Pushing for May...

Another quick post today. I'm looking at the course schedule for the final instalment of real estate. It might be possible to be licenced by the middle of May. June would be the latest.

I told you so!

If you have been listening to the reasons as to why I got into real estate, here is an article that further proves my point. It was found in today's paper.

Another property???

Well, there are those that are close to me that might know which home I am moving into to try to buy. At this point, we are still in the negotiation stage, but I'd like to reach an agreement in the next couple of weeks. It's going to be a private deal to save the seller some commissions. I'm hoping that this will translate into some savings for me.

I'll keep people posted. I'm sorry for the vague nature of the post, but I really wanted to share this information. I suppose that a little post is better than nothing right?

Multi-unit family dwellings...

The final topic that I got to see at the OREIO roundtable was likely the least applicable to me at this point in my real estate career. Nevertheless, there is good information for me to know, so that I can help out potential future clients. The topic covered selling multi-unit buildings. The individual that presented seemed nervous, but you could tell that the man had vast experience in dealing with the sales of multi-unit dwellings.

The overall message was very simple. Be prepared. There are many due diligence procedures that a buyer wants to complete before an agreement in place, so you should know the ins and outs of the buying process to help facilitate the selling process. There can be numerous questions surrounding safety and health and the more preparation you do, the more confident the buyer becomes in the purchasing process. Less questions means less doubt for the buyer.

Some of the things that you should get done:

1. Fire retrofit certificate - the more current the better, but a buyer will eventually demand it, so make sure it's up-to-date.
2. Inpect systems - ensure heating, emergency lighting, electrical and security systems are fully functioning and up to standard code. Buyers seldom want to do extra work after purchase.
3. Ensure that the structure is sound. It may sound dumb, but don't cover up any small leaks for example. It pays to have things done right. If there is any hint of problems, buyers will RUN!

These are pre-marketing things. They are important, so that when it comes to list a property for sale, that you can attack with a proper marketing campaign. If these things aren't done satisfactorily, it will compromise your ability to get top dollar from such a campaign. I thought that this part of the information session was the most interesting and insightful. You would be surprised to see how much you need to discount a property if the pre-marketing items are not done right.

Cash-back mortgages

The next guy at the OREIO roundtable was discussing some of the various financing options that exist for people. In some cases, these are very interesting options. They are very creative. I admire how financing companies have adapted to provide different forms of money for investors.

Generally, this speaker spoke on many different forms of financing and tried to enlighten investors on the different options that are available to them. I appreciated this. There are certain rules and procedures that exist that are designed to protect the Canadian credit market, but the presenter was hinting at ways to circumvent these methods. He, to me, seemed sneaky and snake-like. Again, I will not mention any names, but I was very weary of what benefits this guy could provide. It may all have been legal, but the tone I got was different. I'd want more information before I started to deal with this guy.

Business is not about lying, cheating or stealing. It's about relationships between customers, suppliers and employees. In some cases, certain relationships are more pre-dominant than others, but ultimately, you cannot run a business without developing trust along the way. You may get ahead in the short-run, but in the long-run, the costs catch up to you. I think it's critical that you continuously look at ways to make those relationships stronger to be successful.

I guess my point is this for this post. You need to do your homework. You need to be able to trust someone, so you need to know the background information. As a chartered accountant, our profession is built on a strong code of ethics that has greatly enhanced our reputation in the business world. I feel very strongly about upholding this reputation, and refuse to be involved in get rich quick schemes.

Changing the way business is done in Ottawa

There are probably quite a few people that read this blog that do not have any experience whatsoever in real estate. This is fine. It's one of the main reasons that I have this blog. I enjoy sharing my knowledge and experience with everyone. As such, I am going to talk a little bit about another speaker that was at the OREIO roundtable on Monday.

The speaker was a lawyer. Now, lawyer's tend to have the mindset that anything that can go wrong will go wrong and that's not necessarily a bad thing. You want to be protected by the law in case something does not work out for you, especially in real estate. With such high dollar amounts, a bad deal in real estate can take years or even decades to recover from. I was definitely listening closely to what he had to say.

With the recent decline in the markets, there is a greater likelihood that someone will be pulling out of a signed deal. A potential buyer could have second thoughts when purchasing a home, especially if they have just lost their job. Now, as a seller, you need to protect yourself against this. Typically, a deposit is given at the time of offer to show the vendor the seriousness of a bid on a property. In Ottawa, the amount has usually been a token amount, about $1000. This is not the rule, but fairly custom in Ottawa.

Now, the $1000 is all that the vendor has against the buyer if the buyer backs out. This is not sufficient. If you have pulled your house off the market to work a deal, you are possibly letting other potential buyers slip by. You need to be compensated for this. It is not uncommon for a property in Toronto for the deposit to be in the $20,000-$30,000 range. This allows the vendor to recover some of the legal fees and some of the headaches that accompany this type of failed deal.

The lawyer's message was clear. Ask for larger deposits when selling your home. If buyer's are serious in your property they will put up or shut up. It's important that you protect yourself from a bad deal, especially given the deteriorating economic environment.

Home staging

One of the topics that was presented at the OREIO roundtable was home staging. Although I have watched the occasional home renovation/home decorating tv show on HGTV, I certainly do not consider myself a professional decorator, or designer by any stretch of the imagination. My specialty is numbers. I understand what kinds of things that go into costs and budgets, so that I can minimize costs while maximizing profits.

While you minimize costs, there is a second part to maximizing profit and that is maximizing potential revenue. This is where home staging comes in. I was very intrigued by the discussion by our presenter. I had thought that home staging was merely decorating, but it's more than that. It's a marketing plan to ensure that you maximize the potential revenue when you go to sell your home.

