When is an 8% return on investment actually 35% ???

Good day all!

Many of you know that I am not only a Real Estate Salesperson, but also a Real Estate Investor.  The purpose of this blog post is to show how you can absolutely demolish returns expected through traditional stock-market investments through Real Estate Investment.

So, how is it possible to earn HUGE returns on your investment in this volatile marketplace?

Let's use my new listing at 42 Vansittart Avenue in Woodstock as an example.

Asking Price is $157,750.
Both units are currently rented, grossing $16,800 annually. 
Landlord covers Property Taxes ($2,138 annually), Water ($1,100 annually), and Water Heater Rentals ($380 annually)
You should probably have insurance too ($600 annually).

This leaves a NET OPERATING INCOME (NOI) of $12,582.  

When you consider that you'll earn $12,500 on a purchase price of $157,750, you end up with a RETURN ON INVESTMENT (ROI) of 7.92% or, 8%. 

This 8% return on investment assumes that you paid $157,750 in CASH for the property. 

Not a bad return, when I consider what my Mutual Fund portfolio looks like at the end of 2011......but....

BEHOLD the POWER OF LEVERAGING!

Suppose, however, you decided take out a mortgage on the property, as opposed to pay cash for the full amount.  How does the investment look then?

Well, you'd need a 20% downpayment (thanks to the instability in the global markets, investors need to pay 20% upfront in order to purchase "speculative" property).

So, your 20% downpayment would be $31,550.

Lets assume closing costs at 1.5% (may be more, may be less, depending on certain circumstances).  Another $2,366.25.

Your total out of pocket expense would be $33,916.

We now must add the cost of borrowing that money into our expenses.  Year 1 on a mortgage (using 4% fixed/15 years) would cost you $4,893, reducing your ROI to $7,688

Considering you've only invested $33,916, and you're earning $7,688 on that investment, it now shows a return of 23%.

TRADITIONALLY, PROPERTY VALUE IS AN APPRECIATING ASSET

Calculating Capital Appreciation based on 2.5% annual increase in property values (historically, increases have been much higher than that, however, lets be reasonable here - historic increases are largely unsustainable, and a more conservative approach is prudent) shows a further gain of $3,950 in equity.

LOOKING AT THE BIG PICTURE.....

After the first year, you've seen a 23% return on your cash investment, and you've seen an appreciation in the asset of 2.5% or $3,950 (representing a further 12% return on your cash investment), for a TOTAL RETURN ON CASH INVESTMENT of 35% in your FIRST YEAR!

MONEY OUT = $33,916

CASH RETURN = $7,688
CAPITAL APPRECIATION = $3,950

(TOTAL RETURN = $11,638) 

Divided By 

(TOTAL INVESTMENT = $33,916) 

 equals 

34% ROI

CALL ME TODAY TO GET STARTED!

 











Ben Sage, Sales Representative. www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON

What's happening in Woodstock, December 2011

Hello again!

It's time for a market update. These statistics reflect Residential Real Estate Sales information (excluding condominiums) in Woodstock, Ontario. These statistics were generated using information from the Multiple Listing Service.

It looks like the Average Sale Price for a Residential property in Woodstock in November 2011 was $207,325, which is down from $221,112  in October of 2011, but remains up 4% over November of 2010!

This chart shows current Residential Listings, compared to Residential Homes Sold in Woodstock.  As of November 2011, Woodstock showed an Absorption Rate of 7.2 months (meaning at it's current inventory and sales levels, our market would run out of inventory in 7.2 months).

I hope you find this information useful and informative - if you have any questions about this or other Real Estate related matters, please feel free to contact me!


Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca


Ben Sage, Sales Representative. www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON

House Prices Flatten in September (on a National Level)

After nine straight months of increases in the national home price, the numbers flattened in September, according to the Teranet—National Bank House Price Index out today.
Both the national composite of the recently expanded 11-city index remained at 149.52 in September.... (Click HERE to read the complete article.)




Ben Sage, Sales Representative. www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON

Oxford County unveils new website.

 The County of Oxford today revealed phase I of it's newly developed website.  The site features a new "glossier" look, similar to other websites, streamlined navigation, upgraded search function, new mapping tool, and SMS service for news, events, tenders and other updates.

