experts: real estate column Tuesday, May 04, 2010

'For sale' signs in B.C. good for buyers

If you buy a condo, purchase in a good location in the building - such as a corner lot - and buy one with a balcony. Make sure you get a good mortgage broker and get your pre-approval in writing.

By Ozzie Jurock

VANCOUVER - Here in Lotusland, more is rising out of the ground than the flowers that lushly pop out of the soil months before snow-weary Albertans ever see them.

There’s also “For Sale” signs in front of recreation properties.

If you’re thinking about buying a new or resale condo in B.C. - we call them strata units here - as a second or vacation home, here are some words to the wise:

- Buy a good location in the building. Choose your suite wisely: Not over a garage door! Not over the entrance! Not near a garbage can! Buy corner units, particularly in townhouse complexes. Buy on the top floor in a three-storey building. Buy balconies. Buy for the view.

- Purchase a unit in a building where you can rent out the suite. In B.C., strata councils can vote tenants out. In many parts of Canada, condo councils have that power, too. Find out about things like pets, age, or children restrictions.

- Read the minutes of the strata for two years. If you can’t, get someone who can. Watch for “lawsuit pending,” “Building envelope study commissioned,” etc. — anything to do with the word “legal” in it. Leaking by itself is not the problem, but you need to know what they did about it.

- Buy cubic volume — not only square feet: i.e., lofts. Buy height in expensive suites. If it’s priced at more than $1 million, get nine-foot ceilings.

- Really watch conversions from rental apartments. Who did them? What precisely has been done?

- If you buy out of town for investment, make sure that heat is not included in rent. Go talk to the local notary for bird dog info.

- Have good property management. It will make or break you.

- Get a tenant package insurance. Understand all strata, heating, water and garbage fees. Check the insurance claim record of the building.

- Talk to a member of the strata council and/or the property manager and ask him about what kind of people live in the building.

Here are some things to do before buying a pre-sale unit:

- Buy for the builder/developer’s reputation. Ask for references from buyers in previous projects. What is your builder’s rating for after-sales service? How solid is the developer? What recourse do you have if developer does not complete? Call the Better Business Bureau.

- Get on the pre-sellers list — Rennie Realty, Mac Realty, etc. Get invited to pre-sale launches. Learn prices ... or at least get the free shrimp.

Ask these questions:

- What amenities? What warranties? Who guarantees quality? Materials, flooring? What will the monthly maintenance/common area fees be? Will this amount change after the last unit is sold? How much are taxes?

- What is included? Do I own my parking spot, or is it leased? Is balcony square footage included in my apartment measurements? Where is the suite located, exactly? Will the suite be beside an outdoor vent? Exhaust! Over entrance? Noise! Over garage? Ditto! Arcade? Restaurant?

- Note that many developers no longer let you assign the presale before closing. If they do, find out the conditions. Have your lawyer read over any presale agreement.

- Has the developer filed a rental disclosure statement? What are the terms? How many years can you rent it?

- Use Craigslist.com or Kijiji.ca for any “resale-presales.” Again, have your lawyer read over the assignment. If you buy an assignment, never pay any profits until the day after you close with the developer.

Things to do to buy a ski resort property for investment:

- Buy money invested. Buy where there is ambience. If there is just a lift and a parking lot, values rise very slowly.

- Buy on the news. Money invested or proposed to be invested in high speed quad chairs, new hotels all helps a sleepy resort ... long before it happens. What are the plans, track record and nearby major population centres?

- Buy old units in the old town, versus the new ones on the ski hill. In other words, you can still buy an $80,000 older suite in Kimberley, B.C., when units on the mountain are over $300,000.

- Buy “unlimited personal use.” Sometimes called Phase I units (at Whistler), they allow you to use it yourself or rent it 24/7 when you want to. Phase II, or “limited personal use” units, force you into a pool - only 28 days personal use. Most of the money goes to management. The resale value is poor.

- Watch out for hotel units and all fractional ownership (quarter share or more). Some never make any money. Most are taxed commercially now.

- Buy two legs ... winter and summer, golf and ski.

- Look for deals. There are many resorts hurting and have discounted units by 40 per cent and more (in 2009/2010). Check the furniture package - make sure it is included. Also include it in your insurance.

- If a new project, look at builder reputation, guaranties and warranties. Also make sure the GST has been paid. In a resort type deal, developers sell without the GST. You are liable, eventually.

Things to do for your financing:

- Get a good mortgage broker. Not all brokers are the same. Only a few now have access to all the financing institutions.

- Talk to your broker and get your pre-approval in writing. Rates will likely be moving up later this year. Your pre-approval will hold rates for you and also give you an idea of what you qualify for.

- Gather up your support documents for financing. Your broker can advise you of what documents are required for this package. Be ready - do it now.

- Re-evaluate your portfolio. Financing for portfolios has become much more difficult and you want to know how set up financing for each and every mortgage. There may be some changes that can be made to your portfolio that can help you qualify for new mortgages or even cash flow better on your existing properties. More often now than before, refinancing existing properties to show better cash flow is necessary to help qualify for the next purchase.

- Sometimes, you can take out down payment for the next property and still have lower payments. If you are planning on buying something this year, it might be better to borrow the funds at today’s rates than to wait until you need it (when rates could be one per cent higher).

- Understand that a credit line is reported to your credit bureau and sits on your credit. Most mortgages do not.

- Ask your broker to help you analyze deals. Does he have a spreadsheet that analyzes cash flow, ROI (return on invested capital), total profit and amortization table — and even tells you if it “80 per cent offsets” and what the DCR (debt coverage ratio) is on the deal.

Published in the Calgary Herald, Saturday, May 1, 2010

Ozzie Jurock is a Vancouver-based real estate expert and motivational speaker who is the publisher of Jurock’s Real Estate Insider at Jurock.com. He teaches real estate investment courses in Alberta and B.C. at www.reag.ca. Canadian journalist Peter Newman, in his book, Titans, called him a real estate guru. Donald Trump features him in his book, Trump: The Best Advice I Ever Received. You can reach Jurock at 604-683-1111, or e-mail him at oz@jurock.com.




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