2 guys working on a computer

What’s My Risk Tolerance Profile?

Written by guest writer Nabil Farah, mortgage specialist @ TD
Translated by Terrie Schauer

Have you ever wondered about your risk tolerance profile?

When investing in real estate, it’s important to understand your income profile and how this affects the types of risks you can and should take with your mortgage financing. With a better appreciation of how risk-proof your profile is, you’ll be able to choose a mortgage product that is right for your situation.
Mortgage markets are increasingly complex, and it’s important to have a macro understanding of your profile and financial situation so that you’ll be able to take maximum advantage of the financing on offer. The amount you can borrow and should borrow is not only linked to your debt ratios.
Do you know if your profile is best suited for conservative or aggressive borrowing?
Here are some factors you should consider:
  • Your income:
Depending on your credit score, allowable debt ratios will be between 42% and 44% of your gross income (this includes all debts, car loan, credit card balances, lines of credit etc) and between 35% and 39% of your net salary (for the property you are looking at purchasing, including municipal taxes, condo fees and heating).
If you earn 5,000$ gross each month, your debt service payments must be under 2,200$ and the monthly costs associated with owning the property must not exceed 1,950$. This calculation is call a “Stress Test” created by the Federal government to protect Canadians in the case of an interest rate hike. The Stress Tests are done today based on the higher of two numbers: the Bank of Canada’s Benchmark 5 year rate (fixed today at 5.14%) and the client’s quoted rate plus 2%.
For rental properties, the calculation is a bit different since some banks (including TD Canada Trust) examine each file case-by-case. The good news is that rental income balances out the expenses associated with owning the property in question, either entirely or partially, which allows you more borrowing flexibility.
  • Your financial stability
The type of income you earn is also an important factor to consider.
If you have a stable job with a base salary + commission + bonus, your additional revenue can help you should things become financially strained. Your profile will allow you to get close to the 44% permitted debt ratio.
An aggressive strategy may be a good idea.
However, if you have stable employment but few prospects for a raise or promotion, a more moderate financial plan may be a wiser option.
If your income is 100% commission or you’re an independent worker, a more conservative approach is recommended unless your income-history shows a lot of stability.
  • Your saving habits:
Your investor-profile has a lot to do with how you make your income. But banks also look at how you manage your money.
If you have considerable savings, I’d be more comfortable recommending an aggressive approach, since you know how to manage in difficult months.
If you have little or no savings (or if the purchase uses most of your savings), you’ll save time and energy in the future if you opt for a conservative strategy today.
  • Your age:
At the start of your career, you have many years of promotions, salary increases, and opportunities to look forward to. Choosing an aggressive plan makes sense for this type of profile. As time goes on, you’ll be able to pay down your mortgage faster and build equity each month.
Closer to retirement, the game changes and you’ll need a different strategy. Even if you can borrow a bit more, budgeting to use your full income each month may not be a good idea. At 58 for example, for a 20-25 year amortization period, it’s wiser to base your calculations on what your revenue will be once you retire.


Wise investors question the risks facing their investments. To assess this information before making a decision, a meeting with a Specialist is always the best option. Especially in a growing and changing market, as is the case in Canada today.

Want to know more?
Come listen to Nabil on Risk Tolerance at our next investor’s workshop in May.

Local real estate prices

Local real estate prices too expensive? Here are come creative solutions…

Shopping for real estate in areas like Montreal’s Plateau Mont-Royal, or the GTA. Markets in many desirable areas present a challenge for first-timers and more experienced investors alike.

It’s hard to find properties that cash flow. Barriers to entry for a first purchase are about to take a step skyward. With changes planned to lend criteria early next year, many will see their buying power decrease. Tempting to sigh and conclude you’ll never be able to get into the real estate game?
Don’t! Maybe it’s just time to get creative.
Answers exist outside your local market. Instead of plopping down 500k for a condo in the Plateau, why not consider a triplex in a less sexy part of Montreal? Duplexes and triplexes in areas like Mercier or Lachine go from 300k-450k. At this price, it’s possible to find properties that break even or have slightly positive cash flow.
Not stoked about living in Lachine? Or Hochelaga? No problem! If you want to live in a pricey area, consider renting. When you run numbers, you’ll be surprised how cost-effective renting may be. Let someone else lose money on negative cash flow!
Don’t forget: you pay your mortgage on a principal residence with after-tax dollars. Add to this the fact that interest in your private residence is not tax deductible. Now you’ve added two tax burdens to compound already exaggerated property prices.
If you live in Toronto, prices may have you thinking you’ll never own property. Did you know a one bedroom condo in Montreal can go for 175-200k?
With a property like this, well rented, you can cover your costs with pre-tax rent dollars. You can deduct the interest as a business expense. If Montreal seems too far, what about student havens like Kingston or London? Prices in these areas are lower than the GTA, and you’ll have a pool of student-renters with parents as guarantors who can sign your leases. Food for thought!
Whatever market you choose to live in, don’t let soaring prices dash your investment hopes. Think again! In a challenging market, I like to put a twist on an old proverb: when the going gets tough, the tough get creative.
Yours in property investing,
Terrie Schauer

