TOP 10 WAYS TO PREPARE FOR THE LANDLORD AND TENANT BOARD IN ONTARIO

Think that your landlord tenant lease is enough to protect you because of tenant didn’t pay their rent?

Think again. In Ontario, the landlord tenant board stacks the odds in favor of the tenant.

Any property manager and real estate investors who owns cashflow residential real estate can tell you how frustrating it is dealing with a tenant who is destroying your property and NOT PAYING RENT.

Trash everywhere, destroyed walls, stained carpets, damaged doors…and you cannot throw these vandals out on the spot?

Going through this for the first time, I felt violated, helpless, and most of all angry. How can the rules be so stacked against me? How can this be fair? Asking myself these questions over and over was sending me a loop. I can see why most people feel burned and never want to invest in real estate, the loss is so personal.

Going through these experiences early in my career was a blessing, because I now know how to play the game to win, I know how to set up the systems preventing me from ever getting to that breakpoint again. Thanks to April “The Terminator” Stewart, whose company, Landlord Legal, mission is to save to save landlords and real estate investors from ever reaching this breaking point I’ve compiled the Top 10 ways to prepare and win at the Landlord Tenant Board hearing.

1. Don’t accept excuses for late rent: serve an N4 as soon as they are late
2. Follow directions exactly on all Board forms – 100% accuracy is a must
3. Serve the documents by accepted methods as listed on COS
4. Pay attention to Termination Dates! Again 100% accuracy!
5. Don’t Go Blind: Obtain legal advice or representation prior to the Hearing
6. Make sure you have up to date evidence and records ready in triplicate
7. Provide a copy of your evidence to the opposing party before your case is called, preferably at the start of the Hearing Block
8. Consider mediation at your hearing – for a result that can’t be appealed
9. Address the Member as Mr. Chair or Madam Chair
10. Show respect for the other party and the Board Member at all times

Happy Property Investing

Why Smart Investors Buy During Times of Economic Uncertainty

In today’s market place, everyone is talking about the negative impact the recession has had on people’s wealth and standard of living. All you hear is how businesses are losing money, laying off workers, investors losing their savings and the list goes on and on.

However, nobody is talking about the massive opportunity that this recession presents to everyday people like you and me. For example, if you look at the price of stocks and real estate, they are down significantly. Currently, the focus is on how these assets have performed recently.

Nobody is talking about the fact that there are rock solid companies trading at dirt cheap price or that one can pick up prime real estate properties 10-20% below current market value.

While the mainstream media may not be pointing out these opportunities, astute investors have identified this opportunity and jumped on it. Here are a few examples:

1. Warren Buffet (one of the most successful investors of our time)has spent tens of billions of dollars buying banks and insurance companies in 2008 and 2009.

2. Oil companies have used the price correction in the share price of their competitors as a buying opportunity and purchased them completely. Suncor purchased Petro Canada for more than $20 billion dollars. However, at today’s market price, Suncor got Petro Canada at a 30% discount compared to the peak share price of the company a year ago.

Today, Sinopec (a state controlled Chinese Oil Firm) purchased Addaxx Petroleum for $8 Billion.

3. Bank of America purchase Citywide Financial close to a 90% discount from its peak valuation in 2008.

4. Nokia just entered into an agreement to purchase Nortel’s Wireless unit at a fraction of what it its worth.

5. Fiat is buying Chrysler for below book value. By the way, Fiat is not like your ordinary North American auto company. They are thriving relative to their competition and have the money to buy their broke competitors.

So the question becomes:

Why are these large sophisticated investors and companies spending billions of dollars buying assets in today’s recession?

Do they know something the rest of us don’t know?

Why didn’t Warren Buffet, Suncor, Bank of America and Nokia buy these companies when times were better and economy was growing at 3 % a year? Was then not a good time to buy instead of now?

The answer is:

1. Astute investors make decisions based on fundamentals and strength of the asset, not on emotion and fear. They are able to see past today’s recession and see long-term opportunity for growth.

2. They know that the best way to make money over the long term is to buy solid assets at deep discounts. For them, this is a ripe season to pick up such assets and profit handsomely when the market starts growing again. An excellent example of this is when Donald Trump bought 40 Wall Street (office tower) for $1 million dollars during the 1980’s recession. Now its worth hundreds of millions of dollars!

3. They realize that you can’t get discounts on stocks, companies and/or real estate when times are good.

So when you are presented with an opportunity to buy any investment in today’s economy, don’t be shackled by the fact that we are in a recession. Do your homework and make sure that the investment you are buying is of high quality. Once the market turns, these high quality companies or properties will make you a handsome profit. Also, be comforted that you are buying quality assets at a discount. Which opportunity would you rather choose buy quality assets at high market value or buy them at significant discounts. Your choice will dictate your success.

I rather chose the second option. Happy investing!

