Multi-Residential Asset Class: A couple of tips
This past week I took some investors to view a mutli res building. The building had furnished suites. Furnished suites command a higher rental rate and can compete with rates on short term hotel rental accomodations.
Some red flags:
1. Cmhc won't finance using the income stream provided in the financials. It will take out the premium and look at rental rates fore unfurnished units when it does its market valuation. That will have a substantial affect on the amount it will loan and subsequently the amount you may offer
2. Furnished suites can result in very short term leases. Too much transition can be a serious issue
3. You'll want to make certain that the leases stipulate something around the "wear and tear" of the chattles provided by the landlord. Last thing you want is a tenant demanding a more modern lcd tv
4. You'll want to really know who your tenants are and where they're coming from that they require furnishings to be provided.
CAPS in general:
In low to mid market were seeing caps these days around 5.5 percent. With interest rates low and some unwilligness by investors to look into equities (there are those buyers who see real estate as a sound investment) and one that you can't overlook market lift on top of the CAP. Still make sure you're getting positive leverage. Take you're yield (net income/purchase price relative to cash on cash (net income less annual mortgage/equity).
For more tips or red flags, please don't hesitate to get in touch.
Best,
Michael Gruenstein MBA CSC Sales Representative
Re/Max Realtron(ICI/Res)
Blog: http://mgruenstein.blogspot.com
C:416.271.2066
mgruenstein@trebnet.com
Wednesday, August 17, 2011
Tuesday, July 19, 2011
Real Estate as an Investment in Toronto
Quickly we're going to look at two vehicles for very different real estate investors.
New condos are still arguably a decent place (with some risk) to invest money over a short term horizon and look for a small but healthy bang for your buck.
If you are fortunate enough to be tied to a broker who has an in with a solid developer, you may be invited as an investor to buy into the development well before it is built. In most cases a developer need sell up to 70% of the units at preconstruction phase in order to tie up the financing they require.
Often this 70% can be sold through these relationships with buyers at this stage buying in for 10%-15% below the planned market value. The remaining 70% will get sold to the average Joe Buyer at a higher rate.
Many would argue that buying in at preconstruction should net you 25k-50k plus depending on the developer, location and when you pull th trigger to sell. Some developers will allow you to "assign" (sell the deed prior to closing to another party) and you should still be seeing a pretty penny for this hurried transaction.
Why does this work?
1. Since 70's there's been few buildings built as rentals. I'm talking about high rises. Most have been developed as condos so renters need somewhere to live
2. we still have 100k plus immigrants a year coming to Toronto to look for work. Before they buy a home many rent. You hold the stock!
A second investment is a small apartment building.
In the Toronto core these days, you're looking primarily at 5-6% returns. Not sexy but certainly better then the bank's GIC rate. You need to be prepared to work though. It's a job. The supply of these buildings is in tight order so Sellers are having their way. You need to look past the cap rate and look as a buy and hold. As such the real opportunity lies in the areas inflation If you can find a building buried in a residential area that is seeing growth...all the better.
The one downside is that rental escalations are tied to the CPI and last year that wasn't showing much growth. As a result, rent increases for existing tenants who wish to renew at a low .7%. But there are accounting advantages on taxes for both property and depreciation.
Much more can be said and needs to be addressed.
If you have the interest and time, please don't hesitate to call me direct.
Stay cool....
Michael Gruenstein MBA CSC
mgruenstein@trebnet.com
New condos are still arguably a decent place (with some risk) to invest money over a short term horizon and look for a small but healthy bang for your buck.
If you are fortunate enough to be tied to a broker who has an in with a solid developer, you may be invited as an investor to buy into the development well before it is built. In most cases a developer need sell up to 70% of the units at preconstruction phase in order to tie up the financing they require.
Often this 70% can be sold through these relationships with buyers at this stage buying in for 10%-15% below the planned market value. The remaining 70% will get sold to the average Joe Buyer at a higher rate.
Many would argue that buying in at preconstruction should net you 25k-50k plus depending on the developer, location and when you pull th trigger to sell. Some developers will allow you to "assign" (sell the deed prior to closing to another party) and you should still be seeing a pretty penny for this hurried transaction.
Why does this work?
1. Since 70's there's been few buildings built as rentals. I'm talking about high rises. Most have been developed as condos so renters need somewhere to live
2. we still have 100k plus immigrants a year coming to Toronto to look for work. Before they buy a home many rent. You hold the stock!
