Q – What are the upsides to real estate investment?

A – There are many. For example: attractive return on investment, tax advantages, low starting capital, ease of borrowing most of the investment money (leverage), relatively low risk, historical appreciation in value, equity build-up, inflation hedge, increasing demand for land, flexible investment options, minimal personal time involvement, and learnable investment skills, etc.

Q – What are the downsides to real estate investment?

A – Almost all the downsides and pitfalls can be anticipated and avoided. For example: subjective feelings, poor decision-making, time expenditure, exposure to government control (eg rent controls, expropriation, etc), partnership disputes, etc.

Q – What are the main types of real estate markets?

A – There are three main markets:
Seller’s market – the number of buyers wanting homes exceeds the supply of homes available. This type of market is characterized by homes that sell quickly, an increase in prices, a large number of buyers and offers, and a minimal inventory of homes. These characteristics have implications to the buyer, who has to make decisions quickly, must pay more, and frequently has his/her conditional offer rejected

Buyer’s market – the supply of homes on the market exceeds the demand for them available and number of buyers. Characteristics of this type of market include: homes being on the market longer, fewer buyers and offers, higher inventory of homes, and a reduction in prices. The implications for buyers in this type of market are : more favourable negotiating leverage, more time to search for a home, better prices, and more conditional offers.

Balanced market – the number of homes on the market is equal to the demand or number of buyers. The characteristics of this type of market include: houses selling within a reasonable period, demand equaling supply, sellers accepting reasonable offers, and prices generally stabilized. The implications for the buyer in this type of market is: the atmosphere is more relaxed, and there is a reasonable number of homes from which to choose.

Q – What are the key factors that affect real estate prices?

A – There are many factors that influence real estate prices. These would include the following: position in real estate cycle, interest rates, taxes, rent controls, economy, population shifts, vacancy levels, location, availability of land, public image, political factors, and seasonal factors.

Q – What are the key factors to consider when buying real estate with others?

A – There are many factors as follows: goals and objectives, expertise, liquidity, liability, legal structure, control, tax considerations, compatibility, risk assessment, contribution, percentage of investment, getting out or buying others out, risk tolerance, management, and profits and losses.

Q – What types of group investments are there?

A – The main options are: co-tenancy, general partnership, limited partnership, corporation, joint venture, syndication, and equity sharing

Q – What are the main types of residential real estate investment options?

A – The main categories are condominiums (including apartment condos and townhouse condos, duplexes, triplexes, and four-plexes, residential and recreational/resort condos); single family house (including re-sale house, new house, buying a lot and building a house), property for renovation; recreational property; multi-unit dwelling (eg duplex through to an eight-plex); apartment building; and raw land.

Q – Where do you find specific research information about a geographic area for possible investment?

A – There are many sources of research information and data to enhance decision-making. These include: Statistics Canada; provincial housing stats, Canada Mortgage and Housing Corporation (CMHC); real estate boards, real estate brokers, municipal building departments, municipal planning departments, economic development departments, municipal tax department, municipal police department, municipal fire department, local newspapers, specialty real estate publications, local homebuilder’s association, remodeling contractors, building inspectors and neighbours. Extensive amount of research information and data available on the Internet.

Q – When deciding on a particular house or condo investment, what are the key factors to consider?

A – There are many factors to consider. Here are the main ones: location, noise, privacy, pricing, parking, common elements and facilities (condo), storage facilities, quality of construction materials, neighbours, design and layout, owner/occupiers and tenant mix (condos), management (condos), property taxes, rental situation in area, local restrictions and opportunities, image of area, stage of development of geographic area, economic climate, employment, population trends, shape and size of lot, transportation, topography, appearance, crime rate, services in community, unattractive features, convenient proximity to investor (eg less than 4 hours drive), reasons for sale, etc.

Q – How do you determine the value of a property?

A – There are three main approaches: market comparison approach, cost to rebuild (including house and land) approach, and income approach (percentage of operating expenses, gross income multiplier, net income multiplier, and internal rate of return).

Q – When selecting professional advisors (eg lawyers, accountants, financial planners, building inspectors, insurance brokers, etc), what sort of criterion should be applied?

A – As many selection benchmarks as possible. For example: qualifications, experience, expertise, compatible personality, confidence, chemistry, integrity, trust, fees, comparison, referrals, etc.

Q – What types of mortgages are available?

A – There are many types of mortgage options to consider. For example: conventional mortgage, high-ratio insured mortgage, collateral mortgage, government assisted mortgage, assumed mortgage, builder’s mortgage, discounted mortgage, vendor’s mortgage, blanket mortgage, leasehold mortgage, condominium mortgage, and agreement for sale

Q – What are the key factors to consider when selecting a mortgage?

A – The key factors to review include the following: amortization period, term of the mortgage, interest rate, interest averaging, open or closed mortgage, payment schedules, prepayment privilege, assumability, portability and lender incentives.

Q – What are the general contents of a mortgage?

A – The general contents include the following: personal liability, insurance, requirement to pay taxes, requirement to maintain property, requirement to keep any subsequent mortgages in good standing, prohibition against renting out premises without written consent, assignment of rents, must comply with all laws, quiet possession (lender won’t interfere if payments not in arrears), prepayment privileges, assumption of mortgage privileges, special clauses relating to a condominium purchase, acceleration (of mortgage payment) clause, steps in the event of default, etc.

