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 GOOD NEWS to our real estate investing friends and associates: 8-10% Cap rate buildings are now coming into the marketplace (Ontario, Canada). Besides lining up the fundamentals, try to find motivated sellers! We came across an owner who had overpaid for his apartment building by $300K two years ago and is now bleeding $150/unit negative cash flow owing to mismanagement. Another owner wants to sell a Mixed Use building with 75% seller financing. Needless to say, there’s more and more power of sales on residential houses you can pick up for a bargain. If you are real estate savvy, you might want to start analyzing some deals and get ready to buy.
Qualifying a good neighborhood is far more important than the numbers. We have viewed a condo for sale at $68,000, but the neighborhood is mostly infested with drug dealers, ladies of the night and druggies. Talk to the cops on the street, they might tell you the whole story behind the scene if you ask nicely (although, officially they’re not allowed to say negative things about their beat). Talk to the tenants of the building you want to buy. Talk to the residents on the streets. Talk to the cab drivers by giving them a tip. Drive around different neighborhoods at different times, you would be amazed to see one block can be completely different from the next block. One property owner spent over $500K to retrofit, renovate, convert from office use to residential units with high quality material, yet he can’t convert his tenant profile and the quality of the neighborhood!
The Lynes’ Inner Circle
We would like to say thank you to all who inquired about our real estate opportunities. The more deals we analyze, the more time we spend with appointments, and power team members, the less time we can attend to individual inquiries. It has been suggested we form an inner circle to serve our real estate community. Initially, we want to set up an exclusive mailing list for readers to be notified about all the potential deals: Commercial and Residential. We believe residential properties with opportunity for some minor upgrades for a quick flip can produce quick chunks of cash in good pockets of neighborhoods. Our criteria: any one within our database who are interested in real estate investing in our residential and/or commercial projects. Any questions or concerns, please drop us a line.
If you have decided to join us, we welcome you to send us a e-mail with subject line: “The Lynes’ Inner Circle”.
Is It A Setback?
Life is not getting easy for most of us in today’s turbulent economy. We see friends being let go from their long term jobs. We have financial constraints from overspending on real estate courses, unexpected vacancy on a property, Daniel’s unstable contracting work and the list goes on. Part of us (the impatient side) want to quit, but Scott Scheel’s story inspires us to move on. Scott incurred a $400,000 debt from failing in a business venture. He couldn’t even feed his dog and he had to move back to his mom’s tiny basement suite. (Be grateful to supportive parents when they are). With his creative strategies, Scott bought his first 24 unit apartment building with 80% VTB, which cash flows $2,500/month. He now owns and manages hundreds of millions of commercial properties. Should we believe a set back is a set up for a come back? If denial is not a choice, we can only work harder to get through our challenges and learn from our mistakes. Going through a setback requires mental strength and taking actions, yet, you will see you will become a much stronger person at the end. Cheers!
Free Seminar: Risks in Real Estate, Kitchener, ON
For those of you in Ontario, the Gowlings law firm will be hosting a free seminar at the Holiday Inn, 30 Fairway Rd S, Kitchener, ON. Free breakfast is served during registration at 7:30am. Seminar starts at 8am and lasts until 9:30am. The title is ‘Risks in Real Estate‘. It will touch on the topics of Aboriginal Issues (the duty to consult and what it means to you), Official Plan Policy Changes (impact on development), and Paying the Rent (landlord and tenant points of view). If you are going to attend, please register at Gowlings’ website. For more information about the event, please contact Chantal Chaves by phone at 519-569-4558, or by email.
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4 Full Days of Complete Immersion!
 Here we are in the Rock & Roll City, Cleveland, OH attending the Commercial Property Academy as alumni. Scott Scheel never ceases to amaze us by his genius creativity in adaptive reuse, financing in volatile market, advanced market analysis, reading trends, repair & rehabbing, condo conversions, mini-storage and much more! Aside from the seminar world, Scott took us to the real world. He took us on a bus tour to show us some of his properties, how he analyzes the upsides in real numbers, structures the deal, acquires the property, organizes phases, budgets, adaptive reuse strategies and how he makes the profit at the end of his project. What an eye-opening experience! If you are going to learn, learn from the best!
One intriguing scenario: A gung ho young man, Ted bought a property in 2006 for $2,000,000 at a 7% Cap rate with 10% ($200,000) down and 10% ($200,000) seller financed note for 3 years at 5% interest with no payments. He took out a bank loan of $1,600,000 with interest rate of 4.5% for 25 years with a 3 year term and monthly payment of $8,856 ($106,272 in annual debt service). He has a DCR (debt coverage ratio) of 1.27 with his NOI (net operating income) of $135,000. Over the next 3 years, Ted successfully raises his NOI to $155,000, so that he can refinance the property. He hopes that the refinance will allow him to pay off the seller’s $200,000 note and pay off his acquisitions loan of $1,600,000. Sadly, when Ted sits down with the loan officer to discuss his new loan in 2009, he is shocked to realize the interest rate has climbed to 8%. He can only support a loan payment of $10,700/month or $128,400/year based on $155,000 NOI. Thus, his property can only support a loan of $1,279,230. After paying on his loan for 3 years his balance is still $1,488,092 and the balance with interest on his balloon to seller is $231,525. This leaves him $440,387 short of being able to pay off his notes and keep the property. Ted has already invested $200,000 up front and he has no where to go to raise the $440,387, to avoid foreclosure by the bank and pay off the seller.
Don’t be caught in the bubble! Knowing when to get in and when to get out is critically important. NEVER EVER OVERLEVERAGE on your properties!
The New Top 10 Towns
Don Campbell, president of the Real Estate Investment Network (REIN), has released the list of Alberta, BC and Ontario’s top investment towns for 2009 – 2014. The list for Ontario is as follows:
- Technology Triangle: Kitchener, Waterloo, Cambridge
- Hamilton
- Simcoe Shores:Barrie- Orillia
- Brampton
- Durham Region – Whitby, Pickering, and Ajax
- Ottawa
- Brantford
- Toronto
- Vaughan
- Whitchurch-Stouffville
For further information about REIN Canada (named North America’s best REIA by Robert Allen), or to purchase the reports, please contact REIN at 1-888-824-7346, or by email.
A Powerful Use of Google Maps
Do you know that you can now view Google Maps at the street level while sitting in the comfort of your own home? This is new to Canada and Europe. The US has had this feature for a couple of years now, but due to privacy issues in Canada and Europe it took a while before everyone was happy with it. It is called Google Street View and It is a great little tool. Type in an address and drag the little man to your designated spot to view. You can check for blighted lots, trashy streets, schools, shops, and anchors from your own desk. You can view a rental building you want to rent from. Try it, it is great!
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”
- Winston Churchill
Daniel Lynes and Julia Lee |
