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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,
Terrie
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.

https://www.meetup.com/GROUPE-IMMOBILIER-MONTREAL-INVESTIR-GERER-RENTABILISER/events/246023549/

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!

Yours,
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,
Terrie

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.