Ty Lacroix: December 2009

Do consumers sit home and plan to find a REALTOR who will drive them all over the city looking for a house or condo to purchase? If they really like the REALTOR, they will let him or her do it for weeks on end!

Do consumers learn their negotiating tips from real estate reality shows and then go out and offer 50% of asking price in a seller's market?

Does a home owner sit around at night and diligently try to find a REALTOR who will list their house for 10-15% over market value and maybe allow him or her to show it only when convenient to them?

Does the home owner feel that now that the house is listed they will not have to repair the things that are wrong with the house that they did not declare?

Do home owners interview 3 or 4 REALTOR's to get a price on their home, pick the one with the lowest commission and highest price, then bad mouth the industry because their home did not sell?

I'm not much of a fisherman but I know one thing for sure, if they keep biting and I don't catch anything, maybe it's me.

Whenever I have had a challenge with a buyer or a seller, I find if I take a hard look in the mirror, I can identify the problem. Once is OK, the second time I'm stupid!

The above 5 rants were from REALTOR's in 2009 who either asked me for advice or were ranting. Their names are hidden to protect the guilty.

The majority of tax benefits associated with investing in real estate is fairly straightforward. One of the best tax incentives is depreciation that applies to a whole variety of investment properties, including rental houses, apartments, condominiums and commercial buildings.

This is the second of a series called "Why the Real Estate Market Tops the Stock Market" Depreciation is essentially a "paper loss" for wear, tear and obsolescence - and a big tax incentive because it generates tax savings with no out-of-pocket costs. Those who qualify are entitled to many additional tax deductions such as property taxes, mortgage interest, insurance, maintenance and repairs.

Real estate investors can sell their properties without paying capital gains taxes as long as they exchange them for others of like kind.

To summarize, sell stock in which you have a gain and you'll be paying taxes - there's just no way around it. But sell appreciated property and if you do it right, you can defer your tax indefinitely.

 The tax benefits written here are particular to our federal and provincial tax regulations. Check with your friendly accountant or invest 5 or 6 hours and research what you can do and can't do. It also should go without saying that there is a lot of free advice out there, just be sure you know where it is coming from and what are the motives of the free advisor?

Remember, there are paper profits and real profit in your pocket. If you find a grocery store that will take paper profits at the checkout, I may have a bridge for sale, it is in Brooklyn and have I got a deal for you!

   Why the real estate market tops the stock market!

     Sure, you can make a fair amount of money in either stocks or real estate, but that doesn't make deciding where to invest any easier. And while all investments are cyclical, there's a reason sophisticated investors are becoming increasingly more comfortable with owning property.

Everyone knows someone who has made a good investment in property - someone who got in at the right time and bought low and sold high.

The same could be said for stocks and bonds. It's not unusual for those in the financial services industry to have reports with "documented results" or testimonials from investors who have reaped significant gains through strategic planning and market-timing.

Still, there's an inherently large amount of risk associated with investing in the stock market and as smart investors will tell you, real estate, by contrast, provides a controllable, predictable source of wealth generation that affords a certain comfort zone.

 That's because the stock market is a fickle thing unpredictable, intangible asset that has little, if any, tax benefits.

Real estate, on the other hand, is far less volatile, has superior tax benefits, significant cash flow and a high degree of leverage. The comfort that comes from these attributes gives those investors whose comfort level lies somewhere between low and no risk an ideal investment vehicle.

In future blogs I will cover 5 main points of real estate investing that seem to be an advantage over mutual funds, stock market, GIC's and Witchcraft!

You make money in real estate when you buy it, not when you sell it!

I just got approval from the Royal Bank to reduce the price of this house at 416 Stonehaven in Hazelden North in London Ontario to $385,000!If you are looking for a great deal for a quality 2 storey home  that is 4 bedrooms, 3 1/2 baths, inground pool and double garage in a great neighbourhood in London Ontario, this is it!  At this price, I'll have to call in someone for crowd control!

Now is the time to make some money by saving some money. Call Ty today 519-435-1600 to see this bargain!

I have amassed 21 executive houses or condos to rent or lease in London Ontario starting from $1,800 per month.

If you are being transferred to London or in between housing, I can assist and guide you in the myriad of available properties in London.

Please note that this list is proprietary and will be disclosed to discerning individuals and families only.

The following 2 blogs were written by two Realtors who were ranting about sellers who do not listen to their advice but will listen to their (uncle, friend of a cousin who knows someone they used to work with who knew a neighbour whose daughter used to sell real estate or your pick) who has their best interest at heart but because they have moved 3 or 4 times, they are now experts!

I can understand and appreciate that there are some bad apples out there but if you are going to entrust 100's of thousands of dollars to someone, should it not behoove you to select with care?

