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Michele Gives Tips On Investing In Real Estate

Posted by Brad Fry on July 13, 2021
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Warning! ;) This is a digitally automated transcript of the show so there will be mistakes throughout - including the spelling of Michele's name!
Curtis Pope: 

It's time again for the Coventry Real Estate Group show with local superstar realtor Michelle Cummings and myself Curtis Pope. Good morning, Michele.

Michele Cummins - PREC: 

Good morning. How are you?

Curtis Pope: 

I am good. I'm feeling relaxed and refreshed. I'm back from vacation. The first thing I got to do is, is work with you, which is, you know, a nice way to come back to work.

Michele Cummins - PREC: 

Nice. What bottle of wine? Did you bring me this year?

Curtis Pope: 

Well, you have your choice. I think there's a few bottles that were in the back of the escape coming home.

Michele Cummins - PREC: 

I'll close my eyes, blindfold any meenie miney Moe might use a few fingers. So maybe I'll get a few. But

Curtis Pope: 

I like the way you think.

Michele Cummins - PREC: 

Oh, welcome back.

Curtis Pope: 

It is good to be back. Now, of course, while I was away, well, just before I went away, we had some changes here in the province, with restrictions being eased up around different things. Now I imagine that's probably affected real estate a little bit.

Michele Cummins - PREC: 

It has it's so exciting for everyone. open houses are being allowed again. Oh, wow. Yes. So you will be starting to see those come up on the realtor apps. When it says open houses. There'll be there you'll start seeing the signs out and it'll start becoming a bit more of the norm again.

Curtis Pope: 

I mean, your weekends are gonna be busy again. Yes, you

Michele Cummins - PREC: 

know what, every day is a weekend we every day is Saturday, every Sunday, I should

Curtis Pope: 

rephrase that weekends are gonna be busier again, because they're still been busy.

Michele Cummins - PREC: 

You got it. Oh, and I'm very excited because you didn't know. But I've been training to get my motorcycle license. And yeah, I'm gonna take the test next week. Actually, all of my staff, we're all doing it as a group. It's gonna be so much fun. So we're taking this, take the test, and then do the driving course. And should be a lot of fun.

Curtis Pope: 

Well, you know, and that's cool. Because living out in agassi, I know if you guys have motorbikes, and I know that one of the roads they love to ride because it's not as busy. And there's great seniors, they love getting on loaded highway like mission and just driving out to like, just to hope just for a short ride.

Michele Cummins - PREC: 

It's some of the most beautiful terrain and like, it's not boring. So there's lots of great views. And if people don't, you know, race or ride too fast, and they're fearful. It's really beautiful. There is a very sharp and very a point on that Woodside that every motorcyclists should know about and be very careful. Yes, a lot of accidents there. Yeah. But you know what, it is a gorgeous ride.

Curtis Pope: 

Yeah, I know. That's the one place that my brother said there was the one sketchy part.

Michele Cummins - PREC: 

Yes, I've clients that live on the have the 20 acre above it. Yeah. Yeah. So it's the here. Something happens

Curtis Pope: 

now is Richard getting his license? Or is he already got his?

Michele Cummins - PREC: 

Actually, he's wanting to do it too. So he's doing it too. He has never had his.

Curtis Pope: 

Okay. There's a danger here because now you're adding motorcycles to the vehicles that Richard can buy?

Michele Cummins - PREC: 

I didn't know I know, you know what? It is? I don't know. It's a habit. It's hard to break.

Curtis Pope: 

And what kind of bike Are you gonna buy?

Michele Cummins - PREC: 

Well, I want a small one, you know, because I'm a beginner and not too heavy, because I don't want to fall over and not be able to pick it up. I don't want to fall over at all. But to me, I'm thinking about a little Yamaha or a Suzuki not a Suzuki triumph, or I don't know, just something with low kilometers, not too spendy and something like, Okay, that makes sense. Well, you know, if

Curtis Pope: 

anybody out there has a bike that they want to sell those websites and earn email,

Michele Cummins - PREC: 

please.

Curtis Pope: 

That's very cool. You know, I you know, I used to have that urge to get a motorcycle, but then I was always living up north moved back down here. And there's just so much traffic. I was like, Yeah, I don't know.

