Feb 252014
 

The following is a guest post about property investments

Become a landlord and make your money work for you

Buy-to-let is a way that many people have been investing their money since interest rates fell to historic lows and savings have offered little return.

With a strong recovery in the property markets hitting the headlines, it looks like now is as good a time as any to get involved in rental investments before prices go any higher.

Investing in property has always been seen as a great investment and becoming a landlord is now more popular than ever.

Interest rates

The big factor that affects savings is interest rates. When they are as low as they have been for the past few years there is more incentive to make your money grow in other ways.

In the UK, interest rates are set by the Bank of England and there are conflicting signs as to how soon we can expect any increase. In the meantime, low cost mortgages remain a good deal for many would-be landlords and mean that higher yields on rental levies will be possible until circumstances start to change.

Property prices

Obviously when you buy a property to rent out, not only do you receive a regular income but the property itself also grows in value if you have bought wisely. This is called ‘capital appreciation’ and some forecasts are currently suggesting a growth of 20-30% over the coming years in the value of property in the UK.

Of course international property investment opportunities are also available to everyone wherever they are based, and different countries have excellent prospects across various sectors.

In fact, unless you are lucky enough to stumble into buying shares in the very early days of the next Facebook or Twitter, putting your money into property in the UK or abroad is likely to offer the best returns of any investment currently available.

First timers

With interest rates unlikely to see large jumps even when they do start to rise, many first time buy-to-let landlords are currently looking to get involved in the rental sector.

For those who already have a buy-to-let portfolio, now could also be the ideal time to extend it by adding more properties. As rents have remained stable through the economic crisis and the benefits of low mortgage costs have been felt for some time, existing landlords will be well placed to invest further.

Outlook

For many rental property owners, yields are the best in a generation and capital growth has already begun to revive, so investing money in this sector really does seem like a solid and viable way to keep making your money work harder for you.

 

Nov 242013
 

Hello friends in Regina! :-o  What a fantastic game over the weekend :) Our household debt to personal disposable income in Canada is around 163% today. In the U.S. the ratio is only 140%. This ratio is greatly affected by the price of homes. The Canadian housing market has done well since the last recession, but home prices in the U.S. have fallen. So Canadian indebtedness has continued to grow while U.S. households have deleveraged which has lowered their debt to income ratio.

So why do home prices continue to climb up here? I believe there are many reasons but by far the main contributor is the monetary policy of keeping interest rates low for so long. Interest rates have been overall falling for the past 3 decades. When interest rates are lower borrowers can afford to borrow more, which they often do :) And banks are willing to lend more because they only consider ratios, incomes, and whether or not the borrower can afford the minimum payments.

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So with such a high debt to income ratio (163%) are we in a lot of financial risk like the U.S. was back in 2007 when their ratio was also 163% at the time? I recently read a study by an economist on TD Bank’s website (It’s in PDF format) that looks at the differences between Canadian and U.S. debt-to-income ratios and explores why they should NOT be directly compared.

The study suggests the methodologies used to calculate the ratios are different in Canada and the U.S. For example we have different ways to fund health care and tax personal incomes that should be factored into the disposable income amount. But after adjusting for various methodological differences, the Canadian indebtedness ratio in 2013 is lowered to just 156%. And instead of 140%, the U.S. ratio increases to 152%. So we’re not all that different after all :)

Mortgage rates have not gone up in Canada for quite some time now. But Canadian wages HAVE been increasing every year since the recession. What happens when our incomes rise, but our mortgage payments stay the same? Yup, it becomes relatively easier to service that mortgage :) The interest costs we pay to own a home relative to our incomes have never been more affordable in my life 8-O Continue reading »

Aug 312013
 

A home equity line of credit or HELOC is a revolving credit secured by a home. It can be used to lower borrowing costs, or pay for tuition, or unexpected expenses. It can even help people invest 8-) If we’ve worked hard to build up equity in our homes then why not make that equity work for us? ;)

Benefits of having a HELOC.
Since it’s backed by a hard asset (our home) HELOC interest rates are lower than other types of loans like a traditional line of credit. This means if you have student loans, credit cards, or any other high interest debt, you can transfer the balance to a HELOC and save money on interest since most HELOC rates today are just 3.5%.  They are also very accessible because we can get HELOC money via online banking, cheques, or even ATMs.