A second investment is a small apartment building.
In the Toronto core these days, you're looking primarily at 5-6% returns. Not sexy but certainly better then the bank's GIC rate. You need to be prepared to work though. It's a job. The supply of these buildings is in tight order so Sellers are having their way. You need to look past the cap rate and look as a buy and hold. As such the real opportunity lies in the areas inflation If you can find a building buried in a residential area that is seeing growth...all the better.
The one downside is that rental escalations are tied to the CPI and last year that wasn't showing much growth. As a result, rent increases for existing tenants who wish to renew at a low .7%. But there are accounting advantages on taxes for both property and depreciation.
Much more can be said and needs to be addressed.
If you have the interest and time, please don't hesitate to call me direct.
Stay cool....
Michael Gruenstein MBA CSC
mgruenstein@trebnet.com
Wednesday, July 6, 2011
Toronto Housing Market: What's the Latest? Plus..some tips.
There hasnt been an abundance to write about.
Market in Toronto continues to churn out listings slowly.
Homes that show well and in sweetspots are still seeing multiple bids.
Interestingly, there may be a bit of a ceiling these days on just how high buyers are willing to bid upwards. We all know bank appraisals are getting a good deal more stringent.
Also days on market in a number of areas has slowly been on the rise.
Is this the typical slowdown we see each summer? Or is this the sign of ano inflated market begining some degree of a correction.
Economists will argue yr over yr prices have not been rising in a bubble formation as the litmus test is comparing wage growth relative to inflation of housing prices and theyve been rising together thus far. And we always talk about Toronto as a world class city with affordable (on relative scale) prices.
We do collectively know that interest rates cant stay this low BUT when will they go up? US debt levels, strong loonie, Eurozone nightmares, not so hot economic growth, a weak second quarter and slowdown economies in developing nations dont exactly scream for heightened rates.
BUT...they did infact raise rates at many banks yesterday on fixed rate mortgages.
2 litmus tests you should know around financing your home:
1. When you buy..know that a 2 percent increase in rates on a 4 percent mortgage will increase payments by 50 percent. Make sure if you think rates are going in that direction that you are confident in 5 yrs or less when you renew, that you can afford this increase.
2. This is a barometer as to whether you should rent or buy. Some use this. Take the monthly rental payments for the year. Divide the price of the house by these payments. If the number is less then 15..theres ano arguement that it may make sense to own a house. If the number comes in 20 or above..it makes sense to rent.
I didnt make this up and frankly i dont know who to credit. If you dont like it..dont use it!
As always, send in your questions/concerns to my email and my best!
See my website @ http://www.TheSmithsBuyAhouse.com.
Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.PropertiesintheGTA.ca Blog: http://mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com
Market in Toronto continues to churn out listings slowly.
Homes that show well and in sweetspots are still seeing multiple bids.
Interestingly, there may be a bit of a ceiling these days on just how high buyers are willing to bid upwards. We all know bank appraisals are getting a good deal more stringent.
Also days on market in a number of areas has slowly been on the rise.
Is this the typical slowdown we see each summer? Or is this the sign of ano inflated market begining some degree of a correction.
Economists will argue yr over yr prices have not been rising in a bubble formation as the litmus test is comparing wage growth relative to inflation of housing prices and theyve been rising together thus far. And we always talk about Toronto as a world class city with affordable (on relative scale) prices.
We do collectively know that interest rates cant stay this low BUT when will they go up? US debt levels, strong loonie, Eurozone nightmares, not so hot economic growth, a weak second quarter and slowdown economies in developing nations dont exactly scream for heightened rates.
BUT...they did infact raise rates at many banks yesterday on fixed rate mortgages.
2 litmus tests you should know around financing your home:
1. When you buy..know that a 2 percent increase in rates on a 4 percent mortgage will increase payments by 50 percent. Make sure if you think rates are going in that direction that you are confident in 5 yrs or less when you renew, that you can afford this increase.
2. This is a barometer as to whether you should rent or buy. Some use this. Take the monthly rental payments for the year. Divide the price of the house by these payments. If the number is less then 15..theres ano arguement that it may make sense to own a house. If the number comes in 20 or above..it makes sense to rent.
I didnt make this up and frankly i dont know who to credit. If you dont like it..dont use it!
As always, send in your questions/concerns to my email and my best!
