Hot property June 27, 2009

Hot Tip Of The Week

Get more income from your rental ... or from your home

If you own a unit in downtown...For the upper end :

1. Rent to the movie set (Hollywood north) I know of one 800 sq ft apartment that rents at 3,900 per month (BUT exquisitely furnished)

2. Film companies comb local registers and scout neighbourhoods looking for just the right place to serve as a backdrop for their movie. You can register your home with the local film liaison office. One acquaintance made over $1,000 a day renting his upscale property to a U.S. film company

3. You can raise extra money by renting it out furnished (apartments/homes)

In general get more income if:

1. If you are renting a suite (or a fourplex i.e.) think about changing the monthly payments into weekly or bi-weekly payments add $25

2. And what about that garage you don’t use? You could always rent it as a parking spot, but you could also clean it out and rent it to someone who desperately needs storage space or a place to work on a hobby such as restoring old cars.

3. For those with a now empty in-law suite, why not consider renting out the kitchen to a catering company or other food prep organization?

4. You also could rent a basement room as a photography darkroom or a soundproof garage to local musicians for practices.

5. Don’t overlook the garden. You can grow vegetables, flowers, even turf, on the back 40 and sell the results online or through local landscapers. ...or rent the whole garden to an apartment dweller.

6. Then there are the home-based businesses: bed & breakfasts (particularly in demand in tourist areas); baby sitting services or daycare; pet boarding; esthetics; music lessons and tutoring; antiques (great if you have an old barn or large shed on your property)… the list could go on and on.

7. Landlords can also increase income by charging for extra services. Computeres, TVs and VCRs for $10 - $25 per month.

8. Empty nesters, could rent a room or basement suite to students.

Most Undervalued Real Estate In The U.S.

A new study from the international consulting group IHS Global Insight (www.globalinsight.com) has identified dozens of undervalued U.S, metropolitan markets - where household incomes, employment, population density and other factors - could support higher housing prices, but just aren't doing it at the moment. Some of the most undervalued markets as of the first quarter of 2009, according to the new study, are formerly high-flying boom-era cities. They include:

- Vero Beach, Florida, where prices are now 42.5% below the underlying economics.

- Reno, Nevada is rated 26% undervalued based on its underlying economic fundamentals. Today's median is $179,000 compared with $324,500 three years ago

- San Francisco is undervalued by 25%, according to Global Insight researchers. Back in 2006, the median house price in San Francisco topped $811,000. Today it's $578,000.

High on Global Insight's list are two big markets that in recent years missed the wild appreciation of the boom, and have only experienced modest price deflation: Houston, which is 36.9% undervalued - and Dallas, where median prices are about 32% below what the market fundamentals could actually support, according to IHS.

Major Point: Affordability is at a record high in dozens of markets in the US, because of the price declines and lower rates.

1. We said last week: "LOCK IN THAT 3.5% 5 YEAR TERM! BOND RATES ARE RISING..."

This week 5 year term rates jumped more than 1%!

The best 5 year rate right now is 4.49% and the National bank just raised their's today to 4.99%

‘Emergency rates for emergency times’ was the quote I recall hearing, Looks like emergency times are ending in the eyes of the bond market.

2. CMHC fine Spring Rental Market survey (reporting on rental purpose buildings NOT individual investment condos) showed that the average apartment vacancy rate in urban British Columbia rose to 2.3% from 1.1% in April 2008. Even with that increase, vacancy rates were among the lowest in Canada.

3. 10 HOTTEST BC NEIGHBOURHOODS ACCORDING TO C-21

1. Langley - The hottest neighbourhood in the Lower Mainland is in the Township of Langley. Prices were $490,354 in April 2009, an increase of 112.2% from $437,041 since April 2008.

2 Richmond - The second hottest neighbourhood in t $448,469 in April 2009, an increase of 16.29% from $375,396 since March 2009 and an increase of 3.43% from $433,605 since April 2008.

