 If you haven’t been living like a hermit over the last few months, you’ll have heard that the world is in the worst position it’s been since the depression of the 1930’s. However, if you compare it to the last real estate crash of the late 80’s/early 90’s, you’ll see that it’s actually not as bad as the doomsayers are saying. People lost big time in stocks, real estate is a good place to hedge your wealth. Interest rates are at an all time low. During the last major real estate crash, interest rates were at an all time high. When GM, Chrysler and the CAW (and possibly Ford, but they’re not letting on) get a dose of reality, the economic landscape of the rustbelt will be forever changed. Over the next 2-3 years, there will be drastic changes within the industry, and perhaps you’ll see GM and Chrysler merge, declare bankruptcy? We think Ford’s just waiting in the wings to pick up whatever pieces they think are worth salvaging, and leave the rest. Whatever happens, you can be sure there will be a lot more people unable to afford a house, and will be forced to rent. Wouldn’t you think this is a good time to buy apartment buildings?
Lessons To Be Learned
Further to the last issue, we want to share all the lessons we learned, that might be valuable to you.
- Know the area and neighborhood well before you buy. You want to see it during the day, the night, the weekend
- If you are out-of-town investor, don’t buy the property unless you have found a reliable, experienced, local property manager
- If you are new investor, try to stick to a maximum of $15K rehab project on single family homes
- Even if your personal real estate coach tells you it is a good deal, do your own diligence and research
- Build a power team on each market your are going into
- If the property has been vacant to the extent the inspector can’t turn on the electricity and water due to fire hazard or water damage hazard, you may want to walk away. You want to avoid unexpected rehab costs
- Any termite damage, walk away or order a termite damage inspection.
- You need to pull at least 3 recent comps of sold properties of similar age, size, # of baths to decide the after repair value of the property
Still Looking……
We have looked at several properties. A townhouse complex with 56 units, 29 two bedroom, 27 Three bedroom, 7% Cap rate, 4% vacancy; good unit mix and owner pays utilities? We find out that the cost to submeter the units would be prohibitive; this is a C class property with an entire tenant mix of D class tenants meaning a decent property with low class tenants; although there’s an assumable mortgage at a 4.85% interest rate, expires March 2016, CMHC insured. The cash flow is only $1,170/month, with a 5.7% cash on cash return? Obviously, the owner wants to offload this don’t wanter property onto somebody else. No way! We don’t mind looking with patience. The more we look, the more we know how to analyze and pick out a diamond in the rough at the end.
How is the market in your area? If you know of any good deals in Southern Ontario, please let us know. We’ll pay you cash for any deal on which we close.
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A Week In The Life of Joy and Sorrow
Yep, that’s Julia’s sister being married on Valentine’s Day. Congratulations to Mary and Roy. They picked an unforgettable date to get married and for celebrating their anniversary in the future.  We really enjoyed the 14 course dinner in Sun Sui Wah. Yummy!
We are happy that we booked this flight ahead of time, and had enough foresight to book it for six days. If we hadn’t, we would not have had a chance to say goodbye to Julia’s Grandpa. Sadly, Julia’s 83 year old Grandpa, was dying from a hemorrhagic stroke. Grandpa couldn’t move, speak, his brain failed to regulate his body temperature. The whole family was feeling hopeless. A Christian lady suggested a pastor to pray for Grandpa. Julia called a friend to get a pastor to come. Miraculously Grandpa was able to open his eyes for a long time without moaning in pain as the pastor ordered the demons to stay away from his body, soul, mind, spirit. The pastor explained how Jesus has come to die and cleanse our sins so that we can go to heaven. Julia’s Grandpa listened with joy like a child as the pastor told him that God doesn’t mind if he comes to Him at his last days. The pastor finally asks if he understands and accepts to raise his left hand. He did. The next morning, we visit Grandpa again, his roommate says Grandpa has had the most peaceful night. A few days later, Grandpa passed away. It’s God’s mercy to open His door to Grandpa on his last days to know that he can enter the heaven by accepting Christ.
Upcoming Event in San Antonio, TX
Real estate involves lots of learning and implementing, we should be committed to learning new concepts and strategies at all times. We will be attending Alan Cowgill’s "Where to Get the Money" Boot Camp on March 18-21, 2009. If some of you are going, please give us a shout. Stay tuned as we share what we learn in the next issue.
A Mortgage Acceleration Wisdom
We are intriqued by a mortgage accelerator software called Money Merge Account system (MMA). The basic concept of MMA is using your HELOC, Lines of Credit or Credit Card with simple interest to pay for your mortgage based on compound interest. Since the home mortgage balance is much higher, even a low interest rate, such as 6%, you make payment of $500. just interest, on a $100K balance!! By using interest cancellation and time value of money, you strategically pay off your mortgage in as little as 1/2 to 1/3 the time. However, MMA costs $3,500. For us, we would prepay our mortgage as frequently as we can using HELOC or idle money and pay off HELOC with income. However, you must have strong discipline to apply the concept. The application shows we can pay off our mortgage from 22 years to 13 years by simply prepaying as little as 3.33% (of total mortgage amount) and the total interest savings is approx. $90,000. We would highly suggest a Mortgage/Loan Amortization Scheduler to analyze a prepayment plan that accelerate your mortgage payment. We use the MacKenzie Mortgage Amortization Scheduler. The faster you prepay your mortgage, the faster you become financially free. Good or good? Read more…
"Success consists of going from failure to failure without loss of enthusiasm."
- Sir Winston Churchill
Daniel and Julia Lynes |
