So You Want to Flip Houses or Own Investments, Eh?

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Here are the things to consider right after you make the decision to invest FOR EXAMPLE PURPOSES ONLY:

General Information: What type can you afford? You prefer or feel more comfortable with?

The property I have selected is a residential “home within a home,” custom-built investment unit. It is a unique approach to income properties as it is built in R1 – Single Family zoning although act’s in theory as a town home. From the outside one would never be able to tell it is a home within a home. There are two separate entrances—can’t see one from the street because it is hidden—shared on the front porch, though. Ontario began accepting this practice in 2006 in order to address suburban sprawl and to increase urban densification. Here is a great article on this http://spacing.ca/ottawa/2010/02/08/intensification-smart-growth-and-density-bonusing/

Properties To Purchase @ Market Value – XXXX

Investment Details:

Layout= PDF of the floor plan

Income:

1,600 sq rents for $1500
1250 sq rents for $1350

x 2 properties total = $5,700 monthly

Cost of Land and Build:

Land= XXX
Building= XXX

total= XXX

Maintenance:

Taxes: $5,700 yearly x 2 = $11,400

Lawn and Snow Removal = $800 yearly.

Utilities etc: covered by tenants

Competition:

Our competition sites are other active listings currently on MLS or rental site (below) for rental and one track builder called XXX who has rentals in the immediate area

Accommodation Floor Plans

Two Bedroom Terrace Homes $1,249
Three Bedroom Town Homes $1,461
Four Bedroom Town Homes $1,550

NOTE: Although similar in style EXAMPLE charges a premium because close to a park, new development and larger in size compared to most.

Financing:

Likely sources are public banks and private

Types of mortgages can be 5% min. – as it is considered a family home – all type private, public bank backed, fixed – variable.

*This is a huge selling feature as it allows the purchaser to buy into an investment building with 5% down – unlike the min. amount of 20% required in Canada on all properties outside of primary residences.

Uses: (owner occupied, lived in investment or long-short term rentals).

NOTES: I took the liberty to study the big picture. See below how I would end the preliminary research if I was helping a client through the process of investing in real estate.

Appendix: (In addition to what would be outlined in the spreadsheet)

  • In Canada, our economy is strong and our real estate market is stable; therefore forcing investors to buy high and sell high (local markets – average).
  • Because of this the real question is not what the cash flow is generated from the property it is what will an investor make on their investment ($ to acquire) upon sale.
  • In particular to this case it is evident that XXX AND XXX properties do not generate positive cash flow until years after purchase (especially if purchased at todays Market Value).
  • What the investor is seeking is to calculate the profits from their down payment compared to other investments (market trading, bank savings account etc).
  • The draft spreadsheet clearly show positive capitalization rates for expected, best and worst case scenarios. This demonstrates that the properties are not only worth the purchase price it shows it to be a low risk investment opportunity (WOULD BE COMPLETED BY INVESTOR OR REALTOR).
  • Both properties are newer (2009) which limits investor risk of improvements and associated costs
  • Although there is an amount loss in year 1 (XXX) to year 5 the profits from the sale XXX$ (both properties – EXPECTED) after tax is substantial.

NOTE FROM REALTOR®:

  • The investment is the mortgage and expenses paid by the tenant to which the owner makes money on the principal paid by the tenants and the eventful sale.
  • Instead of the money being in the bank at 1% interest, in real estate it is making 4-7% a year excluding the sale price, which potentially could make it more or less.
  • A townhouse in that area sells for 300K minimum. Whereas if you buy for XXX and have double the same rental income
  • A typical investor looking for high X% return – average 3-4% – which is comfortable
  • Bad tenants always could happen
  • Depreciation and write offs are a major benefit

Follow this ‘cheat sheet’ then call us! #WorkWithAnExpertOntario

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Ian M. Charlebois, Masters in Real Estate c.
Owner, Chairman, CEO & Broker of Record
Residential | Commercial | Investment | Property Management | Relocations
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2015: Ian was nominated by his industry peers and Real Estate Professional Magazine editors selected him as one of the Top 50 most influential individuals in Canadian real estate today.

2014: Ian was named REALTOR® Magazine’s first Non-U.S. 30 Under 30 Honoree