Four signs it is a good time to sell

Are you thinking about selling? Best to consider these factors and avoid the following traps.
1. Profit has been maximised: When a property has reached maximum value, there is little value in holding onto it for longer. Therefore this is generally considered the optimum time to sell.
2. Property has not performed: Having cash or equity tied up in an investment that has not performed (over a reasonable time period) can prevent an investor from reaching their financial goals.
3. Better opportunity elsewhere: Investors should know how each of their properties are performing relative to a) others in their portfolio and b) those in the market place. If another opportunity presents itself with greater investment prospects then it should be considered.
4. Depreciation has been maximised: Depreciation on a property lasts for up to 40 years from the time of construction. Over time the value of depreciation recedes. This could weaken a property's cash-flow position to the degree that it becomes better to sell.
While a forced exit can cause investors to panic and make easily avoidable mistakes, there are a number of traps that any investor wanting to exit a property needs to be aware of, according to experts.
These include:
-Selling too soon - before the market has started moving. This can impact on capital gains and, thus, the profit made.
-Holding for too long until demand has dropped off and the market is going down. This can prolong the sales process and result in a lower price.
-Selling to buy in a rising market, but then sitting on the sidelines. If an investor sells in this scenario, they shouldn't then neglect to buy a property as intended.
-Forgetting to factor in selling costs (eg: agent commissions, legal costs and the like).
-Cross-collateral implications with lenders: Selling might trigger the need for valuations on other properties in a portfolio. This, in turn, could impact on the value of the portfolio.

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2212-four-signs-it-is-a-good-time-to-sell

How to manage your portfolio from abroad

1. Tenant Selection. This is the most important part of the process. While most people put in the first application that comes in the door, we spend most of our effort ensuing we find the right tenant for our property. Why would I trust my asset worth hundreds of thousands of dollars to just the first application? It is less expensive to leave your suite vacant for one month than to kick out a crappy tenant for months while they destroy your property.
2. Property Management. Yes, you've got a property manager and you can leave all your worries with them right? Absolutely not! Remember, they have hundreds, sometimes even thousands of doors to look after. It is your job to make sure that yours are taken care of better than anyone else's.
3. Tenant requests for repaid. If you want great tenants, you need to provide them with great rental suites. However, you can't just give them blank cheques. Make sure that every repair / renovation that is over $500 needs to be approved by yourself before it can go ahead.
4. Fast Decisions. Your property manager is one of your greatest resource and they will do most of the dirty work. However, they will need to get your decisions once in a while - make sure that they get this as soon as possible. As an investor, it is your responsibility to enable your team to do their best and your PM can’t do a lot of things without decisions from you.
TIP: It's always a give and take. They may make decisions that may not be the best once in a while - during these times, do not be emotional and take it rationally. How much did it really cost you? If it isn't that much, don't sweat the small stuff! It is way better to have a great relationship with your team than to save that $50 from something that they missed.
Remember, investing in real estate is not passive. It's like a baby that needs constant attention and you need to tend to its needs right away. Build your team, implement your systems, and make fast & rational decisions - and watch your investments grow (even if you are traveling the world).

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2207-how-to-manage-your-portfolio-from-abroad

Top 10 ways to win at an auction without overpaying

1. Check everything before you put in your bid. Make sure you do some leg work well before the day. Remember it’s your money and it’s your decision. Make sure you base your decision on some good substance.
2. Don’t give away too much. If you tell people how high you’re prepared to pay, it will put you at a disadvantage. Play it like a poker game and keep your cards close to your chest.
3. Know the true value. This means, do your research! You can find out what similar houses in the area went for by looking in the paper or hiring an independent valuer.
4. Get legal advice. Before you sign any documents, hire a lawyer to look through them for you. Do not be tempted to save a few bucks by doing it yourself as it can cost you tens of thousands.
5. Don’t bid too soon. Do not bid before the reserve price has been reached. The reason for this is because until this price is reached, the property isn’t for sale.
6. Keep your highest price a secret. The buyer has the advantage in an auction negotiation simply because they know the minimum price the seller is willing to accept without the seller knowing the maximum price the buyer is willing to pay. If you keep this price to yourself you have a good chance of saving thousands of dollars.
7. Try to speak to some other potential buyers on the day of the auction and ask them how much they think the property will sell for. Most of the time, people will quote their buying capacity unknowingly, which means you can suss out your competition. This is sometimes hard to pull of casually and takes some courage to do, alternatively walk around the pre inspection and listen intently to people talking around you.
8. Refrain from making any bids on the day of auction if no other bids are made, until the last minute and aim to be the first and only bidder. This allows you to negotiate after auction session with the vendor’s selling agent (no doubt the vendor will be feeling worried about the property not selling at auction and maybe likely to move).
9. Bid confidently. Deliver your bid with a loud, clear voice and for the full amount. Your quick and understandable bid might put your competitors off psychologically, making them believe that they should back down because you are nowhere near your limit and have endless amounts of money, shown by virtue of your confidence.
10. Ignore the agents coming up and befriending you throughout the process saying it’s your dream home or investment and its only $1,000 more. Remember – they are paid by the vendor and by law have to represent the vendor, not you.

