Archives for August 2021

3 Ways water issues can ruin your real estate investment

August 28, 2021 by admin

When you are looking at investment properties sometimes you have to move quickly to snap up a great deal. Newer investors AND experienced investors should always get a home inspection whenever possible.

There are some situations where you need to make a quick offer in competitive markets or even go all cash unconditional. What can you do to make sure the property is sound? We recommend bringing in an experienced contractor and some of your trades people to do a walk through at a bare minimum.

(We do not suggest making unconditional offers unless you are very experienced and are comfortable dealing with any issues that may come up with the property.)

This will give you valuable information on what risks there could be with the property even if you are in a bit of a rush to get that offer in. The best deal is often the one you DON’T do….which means you didn’t make a mistake and wind up with a very challenging deal!

We will often make offers conditional to viewing satisfactory to the buyer, which will not give you the same coverage as a home inspection condition – but this still allows you to walk away if you and your team find something that seems risky about the property such as plumbing concerns.

Water is the nemesis of all landlords and investors of all real estate strategies. Nothing other than a fire can cause more damage quicker than water damage, insurance companies also hate water damage because that causes them more payouts in claims than many other losses.

Damage from water can happen from more than just the plumbing though, including sewer backups (gross I know but it happens more often that people want to admit!) flooding, and rain coming in around windows or through the roof. We recently saw a property in Calgary that had a woodpecker that poked a hole in the roof causing a leak!

What are the most common water damage risky items to watch out for?

Leaking or improperly installed fixtures (that includes toilets). When fixtures are old or improperly installed by happy home owners doing things themselves they can leak behind walls and through floors going unnoticed until these issues have damaged drywall/floors/ceilings causing mold which could need remediation and those costs add up fast.

2. Basement windows without proper drainage – window wells have building code requirements that mandate proper drainage and slope to move water/snow away from the window so that water does not flow toward the house leaking through windows into the house.

Often new landscaping or walkway construction will change the grade to slope toward the house causing water to leak through the windows – which are not waterproofed to heavy water flowing directly toward them.

Window wells that are too shallow or do not have drainage can fill up with snow or rainwater and cause leaking into the house, this can allow lots of water into the home causing major damage and if left undetected can also cause black mold in the home behind the drywall.

3. Sewer backups – in some cities there are flood prone areas or even in areas with higher elevations under heavy rainfall conditions with older waste water pipelines backups can happen from the city sewer. What that means is that high pressure can force the gray water back into the house up through toilets and drains ….Gross I know but something that needs to be considered. A good mitigation for this is a back-flow valve which prevents the gray water from flowing back into the house’s pipes under these heavy rainfall/flood conditions.

Water, we all need it it can be our enemy as real estate investors if we are not careful. Do your homework on the water risks, ask the professionals when in doubt and maintain the plumbing systems in the property and you will avoid costly repairs and higher insurance bills.

If you have questions about how to due your due diligence or how to value these repairs contact our team to book a discovery call and let’s chat.

To your success,

Tim Reid

-Respect The Hustle

Filed Under: Uncategorized Tagged With: calgary, cashflow, Coaching, Investing, relaestate, wealth

Want Cash Flowing Real Estate? Look to Alberta

August 25, 2021 by admin

It might seem like Alberta is a have-not province over the last few years with the energy sector down turn. When you look at other areas such as Toronto (the GTA – greater Toronto area) have seen gains in prices in areas soar as sales volume increases hit as high as 96% in central Toronto this is driving prices into almost un-rentable territory.

How can rent keep pace with that? Well quite simply it can’t not to support a mortgage with 80% Loan to value, forcing investors who want to operate in that market to put huge down payments equal or greater than commercial rates.

This has forced investors to look further and further out to the suburbs to find rental properties to get decent returns on investment. When you consider multi-family cap rates so low it does not even out pace inflation, you are only land-banking in essence which is a speculative game.

Eventually there can be a shift in interest rates that would bury all those properties bought at those rates, forcing even more cash to go into those assets to prevent massively negative cashflows.

