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How profitable can investing in Kitchener Waterloo Real Estate be?

I just got this email from a client, who bought his first real estate investment property in 2008. He now owns 4 rental properties in Kitchener Waterloo, including student rentals, single family homes, and a future development site (currently rented).

Hi Ben, I hope this message finds you and Sarah well and enjoying married life.

I’m sold on the value of Real Estate investing. We are generating positive cash flow from every property plus I just received my mortgage statements from last year. My tenants paid my mortgages down by over $25,000 in one year. Not including the cash flow or appreciation.

We are proceeding to build an addition onto 1234 Cedarbrae and by Sept.1st we will have two extra rooms available to rent. I owe you the credit for that property. You saw the value when I didn’t. Now I will gain over $100k in post-construction value plus the extra cash flow will pay for the construction in less than 5 years.

I am tinkering with my properties, trying to maximize the value. The property at 1234 Weber St. was purchased as a duplex for $222,000. I am considering trying to convert this into a triplex, with three 2 bedroom units. Would you be able to give me a rough ballpark as to what the value might be post-construction? This will help me in my decision process.

Thanks in advance, Larry

For information on how Larry and his wife have built their portfolio, contact me today. I’d love to serve you the way we’ve served Larry’s family over the years (yes, we help more than one generation of his family

You know where I am – Benjamin@BenjaminBach.com or call me at 519 772 4376

Market Update: Real Estate selling fast in Kitchener Waterloo

“I can’t believe this sold in 2 days – the market is crazy these days!”

– a client who wanted to invest in a condo this weekend (2nd unit in this complex that sold inside 3 days too)

Homes and condo’s are moving very quickly in KW these days – our clients are involved in a multiple offer situations fairly regularly on smaller properties (condos, 5 bedroom student rental houses etc), and we’re even seeing multiple offers on apartment buildings that are in good shape, well rented and fairly priced.

So far in 2010, 56 homes have sold in 3 days on market or less, 144 residential properties have sold in less than 7 days, and 357 have sold in inside of two weeks (note: these Days on Market times include days where the property was tied up with a conditional offer, and due diligence periods).

That means over 32% of homes sold in 2010 were listed on the MLS for less than 14 days (note: a small % of these homes may have been relisted)

The Record has some more insight:

It appears that homebuyers are trying to get a jump on the Harmonized Sales Tax (HST), which goes into effect July 1 and will boost the cost of buying a home. But the biggest factor sparking the surge in sales is historically low interest rates, said Ted Scharf, president of the Kitchener-Waterloo board.

“Consumers are taking advantage of current interest rates now before they are predicted to rise this summer,” Scharf said in a news release.

The Bank of Canada plans to keep the key bank rate at 0.25 per cent through June. However, in the wake of a report Monday that the Canadian economy is growing more rapidly than forecasted, economists say borrowing rates may increase sooner and rise more aggressively than had been expected.

With the strong sales, there was another double-digit increase in prices last month. The average sale price in Kitchener and Waterloo rose 12.2 per cent to $276,891; in Cambridge, it rose 14.3 per cent to $280,996.

Strong demand for homes in higher prices ranges contributed to the increases. For example, in Kitchener and Waterloo there were 75 sales in the $300,000 to $350,000 price range, an increase of 150 per cent from a year earlier.

Leave me a comment below with any questions, and please contact me for more information at 519-772-4376 or via email at Benjamin@BenjaminBach.com

Canada Olympic Team Makes History in Vancouver 2010

Taking a short break from Real Estate –a quick one, I promise – I want to draw attention to the amazing day our Canadian athletes had in Vancouver today.

I once joked that I preferred watching American coverage of the Olympics over Canadian television because it seemed like all the US channels showed was never ending stream of American athletes winning medals, and ours was a little more… tame.  Today wasn’t like that.  Today Canada silenced a lot of critics, with some amazing performance that brought in 4 medals. 1 gold, 2 silver and 1 bronze. 