Here are their comments:

The question I ask after reading this blog is: why do sellers hire a professional if they won't take our advice?

I find it is pride and how embedded the opinions and advice from the media, friends and family or their own experience from selling 1,2,3 or perhaps 4 properties are.

They discount that we have not only sold 100's of properties, we have visited 1000's to sell or purchase those properties. AND, we have a strong, robust network of colleagues we learn from on top of our own learning.

You can lead them to water, but you can't make them drink. I am an "agent" meaning a "third party to a transaction". At the end of the day, it is my client's money, not mine. I can only advise professionally and honestly.

Their is also the suspicion that we are only there to collect our commission. Poppy-***! The life blood of our business are referrals. If I do not do my best, I am only hurting myself. Then again, the few bad apples in our industry get the most press.

At the end of the day, my clients have free will to follow our advice or leave it.

by John Joseph Westmount, QC

Via Mike Carlier ABR CRS GRI (MarketLink Realty):

When sellers sign a listing agreement, they indebt the listing broker  to the fiduciary duties that they deserve from us.  Often, sellers do things that help the eventual buyer gain an advantage in the sales process.  Sometimes, sellers are their own worst enemies.

I'm thinking about asking sellers to sign a statement acknowledging that they understand that certain acts or omissions by them will decrease the final price they receive and increase the time it will take to get there.  Here's my first draft of possible acknowledgments:

•1.       I understand that my asking price will define the expectations and limit the number of buyers who see my home.  An unreasonably high asking price will create unreasonable expectations from buyers.

•2.       I understand that there is a finite number of buyers who may want to see my home.  Every appointment request that I refuse will significantly limit my chance of receiving an offer, and increase the amount of time needed to sell my home. 

•3.       Every day my home is on the market is a day closer to a price reduction and/or failure to sell.  In the near term, housing data indicates that my home has a higher market value today than it will at any time during the duration of the listing agreement.  It is in my best interest to sell quickly, even if I don't absolutely have to move soon.

•4.       Buyers typically tour between four and forty homes.  My home needs to be in first place to get them to make an offer.  If its price, condition, and presentation are not number one, I will not get an offer.  Close doesn't count.

I like Mike's comments and I wonder if I could add that to my contracts?

Ty

We are introducing a new service in London Ontario as requested by many of our clients. Many of our clients have been transferred or taking a sabbatical and leaving London for 6 months to 2 years.

They do not want to sell their home or condo or go through the headaches of being a single landlord.

We take the worry away. We collect the rent, screen tenants, provide a lease and look after all property management for a low monthly fee!

So, if you are a small investor or have a condo or house that you need cared for, give Ty a call at 519-435-1600 for an appointment!Apartment Rentals, Apartment Leasing, House Rentals & Leasing and small commercial and industrial leasing are skill sets we have and the experienced property managers to back up our high standards.

Merry Christmas All and may 2010 be prosperous and healthy. Usually the first 30 to 60 days of a new year people are upbeat and energetic and then for what ever reason, return to that day to day 'why try mode'.

2010 could be the year in which the past 18 months has taught everyone a lesson in humility, finances and other challenges to learn from them and not repeat past errors and mistakes.

Ty

Real Estate Investor or a True Investor?

 As a real estate broker of record and owner, I meet plenty of people who, when the subject comes up, mention that they are real estate investors. The conversation will go on for a bit, and I typically classify the person in question as either a true investor, or a real estate "investor."

True investors typically have a number of transactions under their belt, realize that they're still learning, and are open to any insight I can provide - and I am always open to their insight. The real estate "investor" typically has never actually taken the leap and bought a property purely for investment, doesn't realize the difficulties of real estate investment, and proceeds to overwhelm me with their "expert knowledge." What they should do, is listen.

1. It's not as easy as it looks on TV

"Flip This House" is a fantastic television program - that's about as realistic for the average investor as "Sponge Bob Square Pants." The problem with TV real estate investment programs is that they downplay the work involved, and accentuate the money made by the investors. "Flip This House" will show you a tidy $150,000 profit wrapped up in a 30 minute episode. What they're not showing you is the work done to find the property under market value, build the industry relationships necessary to tackle a sizeable project, the skills necessary to manage that project, and the market knowledge to accurately predict that properties final sales price. Bottom line is: investing is hard. It can be, however, very lucrative.

