Home inpection

I have done another home inspection. This time, it is the neighboring property. Details to follow.

Another assessment...

Before people start thinking of me as a cheap prick, I have asked for my home to be re-assessed on only one of my homes. My Stittsville property has increased in value, but ultimately, I do not have any objections to the assessed value. My Ottawa property on Arlington, however, was a different story.

Now, I want to say that I think that the municipal property assessment corporation (MPAC) is somewhat poorly organized. First, they had re-assessed the value of my home at $191,000 in the spring. I was perfectly happy with this number as it saves me a lot of money when it comes to property taxes. Despite the re-assessment only being 6 months old, they re-performed the valuation of my property and my property's value increased to $253,000!!! A $62,000 increase in only 6 months! Although this would be a nice return on my investment, it means that my property taxes have just shot through the roof. To make matters worse, the City of Ottawa is proposing a minimum 4.9% tax increase next year as well.

Now, I think a 32% increase in my property value over 6 months is a bit ridiculous. This is especially true given the fact that all I've done to renovate the place is get rid of the garbage, and paint a couple of the walls. Therefore, I got on my horse and called MPAC. They agreed to re-assess the home yet again.

This time, however, they decided that they needed to inspect the inside of the house. I had no problems with this as I could easily justify the value of the house being lower. I have the advantage of having my neighbour having his home listed for sale. He is asking $214,900 at the moment. His home is in worse shape though than mine, but nonetheless it is likely the best comparable. Given the fact that my house isn't in perfect condition, I was able to get an idea of what my home should be valued at.

Before I say what the home was re-assessed at, I want to give people a warning if they are thinking about getting a re-assessment performed. MPAC has access to records of house listings. I had listed my house in the summer to see if I could sell it. I listed at $259,000 at the time. Hence, they had made a valuation of my home based in part on my listing price for my home. Arguably, this is a decent estimate of the value of the home. Thankfully, I had received no formal offers on the house and only received calls of interest. I had a verbal offer for my house, but nothing written on paper. This saved me hundreds of dollars on my property taxes as a result. Therefore, if you plan on living in a home, please be careful in listing your house unless you truly want to sell. You may be re-assessed on your property taxes as an undesired consequence.

After all of this, my home was re-assessed at $218,000. I am okay with this amount. It still represents a 14% increase from my original assessment, but it probably accurately reflects the value of my home. I could argue the amount further by appealing the decision to a tribunal, but ultimately, I am not going to be able to save that much more money. I did manage to lower the tax base by $35,000, so I am quite happy with that.

MPAC - My new enemy...

If you've been reading this blog for awhile now, you might remember the time when I bought my Arlington house that I decided to get my house re-assessed for property tax purposes. I was successful in my endeavors as I had my assessment base change from $233,000 to 191,000. This reduction of $42,000 meant that I saved this year on my property tax bill. I probably saved close to $500 this year. I was very happy with my work.

Unfortunately, the Municipal Property Assessment Corporation (MPAC) has decided that all homes are being re-assessed for 2008, as most properties were assessed last in 2005. Since they were doing all properties, I had both my Fringewood and Arlington properies re-assessed. Now, the standard increase has been 3.36% in the City of Ottawa. This translates into that my Fringewood home is now assessed at $214,000, an increase of 3.16% year over year, from 190,000. I have no real issue here. In fact, I can likely find evidence that the Fringewood property is worth more, but I will keep my mouth shut for now.

On the other hand, my Arlington property was a bit of a shocker. Despite having a re-assessment performed only 6 months ago, my property tax base increased from $191,000 to $253,000. $62,000!!! This translates to an 8.12% increase year over year since 2005. This is more than double the rate of the rest of the City of Ottawa. I am planning to appeal this decision. This means probably $3-4K over the next few years in extra property taxes. The increase is supposed to be phased in, but I'm going to do everything in my power to reverse this decision.

I have evidence to support my position. Although it's nice to see the assessed value of my home increase (as it means my home's value has increased), I do not want to be spending a fortune on property taxes. I have started the appeal process, and along with my evidence, I will present everthing in future post (maybe tomorrow even).

Howdy Neighbour

OK. I've had another brain wave. I have to thank my real estate agent for this one. Jeff called me the other day to let me know that he has recently sold one of his properties. He had just purchased it, but decided to flip it as he was going to turn a nice little profit.

The downtown market is still hot. There are parts of the city where housing prices are certainly cooling off, but the downtown core is where it is at. This is where the brain wave comes in.

I'm going to visit my neighbour. The home that I purchased is a semi-detached and it yields a nice return on my investment. The rental income is great. I even end up with some positive cash flow on a monthly basis. This is fairly rare in the real estate world. Real estate is very cash hungry. It takes a lot of cash to make any money.

I want to visit my neighbor to see how much he is willing to sell his half of the house for. I'd like to know because having the whole building will be much better than just one half. If I wanted to do some work to the exterior for example, I will not have to consult with my neighbour about performing the repairs.

