Muskoka Real Estate Investment – One Simple Formula

By Andrew John Cocks | Buying , Huntsville Real Estate , Muskoka Real Estate , Selling

Muskoka Real Estate

I saw ads in muskoka’s small-town newspapers for years before I realized exactly what was going on. They were always the same: A Muskoka cottage for sale with 5% down and payments of 1% of the purchase price. It might be a three bedroom home for $190,000, for example, with $9,500 down and $1900 per month payments.

A friend started doing the same thing and explained the process to me. It was a way to get a great return on capital. It was the opposite of buying with no money down. You bought for cash.

A Muskoka Real Estate Investment Formula

It is simple, really. When you buy for cash, you often get a much better price. A house that needs a little work might be worth $75,000, for example. By offering $65,000 cash, you negotiate your way to a $68,000 purchase price. If not, you walk away – there are always others.

Then you put few thousand into high-return repairs and improvements. Paint, carpet, and maybe asphalt for the dirt driveway. For our example, we’ll say you put $5,000 into it.

Now it’s worth $85,000 perhaps, but you target those buyers who can’t get financing easily, and you finance it yourself. By making it easy for the buyer, you can get $90,000 for the home. Whatever the sales price, you let the buyer put 5% down, and make monthly payments of 1% of the purchase price. Of course, you get higher than market interest too.

The buyer is thrilled that they can buy instead of renting, and you get a capital gain of perhaps $14,000 after expenses, plus good interest. Your total rate of return is somewhere over 25%!

The first to do this consistently in our town were a father and son. They were both lawyers, and saved money by doing their own foreclosures when necessary. After forclosing, they just raised the price and sold it all over again, of course. By the way, if you can get an average return of 18% on your money, you’ll turn $75,000 into more than one million dollars in about fifteen years.

Muskoka Real Estate

10 Ways To Find Investment Properties

By Andrew John Cocks | Buying

If you really want the best deals in investment properties, you have to increase your odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources? Here are the ten:

1. Talk. Let people know you are looking and sometimes the properties will come to you. There are a lot of owners out there who want to sell, but haven’t yet listed their property.

2. Use the internet. Go to a search engine and enter the type of real estate you are looking for, along with the city you want to invest in. You never know what you might find.

3. Drive around looking for “For Sale By Owner” signs. Owners often don’t want to pay to keep the ad in the paper every week, so you won’t see all properties there.

4. Find abandoned properties. That’s a pretty clear sign that the owner doesn’t want to deal with the property. He might sell cheap.

5. Find old “For Rent” ads. Call if they are a few weeks old. Landlords are often ready to sell, especially if the haven’t yet rented the units out.

6. Talk to bankers. You might get a foreclosed-on investment property cheaper if you buy it before they list it with a real estate agent.

7. Offer someone a finder’s fee. There are people that always seem to hear about the good deals. Have such people coming to you.

8. Eviction notices. If your local papers publish eviction notices, or if you can get the information at the courthouse, it can be useful. A landlord who just went through the procees of evicting tenants is a likely seller.

9. Old FSBO ads. If you call on two-month-old “For sale By Owner” ads, and they haven’t sold, they may be ready to deal. Owners often give up the effort, but still would love to sell. Help them out!

10. Put an ad in the paper. “Looking for investment properties to buy,” might be sufficient to generate a few calls.

It’s So Easy, Being Green

By Andrew John Cocks | Buying , Selling

With oil and natural gas prices, stoking terror of long, cold and and expensive winters, a renewed interest in keeping heating costs under control has has been sparked. Homeowner’s have an ignited passion in understanding energy saving methods. If you’re in this boat, stuck in cold waters, here are some tips for energy saving tricks of the trade.

If you’re living in a home with a furnace that’s more than 20 years old, you may have already attempted the “buy a sweater” method of keeping warm. This is certainly one approach, but these days upgrading your home’s heating system is a much better option, and will bode well for you in the here and now, and in the long term, should you decide sell your home. More and more, homebuyers are looking for homes with energy efficient systems already in place. So, think of these upgrades as a long term investment in the resale value of your home, as well a cost efficient and green alternative to your current conditioning system.

Now, with that old choker of a furnace huffin’ and puffin’ away, guaranteed it’s not as efficient as it could be, no matter what fuel type it uses. The newer gas furnaces are mid-efficiency (78-82%) or high efficiency (89-96%). Although the higher efficiency products can cost up to $1000 more than the mid-efficiency products, extra costs will be re-couped in a couple years, as they will burn less fuel. And, you’ll be the greenest frog on the block, sending less harmful emissions out into the atmosphere. “It’s so easy being green”, murmured Kermit, once he upgraded his furnace.