Why real estate investors should care about the Synchrotron

One question that I always ask: How can we find the towns where growth will be strong before anyone else knows about it?

To find up and coming markets is a difficult task, there is no one answer because there are multiple different factors working together...lots of research by Ajay and I helps us understand what's going on to spot trends.

What we have learned over all of our research: what a city and its residents do today will have a huge impact on its real estate for years.

So what does this have to do with the synchrotron? Everything.

In 2004, the synchrotron was built in Saskatoon for a cost of over $170 million. The synchotron in Saskatoon is world class and has many different applications. Companies from computer engineering to medical research rely on the synchrotron for their research; as a result, high paying skilled jobs are being created now and expect more in the future...which is great for real estate in specific neighborhoods in Saskatoon.

Right now change is happening at an accelerated pace as governments are spending their way out of the recession. A communities ability to mobilize local resources to get provincial and national funding will be key to it's future success.

While most cities realize this, they don't always make the right choices (hello Windsor...how does it look in hindsight building your schools around Chrysler).

Research what's happening around your town and see how you can profit from it.

Gentrification in Action

Toronto is home to the largest re-development in the western world. I've been to a number of the consultations over the past two years and I'm pretty excited for the future.

I think people get pretty frustrated at the speed governments do things. I think we should consider the impacts of hasty decisions and not doing full studies and consultations...as highlighted by Infranet Lab in a recent blog post

They note that sometimes when things move too quick, politics trump utility:

…the places that are most critical to the country’s economic competitiveness don’t get what they need. The nation’s 100 largest metropolitan regions generate 75 percent of its economic output. They also handle 75 percent of its foreign sea cargo, 79 percent of its air cargo, and 92 percent of its air-passenger traffic. Yet of the 6,373 earmarked projects that dominate the current federal transportation law, only half are targeted at these metro areas.

“Clogged Arteries”, Bruce Katz and Robert Puentas, The Atlantic

WaterFRONToronto seems to be doing things right and I can't wait to see how it get's translated. I appreciate the world class vision they have (examples: make the best street in the world at Queens Quay and make the largest urban park in North America Lake Ontario Park - set to be bigger than central park).

Watch for areas around the gentrification, all the changes will have a positive impact on surrounding real estate.


Check out the videos and enjoy

GDP growth and Toronto

Don Campbell was recently on the Hour telling us Torontonians why Hamilton would be a better place to invest than Toronto. Crazy? No



Picking up on my GDP example from my previous post I remembered an article I read in the Hamilton Spectator. the article noted that Hamilton ranked 7th of all the cities in Canada to do business (see here). Toronto didn't even break into the top 10.

Here's why: it costs too much in Toronto to do business. The article states:

It would cost a 300-person insurance firm or IT company at least $2 million more a year to operate in Toronto than in Hamilton.

So jobs are more likely to be created, real estate is generally cheaper...won't this increase the population? Won't more people working in a town mean more tenants (driving up rents) and more demand for housing (driving up prices).
Amid the bad news, take a look at the back pages to find the opportunities (I mean for clips like this, not the classifieds)

Economic Recovery in Alberta

Here's another reason why it's important to have a long term perspective when investing in real estate: You can spot trends that indicate that prices are going up in a particular area.

Every bank is predicting that Alberta will lead the country in GDP growth in 2010. BMO currently bases their GDP numbers on a $52/barrel of oil in 2009 and $65/barrel in 2010. Currently oil sits at over $70/barrel. As oil price increases, we can expect the GDP number to be higher in Alberta.

GDP growth is a good signal for the an economy's performance because when GDP goes up we can expect consumption, investment, government spending and net exports to be higher. Going through a conceptual example, let's say the is a new road built in town (government spending), this allows a business to open a location that was previously undesirable. The business buys a warehouse and equipment to set up shop (investment), this new business exports goods to the US or gets used at home (net exports) and provides jobs for people (and for new people moving in the area). People use the income from their jobs to buy stuff like buy real estate, and to pay rent...driving real estate up (consumption).

Taking a look at the change in the number of jobs available in Alberta vs Canada illustrates the effect GDP has on jobs. So it's no surprise that every bank expects Alberta to lead in GDP growth will also forecast that the province will lead the country in job creation.

The reason why no one tells you to look at the GDP of the region you buy real estate in is because its not sexy. Sales people know that investors want the nonsensical no money down deals or just look to buy as much real estate as possible...this is not a focused plan to achieve your goals. Study the fundamentals...buy for cash-flow, buy when no one else is buying, and buy under-market value.

After setting a goal you will have perspective on how to invest...Being consistent and persistent in your wealth creation is so empowering. It simplifies your life because you can make a decision on whether something works for you very easily.

This is why I love making 5 year plans for my clients. While people often overestimate what they want in a year...they underestimate what they could do in 5.

Call me, let's make a plan together

Myth Busted: McJobs in the recession

I think we have established that simple supply and demand drives real estate prices. So the key to my business is to understand what drives supply and demand.

