Real Estate Resources
Investing in Real Estate – Fixer Uppers
If you have a desire to purchase a property with the goal of renovating it and reselling it for a profit (commonly known as "a flip"), then you should start by looking at a few properties and calculating what your return would be. I am always willing to show possible real estate investors around a property. Contact me at 905-231-3274 (office) or 905-626-6386 (mobile).
Here is a link to a tool to calculate if you can make a profit on a real estate flip. One tip – make sure that your assumptions are realistic (for example: the length of time you will hold the property, your available downpayment, rental income if applicable, mortgage interest rates)
To complete the Holding Costs and Selling Costs sections, you will need to do some calculations relating to mortgages. There are many available online tools to calculate mortgage payments. Look for one that gives you a split between principal and interest.
If you need to understand what closing costs are involved, I am always happy to work with prospective buyers to figure out the closing costs for a purchase or sale – you can call me at 905-231-3274 (office) or 905-626-6386 (mobile) and I will walk you through it. Or just e-mail your question to firstname.lastname@example.org.
You should have a comprehensive checklist on a clipboard that you make notes on as you walk through your target property. I found a great checklist for my clients at
Calculating the Cost of Needed Repairs and Renovations
Assuming that you do not have costing manuals, Pillar to Post Home Inspectors has a great downloadable Costing Guide here:
To fully complete the expenses side of the spreadsheet, you will need to go to Home Depot /Lowe's/ Rona to check out prices on materials where you will be doing the work yourself (sweat equity).
Estimating Sales Proceeds and Profit
Your next step is to estimate what the property will sell for after renovations. To do this you will need to take a look at what is happening with other real estate in the neighbourhood. Contact me at 905-231-3274 (office) or 905-626-6386 (mobile) and I can help you establish the current fair market value for a property. It will also be helpful to you if you tour other neighbourhood houses that are for sale so that you can determine the type and quality of finishes that are common to the area.
It can be profitable to fix up homes that have fallen into disrepair and rehabilitate them for resale. However, it can also be risky and you need to write down all of the "What Ifs" and make a contingency plan to make sure that at a minimum you break even. One of your key actions to mitigate risk should be to have Linda Porritt on your team.
Real Estate Market - Ups and Downs
January 21, 2015 - Down
Today the Bank of Canada surprised market watchers by reducing the Overnight Lending Rate by 0.25% to 0.75%. Many are wondering what impact this will have on mortgage lending rates and on the real estate market.
The overnight lending rate is the rate at which banks borrow and lend money to each other.
There will be no impact on mortgage lending rates unless the banks lower their prime lending rates. Right now prime is at 3.0%. If the banks lower the prime rate then this will have an impact on new and existing variable rate mortgages. The longer the banks hold off adjusting their prime rates, the interest differential results in higher bank profits.
Five year fixed term mortgage rates are based on the pattern of five year Canada Bond yields plus a spread. New mortgage rates for 4- and 5- year fixed term mortgages had already been reduced this week since bond yields are driven in large part by economic factors such as unemployment and exports (including oil).
The Inside Scoop on Pre-Approval for a Mortgage
First, a Warning - the pre-approval process varies from lender to lender. Even the terminology is not standard. A lender may refer to Pre-Qualification or to Pre-Approval.
Pre-Qualified vs. Pre-Approved
If the lender you approach for pre-approval does not ask you to provide proof of income, proof of down payment, and authorization to perform a credit check, then what you will be receiving is a "pre-qualification" certificate not a pre-approval. This certificate will give you a rough idea of what size of mortgage you might qualify for so you will be able to calculate your target purchase price. It will also protect the quoted interest rate on a fixed rate mortgage for a certain number of days. That's it. It does not guarantee that you will get a mortgage.
You can run into serious snags in the mortgage process if:
- A credit check was not done at pre-approval and your credit rating has been affected by a bad report (even if inaccurate) or by too many open credit sources.
- You were not asked to prove income and it turns out that you cannot verify the income estimate or that your type of income does not qualify you at a 'normal' loan ratio.
Will a True Pre-Approval Guarantee a Mortgage?
Even with a pre-approval certificate which has been vetted by a loans officer or mortgage broker (along with all of the income information you have provided and results of a credit check) you are not guaranteed to be granted a mortgage. That will still be subject to underwriting which will consider all factors in the moment including:
- There is the possibility that the lender will request an appraisal of the property being purchased. The underwriter can request an appraisal after considering a number of factors including the size of the mortgage, and the age, condition and location of the house.
- If there has been any changes in circumstances. For example, a change to your employment or a change to your credit report occurring since the pre-approval.
Pre-Approval is an Important First Step
Pre-qualification or pre-approval can both be an important first step toward the purchase of a home for the solid reason that you will have important information in hand including how much you can borrow, what purchase price you can afford for a home, and an approximation of your monthly mortgage payments.
Recommended Websites for More Information
Bank of Montreal mortgages
Royal Bank mortgages