Monday, November 23, 2009

Investment property purchase in the GTA and Mississauga

An investor that I know has contacted me with some very good questions about buying an investment property. I have shown his questions and my comments below in blue.
All the best,
Hello LS,
Yes, I remember you from some time ago, a very inquisitive man indeed!
I've put my answers below in blue for you to see.
Mark's comment: .

It may not have been the right time for you to buy last December when you first contacted me, but that was most definitely the right time to buy one or more properties. Values have increased about 10% since last December. I've blogged about this in the past, December 10th is the best time of year to buy a property.

Let me know your thoughts form my comments below and if you are ready to proceed. If so, my partner will also work with you and we will find you a suitable investment property

Thank you,

This was his original email below with my answers in blue

From: LS
Sent: Sunday, November 15, 2009 11:34 PM
Subject: Investment advice

Hello Mark Argentino,

  • For quite some time I have reviewed the power of sale properties that your system sends. I am wanting to find a way to better understand the relation of expenses (for example on a 2 bdrm, 2 bath condo) and comparisons at varied down payment levels, with realistic rental rates likely achievable in certain areas. Mark's comment:This is a very good method of analyzing which properties are the best to invest .
  • Are there spread sheets designed to assist? .Can a potential investor, get access to Days on the Market of these foreclosed properties, accurate comparison of recent similar sales, do banks have reasonable response time if an offer is presented? Mark's comment: Only if you have a real estate agent that is willing to do all this research and work for you .Do the banks have a growing number of such properties, preferred investor groups they reveal such information to? Mark's comment: Not a chance! If this were to ever leak out the banks would be sued for giving inside information .
  • Can you help with strategy for getting an individual from a “one home investment level” to multiple positive cash flow properties? Mark's comment: yes, but to have a positive cash flow property is dependant upon your downpayment, the more downpayment you put on the investment, the closer to a positive cash flow you will have. Multi-unit properties are similar to single except you have more tenant headaches but at least they are all physically under one roof. As well, tenants talk to each other in multi-units so expect to get similar requests for improvements all at once! .
  • I know that is a lot to ask, and a lot of questions, however without asking, I would be sure to get no answers. Mark's comment: Ask and ye shall receive and my credo is "If you don't ask you don't get" .
  • I have selected several 2 bdrm condo units for discussion. I would be pleased to compare your best guesses as to likely sale price, mortgage rates, expected carrying costs, etc. Mark's comment:What property? .
  • I have a carpenters knowledge of properties, and am trying to determine if I could make money by investing in properties. I am not intending to do renovations and flip them as I am a few years shy of retirement from the "blanked out" department, and too busy with back problems for that unless I were to sub-contract such work. Mark's comment:You fit the profile of a 'typical' investor .
  • What I consider is condo properties that could rent with only minor repair, where common elements fees took care of the external unit, and the renter might be encouraged to rent to own, perhaps given an owner held second mortgage if they did not fully qualify with CMHC. Mark's comment: I agree, all of our investment properties are condominium townhomes, this way, as you say, the tenant does minor repairs on the inside and I don't have to worry about the outside maintenance .
  • If I were able to find a bargain property I would consider forming a corporation and having it purchase my own home, then renting my home from the corporation, in order to free up some of my assets to purchase a second or third property if rental incomes or flip prospects made it viable to do so. Mark's comment: Why a corporation, you will have different tax levels, but it may be more difficult to obtain financing. I may be wrong on this, but the banks will usually want personal covenants on the mortgage unless the corporation has large assets and capital and has been in business a long time. .
  • Is such a bargain property a needle in a haystack type search? Mark's comment: Absolutely! .


Thanks, LS

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