Most homeowners know when it’s time to sell, their home needs to look it’s best. The process of putting your home on display for potential suitors is called home staging. But what if your goal is to get renters into your unit? Many successful landlords will put the time and extra effort to “stage” the unit in the same way you might for listing it on the market. In essence you want to “sell” the unit to potential renters.
It’s helpful for renters to picture themselves living in your space just the same as buying the home from you. So the next step is to figure out what we need to do to put our rental on display.
I believe you should maintain the unit(s) as best as possible while tenants are dwelling there. However when landlords receive notice there will be and upcoming vacancy proactiveness is paramount. People get their first impression of a home when they pull up out front so make sure the landscaping is clean and maintained.
If you have put off any jobs inside, now is the time to bang them off. Baseboards are all on, holes are filled there are no broken steps or hazards. A fresh coat of paint is a low cost way to make your home bright and clean.If you don’t have the time or constitution to scrub the tub and toilet, hire a maid it’s worth the investment.
At a recent member event for Rock Star Real Estate out of Oakville, Tom Karadza talked about the true cost of management fees charged by managed funds.
Tom quoted a recent book he was reading by Tony Robbins “Money Mastering The Game”. We heard about the hidden fees charged by managers.
“Most people don’t do the math, and the fees are hidden. Try this, if you made a onetime investment of $10,000 at age twenty, and, assuming 7% annual growth over time, you would have $574,464 by the time you’re nearly my age[eighty]. But, if you paid 2.5% in total management fees and other expenses, your ending account balance would only be $140,274 over the same period.”
Someone’s making out well in this scenario but it’s probably not you or I.
So if mutual funds by the way of Registered Retirement Savings plan(RRSP) aren’t a rewarding way for Canadians to save, what is?
To reduce the fees I was looking at paying, from purchasing RRSP’s, I opened a discount broker account at my bank. Which is a way for investors to self direct which stocks and bonds they wish to buy, but without all those fees.
My choices to buy were well established companies stock at a fairly steep price or lesser known ones that may be equivalent to rolling a pair of di’. I liked the idea of buying funds that paid you back(dividends), however it would take years to make any significant gains and get a decent return on my investment.
Through more investigation and planning, I realized if I saved that same amount that was set aside for mutual funds and paid down the mortgage on my investment properties I would get a nice return later.
The benefits of owning Real Estate in Ontario are 3 fold.
Over the years as living expenses has increased I plan on keeping up by making the rental price adjustments necessary. As for my would be RRSP’s hopefully at retirement they would be there when I need them.
I choose something not so easily evaporated with market volatility!
Here's how to find five star tenants
and manage your units like a pro!
Landlords, want a fast easy way to increase your cash flow? How about an increase in your rent collected? An increase seems like a quick, easy way to balance the books. So when is it a good time to bump up the rent? The answer I respond with is actually in two parts.
First, landlords can only raise rent on their tenants after a year of tenancy. Typical leases run for an entire year and then, if not renewed are considered on a month to month basis. This is the point you may follow the landlord tenant guidelines to raise it which is subject to regulated caps - or simply put - no more than the prescribed amount for that year. In 2015 the amount is 2.6%. There are instances where you can apply to the Landlord and Tenant Board for a rental increase sooner (interest rates have changed significantly, the necessity to refinance to cover costly repairs)
The second part of my answer to landlords is should you be raising the rent? Market conditions and comparable properties should be taken into consideration. If you raise the rent too much on tenants who may already be at the top of their comfort zone, they will most likely begin looking elsewhere. This could leave you vulnerable to unexpected expenses for advertising, paint and other maintenance or repairs just to fill your property all over again. Over time, consistently keeping your units filled is the best way to ensure your investments remain profitable.
Whether you choose to wait for the anniversary date of the lease or apply for an early rental increase, you should always consult the ltb.gov.ca site for more information. Here you can also learn how to properly serve a rental increase notice to your tenants and avoid any unnecessary conflicts.
Please leave me a comment if you found this information helpful.
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Again I'm reminded of the challenges that face many this time of year. Sometimes we neat to treat difficult tenants with a bit more reserve then normal. After all holiday bills are rolling in, manufacturing slows down and some of us are fighting the effects of Canadian winters. Us, as Ontario landlords inherit our tenants problems.
I must admit to something here dear readers, I don’t always feel like greeting each challenge with a smile on my face. I'm a person after all and sometimes my initial reaction is to shout, give notices and yes sometimes I even curse! Thankfully, this is done internally and when reason returns (often times with the direction of my better half)I find a more constructive way to deal with my tenants.
