Real Estate Insider: 2017 Summer Report

Welcome back, real estate readers! We are going to be adding a new monthly series to our blog. In addition to interesting real estate blogs, we'll be including helpful articles and subjects we think you'll benefit from reading. Last month, we found a treasure trove of insider info we just can't help but share.

Worrying about your credit score? Make it a thing of the past! CIBC is set to launch an easy-access platform for all clients to check their credit scores whenever they want, indicating the importance of everyone being comfortable and up to date with their financial situation. >>

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How much do you know about your condominium’s governance? After investigating some questionable practices in downtown Toronto, this article gives tips on what you should be doing to ensure that your condo is well-managed. >>

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Are we digging ourselves into a deeper hole with the Foreign Buyers Tax? The Montreal Economic Institute says that public decision makers are “missing the mark” and that this tax will do the opposite of what it was imposed to do. >>

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Trying to halt the train! Chief economist at the Canadian Real Estate Association says Torontonians should prepare for a possible tax on speculative home purchases to try and stop outrageous house prices, but will it work? >>

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What goes up, must come down. Home sales dropped 6.2% from April to May 2017, signifying the largest drop since August 2012. This could possibly mean the market is beginning to balance itself out once again. >>

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Is your house under seven years old? Make sure you know about the new home warranty program in Ontario and the changes coming! >>

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Could the legalization of cannabis affect the real estate business? Who should be responsible for all the costs and risks associated with growing marijuana plants? This commentary discusses some of the legal implications that could come with the industry. >>

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Risk big, win big. With interest rates set to rise, are variable rate mortgages worth the risk? Locking in your mortgage rate now might be the way to go for the more cautious homeowner. >>

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Canada has a historically moderate financial situation. In the wake of the recent housing boom, learn how the economy is protected with policies like the Foreign Buyers Tax to ensure Canada’s economy is safe now and in the future. >>

We hope you enjoy our findings -- happy summer and happy reading!

Investing in Real Estate – Building The Right Team #5: Property Manager

One of the first concerns we hear about when talking to new real estate investors goes something like this: “I heard real estate investing is a pain because I’ll be getting calls about clogged toilets at two in the morning from my tenants.” Is this something that has made you hesitant about investing in real estate? Today we are going to alleviate some of these concerns by talking about the next member of your team – the property manager.

What Will A Property Manager Do?

The property manager will be the main contact for the landlord in the day to day dealings of the property. They will collect rent, hand out any necessary notices to tenants, market vacant units, handle any complaints, deal with minor repairs and maintenance, etc.

What Should I Look For In A Property Manager?

Ideally your property manager should have lots of experience in handling similar types of rental properties to yours. They should have knowledge of the local rental market and tenant profiles. They should also know how to legally deal with problem tenants, including serving proper notices, keeping records of correspondence, and taking the proper steps up to possible hearings with Landlord Tenant Board. This last part is very important as not handling evictions and other tenant issues properly can get very expensive for the landlord. Make sure to interview them the same way anyone you would hire and get references. Sometimes it is prudent to manage a building yourself at the beginning so you understand the property, the tenants, etc. to get your feet wet and be able to properly manage your property manager.

How Will My Property Manager Help Me As A Real Estate Investor?

As a specialist in property management, your property manager should have the skills to ensure your investment property runs smoothly. Lots of real estate investors do not have the time or the desire to learn the management side of the business, so this frees up time for the investor to work on acquiring more properties, spend more time focusing on other employment or to spend free time with family or friends. And you won’t be getting any late night tenant complaint phone calls, so you can sleep easier!

How Much Will My Property Manager Cost?

Property management fees can vary as with any other professional services. On larger multi-unit buildings, we see fees such as a 5-8% of gross rent, one month’s rent per year or a $/per door per month. There can also be additional fees for renting/leasing of vacant units and you should inquire about that as they can add up. Usually there are also à la carte items available such as evicting tenants, going to landlord tenant hearings, etc. that they can provide for one-time fees. Get multiple quotes to understand the market prices in your area but be sure not to only focus on costs, make sure to also understand the service that comes with each. Also make sure to budget the costs of management into the financials of any investment properties you are looking at going forward.  Having your property properly managed is too important to cheap out on!

Get a good property manager on your side…you’ll be glad you did. Readers, do you manage your own investment properties?

Investing in Real Estate – Building The Right Team

After doing some research on different investing ideas, you’ve decided that real estate investing is right for you. No matter how big or small you intend for this investment venture to be, its important to be ready, willing and able to handle everything that comes your way. But how do we do that? By building the proper team of professionals around you to set yourself up for success.

But what type of professionals do you need? We've put together a list of such professionals. Not every one of them is necessary for every investor, but the list is a starting point to make sure your bases are covered.

Realtor

Now this is a pretty obvious one ☺. They’ll be able to help you out with understanding values, demographics, rents, etc. Working with a realtor who either owns rentals themselves or does a good amount of income properties is a huge bonus.

Lawyer

A good real estate lawyer is invaluable. They will make sure your interests are protected in whatever deals your are considering. Good legal advice can be expensive but can save you money in the long run.

Mortgage Broker-Professional

Assuming you will be mortgaging your properties, a good mortgage broker-professional is essential in getting your deals financed. They can give you advice so you can continue to accumulate properties and get the best terms possible.