See my website @ http://www.TheSmithsBuyAhouse.com.
Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.PropertiesintheGTA.ca Blog: http://mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com
Wednesday, June 15, 2011
Multiple Offers/Bidding Wars...How it all goes down!!
Multiple Offers/Bidding Wars...."The Stage Production"
No other topic is seemingly so searched on google, as multiple offers on a home, these days.
Heres my take...for what its worth.
Dont let the stage production take you in. This is a chance for sellers and agents to get something going.
Act 1:
Listing appears and the (drum roll).."Offer Date" appears. Buyers get excited and nervous.
Act 2:
Sellers provide preinspection. "Hurry Up Offense".
Act 3:
Showings begin. Typical pattern begins. Agent open house followed by showings, a weekend of open houses and the offer date
Act 4:
Listing Agents update listing with a time for offers to be registered.
Act 5:
Offer day comes.
Act 6:
Buyer Agents call to find out how many offers are coming in and keep nervous buyers abreast.
Act 7:
Offer Time. Anxious buyers and their agents park in a row or line up at listing agents office
Act 8:
Agents present. Buyers wait to find out if they get to make it to second round.
Act 9:
Crown the king and queen. "We have a winner"
Act 10:
Most parties leave beaten up and their agents leave knowing their work is still cut out (some are okay with that, others are scarred!)
Heres the thing. This isnt new folks! When you were in school, you competed (well some of you) for the highest marks. On the soccer field you competed to win. This is a competition and the winner isnt always the winner because they played the game better or were better prepared. Sometimes somebody better suited to meet the mortgage payments, chose to stop short as they lost the idea of "value" on this particular property.
Dont let the production sweep you away. Study the market, understand value, offer what the house is worth (not to you but according to the comps); utilize the knowledge of your agent and understand that their are some benchmarking strategies.
And it wont be the last house...even in a market with seemingly not much inventory!
Good luck!!
Michael Gruenstein
No other topic is seemingly so searched on google, as multiple offers on a home, these days.
Heres my take...for what its worth.
Dont let the stage production take you in. This is a chance for sellers and agents to get something going.
Act 1:
Listing appears and the (drum roll).."Offer Date" appears. Buyers get excited and nervous.
Act 2:
Sellers provide preinspection. "Hurry Up Offense".
Act 3:
Showings begin. Typical pattern begins. Agent open house followed by showings, a weekend of open houses and the offer date
Act 4:
Listing Agents update listing with a time for offers to be registered.
Act 5:
Offer day comes.
Act 6:
Buyer Agents call to find out how many offers are coming in and keep nervous buyers abreast.
Act 7:
Offer Time. Anxious buyers and their agents park in a row or line up at listing agents office
Act 8:
Agents present. Buyers wait to find out if they get to make it to second round.
Act 9:
Crown the king and queen. "We have a winner"
Act 10:
Most parties leave beaten up and their agents leave knowing their work is still cut out (some are okay with that, others are scarred!)
Heres the thing. This isnt new folks! When you were in school, you competed (well some of you) for the highest marks. On the soccer field you competed to win. This is a competition and the winner isnt always the winner because they played the game better or were better prepared. Sometimes somebody better suited to meet the mortgage payments, chose to stop short as they lost the idea of "value" on this particular property.
Dont let the production sweep you away. Study the market, understand value, offer what the house is worth (not to you but according to the comps); utilize the knowledge of your agent and understand that their are some benchmarking strategies.
And it wont be the last house...even in a market with seemingly not much inventory!
Good luck!!
Michael Gruenstein
Thursday, June 2, 2011
Buying a Home..Who else can you ask for help?
I was out with some buyers yesterday and showed them that there is a periphery or secondary cast of characters that can help do your homework when you're targetting a home outside of the agent's, home inspectors, sellers and lawyers.
When we got to the house yesterday a very kind nanny was there to greet us. She wanted so badly to be part of the action! So...I involved her as much as I could. I asked questions that I never dreamed I'd get answers to...
1) Any clue why these guys are selling...Response: "i know they've had a number of issues with recurring water". Wow...that's a goldmine to uncover.
2. Have there been a lot of showings here? Have you seen the same agents come back a few times? No not really. Seems a little quiet. I know the homeowners were talking last night about it feeling sluggish. Loving this.
When we were outside looking at the front of the house there happened to be a roofer redoing the house right next door.