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2174-top-10-ways-to-win-at-an-auction-without-overpaying

5 Easy Ways to Update a Room

You don’t have to hire a decorator (or break the bank) to give a room a quick update with lots of impact. So whether you’re getting ready to sell, have just moved in or feel like a mini overhaul, these five tips will have you enjoying the room of your dreams in no time. Change Your Fabrics Replace your curtains, re-cover your throw pillows, buy a new rug, Any one of these easy fixes can make a big impact; but all three will completely change the entire room! And if it’s a bedroom you’re tired of, same rules apply: Replace the duvet cover, re-cover the headboard, and toss a few new pillows on the bed. Freshen Up With Paint Whether you tackle an entire room, or maybe an accent wall or two, a new coat of paint is probably the easiest way to change a room. From light and bright to dark and dramatic, paint can completely alter the mood. Re-Organize A Bookshelf Bookshelves are amazing; not only do they keep your books organized, but they can also serve as great focal pieces. Try colour-coding your books or arranging them in stacks instead of side-by-side. Remove an entire row of books and replace them with framed family photos or bright accent pieces. Sometimes all a room needs is a shift in thinking about it. Update Your Art Updating the art on your walls is a great way to showcase the family talent. Frame your daughter’s sketches from high school (no one will know it’s not a real Picasso) or your son’s first finger painting. Or grab a blank canvas and paint it a bright colour to hang in the kitchen (you don’t have to be a Fine Art grad to add some basic pops of colour!). And the best part of this approach is once you’ve bought the frames, the art can be rotated throughout the year at no extra cost. Add An Accent Is your bathroom feeling boring or your living room giving you the yawns? Pick bright, colourful wallpaper and add an accent wall! Paint stripes in your dining room, or buy a chandelier for your front hallway. Adding an impressive accent is a fun way to give the room some personality without a complete overhaul (of the room OR your bank account).

Source: http://www.hgtv.ca/realestate/article/5-easy-ways-to-update-a-room/

Why evaluating CAP and ROI are so important in deals

Knowing what property to acquire remains one of the more difficult decisions for any investor. The good landlord looks at the financial numbers and tries to make decisions based on facts, and attempts to keep emotions in check.
The common way to evaluate different investment properties is through comparing CAP rates. CAP rates are determined by factoring all of the investment’s expenses (but not finance) and calculate that against the projected revenue. Too often, property management, repairs, maintenance and vacancy expenses are left out in determining a proper CAP figure.
But CAP shouldn’t tell the whole story in evaluating properties. An in-depth analysis should consider projected appreciation which will lead to a superior return on investment (ROI). Suppose you are offered two investment opportunities. One is located in Windsor Ont. and offers a true CAP rate of 8 per cent and another in Toronto that offers a CAP of less than 6 per cent. If CAP is the only component to consider, it is a no brainer. You buy the Windsor property.
I'm sure you've heard the expression that past returns are no guarantee for future success. That is certainly true. But, it can be an indication. You also look at an area and see the growth within it to help estimate potential future growth. Based on your research, you conservatively estimate that the Windsor property will grow at one to two per cent over the next five years.
Meanwhile, the Toronto property should appreciate at four to five per cent over that same period.
Now calculate the projected ROI over those next five years. Ensure to include the numbers used to calculate the CAP rates, but add in the mortgage pay down and the projected appreciation and you will likely find that the lower CAP rate property, with the better appreciation, winds up on top.
The other factor to consider is risk. If I'm going to take on a riskier venture, I want a better ROI. There is nothing wrong with a solid ROI on a low risk venture. If you acquire a well-maintained building in a desirable neighbourhood, one might be willing to sacrifice some ROI to add that property to their portfolio. However, if one is willing to acquire a property that will include higher risk ventures, such as dealing with environmental issues, tear down and rebuild, complete renovations etc., then one should be looking for an ROI that can support that risk.
No one can tell you what an acceptable return on investment should be for any venture for you. A low risk individual who is accustomed to investing in GIC’s will not require the same return on a deal as a person who is more willing to gamble with his money.
My advice is not to wait around for the home run deal. Find a cash flow generating property in fair to good condition, located in a market that you have researched and understand to be a desirable area to invest and buy it. You can certainly use numbers to convince yourself not to take action in any deal, but, in my experience, the investors that do the best are those that take action.

