All Forum Posts by: Chris Muller

Okay this is a new post playing off my last one in regards to the short term property renovations.

The property is a small acreage with a rustic farmhouse vibe. Currently 3 bed/2 bath and can sleep 8 (king bed, queen bed, 2 singles and a pull out queen sofa.

Current amenities are a large deck with pool and hot tub, Lakeview, large outdoor firepit area, a small orchard, 1 RV setup with full services for additional guests (newer unit and can accommodate 4 more guests)

We have come up with 3 options and have a $30k budget. All of these fit within the budget.

1. kitchen - currently a 90’s kitchen of older melamine/oak trimmer cabinets with an older cooktop and wall over. Functional, decent condition but no wow factor.

Would redo kitchen with modern shakers, quartz counters, and update the flooring. Would have a custom hood fan and open upper shelving. With this would also be redoing the master bath. Again currently decent, just a bit older.

2. Basement reno - currently not a very inviting unfinished basement where laundry is located and access to pool equipment under the deck.

Would finish the basement to add a 4th bedroom and additional space for a games room and small workout/gym area. Would add 700 sq-ft of living area to the upper 1250. This would allow for upto another 4 guests with the bedroom and another pullout. Proper egress would be provided of course. Drywall for walls and drop ceiling etc

3. Outdoor rehab/Sauna area - this would be adding an area near the pool deck for an outdoor 4-6 person barrel sauna (electric) and a deck area setup with plunge pools and outdoor shower. With this would be redoing the landscaping around the home and adding some irrigation for the main lawn area.

Out of these options what brings the best ROI?

We are in the Okanagan Valley in British Columbia (well just north in the Shuswap region) - hot summers and snowy winters.

The winter would attract families, snowmobilers, and winter activity enthusiasts.

Where would you put your $$?

Hey

Looking for input from other members running their short term rental properties.

We are onto a new project where we have a small acreage that is nicely setup.

3 bed/2 bath house that can accommodate 8-10 guests

3 services rv pads that can come with newer trailers to accommodate upto anther 12 guests.

The property is close to the lake, golf, kids activities, town etc and have a Great Lake view.

Last year we added a large 1400 sq-ft deck to capitalize on the view and add a hot tub, 12x24 pool and lots of seating etc.

This year was a large fire pit area suitable for 12-16 people.

Next up are three choices and not sure what would give the most value (or do I do all 3)

1. The kitchen is older (mid 90’s) melamine/oak cabinets.

We would do modern shakers with butcher block counters. Put in a new 36” gas range and a double wall over/microwave to accommodate larger group cooking (it’s a large galley kitchen)

2. The unfinished basement turned into a games room

Would put rubber flooring down and add some gym equipment and activities like fooseball, pool, arcade, poker table with some cool movie and memorabilia decorations - pseudo man-cave for all ages

3. Removing a large old tree beside the deck and pool to add a 6-8 person barrel sauna (electric) and a deck structure with 2 cold plunge pools, faucet, all nicely landscaped and setup

We are primarily looking to target reunion/generation family gatherings

My main question is what of the above would give the potential for the best bang for the buck…or should I be looking to get it all done at once to streamline the work and have it be all done right out of the gates.

Input appreciated!

Here is a link to our other project. We like to do higher end styled places so this gives an idea of what we currently do and how this place will look

https://abnb.me/wMH39O71sBb

That’s a hard question to answer.  It really depends on your situation and should also consult an accountant as well.

If you only own a couple rentals, it probably isn’t worth it.  However if you plan to scale and build, it can make sense to a lot earlier (I would also consider timeline to building your portfolio).

Keep in mind that rental income inside of a corporation is considered passive income and is taxed at the highest possible tax rate (52% I believe) so there are strategies with multiple corps to help reduce this somewhat.

Not to mention that you can expect to pay $1500-3000/year for corporate tax filings and $500 or so for legal upkeep…and worst of all is that everything in and out of the corporate accounts has to be tracked and accounted for.

Transferring properties in certain provinces can also trigger land transfer taxes etc (BC).

Being incorporated does have some benefits - mitigation or liability.

