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'Investment Opportunities' Category

Do You Recognise The 7 Sets Of Statistics That Show What Areas To Invest In? Part 4

Enough of the theory. Barrie Ontario is the real thing.

Barrie use to be a sleepy town on Kempenfelt Bay. Not anymore. A population of 132,000 is expected to rise to 180,000 by 2031.

The local natural beauty of the surrounding resort country including ski hills and lakes make Barrie is a “want to move to” city. Additionally  the cost competitiveness of Barrie as a location for industry  has seen a positive migration of companies and skilled workers into the area.

In the May 2008 “MoneySense Magazine” article ” Where To Buy Now“, Barrie was the only city awarded A+ in the Economic Strength category appealing to real estate investors.

Barrie ticks all the boxes on the list of 7 sets of statistics and is a city any property investor should consider?

1. Population Growth
2. Spending On Infrastructure
3. Retail Sales
4. Employment Growth
5. Employment Makeup
6. Demographics
7. Average Income

Do You Recognise The 7 Sets Of Statistics That Show What Areas To Invest In? Part 1

Do You Recognise The 7 Sets Of Statistics That Show What Areas To Invest In? Part 2

Do You Recognise The 7 Sets Of Statistics That Show What Areas To Invest In? Part 3

How Do You Make Money Out Of Investment Property?

4 ways to make money from an investment property:

1. Passive income.

2. Equity.

3. Tax advantages.

4. Appreciation.

Passive Income

Or more normally referred to as positive cash flow. It’s quite simple to work out:

Gross Rental Income
Minus: Vacancy rate
Equals: Adjusted Gross Income
Minus: Operating costs
Equals: Net Operating Income
Minus: Debt Service Payments (mortgage)
Equals: Cash Flow

What do you need to do to achieve a positive cash flow. Get the best rent possible whilst keeping vacancy periods as low as possible. Don’t be greedy. Holding out for that extra 50 bucks a month could result in a month’s vacancy and minus say $1200 that year.

Keep the money going out, the overheads as low as possible. Obviously the lower the price you pay for the property the less the mortgage payment will be. Again though don’t be greedy when purchasing. If the figure on the table is acceptable then pay it. Letting an ego get in the way, focusing more on the deal and the need to have the last word could let an excellent income generating property slip through your hands. Work with a mortgage broker to get the best rates and or possible.

Shop around for insurance or build a relationship with an insurance broker who you can trust to find you the best deal. I use Brent at Murphy Insurance ( 705 737 3630)   and no I don’t get any kick back for referrals.

Equity

The renters are paying down your principal. Even as you sleep your equity is growing. Use that positive cash flow to pay off more principal, pay less interest and see the equity grow even more quickly

Tax advantages

There are 2 certainties in life: “death & nurses taxes.”  The good news is that property is a very tax efficient investment. Get expert advice as tax laws are continually updated.

Appreciation

Historically property has always gone up in value. There are ups and downs but in the medium to long term the value will always increase.

“Flipping” Houses For A Quick Profit

“Flipping” a house can be a great way to earn cash fast

A family I work with need to raise capital for investing in more long term rental properties They made their initial investments last year and were very pleased with the positive cash flow, good tenants and receiving rental income before the first mortgage payment.

They have decided to look for a house to flip: a property bought at below market value (BMV), that needs some tender loving care and can then be sold quickly at a decent profit. We have found a home in Wasaga Beach available at less than $200,000, that with some cosmetic work and a new roof should sell for around $250,000. The work will take less than 4 weeks.

What do investors need to remember when considering a home to flip?

• Ensure the house is bought at BMV. These homes often look in a state of disrepair but an investor can see past this as it won’t be their “home”, they won’t move in to it.
• The art of flipping a home is to spend as little as possible on the purchase and the renovations. Make sure the repairs will not prove too costly or take too much time.
• Research the area and find out what the average price is. Don’t base your figures on the highest price possible.
• Save on costs by doing as much of the work as possible yourself. Make sure the work is of the highest standard.
• AVOID houses with plumbing problems and or electrical faults. These are expensive to fix and can eat away at profits.

How Come Everyone Is An Expert On Investing In Real Estate?