Take a minute and have a look:

http://www.oxfordcounty.ca/



Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca

What's Happening in Woodstock? November 2011

Hello again!

It's time for a market update. These statistics reflect Residential Real Estate Sales information (excluding condominiums) in Woodstock, Ontario. These statistics were generated using information from the Multiple Listing Service.

It looks like the Average Sale Price for a Residential property in Woodstock in October 2011 was $221,112, which is up from $214,230 in September of 2011, and up almost 11% over October of 2010!

 
Continued low interest rates, and lack of supply seem to be supporting values in Woodstock. 

This chart shows current Residential Listings, compared to Residential Homes Sold in Woodstock.  As of October 2011, Woodstock showed an Absorption Rate of 6.5 months (meaning at it's current inventory and sales levels, our market would run out of inventory in 6.5 months).

I hope you find this information useful and informative - if you have any questions about this or other Real Estate related matters, please feel free to contact me!


Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca

House prices to hold next year: CMHC

Originally seen in The Globe and Mail

The housing market may be a boring place for the next year, according to CMHC, as the number of starts remains near current levels and resale prices hold steady.

In its fourth quarter market update, Canada Mortgage and Housing Corp. said mortgage rates would likely remain at historically low levels at least until the last half of 2012. The housing market’s fate is largely tied to rates, the agency said.

Economists and market watchers have predicted a variety of scenarios for house prices in the next year, with some suggesting prices could drop as much as 10 per cent by the end of 2012. Capital Economics goes a step further, having predicted a drop of 25 per cent in the next several years as demand weakens amid higher mortgage rates.

“Should rates move lower than projected, housing starts and MLS sales could be higher than expected and house prices could grow at a faster pace than forecast,” the report stated. “Alternatively, should financial market expectations improve and interest rates move higher than projected, housing starts and MLS sales could be lower than expected and house prices could grow at a slower pace than forecast.”

CMHC said there could be as many as 470,100 resales in Canada this year, and expects that number to rise to 485,500 in 2012.

“We expect balanced market conditions to prevail and the average MLS price to remain fairly flat to the end of 2012,” the report stated.

CMHC said 186,750 new homes would be built in 2012, compared to 191,000 for 2011. Analysts generally agree that at least 175,000 new homes are needed each year to meet demand from new families and immigration.

“Ontario, Saskatchewan and Nova Scotia’s growth will be the strongest, while Prince Edward Island and British Columbia are forecast to see modest growth,” CMHC said. “The other provinces, on the other hand, are expected to see decreases. In 2012, housing starts are forecast to increase in British Columbia, Alberta and Manitoba.”

Other highlights from the report:

· Posted mortgage rates will remain relatively flat until late 2012. For 2012, the one-year posted mortgage rate is expected to be in the 3.4 to 3.8 per cent range, while the five-year posted mortgage rate is forecast to be within 5.2 to 5.7 per cent.

· Single starts have rebounded coming out of the recession. After an increase in the third quarter of this year, they are expected to moderate before rising later in 2012.

· Since the beginning of 2011, new listings steadily outpaced existing home sales. As a consequence, the resale market has moved from sellers’ to balanced market conditions.

The agency said the economic outlook for the country was uncertain, making it difficult to forecast growth in the housing market.

“Sustained financial market uncertainty has heightened risks but, there are both upside and downside risks to the outlook,” the agency stated.

The positive: “Some upsides include the potential that the U.S. could recover stronger than is forecast, thus increasing U.S. employment and economic growth. This could, in turn, boost employment growth in Canada and lead to stronger than anticipated housing demand.”

The negative: “Some downsides include a slower than expected recovery for the U.S., reduced economic growth in emerging economies and a downturn in parts of Europe. Such events could result in slower employment growth in Canada, which could lead to lower demand for housing.”

Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca

Is Zoopraisal Just a Fancy Word For "Wild Guess?"

