All Forum Posts by: Michael Chow

@Dan Mackin,

Haha, nice thinking :)  

Re options, I've decided to have a concrete patio poured instead; starting at the front, continuing along the side and end in the back yard with a 25x'50' concrete patio.

@Dan Mackin,

Thanks for the suggestions. I never thought of putting in a French drain before! Definitely see how that might save me a lot of money! Good stuff :) If I run it to the fence, I'm a bit concerned about water pooling on either neighbor's property so any suggestions on how to terminate the drain? 

Hello,

I'm engaged in redoing the flooring in part of the backyard in a residential triplex. When I bought the property last year, there was an larger platform deck that was not property supported, was painted and rotten in many places so I tore it down and rebuilt a smaller 60 sq.ft. for the exclusive use of one of the tenants.  You can see in the picture (in the barren areas) where the old deck was.  

Additionally, the terrain is a bit uneven and I think re-grading will need to be addressed as part of the work as the land, beginning at the rearmost lot line and moving towards the house to roughly where the grass starts, seems to be sloping towards house (see pictures).

One other tenant has a walkout balcony in the front where he has a BBQ set up so he only uses the rear yard to let his dog run around and "use the washroom".  The basement tenant has a dog too but no deck/walkout area so I can see him possibly wanting to set up a BBQ in the new back yard.  

I'm looking for opinions on cost-effective options to address 1) the grading and 2) re-flooring the barren areas given that the backyard (not including the small deck) is to be shared by all tenants.

Should I just regrade and re-sod the sloping section and then re-sod the barren section?Would it make sense to spend a bit more to put in large patio stones in the barren section? 

The RBC Housing Trends and Affordability Report is released quarterly and shows the % of housing costs as % of household income. 

http://www.rbc.com/economics/economic-reports/pdf/canadian-housing/house-march2015.pdf

 In the March 2015 report, that percentage is currently hovering around the high 40s mark for 2-storey, and low 40s for a bungalow in Ontario.  As others have mentioned @Roy N., @ and  @Doug Pretorius, these results are very likely province-wide averages skewed by the even higher percentages seen in Toronto and Vancouver.  Having grown up in Toronto, still living nearby and having friends who currently invest there, detached homes are in limited supply and that supply has been pent up for some years now compared to demand, while sustained demand due to added competition from foreign investors, local investors, and sustained low rates compound the rate of increase.  However, income is generally not keeping pace with increases in property prices, and the current housing to income ratios here are not generally sustainable in the long run. I think now is a great time to sell in Toronto.  

http://www.torontohomes-for-sale.com/Toronto-average-real-estate-property-prices.html#Price

@Gary McGowan, as a realtor, I'm wondering what your take is on Brampton, Ontario?  The City Council there just passed policies allowing legal second suites, albeit with gross floor area restrictions, it was the fastest growing municipality in Ontario from 2006-2011 (~20% growth) according to the 2011 census, and the province just announced last week a LRT connecting downtown to Mississauga and Brampton.

Yup, title transfer on properties in the city of Toronto are subject to Ontario Land Transfer Tax and the City of Toronto Municipal Land Transfer Tax.  This is distinct from the Greater Toronto Area  (where I invest) which includes the Regions of Peel, Halton, York, and Durham and all the municipalities therein (Brampton, Ajax, Markham, Oshawa, Richmond Hill, New Market, Oakville, Burlington, and more) where, currently, only provincial land transfer tax is required.

Also, just curious to know, by setting up the corporation, are you anticipating a windfall of cash and/or acquisitions in the near future?  How do you justify paying higher taxes on the rental income, assuming you don't have 5 full-time employees? I checked, and for $3-5/month, I was able to increase my current Premise Liability amount 3x.  That's in addition to tenant insurance in case I need to sue the Tenant to collect for lost rent, e.g., for burning down my rental :)  

However, I speak from experience with small multifamilies only. Is it a lender and/or JV partner requirement to incorporate in your case?

@Jesse Shields,

I can't speak to the financing aspect but I've also considered incorporating my rental business recently.  Hopefully, I can also learn more from subsequent posters on this thread as well.

I have 11 rental units in the Greater Toronto Area. I'm in Ontario.

I'm not incorporated.

I see 2 main potential benefits to incorporating (I'm sure my accountant knows more): 1) tax advantages and,

2) limited legal liability.

