Mortgage Jargon – Part 5
By Gord | February 19, 2012
Mortgage Jargon – Part 5
If you missed the previous article – Mortgage Jargon – Part 4
We will continue in our series of Mortgage jargon. As full time Canadian real estate investors, we need to utilize the following definitions as part of our everyday language.
Estopple Certificate
This is a document that outlines the legal and financial state of a condominium corporation. When a condominium corporation is formed, and goes on for a period of years, they have certain legal outlines and an annual (if not monthly) financial statement that is created by its members. If you are getting into purchasing a condominium project, you must understand the state of it financially and legally by getting an Estopple certificate.
Guarantor
A guarantor is a person who will make the payments on the loan if the borrower fails to do so. So that can be considered an immediate family member, but it can also be a friend. They are a co-signer who accepts liability if the owner does not follow through with his obligations.
Portable Mortgage
A portable mortgage is a mortgage that you can take with you to a new home that you are buying at your current rate. So if you are half-way through your 5-year term on a particular mortgage, you can buy another property and take that mortgage with you to your new home at the current rate of your mortgage. This is provided that the mortgage amount remains the same.
Pre-approved Mortgage
Pre-approved mortgage is one where a lender will guarantee an interest rate for up to 120 days on a fixed-term loan. The lender or mortgage broker will also help you establish a price range by which you can search for in regards to property prices. This is generally based on the amount of confirmable income that you have. It is not typically based on your credit score. By that I mean that they will often not pull your credit before telling you how much property you can buy. This may come back to bite you if your credit is poor and you have found the home that you want to purchase.
Zoning
Zoning is the geographical zones in a municipality designed for a specific use. A zoning by-law will outline the types of buildings that the municipality wants in certain places. In one area it could be residential; in another it could be industrial; and in another commercial, or agricultural, etc. Applications to change zoning from one use to another use can take some time, but if you understand what the town has in mind in its 20-year plan, it may be easier to go to a particular area and get that zoning changed.
After Repair Value (ARV)
Some lenders may give loans based on what the value of the property will be once it is fixed up. They may be able to advance you loans based on your property acquisition and your repairs to the property as you increase the value of the property to its highest value.
World Wealth Builders offers many unique, practical, “out of the box” real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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How To Get Rid of Bad Tenants Part 1
By Gord | February 19, 2012
How To Get Rid of Bad Tenants Part 1
As a full-time Canadian real estate investor, we must do our best to create massive and passive income. This includes driving more and more deals to us from as many sources as possible.
Keep your losses minimal
As a full-time Canadian real estate investor or landlord, we must keep our loses to a minimum. We have only a limited amount of time during each day, and we want to keep our time to work on things that make us money, and staying away from things that create losses and lots of stress for us.
Being a full-time real estate investor and landlord doesn’t have to be stressful, if we utilize intelligent options that give us the best results.
When a tenant defaults
When a tenant defaults on rent, we have a situation that either gets prolonged, or we can nip it in the bud immediately. Typically a landlord who has collected postdated cheques will have the most trouble in this situation. Why? Because they are alerted to a bounced cheque 12 to 14 days after the cheque has bounced.
At that point you have to go to the tenant and say “I am sorry Mr. tenant, but it appears your cheque has bounced.” And that tenant will say “I’m so sorry, I cant imaging how that happened. Here is another cheque.” And if this tenant’s desire is to not pay you again, they will write you another cheque that will bounce, but you won’t find out about that until 12 to 14 days later: at which point they will have been in the property for one month for nothing. To be a successful full-time Canadian real estate investor, you must be fully aware of your passive income.
The dreaded landlord and tenant board
At that point, you will go to the landlord/tenant board, and serve them with a document that essentially says that you have taken notice that you haven’t paid, and legally they have a certain amount of time to respond to that, and put in their statement of defense.
If they put in a statement of defense, then that time gets prolonged even further, and this whole thing can go on and on, and by the time you get them out through the landlord/tenant board, they could have been in there three months without paying rent, or longer.
In the next article you will learn how to get tenants out quickly and easily.
World Wealth Builders offers an intensive 2 day Successful Land lording training which involves management and purchasing of small multi-units to apartment buildings.