How to Build a Killer Investor’s Network

Missed Our Last Workshop?

A Sneak Peek At What Happened…

Networking is one of the keys to success in the real estate industry. But it’s a struggle for so many of us!

Networking can be a struggle because we don’t have a good understanding of the science of effective networking building. We go to random events, wasting time and effort and often enduring social awkwardness because we don’t know how to network effectively.

Without giving away everything that happened at the workshop (including networking), here are a few do’s and don’ts:

– Do attend activities that allow you to have regular contact with people (recurring meet-ups, BNI breakfasts, etc). Networking is more like farming than hunting. You’re building a network, so the more you see the people in your network, the more you’ll be top-of-mind, and the deeper your relationships will become.

– Do attend events with an objective in mind. Who do you want to talk to? How many people would you like to connect to? Who do you want to meet? Otherwise, it’s too easy to spend the evening talking to the same 3 people.

– Do think of other people. When you meet someone new, keep in mind how you can be of use. Ask yourself: how can I add value for this person? Who can I connect them with? How can we help each other? This prevents you from being in sales-pitch mode.

– Do attend smaller, focused events. It’s better to be in a room with ten useful connections, than in a room with one hundred tourists.

– Don’t be afraid to ask potential mentors or peers for a 15-minute Skype call, a lunch or coffee with the phrase: “I admire what you’ve done. Would you have a few minutes to tell me how you did it?” You’ll be surprised how far a little flattery will get you!

– Don’t assume that once you’ve made a connection it will “stay warm”. There is a science to maintaining your network with scheduled phone calls, newsletters, emails and so on. There are some great podcasts on this topic. Schedule time to maintain your network so you remain top of mind.

– Don’t be afraid to use social media. LinkedIn and Facebook are obvious ways of connecting with people, whether peers, clients or potential mentors. There is also a new Tinder-like app called Shapr that will connect you with people who have similar interests and want to grow their network.

In Real Estate and in life, your social capital (or network) has a direct impact on your financial outcomes. Whatever the current state of your personal- and professional networks, there is always room to improve.

 Did I leave anything out? Got any favourite networking tips or techniques? 

Leave your comments below.

Looking to grow your network? Hope to see you at our next networking event!

Property Management Workshop : What to Do About Problem Tenants

Wednesday, Mar 14, 2018, 6:00 PM

Centre d’affaires Communoloft HOMA
3965, rue Sainte-Catherine Est Montréal, QC

8 Investisseurs en devenir Went

The most popular question my clients ask me is: “What can I do if I have problems with my tenants?” BEFORE you sign your leases for 2018, don’t miss this workshop. We share property-manager’s secrets for how to avoid renting to problem-tenants.

