Investors guide

?

?

?How much money do I need?

What type of property do I purchase?

Can I be a landlord?

I WANT TO BE AN INVESTOR

Where do I begin

Percy Fulton LTD. Kirk Rickman & Victoria Carter

?What type of Investor are you?

We have classified a Real Estate investor as a person(s) doing one of the following to generate income and or equity in Real Estate:

• Personal Property: This is where you can gain equity in your home by simply living there.

• The Flipper: May be worthwhile if you understand the costs associated with renovating and what improvements the market will handle.

• The Income generator: My favorite because the property pays you in more than one way

Although we look at these as separate types of investments, one property can be a combination of all three.

Kirk and Victoria will help you every step of the way to determine the Pros and Cons of each type of Investment.

Kirk Rickman & Victoria Carter905-683-2100 or 416-298-8200

1Personal Property?This is the simplest form of Real Estate investing:

• Rent vs Buying: paying yourself not your landlord.

• Paying your Mortgage down: Each payment you make reduces your amount owing each month, thus you will be gaining equity every month.

• Normal appreciation of the property: Year over year growth of the market has been on average 2% – 5% per year.

• Handy-Man Property: Purchasing a home below market value and improving it over time to bring it up to market value.

Kirk and Victoria will help you every step of the way to determine the Pros and Cons of the types of Investments.


2The “Flipper”?

Flipping also known as the “Fixer-upper,” “TLC,” or “Handyman Special”. These are properties that require work to redecorate, reconstruct or redesign. They are great for buyers who wish to raise the property's potential value to get a return on investment.Buying Tips Patience is key when shopping for a fixer upper. Be sure to get pre-approved before starting the process as there is there is much

competition in purchasing these types of properties. When we find a “good” property, we have to act fast, and we have to act aggressively.

Purchase homes that are below the market value. Choose a house with three or more bedrooms. It is up to the buyer to assess the estimated repair costs. You need a clear assessment of what is needed and what it will cost. Don't

forget to add in the cost of labor — both your own time and that of contractors.

Look for sellers who are motivated to sell and who want to make the sale happen.

Kirk and Victoria will help you every step of the way to help calculate the costs to renovate and what the market value will be afte repairs.


2The “Flipper”?Two simple examples of how to calculate if the property if worth renovating.

Kirk and Victoria has been investors for a number of years and we use our knowledge of the Real Estate market and our personal investment experience to assist you in making an informed decision.


Purchase price $250,000Closing costs 2,500Carrying costs 3 months 5,000Materials 15,000Labour 10,000Selling costs 16,000(Lawyer fees, mortgage discharge fees, Real estate fees)

Total investment 298,500Comparables in area 325,000Potential profit 26,500

Purchase price $250,000Closing costs 2,500Carrying costs 6 months 10,000Materials 20,000Labour 15,000Selling costs 16,000(Lawyer fees, mortgage discharge fees, Real estate fees)

Total investment 313,500Comparables in area 310,000Potential profit -3,500

Good Purchase Bad Purchase

3The Income Genarator?Becoming a landlord can be financially rewarding, and many people choose this option to make a supplemental income, while others do it as a full-time living. an apartment or house, can be rented out and pull in money on a monthly basis. You can even buy and rent out vacation property. Before you get started, however, you'll need to brush up on landlord and tenant act.

Visit a local Landlord and Tenant Board office or go towww.ltb.gov.on.ca/en/index.htm

The good and the badA landlord is a person who owns property and rents it out to residential or commercial tenants. At its best, being a landlord consists largely of collecting rent checks and maintaining property, but at its worst, being a landlord can involve dealing with nuisance tenants, property damage, insurance claims or vacant units.


http://www.ltb.gov.on.ca/en/index.htm

3Should You Be a Landlord? - Managing a Rental Property

Compared to flipping properties, being a landlord is a long-term commitment with demanding requirements of your time. Before you take the steps toward the job of landlord, examine your capabilities and desires, and make sure that you're up to it. If you are, it can be a wonderful and profitable experience.

1. Are You Cut Out to Be a Landlord?All those number-crunching skills that serve you well in selecting, buying and selling real estate properties for investment are valuable. However, as soon as you take on the role of landlord, people skills are also quite important.

2. Prepare Properly Before You Select a TenantOne of the most important tasks confronting the real estate investor-landlord is the selection of tenants. Shortcut this process and it can cost you more than money down the road. Learn the simple steps to intelligent tenant selection.

3. Setting the Rent - Cover all the BasesSome might think that deciding on the rental amount for a property is only a matter of matching the market rates. That's an important factor, but there is room for manipulation of the rent price based on other factors. Learn how changing the rent amount at the beginning can influence tenant choices and long-term occupancy.

www.TwoMoveYou.com905-683-2100 or 416-298-8200

http://realestate.about.com/od/realestateinvesting/qt/landlord_query.htm

http://realestate.about.com/od/realestateinvesting/ss/before_a_tenant.htm

http://realestate.about.com/od/realestateinvesting/qt/setting_rent.htm

3Should You Be a Landlord? - Managing a Rental Property

4. Things Break - Plan and Budget for ItA rental property is a home or office also. Using the property on a day-to-day basis will cause wear and tear, and repairs will become necessary. Plan and budget for these problems, and learn how to handle repairs to keep your tenants happy. How you treat the property speaks to their treatment of it.

5. Don't Let Your Investment Manage You - Avoid Landlord BurnoutMaintain your life's balance, and plan your management activities to maintain profitability of your rental properties without letting your investments manage you. This is particularly important when making a decision to move up to multiple properties when one has been a positive experience.