More investors are looking for better cap rates and better cash flow in other markets. Due to the energy sector taking a hit over the last few years we have seen downward pressure on pricing in Alberta overall, but only a small downward pressure on rents.

Since there have been harsh rent controls in Ontario and BC these markets also have those forces working against rental property investors. Alberta has seen rental rate gains back to normalized rates at or above pre-covid19 levels

What this means for investors is that we have the opportunity for massive upside in appreciation, and also an older value-add potential for many older assets that have been allowed to accumulate deferred maintenance for years in Alberta.

Have you thought about rental property in other markets?

If you are considering Alberta locally or from abroad in Canada contact our team to book a discovery call, we are here to help with access to private deals/Vendor financing opportunities just to name a few!

To your success,

Tim Reid

-Respect The Hustle

Filed Under: Uncategorized Tagged With: #multifamilyinvesting, alberta, Realestate

Canadian Election Effect on Real Estate Market

August 20, 2021 by admin

WOW we have had a heck of a year and a half in the Global covid-19 pandemic, with governments having to put billions into the economy to support workers and businesses alike.

The Canadian election has been called, now I normally do not like to comment on politics often – however this election will be a real barn burner with the announced platforms of the different parties. Some of these proposed changes to tax law in Canada are HUGE for investors.

Our American friends have enjoyed one of the best tax advantages on earth for many years called the 1031 exchange. What the heck is that? This is a tax exemption that states if you sell an asset, for example an apartment building and have a 1,000,000 capital gain you would need to pay the tax on that normally if you put that cash in your bank account. However, if you buy a like for like asset within an approved amount of time then you defer the tax.

This is an incredible advantage to scale your business without having to incur the tax all the time. In Canada there has been a rental housing shortage for many years as developers focused on for sale product such as condos and single family homes.

Conservative government politicians have realized this is a problem, and making it a campaign issue. The solution they have proposed is for rental property owners who sell to re-invest in additional rental property and defer the capital gains just like the 1031 exchange!

This would be a game changer for Canadian real estate investors, and the renters that would benefit from more supply of better housing. Let’s face it our rental stock is very aged in a lot of cities in Canada with a lot of deferred maintenance. All that deferred maintenance is partly due to the fact that owners can’t sell and buy something larger or similar to extract that equity to perform the repairs – also rental controls which in my opinion also contribute negatively to this problem.

Look at New York’s history of rental control, which has basically forced landlords to not spend money on the buildings there because they are held hostage by rental policy. (that is a whole other post for another day!)

Financial services and investment industry what I like to call “retail investments” offered by banks and mutual fund companies could be shaken up as well. The feds are pushing for more transparency on fees that are charged to consumers when speaking about returns on products such as mutual funds, bonds, EFTS.

What impact would that have on real estate investing? Hard to call, however with a better informed consumer they may choose to look at different investments more often once they know the fixed costs of the alternatives.

Real Estate IMHO is one of the best ways to build wealth for multiple generations, which is 1 of the 3 pillars of wealth

real estate
stocks/bonds
Business investments

They are all needed for a well rounded portfolio, and you have to be at least somewhat active in 1 of the 3 to really crush it. There is no such thing as a great return on investment that is totally passive – 100% passive does mean lower returns than being active, what you put in for effort you get back in higher ROI.

Investing in real estate does not need to be complex or difficult, if you are thinking about real estate investing book a discovery call with our team today to find out how to get started or grow your current investment in real estate.

To your success

Tim Reid

-Respect The Hustle

Filed Under: Uncategorized Tagged With: calgary, Coaching, electioncanada, Investing, Realestate, wealth

6 Big Mistakes Buyers Make

August 19, 2021 by admin

Today I wanted to provide a list of common mistakes that home buyers make and more importantly – what do do about them to make your home purchase in Calgary or any area as smooth as possible.

1. Not getting pre-approved for a mortgage before you go shopping. This means that you might lose out on a deal because the bank tells you that you are approved for 50k LESS than you need to buy your dream home

2. Buying too much house and winding up “house poor” winding up with payments that could become unmanageable after “life happens” events such as work hours being reduced or slow times in business can really cause a family a lot of stress if things get tight.

