Starting Out: 8 Things

Posted on February 12, 2021February 12, 2021 by Dale Kehler

Want to Invest in Real Estate?

8 things to Think About

Investing in Real Estate can seem daunting because it’s complicated and there is a lot to learn and understand. The good news is you don’t have to know it all! There are plenty of people with specialist knowledge to help you on your journey. But what you DO need to have is a goal, a vision, a North Star – whatever you want to call it. Taking stock of your interests and objectives will help you cut through the noise and let you hone in on what’s important to you. It will also help you ‘course correct’ should things take a turn or life hands you some setbacks.

When it comes to building wealth through real estate, here are 8 key things you should think about as you get started:

Your ‘Why’

Like a gazillion Instagram posts out there, I’m suggesting that you explore what moves you, makes you do what you do, your ‘Why’. Understanding why you TRULY want to build a portfolio of properties will help your decision-making and getting through the difficult moments when you feel like giving up. (If you don’t already know about ‘Start with Why‘ you can check out the OG himself Simon Sinek)

Portfolio Goals

How many properties do you want? Are you looking for a second home for your family like a cottage or condo in the city? Do you want a few rental properties to build equity and some income? Or are you looking to grow a portfolio of more than 5 buildings? Having some idea about how big you want to grow your portfolio will help you make wise decisions about financing, taxes and other matters.

How Active do you want to be?

There are many ways to be involved in investing. Think about how ‘ACTIVE‘ you want to be? Do you like: buying? renovating? managing properties? managing tenants? Maybe you even want to learn more about investing itself?

Those aren’t your only options – you can also be a ‘PASSIVE‘ investor. You might just want to be the owner on title and do nothing else. Or you might just want to invest your money in property projects earning interest and profits with no property ownership.

What Returns do you want/NEED?

Real Estate essentially provides returns in 3 ways: market appreciation, equity from principle paid, rental income (read more). Are you looking for income? Do you want to grow a perpetual income stream? Maybe your current tax situation would be improved by structuring returns through equity instead of income.

How will you fund it?

What resources do you have to work with? Savings, registered savings, existing home equity can all be utilized in investment strategies.

Don’t have any money? It’s actually not a problem. There are many ways to get started in investing even if you don’t have money saved up.

Property Types / Asset Classes

There are many types of properties (also called asset classes)

Residential: Single Family Homes, Multi-Family (Duplex, Triplex, Multiplex), Mixed-Use, Condo, and others.

Commercial: Office, retail, industrial, and many others

INvestment Strategy

You could say every person has their own strategy because there isn’t any one strategy that is better than the others. It really is about you and your interest and all the things in this blog post. But there are some main ‘categories’ of investing that you can think about:

Buy and Hold: purchase an income property and hold it for many years
Buy, Uplift and Hold: buy an undervalued property, fix it up to increase its value and income potential, then hold it for the long term
Flip: buy an undervalued property, fix it up to increase its value and sell it for a profit
House Hack: pay for your own home – buy a home with one or more income suites, live in one, and rent out the others
BRRRR: Buy, Renovate, Rent, Refinance, Repeat – buy an undervalued property, fix it up, rent it, refinance at a higher appraised value, use profits to repeat in a new property (while still owning the first).

Markets

An important key to success is to align your goals and interests with markets that can serve those interests. Sure, it’s possible to invest in Toronto and the GTA but some strategies will be much more difficult. Cities and towns outside the GTA are great places for some strategies. And, it is completely possible to own properties that you never visit outside the GTA or even other provinces.

If you want to learn more or have any questions,
I would be happy to have a conversation with you.

3 Ways to Build Wealth

Posted on January 8, 2021February 15, 2021 by Dale Kehler

How does Real estate Build Wealth?

There are many ways that Real Estate can build wealth but they all come down to 3 essential mechanisms by which your investment in property provides you with a return.

Why is this important?

Set Your Goals accordingly
Evaluate an Investment using all three
How does increasing/decreasing one affect the other?

1. market Appreciation

This what most people think about and what the media tends to focus on with respect to real estate. That is, what is the current value of this property in this market?

Anything more than what you have paid is appreciation (i.e. more wealth to you!)
Market value fluctuates based on macro factors like the economy and localized factors like the condition of the property.
The market trend for most properties in Canada is that property appreciates over time.
Bottom line: simply holding onto a property will increase your wealth over time.

2. MortGAGE Principal Paid

Your mortgage payment is comprised of two parts: the interest and the principal. Interest is the fee your lender is charging you to borrow their money. The principal represents the actual loan and each payment of principal reduces the loan left owing on the mortgage.

Principal paid is your ownership in the property, i.e. your equity

3. Property Income

A third way that Real Estate can build wealth is to provide income to you through charging people rent and fees for other property services such as parking, laundry, utilities.

If the total amount of income is greater than the property’s expenses including the mortgage payment, property taxes. and utilities, then the property can be said to be ‘Cash Flow Positive’.

Toronto Condos – Invest?

Posted on December 30, 2020February 11, 2021 by Dale Kehler

Toronto Condos – Is it the Right Time to Buy?

Invest in Condos?

♦ Buy and Hold Strategy works for some investors

♦ Greater Selection

♦ Lower Prices

♦ Less Competition

♦ Low Mortgage Rates

Many Canadian investors dismiss the Toronto condo market because condo prices are too high and rents are too low to achieve a positive cash flow. Rents in Toronto have dropped this past year and that has made it even harder. BUT… that doesn’t mean a condo can’t be a good investment with a ‘Buy and Hold’ strategy.

Simply put, a Buy and Hold strategy means you expect to hold onto the property and realize a return sometime in the future from selling it, accepting that you will have to cover any shortfall in income that doesn’t cover the mortgage and property expenses. In the long run, you expect that market appreciation will still provide an acceptable return on your investment. There are very good reasons to believe that the condo market will rebound.

The media is often confusing, with contradictory reports, because different writers choose to interpret the stats differently. The condo market has been flooded with inventory lately because the rental rates have dropped dramatically and travel has been restricted affecting Air BnBs. Some investors are trying to cut their losses and move on by selling their properties. This increase in inventory results in lower prices. In the third quarter of 2020 there were 7,253 condos listed on TREB, as compared to 3,327 condos in 2019’s third quarter.

Even as an investor you might be asking yourself “why would I buy a condo now, when everyone is trying to get rid of theirs”? Or you might be thinking about taking a “wait and see” approach, wondering how far will condo prices fall. In my opinion, if it’s a Buyer’s Market and you are comfortable with a strategy to ‘Buy and Hold’ now might be a great time to snap up a good deal. The buyer’s market means that there is:

Greater selection
Relatively lower prices
Less competition amongst Buyers
Low mortgage rates that are projected to remain low for some time.

If 2020 has taught us anything, it’s that we cannot predict the future. But there are a number of key indications that the condo market can only fall so far in Toronto and this Buyer’s Market will only last so long:

The pandemic will come to end as vaccination will become available over the next year.
People and businesses will stay and return to downtown.
Working from home is the new normal for many, but Toronto’s office vacancy rate is still considered low and a turnaround is predicted.
There is still a housing shortage in Ontario which will continue to grow
The federal government’s immigration plan will bring 1.2 million new people to Canada and many will come to Ontario
Short term rentals will return, albeit under new guidelines in Toronto. But Airbnb isn’t going away and short term rentals will still draw demand for condos.

So there are many good reasons to look at condos this winter. But a wide selection doesn’t mean that all choices are good ones.

Understanding which condos offer good value, which neighborhoods are desirable, and knowing the Toronto market will make all the difference. That is where I can help, contact me and let’s discuss whether a condo investment is right for you.