Real Estate Exam #3

This is the final phase that I have to complete before I am able to sign up with a brokerage and begin to buy or sell a home. I guess, at this point, if you are thinking of buying or selling, I could probably start pointing you in the right direction. There are many things to consider before buying or selling a house.

The reason why you would use me as your future real estate agent is that I have the knowledge from a tax and business perspective that will not only help you make the right decision, I will soon have the ability to get you the best deal possible for your home or future home. There are tax planning opportunities that you should be aware of, and these planning opportunities co-exist with your ideal home. It's important that you take advantage of these opprtunities because, for most people, a home is the single largest investment you can make in your lifetime.

As of May, I will also be looking for people interested in real estate investing. With interest rates so low, there are plenty of opportunities out there that people should try taking advantage of. I can bring many small investors together in hopes of finding properties that offer a safer and better performing investment opportunities than the markets are currently giving.

I guess I should mention my background for a change for those that do not necessarily follow my life too closely. I recently graduated Carleton University with Honours in Finance and Accounting with the co-op option. I have been working as an accountant since 2005, and received my chartered accounting designation this year. I have owned property since 2006, and I have two single family homes in my portfolio at this moment. During the last few months, I have been pursuing courses at OREA (Ontario Real Estate Assocation) in order to be a licensed broker. I should be licensed by the end of May, and I am looking to do business.

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.

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.

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.

Time is short.

I don't have much time today, so this is more just an update. I am writing my real estate exam this Saturday, so that means that I will be inside studying on Hallowe'en night. I'm a little behind in the material at this point, but the material is pretty easy so far, so I do not anticipate many problems on Saturday.

This is exam one of three before I can go and get my license.

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.

Chad the Real Estate Agent

Ok. Maybe I'm nuts. Two careers? I always liked the idea of things like new home sales, residential resales, commercial properties, and property management, but it seems as if I have jumped into the real estate game a little faster than I really had originally expected.

I've ordered the course materials and now I am studying to get my real estate licence. I write the first of 3 exams November 1st. It's a little bit rushed, but I want to complete it before I get too busy with my other job. Once the new year rolls around, I'm not going to have much time to study with all of the curling that I will be doing as well.

Someone told me that it takes about 6 months to complete the set of exams, but I'm going to push myself to try to be done most of my work by the new year. That only gives me about 3 months, but I really don't mind reading the materials because it is of great interest to me.

So, if you're thinking about buying a house in the near future, I'd like to hear from you. As an accountant, I can help you plan different ways to help you save for your house and save some money. As a real estate agent, I can help you find the house you want for the price that is reasonable. The earlier we start the process, the better you will be in the long-run. Buying a house is serious business. It will likely be the single-most important investment in your life, so you want to do your homework. I'm helping people because its what I want to do with my career. I can help you ensure that you will be comfortable with your home purchase.

US subprime crisis

In a previous post, I mentioned my desire to become a real estate agent. I want to be able to access some key information and networks that will allow me to maximize the potential in a home that I buy or a home that I buy for someone else. I think it will be a key part of being able to get some deals completed. This doesn't come without consequences.

With the housing market in the US taking a huge hit, many Canadians are concerned about the economy north of the border taking a dive as well. Canadians are stretched financially with 40 year mortgages with no money down. There is a real risk that the market does take a hit as banks have been generous with their loaning policies. To me, this indicates that it may not be the best time to enter the market as a real estate agent. The markets are too volatile.

There are two reasons I believe that there will not be a crash in Canada. First, the banks are still loaning money at rates affordable to them in Canada. Even though they are taking on bigger risks, they are protected with rights to the underlying assets. Mumble jumble to you? Simply put, in the US, the banks borrow money at rate A, but loan out at rate B. Due to the intense competition, rate A is higher than rate B thus the banks are poised to lose money. In Canada, rate A is still lower than rate B.

Why would the banks do this in the US? To make it simple, they want to do business with you. Customer loyalty translates into extra revenue in forms of fees and surcharges. However, when the economy started to slow down in the US, people lost their jobs are were forced to try to sell their homes. Subsequently, the price of homes dropped because there are more sellers than buyers.

My second reason for why Canada will be better off than the US is that our economic fundamentals are better. What does this mean? Well, first off, Canadians are continuously paying off their national debt. We are saving billions of dollars in interest charges while the US is poised to sink $700 billion more this week. This is not including the future interest costs.

Next, we are running surpluses in Canada. Albeit, they have been smaller in recent months, but, nonetheless, our revenues exceed our expenses. Given the slowdown in the US economy, we are poised to feel a slight pinch from our biggest trading partner. What does this mean for the housing market? Well, it means that if we needed a bailout package such as the one in the US, we are in a much better position to fight off a recession. Therefore, people will be better suited to keep their jobs and not be forced to sell their homes. I could be wrong, but I think I make sense.

Therefore, given all of the housing market volatility, I am still poised to become a part-time real estate agent. I have an interest in this kind of stuff and I want to be able to help people as much as I can. This is merely a hobby for me, and not a career. My approach as a real estate agent is that I have information available, but I'm not going to force a sale down your throat. I don't need you to buy a house to put food on my table. I'm an accountant, but I like investment decisions.

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.