Ask an Expert

Q: How much below the asking price can an offer be made to seem reasonable for the seller? I hear people saying 7-8% on average, but if I believe that the true value of the property is closer to -30% off the asking price – will it look like I’m trying to low-ball?

A: That is never the issue … offer and acceptance are a matter of negotiation, market conditions, terms and urgency of the seller’s need to sell and buyers ability to pay … etc.

In the US properties have been sold for a number of years at 50% below asking price.

In Vancouver for many years, nothing sold over asking.

You never find out a vendor’s condition until you try.

Much success,

Ozzie

Q: We have a commerical property in Cranbrook that is fully leased and brings
in over $103,000/year plus NNN. There is a large retail tenant that has the
bulk of the revenue (about $86,500/year) with 7 years remaining on the
lease. The remainder of the property is leased to a landscaping firm on a
one-year lease (stable tenant, has been with us for a couple of years),
previous tenantwas with us for about 5 years. The property is 2.24 acres
within three blocks of the downtown core of Cranbrook.

We have tried using a local realtor to sell this property, but it sat on the
market for a year. We need our investment out of the property to develop
another property we own on Vancouver Island. Who should we contact and what
kind of cap rate should we use to realise a fairly swift sale?

A: Commercial properties in small cites can be difficult to sell in a climate
of economic uncertainty like we find ourselves in now. Too few buyers
willing to risk investing in areas far from their home base. The best bet
is to find someone local. If I were selling a property in Cranbrook or any
smaller city in BC I would try a multi faceted approach. Here are some
ideas: First step is to identify a competent Realtor. Try phoning the
local Real Estate Board and ask for a list of commercial Realtors. Next
would be to Google “commercial Realtors Cranbrook BC”. Check out their
websites and testimonials. See if your friends or colleagues have any
recommendations. Next I would look in the Western Investor newspaper and
see if there are any Realtors who specialize in similar product. Next I
would advertise your property on Craig’s list and Kijiji. Next see if
there are any local investor clubs in Cranbrook to promote your deal. Go to
Meetup.com for this. Try and meet local investors through the Chamber of
Commerce, service clubs such as Rotary, local accountants, property
managers. It will take rolling up your sleeves and putting in some work but
the results should make it worthwhile. Good luck!

Q: My question is, as we stand in late 2012, from your expert R.E point of view, what would be the ‘new Dubai growth’? In other words, where in the world would be the place to invest, it can be a bubble or not, flips or not. Qatar? China? Mongolia? Alberta? Are there any places / territories that come out of the background like Dubai did in 2000′s until 2006 I would say.

A: I teach my students to look for areas where there is population growth and jobs growth. Areas where there are large infrastructure projects. Areas where people with money like to live.

One of my favourite places right now is Northern British Columbia. Kitimat, Prince Rupert, Terrace, Smithers, Dawson Creek, Fort St. John. The whole corridor should do well because of the race to build liquefied natural gas export facilities, pipelines, container port growth and more.

I own properties in Kitimat, Prince Rupert, Terrace, and Smithers.

When looking for potential areas for appreciation in the rest of the world, these are the things I suggest you look for.

Hope this helps! – Ralph

Q: Looking to buy a rental property in Kamloops, BC, but I keep hearing on the news we are in for a nationwide price correction of 10 to 15 %, should I hold out for a bit or should I buy now and take advantage of 3.09% interest rate for the next 5 years?

A: In our monthly seminars we teach that it is not the city you are buying but a deal in that city.

Kamloops is a good town, we like it … but it is up to YOU to get a good deal there.

You are not buying the market … you are buying a great deal that you personally schuss out.

Good time to find a good realtor, good mortgage broker … your team … and then make offers.

Much success,

Ozzie

www.factsbyemail.com

Q: Hi Kyle, I read in the Sun today that the OSFI is going to be watching over CMHC now and that there may be new changes to mortgage rules. What do you think will happen with mortgage rates? Will financing get tighter again? Thanks, Heather

A: Hi Heather and Harry,

It will be interesting to see what will come down the pipeline with the OSFI overseeing CMHC.

The inevitable change that occured is the way that mortgages are securitized. It will likely become more expensive for banks to securitize their loans the way way they had done in the past, and this cost may end up getting passed to the consumer. Economists predict this cost could be anywhere from 10 – 20 basis points (.1% – .2%).

Julie Dickson, Superintendant of Financial Institutions

With regards to financing product changes, the OSFI had made it clear that they do not want Canadians using HELOC’s (Home Equity Line of Credit) as an ATM machine, and are strongly suggesting that banks cut total financing down from 80% to 65% for these products. This would have a large impact on investors, as HELOC’s are an integral part of most investment strategies, but also on your average homeowner who wants to borrow money for improvements to their house or for debt consolidation. How much pull CMHC will have over the banks with the OSFI overseeing them is yet to be seen.

CMHC has already tightened up financing and although they haven’t changed your guidelines, it is becoming apparent that as they come closer to their $600 Billion cap, they are beginning to become much choosier with who they will insure. Clients with tight debt servicing (but still fall within guidelines) are beginning to get declined much more frequently than before. Self employed borrowers and clients relying heavily on rental income will continue to feel the squeeze.

Most of the tightening already began with CMHC’s realization in early February of this year that they were nearing their cap. That being said, don’t be surprised to see a few tweaks here and there to keep the OSFI happy.