Michele Cummins - PREC: 

I know, I know what I'm just going to do it for cruise and just you know, when you just need to get away and just feel the well not the wind through your hair because your hair is the back. But I just always wanted to do it for like 20 years. So finally, I'm just going to do it because life is short and just do do things that's been on your heart and mind. So and it's funny because I was talking to Christine Allen and then we were all talking at the at the last staff lunch meeting that we had and everyone was like, I've been wanting to do too. I've been wanting to do too. So we all was like let's all do it together. And so we just booked it and we're making it happen. So it's a lot of fun. And I wanted to bring up grab this our our MP for the mission and the writing big of ours anyways, he actually had been promoting, I follow him on Facebook and, and such, and there's bill seeds to await I don't know if people know about this, but this is an important one. And it has to do with real estate and us as as family members and, and humans, and it's very good one, it will remove the unfair tax burden families face when transferring a farm or business to their children. So there's so many assets, and so many things to do with taxes and, you know, transferring names on title that people just don't think about, or if you live on an acreage and you know, there's GST implications and your capital gains. And then you just there's all these things that you don't know unless, you know, and this is one of the things that a lot of people feel is unfair. And so hopefully, and this is a good thing. And there's some good things happening at the government levels right now, for real estate. And that's one that I'm very happy about. And yeah, so wanted to mention that Bill C 208. And the first segment we're going to talk about, we should get right into the ultimate Beginner's Guide to investing in real estate.

Curtis Pope: 

Okay, that's a good topic. I like that. Because I'm, you know, it's been a very slow and steady climb for me and my wife, but we realized that, you know, we've owned three houses now we're, we know we are borderline investors.

Michele Cummins - PREC: 

Exactly, exactly. And there's a tip I'm going to share. And then after the break, when we come back, we're going to talk about how much equity Can I use to buy a second home, and what is home equity. So financing options for buying that second property or third property or whatnot. So with further ado, how to start investing in real estate. So while it may be a great time, and I do it, because that's the real estate, it's often easier said than done, as, as those that have done it in the beginning, everything in the beginning, it's harder. Once you get going, you got your 10,000 hours, so to speak, it's easier. But these are eight tips that will influence your strategy and help set you up for success. So I haven't seen and it's unlocking your real estate potential. That's one of my mottos. It's one of my things I love bringing to my clients, and helping them out. So let's unlock the real estate potential. So tip number one is determining your goals. The first of a real estate investing is determine your goals. And that's not any different than anything in your life, right. So don't get into it blindly. As you know, take the time and investors goals should outline what you want out of your investment and guide your next step. Just find it. Many people set very general goals, like I helped to grow my investment. So let's just do it. Well, you got to consider the SMART goals instead. So that's an acronym FMA RT. So the goals are specific, that's the s, the M is measurable, the a is attainable, the R is irrelevant. And T is for time. So smart goals, will help you get a better understanding of what you want out of real estate investing, and how you can make that happen. And it will set you up for success. It'll also be fun, and you'll be assured that you will get to the end result that you want and even better. So let's revise the goals. I hope to grow my investment. So how do you use a smart strategy with that? So this goal could be I want to, I want my first investment within the first two years of buying a rental unit I I hope to have positive cash flow of at least a certain amount, let's say $500. So the goal is specific, it's measurable, it's attainable, and it's relevant and it's time so that's all in all it's a great goal. So tip number two speak with a seasoned investors are jumping into investing into real estate can be difficult, and you have little knowledge on the topic. You can go online, you can listen to a lot of great podcasts out there, but there's nothing like speaking with an experienced real estate investor and using a realtor to help you and use their knowledge but make sure they are a an investor. So you would think realtors are all investors you would think that But typically, I don't know maybe only 5% are so I mean I don't know the exact figures but I know there's not a lot. So make sure you find a seasoned investor and realtor to help you that you can ask myriad amount of questions to and they can help you. It's so important. You will be more confident as an investor The more you know so just dive into it. I've got these two lady, beautiful ladies, their clients and friends of mine and they just bought another investment condo we have possession a couple weeks ago and it's such a beautiful thing. Seeing them grow their investment portfolio and how excited they are and how, how they're building their wealth. Wonderful. Okay, so tip number three, become familiar with the market. So the market, the current housing market trends play a complete important role in the real estate investment. It's because it's determined how well investment you'll do and how quickly you'll do. So this is why every person considering real estate investing should get to know the housing market, its history and any expected changes. So, you know, Chris, I love stats.

Curtis Pope: 

No, not you.