LEGAL LIABILITY

I prefer to minimize risk through insurance instead - mine and tenant's.

I've only been investing full-time for one year so I'm not perfect.  Some of my tenants have tenant insurance, some don't.

My mandatory rental property insurance (I'm using Square One) includes $1M Premises Liability which covers personal injury cases where the injury was caused by some type of unsafe or defective condition on my rental property. While my insurance covers my asset - the building, my possessions therein - it doesn't cover tenant's possessions or potentially stupid irresponsible acts.  

That's where tenant insurance comes in handy.  For a few dollars per month, depending on the policy chosen, it can provide additional levels of liability and premise insurance to the tenant, it protects the tenant's possessions in case of fire, theft, natural disaster (u never know, some be storing expensive gear, clothing, bling, in my units), it insures against accidentally injuring others (including their guests) on the property, and some policies even continue paying the tenant's rent if it happens that the tenant(s) loses his/her job during their tenancy. If the tenant didn't have this, the probability of him/her suing the landlord if something bad happened would be much greater IMHO 

Thus, I've been advised to by my accountant, who also invests in RE (both in US/Canada) to require all future tenants to get tenant insurance and minimum $2M liability at that :)

TAX ADVANTAGES:

The corporate income tax rate for rental income is the same as the highest marginal tax rate—so there are no tax savings. The exception is if your business has at least five full-time employees. That makes it an “active business” and it qualifies for the small-business tax rate, in the 15% range. At this point can only hope, prey, and imaging my rentals cash-flowed hard enough to pay 5 people a full-time salary.

Mike

@Edwin,

I don't have a ton of experience compared to some other Canadian investors on here (I've been investing, renoing, landlording full-time for the past 12 months) but I'd be willing to lend an ear, give feedback, provide any sort of general RE-specific support you may be in search of.

NOTE:

I'm not an expert at financing (although I have obtained 11 rental units of my own)

I'm working on getting my agent license and need to complete two more exams before I can buy/sell for others

I'm good with numbers

EXCHANGE:

If you will only consider (not 100% agree to atm) using me as an agent in your future search for profitable investment properties, I would be glad to assist. I get a kick out of helping others too, where I can :)

Mike

@Gary McGowan

Thanks for sharing your wisdom!  That's certainly a new perspective on an "investor agent".  By your definition, my estimate would be 99.5% of all agents do not meet that criteria. How do non-investor agents survive just listing/selling for regular homebuyers?

Also, your name is actually mentioned in a book I'm currently reading called "Fix & Flip" by Ian Szabo & Mark Loeffler (or is it Renos to Riches? I'm reading  both).  How long have you been an investor agent or investing in RE in general?  

I'm looking at doing flips fix/refi/rents this year.  What areas are you most familiar with Gary? Do you know any such investor agents familiar with Markham?

Do you project manage your own flips? 

Do you think doing 12 flips a year in GTA with a minimum 50% annualized return on total capital is doable? 

@Filipe Matos

We've bought 4 properties thus far. But, yes, we haven't done any flips yet. 

I gather the markets here, how far one is willing to (or equipped to) extend themselves geographically plays a big part in all this. If one is only looking at GTA which is one of the most high demand (and high priced) and thus competitive areas than yeah, I can see nothing but lower margins with only the very savvy ones taking the greater share of the pie.

I'm most certainly going to do a few flips first where I project manage them and go from there.  

But I mostly agree with you, easier said than done. 

@Filipe Matos

Check out this podcast:

http://houseflippinghq.com/hfhq-30-five-tips-creat...

34:06 

Keep in mind this guy has been a full-time flipper for 4 years and does higher volume, (around 100 houses per year) which I would agree definitely make for an easier "buy in" proposition to any agent.  But he doesn't only use one agent, I think he mentioned elsewhere on the site he has 2-3, with the remainder of his deals brought in through wholesalers, bird dogs, etc. 

But yeah, I totally hear you on the agent front. Of all the agents I've worked with (we've dealt with 4 thus far), only 1 was an investor himself and knew how to run basic numbers on a property - PITI,vacancies, capital expenses, repairs. cashflow, etc.

(it also sounded like his properties were borderline slums as I recall him mentioning that "I'd never live in one of my rentals" lol)

And yes, all of the agents I've met knew next to nothing about renovation costs, scope of work, permits, etc. That's why Justin mentioned he "teaches" the agent these things and I could see that proposition working as long as it's win-win for both parties.