Monday, October 27, 2014

Navigating a complex set of options

Thanks Greg.  It was a pleasure working with you and your team to achieve these results.  When we started on this path earlier this year, finding a way to purchase the home we wanted and be settled in before September didn't seem possible.  With your help, we were able to consider a complex set of options and follow the path that made our move easiest.

My wife and I are very pleased to be able to have sold our former residence at this time and not have to worry any further about completing these plans over an extended period.  I knew we would need a lot of help to get this done and you and your team of professionals delivered for our family.  We will certainly recommend you to our friends and family and would certainly enjoy working with you again in the future.

Our family will very soon grow by one more and we are extremely pleased to be able to focus on our new arrival.  Thank you once again for your tireless assistance and access to your team of committed professionals who know how best to get things done.

Melanie and Rick

Tuesday, October 21, 2014

Financing investment properties - only 10% down with no FEES

I thought I would share with you that clients have the ability to buy an investment property with 10% down with no mortgage insurer fees (CMHC/Genworth).     

This is fantastic for those who are looking to buy an investment property with 20% down as now they can buy two investment properties with 10% down on each.   

This is also great news for those who have challenges in saving up the 20% or more that lenders typically require and is available on multi-unit rentals too! 

Apartment building with low rents

Property X is listed on the resale market.  It is a very attractive building in a great location, but it has very low rents.  It seems really expensive asking price of $800,000 for a net income of $34,500.  Based upon today's market, this building is likely worth $650,000, based upon an income approach.

The rents are between $1000 and $1500 low per month.  This means it will not cash flow well now.  The property actual will lose about $60 per month in it's current configuration.

With some slight changes, the property can be brought to cash flow positive immediately.  There are two additional income sources a savy owner can take advantage of: 2 parking spaces, which should rent for $100 per month and coin laundry, which on 6 bedrooms should generate $50 to $75 per month.

This leads to another $250 monthly, or $3000 annually.  Wiping out the $60 a month loss and creating a small $200 per month of cash flow.

The big secret to changing this building is to turn over the suites.  Increasing your monthly rental income has a drastic effect on the value of the property. 

By increasing your monthly rent, assuming an increase of $1250 per month ($312.50 per suite per month), this means the net income goes from $34,482 to $49,482  which supports a value of $899,000 ($49,482 divided by 5.5%).

There is also a potential to put another suite in the basement, likely a one bedroom.  If the basement one bedroom can rent for $900 a month, that means an additional income of $10,800 increases the value of the building by $196,000 ($10,800 divided by 5.5%)

The total income would then be $60,282 with a 5.5% cap is a value of $1,096,000

Let's assume you can buy for $775,000 plus $50,000 (estimate for a one bedroom suite construction) is $825,000 - meaning and equity bump of $271,000.  The other interesting development is that this property will now cash flow over $1000 per month.

*** This is predicated on increasing rents and using the cap rates to validate the appraised values.

Wednesday, October 8, 2014

Steady as she goes for September real estate sales in Ottawa

Members of the Ottawa Real Estate Board sold 1,133 residential properties in September through the Board's Multiple Listing Service® system, compared with 1,118 in September 2013, an increase of 1.3 per cent. The five-year average for September sales is 1,103.

"Our community is fortunate to enjoy one of the most stable real estate markets in Canada," says Randy Oickle, President of the Ottawa Real Estate Board. "This is evidenced by the fact that the units sold and the average sale price in August and September has stayed within a few percentage points from the year before. We are also right on par with sales and average sales price year-to-date compared with 2013."

September's sales included 232 in the condominium property class, and 901 in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, townhouse, 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.

The average sale price of residential properties, including condominiums, sold in September in the Ottawa area was $356,915, an increase of three per cent over September 2013. The average sale price for a condominium-class property was $254,036, a decrease of 1.2 per cent over September 2013. The average sale price of a residential-class property was $383,406, an increase of 3.2 per cent over September 2013. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.

"The $300,000 to $399,999 price range continues to have the highest concentration of properties sold, followed by the $500,000 to $749,999 range, which is closely followed by the $275,000 to $299,999 price range," explains Oickle. "Condos performed better in September than in August, which could be a contributing factor in the latter price range having a higher concentration of properties sold than in the past."

In addition to residential and condominium sales, OREB members have assisted clients with renting almost 2,000 units so far this year. OREB members also assist clients with the sale of building lots, businesses, farms and recreational properties, and the leasing of commercial space.

Tuesday, October 7, 2014

Our first income property

We worked with Greg Blok to purchase our first income property. Greg provided us with a strategy for success in income property investment, showed us some properties, and most importantly connected us with very knowledgeable colleagues to assist with the legal, financial and construction side of things. Greg was laid back and patient with our group (which consists of six individual investors). We would not hesitate to recommend Greg for those looking to learn more about investing in an income property.