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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Automate Your Rent Collection
By Gord | February 18, 2012
Automate Your Rent Collection
As a full-time Canadian real estate investor or landlord, you only have enough time in the day, and that time should be spend creating massive and passive income for yourself by acquiring more property and/or making more deals. So having to go and collect rent cheques every month, depending on the amount of your portfolio, can be quite time-consuming. Read the rest of this entry »
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Cutting The Cost of Repairs
By Gord | February 18, 2012
Cutting The Cost of Repairs
Stay Out of the Repair Business
One of the worst things that a full-time Canadian real estate investor despises is getting calls from tenants for some small insignificant thing in your unit that needs fixing.
There are ways to be able to alleviate this and have the tenant want to be responsible for small insignificant repairs and never bother you with them, thus keeping your maintenance to zero. Is this possible?
Three key Strategies
In our investor trainings we discuss implementing 3 key strategies:
1. We sell our appliances to the tenants as soon as they move in. Yes. And when they move out, as long as they are in clean and good working order, I will buy them back from them for $250, or $300, or even $500 more than what you paid me. This is obviously dependent on the length of their stay, and you can make it a graduated scale: if they stay one year, we will give you 50 more, two years 100, three years 150, etc. So who is going to fix the appliance when it breaks down during the time of their stay? Obviously they are, since it is not even your appliance anymore.
2. Make sure you give them a repair request sheet, in fact a full stack of them when they move in. This repair request sheet states the date, and the description of the repair. In doing this, you are creating a paper trail with dates and signatures, and obviously the description of the requests. Now as a landlord, we want to get to these requests in good time. Why? Because the main reason that the people move out is because the landlord doesn’t to the repairs that are requested. So very important that you do the repairs. You can even say to the tenant, or give it in writing, that if you don’t do the repairs within one week of the repair request being submitted, that you will actually refund that tenant the daily amount of their rent up until the time that the repair is completed. Is that fair? I think that is a very fair solution, and that gives you lots of respect in the eyes of the tenant.
3. You can tell them that if they take their repairs upon themselves, that you will give them $100 at the end of the year. Now, you have to be cognizant of who you are offering this to, and perhaps you need some history before offering this to someone, because they can abuse this and not fix something ever, and have badly needed repairs in the unit and they just don’t say anything. So to make this happen, you have to trust the tenant, but even that being said, it is very important that you inspect the unit on a regular basis, making sure indeed that no repairs are needed.
Implement these three strategies, and you will have very, very few repair issues, and you may even keep your maintenance to zero.
World Wealth Builders offers an intensive 2 day Successful Landlording training which involves management and purchasing of small multi-units to apartment buildings.
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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Mortgage Jargon – Part 4
By Gord | February 18, 2012
Mortgage Jargon – Part 4
If you missed the previous article – Mortgage Jargon – Part 3
We will continue in our series of Mortgage jargon. As full time Canadian real estate investors, we need to utilize the following definitions as part of our everyday language.
Municipal Levees
Special levees can be charged by municipalities to recover the cost of their services if their services, for any reason, cannot be funded from general revenues. For example, a water-meter installation, road improvement, or sewage improvement can be charged to the owner or new owner, if these are new improvements to the area.
Insured Mortgages
If your down-payment is less than 20% with a regular lender, such as a bank, then you have potentially got into requiring an insured mortgage. This “kicks in” because of the small amount of down payment you are using. You have become more of a risk to the bank and they hedge their risk by getting you to take out insurance in case you default. You may be dealing with CMHC (Canada Mortgage and Housing Corporation), Genworth Financial, or AIG. Perhaps you are with a lender who has their own private insured mortgages. This is commonly known as ‘default insurance’, which means that if you default on your mortgage, your lender will be paid the balance of the mortgage. If there is any shortfall, they may sue you for the difference.
Conventional Mortgage
A conventional mortgage is commonly thought of as going to the bank. This is incorrect. A conventional mortgage is putting 20% or more down as a down-payment with a regular lender such as a bank.
Convertible Mortgage
This is a variable-rate mortgage that can be converted to a fixed-rate mortgage at any time, without any fees.