Even though “they” own no investment properties

I know I often repeat myself on one particular issue when talking about investing in real estate to friends, clients, experienced and new investors; be prepared for everyone who knows you are or thinking of becoming an investor to be an “expert” on the subject and inevitably tell you now is not a good time to invest.

Then be prepared for these “experts” to contradict themselves and tell you how much they made on their last sale. They forget to mention that all this profit was immediately spent on a new home!

I bet that the “profit” in their possession for that split second before shooting out again on a new home was the most cash they ever had.

Imagine if the profit didn’t have to go towards a new house

The media are not immune to this negative bias against investing in real estate and I have found tend to be more pro the stock market.

I recently read some articles that support this view; admittedly it is USA based but I believe the sentiments carry over to the Canadian media as well.

From the CNN money web site entitled:

“10 years…no gain in home prices”

It starts “Taking into account inflation, home prices are actually lower than they were 10 years ago . . ..”

Further on though explains  that there was “no gain in home prices” in inflation-adjusted dollars. In fact homes prices increased by 25% over the decade.

A very pro stock market article in USA Today does not take into account the effects of inflation but still the S & P 500 was down almost 25% during the same period.

Now where would you prefer to invest? Real estate UP 25%, stocks DOWN 25%.

This does even take into account the tax advantages and leverage.

Finally I would like to relate a recent experience of a client. The couple bought their first two ever investment properties early last year. Both in Barrie, both rented out before the first mortgage payment and both have positive cash flow taking into account everything including the interest on the Line Of Credit used for the down payment. I set of tenants have asked to leave at the end of February due to financial difficulties , a few months before the 12 month contract ends. With out going into too much detail the owners have advertised for new tenants and been overwhelmed by the interest. I offer to advertise the house on Craig’s List with a high profile advert but was told :

” If you don’t mind I will hold off posting( on Craig’s List) for a couple of days, as we may have it rented out. Had a couple of viewings on Sat and have a completed app. form but am just working on the references, so will let the potential tenants know if they have been successful by tomorrow. Have also had a couple of enquiries today as well.
It gives you the bug to do this ten fold when you realise the interest out there!!!”

To paraphrase from the movie “Field Of Dreams”:

“Buy it and it will rent.”

Is 2010 The Year You Will Become A Property Investor? 6 Tips To Get You Started

Six important lessons for a new property investor

Find the Experts in Your Field and Copy What They are Doing

“Imitation is the sincerest form of flattery“; you should be taking advice from those who are successful at what you are trying to do.  There’s no sense in reinventing the wheel- instead, figure out who the successful investors are in your market, and mimic what they are doing.

Get in the Habit of Making Offers

Property investors want to buy at below market value . Some sellers are willing to accept these offers as they solve a problem BUT you need to make the offer.If you aren’t making offers, you aren’t doing deals.  If you develop this habit early on, you will reap the benefits down the road.

Distance Yourself From the Naysayers

The last thing you need when you are just starting out is someone chirping negativity in your ear.  Put as much distance as you can between yourself and those who try to discourage you.  If the profits of doom are friends or family make it a point to avoid the topic of your investing  while they are around.

Pick a Farm Area and Become an Expert at it

Trying to learn the market values of every neighborhood in your city can be an extremely overwhelming and daunting task.  Instead, pick a small farm area and become an expert at it.  Once you have mastered one neighborhood, then move on to another.

Be Consistent

Whatever your target market, you need to remain consistent with your efforts.  Keep in mind that you will most likely get many rejections before you get your first deal, so make a commitment to yourself to keep going until you get that “yes” that you are looking for.

Set Realistic Expectations

Property is a medium to long term investment, do not expect to become an overnight millionaire.  There is a learning curve involved that everyone has to work through, and it’s best if you realize this from the out set.  You are setting yourself up for disappointment by expecting too much too fast.

Will You Buy Your First Investment Property In 2010? Or Are You Stuck On The Rat Wheel Of Indecision?

The first step is always the most difficult

This is not some Zen like proverb but rather reflects my experience in talking to people thinking about buying an investment property. Nearly everyone knows it makes sense to invest in property but logic often cannot overcome emotion; people are afraid to invest and make that first purchase.