Q – What are the common costs of obtaining a mortgage?

A – The most frequent costs that you may or may not incur, include the following: appraisal fee, mortgage application fee, standby fee, survey fee, mortgage broker fee, mortgage high-ratio insurance fee, mortgage life insurance premium, home fire insurance premium, property tax adjustment holdback, contribution to property tax account, interest adjustment, interest, provincial mortgage filing tax, provincial property purchase tax, and legal fees and disbursements.

Q – What are some of the methods of creative financing?

A – Methods include the following: interest deferral, equity participation, mortgage assumption, variable rate mortgage, reverse mortgage, blanket mortgage, graduated payment mortgage

Q – What are some of the options available if faced with the possibility of negative cash flow with the investment?

A – Some of the options include: rent with option to purchase, equity sharing, graduated payment mortgage, purchase lower priced home, rent out basement suite, refinance the property, rent to singles to optimize income, obtain longer amortization period, reducing expenses, increase income, negotiate a lower purchase price, and pay a larger down payment

Q – What are the two main way of joint ownership in a property?

A – The main options are joint tenancy and tenancy in common.

Q – What are the two main types of interest in land?

A – The two main types of interest are freehold and leasehold

Q – What are the legal options to get out of a signed contract?

A – The main options are: recission, specific performance, damages, conditional contract, void contracts, and voidable contracts

Q – What are the typical contents of a purchase and sale agreement?

A – The key contents are: amount of deposit, conditions and warranties, risk and insurance, fixtures and chattels; adjustment, completion, and possession dates; merger and commissions.

Q – What are the three main types of listing agreements?
A – The three main types of agreements are: open listing, exclusive listing and multiple listing

Q – What are some of the common reasons why a principle residence property might be for sale?

A – Many reasons including the following: separation or divorce, death of an owner or co-owner, job loss or one or more owners, ill health, retirement and downsizing, relocation of job, owner lost money in business that had home pledged as security, owner wants to sell in a seller’s market, owner testing the market, children leaving home and therefore home too big, desire to buy a larger home due to increasing family size or needs, desire to trade up to a nicer home or better neighbourhood, and desire to buy a house with a rental suite in basement for revenue purposes, or desire to buy a home to accommodate an expanding home-based business.

Q – What are some of the reasons why an investment property might be for sale?

A – Many reasons including the following: inexperienced investor, partnership disputes, tax benefits, settling of an estate, run-down property, poor management, excessive vacancies, financing problems, distress sale, personal or marital problems of owner, change in investment strategies, more attractive investment options, knowledge of impending changes in neighbourhood that could impact negatively on sale price, seller’s market, and concern that a downturn might be coming.

Q – What are the main categories of property management available to an investor?

A – The main options are: self-management, resident management and professional management

Q – What are some of the common contents of a tenancy agreement?

A – The common sections include: smoking policy, pet policy, number of occupants, maximum time guests can live in home or suite, when the rental payment is due, penalty for late payment, penalty for cheques that bounce, term of tenancy (eg month-to-month or fixed period), proportionate share of utilities, amount of security deposit and deposit interest, tenant’s obligations such as care and maintenance of premises, access to premises by landlord, notice to landlord of extended absence by tenant, and no assignment or sub-letting of rental suite by tenant, without the prior written consent of landlord.

Q – What are some of the techniques of increasing revenue property income?

A – Some techniques include: charging for a tenant application fee, late payment charges, parking fees, pet fees, additional tenant fees, coin-operated machines, vending machines, charges for use of recreational facilities, furniture rental, and charge for storage facilities.

Q – What are some of the issues that need to be considered when deciding to sell your property?

A – Issues to consider include the following: timing, pricing, documentation preparation, financing considerations including mortgage pre-payment penalties, obtaining professional advice, selecting a realtor, checking out local competition, determining how your property sale is to be promoted and marketed, determining the deal you want and bottom line, making the property attractive, calculating the closing costs, determining the tax implications of the sale

Q – What are some of the disadvantages of selling the property yourself rather than listing it through a realtor?

A – There are many disadvantages. These would include: inexperience, emotional roller coaster, time commitment; expense, nature and content of advertising; limited market exposure, potential legal problems, lack of familiarity with market, no pre-screening of prospective purchasers, offer price not necessarily the best, lack of negotiating skills, purchase wanting discount in price equal to commission saved, and tough to sell in a buyer’s market.

Q – What are some of the classic cost-benefit home selling preparation tips to enhance the interior?

A – Lot of tips: keep things clean, make the interior decorating attractive through new paint, un-clutter the premises, clean up all the closets, make kitchens and bathrooms inviting, tidy up the garage, make necessary repairs, make the environment as peaceful as possible, provide a comfortable environment, keep pets out of the way, remove ashtrays and odour of smoke.

Q – What are some of the classic cost-benefit home selling preparation tips to enhance the exterior?

A – Lots of tips: maintain your landscaping, buy a new doormat, organize outdoor items, repair outside of house, consider painting the exterior, and consider replacing the front door.