Cost of Borrowing
The total costs charged to a borrower, by a lender, to obtain a mortgage. This includes, not just their interest, but the other charges that have been calculated into the mortgage. These charges can be any up front fees, such as appraisal fees, lender fees and the like. What may look like a 5% rate could wind up being a 7, 8, or 10% rate because of the fees that are paid by the borrower at the outset of getting the mortgage.
World Wealth Builders offers many unique, practical, “out of the box” real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com
For the next article in the series – Mortgage Jargon – Part 5
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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How To Pick The Best Tenants
By Gord | February 17, 2012
How To Pick The Best Tenants
As a full-time Canadian real estate investor or landlord, we only have enough time in the day to do certain things, and one of them should not be responding to a continuous barrage of tenant problems. We need to utilize our time in creating more massive and passive income for ourselves.
Tenant Problems?
Tenant problems get people out of the business quickly, and can obviously be a bane to ones existence. The sad fact is most landlords out there do have tenant problems, and have essentially brought them on themselves. What I like to say is that there are no bad tenants, only bad landlords.
There are no bad tenants, only bad landlords!
So if you have bad tenants, in most cases, you have set yourself up for disaster and misery. Why? Because instead of leaving a unit vacant and waiting for the right tenant, most landlords will be freaked out because they are having perhaps a time of negative cash flow, and will take anybody that has first and last months/security deposit.
Screening is the key
How do we get the best tenants? Well, this all comes down to screening. Screening is a key element in your survival and sanity as a landlord, and is important knowledge to a full-time real estate investor. The first part of screening comes before you even meet a tenant. The best way is to let them screen themselves out.
When someone responds to one of your ads for a unit for an apartment, you must tell them over the phone a few things that are required before even seeing the property. Now if you have a property available, tell them “here is the address, go drive by the property” drive by the property, and see without going in (if there are tenants in it obviously), but drive by and see if you like the area.”
They’ll screen themselves out of the running
This may screen tenants out right away because it may be an area that they don’t want to live in.Secondly, we want to screen tenants out by telling them that there will be a $25, $30 or even $50 application fee. This will screen out so many of your disaster tenants. We can even put in an outgoing message where people are responding to your ad, that they will be subject to a 50 application fee, and this will be for the purpose of doing a criminal and credit check.
Credit issues
Now just think to yourself, how many people will not go any further because they have credit issues and/or criminal issues, and don’t even feel that it is relevant or necessary to give anybody $50 just to apply for the apartment.
The people that do come forward and do apply, pay the 50, which you will certainly tell them that is 100% refundable once they are chosen to be in that unit. The people that come forward will be, for the most part, excellent tenants, since they will be responsible, and you want a better quality of tenant in your units obviously.
World Wealth Builders offers an intensive 2 day Successful Landlording training which involves management and purchasing of small multi-units to apartment buildings.
With that I say happy screening, and don’t be afraid to ask for an application fee, so you can make your life much easier as a landlord.
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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Mortgage Jargon – Part 3
By Gord | February 17, 2012
Mortgage Jargon – Part 3
If you missed the previous article – Mortgage Jargon – Part 2
We will continue in our series of Mortgage jargon. As full time Canadian real estate investors, we need to utilize the following definitions as part of our everyday language.
Default
Default is the failure to make any monthly mortgage payment, or meet any other term of a mortgage agreement.
Buy-down
Paying down the mortgage rate, by giving the lender a premium at the time of funding. This means that you are contributing to the amount of the outstanding loan right off the bat, and therefore they can use that to lower your mortgage. And sometimes mortgage brokers, to be competitive, will spend some of their commission to buy down the rate at the lenders for you (if you are getting the mortgage)
Commitment Letter
A commitment letter is written from a lender to a borrower who is considering lending mortgage funds to a borrower. These commitments contain conditions that need to be met before closing.These usually consist of asking the borrower for supporting documents etc., thus “substantiating” the statements made in the mortgage application.
