by Teresa Leung | Dec 7, 2017 | Real Estate Investing Tips, Uncategorized
In October 2017, the Bank of Canada announced that new mortgage rules will be taking place beginning Jan 1, 2018. This will drastically affect borrowers if they are currently putting a minimum of 20% towards their down payment as of right now as they are enjoying the benefits of qualifying for the lower rate of their mortgage contract. As of next year, it will become mandatory for borrowers to qualify for a greater benchmark rate either at 4.99% or their contact rate with an additional two percent on top – therefore reducing the amount you can borrow by around 20%.
For example, if buyers currently qualify to be a in fixed term mortgage contract at a discounted rate of 3.14%, under the new rules they would have to add an additional 2%, thereby, they would have to qualify at a rate of 5.14%.
Borrowers however may be able to be exempt from the new mortgage rules should they either:
- renew their current mortgage with their existing lender where their amortization period stay the same and where no additional funds advance;
- if they purchase a property before the new rules take into effect (completion can be in the new year);
- if they get a mortgage with credit unions such as Coast Capital or Vancity due to the fact that they are not federally regulated banks, and as of this writing, only federally regulated banks are affected by this new rule.
With that being said, it is important that as real estate investors you understand how the new mortgage rules taking place will affect you so you can prepare for any changes ahead of time. Happy mortgage shopping!
by Teresa Leung | Nov 24, 2017 | Blog, Real Estate Investing Tips
The City of Vancouver is implementing an Empty Homes Tax due to a lack of rental properties available. Properties deemed vacant will be subject to a tax of 1% of the property’s assessed taxable value.
Mayor Gregor Robertson said,“Vancouver renters are in crisis, with the rental vacancy rate hovering over zero for years. The city will not sit on the sidelines as more than 25,000 empty and under-occupied properties hold back homes for people who live and work in Vancouver. We need a tax on empty homes to encourage the best use of all our housing, and help boost our rental supply for locals.”
Consequently, it will now be mandatory for each Vancouver homeowner in the city to submit a declaration of their annual property status – determining if their property will be subjected to the empty homes tax policy by February 2, 2018.
Most properties will not be subject to the Empty Homes Tax, including those:
- Used as a principal residence by the owner, his/her family member, or a friend for at least six months of the current year
- Rented for at least six months of the current year, in periods of 30 or more consecutive days
- Meeting the criteria for one of the exemptions https://rem.ax/2B0AbH4 .
Nonetheless, upon failure of submission or meeting any of the exemption criteria, your property will be reckoned as vacant and will be subject to the one percent tax rate based on the 2017 assessed taxable value of the property. This is sure to impact the vacancy of homes as based on the assessed value of an average home in Vancouver now to be $1 million the tax subjection would cost owners at least $10,000.
In addition to this, the homeowner will also be charged with a $250 penalty for not adhering to the declaration requirements.
As Real Estate Investors, we’re sure your Vancouver home will be full of tenants at all times, but we just thought we would give you this interesting update. Happy Landlording!
by Teresa Leung | May 6, 2017 | Blog, Real Estate Investing Tips
One of the most frequent questions my clients ask is, “Should I incorporate or use my personal name to invest?” There is no hard and fast answer for this, as everyone has different circumstances.
As an Investor myself, and someone who has helped hundreds of investors purchase their real estate, all I can tell you is that about 90% of my clients, even the wealthy ones with over 10 investment properties, have invested in their personal names.
Drawbacks of Incorporating
Of the 10% who invest through their corporation, there are a few who wished that they had just invested in their personal names. When I ask those clients why they regretted investing through their corporations, this is what they have told me:
Difficult Mortgage Approvals
“Mortgage financing became harder as only a handful of banks will finance an investment property owned by a corporation. It also takes longer to get the approval, and there pages upon pages of criteria for us to fulfill. We were nervous that we would lose the deal because we couldn’t remove subjects.”
Additional Fees
“The start-up costs of a corporation and the annual accounting and filing fees are a few thousand dollars. That eats up all our positive cash-flow on our properties.”
High Taxes
“I was told by my accountant that taxes for rental income is over 49% as the exemption only applies if I have 5 or more full-time employees in my real estate business.”
Ouch!!!
For the above three reasons alone, I can see why so many people shy away from incorporating. Having said that, there are benefits to incorporating too.
Benefits of Incorporating
For investors who do joint ventures and have many partners, investing via a corporation can add a layer of protection in the event of a legal dispute. Owners of a corporation wouldn’t likely be impacted by any remedy or judgement.
Upon hearing this, investors usually follow up with, “What about tenants suing me?”
If your property is managed by a property management company, they should have insurance to cover liability claims. You should also have tenant insurance on your home insurance policy, and make sure that it includes liability coverage. It’s always best to check with your property manager and your home insurance company to know what you are covered for.
It’s also wise to keep your investment property in good shape and do repairs as soon as possible after the tenant reports it to you. That way, you will avoid most tenant claims for injury.
