Latest real estate trends.

As doom and gloom the media has made the economy, there appears to be a silver lining in the clouds. Apparently, in Eastern Canada, there have been significant increases in real estate prices. In Ontaio and Quebec, prices have remained somewhat steady. It appears as if it is out West where the problems lay. See the article here.

Neighbours are out...

The neighbours are out of the house next door. I've left a message with the owner. I should be able to report more in the days to come.

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.

How the budget yesterday affects you...

Incentives! Incentives! Incentives!

As a future real estate agent/chartered accountant, I feel as if it's my duty to report to everyone the items that were offered in the most recent federal budget for real estate participants. Now, the incentives that have been offered are not for everyone. There is a targeted market for the incentives and you should speak to an accountant or a knowledgeable real estate agent for more information for your particular situation.

First, the maximum under the Home Buyer's Plan has increased from $20,000 to $25,000. This means that you may withdraw up to $25,000 tax free (repayments are required over 15 years) from your RRSP to purchase your first home. RRSP contributions reduce your taxable income, so that your taxes owing are much lower. As a result, you may be entitled to a nice refund. If done properly, you can save yourself a lot of money when purchasing your first home. You should speak to an accountant to find out the details of how to best take advantage of the tax implications of your purchase.

Now, the importance of the $5000 increase can be significant in some circumstances. The Canadian mortgage system requires mortgage insurance when purchasing a home for under a 25% down payment. This means that more of your down payment can come from taking advantage of this plan. Please plan your home purchase with a knowledgeable salesperson.

Next, there is a new credit being offered for first time home buyer's. This is separate from the home buyer's plan. You really do not have to do anything to earn this credit other than purchase your first home, and have an acccountant that knows what they are doing. This is a non-refundable credit of 15% based on $5,000. This credit is available to first-tiime home buyers after January 27, 2009.

I realize that I may have spoken a foreign language to you. Basically, the point I want to get across is that if you are thinking of purchasing a home is to think of me. I have the required knowledge to make sure the purchase is done properly, saving your hundreds and possibly thousands of $$$. I have extensive knowledge of the Ottawa market having lived in Ottawa for 25 years, and I have been working in accounting since 2004.

Ottawa Real Estate Market

I'm sorry to those government workers that read my blog on a nearly daily basis. I know that you are constently busy looking at stuff on the internet, and you stop by my blog to kill a little time by reading what I have to write. I said that I would post my opinions about the Ottawa Real Estate Market, and since I've said that I was going to post, my opinions have changed somewhat. I wanted to digest some of the recent economic news before I decided to make an opinion. I'm sorry for waiting a few days between posts.

Now, Ottawa is a unique town. We are a government town. We are somewhat protected from economic boom and bust cycles. We are not immune, but protected. What does this mean for real estate? Well, first, it means that you are not going to double your money on your real estate investment in one or two years. We never have such a hiring spree that we have excess amounts of workers in our city looking for houses. We also do not have the mass exodus of workers when times have taken a turn for the worse. Ottawa doesn't suffer the ups and downs of gold-rush-like town, so our growth is usually modest and steadily increasing.

That being said, the Ottawa job scene has deteriorated somewhat in recent months. Nortel, a former darling of the pageant, continues to cut jobs. In addition, the City of Ottawa is facing a budget crisis and are thinking about cutting jobs. These seem like troubling times for our city, but the news isn't as bad as it looks. Although, housing prices will cool a little bit as a result of these job cuts, this presents a good opportunity for those that continue to work.

Housing prices do not fall instantly. They take time because home-owners want to maximize what they pay for a house. They can always start high and come down later. Therefore, I think you will see the prices coming down in the next few months. It will be a chilly winter for real estate sales, but things should warm up in the spring again. With mortgage rates at near all-time lows, it seems ludicrous to me as to why you wouldn't want to lock in a mortgage at these rates. I think, from an investment point of view, you have to like the current conditions to buy. As the old saying goes, "buy low, sell high".

If you've already bought a house, don't feel bad. You've likely locked in a great mortgage, so over the long-term, you have made a great investment decision. I'm just outlining when the housing prices will reach its bottom. It's pure speculation, but I think it's an interesting concept to discuss.

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).

Full House.. and some tidbits...

Although not quite the Danny, Joey, Jesse, Becky, DJ, Steph and Michelle, the rooms are now full in my house. Scotty moves in today and I had spent last night trying to get a new coat of paint on his walls before he moved in. I've been so busy lately that I have been postponing some of the household repairs, but this weekend should see an improvement in that regard.