Why not, I thought. "Excuse me Roofer...from your vantage point...do you notice anything odd about the roof on this house OR does it look fine? Immediately he was thrilled to let us know that there seemed to be some standing water on the flat roof. Again, this is all very helpful.
Across the street a neighbor was standing outside. Neighbors love to talk. We went and discussed the neighborhood for a bit. Schools, neighbours, traffic, safety, parking situation, etc. Nothing like learning first hand from a 10 year home owner on the street. Geez, we got names of babysitters, where the loud dogs lived, the house number of the old lady who does tailoring.
My point here is that if you and your agent are not "pushy" and "professional" there's no harm in asking open ended questions to learn more then the static MLS offers. Keep your eyes and ears open at all times. There's good info that you can learn from those who have no vested interest in your potential transaction!!
Please send any questions to mgruenstein@trebnet.com
And check out my website at http://www.TheSmithsBuyAHouse.com
Thanks-
Michael Gruenstein MBA CSC
When we got to the house yesterday a very kind nanny was there to greet us. She wanted so badly to be part of the action! So...I involved her as much as I could. I asked questions that I never dreamed I'd get answers to...
1) Any clue why these guys are selling...Response: "i know they've had a number of issues with recurring water". Wow...that's a goldmine to uncover.
2. Have there been a lot of showings here? Have you seen the same agents come back a few times? No not really. Seems a little quiet. I know the homeowners were talking last night about it feeling sluggish. Loving this.
When we were outside looking at the front of the house there happened to be a roofer redoing the house right next door.
Why not, I thought. "Excuse me Roofer...from your vantage point...do you notice anything odd about the roof on this house OR does it look fine? Immediately he was thrilled to let us know that there seemed to be some standing water on the flat roof. Again, this is all very helpful.
Across the street a neighbor was standing outside. Neighbors love to talk. We went and discussed the neighborhood for a bit. Schools, neighbours, traffic, safety, parking situation, etc. Nothing like learning first hand from a 10 year home owner on the street. Geez, we got names of babysitters, where the loud dogs lived, the house number of the old lady who does tailoring.
My point here is that if you and your agent are not "pushy" and "professional" there's no harm in asking open ended questions to learn more then the static MLS offers. Keep your eyes and ears open at all times. There's good info that you can learn from those who have no vested interest in your potential transaction!!
Please send any questions to mgruenstein@trebnet.com
And check out my website at http://www.TheSmithsBuyAHouse.com
Thanks-
Michael Gruenstein MBA CSC
Sunday, May 29, 2011
Multiple Offers/Bidding Wars...."The Stage Production"
No other topic is seemingly so searched on google, as multiple offers on a home, these days.
Heres my take...for what its worth.
Dont let the stage production take you in. This is a chance for sellers and agents to get something going.
Act 1:
Listing appears and the (drum roll).."Offer Date" appears. Buyers get excited and nervous.
Act 2:
Sellers provide preinspection. "Hurry Up Offense".
Act 3:
Showings begin. Typical pattern begins. Agent open house followed by showings, a weekend of open houses and the offer date
Act 4:
Listing Agents update listing with a time for offers to be registered.
Act 5:
Offer day comes.
Act 6:
Buyer Agents call to find out how many offers are coming in and keep nervous buyers abreast.
Act 7:
Offer Time. Anxious buyers and their agents park in a row or line up at listing agents office
Act 8:
Agents present. Buyers wait to find out if they get to make it to second round.
Act 9:
Crown the king and queen. "We have a winner"
Act 10:
Most parties leave beaten up and their agents leave knowing their work is still cut out (some are okay with that, others are scarred!)
Heres the thing. This isnt new folks! When you were in school, you competed (well some of you) for the highest marks. On the soccer field you competed to win. This is a competition and the winner isnt always the winner because they played the game better or were better prepared. Sometimes somebody better suited to meet the mortgage payments, chose to stop short as they lost the idea of "value" on this particular property.
Dont let the production sweep you away. Study the market, understand value, offer what the house is worth (not to you but according to the comps); utilize the knowledge of your agent and understand that their are some benchmarking strategies.
And it wont be the last house...even in a market with seemingly not much inventory!
Good luck!!
Michael Gruenstein MBA CSC
Visit my website @ http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
Heres my take...for what its worth.
Dont let the stage production take you in. This is a chance for sellers and agents to get something going.