Rate hold
There is often a component in the commitment called a rate-hold which is used when interest rates are moving up or down. The lender may hold the rate they are offering you for 60, 90, or even 120 days. Some of these rates may be a capped rate which can be used on new home purchases. They can have an even longer hold time because the builder has not finished the particular project. They could be held for up to six months, or even as long as a year.
Compliance Letter
A compliance letter is required in many municipalities before a property title can be transferred. This is essentially acknowledging that the property has either been cleared or is cleared of any work orders that have been specific for clean-up or fix-up that the owner must complete before the title transfer happens. This could pertain to a house with mold in it as a result of a grow-op or the like. These acknowledgments come from the municipal building department.
Doubling Up
This is a feature in some mortgages which allows you to double up your mortgage payments at any time without a penalty. This also allows you to skip a payment later on in the mortgage. So if you have doubled up once, then you can skip a payment once, because you have already made a payment. This can be used to accelerate your mortgage (pay it off faster). And when you pay a mortgage off faster, you are essentially saving a lot of money on interest payments.
World Wealth Builders offers many unique, practical, “out of the box” real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com
For the next article in the series – Mortgage Jargon – Part 4
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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Mortgage Jargon – Part 1
By Gord | February 16, 2012
Mortgage Jargon – Part 1
As a full time real estate investor, we will be getting a number of mortgages during our career. It is best that we understand all of the mortgage jargon in order to fully understand our mortgage brokers, bankers, lenders, etc., not to mention the contracts we will be signing.
So let’s highlight some typical jargon that we may encounter on a regular basis:
Amortization Period
This is the amount of time it takes to repay a loan in full, at the payment amount and payment frequency that you have agreed upon at the current interest rate. A standard amortization period is 25 years. Often will get five 5-year term during that time. At the beginning of our new term, our rate will be changed to reflect the current rates available at the time. Our amortization period can be chosen from 1-35 years. You must remember that the longer the amortization period, the less you will pay monthly, but it will take longer to pay, and the more interest you will ultimately pay.
Property Assessment
Property assessment is the value of your property which is used by the municipal or local government as a way to calculate your annual property taxes. Depending on your province, you will receive this assessment notice each year or every 2 or even 3 years. To get your yearly tax payment amount , the property value is multiplied by what is called a ‘mill-rate’. There are many other key elements on the tax assessment document that we will require from the seller in order to write a proper offer. Not only the tax assessed value, but the legal description of the property, the year the property was last purchased, and sometimes even the amount that the property was purchased for by the previous owner.
Variable-rate mortgage
A VRM is based on the current prime rate. Depending on the economics at the time, the mortgage could be the prime rate + an amount or prime rate – an amount. In most cases, a variable rate mortgage is considered open in that you can lock in to a fixed rate at any time of your choosing.
Underwriting
A process whereby a person hired by a lender as an underwriter decides if your deal with qualify with the lender. They take in all the information and documentation that is required. Based on the lending criteria of that particular lender, the underwriter will calculate your debt/service ratios, as well as take into account your credit score. From there they determine if you qualify to get a mortgage loan.
Gross debt/service ratio
Your GDS is required to be no more than 32%. What that means is that no more than 32% of your gross income can be going to servicing the debt for your property, which is your principle, interest, property taxes, heat, and 1/2 condo or strata fees.
World Wealth Builders offers many unique, practical, “out of the box” real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com
To read the next article in this series – Mortgage Jargon – Part 2
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
Topics: Real Estate Investing Tips | Comments Off
Foreclosure Process in Alberta Part 2
By Gord | February 15, 2012
Foreclosure Process in Alberta Part 2
Streams of Income
As a full-time Canadian real estate investor, we must fully understand the foreclosure process in our own province in order to both advise the owners we are helping and to take advantage of the legal processes and time lines to increase our potential streams of income.
We are continuing the article on the Foreclosure process in Alberta. We are up to the point where the lawyer has sent the defaulting owner a demand letter to which there has been no response.
Statement of Claim
The lawyer then issues a statement of claim to the courts. If, at that point, the lawyer does not hear anything, the lawyer searches at the courts to see if there was a statement of defense filed. If not, a notice of default is filed, which is basically saying “this client has defaulted. The mortgage payments were this much, the term was until whenever, the rate of interest was such and such.”