So, you might still be wondering what the difference is between decorating and staging. Decorating is making your place look nice, but staging considers what type of clients would enjoy a certain style of decorating and gear the designs around that person, so it becomes more sellable. Staging involves highlighting key features in your home that are attractive, and making them stand out for the buyers. Staging is a marketing plan that is strategic in nature to help you sell your property for more money in less time.

The thing that makes staging work is the fact that people rarely buy a home for themselves without thinking of how they see themself in the house. If you can present to them a certain lifestyle, it certainly helps them have a clearer picture in their head how they would like to live. Real estate agents often do not simply sell houses, they sell lifestyles. People need to know that they can enjoy their time in a building despite most buildings consist of the same basic elements (walls, roof, floors, etc.). It's how a buyer sees themself in those walls the key to making a profit maximizing deal.

Now, I have decided that I would love to start posting free referrals on this blog to help those needing resources to find things related to real estate. However, I think I will reserve posting referral advertisements where I have not either dealt with the person, or found out from numerous sources of their outstanding reputation. As a future real estate agent, I don't want to compromise my reputation based on poor work by another company or individual. Hence, despite an excellent information session by an Ottawa-based home stager, I'm not going to post a link to their information until I actually get to deal with them personally.

OREIO

Last night, I popped my OREIO cherry.

OREIO stands for Ottawa Real Estate Investors Organization. It's a group that meets about once a month on the second Monday of the month. They usually have guest speakers to talk about a variety of subjects relating to real estate. It's a great place to learn, and it's a great place to build up a good little network.

Last night was a freebie. I got to see first hand what a membership would be like in OREIO. It was a roundtable discussion about real estate from many different perspectives. Each session of the roundtable offered a unique insight into one aspect of real estate. Granted, at my level of real estate investment, some of the information was not relevant. I'm not quite prepared to jump into multi-unit buildings just yet. I like the idea of managing single family homes.

I know this post is not about taxes, but the main focus of the blog was originally supposed to be about real estate and sharing ideas and knowledge about real estate. I think real estate is more interesting for people, and it may prove to be a better investment given the economic circumstances that we are currently dealing with, and have to deal with in the near future.

The group meetings offer a new perspective for me. It's a chance for me to gain valuable insights into the world of real estate, and I will likely be able to share my knowledge via this blog. It's a new source of knowledge for me that will benefit anyone that needs information about properties for personal use or for properties for investment purposes. I no longer have to use my own experiences, but the experiences of others to ensure that actions are done with due diligence.

This post has been very vague in terms of offering anything new. I plan on sharing in the next couple of days some of the various knowledge that I received. It's a good excuse for more posts, and it also gets my mind off of taxes a little bit. If I get stuck, I'll put up a tax-related post, but I'd like to avoid that if possible.

Tax-free savings account

There are only three sure things in life. First, there is death. Second, there are taxes. Finally, there is the fact that Dolly Parton sleeps on her back. Even though taxes are a sure thing, you should be aware of any new measures the government introduces to help you save some money. Recently, the government has introduced a savings plan that will at least reduce some of your potential taxes. It's called a TFSA or tax free savings account.

How does it work?

Each year, you are given an allowance of $5,000 to contribute to a TFSA. This amount is cumulative on an annual basis, so if in one particular year you cannot contribute to the maximum, you can carryforward the balance on your account. TFSA can be self-directed or they can be managed by a financial institution. For most people, they would likely manage their TFSA's similarly to their RRSP's, so that would be by a financial institution. The benefit of a TFSA is that any money that you earn with this investment is not taxed. This can lead to substantial savings for the investor over time. This is an excellent way to save money.

Which is better? RRSP's or TFSA's?

Well, both programs are designed to save you money, so you should take into account which form of tax savings work best for you. Each person has different needs with respect to cash flow needs and financial goals. It is probably best if you talk to an accountant. Sadly, that is the best advice that I can give, but there are many considerations that need to be made as to whether you should throw excess cash towards an RRSP or a TFSA.

Home renovation tax credit

This year, and this year only, there is a special credit available to people that are planning to perform some home renovations. Now, since we are at a point in time where you probably haven't got everything together for your 2008 return, I thought it would be a good opportunity to start planning for the 2009 tax year. I feel that this is a good time to maybe suggest what you do with your 2008 refund (if you get one), since you probably haven't received it yet.

There is a temporary credit available for eligible expenditures on home renovation projects. These projects must fall in the period of January 27, 2009 and February 1, 2010. Now is the time to start planning some painting, kitchen re-modelling, etc. There are numerous items that you may be thinking of, so you should take advantage now. This can lead to many benefits. First, you save on your taxes in 2009. Secondly, if you are thinking of selling your home in the near future, this should increase the value of your home. You may wish to discuss with your real estate agent what renovation projects will be most beneficial (or you can ask me).

The government has introduced this piece in the last budget as a stimulus item that will help our economy. It is up to you to take advantage of it. The credit is a one time deal, so be sure that you find out what information you need before proceeding. You may wish to find out which expenses are eligible, and which expenses are not.

More information can be found here.

Deadlines! Deadlines! Deadlines!

Today is the last day to contribute to your RRSP for the 2008 tax year. RRSP contributions are a great way to save money because it reduces the amount of income that you have to pay tax on. You should review your notice of assessment from last year to see how much unused room you have left. You should be trying to use up this room for 2009.

April 30th is the last day on which any taxes owing are due to the government. This means that everyone needs to pay up. You may have a filing date of June 15th, if you are self-employed, but the taxes are still due April 30th. You should do your taxes ASAP in order to properly plan out any amounts owing to the government, plus you avoid any late fees.