Month: February 2014

Uncategorized

How to: Increase net worth by $700/month w/bonus cash of $600/month for 5 years with a few thousand dollars start up.

Let’s say you are renting a townhouse. In Ottawa a nice townhouse can fetch 1450-1600 a month rent, so let’s just say $1500 for arguments sake.

That same townhouse is likely going to be about 305-325 to purchase, so let’s go with $315,000.

5% down is 15, 750. Budget a few thousand for closing costs as well.

On a 5 year, 30 year ammo, 3.5% your payment is $1343 – CHEAPER than rent. 

It get’s better. 

Remember that rent you were wasting? All $1500 of it? Well when you are paying a mortgage – this one specifically – $480 of the payment is going towards the loan itself, and the only the balance of $1020 is being wasted away! With a scenario like this you are saving about $500 a month when compared to renting. The money being paid against the loan is similar to being put in a bank account called “equity”. Think of it as a bank account in the walls of your home, and you get to cash it out when you sell. Now if you only put 5% down you will have to pay CMHC Insurance, which will get added to the mortgage and cost you about $30-$40 extra per month. Property Taxes and Insurance will also cost you about $300 a month as well. So you’re extra $480 per month becomes about $150 per month of a net savings.

It get’s better.

Some banks are offering Cash Back incentives of up to 5% of the purchase price of the home you buy, so while you are spending 5% plus closing costs to GET the house, you are getting back 5% cashed back, meaning you are only out of pocket a few thousand bucks!

Not too bad!

It gets better.

Let’s say that townhouse appreciates at a conservative 2% per year, and you hold onto it for 5 years. That’s about $6600 per year in appreciation, or $550/month NET (since you can realize this amount in a lump sum when you sell, tax free as long as CRA determines it was your principle residence). 

Summary:

TOTAL CASH OUTFLOW of owning this townhouse of ($1343 mortgage plus $330 taxes and insurance = ) $1637 per month.

Net Worth Increase of ($150 paid against loan + $550 gain in appreciation = ) $700 per month. 

Do you see how people make some good money by buying a home and selling it after (about) 5 years? That’s 60 months of increasing net worth by $700 which is $42,000!! MONEY YOU WOULDN’T GET RENTING!

BONUS: Rent out a room to a good friend for $600/month and put that money directly against your mortgage and realize ANOTHER $40,000 of equity from paying down that loan faster. That’s up to $82,000 of a gain in 5 years!

As I always say – don’t go running amok spending your money on a townhouse now… consult with your trusted sales and lending professionals to make sure this scenario is right for you, and to go over all the intricate details and risks. Email me at mevans@evanselattar.com to look into it if you would like. 

Uncategorized

A Good Plan Today is Better Than a Perfect Plan Tomorrow

Interest rates are more than likely to start going up in then next 6 months….very slowly I’m sure.

Are you fully taking advantage of the historic low rates?

Have you thought about refinancing your home?

Maybe pulling out some equity to invest in something?

Straight out buying an investment?

It’s the time to start thinking about it and even to explore opportunities. A lot of times people don’t think they could ever get involved for one reason or another. Some believe they don’t have enough money, some think it’s too risky. Well…There are ways to get in for relatively cheap and even FREE, and when it comes to risk, well…driving can be risky too…but that doesn’t mean you have to be a risky driver.

Remember that Ottawa is a slow and steady market, so the bread and butter to long term wealth here is buying and holding. There are plenty of opportunities out there right now.

I myself am looking to upgrade my personal residence this year and have a secondary dwelling in the walk out lower level to subsidize my mortgage. If rates weren’t where they are I would be staying put for another few years until I completely outgrew my home and had more equity – but instead I’m taking advantage of a good buying environment and upping the ante.

Are you making any moves?

Uncategorized

Investing in Real Estate with Little to No Money Down

2 ways to do this:

First one: “100% Financing” from lending institutions.  Now I have this in quotations because TECHNICALLY it’s not 100% financing, but PRACTICALLY it is. Many banks are offering a loan at 95% value, and if you qualify for the program they will CASH BACK 5% on closing. There are a couple hoops to jump through with this program but it IS available for those who qualify. This would only apply to a principle residence (strategy to get into other projects is below) but there are strategies to make the best investment use of your home as well (see a few blogs ago).  If you want a contact name for a lender that I trust that offers this program email me at mevans@evanselattar.com.

