Even More Answers to Your Questions- Q&A With Don R. Campbell
Even More Answers to Your Questions- Q&A With Don R. Campbell

Even More Answers to Your Questions-

Q&A With Don R. Campbell

At the recent ACRE™ program in Toronto, the participants of the program were encouraged to submit questions to a panel of experts.  The majority of the questions were answered at the event by the panel of experts.  What follows below are the remaining questions that were submitted and the corresponding answers.

If you attended this event in Toronto you would have received an exclusive email note with additional resources available, including audio recordings, panel discussions and additional downloads, all designed to enhance the program you just attended.

If you are interested in getting your questions about Real Estate answered make sure you are registered for the upcoming ACRE™ program.  The next one is in Vancouver and only a few short weeks away… click here for the details

Q: I see apartment buildings being sold at 5.5% cap.  What impact do you expect from rising interest rates?
Fraser Campbell

[Don R. Campbell]
Rising interest rates are a given, they are coming.  That is why cap rate has never entered into my world as an analysis tool. I use it only when presenting for financing.  Knowing that interest rates are going to increase, I have factored in a 1.75% rise in my mortgage rates that are variable.  In the multi-family world, due to the bond rates, I have locked in many of my long-term commercial mortgages for at least 5 years at below 4.5%.

Q: Any comments on new HST coming to ON in July?  Heard rumors that landlords will not be able to pass any increased costs onto tenants.

[Don R. Campbell]
HST will surely add costs to our operating expenses as well as closing costs.  In the short term this will not be a positive on cashflow.  The good news is that when your tenants do move on, you will be able to increase your rents back up to market to compensate.  The BC government will logically be allowing these increased costs of HST to be passed on, sadly in Ontario the government has once again made a decision against the landlords (a consistent pattern).
For more HST analysis go to this link

Q: How difficult is it to obtain financing for flipping properties?

[Don R. Campbell]
It is not very easy if you go to conventional sources.  However there are private lenders who specialize in this type of quick-turn financing, they will still make you jump through a lot of hoops, the interest rate will be high, but all you need to do is factor it into you pre-purchase analysis.

Q: If a tenant doesn’t pay rent for 2 months and you decide to get help to try and put pressure on the tenant, what are the best steps to take?  In what order should you act?
AND
Q: When can a lease be terminated for non-payment of rent?

[Don R. Campbell]
Within each province the rules differ… and they differ substantially.  The one consistency is that each province clearly defines what the process is that must be taken, what forms must be used to make is legal.  Many veteran investors have an expert they can call to take care of this side of their business (i.e bailiff company, property management company) as it is important to follow the system (and the system does change.

Check with your province’s Landlord & Tenant web-site to ensure you are using the most up-to-date process and rules.

Q: What is the advantage /disadvantage of going with a CMHC insured mortgage financially?

[Don R. Campbell]
For multi-family properties, CMHC is a fantastic tool to use as the insurance you get dramatically reduces your interest rate AND they force you to do extra homework (homework investors should always do but don’t) so you know that you are buying a property with lots of potential.  CMHC is a great deal as long as you hold the property for more than 5 years.

With the new rules that CMHC imposed on smaller rental properties in April of this year, it is going to be a lot more difficult to use them for more than a couple of properties in your portfolio.  I suggest use them where you can to reduce your interest costs, but don’t come to rely upon them.

Q: Can you discuss more about multi-unit properties (Residential and Commercial) with respect to the new mortgage rules (How down payments % work with multi-units)?

[Don R. Campbell]
The new mortgage rules do not apply in the multi-unit (above 6 units) investing world.  The rules in place stay the same.

Q: What can a book keeper do for you? When do you know you need one?

[Don R. Campbell]
A bookkeeper buys you time (you don’t make any money in your business by being your own bookkeeper, you need to be out doing deals) and as importantly they make sure that the receipts, reports and inputs are done accurately and on time.  Let them manage YOU and your receipts.  I suggest that you have one even if you have just a couple of properties, share one with some other REIN™ Members as you start out.

Q: How do you determine where to put new capital – additional investment or pay down debt?

[Don R. Campbell]
It all depends on what your goal is, how close you are to achieving your financial Belize and most importantly what your long term plan is.  Many investors build their portfolio (add investments) for the first number of years, then after they hit their target number (whether it is net worth or cash flow) then they start to accelerate the pay down of their mortgages (thus increasing their cash flow) as they go into the next phase of their real estate investment business – managing for cash flow.

Q: In Robert Kiyosaki’s books he talks about buying 4 green houses – 1 red hotel and when he moves up to the red hotel he talks about deferring capital gains tax (until you buy the next property) Does this apply to properties in Canada?

[Don R. Campbell]
There is no program in Canada that allows you to ‘roll-over’ or defer your Capital gains upon the sale of a property.

Q: What are some of the tips/tricks or strategies you rely on to keep your business organized and running efficiently on a daily basis?

[Don R. Campbell]
A great book on this subject is by David Allen called “Getting it Done.”  I highly recommend not just reading it but actually putting the strategies in place.

In addition, you will want to implement the REIN™ Power Paperwork system that is designed so you know EXACTLY what to do with every piece of paper that is generated in your investment property business with the ultimate goal of only touching each piece once and knowing where to find the paper when you need it in the future (thus saving you a ton of time at the beginning and the end).

Thirdly, get a bookkeeper and get one early on.  The small cost of having someone handle that paperwork side of your business quickly is returned by you being much more productive.

Q: Why increase payments on variable rate mortgage to pay down principle faster rather than build up a reserve for when rates rise and cash is needed for the higher payments? Wouldn’t it be prudent to have some extra liquidity in the form of increased reserves?

[Don R. Campbell]
As we speak about a lot in REIN™, it is important to have a Reserve Fund for each property (one or two month’s rent).  This should be factored in at the time of purchase and put aside and not touched unless something needs to be fixed (or a vacancy occurs) in that particular property (see Property Analyzer Form).  As long as these reserves are in place, then you are well covered.  When the reserve are tapped into, then the extra payments would go to replenishing such.

Q: All the top towns sound so great. How did you decide which one to choose when developing your plan?

[Don R. Campbell]
We analyzed many, many towns in each province using the economic fundamentals. Many sources were consulted in order to provide the most comprehensive information.  These included a variety of research reports published by Canadian Mortgage and Housing Corporation (CMHC), Statistics Canada’s most recent census information available at the time of printing (2006), Multiple Listing Service (MLS), Canadian Home Builders’ Association, City and Regional Real Estate Boards, local economic development offices and the Office of Budget and Management.

Additionally, real estate investors and realtors© who were well acquainted with particular cities and towns were consulted to provide ‘real time’ and ‘on the street’ experiences that may be more applicable than government statistics can provide. This triangulation of data collection is anticipated to provide the reader with the most comprehensive information to form their investment strategies.

Even More Answers to Your Questions- Q&A With Don R. Campbell was last modified: May 13th, 2010 by admin
 

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