The Order Nisi
The owner will then be summoned to court to appear in front of a judge. At this point, an Order Nisi (order for sale) is filed, and the judge will assign a redemption period based on what the borrower’s chances of paying off this property are.
Redemption Period
The redemption period is typically six months, which means that the owner gets to live in the property without paying for six months(although the mortgage payments, legal fees and interest are still racking up.
This period and the time leading up to this point is a golden opportunity for an investor to get in there, make a deal to take over that property, pay off the arrears, and be able to make some amazing money. In our real estate training we go into this process in great depth.
Order Nisi
Once the Order Nisi is filed, and the mode of sale is ordered by the courts there is still time to help that owner but we have to become even more creative in our strategies. This is why knowledge, skill and education are key in making lots of money in Canadian Foreclosures.
World Wealth Builders offers an intensive 3 day training on Foreclosures in Canada and highlights your province specifically.
In a future article, we will talk about all the advantages that the investor has to be able to capture equity in a property and be able to make tons of money while helping the person that is in trouble at the same time.
Happy investing!
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
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Mortgage Jargon – Part 2
By Gord | February 15, 2012
Mortgage Jargon – Part 2
If you missed the previous article – Mortgage Jargon – Part 1
We will continue in our series on mortgage jargon. Many of these references should or will soon become apart of your language in real estate investing.
Total debt/service ratio
This ratio is calculated by your mortgage broker. This is a standard by most lenders which states that no more than 40% of your gross income can be utilized to service your property. Your total debts are principle interest, property taxes, heating, 1/2 condo fees, plus all other monthly obligations, such as credit cards, leases, loans, lines of credit, etc.
Switch
This term applies to changing lenders at the end of a term. When a mortgage is at the end of it’s term, or coming to the end of it’s term, another lender may pay the costs of switching over to their company. This means that if there is a mortgage penalty, the other lender may pay that penalty for you to break your mortgage and move the mortgage to them. They may also offer you a reduced rate to come to them from a competitor.
Cap rate
A cap rate is a calculation that is used mostly in the commercial side of real estate. The the fair market value is divided into net operating income (rent minus expenses, not including mortgage). Capitalization rate is essentially a percentage calculation that is better when higher. The higher the result, the better rate of return.
Closed Mortgage
A closed mortgage is closed for the term, usually 5 years, but it can be anywhere from 1-5 years. It cannot be paid out unless there is a penalty involved which can be discharged at a cost of either three months interest, or an interest rate differential.
Interest Rate Differential
The IDR is a penalty for an early pre-payment of all or part of the mortgage outside the normal payment terms, or even pre-payment terms. This is calculated as the difference between the existing rate and the rate for the term remaining, multiplied by the principle outstanding and the balance of the term. For example, if the mortgage balance is $100,000 at 9% with 24 months remaining and the current 2-year rate is 6.5%, the different between 6.5% and 9% is 2.5%. The interest rate differential is $100,000 outstanding mortgage, times 2-years times 2.5% will equal $5,000 dollars.
High Ratio Mortgage
A mortgage that is greater than 80% loan to value(LTV). What is loan to value? It is the ratio of loan compared to the value of the property. For instance: if the mortgage was a 70% loan to value on a $100,000 property, the value of the loan would be $70,000.
Equity
Equity is the difference between the value of what you can sell your property for (or fair market value), compared to what is owed against it. So the more equity in a property for a real estate investor, the better.
We will continue in our mortgage jargon series in a following article.
World Wealth Builders offers many unique, practical, “out of the box” real estate investor trainings which offers the student hands on, in the trenches style instruction to facilitate both a different mindset as well as a successful and lucrative real estate investment business. To find out more, please go to www.worldwealthbuilders.com
To read the next article – Mortgage Jargon – Part 3
www.WorldWealthBuilders.com/live
P.S. Take Action now to attend the eye-opening seminar and walk away with confidence, knowledge, and specific “action ideas” that can help you achieve your dreams and leave the rat race behind.
We have been training Canadian Real Estate Investors since 1993
Topics: Real Estate Investing Tips | Comments Off