Long story short, there is a lot to consider and definitely consult with an accountant, lawyer and a seasoned investor. For myself it was year 7 and owning about 10 properties before it made sense for my scenario, and the main reason was to reduce taxes with flips and push funds into more buy and hold acquisitions.

Hopefully that helps a bit!

The book is definitely relevant.  Currently we are experiencing a dramatic boom part of the real estate cycle, however history has proven this is cyclical and eventually will see a downturn, we just don’t know when.

It will show you all the factor that lead to each part of the cycle - boom, bust and recovery and will cover the metrics you should use to evaluate where in the market cycle your area is in (or area of interest).

BC is generally hard to cash flow in the more desirable areas, but Calgary and Edmonton are looking pretty good these days.  If you are in BC it’s worth considering how far away a property is if you need to go to it.  Also everything gets to be a bit more challenging with distance and probably the most important thing (in my opinion) is good property management as that can really make or break your rental property.

Hope that helps a bit.

@Brent Barnes

You have to really want to make it happen.

Everyone can find excuses why they don’t have time or can’t do something - really digging down and finding out your WHY and building around that, at least for me, has put real purpose and drive behind what I do.

Remember if it was easy, everyone would do it so most wont.

I’ve been starting to look at expansion again outside of the Okanagan and have found some off market properties in Airdrie.

I’ve started doing my research, but also wanted to lean on anyone currently working in this market - mainly focused on suited single family homes.

That being said, here are my questions:

1. Any particular areas to avoid?

2. Rental rates - top floor/basement suite/whole house?

From browsing ads it looks like top floors (3 bed) are 1500-1800 with or without utilities

Basement suites (2 bed) are 1100-1350 with it without utilities depending on the listing

Whole houses are in around 1900-2300 plus utilities

Does this translate to actual market rents? As people can ask anything.

3. What is vacancy like?

4. What is the preferable tenant profile? Families seems to be a good fit for the community from what I’ve been seeing

5. Where are prices these days? I’m looking at 1-90’s build and 2-2000’s built houses with non-confirming/illegal suites.

6. How busy is the market - are homes driving multiple offers or are buyers able to scoop up under list price?

Any market info/advice is appreciated as always! If I’ve missed anything, please do chime in.

@Andrew Richardson

Being an ex-realtor in BC I can give you some guidance.

The Sauder school of business at the University of British Columbia is where you would apply to take your real estate agent course (as well as property and strata mgmt).

It’s been a few years since I took the course but I believe the quickest you can complete the course online is 10-12 week (max a year) and then write an exam.

Licensing has changed and there is some additional work/courses after you pass the exam to get your full license.

Roughly speaking all said and done between the course, exam, e&o insurance and board fees you can expect to spend around $4-5k.

Hope that helps!

In regards to vacant possession - this is something that would be done as a renoviction.  There will be permits pulled for extensive renovations including rewiring (I work for an electrical contractor), as well as, a variety of other upgrades.  The liability etc would be word-smithed by my lawyer in the contract for covering myself.

As for property mgmt, yes I have been able to locate a local property manager that does flat rates which is nice!

Carrying costs are small, probably should account for 10k, no payments on the loan, it would be portion of expenses for a few months.

As an ARV, using the conservative new gross rents use, taking the NOI and using the area cap rate of 5.5% gives a value of approx 1.1M. From there a 65-70% LTV leaving somewhere between $80-$135k in the deal if everything went well (broker noted rates should be 3.5-4% @ 25 years)

Monthly debt servicing would be $3.5-4k/mo leaving about $1-1.5k/mo cash flow after all expenses, maintenance reserves and prop mgmt are taken care of.

It is located downtown sicamous, about a block from the beach.

Hey there,

I have, to date, been a residential buy/hold investor with 2-3 units properties.  I have sourced an off market deal and am in negotiations with the vendor.  Before taking anything to the next level, I have been taking time to do my due diligence in regards to the market, property etc.  Part of this has been connecting with local real estate/property management professionals that I know and use in the area, but also wanted to reach out to the community here for opinions/insight.