Accountant

A good accountant is also invaluable. Understanding the best way to hold the real estate, claim expenses, amortize costs, etc. can save you tax dollars. They also have your back should CRA ever audit you.

Property Manager

Don’t have time or the ability to handle your rentals yourself? Finding a good property manager is must-have. They can collect rents, leasing, handle tenant calls and be the general go between the property and the owner. Fees generally range from 5% of rent to one month’s rent per year and up.  Make sure you factor this cost into your budget if you're planning to have the property managed.

Contractor/HandyMan

Not very handy? Then you’ll need to contract out any renovations or general upkeep. When you find good people who don’t cost an arm and a leg, it is important to keep them around and happy. They will make your life much easier in this business.

Bookkeeper

A good bookkeeper can keep track of all your income and expenses related to each property and make sure everything runs smoothly. They can also run regular reports so you understand your profits and can uncover trends (like increasing utility costs), so they can be addressed.

General Maintenance – Grass, Snow, Cleaning

A list of maintenance contacts can go a long way in efficiently operating your property and keeping it safe and attractive to tenants. Be sure to also add these costs to your budget.

This is far from an exhaustive list, but it gives you a general idea about who you should have on your speed dial as a real estate investor. How has your experience been in creating your team?

6 Tips For Taking Over Income Property

So you are set to close on a property, containing multiple tenants which you are now assuming and responsible to. Here’s some ‘tips’ to ensure a smooth transition:

1. Preferred Method of COMMUNICATION – simply what is the best means to connect with you to discuss a tenant matter and what is the expected response time. Do you prefer email, text or a call? Whichever it is – clarify the preferred means upfront.
2. Preferred Method of PAYMENT – most common today are direct deposit or email transfer. But is cheque acceptable and how it is delivered (mail or pick-up)? All forms of payment may work, but lay out the expectations so all sides are clear.
3. Arranging REPAIRS/MAINTENANCE – what do your tenants expect when a repair has to made? Can they be done during business hours and can tradespeople have easy access to the premises? Do you have an on-call list of trades people, for handling such repairs? More questions then answers - but it’s all about expectations and managing them on both sides.
4. Preparing premises for NEW TENANTS – readying the space for a new tenant is often full of expectations that need to be met. What are your responsibilities on possession date? What is required of them at takeover? Will there be a walk-through on possession date and even a checklist report completed? Best practice, is to have a system and employ it. In the case of new tenants, you can also establish the groundrules.
5. Understanding the BUSINESS OF EACH TENANT – beyond the lease agreement that you assumed, spend some time understanding the Tenant’s business and how it affects the overall property. Is it a quiet office environment vs. a busy retail operation? Does it draw considerable traffic (parking demand), and what sort of hours of operation are involved? Is it compatible with the neighbouring units? Are there operational issues which you may be assuming buy may have missed during your due diligence process?
6. Keep Good TENANT FILES – not simply about keeping track of rent and expenses. Files should include all tenant communications, written notices, and future plans for the space (ie. expansion). Even if you did not assume good files at closing, make a habit of establishing a better system going forward.

The above should help to make a good first impression with your Tenants at closing. Again, it’s all about expectations --not only setting them, but managing them! Love to hear about any stories about problem takeovers, on past deals…

Just a click / call away from discussing our latest investment opportunities in Windsor-Essex.

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Mark Lalovich
mark@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 259-5434

Property Management Q&A - Necessary? Benefits? Costs? Who Pays?

As you get ready to close on a commercial property, the question of property management needs to be addressed. Assuming you are not looking to manage the property on your own (NOT hands-on), it's time to assess the issue of hiring a property management company.

NECESSARY? - any tenanted property requires some level of active management. Obviously a single tenant would be less involved, than a multi-unit property involving multiple tenants. On a regular basis, matters arise requiring a landlord's response and you must (or someone on your behalf} attend to those issues. Management services can be tailored to suit your and the property's specific needs -- but appropriate oversight is a must.

Benefits? - the major items would include 1) financial management (collection of rent, follow-up on receivables/bill payment. ,monthly statements, operating cost budgets to name a few). Established management companies can provide better rates on insurance and property services, based on bulk purchasing power. They can also be 'on call' after midnight, based on an unforeseen emergency.

Cost? - Will vary market to market and based on property category. It will also most certainly depend on the actual services being provided, and ensure you are making 'apples to apples comparisons' when considering management firms. Typically on commercial properties, it may fall in the range of 3-5% of the property's gross income. But as with everything - 'you get what you pay for' and the cheapest management costs may not be the most appropriate for your needs.

Who Pays? - That all depends on how your lease agreements read. If you are assuming "NET LEASES", ultimately the tenant pays the cost of property management, through the additional rent provided for in the lease. In most cases, this should make the argument for professional management academic. In cases where the leases are "GROSS", any management costs will ultimately be added to the expense side of the property. As a final caveat, make sure you review the lease agreements to understand what the implications are for hiring on a property manager.

As a final note, good management companies can always provide a list of satisfied clients - get in touch with those references and confirm the quality of services being offered. Good property managers generally make for good (happy) tenants, and that generally makes for a GOOD INVESTMENT!

Tell us about your past management experiences. Just a call/click away if you are interested in discussing investment opportunities in Windsor - Essex!

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Mark Lalovich
mark@lalovichrealestate.com
Office: (519) 966-0444
Cell: (519) 259-5434