Now, I know I do not have the money right now. I'd have to sell my house in Stittsville. Although I've had it pretty good with the tenants, I want to maximize my investment by getting deeper in the downtown market. I'd hope that I could sell the house in Stittsville and use the proceeds to purchase the house downtown. There are a lot of steps required for this to happen, but I suppose it wouldn't hurt to at least communicate with my neighbour about the possibilities of him selling. I think it is simply another rental property, so hopefully he doesn't mind taking some profits off of the table.

Heating options

It's time to go shopping. Now, you won't see me carrying any European handbags soon, but I am excited about the prospects of learning a few things. I need some new heating systems. At least, I think I do. I want to buy a new furnace for my Arlington property to increase the efficiency of the furnace and hopefully save some money in the long-run on my gas bills.

Now, with the Arlington properly, there aren't that many options for me. I can go with a mid-efficiency or high-efficiency gas furnace. You're thinking, big woop. The interesting savings will come from my decision regarding the fringewood property.

At Fringewood, it is heated using electricity. It's probably the most expensive form of heating, so I want to use the natural gas that is available to me. I have some more options here. I can go with a gas fireplace which will reduce the dependency on the electric baseboards, or I can try to see how much it would cost to convert the whole system to gas heated. There are probably not a lot of savings to be had on such a huge cost outlay, but it may make the property sellable in the future.

Anyways, I thought I would mention this stuff as I have not written lately. I'm still trying to wheel and deal, but it gets hard when I've been at the office so much lately. 5 more days!!!

Tenant issues

Yesterday, I had my first issue with the house at 75 Arlington. The tenants had called me last night while I was at work to tell me that the furnace was not working. When I bought the house, the home inspector had indicated that the furnace was quite old and that there would be a good chance that it would need to be replaced in the near future. I didn't think it would be so soon.

I called Direct Energy to come and check out the furnace. Unfortunately, they wanted me to pay the service man the day of the service, so I had to attend. They told me over the phone that it was going to be anywhere between 8-12 in the morning. Being an accountant, I was not thrilled with this appointment. This meant that I would have to leave work at some point or be late for work. It means that I will have to work a couple of nights pretty late to make up the time.

Thankfully, the service man called me pretty early in the morning, so that I was only minimally late for work. I called to say that I was going to be late, and I bet they understood, but I would have certainly preferred not to be late.

When everything is running smoothly, being a landlord is a great way to make money. There are very few headaches when things are running smoothly. On the other hand, it just seems like the bad things always occur at the worst times. When I had water issues with my Fringewood property, my parents were out of town, so I could not rely on them to help me out. It was my property anyways, and I would have done the work myself, like I had, but it would have been nice if someone like my dad was able to check on things during the daytime while I was at work. It just helps to relieve the stress a bit.

Game #6 - City of Ottawa Bonspiel (Ottawa Curling Club)

On Saturday, we only had one game to play. It was a do or die scenario where we had to win to stay in. At this point, we have been pretty tired of playing in the tournament and was looking forward to some birthday celebrations in the evening. If we had won, we would have to play at 9am Sunday morning.

We played a team from the RCMP curling club. They were a seniors team and were very friendly gentlemen. Before the game, we were delayed slightly by my teammates' tardiness and I had a chance to chat with a couple of their players. It was a very nice way to break the ice and have a very friendly game of curling.

We controlled this game. The team from RCMP had given us a lot of credit for "not giving them a chance" to get back into the game. This was not completely true. The team had a great chance to have one big end, but my team escaped that threat due to a key miss from their skip.

It was very nice to curl out of the Ottawa Curling Club. This was my second time curling there, and I have been considering joining the club for next year. It is about a block away from my newly purchased home, and would like to be involved with a club with many competitive teams and a rich history. I also really like the fact that they have a kitchen and draft beer. This will be quite handy as I will likely be working a lot of hours and may not have the time to prepare meals for myself.

Anyways, we won the game and we had to play at 9 am. We were quite relaxed and played a much better game than we had been having. It was unfortunate that we would have to play so early the next day. We were going to go out for 4 of my friend's birthdays (Robert, Kyle, Tyler, and Derek) and St. Pats day. It was going to be rough.

Reno Tips

I've been reading. I've been watching renovation programs. I've been contemplating my next move. I've decided to share some of the stuff that I have read and learned over the last little while.

Painting - Painting is probably the number one way to add value to your home, unless you are buying new of course. The trick is to remain fairly neutral, but contemporary at the same time. Colours that stick out can be a turn-off to potential buyers, so you want to make sure that you are not limiting yourself to buyers with your personal taste. There's a good chance that you're unique and it won't work.

For my house, this will probably be done before I move into the house. I will likely quickly paint the bedroom and then take my time to finish some of the common areas. I'm hoping to do most of this work myself.

Kitchen remodelling - For me, this is a very fine line to walk. Most websites suggest that you stay within the realm of your home. You do not want to put a $50,000 kitchen in a $200,000 home. There's a very good chance that you sell your home, but at the same time you will have wasted a lot of money.

The reason that there is such a fine line to walk is the fact that I plan on living in the home myself. I would like a nice kitchen, but I do not want to overdo it. Ultimately, this is an investment property and I would like to recoup some of my investment. This might be the most critical decision that I make regarding my home.