Michele Cummins - PREC: 

And next week, we will have our stats show. But yes, I am a lover of fats and of history and of, you know, speculation to some degree. So I'm a little bit of a speculator investor, yes, but I kind of I look at it all things, right. So you want to know, what's happening in the area that you're thinking of purchasing in. So you want to become familiar with how fast the equity grows in that area? What's the future results, the overall community plans to the area, what jobs or schools or what's happening in the future? What's the past all that good stuff. Tip number four, get to know your target audience. So important. In real estate investments. A target audience means the demographics that an investor hopes to attract to their rental property and sign as hopefully long term tenants. This plays an important role in the location and type of property that you purchase. So for example, an investor that prefers working professionals will need to understand their values and demographics in order to appeal to them. working professionals typically work long hours in the city or urban area, with plentiful jobs. They may also have recently graduated from college or university, I have one of my investment condos right now with that those exact couple, and they have not settled down or started family. Yes, investors who would like to appeal to working professionals should choose a small condominium like I did, or apartment until near an urban area, an urban center. So the unit's proximity to offices could attract many working professionals who don't need a large amount of space. So that's one example. Another example is if you let's say have a bachelor suite, or something else, you know, going for that single gentleman or the pipeline workers, amazing tenants, the correction institutions, a lot of single female and males, you know, where you might have multiple units near University, and it's actually rented out seasonally to university students, that's a good one, there's so many different options. So get to know the areas you're thinking of Get to know your target audience and make sure you purchase the property that is perfect for them. Tip number five, find the right location. So that's part and parcel with it all. So before searching for properties to purchase, you as an investor should determine what location you'd like. So first of all, are you going to have it properly managed? Or are you going to manage it yourself? Well, if you're going to manage it yourself, you want something close to home. So find the perfect location and the perfect type of property and that target that perfect audience tenant for you for that. So think of that now, Vancouver, Calgary, Toronto, these cities, typically, it you know, if you're wanting to rent out, let's say, a family who has kids in school, who you think will be there for a long, long time, while the kids are growing up long term tenants, you might want to consider 30 minutes out of that city core, because it'll be more rentable, because that's sort of where they are at. So those kind of things you want to consider as well. So it's important tip number six, find the right property it has to have determine your target audience and narrow down the desired location of your investment property, it's time to find an actual property to purchase. So it's definitely can be stressful. You don't want to overthink things, you just want to make sure you have things black and white written down. The numbers are perfect, you've done your schoolwork, your homework here, and you will find the right property. Just make sure that you are working with a realtor who understands your goals as well and be upfront. Be honest. Talk about everything about your future about what it looks like all of that and you'll find the right property for that right. Investment purchase. Tip number seven sort out your finances. Okay, so we're going to talk in the second half again about a little bit about that. But buying investment properties can be overwhelming when you're thinking of where am I going to get the money for the down payment? How am I going to sustain it, all of that and that's why you want to write it all down. Little little people don't know that you are sitting on a pile of cash A lot of people don't know. So if you have your primary residence I've always said your primary residence is the start of your real estate portfolio of your real estate wealth. Growing up that ladder. So Home Equity, which is it's the difference between the value of your home and how much you owe on your mortgage. And lately, everything's been going up so fast, so high, you may be sitting on a lot of home equity that you don't know you have, how do you tap into it? We'll talk about that second second portion. But typically up to 80% of your home equity, you can borrow with rates as low as 1.5% right now, depending on how you find those rates, and who you go with, but let's talk about that after and so tip number eight, commercial versus residential real estate investing. So this is so much fun, and it's so diverse. One of the most important decisions you make while investing is whether you would like to invest in residential or commercial a lot of people start with residential first and move to commercial. There's lots of benefits of commercial real estate investing. And when we come back from our break, I think I'll talk a little bit about that before we jump into how to tap into that cash to invest. Alright, well

Curtis Pope: 

if people want more information about what you can help them with as a realtor, where can they go? Michelle COMM And stop ca. We're back with more right after this. She for Segment Number two, show photos of herself Curtis Pope. Alright, Michelle. Now we're moving on to a related topic to our first segment now what are we talking about for the second segment?

