Edmonton Real Estate Investors Association Message Board › ERPIA June 12, 2012 meeting minutes.
Sherwood Park, AB
Edmonton Revenue properties Investors Association - minutes of June 12, 2012
Jim Whitelaw introduced Brent Davies our president. New attendees introduced themselves. Our first guest speaker was Narish Maharaj with Dominion Lending centre and he talked about qualifying for a mortgage and your options. His web site is www. narish.ca. Some banks limit rental inclusion which can limit investors to perhaps 1 or 2 rental properties. Some calculate using a percent of rental income and others use a spread sheet calculation including principle, Interest, taxes and heat. ( PITH).
Canada Mortgage and Housing Corp . ( CMHC) uses 50% of the rental income. If you have 4 rental properties and have reached your limit, then you may qualify for a commercial mortgage. You will need lease agreements on all properties. National bank will use 80% of rental income, which is much more favourable. With the spread sheet method, the gross rent is reduced by the expenses and is the most favourable.
Some lenders have a “cash back” policy which effectively lowers the down payment required, or funds renovations. One also has an option to use private lenders. For example you may be able to borrow up to 90 % loan to value ( LTV) and the interest rate will be higher- up to 20% . It can be useful on a short term basis.
Real estate summary: The jobs report is positive with 10,700 more jobs in April and the unemployment down to 4.9%. According to the Real estate Summary, sales are up, prices are up and days on Market dropped 1 to 49 days on market.
Our second speaker was Ahmed Assaf, and he spoke on the topic of buying and financing Commercial Real Estate.
There are 4 classes of Commercial:
Multi – family (6 units or more)
key benefits of commercial
1) long term fixed contract
2) maintenance and repairs are tenant expenses.
3) Tenants also maintain the property.
There are several types of leases. – triple net, fully serviced and a percent lease such as in malls with a base rate, then a percent of sales. Commercial leases can vary: ie, fixed term of 3 to 10 years, with a renewal option. Generally you will need 35% down payment and it is a stand alone investment depending on cash flow and leases. You as the owner must qualify. You will need good credit and good net worth. You would want cash on cash return of say 20%
Additional upfront costs of commercial;
Building inspection $ 2000.00 +
Environmental assessment - $2500.00 +
Appraisal – $3000.00 +
Lawyers fees - $3500.00+
Lending broker fees - $4500.00+
If you do not pass the first level of environment assessment -run fast.
Buy /sell and book draws completed the evening.