto $1750
upto $13,000 in upgrades

Price with parking for a two bedroom is $318,565

Monthly mortgage - $1204.77
condo fees - $254
property tax - $0
total cost - $1408.77

I spoke to my property manager and he figures rents are

1 bedroom - $1400
2 bedroom - $1700

Top 25 Grants available to Home Buyers

Great article on the Top 25 Grants and programs available to Home Buyers ... Vancouver Sun article - please click here

Friday, March 1, 2013

Student Rental close to Algonquin College

Interestingly, there is only space for 10% of Ottawa's 60,000 students to live in on campus housing (CMHC)

Asking Price - $299,900
1 three plus one bedroom home perfect for a Algonquin student rental
Suggested rent - $500 per room x 4 = $2000 – annually $24,000

Taxes – $2,534.95
Net Operating Income - $21,465.05

Mortgage payment (assuming 20% down, 3% interest, 25 year term) – $13,625.04- (monthly - $1,135.42)
Deposit needed - $59,980

Cash flow - $7,840.01
CAP RATE – 7.2%
Cash on cash return - 13.07%

To find the perfect student rental in Ottawa, contact the Bennett Property Shop Realty Brokerage for Ottawa real estate needs.

E and OE.
Proformas are for illustrative purposes only. Cash flows will vary during brief periods of vacancy