6. Hire a Property ManagerHiring a property manager could pay dividends if you prefer to be kept separate.

Kirk and Victoria have been investors and Landlords for years. We use our own experience to help you avoid the mistakes that we made.


http://realestate.about.com/od/realestateinvesting/qt/rental_repairs.htm

http://realestate.about.com/od/realestateinvesting/ss/landlord_manage.htm

http://realestate.about.com/od/realestateinvesting/ss/landlord_manage.htm

3What type of property is right for you?

• Single Family: One stream of income Tenant usually maintain lawn gardens ect.

• Multi Plex: More than one stream of income Attracts specific types of Tenants Landlord maintains grounds and property

• Condos: Similar to Single family Little maintenance needed. Only inside unit Condo corp. looks after building and property

Hire a Realtor with experience in investing, and who has investment properties of their own. The right realtor will know which properties will generate a positive cash flow.

Kirk and Victoria own a number of investment properties and can guide you through all the different aspects of choosing the correct location, style and what is right for you.


3Example of choosing the right property

Single income Property

Purchase price $215,000Down payment 21,500P&I 813.87Insurance 50.00Property tax 269.87Loan insurance 16.28Total cost/month $ 1150.00

Rental Income $ 1350.00

Cash flow $ 200.00

ROI 11%(Return on investment)

Duplex income Property


Rental Income Unit 1 $ 1000.00 Unit 2 $ 650.00Total income $ 1650.00

Cash flow $400.00




Condo income Property

Purchase price $215,000Down payment 21,500P&I 813.87Insurance 50.00Property tax 269.87Condo Fees 300.00Loan insurance 16.28Total cost/month $ 1450.00


Cash flow --$ 100.00

ROI -5%(Return on investment)

Condo income Property

Purchase price $215,000Down payment 21,500P&I 736.05Insurance 50.00Property tax 269.87Condo Fees 200.00Loan insurance 16.28Total cost/month $ 1350.00


Cash flow $0.00




Single income Property



Cash flow $ 217.00


Duplex income Property


Rental Income Unit 1 $ 1300.00 Unit 2 $ 950.00Total income $ 2250.00

Cash flow $986.00



4Understand the Ways to Profit from Real Estate Investment

Cash flow is an important factor in selecting a real estate investment, but there are other benefits to owning real estate as an investment that can impact your selection of properties. Learn them and profit can follow.

1. Look for Below-Market Rents when PurchasingIf you can locate a rental property with a significant percentage of rents that are below the going market rates, just getting the rents up to market standards will result in less risk in your investment due to better cash flows. The ability to do economical remodel or upgrades to increase rents is also a good indicator for purchase of a rental property.

2. Look for Favourable Financing that Reduces Cash OutflowWorking an assumption or other creative financing solution that reduces the interest rate is a good strategy if the property isn't over-priced. Lowering your payments by lowering the interest rate will increase cash flow and reduce real estate leverage risk.

3. Just Make a Higher Down PaymentWith all the hype about low-down or no-down financing for huge profits in real estate investing, it's not hard to get on the wrong side of an investment. Sometimes lowering your return on cash investment is still a better solution. High debt can backfire, particularly in a period of higher vacancy or credit loss.


4Understand the Ways to Profit from Real Estate Investment

4. Look for a Property that You Can Improve ProfitablyIncreasing the value of a property via improvements increases equity and results in greater profits upon liquidation of the asset. Should interest rates decrease, the increased value can also be used to finance other investments or decrease debt service.

5. Look for the Hot Areas of the FutureLocating the area that's about to be "the place" can be quite profitable. Identifying a neighbourhood that's on the front end of growth and rehabilitation puts you on the front end of appreciation in value as well.

6. The Obvious Strategy is to Buy ValueThis one requires little explanation. The research time and effort to locate a property priced below market is usually well worth it. Starting with equity infusion just puts you that far ahead and reduces risk if market rents decrease or other misfortune occurs.

7. Don't Forget That Cash Flow is KingIf just one of these "don't" behaviours sticks in your mind, this is the one that you should consider carefully. Errors in judgement in one or more of the other items here can be overlooked if you have that one great thing - excellent cash flow. If your rental income minus your mortgage costs and expenses is putting a nice cash return in your pocket every month, then the fact that the property didn't gain in value this year won't be as worrisome of an event.


http://realestate.about.com/od/knowthemath/ht/cashflow_before.htm

5Contact a mortgage professional to determine how much You can afford.

The type of mortgage that you select as a real estate investor is a key factor in determining your level of risk and the cash flow that your investment will generate. Here are two popular types of mortgages from an investor’s perspective:

• Fixed Rate: The “steady Eddie” mortgage. Low risk and predictable. But, not always the lowest rate.

• Variable Rate: May offer lower initial rates, but the investors assumes the interest rate risk over the life of the investment.

Be Careful with Leverage - Know the PitfallsBuying property with little or no down payment can sound quite wonderful, but there are major pitfalls to this strategy. Though it can have a place in your real estate investing arsenal, make sure you understand the risks.

Kirk and Victoria will help you every step of the way to determine the Pros and Cons of all your financing options.


Benefits for choosing Kirk Rickman and Victoria Carter

Two Qualified Realtors working for you 24/7Proven Track RecordWe use the power of the Internet to market your homeAir Miles Reward Miles

Up to 1500 Air mile reward Miles with the purchase and /or sale of your homeStagingDiscounts from the Brick

Donations to Easter SealsExperienced in investment propertiesExperience as LandlordsWe screen your Tenants


Contact us today!

Office: 416-298-8200 905-683-2100

Direct : 905-626-3294 647-669-8425

Email: [email protected] [email protected]

Website: www.TwoMoveYou.com

mailto:[email protected]

mailto:[email protected]

http://www.twomoveyou.com/

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