With oil furnaces, there are again, much more efficient products on the market as of late. But, a oil furnace does need to partner with a good chimney, and so this may be an additional cost to keep in mind

Take note, it’s still the case that electric heat is more expensive than oil and gas, although a smart combination of central woodstove heat, supplemented by electric heat can be cost efficient.

Let it Flow: Change Your Filters!

Whether disposable or washable, all forced-air heating/cooling systems use filters. And, these filters need to be maintained and changed. Some filters require monthly changes while other last up to three months, and much depends on the conditions within your home. A dirty filter will restrict air flow and with clogged filters you’re blocking heat that would otherwise be keeping you toasty warm. Do yourself a favor and keep on top of the regular changing of your heat filters. This is a pretty easy way to boost your energy efficiency and cut costs.

Pump it up: Install a Heat Pump

Air source heat pumps are the most common and they are generally used with a back-up heating system. In terms of function a heat pump works by extracting heat from the outside and bringing it in, (in heat mode), and by removing heat from the inside of the house and releasing it outside. ( in cooling mode).

The king of heat pumps, though, are ground and watersource, or geothermal. And while the initial investment may be great, the saving will be substantial in the long run. These pumps will use 25-50% less energy than conventional conditioning systems.

At the end of the day, another simple method to help with soaring heat bills, is to keep an eye on the set temperature levels in your house, What is normally described as room temperature is around 20 degrees celsius (68 Fahrenheit ). Of course, only you can decide where to set the dial. But, if you’d rather avoid the ” put on a sweater” method of winter energy conservation, you might consider investing in an improved system that’ll bring you warmth today, and will be a smart investment in the re-sale value of your home.

Choosing a Property Manager for a Muskoka Real Estate Vacation Rental Home

By Andrew John Cocks | Buying

So you are the proud owner of a Muskoka real estate vacation home – congratulations. But just as with your own home, a Muskoka vacation home needs a lot of tender loving care. Who is going to look after it when you are away? And, perhaps, how is it going to pay its own way? Thoughts like these tend to push vacation home owners into thinking about appointing a property management company. So what should you be looking for in a property manager, and how do you go about finding one with the qualities you want?

First and foremost, you have to decide if you just want the property taken care of, or if you also want it rented out. This will determine what kind of property management firm you want, and whether you need to check their credentials for marketing your firm, or just for looking after it. Assuming that you would like your home to generate some income for you, you need to look for several key capabilities

• A firm which will ensure the highest standards of care and attention to the fabric and contents of your property. Lots of rental income will not make up for the damage caused by careless renters. Make sure that your chosen firm will keep on top of every
• Personal check-in and check-out of every rental. Many firms take advantage of the availability of keyless coded locks to allow renters to check themselves in and out. This means that they never know who is in your property, and whether your four-bedroom home which is supposed to have a maximum of 8 guests actually has 16 grad party celebrants all over the floors
• The highest standards of cleaning. Cleaning a property thoroughly is time-consuming and expensive. Many property management firms cut corners here, and if they do, you will eventually pay the price in worn-out carpets and other forms of dilapidation.
• Superior marketing capabilities. Marketing vacation rental properties has become a sophisticated business these days. Make sure that the primary website on which your property will appear is ranked highly against the most popular keywords for your location. A local firm without much experience in search engine optimization may be able to take good care of your property but they won’t generate a lot of income since no-one will know that they exist.
• Great service for guests. Look for a manager who knows how to offer excellent service to guests: arrival baskets of food and drink, pre-booking of activities, restaurant reservations etc. If guests feel they are well looked-after, they will be more inclined to come again, but also feel more of an obligation to take good care of the property they are in.
• Great service to you. You should expect VIP treatment when you are using your own property, but also VIP service when you call up your property manager to enquire about availability, discuss renovation and maintenance issues, query your income statements or any other matter. Make sure you will always get to speak to someone senior who knows you and your property.

Make sure you talk to them in detail and go over the management contract with a fine tooth comb before you sign on the dotted line. You should expect to pay 30-50% of gross rental income to the management company; if they charge less you might want to be suspicious of what they are offering; if more, they’re probably too expensive. This may sound a lot, but remember that they are looking after your property for no fixed outlay to you, and they only make money when you do as well.

Good luck with your search.

