RealEstate Inside: November 2018 News Report

Welcome back, everyone! This month, we've put together a full lesson plan to boost your real estate smarts. How real estate savvy are you? Looking to increase that pesky credit score, or become an Air BnB? We have some invaluable reads to help you on your way.

“Proficient in Microsoft Excel” used to be a skill every employer wanted to see on a resume, but nowadays it's expected—some would say required. Those not familiar with the many functions and shortcuts of Excel could save themselves a lot of time and effort by learning these handy functions, and this article is the perfect place to start! >>

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Nightmare tenants are a tale as old as landlord time. There are steps we have gone over to ensure good tenants, but sometimes you're just unlucky! There's no such thing as too much information when getting tips on picking good tenants, so be sure to read this story of nightmare tenants and what this landlord learned during the process! >>

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POP QUIZ TIME! How up to date are you on the Personal Information Protection and Electronic Documents Act (PIPEDA)? It began November first and this 20 question quiz could help you understand some of the changes a little better! >>

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Would you want the contents of your offer on a house to be public knowledge? Some people think it should be! Read this article on the auction style bidding process and let us know your thoughts! >>

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Thinking of buying your first home? This article might help to understand some of the monthly costs to expect outside of your mortgage payments to help you get prepared! >>

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Putting your rental properties into a holding corporation could be a good or a bad idea—it all depends on your overall objectives and your regions tax rules. Read this article to find the right questions to ask during your next meeting with your accountant! >>

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Condo or single family house? This is a question many people tend to have when deciding to make a real estate purchase. Things like lifestyle and goals are only some considerations when making your decision. Read this article for some advantages and disadvantages of buying a condo to help you decide! >>

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Cities with a high “walkability score” tend to have higher property values. Is your city walkable? If not, is your city planning geared towards making owning a car optional? This article explains the reasons why “walkability” is an important aspect for future economic growth, and why it should be one of your city planner’s top priorities.  >>

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Do you have a lower credit score as a result of past mistakes but want to get back on track? This article has great tips on how to repair a bruised credit score. >>

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Should you use your rental property as an Airbnb or a long term rental? This article lists both pros and cons to Airbnb and what to consider before becoming a part of the sweeping trend. >>

Considerations when Evaluating a Multifamily Property

We are in the process of concluding a multifamily listing that kept us very busy these last few weeks. During the listing period, we came across several investors who seemed new to this area and had a lot to learn before pulling the trigger on something. Therefore, today we are going to discuss some points that are always worth considering when evaluating a multifamily property.

What is the Structure Like?

Does the property have a concrete or wood frame? Is the exterior full brick or have siding? How old is it? With a multifamily property, you are not just buying a cashflow—you are acquiring an asset. How solid is that asset? Make sure the structure is sound.

How is the mechanical in the building?

Are there forced air furnaces in each unit? Is it a boiler system with hot water or is it electric baseboard heating every unit? Heating is a very important consideration. In Ontario, hydro rates are sky-high; having electric heat is a huge drawback and can sap the cash flow of any building. Gas is a more economical choice.

Are utilities separately metered?

Are there separate meters for gas and hydro? Having your tenants pay for their utilities adds lots more certainty on expense projections. Statistically when tenants pay their own utilities, they are natural incentives to not waste energy.  

How do the existing rents compare to CMHC average rents?

If you review the rent roll and the rents seem low, this can be both good and bad. It's good that there is upside in the average rents in future should you have tenant turnover; it's bad in the fact that if you have very low rents, the tenants will be much less apt to leave such a good deal. You’ll only be able raise their rent by the annual CPI percentage (1.8% this year).  

What is the tenant profile?

What is the area like? What sort of tenants would you attract in this building? What sort of jobs do these tenants have? It is important to understand what sort of rental pool you are operating in. If you want to attract high-end renters, you need to look at high-end locations.  

What is the cap rate?

Is the cap rate consistent with the market? Does it seem too high or too low? If it's too high, it might indicate there is something off with the building or problems with the tenants. If it's too low then it probably won't appraise at the bank, meaning you’ll be forced to put down a higher downpayment, lowering your returns.

Do the expenses seem legitimate?

We continuously see buildings being advertised with several items being excluded from the expenses. For example, they’ll only include utilities, insurance & property taxes. What about other items? Where are the repairs and maintenance, management, grass cutting, snow removal, and vacancy allowance? Sometimes these buildings are run and managed by the owner, but if you are a hands-off investor, you need to hire someone for these tasks—they need to be accounted for. An appraiser working for the bank is going to rework these expenses too and run the number based on their expense assumptions.

Do you notice any major deficiencies related to fire code?

This one isn’t easy to identify and it's a bit of a grey area at times, but there are some easy items to look for. Are there any basement units? Did they get permits for the basement unit? Are there egress windows in the basement units? Are there multiple entrances and exits to the building for tenants to access? Do items like fire alarms and smoke detectors seem somewhat recent?

Those are just some items to consider when evaluating a multifamily building. There are quite a few more, but we wanted to keep this at a beginner level. Readers, are there any more you think should be added?