3. Not structuring your mortgage for both short term AND long term goals, being trapped in a mortgage due to a huge payout penalty is no fun at all. In fact, recently I had a client that HAD to keep their rental policy because of this problem.

4. Failing to learn about pre-payment penalties and how they work. What is the penalty if I sell in year 1 of 5 year terms? What is the difference between fixed or variable? Can I port the mortgage? These are all questions that should be asked.

5. Not asking if the mortgage is portable/assumable – not portable you have a penalty for sure, how much is that going to be? Could be 10’s of thousands of dollars if you are not careful.

6. Not working with a mortgage broker and only their bank – the bank wants to make money for their share holders, that is their primary goal. Mortgages are set up to protect the bank’s bottom line not YOURS.

There is a lot that goes into designing a mortgage, it is kind of like building a house from the ground up – there are a lot of things that can go wrong without the proper design/guidance along the way.

Ok great, so now we know what to watch out for…what do do about it?

Here are some solutions and things to think about”

1. ALWAYS get pre-approved when going to shop for a home, investment or to live in. This process involves the bank verifying and checking all your documents (credit score, income, expenses, assets, liabilities just to name a few)

Then they will give you a commitment letter that is an full approval to lend you X dollars with having Y down payment available. This also locks in your interest rate in case rates go up you will get the agreed rate for up to 6 months depending on the bank.

BONUS: this helps you negotiate stronger knowing your max price. Not saying you need to use the whole approval, and generally you shouldn’t to avoid the house poor issue.

2. Biting off more than we can chew is a common trait for North American residents overall. We often feel the need to “keep up with the joneses” and live above our means, in terms of cars, clothes, houses. Real estate is generally the most expensive thing that families will ever buy, so any financial advisor will tell you not to buy more house than you need for your current family dynamic.

When investing in real estate we only think about the numbers: will it cash flow? What is the repairs needed? What is the common expense ratio for this area? (more on these in another article to come) Think of your house as an investment even if you live there, that thing should cash flow if you ever moved out and rented it.

3. Speak to a mortgage broker (or call our team for advice) on how to set up your mortgage for success both today and tomorrow. There are many features of a mortgage to consider past the interest rate – which is all that most buyers think about after watching ads/seeing posters for 0.99% interest rates (there are many strings attached to those!)

4. Dreaded penalties for breaking the mortgage early – which is generally 5 years, but it does not have to be there are 1,2,3,5 year and even 10 year mortgage terms that you can get to suit your goals over the long term. Also lines of credit or HELOC for short that have 0 penalties to pay them off early, and blended mortgages which are a combination of the 2 that are ideal for flipping houses. Also, how many payments you make per month is up to you bi-weekly can save you tones of interest over the life of the mortgage. Talk to the broker about these items

5. Many mortgages are no longer assumable after the regulators changed the rules many years ago, some still are which could be a great option for a home buyer both investors in real estate and retail home buyers alike – you need to ask and confirm. Always ask for a mortgage to be portable, this can save you lots of money in penalties – better to have the option when you need it because it cannot be added to a mortgage after the fact.

6. Bankers work with the tools that they have, and their list might not give you everything that you need to build the mortgage ideal for you. Get a second opinion at the very least – if you were told today you had cancer and only 6 months to live wouldn’t you get a second opinion from another doctor? OF COURSE YOU WOULD! Do the same with your mortgage your making a 5 year deal on terms and a 25-30 year commitment with that bank, for pete’s sake get it right from the start

If you have any questions about real estate financing, private money, how to invest your RRSP’s in mortgages and play the same game the banks do – contact our team to book a discovery call.

To you success,

Tim Reid

-respect the hustle

Filed Under: Uncategorized Tagged With: calgary, Coaching, howtobuyahome, Investing, mistakes, mortgages, Realestate, wealth

Real Estate and Inflation

August 17, 2021 by admin

There is a lot of talk about inflation both in the media and in private conversations. With a Canadian election now looming in the fall of 2021, these are all hot topics for real estate investors, business owners, and what should be a topic of discussion for everyone else…but is it?