Bathroom additions - As my cousin would quickly point out, bathrooms are key. The number of bathrooms can be a huge selling point to potential homeowners. If there are similar homes in the neighborhood, the one thing that might quickly separate the house from the pack is simply the number of bathrooms.

I have another huge decision to make here. The upstairs bathroom is laid out very poorly. I've considered removing a bedroom in order to create a master bedroom that would be complete with a walk-in closet and an ensuite. This would make the upstairs become very elegant, spacious, and luxurious. On the other hand, I could work with what I have and upgrade to the point where I could rent out to young professionals. This would make for a very nice rental property as there still would be 3 bedrooms upstairs. The bathroom would likely still seem cramped, but it would look nicer.

Finishing unfinished space - If you create more living spaces, people are willing to pay you more for your home. There is a great opportunity for people to take the space they have in their home and make some very nice spaces.

The house I purchased is approximately 50% finished in the basement. The space does not really serve any purpose though. There is a full bathroom, which is nice, but the other areas are used as common areas as they are not quite complete. I'm sure, with a little creativity, that the area could add a lot of value to the home. The trick is to make sure that things are done properly in terms of design and to complete the space by adding the appropriate furniture and fixtures.

Finally, there is another option for my home that is not necessarily available to all homes on the market. My home is a semi-detached. One day, I hope to purchase the other half and be able to do more in terms of exterior work. There's a good chance that I make an addition to the home. The home has a flat roof. I hope that I would be able to construct another level to the home. By doing this, I can either create additional bedrooms for each existing unit, or I could create a completely new unit for rent. It would give me three properties. It's just a thought at this point though.

Gimme my RENT!!!

Not much news on the house these days, so I have not been updating my blog. I am officially the landlord as I went to collect March's rent. No troubles there, so hopefully everything works out fine until the end of August. I received some post-dated cheques, so hopefully I can slumlord it all the way until I am prepared to do some renovations and move in.

F.A.Q.'s

I decided today would be a great opportunity for me to answer some of the more common questions that I receive about my recent ventures in real estate. It will give some background on my thoughts and goals in this whole process. Although some of the renovations will not occur until late summer, I want to be able to plan as much as possible to help reduce costly mistakes. I will be posting to the blog on a semi-regular basis as a result.

When are you moving in?

I am planning to move into the house in September 2008. Currently, the house is being rented by students. The students are under lease until the end of August. Their rent payment will be enough to cover my mortgage for the period that I do not live there. This will give me an opportunity to try to save up some money to help towards renovations.

How can you afford two houses?

I can't. I would never be able to pay the full cost of the two mortgages on my own. The key is to have income coming in. I have decided to rent out one property entirely, and the other property entirely until I want to take over. After I take over, I plan to rent out a room or two to help cover some of the expenses. Hopefully, by doing this, I will be able to get a little more money ahead to help with additional renovations.

When I bought the first house, I had used some of my personal savings for down payment. In addition, I had performed some legal maneuvering in order to obtain this home. I'm not going to get into many details, but tell you that I now own that house.

As for the second house, I purchased this home using money that I had saved up over the years using an RRSP. When I was 18, I put $3500 into an RRSP. Every subsequent month, I had put $50 per month into the RRSP. Honestly, if you have never done it, I would recommend making an RRSP contribution this year. There are tax benefits now and you will be saving for a home in the future. There are some serious benefits in doing this. The $50 a month is nothing. I do not even notice it coming out of my bank account each month, but it has paved the way for me to own a house.

In addtion to the RRSP advice, I want to give another little bit of wisdom. Although it seems like that it sounds very profitable and the opportunity to establish some equity sounds desirable, it is very important to consider many factors when purchasing a home. Most people will only ever buy a home once or twice in their lifetime. It is truly one of the most important decisions that you can make. Therefore, it is important to do your homework. There is not much point in paying a mortgage if you decide that you are not settled into a career or city. The transaction costs associated with homes is fairly significant and the concept of living in a home for one or two years is probably going to result in you losing thousands of dollars. You have to be sure you want the home.

Where did you find the second house?

I'm a bit of a real estate junkie. I frequently visit mls.ca to help keep an eye on the properties in the vicinity of the first home that I bought. I want to see if places are selling, what they are being listed at, and the details of those homes that are comparables to the home that I own.

Recently, I've been using mls.ca to look at homes in the area in which I wanted to live. I wanted to do some research on the area. I wanted to make sure that the place I bought wasn't going to cost me any more then it had to. I had stumbled a couple of properties in the past that I thought would be pretty good, so I had an old friend from high school send me some additional information. He's a real estate agent and he gives me some extra info on properties if I ask him. Unfortunately, the properties I thought might have some potential were listed on Bell Street. Bell Street is a dump and the houses were appropriately valued.

One day, I had came across another property. I asked my real estate agent for some additional information and he told me that it was on Arlington Street. Not knowing where it was at first, I google-mapped it and decided that this was a prime location. The price seemed right, so I made an appointment to go and see it. The rest is history and will explain it at another time...