Check out this Meetup →

Eyeing Better-Than-Market Returns? Avoid This Mistake

Eyeing Better-Than-Market Returns? Avoid This Mistake

Those sexy numbers might be hiding something

Every year I encounter one or two new investors who want the best deal ever made in human history. He or she (but usually he) expects to buy a property with outstanding upside. For buckets under market value. The first time they do a deal. In a competitive market. The investor then proceeds to look properties farther and farther in the boonies, with bigger and bigger defects, and worse and worse tenants. Sound familiar? If so, here are a few words of advice to consider.
Risk & Reward
When you invest in stocks, your broker (should) mention risk tolerance. In stock investing, it’s common knowledge that high returns carry high risk. If you want a portfolio that offers ten plus percent return, you gotta be willing to deal with a downside. Read: you can make big returns, but you might take big losses.
Real estate is no different. Real estate markets – like other markets – operate according to baseline metrics (Cap rates, GRM, NRM, and so on). If you’re looking to beat these returns by a wide margin, chances are you’re heading for one of two not-so-great scenarios.
What’s Your Time Worth?
First, it’s possible that the time component is missing from your number crunching. Let me give you an example. A building full of studio apartments may show juicy returns on paper. On the ground, these returns aren’t quite so sexy. A property filled with small units may indeed generate lots of income. But, your turn-over rates will be bananas. Bad debt percentages on these kinds of properties are usually high. You’ll probably pay utility bills and perhaps have to maintain appliances. The tenants will call you more.
Basically, you or someone you pay will be spending time dealing with a high maintenance property and population. This will eat your on-paper gains. Certain types of properties are time-suckers. Learn what they are and avoid them. Or else make very sure you’re accounting for your time.
Banks & Insurance Companies Judge Risk Better Than You
Properties that show higher-than-average returns on paper can also be riskier. Small-unit properties like the one I mentioned carry higher fire- and water damage risks. This is why banks are more reticent to finance them, and why insurance is costly. In fact, take the banks and the insurers as a guide. What is expensive to insure or hard to finance is probably risky.
The same goes for buildings with commercial revenue. If a property has a good mix of commercial and residential tenants or even a good mix of commercial tenants, the risk may be mitigated. But, if a building looks profitable based on the occupancy of one commercial anchor tenant, you may want to watch out. With Amazon and the current trend in online retail as well as telecommuting, the market for commercial space is definitely in flux. Factor in that commercial tenancy is very sensitive to economic cycles and neighbourhood evolution. Also, when cash flow depends heavily on one commercial tenant, this indicates a high-risk scenario.
That’s why the bank demands higher interest rates, more information, personal guarantees and higher interest rates for commercial properties. Commercial insurance is more expensive. This is not robbery. Banks and insurers charge a premium because these kinds of investments are, statistically, riskier. Trust me, whatever calculations you’re making, the bank made them a long time ago. If they’re nervous, maybe you should be too! They’ve been in business longer…
Debbie Downer Does Investing
Don’t get me wrong. It’s very possible for beginners to make money investing in real estate, and even to find good deals once in a while. Simply, it’s important to be mindful of market realities and to factor risk and time into closing decisions. As your network and experience in the industry increase, so will your ability to discover and pounce on a great deal. Don’t let greed and Ego make the wrong decisions for you early on.
So, please go out and look for deals, but play safe!
Yours in property investing,
2018 GUIDE TO MONTREAL REVENUE PROPERTY: Make 2018 your year !

2018 GUIDE TO MONTREAL REVENUE PROPERTY: Make 2018 your year !

Want to invest in rental property in Montreal in 2018? Don’t miss this Meet-Up!

Terrie Schauer, rental property manager, runs a workshop that will help you outline your investment goals for 2018.

This workshop will show basic financial guidelines for identifying profitable investments. Terrie will share her insider’s market analysis of which areas are profitable, as well as price-points for making profitable investments (condos, small plexes).

Join us! Don’t forget to bring business cards and your notebook.


What's the biggest act of self-sabotage real estate investors make?

What’s the biggest act of self-sabotage real estate investors make?

Dear Fledgling Real Estate Investor,

If you want to make positive cash flow buying rental property: please, please, please don’t shop for yourself!

The Agent Who’ll Be Stuck Renting Your Overpriced Units

Let me describe one of the biggest acts of self-sabotage I witness when I work with beginner investors.

“Terrie, I want to buy an investment property.”

“Okay. Tell me.”

“I was thinking of a condo in ***insert over-priced, high-end neighborhood here***”

Watch as I hold my head. Housing, maybe more than any other business, is an emotional industry. I get it.

But, if you’re purchasing an investment property, it’s got to have positive cash flow, right? If you’re renovating a rental unit, it’s to maximize your return on investment or to protect it, no? Aesthetics has its place. Providing good, reliable services to your tenants are important. But be mindful of what makes economic sense and what is a matter of personal taste. You’d be surprised how many beginner investors struggle with this concept.

Let me give you my take on where this issue comes from. If you drive a Mercedes or let’s say, one of the old Volkswagen beetles, it might be difficult for you to imagine that anyone would want to drive a Toyota Camry. I get it. BUT which manufacturer sells more cars? Which car is easier and cheaper to maintain? Which producer will do better in a recession? Which car brand is more vulnerable when people start cutting back on luxury items?

You see where I’m going with this. When economic cycles take their toll on local economies, the one-bedroom for seven- or eight-hundred dollars stays rented. In fact, if this type of unit takes a price hit in a bad market, it’ll be a fifty-dollar hit. No so for the luxury two-thousand dollar a month loft in your oh-so-trendy neighbourhood.