The price of most thing that people spend money on goes up slowly, like the analogy of a frog put in a pot of slowly boiling water will not jump out it will just cook because the change is happening so slowly. (that is a myth by the way the frog will actually jump out when it gets too hot!) Inflation can creep up on you devaluing your dollars and you get the same amount of goods for more money.

Real estate values are derived in a number of ways but the primary metric is the value of the land and the replacement cost. Rent naturally may fall when depressions occur however they rebound faster than many other investments once things start to recover. The investment of real estate has been called a “hedge against inflation” because its value keeps pace with inflation due to labor costs for construction and rents keeping up with inflation very closely.

In an uncertain world, which is less certain now than usual real estate has always been the cornerstone of building wealth for Canadians.

Further detail on this concept in this article here from Crew;

http://ow.ly/nqUD50FSUYt

If you would like to learn more about how to add passive real estate to your portfolio or expand your investments without the headaches of day to day management. Contact us for a discovery a call

PS: did you know that you can invest you RRSP’s in real estate to get great returns secured like the banks? Give is a call and we can show you what the banks will never tell you.

To your success

Tim Reid

-Respect The Hustle

Filed Under: Uncategorized Tagged With: calgary, Investing, realtor, rrps, wealth

Calgary Real Estate Market Cooling?

August 16, 2021 by admin

The National Post sure thinks so, inspiration for this article from shenanigans out east.

There has been a sentiment that the market will remain hot forever, now we all know that what goes up must come down. The stats are unfortunately behind the times, some seller’s still optimistic that they will get multiple offers are turning down valid ones to hope for a higher offer down the line…which may never come and some are getting frustrated.

Also, having many buyers who bought homes at the start of the year now those buyers are “out of the market” or have already bought a home and are no longer in the buyers pool.

The pool of fish has been reduced in number and the fish that are in the sea at the moment are more pressed on budget (due to the stress test) so this is creating a trend toward a balanced market in most areas of Canada especially in Calgary where we have depressed economic fundamentals. The following national post article goes into more detail on some unfortunate seller scenarios.

Do you think the market is cooling off in your area? Let us know what you think, contact us to book a discovery call to chat about real estate.

To your success,

Tim Reid

-Respect The Hustle

http://ow.ly/l6SE50FRPya

Filed Under: Uncategorized Tagged With: calgary, sales, wealth

Calgary Real Estate Market Real Deal

August 13, 2021 by admin

What is going on in the market? Is it slowing down? Is it speeding up? Are there still competing offers?

These are the questions that I get often both as a realtor and investor these days. There is no simple answer, but what we are seeing on the ground is what I had predicted for the most part back in April/May with the looming stress test and the opening of the economy (whatever that really means is up to your personal world view!).

Summer generally sees a shift in buying behavior with kids being out of school and vacation mode kicking in. I have a number of deals on the go at the moment which have been heavily impacted by what I call the “vacation factor” -so that happens to residential as well in any given year.

Inventory is up, buyers pool/motivation has shifted, and financing is now harder to get – this will have downward pressure on pricing as well as speed of sales. Reminder that sales are only recorded by the real estate boards once the property closes…so it could have sold 3 months ago and now is just getting reported.

There is now the ability to show properties relatively easily whereas bookings were tough for the first few days of any new listing on the market. There can still be competing offers for aggressively priced properties relative to the competition in a given community.

Investor demand for renovation projects remains strong, as there is a lack of new builds in the closer in amenity rich neighborhoods. Also, certain schools with differing programs with a draw radius draws families to those areas as well.

Properly marketed properties, that show well, and are priced right are selling very well under the 600K mark where more expensive homes have flattened out/slowed down. If you would like to learn more about how to get top dollar for your home or sell privately in the non-traditional way contact us today for a discovery call.

To your success,

Tim Reid

-Respect The Hustle

Filed Under: Uncategorized Tagged With: calgary, Coaching, market, realtor, wealth