Don't Take No For An Answer

by Darrin DeRoches May 24 - 30, 2012

I would like to continue my article with the client I mentioned in last week’s article. He was discouraged when he found a property and went to his bank to be told he did not have enough money saved for his down payment and closing costs. Within 24 hours, we not only had him pre-approved for a better rate mortgage, he also had three options to close the deal. He fired his agent and his bank. We took him out in our company limousine and showed him three possible homes to consider. He also wanted to look at the house he had thought was “the one” before the bank turned him down. We viewed three properties in the West end all within his dream area. All three had their pros and cons. We then went on to the property he wanted to buy in the Stinson neighbourhood and he was convinced that I would agree that it was “the one”.     Once we pulled up, I was impressed with the street but once we walked through the house my opinion changed. The house had no yard or land and was renovated in a very peculiar way. I started to point out all the shoddy workmanship and the costs it would take to improve. The house had a very “artsy” feeling but the bad foundation, original windows, old roof and overall depressed state was very apparent to me. My client was so in love with this property that I felt bad pointing out all the bad things he did not notice on his first visit. By the time we were leaving he realized that it really was not “the one”. We discussed the four homes we saw that day and he ruled out “the one” and began to consider the other ones we had viewed.     He came down to one in the West end and one near Pier 4. He was leaning towards the one at Pier 4 since he believed it was larger and had a bigger upside. After discussing the current market and future market, he realized that the home in the West end was his best investment. There were six showings that day so if he really wanted the property we would have to move fast.He decided to put in an offer right then and there. I called the seller’s agent and arranged a time to present and we sat in the limousine and typed out an offer, printed it, signed it and we were ready to go! Within hours we had negotiated the deal and our client had his dream home.     A week has passed and my client went from total disappointment to total elation. There is always a solution to your situation if you work with the right people to find the right answers. My client started to ask the right questions and we worked with him to find the right answers. He now has the right house in the right area with the best mortgage because he did not allow the bank’s “no” to stop him from owning his first home. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca

Work With The Right Brokers!

by Darrin DeRoches May 17 - 23, 2012

A new client of mine went into his bank and wanted to get a mortgage so that he could make an offer on a property immediately. He had found a property that he thought was perfect and he was raring to go. The bank had already “pre–approved” him so he was excited and ready to go. While at the bank, they came back with a little problem. The bank told him that he does not have enough money for closing costs and he cannot buy the house. Pissed off, he heads to the pub trying to figure out where he went wrong.     This is where I stepped in. A mutual acquaintance hears him complaining about the “closing costs” and suggest that he should talk to me. He calls me and tells me his troubles with the bank and his agent. Within 24 hours, I not only have him approved by a mortgage broker, I have convinced him to look at better areas and properties to invest in.     The agent he was working with suggested using a mortgage broker and gave him a list of three referrals, then left the client to figure it out on his own. He also told the client to buy a property in an area that is terrible for re–sale. The fact that the property was vacant and sitting on the market for a long time did not tip them off. The client can afford a property in his desired area that will have a great return on investment. The bank looked at his savings account and told him that he needed about $3,000 for closing costs and until he saved it up he was out of luck!     There were two simple problems for this new client to work out. First was to fire his bank and second was to fire his real estate agent. Within a five minute conversation, I realized that his agent was not asking the right questions and his bank did not know their ass from a hole in the ground. This client had more than three options available to him. First was the “no money down option” second was the “congenital mortgage” and third was the “line of credit and RRSP option”.      We met the next day with a mortgage broker who also gave him these three options and had him approved for more than he needs and at a great rate. The client had the best credit score I have seen in a long time; RRSP’s he can use to make up the closing costs and was a first time buyer which will qualify him for rebates on closing costs. The agent should have taken this client to a mortgage broker or been aware of the RRSP’s, credit score, first time buyer rebates and stepped in and called the bank to make them aware of their mistake. I met the client, had him approved and looking into possible dream properties – all within 24 hours. What was their left to do? With this great weather, we went golfing and within a week I am sure we will find him his dream home! V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.