To this day I believe communication is one of the keys to reaching residential resolutions.
So pick up the phone fellow landlords and property owners, send that email, knock on those doors. Let’s see if we can’t get Johnny student to pick up his clothes so we could spray for bugs. Let’s let Mrs. Tenant know if the foundation leaks it’s perfectly okay to give us a shout. And let Martha “maybe next friday” know hey, if you have some of the rent right now I can hold on to it for you! With a bit of work and decorum we can find a solution that works for all.
Good luck hope your holidays don’t seem to distant yet.
Monday, 13 January 2014
The Sharks of Buying Rental Properties
Being a new Canadian investor can be a bit like dipping your toes into a shark tank. There are professionals and tradesmen who could take a big bite out of your wallet . When many first time investors take that plunge into the investment property game. They may be armed with little or no knowledge about the game. While you can’t learn it all right away . Asking important questions and taking a few precautions might save you injury.When dealing with the biggest investment most of us will make, unscrupulous mortgage brokers can put you in harms way. Realtors can lead you into making a bad decision.|These sharks can cost you an arm and a leg. A few precautionary measures can help protect you.
When dealing with contractors I do not like to pay them until the job is done. Paying first can make you the side project . Or worse yet they start and never finish. Also it’s a good idea to get it in writing . Have the two of you write down exactly what you expect from them and what they expect from you . Have it signed and dated. Mortgage brokers can be great but giving them too much power can land you on the hook for surprises . Ask questions , read the details of the contracts. I recommend asking for the underwriters contact information. And start your own dialogue about what to expect . When choosing a Realtor ask friends or family who they used and would they recommend them. Communicate what you are looking for with the Realtor and ask what kind of commitment they expect from you . Many will ask you to sign a contract making it exclusive . Check around , is what they offer typical for the industry.
It would be a book in itself to cover every possible danger . Cover your basics . What’s the reputation of this professional ? Remember to get it in writing . What’s expected of you and what’s expected of them ? The devil is in the details , or is that the shark ?
Sunday, 19 January 2014
Investing in Canadian Real Estate
Passive income is one of the most rewarding roads to travel . Investing in Canadian Real Estate is one of my key strategies to receive passive income . Some of the giants of financial literature (think; Rich Dad Poor Dad) remind us that the highest taxed income is earned income. A more favourable taxable income is passive income. Which by definition means you make your investments and sit back and watch your bank account slowly grow. Money earned from rental property income is in this classification. That said, there are many different techniques real estate investors can use to earn this and I’m going to cover a handful of them that might work for you.
The single family home may be one of the easiest investments to start with . Quite simply, you buy a home and rent it to one individual or family. Each month you collect your rent from the tenants of your home. In return, you as the landlord must pay the Mortgage payments, property taxes and insurance. Utilities are optional to include however,my preference is to make the tenant responsible for these fluid pay per use services. The important factor in this operation is to make sure the rent covers all of the fixed costs associated with your rental unit. There are many financial calculators available to help you accurately estimate these expenses (Bank websites, realtor.ca). Enter your expenses into the box, to this number add your property taxes and insurance costs. If you’ve done your homework well, you should have a bit left over after all of your expenses are paid.
The next option for would be investors is a multi-unit property. This is a building that can accommodate more than one family. Duplex, triplex and fourplex are common forms of multi-unit investments. The advantages to these over a single family unit is your price per door. Where a single family home could net you $850 in rent, a duplex may get $700 + 600 for both units. This will bring you more cash flow for your investment. One might expect to pay more for a multi-unit but there is only one property tax bill, one mortgage payment and one insurance premium . Typically you will need 20% of the purchase price down to pick up a investment property. Anything with 5 units or more is now considered commercial and the rules change. You may get away with less than 20% but expect to pay a higher mortgage rate, CMHC fees and insurance premiums.
A less considered strategy is a Rent-to-Own. The basics of this idea is to purchase a nice home in a nice area. The next step: find people who would like to own your home but can’t quite make it happen. An upfront payment is collected from the Rent-to-Own tenants Every month a portion of the rent is set aside to help with the purchase of the home . After a 1-3 yr period the tenant uses the upfront payment and collected premiums to buy your home from you the investor. With the money you’ve earned from paying down the mortgage and the appreciated home value, you are free to move on to your next endeavour.
Legal disclaimer: As with all advice offered on this blog , it is to be considered the author’s opinion and legal advice should be sought out from a professional.
Glenn Brown is owner of My Rental Unit property management and has enjoyed success with multiple unit investing.