Applying for a HELOC.
I opened up a HELOC earlier this year. I just called my bank (CIBC) and asked to speak with someone to help me get a home equity line of credit. A representative went over the options with me like if I wanted to make “interest only payments” and if I wanted insurance coverage. I’ve always opted out of any insurance for loans but that’s just my personal preference. A couple weeks later, an appraiser called and made an appointment to come assess my home, which he did the next day and took about 10 minutes. He then gave his report to my bank. After that I met with a lawyer that my bank recommended and signed some legal documents.13-08-legaldocheloc

About a week after that my HELOC was ready to go :D 13_08_helocpapers_bankacct

Continue reading »

Jul 232013
 

In the last decade or so the price of a Calgary parking spot has increased by 233%, according to Colliers international. Toronto prices have gone up 130%. The median price for a monthly spot in downtown Calgary today is $453, and Toronto is $336. But relative to other urban areas around the world it’s not so bad. Parking in London’s city center for example costs $933 (U.S) a month. Hong Kong is $745, Tokyo ($654) and Zurich ($605)

“The reason prices keep going up really comes down to limited supply,” said Wayne Duong, director of research with Colliers International in Canada. Over the last 10 years dozens of downtown parking lots from cities across the country have been” torn up”, and in their place, now stand condominium buildings :) “A shortage of spots, a lack of new supply and insatiable demand have all contributed to steady price gains in an often forgotten corner of commercial real estate.”

While the trend looks bad for drivers who work in the city core, this is becoming very lucrative for parking lot owners :) Unfortunately when I found out about the following listing the property was already sold so I missed a good opportunity to buy a nice lot in a great location.

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Not that it matters because I don’t have the kind of money to buy it anyway lol. It’s more common for parking lots to sell in bulk such as in the form of a parkade, however sometimes they are also sold individually. For example last month a pair of parking lots in tandem sold for $560,000 in Boston, Massachusetts. It was the result of a bidding war, literally, because the parking was sold via an auction. In 1993, the previous owner bought the two spaces for $50,000. You can double check the math if you fancy, but I reckon that’s a 12.8% average return on investment per year. Not bad at all :D Parking lots seem like a good way to diversify one’s real estate portfolio. Not only do prices rise over time, but they also provide income potential. And there is very minimal upkeep to maintain a parking lot. Insurance and security cameras aren’t even necessary most of the time. Road lines might have to be repainted but there are affordable road marking companies like Gilvar Linings you can hire for that.

How to invest in parking spaces? I can only think of a couple ways at the moment. But maybe you can think of others.

  • Call a local commercial real estate agent. For example Macdonald Realty, Avison Young, and Colliers International are just a few names in the greater Vancouver area. Google them and contact one of their reps. Ask them to help you find a parking lot. Similar process to buying a house with a realtor.
  • Buy an apartment/condo that comes with a parking spot. Live in the building yourself, or rent out the condo to someone else who doesn’t drive. Rent out the parking spot (like these examples from Craigslist) and earn some monthly income :)

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Random Useless Fact:
Mosquitoes are more attracted to blue than any other color.

Jul 112013
 

New York City is known for its expensive housing. There is even a political party called the “Rent is Too Damn High Party,” which received tens of thousands of votes in the 2010 election. Well according to this nypost article, the average monthly apartment rent in NYC has finally broken $3000 for the first time.

13_07_newyork_homeprices

Some neighborhoods, especially in the Manhattan area, homes can be worth way over a million dollars. Rent is high because prices are high, and prices are high because of demand. The US real estate market is recovering quite well. Brooklyn homes rose 15% in the past year, and in Queens, the median price is up nearly 10%. As more people want to live in a large city, real estate is bound to get more pricey.

The second most expensive place to rent in US is San Francisco at $1999 per month. The average US apartment rent is only $1062 per month. In Canada, an apartment within the city center of Toronto would rent for $1500 to $2500 depending on size and location. In Montreal, it’s $1000 to $1500, and in Vancouver, it’s $1300 to $2900. Continue reading »