A great book to read to understand how to overcome this is “Feel The Fear And Do It Anyway” by Susan Jeffers.

Always there are reasons for not taking action; the wrong time, markets too hot, markets too slow, we won’t find a renter, I know someone who knows someone who heard about a friends friend who lost out investing in property.

Naysayers are especially prevalent. These Victor Meldrew’s ( for fans of English comedy ) are all experts on why not to invest in property and will tell you so. In the next breath they explain how much they made when they sold their last home! Unfortunately all this profit was spent on another home and did not go into their pocket. BUT for a split second when the cash was in their bank account before flying out to purchase another house this was probably the most money they ever had.

Property investment is not for everyone.

However don’t let fear stop you from making that first investment property. I can more than happily put you in touch with investors who in the last 12 months had exactly the same fears and worries but took the first step and bought an income generating property and in many cases quickly bought a second.

Just contact me if you want to have a very informal chat about investing.

5 Mistakes To Avoid When Buying An Investment Property

Due diligence and then check again to avoid these mistakes when buying an investment property

1. Not having the proper insurance.
2. Not properly checking a tenant references.
3. Agreeing to inherit a tenant  without checking if there is a problem.
4. Not ensuring you have the right mortgage.
5. Paying too much interest if borrowing the down payment.

5 Mistakes To Avoid When Buying A “Fixer Upper” As An Investment Property Part One

Buying an investment property requires a different mind set than when buying your own home.

There are a wide range of “fixer uppers” for sale in Wasaga Beach.

Here are 5 mistakes to avoid when buying one:

1. Falling in love with the property.
2. Renovating like it was your dream home.
3. Forgetting the bottom line. Are you acting more like a builder? Are you trying to make a model home? Are you doing improvements just to show how well you do an improvement?
4. Fooling yourself that you will get the money back.
5. Justifying an improvement with a non-monetary return.

Are You Worried About Buying An Income Generating Property? Relax People Do Rent!

Are we going to find a renter?

The number one fear for new property investors is finding a renter. ‘Who rents” is nearly always the first question I hear.

Why do people rent? Here are 5 reasons:

Renting Keeps You Flexible
When you rent, you can pick up and move almost whenever you want, with very little penalty (perhaps an early termination fee of some kind); when you own, selling a home can take a very very long time. You lose a lot of flexibility when you “put down your roots.” When you want to look for a new job, you’re restricted to looking in the geographic area around your home. If you ever get a job offer in another area, you have to go through the headache of selling your home before you can take advantage of it. If you rented, you could just end your lease, rent a moving truck (avoid U-Hauls!), and just go.

Someone Else Does The Repairs
When you own your own home, every time something breaks, you have to fix it. Every time something breaks and can’t be repaired, you have to fork over the cash to buy a new one. A new refridgerator washer or dryer can cost thousands. When you rent, hopefully your landlord will take care of all of your problems, fixing things that need fixing, replacing things that need replacing.

Owning A Home Is More Expensive Than It Looks
With renting, you do throw your money on rent because you never gain ownership of the place you’re renting. However, when you own a home, you also throw your money away on other fees and taxes that never go towards your home ownership. For example, you’ll pay property taxes, homeowners association dues, condominium fees, and any number of other fees associated to the area your home is in – none of which go towards the equity in your home.

Renters Insurance Is Much Cheaper
When it comes to home related insurances, renter’s insurance is ridiculously cheaper than homeowners insurance – oftentimes ten times cheaper.

Home Prices Can Go Down Short-Term
One of the cornerstones of the argument to buy a home is that home prices always go up eventually. The problem with this theory is the fact that while you can invest in the long term, reality forces you to live in the short term and in the short term the market can go down.

Is It Time To Employ A Property Management Company?

Here are 10 questions to ask the company before choosing:

1. Are you licensed?
2. Do you have a professional designation?
3. Do  you have experience with this type of property?
4. Can you provide  references?
5. What are your fees?
6. How do you select tenants?
7. If  a tenant doesn’t pay how would you handle the situation?
8. Do you  provide monthly reports? If so, what’s included in these reports?
9. How do you plan to take care of my investments?
10. What sets you apart  from the competition?