Here's a great article that appeared in The Ottawa Business Journal. Real Estate is such a great investment.....
|Market carnage driving investors to residential real estate
By Peter Kovessy, Ottawa Business Journal Staff
Mon, Feb 9, 2009 12:00 AM EST
Click to Enlarge Paul Blacquiere and Joanne Beehler of Spirepoint Properties. (Etienne Ranger, OBJ)
Low vacancy rates projected to drive up Ottawa rents
As investors watch their financial portfolios crumble, a growing number of residents are eyeing rental real estate properties to generate stable long-term returns, local observers say.
Last summer, Canadian Real Estate Magazine named Ottawa as one of the 10 best places to invest in Canada, highlighting an average rate of return of 6.3 per cent on city properties dating back to 1955.
The ranking coincided with membership numbers in the Ottawa Real Estate Investment Organization more than doubling in the last year and a half to roughly 250 people, as investors flee the recent stock market slide and look to rebuild their savings, says organization president Paul Blacquiere. He projects Ottawa's tight rental market will increase the income opportunities for investors in the coming year.
"Rents will go up ... With lower vacancy rates, we can command a higher rent," says Mr. Blacquiere, who is also co-owner of Ottawa-based Spirepoint Properties.
The Canada Mortgage and Housing Corp. is forecasting average Ottawa rents will increase by three per cent in 2009 as vacancy rates continue dropping. CMHC senior market analyst Sandra Perez Torres projects the vacancy rate will fall 0.4 percentage points to one per cent - the lowest level since 2001 - and remain low.
"Even if (developers) start to build rental units in 2009, it will take one or two years to hit the market," she says.
In the short term, landlords can not only command a higher rent, but will also have less tenant turnover. However, Mr. Blacquiere notes the appreciation in property prices in recent years has made it tougher for investors to make new acquisitions, making it even more essential for investors to ensure the income generated by a property covers all its costs.
"The hotter the market, the more important it is to fully analyze your investment," says Joanne Beehler, who co-founded Spirepoint with Mr. Blacquiere in 2004.
The pair purchased their first property, a Vanier duplex, seven years ago and today own 28 units valued at more than $4 million, doing both 'buy-and-holds,' where they purchase and rent out units, and 'flips,' where properties are renovated or rehabilitated and sold for a profit.
They've also branched out into educating fellow investors on common challenges, such as dealing with tenants and property management issues.
"We've noticed an increase in the number of people approaching us unsolicited looking for an opportunity," says Ms. Beehler, adding investors generally only need to come up with enough money to cover the down payment on a property.
"What RRSP will let you get in at five per cent and someone else make the rest of the payments? ... If home prices drop, but you are still covering the mortgage payments with rents, who cares? Real estate is about getting rich slow."
ADVICE FOR RENTAL REAL ESTATE INVESTORS:
Don't get emotional: Most people pick a home based on how they feel about it. When selecting an investment, emotions are your enemy. Focus solely on the numbers.
Verify all income and expenses: Always check the actual amounts by reviewing leases, utilities and other bills. Use this as a negotiation point with the seller.
Factor in a management fee: If you aren't going to live in part of it, add in the cost of hiring a property manager. In the Ottawa area, this can vary from four to 10 per cent of your total monthly income. Do this even if you plan to manage the property yourself - if something happens to you and you can't work, you will need to hire someone.
Buy a property where tenants pay for more utilities: Look for properties where tenants pay for utilities (i.e. multi-unit properties with separate hydro meters.)
Be prepared to deal with tenants: You will always deal with bounced cheques, midnight calls and noise complaints.
Older properties can have more problems than new ones: You may save up front, but you'll be more likely to have to deal with leaky roofs, broken-down furnaces and plumbing problems.
Source: Spirepoint Properties