2. Walk before you run.

So many "investors" decide one day that it's time for them to make millions in the market, and begin looking for that perfect flip, or perfect rental property - with a hefty price tag. Would you walk out of your door today to run a marathon without training? Absolutely not! Investing is very similar. There are MANY mistakes you can make, and one big mistake can turn an investment sour. The best way to minimize your risk is to start out small, and reduce your variable costs. If you're buying an income producing property, purchase one that's already rented out - preferably to long term tenants. That way, you can do research on a tenant's credit worthiness BEFORE you've taken the leap and bought the property. You'll also know exactly how much cash flow your new property will generate. If you're buying a rehabilitation project, it's often the carrying costs that can overwhelm a new investor. If, at all possible, buy your rehab project as your home - that way you can take your time without paying the consequences. If that's not possible, then build in PLENTY of carrying costs - around 6 months worth. Once you have a few investments under your built, you'll be able to accurately predict your variable costs, keep them lower, and make more profit.

3. For Long Term Wealth - It's a Marathon, Not a Sprint.

Many new "investors" like the model of "buying old houses and fixing them up." This seems to be the easiest way to make money, but it's not. Flipping houses takes skill, foresight, market knowledge, and market resources. Furthermore, flipping houses is hard work, and results in short term capital gains. The true path to long-term wealth lies in income producing properties. Purchase an income property in a market you think will appreciate, hire a property management company, and forget about it. Let the cheque come in the mail once a month - this "mailbox money" will turn into your best friend. After you've let the property rent for 3, 5, even 7 years, check its value and you should be pleasantly surprised! The key here is that you didn't have to put in very much work - you merely found a great property in an appreciating market, and let a passive investment earn big returns.

4. Use a Realtor You Trust - And Don't Go After Their Commission.

Author Robert Kyosaki says, "Corporations have boards of directors. You should have one, too." Good Realtors earn a sizeable income - and they're worth every penny. The keyword here is "Good" because the real estate industry is like any other - there are plenty of bad agents. Don't hire any agent that crosses your path; Make sure and interview plenty of Realtors and find one that works with investors, and personally invests. When you find your "Realtor Advisor" don't go after their commission. Any good Realtor will have plenty of clients and you want to make sure that you're not playing second fiddle to them.

5. Put Together a Business Plan, and Stick to It

The only time you can't POSSIBLY lose money is before you invest it. That's why putting together a solid business plan is the smartest action step you can take. Decide the type of property you plan to buy, what it will cost to purchase it, what it will cost you to hold the property, and how much income the process will produce for you. Most investors have a "formula" for buying properties - develop, borrow, or steal one. Write EVERYTHING down on paper and analyze every possible expense. Plan for the worst and anticipate how you will avoid the worst. Once you've put together your business plan and investing "formula" - Stick to it!!! Execution is key to successful investing.

6. When You See Something That Looks Good - Take Action!

I've worked with many investors that have excellent business plans, and great formulae, but who refuse to pull the trigger on something that looks good. There are MANY ways to back out of a contract, and if you hesitate when you see a good deal - another investor will already have tied the property up in their contract.

7. Try and Talk Yourself Out of the Deal

After you've put together your business plan and contracted a property, you need to look at every negative aspect of the property. Plan for the worst and hope for the best! Oftentimes, planning for the worst involves walking away from the transaction. After you've invested the time finding the property and the money to contract and inspect the property, you might feel emotionally invested. However, don't let these feelings get in the way of making a smart financial decision. If you look at every possible negative that can happen in the transaction and you will still make a profit, then go for it. You can always minimize the negative variables. However, if the worst does happen, you will still have all the clothes on your back. No matter how hard it is, if it looks like you COULD lose money, walk away.

There's big money in real estate investment, and there's the potential for big losses, as well. Someone giving themselves the title of "investor" far from makes them an actual investor. Before you take the plunge, talk to plenty of educated investors with experience, and follow these simple steps.

London Ontario Vacancy Rate Moved Up in 2009

 The Canada Mortgage and Housing Corporation (CMHC)released its Fall 2009 Rental Market Report for the London Census Metropolitan Area.  Highlights of the Report are as follows:

• London Ontario  vacancy rate moved up to five per cent. Movement of households from rental to ownership, a soft youth labour market and more rental apartment completions contributed to this increase in the vacancy rate.

• The average two-bedroom rent in 2009  increased by 1.2 per cent.

"The increase in supply outstripped demand growth. As a result, the vacancy rate increased," said David Lan CMHC's London Market Analyst. "On the supply side, many rental apartments have been completed during the past few years. On the demand side,absorption of these new units has been relatively slow due to economic uncertainty early in 2009. Low mortgage rates have also freed up some rental apartments as renters moved to homeownership."

So What Does this All Mean?

Buildings that are well maintained from single family homes to high rises have little problem keeping their units rented in Lopndon. Landlords which experience high vacancy rates occur when apartments are rundown, poor local management and a poor maintenance history.

I know of small landlords with a waiting list of tenants waiting to rent and a few of the luxury high rise apartment buildings are leasing out before completion.

As with any investment, proper care and 'minding the store' is a wise move. Real estate investing profitably requires professional skills and mindset.

 Perhaps we should sit down and have a talk!