Edmonton Real Estate Investors Association Message Board › Edmonton Revenue Property Investors Association - April14, 2009 meeting min
Sherwood Park, AB
Edmonton Revenue Property Investors Association April 14, 2009.
Karen opened the meeting at 7:09 Michelle welcomed all and presented a property for sale.
Karen asks the following questions of a previous landlord.
1) Are you a landlord or a property manager?
2) Are you related to the tenant?
3) Do they smoke?
4) Any noise problems?
5) Why are they moving?
Les gave us a market update, and Ozzie Jurrock's forecast of things to come both for Canada and the USA. Edmonton has lots of foreclosures. In the last serious downturn CMHC owned many, many properties.
Les does not advertise with the newspapers any more. He uses the internet sites to advertise. Les says his prospective tenants now want incentives to move in. He suggests holding rent increases to no more than $20.00 per month.
Our first guest speaker was Jeff Spark of ALLTYPE Furnace and Air Inc. They have service agreement plans and offer a 10% discount on parts and labor. Jeff explained that 2009 is the final year for mid efficiency furnaces, Government regulations will require high efficiency furnaces after 2009.
Our second guest speaker was Mark Radke from Servus Credit Union commercial financing. He talked about the mortgage meltdown with sub prime and Ninja loans. (No income, no job or assets.) Banks now want a margin of safety. They are more conservative. Spreads are prime plus 2 or 2 ½ %. Commercial rates are higher than residential rates. They are custom tailored, but more expensive. Commercial loans require application fees of .25 to 1% of the loan amount. Also deals through mortgage brokers cost more as the cost is passed on to the borrower.
The basics are the three c’s of credit. They are looking for character, capacity and collateral. They take personal guarantees. So you pay up if things go wrong. They want people personally involved in running the business.
Residential buildings of 5 units and more are commercial. They can finance up to 85% residential with CMHC. Servus requires membership of $1.00 and you become an owner. Each branch is owned by its members. For Residential mortgages the focus is on you and your job. The focus for commercial is the business and the property. A vacant commercial property may be worth only half, with no tenant. The business generates the cash flow. Residential cannot exceed 40% of your income. Commercial has more appraisals and more fees. Also it can take 2 months to get approved and in place. The number one challenge is cash and the second is cash flow.
Draws completed the evening.