Assess Your Situation to Decide What’s Best for You
In general, if you plan on investing in under 5 income properties, its probably better to invest in your personal name. But if you plan on making real estate investing your business and invest in many properties with various partners, then having a corporation could be beneficial for liability reasons.
I invest in both my personal name and through a corporation. For my joint venture deals, it’s through my corporation. When investing on my own or with my family, I invest in my personal name. That’s the best scenario for me.
If you have any other questions regarding this topic, it would be best to speak to your real estate lawyer. They can determine what is the best scenario for you.
by Teresa Leung | Feb 9, 2017 | Blog, Real Estate Investing Tips
This post is by Point B Investment Team’s John Su. John specializes in joint ventures and investment properties. He helps clients invest in the Alberta and British Columbia markets to successfully purchase investment properties, and provides helpful landlord tips.
Many investors think that foreclosures are really great deals because they are paying substantially below market price for the property. But did you know that when you buy a foreclosed or bank-owned property, you cannot include any of the appliances like refrigerator, stove, microwave, or dishwasher with your offer?
This is because the bank doesn’t own those items. They only own the land and the house. I’ve heard of cases where the foreclosed owner even took the light fixtures, door handles and toilets with them in spite!
As the Buyer, you are purchasing the property “as is, where is”, with no warranty from the Seller. So there’s nothing you can do about it if any of the above are missing on your date of possession.
If you are the first person to submit an offer, you are able to put in subject clauses like inspection and financing and even negotiate on the price. Once the offer is accepted, it then goes to court. In court, anyone can bid on the property knowing what the accepted price is. The only caveat is the offer in court must be subject free. Therefore, it’s important to know the risks involved and to ensure financing is in place before making an offer in court.
What can investors do to analyze foreclosure deals?
To further demonstrate if foreclosures are indeed a good (or bad) deal, we’ve done an analysis of a foreclosed property sold to an investor. Based on our findings, and considering the adjustments, we found that the investor actually paid market value for the property. The investor may have even received a poorer asset because the comparable property had a river view and had newer renovations costing $10,000.
Click Here to View Analysis Example
So the next time you are looking at a foreclosed property, remember that you may not be getting the best deal. It may be better to find another property where you are able to the negotiate and price, terms, and inclusions. That way, once the offer is accepted, nobody else has the ability to grab it from under you!
You can always contact us here at Point B to help you evaluate whether the investment property you are considering, foreclosure or not, is a good deal.
by Teresa Leung | Oct 8, 2016 | Blog, Real Estate Investing Tips
If you are an investment newbie, you probably have a lot of questions in mind. What is real estate investment? Why should I invest my time in it? Is it worth investing my time? Where do I look? When do I start? How do I proceed?
To help clarify things, here is our guide for real estate investment newbies.
The “What”
What is real estate investment?
In the past week, I went around asking this question to some of my friends both in and out of the real estate field, and the responses I got were quite interesting.
“Oh you mean flipping a home?”
“I think it’s like buying a house and selling it for profit?”
“Buying a house…?”
“Buying a property and renting it out?”
The most surprising thing I found was that, no one was sure what real estate investment really means. They all sounded hesitant with their responses.
But the good news is that everyone was on the right track. Real estate investment involves investing in a real property for the purpose of making money. There are numerous ways to do this, some simple and some very complicated, so to simplify this for a newbie, I’ll just speak on the most commons methods to invest in real estate. Most people purchase property to either, 1) buy and hold to generate rental income, or 2) buy and flip or to sell to someone else when the market price goes up. But let’s be honest here, there is nothing wrong with doing both.
The “Why”
Why should I invest my time in it? Is it worth investing my time?
Passive income
As you may have guessed, the keyword here is passive income. Imagine earning supplementary income in your sleep – sounds too good to be true? It’s not. With the right properties and having other people manage the property for you, it is very possible for you to make money while you plan your upcoming vacation in Hawaii. But is the income really passive? Yes and no. Yes, if your property manager will treat your property like it’s their own, which is unlikely. Therefore, in the real world, most people will need to spend a little bit of time to manage the managers, and to keep track of what they are doing and if it is inline with your expectations.
Leveraging other people’s money
Yes, you read it correctly. Unlike daily commodities, you don’t need to pay the 100% cash for real estate. As this is a hard asset that the banks can take back in-case of defaulting on payments, they will lend you up to 80% of the purchase price in the form of a mortgage. If the investor chooses to use their home equity line of credit (HELOC) to finance the down payment and all starting costs, you can effectively leverage 100% of your property using the bank’s money. How cool is that!
Predictable Returns
When you do the math before you purchase, you will already know your estimated monthly expenses and income. As the years pass, it is likely that your property’s value is now worth more than when you purchased it. Essentially, this means that as your mortgage balance is going down, your home value is going up. Everything in between is the equity on the property that your tenants helped you get. What a beauty.
The “Where”
Where do I look?
Real estate investment will most likely be one of the most significant investments of your life, so it’s obvious that you want to put a lot of thought into it and make an educated decision on the location. Areas where there are job growth, population growth, and low vacancy rates is what we would recommend.
Check out the list of top British Columbia Investment Cities on our website at https://pointbinvestment.ca/where-to-invest/
The “When”
When do I start?