3. Vancouver - Coal Harbour

4. Vancouver - Kitsilano

5. Port Moody

6. Burnaby - Deer Lake

7. Vancouver - south of False Creek

8. Abbotsford

9. Mission

10. Port Coquitlam

www.century21.ca/media

Early Vancouver numbers...show a very strong May

Active listings: 15% fewer new condo listings on market

New listings 40% lower

Sales only 5% lower over last year...(Last October sales were down 55%)

Numbers are surprisingly strong...

LOCK IN THAT 3.5% 5 YEAR TERM! BOND RATES ARE RISING....

Credit Unions are increasing their rates on credit lines

1. Credit Unions are increasing their rates on credit lines 1% to 2% - even on old existing credit lines.

They are telling their clients...Take it or leave it...Pay it or we are cancelling your line.

Perhaps better now to lock in at 3.5% for 5 years...

2. Sales Are Soaring In The US - In Some Areas

The National Association of Realtors (NAR) reports that the areas with the biggest price declines also had the largest sales gains.

The largest sales gain came in Nevada, up 117%, followed by California which rose 81%, Arizona, up 50%, and Florida with a 25% increase.

Some areas also report price gains.

The largest single-family home price increase in the first quarter was in the Cumberland area of Maryland and West Virginia, where the median price of $114,900 rose 21% from a year ago.

Next was the Davenport-Moline-Rock Island area of Iowa and Illinois at $100,300, up 14% from the first quarter of 2008, followed by Columbia, Mo., where the median price increased 6% to $152,600.

Major Point: No, we are not out of the woods yet, but the $8,000 tax credit for first time buyers lured some 494,000 new first timers into the market, mortgage refinancing is at recod levels. Currently the US is experiencing household formations of 1.8 million annually. In 2009 only 500,000 new home starts are projected. Something will have to give.

Early Vancouver numbers...show a very strong April...

Active listings: 31% fewer new condo listings on market.

Overall listings even with last year (in October listings were 90% higher than the year before).

New listings 33% lower.

Sales only 9% lower over last year...(Last October sales were down 55%).

There is money for businesses out there.

For example, the Business Development Bank (BDC):

“The common perception is still, that our bank is a lender of last resort. That is simply no longer true.”

The Bank is in ‘business development’ and will definitely look at all business loan applications.

For us commercial investors it is of interest to note that the bank is also in the commercial (commercial only) lending business.

To note:

You may get a higher percentage of financing. You may get up to a 125% advance on equipment purchase. Complementing your existing credit line for boosting inventory etc. is possible. Business transition lending…

Major Point: Check it out. Mr. Klarisch can be reached at Edward.klarisch@bdc.ca

Mortgages...

A) Mortgages...

1. The Central Banker signalled that things are a lot worse...and announced freezing the overnite rate until 2nd quarter next year.

2. Easy to go variable now...since you have assurance for a year...

3. Refinancing at 3% is now (at least a 14 months) option...not to worry

4. Best 5-year mortgage now is 3.60!!!!!!! 7 year at 4.9%

5. Commercial lending is getting tougher and tougher... though!

B) Flint, Michigan has decided to bulldoze empty houses and even relocate some people that live in them to a new downtown area.

Instead of waiting for houses to become abandoned and then pulling them down, local leaders are talking about demolishing entire blocks and even whole neighborhoods.

The population would be condensed into a few viable areas. So would stores and services.

A city built to manufacture cars would be returned in large measure to the forest primeval.

(Flint has experienced a shrinking of population from 200,000 to 100,000.)

Mortgage Insurance and In-migration

1. Genworth Tightens Up On Mortgage Insurance

There are a number of changes:

Of special interest: - Imposing new credit score minimums for high-rise (4+ floors) condominiums of: 700 (for 90.01-95% LTV applications) --- 660 (for 85.01-90% LTV applications) - Genworth did not previously have credit score minimums specific to high-rise condos.

Major Point: What is Genworth expecting?

2. BC gained AN ASTOUNDING 73,733 newcomers, net, last year

Alone in the fourth quarter of last year, 17,916 people moved in - and this was during the eye of the economic storm. Currently, about 88% of new arrivals are from other countries, with the remaining 12% from other provinces.

Major Point: All these people need a place to live, 74,000 people represent likely 37,000 families ... that either need to rent or buy!