Gold medalists – Heather Moyse and Kaillie Humphries. Women’s “2 man” Bobsled. 

Local KW connection: Heather is a University of Waterloo graduate!

Heather missed winning a medal by .005 seconds in Turin at the 2006 games, and it inspired her to come back. 

“Five one-hundredths is what made me come back to bobsledding ,” she said. “I guess I have to be thankful for that five one-hundredths because a gold in a home country with Kaillie is better than a bronze in Turin.”

Never give up – just keep trying!  I only saw their last run, but they owned the track all night.  I’m very proud of them.

Silver Medalists:

Helen Upperton and Shelley-Ann Brown, also in the women’s bobsled.  This is the first time Canada has won 2 medals in the same event (I think)

Women’s 3000m relay – Finished third, but upgraded to silver when the Korean team was disqualified

Bronze Medal – and my personal favourite at these games so far – Clara Hughes in the 5000m speedskating

This is Clara’s 6th olympic medal, and she is the only Olympian, from any country, to have won multiple medals in both the summer and winter games.  Pretty impressive, eh?

And to top it all off, Team Canada edged out a close game with the Russians 7 – 3

All in all, a great day. Go Canada Go!

New Mortgage Rules for Real Estate Investment in Canada

My wife and I are in the Carribean this week doing some research, so posting has been light. However, I want to pass along a few articles my friend Jeff Zabel, with Mortgage Alliance in Kitchener Waterloo emailed to me.  They are about changes to the mortgage rules, and will affect real estate investors:

This morning Finance Minister Jim Flaherty made the following three announcements to mortgage insurance rules

1. Variable mortgages qualified at five year fixed rate;

2. Refinancing limited to 90% instead of 95%;

3. Non owner occupied residences [I read this as single family properties bought for rental purposes -BB] require 20% down payment;

This announcement is the result of a review process on debt levels undertaken by the federal government that CAAMP has been actively engaged.  We released Will Dunning’s debt report, consulted with members  and took a position with decision makers in Ottawa that while we opposed changes to the current 5% down payment rule and 30 35 year amortization rates for primary residences, we were open to other changes if the government deemed there to be a problem.  The changes announced this morning reflect CAAMP’s position and do not affect primary mortgages except for the first point where many lenders are already qualifying at 5 years anyway.

Jeff is being told that these rules will be effective april 19th, 2010, so we may be able to still take advantage of the current terms and rates if you’d like.  Contact me for more information regarding that.

Jeff also sent me this article from the Canadian Press, which came out before the initial announcement, so it contains speculation, not fact:

New mortgage rules introduced to lessen mortgage crunch risks: sources say

By Julian Beltrame, The Canadian Press

OTTAWA – The federal government is expected to announce new rules Tuesday that would make it more difficult for first-time buyers to enter Canada’s hot housing market.

Sources have told The Canadian Press that Finance Minister Jim Flaherty is ready to move on the issue because of concern Canadians may be taking on too much debt.

Economists have advised the minister the best way to protect Canadians is to institute a debt affordability test in order to qualify for a Canadian Mortgage and Housing Corp. insured mortgage.

Currently, prospective home owners can qualify for a CMHC insured mortgage if they put at least five per cent down on the cost of a home.

But bank officials say they usually apply a cushion to ensure home buyers have sufficient income to meet payment requirements if floating rates rise, in some cases by more than two percentage points.

Flaherty is expected to make such an income test a condition for acquiring an CMHC insured mortgage.

Another possibility is for the minister to reduce the amortization period from 35 years to 30, which would have the effect of raising monthly payments. [note: it does not appear this happened -BB]

It is believed Flaherty rejected more radical measures to cool the housing market, which has reached record levels in sales and near record levels in average home prices despite the weak economy.