Michele Cummins - PREC: 

Okay, so we're gonna dive in to how to fill out that equity to use for your second home purchase, or third or fourth or fifth or beyond. But I wanted to chat a bit about the benefits of commercial real estate investing because we ended our four segment on that. So there's two categories of commercial real estate, multi unit residences or commercial buildings like office buildings, warehouses and retail spaces. I know we've had a whole segment on investments and different stuff before but this segment is different than we've done before. So bringing to you so properties with five or more rental units designed for living spaces can be considered commercial real estate. This means that investors who choose to buy condos duplexes and Quadri plexes are considered commercial property. In contrast, office buildings, warehouses, and retail spaces are the most common commercial real estate buildings and they typically host a business of some sorts. Long term leases, this is a huge benefit to commercial real estate. So they're known to have longer leases and residential residential properties typically have either month a month, or maybe a six month lease, or a 12 month lease where commercial property leases can last years. In fact, some commercial properties can usually typically be five or even 10 year leases. So Commercial Real Estate's long term leases can help an investor protect their investment for a relatively long period of time. And it's a bit easier because there's not as much upkeep because the actual tenants usually takes care of everything. So it's pretty, it's hands off, pretty hands off. Being a commercial investor, once you get a tenant in place. And if there's any improvements that you had to do, so it doesn't, it doesn't have as much turnover as residential in the theaters and higher ROI. So what is ROI is a return on investment, another acronym. So it's a ratio between net income and investment. So this ratio is used to determine how much money an investor receives after all the necessary payments have been deducted. So this is determined by a simple equation. So ROI, investment gains, my investment costs minus cost, and then the cost of investment so you look at all of that. So there's cash flow, there's ROI. There's different things you look at. So investors have found that traditionally, commercial real estate has the highest returns over residential so commercial properties typically have an annual return of the purchase price between six and 12%. And this is higher because typically residential properties in a balanced market which we're usually in is around in between two to 6% equity growth. So that is something also to think about and then tax benefits. So commercial real estate investor could save a lot of money on taxes compared to those who have invested in residential properties. This is because commercial investors can take advantage of double net leases or triple net leases, and you Usually you see those triple net leases because they are the best in in, in my opinion. So, double net lease and a triple net lease are when a tenant rents an entire commercial property in a double net lease can pay for the rent. And two other incidentals. Typically the property taxes and insurance on the building. In a triple net lease, tenants are responsible for all costs except any structural repairs. So this means the landlord's don't need to pay property taxes on a commercial property everything's been taken care of within that lease. And the triple net changes year to year depending on how property taxes and building insurance fluctuate. So you got your base net rent, and then you've got your triple net, which is covering all those costs, and that changes year to year. So what is home equity? Okay, let's get into that. How am I going to make get money to pay for these investments will use your home equity home equity is the value of your homeowners interest in your home. When a buyer takes out a mortgage loan from a financial institution to pay off their home, they and their lender both have vested interest in the property. Typically lenders have a primary interest in a home after it's been first bought, because maybe you only put 5% down. This is because you know over amount of time though, when you're paying towards your mortgage after the interest, you know, it shifts but it can take a long time if you're not paying more than your basic mortgage payments. But the financing option so as you build up your equity, as you pay down your mortgage in the years to come depending on how much you put down, you do build that up and especially in the last few years, it's built up so much. There are many ways that homeowners can tap into that home equity and buy a second, third or fourth property. So let's talk about all of them or some of them home equity loans, home equity line of credit, and reserve reserve mortgages can help. For reverse mortgages can help you leverage with your primary residence and get the cash you need to start investing. So first, let's talk about home equity line of credit. This is my favorite. For the typical average person, a home equity line of credit, which is a HELOC is a credit line that homeowners can access by leveraging your home's equity. So in Canada owners are restricted to borrowing up to 65% of the appraised value of their house. So to determine how much your HELOC is, take the value of your home and multiply it by 80% substract of the outstanding balance of your mortgage loan. And the final figure will be how much equity that you have to use. But you know, just talk with your financial institution where you have your mortgage through and let them figure that out for you if you're confused at all. But while home equity lines of credits are very useful ways to finance buying a second property, there are some limitations to them. There's always you know, given taste with everything, the good and the bad, homeowners can only access a HELOC when you have built up at least 20% equity in your home. So talking about how hopefully your equity is grown, if you only put 5% down, look into it, though, because the rate everything's gone up, you hopefully would have that. So you'll also need to have good credit. Obviously, we talked about that a few episodes ago about watching your credit score making sure you build up your credit credit and keep an eye on it. So you know if you should have good credit and you don't, you know, find out why. If you if you meet the criteria to access your fee lock, there are many benefits in using it to find another property I mean, the more you pay back your mortgage loan, the more you eat to borrow as well. And it's a line of credit so you don't pay on it unless you're actually using it. So it's perfect to buy that even a vacation property or rental properties. It's a great way to buy an investment property with a home equity loan. Let's talk about that. So a home equity loan, also known as a second mortgage. So that's what it is on your title. It's much similar to the HELOC, but it's an actual loan. But you could borrow up to 80% of the appraised market value of your primary home minus the balance due on the mortgage. Of course, the primary difference between a second mortgage and heliox is that the second mortgage acts like a typical mortgage, as I mentioned that second mortgage on your title, so hence the name second mortgage. They usually have fixed rates as well and a lump come with a lump sum of cash that a person needs to pay back. So it's Here's your second mortgage, here's the lump of cash and you are paying on it from the day you borrow it. That's why I like the home equity lines of credit better because you only pay it the interest on it. You only pay that when you use it instead of a lump sum. But if you need a lump sum for some reason, this is a great way of doing that as well. How about a reverse mortgage for the second property? So of course this is Really good way for you have to be 55 years or older. And a homeowner Of course, but this is a good for for a lot of people who have fixed incomes but want is that second property or want want a bit of a future retirement plan, and you don't have the cash, you know, this could be a way of doing it. So reverse mortgage, sometimes called an equity release is alone, that allows you to get money from your home equity without having to sell your property. So homeowners can get up to 55% of the appraised value of your property from the reverse mortgage making it way easier to buy other properties to reverse mortgages that do not need to be paid back until the home owner decides to buy another primary residence or moves out or passes away. They also don't owe tax on the money borrowed. This makes this a great option for those older individuals on those fixed incomes I mentioned because they can delay loan payments. So that's there's a lot of good things to talk to your mortgage provider about that. So refinancing your primary property is all is the last way of pulling out some equity I wanted to talk about. So home equity is a source of funds that can help finance a real estate investment. So this is I believe, we've talked about four different ways of doing it here and the refinancing your house, which a lot of people have chosen to do that in this last year because the interest rates have gone down so much if you didn't have a huge prepayment penalty. And even if some did, like, back in 2007, I believe I did this on one of my properties, and I refinanced it because I was paying such high interest rates, I had a $6,000. So wasn't that bad of a prepayment penalty, some are like 30,000 26,000. And like there's higher ones if you get out of it earlier, but I paid that amount. But after three months of paying, I started making money, like so I was like I could pay 6000 now because in three months, I'll start rapping raking it in. So yeah, so refinancing your property if the interest rates are a lot lower, or if you want to go into that flexible mortgage, with only three months interest payments, only, which is the variable rate mortgages. So again, talk with an advisor on that to see what's best for you, but maybe refinancing your property is the way to go for you. So take the time to look into all those options. I know I fit that I fitted them out pretty quick here. But how are we doing on time, Curtis?