Edmonton's First Annual Condo Expo

Next weekend I am in Edmonton at the Condo Expo

April 4 and April 5 at 1:30 at the Maifair Inn Trade center

www.edmontoncondoexpo.com

Attendance is free...

New World of Advertising

1. WE ALL KNOW ABOUT THE NEW WORLD OF ADVERTISING ON...

craigslist.com

kijiji.ca

But what about the TWEETS?

How to sell real estate on social networks...

www.twitter.com

www.facebook.com

www.linkedin.com

2. Important news ... There is a new sausage museum in Berlin ... www.echoworld.com/B05/B0507/B0507Wurst.htm

Biggest seller in the world...not bratwurst but curry sausage...

Subleases

Vancouver 800,000 square feet - of mostly prime sublease space
Calgary 500,000 square feet

Major companies have cut back their office requirements. THERE MAY BE A DEAL THERE ... The prices on subleases are often from 25% to 30% below the general market value,

BUT be careful! :

1. You have to take what is left on the original lease. There may only be a few months, or a couple of years, left on the original lease.

2. There will be no option to extend the lease, since this was written by the original tenant who now wants out of the deal.

3. The landlord will still expect to get the original lease amount. If the original tenant does not pay ... you will have to.

4. There are no upgrade incentives, which means the landlord won't help with changing the office layout. You have to take the layout as it is, or pay for the changes.

Major Point: Deal with a reputable commercial agent, preferably someone who has been around the business a long time. They will know the advantages and pitfalls of each sublease space agreements.

Marijuana growing...

14,000 homes in Lower Mainland apparently grow pot.

If you are an owner...with your tenant growing the weed...your property will be destroyed.

Here are ten tips to be safe:

Here are some indications that the property may be intended for use as a grow operation:

Cash Payments
Vague and or incomplete applications
No references or lack of identification
Utilities are registered under a different name
Cell phone number given as only means of contact
Shows little interest in layout or amenities or is willing to rent sight unseen
Shows special interest in electrical service

Building owners can take precautions to help protect themselves from potential grow operation tenants. These include:

Insist upon fully completed applications including legal names of all tenants. Do background checks, ask for references and check them diligently – the best protection is preventions
Specify permission in the lease for monthly inspection of the premises
Physically inspect the location monthly (interior and exterior)
Check with neighbours/other tenants about operations – any unusual activity?
Report any suspect operations to Crime Stoppers or the local authorities

Home Reno Tax Credits

It isn't just you as an owner that can get the credit. Your strata corporation can do repairs to their common area.

Owners that are sharing the common property and share the repair costs to it, will qualify for the credit. Eligibility is family-based. The Strata Corporation would make the repairs (fences, decks, hallway carpets, furnaces, boilers etc.) and issue a receipt for owners. Make sure the Strata Corporation has exceptionally good records and keeps all receipts.

Low, low mortgage rates...

5 year rate - 4.02% (some as low as 3.85%!)

1 year - 3.25%

See all rates

The Western Canada Condo scene...

New condos bulk sales...are they for real...?

What about Vancouver...less inventory? Calgary Edmonton...lots of inventory...

Where are the condo deals going to be?

Haggle hard...get 25% off...

Also...some single family home builders are slashing prices.

Use BC Assessment Authority to evaluate your home

Note: the ability to search for sold properties is only available from 01 January to 16 March each year.

Go to: bcassessment.bc.ca and click on "compare all assessments on line"

BC Assessments market evaluation

Search by property address or by Assessment Roll Number or by Plan # (useful if you live in a strata).

Buying in USA

Financing is getting better for Canadians.
Try the local banks in the area...

Sales are rising...in distressed sale areas...some up by 40%

Things to remember:

Get the property inspected.
Shorter sales take a long time and there is no guarantee.
You must do a tax return.
You can't do any work on your properties.
Check out scam artists selling you foreclosure lists.

Previous Tips of the Week:

11/15/08

Hot Deals in Arizona

11/8/08

Vancouver Numbers

10/11/08

And The Mortgage Plot Thickens...

10/4/08

Some U.S. Thoughts

9/27/08

A sign of a very sharply reducing market

9/6/08