On a side note, there are no more houses listed in the Fringewood area of Stittsville. Since I own a house in that area, it will be interesting to see how the market develops over the winter. It's not an overly active area, but the surrounding area is seeing a lot of new development. I'm thinking of disposing of the property in the spring or summer next year, but I think it will be more market dependent.

Good news on the international front today. In the roller coaster that is the economy, the US has reported a better than expected performance in the 3rd quarter. Since it had been doom and gloom in the US, any news of this sort is expected to help the world's markets, and hopefully will make this economic slowdown a very brief and mild one.

ORIEO

Unfortunately, I was unable to attend last night's meeting of OREIO (OttawaReal Estate Investors Organization). I had curling to attend. It was our first night at Carp's Tubman league. For the record, we won 8-1 after 6 ends. It was a slow start for our team, but we managed the game well and made shots when we really needed to.

So, I diverted a little bit from what I wanted to talk about. At this point, I do not know much about OREIO, but it looks like the perfect type of organization that meets my needs as a potential real estate agent/owner. I would like to go to the meetings, which are held about once a month, but they fall on my curling night. I think I am going to have to wait until there is a meeting that appeals to me directly, and I'll miss a night or two of curling.

From what I understand, there are a ton of real estate people at these meetings. It allows for some really good networking to occur. From mortgages to investment opportunities, there is a lot of information and contacts to gather. I think it will be quite worth it for myself and any of my potential real estate clients.

I know most people that read this aren't going to be real estate investors, but I wanted to let you know that I am continuing to gather information about real estate and how that may help you in the future if you happen to use me as your real estate agent. I'll have good contacts for mortgages, home inspections, repairs, etc.

New poll... reward program!

Ok. If you're reading this on facebook, I'd like you to take a moment to visit featherslam.blogspot.com. On this website, I have included a new poll asking visitors their preferred compensation in a referral reward program. I'd like for you to go and vote. It will give me an indication to what might motivate people to use word-of-mouth to help me out in my little real estate venture.

Why a referral program? Well, real estate is all about relationships and my network is only so big. In order for me to be a successful real estate agent, I believe that I need to do two things. First, get the word out. Second, work hard to gain the knowledge and trust that is needed to deliver to my clients.

What kind of people am I looking for? Pretty much anyone that is looking to get involved in real estate, either buying or selling. If you're a buyer, I'm free. I do not charge any fees to help you look for a property. I earn a commission only when I help you purchase a home. The money that I am paid comes from the seller's proceeds, so I can help you choose the right home at no cost to the buyer. Nothing! Therefore, if you're referring a buyer to me, I will compensate you if I am able to make a sale. It's a pretty good deal. You get a reward and it does not cost your friends a dime.

Planting the real estate seed...

I'm not going to say that real estate is easy, but getting the word out that I'm going to be a real estate agent is pretty easy. It's a good introduction for people. It allows me to let them know that if they ever need someone to buy or sell a home that I would be available to them. The person may not be ready to buy or sell right away, but at least they know that I will soon be able to help them out.

So, when do I get my licence? Well, that isn't for certain yet. There are three courses that I need to pass first to be eligible. Typically, as I understand, it should take about 6 months to complete. Unfortunately, I don't think I want to spend that much time waiting for the exams to occur. I'm going to push myself to write right away, so that I can begin selling in 2009. I'm not sure if it's even possible with the way the exams are scheduled, but I will push for that.

So, if you're sitting there thinking, I think I would like to help Chad out with getting started in real estate, well, here's something I can do for you now. I'm going to give you a little bit of planning advice. If you're seriously thinking about buying a house in the near future, begin by putting money into an RRSP. You're going to need a downpayment for the house, so you might as well do this. Under a program called the Home Buyer's Plan (HBP), you can withdraw up to $20,000 from your RRSP for your first home. The only catch is that the money has to have been in your RRSP for 90 days. Therefore, before you go and start looking for your home, you should be putting your downpayment into an RRSP, so that you will be able to save on your taxes next year, and have a decent downpayment for your home.

So, how does this help me? Well, first, it gets me 90 days closer to my real estate licence. :P Next, it will also give you a natural buffer for giving yourself enough time to make the right decision on likely your biggest investment decision of your life. That way, I can ensure that you will be a very satisfied customer and that you will refer me to anyone else you know that may be looking at purchasing a home.

Realtor.ca

It looks like there is a new website to check out properties. Formerly, mls.ca the site has now changed to realtor.ca. It appears as if they property search function has combined with google maps to provide precise details of property locations. I have mixed feelings about this. First, I probably just don't like adjusting to something that is new. That being said, I do like the feature where properties are imuputed on a map, so that detailed locations can be seen. This is an added feature for those people that may not be familiar with all of the streets in the area.