Assuming you have the money to invest, my honest answer to you is as soon as possible. Having said that, when do you know you’re ready?
Consider asking yourself these questions:
- Is your source of income secure enough for you to be making an investment?
- What are your priorities in life? Would real estate investment help you fulfill your goals?
- Are you able to set aside some time to connect yourself with resources that will help you get your first property? E.g. time to do research, time to meet with mortgage brokers and realtors who could help you with your investment, etc.
The “How”
How do I proceed?
Find a realtor who is also an investor him/herself. They will already know the best places and properties to invest in, thereby fast-tracking your learning. You also get the opportunity to leverage the knowledge and experience from the real estate investor’s team.
In addition, the team will be able to guide you through a wide range of considerations from conducting a cash flow analysis to supporting you through your concerns about the process of investing (and they could definitely relate because they’ve been in your shoes before).
You think you’re ready? Unsure? That’s okay! It’s never too early or too late to start investing in real estate. Contact Point B Investment Real Estate Team today by emailing us at success@pointBinvestment.ca to learn more about real estate investment and get advice from experienced professionals.
We look forward to hearing from you!
***Ask about our FREE Lunch ‘n Learn Seminars beginning in November 2016***
by Teresa Leung | Sep 19, 2016 | Blog, Real Estate Investing Tips
If the Vancouver real estate market has you wondering whether it’s even possible to earn your desired passive income, we have a few tips to share with our valued Investors and Investors-to-be to help you decide and invest with confidence.
Tip #1: Always do a cash flow analysis. Always.
Vancouver real estate is very expensive, so before you decide to commit to an investment, the most important thing to do is to conduct a cash flow analysis. No matter where you invest, whether here in Vancouver, or in another city, province, or country, a cash flow analysis of your real estate investment will help you make the most objective decision.
What does a cash flow analysis tell us?
To put it simply, a cash flow analysis will help you visualize if your projected income will cover all of your relevant expenses. Additionally, it will help put your emotions aside as it creates objectivity in your decision-making.
Our advice? Do research, do a cash flow analysis, and leave it to the numbers to help you make a decision like a real estate investor.
Tip #2: Never go into a bidding war not knowing your upper limit
It’s important to know at what price you will have to walk away from a deal, for several reasons. First, you may (unknowingly) get too emotional which could easily lead to overspending. Second, there is no point bidding for a property that may end up making your cash flow negative, defeating your purpose of investing. Third, you don’t want to buy at the height of the market. In real estate investing, you buy low and sell high, just like any other investment.
Tip #3: Furnish
Furnished properties generally make anywhere from $300 to $500 more on monthly rent than unfurnished ones. This is definitely true here in Vancouver, where the vacancy rate has declined to less than 1% as demand for rental spaces outpaced supply (Fall 2015 CMHC BC Rental Market Report).
The tenant profile for furnished rentals is generally business executives, or out-of-town short-term renters such as students and workers.
So why not take this opportunity and have some fun furnishing your investment property and make a little more money along the way?
Tip #4: Be Open-minded
Have you considered investing outside of Vancouver? Being open to investing in other areas in BC such as Burnaby, Surrey or Kelowna, may lead you to investments that produce a better ROI (Return on Investment).
Additionally, properties outside of Vancouver are often more affordable while still achieving similar rents. Essentially, you would be paying less for the property, but receive similar monthly rental income. For example, a three-bedroom condo in Kelowna is priced at $365,000 while a comparable unit in Vancouver scores at almost $1 million. Even if you receive higher rents in Vancouver, it may not be cash flow positive, especially with expenses such as property tax and strata fees to cover.
To give you a better idea, consider these two properties:
- A Kelowna 3-bedroom condo, price = $365,000, monthly rent = $2,500
- A Vancouver 3-bedroom condo, price = $905,000, monthly rent = $3,700
Annual rental yield of Kelowna condo = ($2,500 x 12) / $365,000 = 8.2%
Annual rental yield of Vancouver condo = ($3,700 x 12) / $905,000 = 4.9%
*Figures were obtained from real comparable properties.
As you can see, the Kelowna property produces a higher annual rental yield than that of a comparable property in Vancouver.
Tip #5: Investment Realtor = Investor
Always work with a realtor who is also an investor with their own real estate investment properties. They will be able to provide you with a comprehensive cash flow analysis and they will already know the types of property that will make money. Therefore, working with an investment realtor will save you time that you would spend doing the research yourself.
Experienced investment realtors also have connections that can benefit you. Oftentimes, they will have a team of investment specialists (e.g. mortgage brokers, property managers, accountant, lawyers/notaries, etc.) who are already familiar with investment properties. This way, you can leverage the skills and knowledge of the investment realtor’s team.
Want to learn more? Contact our team!
If you have read this until the end, then it’s a good idea to call our team for more information. It’s never too early to start investing. If you are here, then you know you are interested and you want to learn more.
You never know what you’ll find out. Contact Point B Investment Real Estate Team today by emailing us at success@pointBinvestment.ca.
We look forward to hearing from you.