Re-Mortgage Or Re-Group

by Darrin DeRoches May 10 - 16, 2012

I was speaking to a mortgage agent this week and we had an interesting discussion about re–mortgaging. Apparently the average time for a re–mortgage is three years. That seemed a little odd to me since most people take out 5 year mortgages, but in reality more and more people are getting a 2 or 3 year mortgage term, nowadays. A lot of clients are looking for money in all the wrong places.     He also works with a trustee and debt counselor who help people correct problems with their debts. The first place they go for money is the home. It seems most people are unable to live inside their means and when they get in trouble they look for the golden egg which is the house. Last year it was reported that homes in our area went up 7 per cent and about 5 per cent the year before. Therefore people in trouble look to take out the 12 per cent of equity their home went up. Most of the time it is to pay off the credit cards and clean the slate. Once the slate is clean and all that available credit is just sitting there – well you can guess the rest. Two years later they are knocking on the mortgage agent’s door looking to re–mortgage once again.     There are occasions due to illness, divorce, death etc., where people need to legitimately re–mortgage their property. If you have not ruined your credit, some banks will go all the way up to 90 per cent of the value of the home. So if you owe $100,000 on a $300,000 home, the bank will lend up to the $270,000 dollar mark and you would have $170,000 available to you. In most cases though, you are in a tough spot and credit is already ruined so you can only get a 50 or 60 per cent loan to value which would be about $80,000 available to you.      The interesting part of the discussion was not the great business he is getting from the debt counselor but rather how he tries to tell people they would be better off selling their home and taking the proceed, buy a more affordable property and start over. He explains to them that they are just putting off the inevitable and will be struggling for the forseeable future. But nine out of ten clients still rather re–mortgage, pay through the nose and keep trying to hold on to the big house. Sometimes stepping back is the best move anyone can make. Re–group and make a plan to not end up in the same position. Divorce is the biggest problem when it comes to the “big house” syndrome. The first answer is “I do not want to make my kids change schools”. Well in todays world, your kids can still stay in the same school even if you do not live in the district. In every district there are more affordable homes that you can buy or rent after selling the “big house” and still keep the family in the same school, hockey, soccer and whatever else is the excuse. Be honest with yourself and take care of your financial future. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.

Perception Of Hamilton

by Darrin DeRoches April 26 - May 2, 2012

I had the pleasure of giving a tour of Hamilton to Toronto investors this past weekend. We met them in the west end, hopped in the back of the limo and began our tour. The first thing they wanted was to stop at a Starbucks. I explained that we have only 5 Starbucks in the city but about 60ish Tim Horton’s and went on how Timmies began on Ottawa street etc. – but Starbucks it is. We proceed over to Locke Street stepped out and got them their Starbucks. They pulled out their “gold Starbucks card” and I realized it will be a long day explaining Hamilton to these Toronto investors.     They are looking to buy an income property outside of the GTA. We drive around the Locke Street area heading to the east end and they are impressed with homes and neighbourhood of the west end. Our first stop is a commercial/residential property on Cannon and Gage. I explain we are building a $275 million dollar stadium steps away from the property but they are not impressed and ask to move on. We head over to Parkdale at the link and look at a 12 unit apartment building that has a good return and they do decide to get out of the limo and take a look. We walk around the building and I point out how the “Linc’ makes this property very desirable and how tenants will be able to get to and from work, buses etc. Then the questions begin.     “I know the steel factories employ about 4,000 people so where does everyone else work?” “I read that the vacancies rates are….” “I believe Barrie has a higher income level and maybe we should invest there instead of Hamilton” I understand they have read all the information about where to invest in Ontario, but it seems they are not getting the right feeling about Hamilton. We hop back into the limo and head towards Fennell and Upper Ottawa.  Along the ride I am pointing out what the city has to offer when they ask me if I own a bike. I answer of course I do. I go on about how the rail trail and Bruce trail run throughout the city. The amount of waterfalls and Pier 4 are great places to bike when they correct me by saying “No, a bike – vroom, vroom”      I answer “a motorcycle, No why?” and they respond “Well we heard from friends that Hamilton has a lot of biker gangs” I begin to laugh and explain to them that their perception of Hamilton is coming from the 60’s and the city has evolved immensely in the last 50 Years. We continue on and show them the rest of the city. We end up having lunch on Locke Street and they leave the city with a desire to buy a property in the west end. The day has taught me that we as a city have a long way to go on marketing our image to our neighbours who are looking to invest millions and millions in our city. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.

Don'y Believe the Hype!

Don't Believe The Hype!

by Darrin DeRoches April 19 - 25, 2012

Calm before the Spring Storm. I was talking with a few mortgage brokers this week and they all were saying the same thing. Things are slow. The weather and 2.99 per cent mortgages have caused a little stir in the past couple of weeks but the market is still quiet. The mortgage brokers were all busy when the 2.99 per cent came out and people did flock to them to be pre–qualified but are not presently looking. One broker called clients and explained that the 90 days is coming close and if they do not use it the rate will go up and the client was not motivated by this.The bank rate was just announced this week as staying the same but with a cache that they are thinking of raising it soon. The press have been saying this every time it is announced since they have nothing else to report on “the bank rate –same!” pretty boring. “It may go up” stop the presses!     While I am writing this I actually just took a call about the “no money down” mortgages and had to explain that of course your credit score must be high and yes you do pay higher rates to pay back the down payment. Nothing is free in this world and when everyone is knocking the “no money down” or 2.99 per cent mortgage has conditions – what the hell do you think it is? The conditions on the 2.99 per cent mortgages are no different than the other low rate mortgages we have been signing up for in the past. Yes you have to sign a closed 5 year mortgage. You did this five years ago with a 5.1 per cent mortgage and no complaints. Understand that the bank is offering the 2.99 per cent than suggesting you look at the higher rate 2 or 3 year mortgage and everyone is on the band wagon that a closed 5 year is bad. Don’t, don’t, don’t believe the hype! Heehaahaw!     The spring market is about to bloom and these pre–approved mortgages at 2.99 per cent may be expiring but there are still more out there to be had. It is important to listen to advice from those who are not making money on the product. The bank tells all of its employees the 2.99 per cent mortgage is bad and they spread the gospel, some mortgage brokers even tow the company line since they get paid less on the deal. People will argue that most people break or re–mortgage every three years so why lock into a 5 year mortgage. Why? Cause it is only 2.99 per cent! If you find yourself needing to get equity out of the house before the mortgage matures – get a line of credit. Banks want you to re–mortgage to take money out since they make more money on that product than they do on a line of credit.       Think ahead and make your decisions wisely. The spring market will come fast and furious so be ready, get pre– approved, work with a good broker and you will be ready to compete in a market that will be moving fast! V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.