The bread and butter of the residential tenancy markets are in middle-and-lower income areas. It stands to reason that higher-end rentals are in direct competition with the condo market. Whoops! The promoter decided to throw up another tower just as interest rates went up? You’ll have to keep your rent below what his prices are now. Lower end units don’t face this type of competition.

Also, your cash flow is directly related to the cost you pay per unit. What’s the cheapest condo you’d personally consider living in? Don’t like the ground floor? The busy street? That not-so-awesome graffitied neighbourhood. That’s fine! You don’t have to live there! The only thing that should interest you is how much someone else is willing to pay to live there.

For all we know, the owners of McDonald’s don’t like the Big Mac. The point is, enough people do, and the cost of manufacturing the sandwich leaves enough margin for the business to make money. You don’t have to want to live in your rental units. Your tenants do! That’s how you make an investment make cents.

Investment property is a business. Our success as investors depends on selling the right product to the right market. We need to be in the business of providing what the market wants, not in the business of creating something we personally would like, and then desperately trying to sell it to cover our overhead costs.

Think of that as you evaluate what type of investment property to buy.

Yours in investment,

Local real estate prices too expensive

Local real estate prices too expensive? Here are come creative solutions…

Shopping for real estate in Montreal’s Plateau Mont-Royal, the GTA, or BC can be frustrating. Markets in these areas present a challenge for first-timers and more experienced investors alike.

It’s hard to find properties that cash flow. Barriers to entry for a first purchase are about to take a step skyward. With changes planned to lend criteria early next year, many will see their buying power decrease. It may be tempting to throw up your hands and conclude you’ll never be able to get into the real estate game, or that your portfolio is doomed to stagnate at its current size.
Not so! Maybe it’s just time to get creative.
There may be answers outside your local market. Instead of plopping down 500k for a condo in the Plateau, why not consider a triplex in a less sexy part of Montreal? Duplexes and triplexes in areas like Mercier or Lachine go from 300k-450k. At this price, it’s possible to find properties that break even or have slightly positive cash flow. If you want to live in an overpriced area, why not consider renting? When you run numbers, you’ll be surprised how cost-effective renting may be.
Don’t forget: you pay your mortgage on a principal residence with after-tax dollars. Add to this the fact that interest paid on your private residence is not tax deductible. Now you’ve added tax burdens to compound already exaggerated real estate prices.
Worried that with Toronto prices you’ll never own property? A one bedroom condo in Montreal can go for 175-200k. With a property like this, well rented, you can cover your costs with pre-tax dollars. You can deduct interest as a business expense.

What to do about problem tenants?

The most popular question my clients ask me is: “What can I do if I have problems with my tenants?”

This issue is so pressing in the minds of would-be investors that it’s the fear that prevents them from taking the plunge into the world of property investing. As a property manager and investment real estate broker, I’ve seen my share of problem-tenants! I have lots specific case-by-case advice for specific situations.

But… and it’s a big but… I’m going to answer this question without answering it!

Let me clarify with an analogy. If you own a nightclub, and you want to know: “What should I do if a fight breaks out?”

My answer would be: “Maybe you should hire a good bouncer so that problem-people don’t get in and start fights in the first place.”

My answer about problem tenants is the same. Instead of giving strategies to solve the million-and-one issues problem-tenants will create for you, limiting their access to your property. Manage problems by having rental practices that screen out the problem-tenants before they get a chance to cause problems!

This is the best advice I can give new investors, or investors hoping to build their portfolio.

Here are a few Do’s and Don’ts for winning tenant screening:

Do : 

  • Always always always do a credit check. This is the single most important piece of info you will get! If I had to, I would base my decisions solely on credit reports. People with bad credit don’t always end up not paying. With experience, I’ve learned, however, that they tend to be the authors of most tenancy-problems.
  • Always call the previous owner. Don’t just ask if the candidates paid on time. Ask about cleanliness, maintenance requests, politeness and any other issues.
  • Always call their employer. Find the phone number of HR online.
  • Always do a criminal background check and a check with your local rental board. Most rental boards have a platform on which you can consult decisions rendered under their jurisdiction. You’d be surprised :/ !!

Don’t :

  • Be fooled by a good first impression. Always, always do your due diligence when renting to people. Seeming nice for 15 minutes is easy. Living life responsibly, less so. You’ll be entering a long-term relationship with your future tenants. Don’t base your decision on a good first date!
  • Call the numbers given to you by the candidate on their application form. Look up employers online. Check that the name of the person the candidate gave as a present landlord matches the city information as to who owns the property. (This information is available online).
  • Be sweet-talked into accepting big deposits or additional months of rent to make up for bad credit. It might look seductive, but once that money is gone, you’ll still have questionable people in your unit.

