All Forum Posts by: Ken Didychuk

@Rick Laszlo I've been living in Red Deer for about 25 years now. PM me if you need opinions on the areas of town that these buildings are located. My fiance is a social worker involved in housing for the less than stellar citizens in town so I certainly know which buildings to stay away from. I can also help with Lacombe.

I use Schlage as well after changing to them on my own residence. They are much better quality than any other company I've used. Do you also use them for their wireless locks? Anything particular to keep in mind when using a wireless system?

Hello Mike ! I'm originally from Manitoba and find myself back home all the time ( 5 or 6 times a year ). As such, I try to keep an eye out for any opportunities so if you are putting together a gathering, I would certainly make the effort to attend. It's a bit of a hike for me, and my schedule may not allow for it, but I figured it wouldn't hurt to throw my name in the hat as a possibility. 

I believe even the "gurus" authoring the big books on real estate will admit that 1% is pretty lofty. Just finished listening to an audiobook (can't remember which one right now) and he suggests 0.6% or 0.8% is more realistic. That being said, I haven't correlated his data with timelines, geography, tenant class, etc. And yes, it certainly seems to be even less than that up here north of the border.

I'm thinking that the challenge may be in finding quality tenants. Vacancy rates are higher and higher the further west you go across the prairies, especially Alberta. That being said, the issue could be mitigated somewhat if your marketing and screening skills are up to the task.

I believe the refinance of a property at 70% of it's value is more common in the US. Up here you should be able to get 80% depending on your personal finances. If, as you say, you have the cash to buy a property, I can't see why this would be an issue. Regardless, if you aren't planning on doing any renovations/improvements to the property, re-financing won't be necessary anyways. Use your cash to put 20% down on a property and mortgage the rest using traditional lending which will give you the lowest interest rate. This keeps the most amount of your cash on hand to purchase another property, or to use as a buffer for repairs/future renovations/considerations. The interest paid on this mortgage is tax deductable because it is an income property. If your "cash" is leveraged out of a HELOC, then the interest you pay on the HELOC is also tax deductable. There are some stipulations and rules surrounding this, so correspond with your accountant on the matter (segmenting the HELOC for rental property purposes only, etc.) .

Finding the regulations is pretty easy. They are usually posted on every city's website. Look under development sections. Most should outline what they expect and require for legal suites. A word of caution, different development officers/inspectors from each city will interpret the national/provincial building codes differently. They will also put more or less weight on different aspects of the code. For instance, some of the smaller cities don't seem as concerned with the type of secondary heat source that is used for the basement suite. In bigger cities, they may limit you to only forced air, hydronic radiant, and/or electric radiant .....or any combination. The building code itself if like reading a legal document ...which I suppose it is. Not an easy endeavor for those not involved with trades ....not even easy for those who are!

I do my own development so that aspect saves me alot of money and headaches, but it takes me much longer than the average contractor since I am doing most of my own work. Screen your contractors like you will be screening your tenants. Get references and actually talk to them. The absolute best contractors usually fly under the radar and can only be found by word of mouth so get networking with the blue collar demographics! They can provide alot of insight.

You would probably be better served by retaining the advice from an accountant that is familiar with your particular scenario. Money spent on rental properties can be classified in many different ways. Was the property still "rent-able" when the renovations were taking place? If so, it may be classified as a capital improvement on the property and would not be tax deductible. If these renovations were in fact "repairs" in order for you to re-establish tenancy, then the expenses should be a write off. Canadian tax law ....as well as most countries from my understanding, is vague on purpose (the use of the word "usually"). Be sure to refer to local professional advice first and foremost. Deferring taxes to the next fiscal year is usually a maneuver used by people who make their living in commodities. However, if you incur a loss in year #1 because of expenses necessary to maintain performance on the property, then yes, those losses should theoretically carry over to the next year to help mitigate year #2's gains. Maybe a wash with no gains to pay taxes on at all. Depends so much on strategy and personal scenarios. 

I'm on the other side of the country in Alberta, but I've been developing the basements of my SFR's into legal secondary suites. Every city and province will have their own bylaws and restrictions, but if I'm going to renovate a house anyways, I will put in the extra time, effort, and cash into this type of renovation.

a) It increases the value of the house much more than a normal renovation would.
b) It allows me to pull in at least 30% more in total rent.
c) It's much easier to mitigate vacancies when a tenant leaves. You can clean and touch up one suite while still pulling in at least some rent.
d) Seems to be a better tenant pool for 2 or 3 bedroom house suites as opposed to an entire house, yard, and garage. Speaking of garages:
e) I also rent out the garage separately on all my split SRF's for more income.
f) I pay for the utilities in my properties, but they are much less than usual. During development, I can get in there and increase efficiency by replacing furnaces, water tanks, better insulation, better doors and windows, etc. This also increases the value of the property and makes it easier to unload. Many of the houses I buy need these improvements anyways. Some provinces offer energy rebates or tax vouchers on these kinds of improvements, so for me, it's a no brainer to spend that extra cash upfront.
g) Much more room to pull your money back out after development when it comes time for refinancing. I supposed it depends on where you live, but here it's the "legal" suites that get the best return. Non-conforming mother-in-law suites will get you part way, but not nearly as much.