How To Increase Cash Flow In An Investment Property

In a hot Toronto real estate market where sellers are getting what they want (and sometime more), finding investment property opportunities requires a skill and having good team members.  In my search for a duplex or triplex, I focused on the Beach / Upper Beach area where the tenant profile is strong and potential for long term appreciation is in place.  We found a duplex that generated $2,500 monthly income, however it had potential for higher rents once the property was updated. Here is a video shot by my realtor, Andrei Angelkovski (www.BeachInvesting.com), who specializes in investment properties in the Beach area, walking through the property and explaining the work to be done.  I'll be posting updates over time showing the progress and explaining why certain things were done.http://youtu.be/1QUw_tvVwNc

Happy Investing!

To discuss your personal investment property goals and opportunities, please contact me.

Don't Get Hung Up On The Dollars When Investing In Real Estate!

I recently met with a client who wants to invest in real estate. In the initial meeting where I find out about the client's long term goals, desired mortgage freedom date, why they want to invest in real estate and how many properties they plan to acquire, the client stated their criteria is to have $400 or more in cash flow on a monthly basis.Cash flow is key in investing in real estate, however I was perplexed since they only wanted to invest $50k.  Based on my quick calculations (downpayment is 20% therefore total purchase price is $250k and using 8% gross rental income rule, the property would generate $20k annually or $1,667 monthly), it would be very difficult for a property to cash flow 20+% of gross rental income (in this case it's $400/$1,6667 = 23%).

Real estate investors want to maximize cash flow which is a great goal, however, it's important to consider ratios since an investor with $100k capital will generate more cash flow than someone with $50k capital, and an investor with $150k capital will generate more cash flow than someone with $100k capital.

Click here to see a comparison between 2 properties ($240k vs $500k) based on 2 actual investment property listings that I have recently come across illustrating the ratios (CAP rate, DCR, cash on cash...) are very similar to each other although the cash flow is double for $500k property.

Investing in real estate is about cash flow and ratios as well.

To discuss your real estate investment goals, please contact me.

Turn Down The Noise And Take Action

A new year is upon us and we are hearing the same things: "Real estate is overvalued by 10%, 25%...", "We are due for a correction".... I agree that real estate prices, and I'll only speak for Toronto since this is where I live and conduct my business, have appreciated over the last few years, however, one can't generalize since real estate is very local.  As per my previous posts "2 Factors That Can Affect Your Home Value", interest rates spike or unemployment spike are the 2 factors that can derail real estate prices. The other factor, is some major global disaster such as a country defaulting on its debt, would affect everyone and everywhere.There is lots of information on TV, radio, newspaper and on the internet. It can be overwhelming and paralyzing.

I am a firm believer in putting a plan together and taking action.  Since it's early in the year, it's a great time to put a financial plan (when you want to be mortgage free or think about buying an investment property to create long term wealth or topping up your RRSPs or consolidating debt to improve cash flow) then take action.  It's best to look back at year end and be grateful for taking action this year as opposed to wishing had done something 12 months earlier.

Please feel free to contact me to discuss your personal mortgage and financial goals.

How BAR Can Grow Your Real Estate Investment Portfolio

BAR??  Yes BAR, which stands for buy, add value and refinance.  The toronto real estate market is hot and finding good deals can be a challenge especially when supply is low and there are quite a few interested buyers (I wonder how many are frustrated with their stocks and have decided to invest into real estate).A property that shows well in a good area will probably go for over asking or very close to asking price.  I have come across listings where the sellers were disappointed for not getting multiple offers which resulted in increasing the listing price the next morning!

It can be frustrating since real estate investment is about numbers and not getting emotionally attached to a property. Working with a realtor who specializes in real estate investment is critical since they are knowledgeable in a local area, know local rents and understand how to add value to a property to create additional income.

Here is an example of a property I came across in Toronto: a 2 bedroom, 2 bathroom semi-detached with a finished basement in the "beach".  The potential was to separate the main floor from the basement (creating an additional income suite) and adding a powder room w/ laundry on the main floor.  The strategy is to create a second income suite up to code and refinance the property once the renos are complete to recover the renovation costs.  This accomplishes the following:

1. Increase property value
2. Increase rental income (2 incomes versus 1)
3. Create positive cash flow property

BAR (buy, add value & refinance) is one strategy for real estate investors to create long term wealth.  It's key to have a strong experienced team (realtor, mortgage broker, contractor and other trades) who understand what the objective are and have done work for real estate investors.

To discuss your personal real estate investment portfolio or questions regarding real estate investment, please contact me.