student housing

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

student housing

Student Rental Market Update – Waterloo, Ontario

We looked at commercial real estate sales in February & a lot of our clients focus on student rental properties in Waterloo; let’s have a look at some recent transactions:

3 properties on Bricker Avenue, directly across from Wilfrid Laurier University (WLU) sold for $8,450,000. There were 143 beds in the 3 properties, and per room revenues were lower than other comparably located properties.

A duplex on Hickory Street , very close to WLU, just sold at $630,000, after being on the market for 30 days.  The property is licenced for 10 students.

A 10 bedroom licenced lodging home on Regina sold for $550,000

Two detached 5 bedroom homes recently sold, both for above their asking prices. One sold at $333,500, the other traded at $336,000, 11K above the list price.  A client offered on one of these, but we felt the properties were not worth the above list price premium being paid.  You have to know when to walk away!

A few licenced condo units have sold recently. One traded at $228,000, another at $186,000

If you have any questions about how you can start investing in student housing, email me at Benjamin@BenjaminBach.com or call me at 519-772-4376

student housing

Property Management for KW investment property

A big part of our client base lives outside of Kitchener Waterloo – other parts of Ontario, Canada, and even people living in other countries.  They are able to live   where they love, but invest where the numbers make sense because they employ quality property management companies.

Even a lot of our clients who live in the KW area use property management to take care of their rental properties; it’s just easier, and can be very affordable (depending on who you deal with)

Here’s a bit of info for you:

Contant me “Benjamin AT BenjaminBach.com” for a referral to a great management company

student housing

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?

student housing

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

student housing

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

student housing

Illegal Real Estate Investments in Kitchener Waterloo

What they are and how to avoid buying them & losing money

By and large, most of the investors we talk to about real estate opportunities in Waterloo Region want to invest in quality properties that they can own and profit from for the long term.   They don’t have to worry about buying an illegal rental property (well, as long as they are using the services of a professional REALTOR [like me!] who has experience in the local investment market they’re buying in); if this is you, this article will just be a reminder to you of why you want to do things above board.  If you might own one of these, or a dozen, pay attention!

A minority of the people we speak to are trying to ‘game the system,’ by fitting more rental units into a property than the city will allow, or by renting a unit legal for 3 lodgers (in town, you need a Lodging License if you’re renting most units out to 3+ non related people. Typical in the Student Rental market, for properties 3 units and under) to 5 etc.  When I explain to them the danger they are putting themselves in, they typically assure me that they ‘know what they’re doing’ and that ‘this is how all the big guys got started’ or some derivation of that theme.

In this video, I lay out what an illegal rental property is, what to do if you have one, and the consequences you are exposing yourself too if you continue to operate illegal real estate properties.

If you do have a property in Kitchener Waterloo or surrounding area that you are unsure of the legality, contact me at 519-772-4376 or email me, or find me on http://Twitter.com/BenjaminBach or http://Facebook.com/KitchenerWaterloo

Operating illegal rental properties means you are likely violating the terms of your mortgage covenant, as well as the terms of your insurance.  In Waterloo, for example, there are hefty fines that can be levied against owners – even without an incident to prompt this (i.e. if your tenant, or any member of the public tips the City off, you can face a large fine). 

If you are violating the terms of your insurance (i.e. your property is a legal duplex, and insured as a duplex.  You ‘were smart’ and converted the basement to a third separate unit, and now rent out the property to three different tenant groups.) and there is ever an insurance claim (fire, flood etc), your insurance company is likely going to discover that you are running the property contrary to what they believed when they insured it, and they’ll probably stick you with the bill.  No fun!  The consequences can be even worse – a claim against you that isn’t covered by your insurance can bankrupt many people – dont let this be you!

When in doubt, and before you invest your hard earned cash in a property, consult the professionals.  A lawyer, a REALTOR who deals with investments, the necessary people in Zoning or By-Law enforcement at the City or town you’re investing in etc. Better safe than sorry, and finding out before you buy is always better than finding out there is a problem once you own the place.

student housing

Kitchener Waterloo Real Estate Market Update: October 2009

Busy busy month! The summer and fall of 2009 has been very busy in Kitchener Waterloo, Ontario.  Real Estate sales are almost at the same level as last year, and volume is up dramatically from the same time last year.  Here is what the press release from the Kitchener Waterloo Real Estate Board says:

A new record for residential sales was set in October as MLS® homes sales to the end of October reached 579 units. That’s a 40.5 percent increase from October 2008 and the second consecutive month that sales set a monthly record.

“October was an especially busy month for local REALTORS®,”  according to Karen Shartun, President of the Kitchener-Waterloo Real Estate Board (KWREB). “Last month’s results represent the largest month over-month increase we’ve seen all year, and now overall residential unit sales have practically caught up to 2008 figures on a year-to-date basis.”

Year-to-date, there have been 5,545 residential units sold, which is just 1% shy of the 5,596 units sold to-date this time last year.
Home sales last month totalled $149,717,233 (up 37.5 percent from October 08) and included 355 detached homes (up 35.5 percent from October 08), 114 condominium units (up 25.3 percent from
October 08), 53 semis (up 165 percent from October 08), and 53 townhouses (up 43.2 percent from October 08).”

We have clients acquiring great property investment opportunities right now in the Waterloo region, ranging from condos and townhouses to land for development, student rental houses and apartment buildings. 

If you have any questions about the market, how you can start investing in real estate, or anything else I can help with, please contact me at Benjamin@BenjaminBach.com or call my office at 519 772 4376