Economists have cautioned the minister against putting on the brakes too strongly. They say raising the minimum downpayment requirement to 10 per cent, one of the suggestions given the minister, could cause a crash in a key mainstay of the fragile economic recovery.

The Bank of Canada has been warning for months that homeowners should ensure they can absorb an increase in their floating rate mortgages once rates start rising, likely as early as this summer.

By the central bank’s own stress test calculation, almost one in 10 households would have a debt-service ratio that makes them vulnerable to economic shocks by the middle of 2012 if current trend continue.

In an address written for deputy governor Timothy Lane last month, the bank suggested the government has all the tools it needs to address the problem.

"An array of supervisory and regulatory instruments can be used by the government to restrain a buildup of systemic risks," said notes the address.

A profile of Eastbridge in Kitchener Waterloo, Ontario

One of my favorite neighbourhoods in Kitchener Waterloo is Eastbridge. Located in the North East part of the city, there are parks, trails, beautiful homes (ranging from condos, semis and towns to luxury homes worth more than $1 million), shopping (Conestoga mall is close by), close to restaurants like Wildcraft, Ben Thahn, The Keg and more. It’s also close to the expressway, which means 401 access to Toronto is convenient to access. 

Friends (and clients) of ours live there, and I asked Darryl and Robin why they chose to buy a home in Eastbridge, as opposed to any of the other areas in KW.  Listen to what they had to say; they also discuss why they like investing in real estate vs other asset classes.

BONUS: Watch the video to find out what the best Thai restaurant in Kitchener Waterloo is:

Why we love living in Kitchener Waterloo’s Eastbridge area

The schools in the area are well respected and include:

Lester B Pearson Public School 520 Chesapeake Dr

St Luke Catholic Elementary School 550 Chesapeake Dr

Lexington Public School 431 Forestlawn Rd

KidsAbility School 500 Hallmark Dr

WRDSB Partners in Ed Adult Cont Ed

You can check out the Eastbridge Neighbourhood Association page here: http://www.eastbridge.info/

For more information on the area, or for a list of available homes and investment properties in the area, send me an email to “Benjamin AT BenjaminBach.com” or call me today at 519.772.4376

Why we invest in Kitchener Waterloo Real Estate

Yesterday I had the chance to sit down with two of our clients, Dr Robin Walsh and Darryl Kraemer to discuss why they invest in Real Estate, as opposed to any of the other investment vehicles available, like stocks, mutual funds, commodities, gold etc. 

Press play to hear what they had to say:

Darryl and Robin have a great portfolio of single family residential (including condo units) & student rental properties in Kitchener Waterloo, Ontario -all tenanted & performing well. 

If you’re interested in starting to invest and building a diversified property portfolio like theirs over time, send me an email. I’d love to help you

What to put in an offer when you’re buying investment real estate

A friend of mine asked me this morning what clauses we usually put in an offer, when we’re helping our clients buy and sell an investment property in Ontario. 

While every purchase and sale will have unique features demanding custom clauses – often a few Schedules worth of them – most of the time, we use the same base of conditions and clauses when our clients are buying a rental property.

Conditions:

Real estate agreements are either ‘firm’ or ‘conditional.’  A firm offer is one where the are no additional conditions on the part of the buyer, and conversely, a conditional offer is where the buyer has some time to do due diligence, such as needing to get approval for financing, having the property inspected, or making sure that the city will let you develop an apartment building on the parcel of vacant land.  Most of the time our clients put in conditional offers.

The typical conditions we use are: a financing condition, an inspection conditions, and verification of income and expenses & supporting documents.

If the property we were looking at was a potential development site, we’d probably put in a Zoning condition – allowing us to research and verify that we could develop and build what we wanted to – and an environmental inspection, to make sure that we weren’t buying a potentially contaminated site.

It’s important to verify the income and expenses, and review the actual leases and bills.  We want to run our own eyes over those documents; trust but verify!  Also, the bank or lending institution is going to want to see the information as well, as they do their own financial due diligence on the investment property.

