development

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

development

Centre Block to bring $95 million development to Kitchener downtown

Exciting news this week about a new development in downtown Kitchener, on the Centre Block land that the city has acquired over the past 10 years at a cost of about $13 million.  From The Record:

During a closed-door meeting councillors gave their final authorization to staff for an agreement between the City of Kitchener and Brampton-based Andrin Homes for the redevelopment of Centre Block with 385 condominiums, four new buildings, underground parking, a boutique hotel-spa and a parkette.

“It has been a long time coming, obviously,” Mayor Carl Zehr said.

By 2000 the city had purchased almost all of the properties and buildings that wrapped around the western half of the block, which is bounded by King, Young, Duke and Ontario streets. So far the city has spent about $13 million on all of the costs associated with buying the land, buildings and businesses.

Andrin gets the 2.6 acre site and two heritage buildings for $3.1 million.

Many people wonder how the city got into the land assembly business.  Turns out, it’s an interesting story…

[Carl Zehr] has held the mayor’s chair for 13 years and Centre Block has been an issue for at least 10 of those years. Looking back on it now, Zehr said the city never wanted to get into the business of assembling the land and attracting a developer.

It started when someone called Zehr saying a cinema for porno flicks was about to open on the second floor of a building along the King Street stretch of Centre Block. City councillors quickly rezoned the land to prevent that from happening, and the owner sued. The settlement had the city buy the building and compensate the owner for the loss of his business.

He said the entire council deserves credit for taking the long-term view of Centre Block.

Under the terms of the development agreement, Andrin must take out building permits for the first phase by Nov. 30, 2012. The first phase includes an underground-parking garage, a condo building with about 240 units and a three storey building. Those buildings will be on King Street.

The second phase calls for another condo building, with about 140 units, at the corner of Young and Duke streets with another building that wraps around that section of the block.

The third and final phase includes the development of the Mayfair Hotel into a boutique hotel-spa. The city, development and some downtown property owners are looking for ways to advance the redevelopment of that corner.

…

The cost of the entire development is estimated at $95 million. Regier credits the city’s work to attract the University of Waterloo school of pharmacy and the Wilfrid Laurier University faculty of social work to downtown Kitchener in helping to secure Andrin as a developer for Centre Block.

“I think things are coming together right now, the real estate market in this region remains strong and people are excited about the downtown,” he said.

The city and the developer are hoping to repeat earlier successes with downtown condos. Andrin redeveloped the old Kaufman factory on King Street West into condos that sold quickly. Lofts on Mansion and the condos at the Kitchener Market also proved popular.

Are you excited for this development to come to downtown Kitchener?  Do you think it will be a great place to live? 

development

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?