Commercial Investing

by Darrin DeRoches April 12 - 18, 2012

I have a new client from Toronto that is looking to buy an income property in Hamilton. They have never bought an income property and their main concern is Cap Rate. They want it to be in a good area and be easy to maintain but all they talk about is Cap Rate and ROI. For those who are unfamiliar with these terms Cap Rate is what many real estate investors determine the value of an income property by using the capitalization rate, aka cap rate. It is probably the one most misused concept in real estate in investing. A broker prices a property by taking the Net Operating Income (NOI), dividing it by the sales price, and bing bang boom – there's the cap rate. Example:     Say the property has an NOI of $100,000, and the price is $1,000,000.     $100,000/ $1,000,000 = 10 per cent cap rate     But what does that number tell you? Does it tell you what your return will be if you use financing? No. Does it take into account the different finance terms available to different investors? No. Then just what does it show?     What the cap rate above represents is merely the projected return for one year as if the property were bought with all cash. Not many of us buy property for all cash, so we have to break the deal down, usually by trial and error, to find the cash on cash return on our actual investment using leverage (debt).     So a realistic Cap Rate is around 7 or 8 per cent in our city. This really means very little so we really should be talking about ROI which is Return on Investment. If you are buying a commercial property and the bank requires you to put down 20 per cent then you want to know the ROI on your 20 per cent investment. People who have never invested before believe that if they invest 200 grand in a million dollar property they should make $80,000 dollars a year since there is an 8 per cent return. The reality is the 8 per cent return is on the $200,000 you invested (ROI) which would be $16,000 dollars a year not $80,000. The investor then thinks $16,000 dollars a year is not worth the investment. Wrong!     No other type of investment gives a safe reliable return of 8 per cent or higher.  The bank will give you 1 or 2 per cent the stock market will give you promises of high returns, but then you can lose it all. Real Estate will produce the 8 per cent or better return plus the property itself will value up yearly and it is all relatively safe.     My new clients just keep asking for the highest ROI and think a Cap Rate of 8 per cent is the way to go but there is a lot more involved in just looking at the “real estate jargon” being thrown around. Luckily I have ability to wade through all the bullshit and will be able to find then a safe and reliable investment that will create a great ROI. V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.

Toronto's View On Hamilton

by Darrin DeRoches March 29 - April 4, 2012

I just spent the last three days shooting a TV show here in Hamilton with a crew from Toronto and it was very interesting to get their perspective of our “real estate market.” Every single one of the 10 crew members asks me about real estate in Hamilton at least once. We shot at three different locations and they were curious about values and locations throughout our city. They were impressed with our first location in Ancaster; they went on about the area and homes. They really felt how the house felt like a “home” instead of a property laid out in a grid pattern of suburbia. We then shot in a vacant renovated home near Eastgate Square. The property was a four level back semi–split and was a large home for about $230,000. They began to ask about its value and I asked them to guess. Most came in around at least $300,000 and up. I explained to them the area was okay and the house was actually a little overpriced.     Throughout the day the producer explained how he has been purchasing student houses in St. Catharines and asked how does Hamilton compare? Basically the comparison comes down to the property. Bring in a few hundred more a month but it will cost at least $50,00 to $100,000 more for the property. He felt that buying in Hamilton will not allow him enough profit, but when I explained to him the vacancy rates, and how Hamilton went up seven per cent in value last year, plus we still are considered “undervalued’ he started to ask more questions. By the end of our conversation he started to see how over the course of 15– to 25–years he would make substantially more money in real estate investing in Hamilton compared to St. Catherines.      One of the cameramen just bought a small condo in Toronto for $235,000 and he also wants to buy income properties in Hamilton. Our third location was a home near Gage Park that could easily be converted into an income property and cost less than his condo in Toronto. He went to Mohawk College to become a cameraman and he was also interested in student housing near the college. It seems whenever we had a break in shooting we were either talking about real estate or looking on the MLS to show them the value of investing in Hamilton. The director of the show even started to consider on ‘retiring’ to Hamilton since she could sell her home in Toronto buy a comparable home in Hamilton for cash and have a lot of money left over to travel.      It was very interesting to get the different perspective on the real estate market from 10 different people who own in Toronto and enjoyed every part of our city. They lunched on Locke Street and were so impressed with what our city had to offer in real estate, culture and amenities. The show is called “My House Your Money” and we are filming episode three for season two which will air late summer or fall!  V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.