Creative Financing – Ten Ways

By Andrew John Cocks | Buying

Do all the creative financing techniques you hear about really work? Yes, actually. They probably have all worked somewhere for someone at least once. The point isn’t if they will all work for you. The point is to know what is possible, so you can find your own creative ways to invest in real estate. Here are ten methods to get you thinking.

1. Hard money lenders. You can ask around or find these online. They specialize in short-term loans at high interest. You typically use this type of financing for a “fix and flip.” You can often get the money fast, and if you make $30,000 on a project, who cares if you paid $10,000 interest in six months.

2. No-doc and low-doc loans. No (or low) documentation of your income or credit required. Again, you can find banks that do these online now. The catch is that you typically will only be able to borrow up to 80% of the purchase price or property value. If you have 10% in cash, you might be able to borrow the other 10% from a friend or the seller.

3. Seller-carried second mortgages. Sometimes a bank will loan you 90%, and allow the seller to take back a second mortgage from you for 5%, leaving you needing only 5% for a downpayment.

4. Land contract. Called “contract for sale” or other names as well, this just means the seller lets you make payments, and delivers the title upon payment in full.

5. Credit cards. If a seller will take $10,000 down on a fixer-upper that you expect to make $20,000 on, why not use credit cards? This is a true 0-down deal for you, and if you turn the project in six months, you will have paid $900 in interest on an 18% credit card. Don’t let $900 get in the way of making $20,000.

6. Retirement accounts. The laws get pretty complex in this area, but you can check with a tax attorney to see how you might borrow from your own retirement account to finance real estate investments.

7. Friends and family. Keep it all business, if you use this source, but loaning you money at 7% isn’t a gift if their money is getting 2% in the bank.

8. Note buyers. The seller needs cash. He raises the price, and sells to you for $100,000 with no money down, taking back two mortgages from you for $90,000 and $10,000. He arranged (or you did) for a note buyer to pay him $80,000 cash for the first mortgage at closing, getting him the cash he wanted. You pay two payments now, one to each note holder.

9. Get a loan on other property. Interestingly, if you take out a home equity loan for a vacation, and then forget to use it for that, you can use it for the downpayment on an investment  property, without violating the rules of the bank that gives you the primary mortgage. In other words, you got in with no cash of your own.

10. Partnerships. For bigger projects, you could arrange for five investors to each put money into a partnership, with your share being the management responsibility instead of cash.

Real Estate Flipping Basics

By Andrew John Cocks | Buying , Selling

You see a lot of articles and books about how to make money “real estate flipping.” Perhaps you’re heard radio or television news reports about the illegalities of flipping real estate. Maybe you’ve seen the late-night infomercials promising you easy overnight fortunes.

What’s the truth about making money flipping real estate?

First, real estate flipping isn’t illegal. Because some dishonest real estate investors conspired with deceitful mortgage brokers and property appraisers, their stories made “good news” for newscasters who love to grab attention with “Investors Scam Banks and Bilk Buyers out of Millions!” sound bites. True, some investors defraud mortgage lenders and/or desperate home buyers. Cheating investors hyped up property values, helped home buyers tell untruths on mortgage applications, and conned banks and buyers.

On the other hand, ethical real estate investors make a lot of money real estate flipping. There are many ways to make money flipping real estate:

1. You can help home sellers in foreclosure save their credit by arranging a sale of the property and never even take title. In other words, buy the property and double-escrow the property to a home buyer who wants to live in the home.

2. Find a seller under stress with a bargain property, secure a sales contract, and sell your contract for roughly $500 to $5,000 to a seasoned real estate investor without financing or taking title.

3. Buy a fixer for a bargain price, fix up the property, and sell for full market price.

You can make money flipping real estate without being dishonest or unethical. But first, you need to:

1. Get your credit in order to finance quickly. ( or have access to private money investors)

2. Study your location so you know what properties sell for.

3. Learn how to negotiate with sellers under stress.

4. Find a good closing agent.

5. Learn how to fix houses or find good professional help.

6. Learn how to sell your property or find a great selling agent.

Before you jump into flipping real estate, do your homework. Copy other successful real estate investors who make money flipping the honest way.

Real Estate Investing and Goal Setting

By Andrew John Cocks | Buying

What is the primary reason for success most people have that seems to elude unsuccessful people? Goal setting is the primary reason for success. Lack of proper planning is the number one reason for failure. Proper goal setting involves setting a business plan in place for your life. Too many people this doesn’t sound fun or sounds tedious. In practice though, goal setters have more time freedom, more money, and more success in all areas of their lives than those who don’t. Well it’s no different with real estate investing.