Now, I encourage you to keep an eye on properties in your area if you are interested in purchasing a house in the next couple of years. It's good to know the market a little bit, so that you know what you can expect to pay when it comes time. It gives you an idea of what it costs, and it also gives you an opportunity to plan your down payment a little bit better. You may consider investing in RRSP's, tax savings account (new in 2009), or other investment choices while trying to build up a down payment. It's important to plan because there are certain rules and regulations that you need to follow in order to be able to take advantage of tax savings.

I'll probably talk about tax implications a bit more in a future post, but I want people to check out realtor.ca today, so that they can plan on where they would like to live and begin the planning process as soon as they can.

Sold???

It looks like my neighbour at 73 Arlington will have a sold house very soon. While I was at the gym last night, a man stopped by my house and left Graham, my roommate, a note to call him back. The man is buying the neighbour's house and wanted to talk to me about something.

Of course, I called him back right away to discuss the purchase. I mentioned that I originally had been interested in purchasing that side of the house as well when he asked me if I was selling my half of the house. At that point, I told him "no". I just bought the house and was planning to do renovations on my side. This guy was an investor and he was looking to buy both halves like I did. Unfortunately, he has the money to do so, but the news is not all that bad.

I like the fact that the guy is willing to do renovations. I had asked whether or not he was going to continue to rent the property or do a quick flip. He did not know the answer. It doesn't matter. The fact that he will be using a lot of money on his side of the house (he estimated 50-60K) means that the direct comparable to my house will increase in value. If it's a quick flip, I can probably see him re-listing in the spring and setting a new precedent for the value of my house.

Now, his side is very different than mine. Well, not completely different, but with some notable differences. First, I have a living room and dining room on the main floor. He has a living room and a bedroom. Next, I have a larger kitchen due to the fact that he has a small bathroom located on the back portion of his kitchen. Finally, his basement is not finished while I have my second bathroom located there. Therefore, I think my home has two things. First, it has more potential. Second, it will cost less to do the renovations.

I think it has more potential due to the size of the kitchen for example. It is big and capable of becoming a very sellable feature of the home. In the other side, for example, the bathroom would have to be removed to get the same effect. Regardless, if the investor wants to do that on that side of the house, by all means, I hope he does.

These are the days that I love real estate the most. They are the surprises that you don't expect. It gives me optimism and confidence that I am doing the right things with respect to my investment. My "hobby" is getting serious.

When hobbies get serious...

Over the course of my short real estate hobby, I have had many people ask me questions about the process, my experiences, and my thoughts on various things relating to real estate. I am always glad to help and that is part of the reason that I have created this blog. I try to share my experiences so that people can read and learn and figure out how to best go about purchasing a home for themselves or as an investment.

The problem is that the questions have started to become more pointed. They are no longer general inquiries, but questions relating to specific properties. Unfortunately, I do not have access to all of the information that is needed to make a proper assessment for people, and this frustrates me. I usually have to refer them to a real estate agent, so that the person can properly assess the situation.

Now, I've had a great experience with my real estate agent, Jeff, but I think its more prudent that I take the next step in my hobby. I'm going to start looking into becoming a part-time real estate agent. Weekends and evenings are usually showing times, so I should be able to manage my duties on a part-time basis. In addition, I'm going to be able to list my investment properties without the fear of losing 5% on real estate commissions.

Also, it's going to give me a better opporunity to get better information for people when they are looking at homes. If there has been one thing that I really like about real estate, it is that I gather information to help make a decision. How long has it been listed? What does a place like this rent for? What are the costs of renovations? Is it a bargain? Is it overvalued? What's the expectation for this area in terms of property values? Can I afford it? Where should I buy?

Chad meets Exit Realty on Monday.

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.

US real estate

With the American housing market in crisis, the Canadian dollar at near parity, and foreclosures at an all-time high in some of the southern states, Real estate is becoming a very attractive venture for Canadians. I hadn't really thought about US real estate at this point in my portfolio, but it certainly appears as if this is the time to be acting.

There are quite a few risks to consider when going into real estate in the US. At this point, I am probably just posting this as a reminder to myself to look at some these risks in further detail. There are different rules for estate taxes. There is currency risk. There are higher property taxes for non-residents. There are a slew of things to consider.

On the other hand, if you had owned an ocean-side property, in say Florida this past winter, you would be smiling as you would have been able to take a mini-vacation at a very reasonable cost. US real estate may not be everyone's cup-of-tea, but under the current circumstances, this may be the chance to take advantage of the weak American economy.