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2191-why-evaluating-cap-and-roi-are-so-important-in-deals

Top 10 things modern homebuyers want

Today’s homebuyer is different to those of previous generations. In the age of smartphones, apps and smart homes, the modern house hunter’s demands have changed dramatically. At the same time, in an era defined by fluctuating house prices, today’s homebuyer is more cost-sensitive than ever before.
As searching for the perfect property continues to evolve, global real estate portal Lamudi explores the top 10 most important factors for those looking for a home in 2014. From energy efficiency to the latest technology, these are the top demands of modern house-hunters.
1. Energy efficiency
Cost of living and the household budget have always been important factors for those on the hunt for a new property. But as the price of amenities such as gas and electricity increase, it is no surprise that buyers now want reassurance about a home’s energy efficiency.
2. Storage - and plenty of it
One word: built-ins. To satisfy the needs of the modern household and help homeowners stay well organised, an ample amount of storage space has become a high priority. Built-in storage - including linen closets, wardrobes and even walk-in kitchen pantries - are now a must to attract modern home buyers.
3. The latest technology
Technology is now part of all elements of our lives and our home life is no exception. This can be something as simple as LED lighting, or involve more complicated technology like automated thermostats. These days, many property seekers expect to have the latest gadgets and high-tech features installed before buying.
4. Top notch security
Home security has been completely transformed by new technologies. Features like glass break sensors for windows and doors, and motion-activated lighting for exteriors, are just some of the modern security solutions that are attracting buyers.
5. Open plan living
Bright, open living spaces have become a staple of the modern home. The trend has even reached the kitchen, which homeowners often prefer to combine with the dining area. In fact, a 2012 study in the UK found that the dining room was becoming a thing of the past, with one in three households featuring a combined kitchen-dining area.
6. A modern kitchen
Kitchen design trends have changed significantly in recent years, as popular features of the past decade have started to look dated. Granite is no longer in vogue, with marble countertops and a simple black-and-white color palette giving the kitchen a distinctly modern edge. Here too, buyers are looking for the latest state-of-the-art, energy efficient household appliances.
7. Entertainment options
The modern home is much more than a place to sleep and eat. It is now also a place to entertain and be entertained. As a result, features including game rooms, home theatre systems and outdoor entertainment areas are now highly sought after.
8. A dedicated laundry room
It sounds simple enough but several recent surveys have pointed to the importance of a laundry room for new home buyers. According to a recent study of the most popular characteristics for new homes from the National Association of Home Builders in the US, a laundry room is one of the top features of a typical single-family home in 2014.
9. Smaller homes in general
As buyers have become more cost conscious, the appeal of the traditional McMansion or large home has dipped. Instead, homeowners are willing to sacrifice space for other key features, such as high-quality appliances and overall energy efficiency, as well as easier upkeep.
10. Location, location, location
The desire to find the perfect home in an ideal location remains top of mind for most house hunters. Where a property is located is often the number one factor influencing a property seeker’s decision to buy. It seems some things about looking for your dream home will never change.

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2176-top-10-things-modern-homebuyers-want

Are you feeling ‘cashtrated’?

I recently read a great book, The Wealthy Barber Returns, by the legendary David Chilton. I really loved this following passage. “Each year, the Washington Post runs its Mensa Invitational contest where readers are asked to add, subtract, or change one letter of a word to give it a new meaning. One year’s winner was cashtration. The act of buying a home, which renders the subject financially impotent for an indefinite period of time.”
I am a huge supporter of adding assets into my wealth portfolio. The mistake that most people make is they simply don’t know what an asset really is. Most people believe that an asset is stuff they own. The more sophisticated say that it is stuff that appreciates over time.
I tend to feel that a true asset is something that generates enough cash flow to (at minimum) sustain itself, and ideally creates cash flow that will support your personal expenses. An asset will not only cover its pure expenses, but also its debt servicing.
These are the following assets that can lead to personal “cashtration.”
1. Cottage. It is no surprise to most that a cottage is an expense. Yes, over time it may appreciate but you can never completely bet on appreciating values. When you consider property taxes, utility expenses, insurance, occasional repairs and debt servicing, this is a true expense.
2. Personal Residence. This one might generate a few arguments. How many times do we hear parents say that their house was the best investment ever owned? This could be because they never owned any other investments. I agree that you need to live somewhere, however, as long as you contend that it is a needed expense, we can all agree.
3. Downtown Condo Rental. The rental income in this case needs to generate more than the carrying costs.
How can you avoid cashtration? Simple. Make sure that any asset you own carries itself and actually contributes to your income.
We have all heard the expression “two-income household”. That typically refers to a household where both spouses bring an income that contributes to the household expenses. Why can’t you have the goal of having a 10 income household? Some might think that this means having some harem of women all working towards the household income.
But what if you add assets that pay you money on a regular basis? For me personally, I have my own realtor income. My wife’s salary. Our RRSP’s and other paper investment’s dividends. Finally, each property I purchase must contribute to the family income.
Not quite the harem of women solution, however, I’m pretty sure that option would have its own host of challenges too.
This way if one of the incomes dry up, like my wife’s job ending or one of my properties unable to rent for six months, then we have alternative sources of income.

Source: http://www.canadianrealestatemagazine.ca/expert-advice/item/2170-are-you-feeling-‘cashtrated’?