When in doubt, consider hiring a realtor or a property manager to rent vacant units. They’re professionals at this and can save you a lot of headaches. My agency will even coach new owners through a first rental if they ask us.


Did you know Airbnb can be risky business?

Thinking of Airbnbing your condo?

Maybe you’re already making extra money hosting guests for a few weekends.

Landlord beware! Here are a few risks to consider before choosing this business model:
  • More and more condo associations are forbidding Airbnb. Even if some continue to tolerate short-term rentals today, there is no guarantee that at the next association meeting co-owners won’t decide to ban the practice.
  • Insurance presents a serious risk. Even though Airbnb offers its landlords some type of insurance, you can be sure your home insurer won’t like short-term rentals. Most insurance companies require that landlords sign long-term leases with tenants (usually 1 year+). Your insurer may not know what kind of lease you have running at this very moment, but you can be sure that if something major goes wrong they’ll go digging. If you’ve been signing short-term leases and your policy forbids it, they may not cover damages. The same goes for your condo association. Co-properties have collective insurance. If something goes wrong with one of your rentals and the condo association gets involved, the building’s collective insurance may refuse to pay. You’d don’t even want to imagine the lawsuit here!
  • Most governments have laws governing rentals and the hotel industry. In Quebec, for example, the rental board requires a lease to be minimum 28 days to qualify as a falling under conventional rental laws. Below this number of days, you are considered a bed and breakfast. This requires special permits, taxes, and inspections. Bed-and-breakfasts also have to have special insurance and fire-code conformity. Although the risk here is relatively low; from what I know most areas don’t police this actively, there is nonetheless some risk.
  • Finally, consider this: insurance companies don’t want short-term renters because they consider the risk very high. This should be a loud warning message. Insurers calculate risk based on statistics of when things go wrong. As a property manager, my experience has confirmed these statistics. Bedbugs, neighbourhood disputes, broken furniture, holes in the walls, loud parties and angry neighbours are just a few examples of the more minor irritants I’ve observed often.
In projecting to the future, it may be wise to consider converting your Airbnb to a long-term rental. In the short term, this may hurt your pockets a bit. No one wants to hear this. But it’s better than building your business model on something shaky and borderline illegal.
Happy renting!
– Terrie Schauer, Rental Property Expert
Did you know you can ask tenants for a co-signer?

Did you know you can ask tenants for a co-signer?

Your tenants filled out an application and you ran a credit check (hopefully). You have a good feeling about them (or maybe you don’t) and now it’s time to sign the lease…

Wait! Did you know asking for a consigner or a guarantor costs nothing? And it can save you big cash if things go wrong.
Having another person who is responsible for rent payment and potential damages is a huge plus, especially in cases where the candidates don’t have awesome credit, or when they’re young, at school or in some other kind of precarious financial position.

Here’s how you should proceed.

  • Inform applicants early in the application process that impeccable credit, references and sufficient income to pay the rent is necessary ***a “healthy” financial situation is one in which rent/housing expenses comprise 33% of gross income***
  • If any of these criteria are not met, inform the candidates that you’ll consider renting to them if they provide a consigner who meets these criteria.
Make sure you run your application on the consigner!

Now it’s time to add the consigner to the lease document.

  • Depending what type of lease you’re using, there may be an existing clause to add a consigner. If so, use it but make sure it contains some version of the following:
  • Person x (the consigner) agrees to act as a guarantor for person y (tenant) (and person z, and person w… if there are multiple persons on the lease) ; this is important because you don’t want a guarantor covering only part of the rent, in case, for example, one tenant doesn’t pay while the other does
  • Person x is jointly responsible for rent payment, damages, and any other expenses related to the occupation of the unit (remember your tenants may bring bugs, break things, cause problems for other residents). You want the guarantor responsible in all of these situations
  • “Person x shall remain as guarantor for this lease and any successive lease-renewal periods.” Most residential leases have automatic renewal clauses. Make sure the guarantor remains on the hook even if the lease prolongs itself automatically.
  • Finally, “All signatures on the lease are jointly responsible for payment of rent, any damages or any expenses related to occupancy”. Again, with this, you’re avoiding the famous “I’m only responsible for my part” argument.
Last but not least, make sure you get everyone’s details up front (social insurance number, permanent address, bank information). If ever things go wrong in the future, better to have a complete file should you need to pursue parties for damages, bank seizures and so on?