Second way to get involved is called a Joint Venture. Essentially what this strategy entails is you getting someone else to pay for an investment with you as their equal partner. Now why on earth would someone do that? Well if you had a solid team with a Realtor, Lawyer, Developer,  Lender, Appraiser and Property Management company AND you had the ability to find great deals before anyone else did and acquire them for a stellar price, offering them an opportunity and return they can’t match anywhere else – why WOULDN’T they be a silent partner?  You disclose that you are expecting X amount of money from this project, and their return is Y. The difference is yours to keep.  Again- if they get to be a silent partner and get the money they want, AND are satisfied with the risk involved – then giddy up.

Don Campbell wrote a fantastic book on this subject. I believe it’s simply called Joint Ventures in Canada. You should get it.

My team offers projects like these, and we have partners that are always interested in expanding their investor/partner base.

There you have it – 2 ways to get in the game.

Be safe and consult your professional Salesperson before jumping in.

Cheers

Renters, Uncategorized

Making Money with a Townhouse

Here’s another one for you.

Buy a townhouse within walking distance to a major public transportation route. 97, 95, 96, O-train, and if you’re feeling confident in the Lightrail project – along it’s proposed path. Walking distance means a distance that you wouldn’t mind walking in bad weather.

Ideally the property is no more than a few years old so you can hold it for a solid 10 years without having to replace or repair anything.

Advertise the property for rent as a 4 bed townhouse perfect for mature students (3 beds upstairs and a lower level as a bedroom). The going rate of a student bedroom for something like this is about $550 a room, so you can try to push for 600 for the basement and master, and 500 for the other smaller rooms – $2200/month and advertised as such (no room by room leases – just one big lease). You should be able to make some great cash month over month. Now more money also means more risk – as I’m assuming you first thought when you read the word “student” – so do a thorough check on them and use your gut instincts. Get their parents all to co-sign as well. I also tell my student tenants that I’ll gladly give them references once they leave and do my best to help them get great rents on their next place. That usually keeps them wanting to be in my good graces. Finding and keeping good tenants is a topic for another blog.

Now what’s great about this strategy is that if you do this right, not only will you be able to make some fantastic cash month over month, but in the event you need to sell this asset at the 10 year mark or sooner – according to a recent CMHC study, townhouses are set to appreciate a little more than all other property types due to the amount of further aging baby boomers and influx of immigrants that want a home but not too much to maintain for their own reasons.

A nice cash flowing asset and a good looking exit strategy with a serious chunk of equity at the end.

Now don’t get ahead of yourself and go running out there thinking this will all work out without some serious diligence and a little risk taking. Consult your trusted professional salesperson.

If you would like some of the finer details of how this could work and a personal step by step walk through, complete with examples of what could work – send me an email at mevans@evanselattar.com

Uncategorized

One Way To Make Money In Real Estate

The Ottawa market has a lot of ways to make money in Real Estate, and there ARE ways to get in on an entry level. A very good way any people have made sizeable chunks of cash have been to use their principle residence as the tool. Now some people have simply bought and held, some have built and held, some buy and reno and hold. Notice HOLD is always there? You can’t just buy and sell right away or CRA will ding you for their cut sooner than later.

The big idea I want to explore to is to find/build a nice home where you can live for a few years that has some potential to use some of the space as a rental suite or a “secondary dwelling” as the City defines it. Either you can have a nice good sized home that has a walk out basement and you use a significant chunk of the lower level as a suite – complete with 1 or 2 bedrooms, at least 1 bath, laundry and a kitchen and all. Keep a part of the basement for your own use- maybe a home theater or rec room for the kids. The walk out basement lends itself to nice big windows, a full and proper entrance. Now you can do this in a regular basement but be weary of the window size restrictions, and the entry can’t be on the front or in the home. The link to the City’s restrictions will be at the bottom.

The other good way would be to buy/build a nice big bungalow and use up to 40% of the gross floor area as a secondary dwelling unit. You could buy a big old 5 bed bungalow and do some remodeling which gives you 3 and quality in the basement with more room to use, and the other side could be a 2 bed with a great sized basement.

Now in our market we have 2 huge demographics. Baby boomers/empty nesters/snow birds and their kids – Gen X’ers (me…and maybe you too). Think about it….The former group needs a smaller space, likely wants to sell their principle residence for tax free money and live off it/invest it, pay a modest rental fee around home and spend some good time wearing white belts and golfing in Florida. Great tenants!

Many people my age are in relationships and still working very hard at their careers, not necessarily starting families yet. This group of young professionals need a place to live for a few years to keep immediate costs down where they can focus on building that foundation. Great tenants!

Both groups also want a quality space they can be proud of, and are willing to pay a fair market rent for it.