Real Estate Investing must be treated as a business and it requires planning that anyone can do. Much like an airplane pilot who goes through a pre-flight checklist, the real estate investor must go through many steps for every real estate deal. You must market to find the deal, do your research on the property to establish a value, have your contracts ready, make your offer, schedule a closing, have title work done, prepare your financing, get property insurance, etc. The reason the doers make money is because so many people aren’t ready to make money. Real estate investing seems like pie in the sky until you put your plan down on paper and it starts to crystallize. The planning process itself should give you renewed energy.

Before I daily setup my plan I didn’t want to get out of bed each day, but now I get up ready to work on knocking out my plan every day. Set your plan up into baby steps that you can review and knock out every single day. Your daily plan must include marketing to get motivated sellers to contact you. Regardless of the deals you have in the works, if your marketing stops, you will go through long dry spells. Even with consistent marketing you will have periods with few leads and periods where you are just swamped with sellers offering you great deals.

Constant daily review of your goals is critical. This is why so many suggest taping your goals on your bathroom mirror so you see it when you wake up and again before you go to bed. You can even buy giant poster sized post it notes that you can write your goals on and stick them on your wall. Reviewing your goals before going to sleep at night causes your brain to dream about your goals and program them into memory. So put your goals down on paper and start putting your real estate investing plan into action.

Huntsville Real Estate – Five Easy Steps to Owning Your Own Home

By Andrew John Cocks | Buying

Buying your own home is one of the largest purchases you will ever make. What should you do to get ready?

The key to a successful home purchase is making your choice through your finances, not your emotions. This takes research and patience. Here are five steps that can help you make a good decision.

1. Decide how much you can afford.

You should look at your finances in order to determine how much you can afford to spend on a home. Look at your income, assets and current debt level. You aren’t looking at what percentage the lender says you can afford, you are looking at what your finances dictate. If your lender says you can spend $1,200 a month, but you know you are struggling with a rental of $1,000 a month, you probably know that you don’t need any more than you already have.

You should also consider the down payment and closing costs. Lenders are usually looking for a 5% to 20% down payment.

Don’t overlook other expenses, such as property taxes and homeowners insurance. Your total interest, principal, taxes and insurance payment should not exceed 28 percent of your gross monthly income according to lenders. Your total monthly debt, including your mortgage, autos, student loans and credit cards should be under 36% of your gross income.

You don’t have to have a house in mind before you apply for a mortgage. It is a good idea to be pre-approved when you are looking for a home It will give you the security of knowing that you have funding and the buyer will know you mean business.

2. Look for what you want.

Spend the time to find the home you want. Find a professional realtor that can help guide you through the home search. Start by checking out neighborhoods and then narrow it down to a house. You should consider the schools, parks, commuting times and availability of public transportation.

When choosing between homes, look at the size, number of bedrooms and baths, design and amenities. Decide what your “must haves” are and what the “nice to haves” are. For example, you might be willing to trade a large kitchen for a swimming pool.

3. Negotiate for the right price.

Once you have the funding in place and have found a nice home, make an offer. Your realtor will help you in submitting your purchase contract. This will include the offer price and any contingencies, such as home inspection and appraisal.

The seller will either accept your offer, reject it or make a counter-offer. Negotiations can go back and forth until both parties are satisfied. Don’t get caught up in having to get the home and loose sight of how much you can afford. You don’t want to pay more for the home than it is worth.

4. Pick out of mortgage.

There are many types of mortgages to choose from. The basic two are fixed rate and adjustable rate. Fixed-rate mortgages have interest and monthly payments that remain the same throughout the life of the mortgage, which is usually 30 years or less.

Adjustable-rate mortgages are also called ARMs. They come with a lower initial rate than fixed rate mortgages, but the rate and payment amount can move up and down with the financial index. This can happen as often as twice a year.

5. Close on your home.

The closing, or settlement, is the point at which you finalize the transaction. You walk in with a check and out with your keys and the property’s title. You can expect to pay between 2% and 5% of the purchase price towards closing costs. These costs include fees, services and points paid.

After closing, you can settle in to your home and enjoy all of your hard work. Five simple steps and the house you dreamed of is yours.

Making Money With Real Estate

By Andrew John Cocks | Buying , Selling

The many ways of making money with real estate include not only the various types of property. Of course you can make money with land, apartment buildings, homes, commercial buildings and more. But with whatever type of real estate, there are different ways you’ll make your profits. Some of those ways, and how to maximize them, are listed below.