Curtis Pope: 

Oh, we're getting a little close to the end here.

Michele Cummins - PREC: 

Oh, good. Because you know what, that's where I wanted to end it. Because there's so much more to say. But I, if anybody has any questions, they can just contact me directly. And I can give them a whole brochure and package on it and talk with them about their specific needs, along with their financial advisor and their mortgage provider. We could be a great team and a real estate lawyer to help you build your real estate wealth. And so then we should end the show with a quote of the week.

Curtis Pope: 

I would hope so it's kind of become our thing.

Michele Cummins - PREC: 

Yes. And this one's from Henry Ford. Failure is simply the opportunity to begin again, this time more intelligently.

Curtis Pope: 

Well, if there was something those early car manufacturers learned, yeah, there was a lot of early failures. And they learned from those very Dean, he knew what he's talking about.

Michele Cummins - PREC: 

It's true and he kept on going on and he didn't stop. He didn't he didn't he got back on that horse. So I love that and that's perfect for this show to say you know what, don't be scared to do your first investment. Just Just take the necessary steps. take that first step and continue taking the steps and you'll be successful.

Curtis Pope: 

Alrighty, well, if people want more information or want to contact you about everything we've talked about today, where can they go? Michele Cummins,

Michele Cummins - PREC: 

- PREC. ca

Curtis Pope: 

and make plans to join us again next week. And once again, we will talk real estate in order to unlock your real estate potential on a show where real estate is maximized. Thanks for listening