This rent pays down your mortgage faster, and you get to sell your home down the road and pocket tax free money, OR you could keep it and pull out some money to use as a down payment for another new home and KEEP this place and rent out BOTH sides.

Now you’re cooking with gas.

Where do you start? How do you go about financing a project like this? How do you develop a project like this?

Email me at mevans@evanselattar.com and I’ll tell you. I also have a FREE investment seminar coming up in a few weeks with featured lenders and developers.

For rules that will likely apply visit http://ottawa.ca/en/residents/laws-licenses-and-permits/laws/city-ottawa-zoning-law/zoning-law-2008-250-consolidation-60  and http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/127/rsdnc/menu-eng.html

For ideas on how to make money buying pre-construction, developing other entry levels of real estate or even converting residences to multi unit buildings – keep an eye on the blog.

Real Estate - ANALYSIS, Real Estate Sales, Thought Process - THOUGHT PROVOKING, Uncategorized

Is More Really Better?

I haven’t posted a blog in over 2.5 years. I’ve been busy building my brand and my business and it’s been going pretty well.

One thing I was originally challenged with was – How do I compete with the BIG BOYS? After all – they advertise homes on radio, they have billboards all over town, etc. That’s A LOT of money that I simply don’t have.

I thought about it long and hard… and I asked myself this one very powerful question: Is having MORE marketing tools the answer? I mean.. what if there are a key 3-5 things that a Realtor does to effectively sell homes, and everything else was just show and bragging rights?

For example.. if I have a 5 point marketing plan, and the other guy has a 10 point marketing plan – what’s the difference if those extra 5 things don’t cause the home to sell? Wouldn’t that even mean that a Realtor’s resources are being diverted into marketing avenues that are distracting and robbing the focus of what really matters?

I believed it did.

So I looked into it.

I started meeting with some of the most respected Realtors in my neighbourhood, reading all about marketing strategies and tactics etc.. and I asked the TOUGH questions – “How often does X marketing tactic sell a house?” You know what I found? BY FAR.. all the extra marketing strategies were just ‘Listing Tools’. In other words – things that made you look good an impressed a seller so it helped you get the listing. That’s it!

This didn’t make sense.

So what did?

Well – there’s been another school of thought lately. It’s been one that says the Realtor that does the best job should get the job – not the one with the largest marketing plan. This school of thought is complemented (at least now in my business it is) by another that believes a large marketing plan is proof that a Realtor DOESN’T have buyers since they are investing so much into finding them.

So we’ve done a few things. First – we tracked out results and our numbers and compared that to the average agent in our marketplace. We’ve been able to compare our performance against the average Realtor and have relied on that information to prove our worth. After all – if you were to get some serious work done.. let’s say knee surgery, you would want to know how often the surgeon performs the operation and what the recover rate is, right? I would think that’s a good place to start.

The other thing we did is invest in marketing 2 ways. First – Targeted Marketing ( a real no-brainer for anyone with a marketing background). Marketing 101 is ‘Know your Target Market”, and everything flows from there. So for every listing we identify who the target market is, and we sell the home to that specific demographic. We put our marketing materials in places they go and where they will see it.

The next thing we did is market FOR BUYERS. In other words – marketing that offered what they wanted: Access to the best deals before others could get to them. You know what? THEY LOVE THIS. People thinking of buying homes just want that – homes. They don’t want a Realtor. Think of it this way: If you were going to buy a car, do you immediately ask yourself where you can find a car salesman and start evaluating which is the best? Of course not! You want CARS. So our mentality is the same with Real Estate. The vast majority of people- 99% of them, couldn’t care less who I am.. they want what I have – access to the best deals in Real Estate – so I provide it for FREE and with NO Obligation. IT’s only natural that through the course of interested buyers getting these homes that they learn that the best way to ACQUIRE these deals is also through me, and the vast majority then ask me to do that for them. What this does it allows my team to have a HUGE queue of buyers just waiting for good deals. Quite often they will sit and wait for months and months for the right house.

Think of that… we get to go to a Sellers home and tell them that we have hundreds of people in our database looking for homes, and IN THE EVENT that our targeted marketing can’t get that perfect buyer for you asap, there is a good chance we have someone looking to be in your neighbourhood in a home like yours.

Let’s see how quick we can put 2 and 2 together.

Oh – and here is what our results look like time and time again, with testimonials, references etc.

(sarcastic) Small side note: If we can’t sell it, we will buy it as well (see evanselattar.com for terms and conditions).

Makes sense right?

🙂