Please note - I am located in the Shuswap/Okanagan region of British Columbia, Canada.

The property and area:

0.75 acre L-shaped lot in a smaller community located about 1-1.5 hours from 2 larger cities (Kelowna & Kamloops).  15 minutes from a reasonable sized town (Salmon Arm), this community (Sicamous) is only about 3000 full time residents.  That being said, our entire region has an extremely low vacanacy rate (has for years) and these communities, which I have been invested in for awhile now, have a strong tenant base.  Partially due to earning income vs. property prices and being a desirable area to live in.

The property had a commercial building that has been converted in 3 residential units and the back of the property has 6 additional units (5 buildings - 1 is a small duplex, the rest are detached 1-2 bed homes).  There are (2) 3 bed units, (4) 2 bed units and (3) 1 bed units.

Rent ranges are as follows:

• 1 bed units - $750-$1100   (used $850)
• 2 bed units - $1000-$1500 (used $1000)
• 3 bed units - $1200-$1800 (used $1200)

A decent amount of improvements have been done over the years include (fairly recently) new roofs, city sewer and water upgrades, paving, 4 units have been renovated.

Numbers/Analysis:

Currently one unit is vacant and the rest of the units are substantially under market rents - 60-70% of market rents.  This was confirmed by polling renters in the area, rental listings, property managers and other investors in the area.

Current numbers (from previous listing/current owner):

• Purchase Price: $715,000
• Gross rents: $60,000
• Vacancy (3%): $1,800
• Effective Gross Rents

• Expenses
• Property Tax:                                    $7,000
• Insurance:                                         $4,500
• Waste removal:                                 $3,000
• Snow removal:                                   $1,200
• Maintenance:                                   `$4,800
• Utilities (Common area, laundry etc): $3,800
• Water & Sewer                                  $5,800
• Property Mgmt (8%):                          $4,800

NOI: $23,300

Numbers once property has been updated and brought up to market rents - rents are based on mid-low end of the rental range.

• Purchase Price: $715,000
• Gross rents: $105,000
• Vacancy (5%): $5,250
• Effective Gross Rents

• Expenses
• Property Tax: $7,000
• Insurance: $4,500
• Waste removal: $3,000
• Snow removal: $1,200
• Maintenance: `$5,250
• Utilities (Common area, laundry etc): $3,800
• Water & Sewer $5,800
• Property Mgmt (8%): $8,400

NOI: $60,800

Closing Costs:

• Inspection $2,500
• Appraisal $2,000
• Environmental Study $2,500
• Land Transfer Fees $12,000
• Lender Fees $10,000
• Legal Fees $4,000
• Lender Fees $7,000

Total $40,000

Renovation work: 

Units need cosmetic work, some electrical, and BB heaters replaced with mini-splits.  Anticipating $15-20k per unit.  Timeline of 4-6 months to have the work completed with team of trades I use and re-rent.

Financing:

Current owner is will to take back 85% at 0% for 12 months and potential to negotiate better terms still.

Possession:  

Owner has noted that he will provide vacant possession.  This would be noted in the contract and allow the closing date to move accordingly and removing any liability on my end from how he deals with his tenants (any costs/claims through the tenancy board would be deducted from the amount owing on the property, as a worst case scenario).

Now for the questions:

• 1. Am I overlooking anything in regards to numbers analysis?  
• It is a bit of an odd-ball property with not being a conventional apartment building, but aside from that there is a good opportunity to really improve the NOI and refinance (essentially BRRRR the property to a comfortable amount of leverage).

• 2. The deal as a whole and the plan/execution - what am I missing?

• 3. What challenges could I expect with financing?
• I have sourced a companies to provide a phase 1 environmental study, inspection etc. The commercial broker I work with has noted that it would be wise to assume 3.5-4%, 25 years and a 65% LTV from a lender.

• Any constructive criticism, advice, etc is welcome.  I'd rather have someone address issues in the property and plan now, then after I own the property.

Thanks in advance and always appreciate the wealth of experience in this community.

Looking to see what CRM software other wholesalers are using to manage leads, clients, mailing lists etc?