 Article written by my colleague Asif Khan – Re/Max All-Stars

As word of Zoocasa’s new property value guessing game made it’s way around the internet, messages began to flow in from clients and colleagues. Is Zoopraisal a game changer or just simply a game? Can the values be relied upon? Is Brookfield not owned my Royal Lepage? Is this an invasion of my privacy? Will my ex now be able to find out the value of my home? Why are the numbers off by so much? All valid concerns, yet nothing to worry about. l’ll share a few of my thoughts here:

Appraising a property’s value can be as automated as diagnosing medical conditions through a computer program. Imagine going online, selecting your body type, sex, height and weight from four or five drop down boxes and then selecting symptoms from a field of three or four predetermined choices like cough, fever, rash, and loss of appetite, then have the computer generate a diagnosis. As the hourglass spins, you wait with great anticipation as your diagnosis is being determined. All of the sudden a box pops up and you now know you have pneumonia. How comfortable would you feel that the diagnosis is correct? Now let’s replace your health with your most important monetary asset – your home. How confident would you feel about your home’s value when determining the same by selecting from a few drop down boxes and choosing from a few predetermined fields?

CTV’s headline read “New service bypasses agents, offers free home appraisals”. There couldn’t have been a more misleading statement to lead off the report on Zoocasa’s new Home Appraisal system. In fact, the word “appraisal” should not even be mentioned in the same sentence/paragraph as this system. It is nothing more than a “wild guess”. It is ironic that the “Zoo” feels they can replace the human element when it comes to something as subjective as property values. Zoocasa’s business model is to have Realtors and Mortgage Brokers advertise on their site to fund it’s initiatives. Yet, obviously Zoocasa is creating a perception that they are a service which “bypasses agents” as this is the second time Zoocasa has been painted in this light. Is this not a classic case of biting the hand that feeds you? Zoocasa will argue that this is not the case and they are a “Realtor Friendly” site. However when the media is led to believe that Zoocasa is being built to “bypass agents” one would have a valid argument.

Today, Canadian Appraisers expressed their concern with the inability of Zoopraisal to provide true values to the consumer. With unique characteristics that can be found from home to home, it is unlikely that a computer generated value would be accurate. There are many factors to consider when pricing a property for sale or evaluating a price for purchase. Each home will have a wide variety of upgrades, updates and specific enhancements that increase or decrease it’s value from the average homes in the area. Outside of upgrades and enhancements, one needs to consider market conditions, competition, supply and demand. To rely on a computer generated value that is based on neighbourhood sales data – which may or may not be accurate – is misleading to the public.

The “Zoo Keepers” are working to persuade realtors to believe this new tool will benefit consumers and real estate professionals in determining true values for homes. On the contrary. Zoopraisal will confuse the general public even more by providing unattainable figures, thereby undermining the value of a Realtor and their ability to accurately determine the proper value of homes. To give you an example, I recently listed a home for $429,000. The home sold for very close to asking price and set a new record in it’s immediate area for price. The value of this home on Zoopraisal is stated to be $685,000. When searching my own home, which is valued at about $750,000, Zoopraisal gives me a value of approximately $594,000. Being a Real Estate Professional, I know Zoopraisal’s values are off base, however if I were a consumer and trusted the figures to be reliable, I would put myself in a compromising situation when pricing my property. Zoocasa’s failure to manage expectations from their launch of a fictitious value determination tool will cause a lot of problems as we move forward. If used for entertainment and taken with a grain of salt, it is a great way to spend a rainy afternoon. If relied upon for accuracy, which unsuspecting consumers will do, how will that affect not only the Real Estate industry, but also the banking industry when it comes to refinancing?

In my opinion, this upstart version of the USA’s Zillow may be positioning themselves to rival the MLS system however is it going to be a contender or just a pretender like others that have come and gone? They are riding on the coat tails of the circus that has been created by the Competition Bureau’s attack on the Real Estate industry to gain popularity, while endearing themselves to Realtors by providing banner ads for a fee. I love Zoocasa’s demographic information, and feel they do provide some value during the home buying process. I am disappointed with their venture into the “guesstimate” home valuation technique, and feel this will make a mockery of the property valuation process. As one of the first advertisers on Zoocasa, I’m disappointed in the direction they seem

headed. Signs at the Metro Zoo read “Do Not Feed The Animals”. The time may be here to apply the same advice at another “zoo” and protect my hands from being bitten.

Asif Khan, ABR
Member of Re/Max Hall of Fame
Re/Max All-Stars Realty Inc., Brokerage
905-888-6222


Ben Sage, Sales Representative. Re/Max a-b Realty Ltd., Brokerage. 519-536-7535. 521 Dundas St., Woodstock, ON
www.facebook.com/SageAdviceRealEstate  www.bensage.com www.oxfordcountyhomes.ca