1. Pay-down on the loan. Equity builds with every payment you make. If you get the lowest interest rate you can, more of each payment will go towards the principal.

2. Cash flow. Buy income property the right way, and you not only have your tenants paying all the costs and paying down the mortgage loan, but you also have positive cash flow. As a rule, don’t buy investment properties without cash flow.

3.  Value appreciation. Sometimes making money with real estate can be as simple as holding on and waiting. For the most appreciation in value, however, you should buy in an area where demand is growing faster than the supply.

4. Tax depreciation. After all the tax law changes, you still get to declare a loss for depreciation that doesn’t really exist. Saving at tax time, means more after-tax profit. To maximize this, buy property that has its value primarily in the buildings,  because you can’t depreciate the value of land.

5. Get instant equity by buying low. Buy below market and you get instant equity that will be converted into a profit when you sell. Offer a reason for the seller to sell low: fast closing, cash, assume some debts or liabilities, etc. Alternately, just make a low offer. A seller may have his own reasons to sell it cheap.

6. Selling high. If you clean it up nice, make it easy to buy, and find the right buyer, you’ll get top dollar. The following four on the list cover ways to create value, so you’ll get more when you sell.

7. Finance the sale. You’ll often get substantially more for a property if you offer financing. This is especially true if you let someone buy it with little money down. You can also get good interest on the loan.

8. Changing the use. Find a higher use for the property, and you can convert it to make it worth more to the next owner. This could mean making condos into apartments, or apartments into condos. Perhaps converting a home into office space will get the biggest return.

9. Improve and repair. Repairing anything that needs it is obvious, but you need to look creatively and carefully to find improvements to make. Concentrate only on those that will raise the value several times more than what they cost you.

10. Sell it in parts. Sometimes in real estate, the parts are worth more than the whole. For example, splitting off an extra lot to sell for $30,000 will rarely decrease the value of a home by that much, so you’ll make more money in the end.

Look at the sources of profit listed here, and think of how you can use a few of them on your next real estate investment. You can get wonderfully creative making money with real estate.

Huntsville Real Estate – Finding Hidden Treasures

By Andrew John Cocks | Buying

Finding a diamond in the rough could help you get some fast equity. Look beyond the curb appeal to find a real hidden treasure.
As a real estate buyer, you have a tremendous opportunity for finding great deals if you look past curb appeal. There is a lot of talk by real estate professionals and real estate articles about curb appeal. It is widely known that improving the curb appeal on a house can get you an extra $10K-$20K+ when you sell your home. This also means that there is an opportunity for home buyers to save $10K-$20K+ when you buy a house with less curb appeal.

When looking for a house with less curb appeal this does not mean to look for a run down house. It means to find a house that with a very small amount of work or money can be greatly improved. By looking for a house with less curb appeal and improving it, you can afford a house more expensive then you would be able to afford otherwise, and you can gain instant equity in your new home.

Look for homes that need paint. Paint is very cheap and can make a huge difference on the inside and outside of homes. An unpainted house will typically not be as desirable to buyers as a well painted home, so there is an opportunity to get a good deal.

Find a home with a messy yard. The yard can have a huge impact on the curb appeal of a house. Houses with large untrimmed bushes, dead trees, unmanicured yards, or junk in the yard will greatly lower the perceived value of the home. Yard work is also very inexpensive to fix, and can add a lot of instant equity to your new home. Carpeting and window treatments are also fairly cheap, and can make a huge difference in curb appeal.

Old porches may mean an opportunity to make a gain. Very often porches and decks become damaged, rotted, or start sagging badly. A porch on the front of the house that is badly damaged can make the whole house appear unsound, when actually porches have no bearing on the structural integrity of the house. The porch can have such a negative impact on the way the house appears that it can lower the value sometimes by more then $20,000. After talking to a contractor, you may find that the porch may be fixed for a couple hundred dollars or completely rebuilt for a couple thousand dollars. This is a great chance to get a good deal on a house.

There are some things that you should avoid unless you are looking to do a total remodel project. Items that you may want to avoid are problems with the windows, electrical systems, plumbing systems, foundations, chimneys, roofs, or floors. Be sure to have a trustworthy inspection who will alert you of any more serious problems.

If you want to find a really great deal and are willing to do a little work, look beyond the curb appeal. If you find a house that is less then appealing, but structurally sound, you may have found a hidden treasure.