Act 1:
Listing appears and the (drum roll).."Offer Date" appears. Buyers get excited and nervous.
Act 2:
Sellers provide preinspection. "Hurry Up Offense".
Act 3:
Showings begin. Typical pattern begins. Agent open house followed by showings, a weekend of open houses and the offer date
Act 4:
Listing Agents update listing with a time for offers to be registered.
Act 5:
Offer day comes.
Act 6:
Buyer Agents call to find out how many offers are coming in and keep nervous buyers abreast.
Act 7:
Offer Time. Anxious buyers and their agents park in a row or line up at listing agents office
Act 8:
Agents present. Buyers wait to find out if they get to make it to second round.
Act 9:
Crown the king and queen. "We have a winner"
Act 10:
Most parties leave beaten up and their agents leave knowing their work is still cut out (some are okay with that, others are scarred!)
Heres the thing. This isnt new folks! When you were in school, you competed (well some of you) for the highest marks. On the soccer field you competed to win. This is a competition and the winner isnt always the winner because they played the game better or were better prepared. Sometimes somebody better suited to meet the mortgage payments, chose to stop short as they lost the idea of "value" on this particular property.
Dont let the production sweep you away. Study the market, understand value, offer what the house is worth (not to you but according to the comps); utilize the knowledge of your agent and understand that their are some benchmarking strategies.
And it wont be the last house...even in a market with seemingly not much inventory!
Good luck!!
Michael Gruenstein MBA CSC
Visit my website @ http://www.TheSmithsBuyAHouse.com
mgruenstein@trebnet.com
Wednesday, May 25, 2011
Condo Investing Basics
Quick Condo Tutorial:
Theres been a lot of info of late around condos in the media
Why? Probably has to do with the fact that 6 of 10 solds are condos right now in GTA
The appetite for condos is huge!
And thats a good thing as theres no shortage of supply.
Who is buying? Investors are playing a big role.
Foreign investors to be clear.
Are condos a good investment?
The idea of buying a resale condo and renting it out often doesnt better your cash flow. It takes care of much of the expenses until you hopefully see capital appreciation and sell. But you need to hope that there arent too many like minded investors as youll lose some of your competitive advantage in a strong market should a number of units find their way to MLS.
New condos may be a better choice for an investor. Here you do need patience and the initial downpayment of 25 percent. All goes well if you buy off spec and the units appreciate yr over yr for the 3 yrs until the condo is registered then youre in a good position. Again, you wont be the only guy to have this idea so hopefully the mls isnt flooded with listings.
What some investors will do is beat the lunch crowd and look to sell paper before registration to lessen the competition.
Though theres no shortage of this manouver either. Have your realtor email you the supply in many new condos of those owners looking to assign their offers prior to closing.
Btw..a crude measure for rental rates can be 2.10-2.30 per sq ft depending on a number of factors.
So do your homework and understand the market and the workings of the deal. Nothing is a slam dunk but ______ and ______.
Cheers,
See my website @ http://www.TheSmithsBuyAHouse.com
Theres been a lot of info of late around condos in the media
Why? Probably has to do with the fact that 6 of 10 solds are condos right now in GTA
The appetite for condos is huge!
And thats a good thing as theres no shortage of supply.
Who is buying? Investors are playing a big role.
Foreign investors to be clear.
Are condos a good investment?
The idea of buying a resale condo and renting it out often doesnt better your cash flow. It takes care of much of the expenses until you hopefully see capital appreciation and sell. But you need to hope that there arent too many like minded investors as youll lose some of your competitive advantage in a strong market should a number of units find their way to MLS.
New condos may be a better choice for an investor. Here you do need patience and the initial downpayment of 25 percent. All goes well if you buy off spec and the units appreciate yr over yr for the 3 yrs until the condo is registered then youre in a good position. Again, you wont be the only guy to have this idea so hopefully the mls isnt flooded with listings.
What some investors will do is beat the lunch crowd and look to sell paper before registration to lessen the competition.
Though theres no shortage of this manouver either. Have your realtor email you the supply in many new condos of those owners looking to assign their offers prior to closing.
Btw..a crude measure for rental rates can be 2.10-2.30 per sq ft depending on a number of factors.
So do your homework and understand the market and the workings of the deal. Nothing is a slam dunk but ______ and ______.
Cheers,
See my website @ http://www.TheSmithsBuyAHouse.com
Subscribe to:
Posts (Atom)