Clauses:

In addition to the conditions, we usually will include a number of additional clauses in the Schedule A (and often we’ll append more Schedules, depending on the offer. The most I’ve written is 4 additional schedules to the agreement of purchase and sale.  The client was a lawyer ).

If you were purchasing an property that was already rented with tenants, one of the clauses would be that the rents and leases are all legal according to tenancy laws of Ontario, and that the landlord doesn’t have any pending or upcoming issues with the Landlord and Tenant Board.

I include a clause asking for the current lodging licence, if it is a student rental that requires one.  Also, make sure that the license is current when the property closes – If we don’t complete the transaction till August, I still want the license to be in place then!

I like clauses where the seller hands over all architectural & electrical plans, and any information they have on hand about possible expansions of the property. It’s amazing what owners have, and how useful it can be in a few yeas when you want to make some changes to the proeprty!

Depending on the type of property, there will be additional clauses; every property is unique, so each agreement of purchase and sale will vary.  We recommend all of our clients run offers by their lawyer, and it’s a good thing for you to do too.

What clauses and conditions do you include when you’re buying a property?

What Student Rental apartment buildings can you buy in Waterloo?

…and what return will you get on your money by investing in these student properties?

This is something I’ve been asked a lot recently, especially with the news that CMHC is now back in the student rental financing game.

In this video, we look at a 180 bedroom property that an investor is considering near both Universities in Waterloo. It is brand new, in a great location, and fully leased at favorable rates.

If you’re interested in buying, selling or developing a student rental property in Kitchener Waterloo, I’d love to talk to you.  Call me at 519-772-4376 or email me for a complimentary no-obligation investment consultation

PS – Make sure you’re following our updates here http://twitter.com/BenjaminBach

CMHC *finally* returns to Student Housing Rentals in Waterloo

The day is upon us.  Many of our clients have been waiting for this since 2008, when the tap of money for student rental properties seemingly dried up. CMHC stopped insuring loans on this asset, and when CMHC gets out of the game, banks tighten up their available financing terms and start looking for much larger down payments, shorter amortizations, and higher fees.  Yuck

Well, CMHC (Canada’s Mortgage and Housing Corporation) announced a new program, creatively titled CMHC Multi Unit Student Housing.  Watch the video embedded below for details on what CMHC is looking for before loaning you money to buy, refinance, or develop a student property

Some notes:

This program is for refinance, take-out, construction& new purchase loans for purpose built student housing projects “located on campus of within walking distance” from the universities (WLU, Conestoga College & University of Waterloo if you’re investing in Kitchener Waterloo).  CMHC will insure up to 85% of their lending value, which depending on the asset, will probably be between 70% and 80% LTV of the purchase price.  There is the option for fixed interest rates or a floating rate with a ceiling. Second (or pari passu) mortgages are permitted on title (presumably with CMHC and lender in 1st positions permission).

Additionally, CMHC wants to see that the borrowers have a track record of running similar projects, and in the case of a construction or development loan, that the borrower has the personal net worth to sustain the debt payments (mortgage) for a full year, in the case that the property isn’t completed for September and sits vacant (not a pretty scenario, and rare with an experienced developer).

For construction loans, CMHC will advance up to 75% of the value or cost during construction, and increase the loan to an 85% LTV (of lending value) once the property is complete and the rental income stabilizes.

If you’re interested in how you can get into the student rental market, contact me at Benjamin@BenjaminBach.com or 519-772-4376. I’d love to sit down with you for a free, no-obligation consultation. 

PS – Make sure you’re following our updates here http://twitter.com/BenjaminBach

Kitchener Waterloo named in “Areas Set to Boom” by Canadian Real Estate mag

The recent issue of Canadian Real Estate magazine has a profile of Kitchener Waterloo, Ontario in the cover story on Areas set to boom. There is a lot of great content in it.
CRE-Feb

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