On the demand side, one of the key drivers is jobs and incomes.

Lets take a look at the latest research from people who don't care if you buy real estate: CIBC.

CIBC World Markets measures employment quality through its employment quality index (EQI). The EQI measures the distribution of distribution of part-time vs. full-time jobs; self-employment vs. paid employment; and the compensation ranking of full-time paid employment jobs in more than 100 industry groups. Basically it measures if people are leaving high paying jobs to go into McDonald's (McJobs) or starting a new network marketing business.

From the latest EQI stats, despite employment has decreased 2.1% (or 356,000 jobs) the EQI has decreased 0.2%.This is quite different from past recessions where the EQI falls faster than the jobs.

From the report:

During the 1991 recession, the 3% drop in overall employment coincided with a 7.7% drop in the quality of employment.

So what is happening?

Most of the job losses have been in low paying jobs (gasoline station operators, real estate, textile and accommodation services). These are basically jobs by younger people who are less likely able to buy real estate (which won't drive down prices significantly).

So what is going on regionally?
Western Canada EQI is falling faster than the rest of the country because the high paying jobs in construction and in the Oil/Gas industry has fallen dramatically. This is perfect for people seeking opportunities in Alberta because these are the sectors poised to gain the most in 2010 and beyond.

Ontario EQI has fallen only a limited degree (despite losing high paying manufacturing jobs). Quebec and Atlantic Canada (Halifax real estate is kicking butt).

Investing area's going through gentrification

The National Post posted an interesting article about the different homicide rates for different neighborhoods in Toronto. In the article they mention neighborhoods with similar demographics have very different homicide rates.

Why?

Urban observer Jane Jacobs gave a compelling case that neighborhoods are structurally created in such a way that promotes crime.

I saw this first hand in Rochester seeing how crime festers through the way roads, services, businesses, and community infrastructure is designed. This results in significant costs to policing and social programs (both of which are in the top 3 in Toronto spending).

Many investors who dream of finding that one property cheap in a neighborhood that is transitioning should understand two things:

1. Because there is some development (i.e some infrastructure spending, new condo's etc) in a neighborhood doesn't mean it will transition
2. Transitioning will slow significantly because of our current recession.
   

Still think you are on to something?

To avoid being a hero in a market by investing too early or investing in the wrong neighborhood, understand what these barriers are (look at my previous post on the ghetto loop to understand what to avoid).

Think of how many times people have tried to revitalize the downtown East side of Vancouver. Imagine investing there in the past thinking that the millions of dollars going to support the area would change things.

To spot an area that is prime for gentrification and re-development is actually occurring key in on neighborhoods that are pedestrian friendly (what makes an pedestrian friendly will be discussed later).

Take a look at this video from BNN for the positive impacts of making neighborhoods more pedestrian friendly (go to 6:34 mark).

Jan Gehl gave highlights of Melbourne and it's recent revitalization:

• Less purposeful use of the city to more enjoyment and livability
  
• 50% more pedestrians (2x as many at night)
  
• Cafe's and street patios
• All economic factors are up (more turnover, more jobs, higher real estate values, lower taxes)

In the BNN report they gave evidence of the Bloor-Annex (click here to see the study they got their evidence from). Pedestrians outspend drivers (i.e. those going to big box stores) therefore there is more demand from business for the space...creating more traffic in the area and therefore reducing crime and increasing property values.

Every city has people as passionate as Jan Gehl..find them, they're even in Edmonton.

(Thank you David Hamilton for being a wealth of information, I'm glad I can we can be sounding boards for Edmonton's future )

Until next time

WHY MY REAL ESTATE IS IS CRASHING?

According the Knight Frank's global house price Index there are been some major shakeups in the worldwide real estate market.



Short answer is that the pendulum never hits the mark



Don Campbell (author of real estate investing in Canada) recently had a good analogy about real estate. Prices swing from high and low and very rarely stay in the middle (where prices fairly reflect values). Momentum always develops as the market changes because real estate is an inherently inefficient investment.

What I mean by that, very rarely does capital flow into real estate in a manner that actually reflects the value (creating HUGE REAL ESTATE BUBBLES or Overactive selling). While one could say that about every investment, real estate is particularly vulnerable to inefficiency for 3 reasons

1. One could never have perfect information about what a particular value a buyer and seller hold for a property and once they do their deal...the information on price is not readily available. As a result, investors may overestimate or underestimate the value (it's always going to go up...so if I put an offer over-list I’m ok or its going to crash and I’m going to lose everything....sell for whatever we can get)

2. Supply is very limited and usually only comes in the market in chunks because of the lag in construction and planning. Developers can never actually always stay on top of demand because demand changes a lot quicker than they could stop construction and planning (wouldn't it be funny if we had hedge funds buying up all the real estate in a particular neighborhood when prices are low and then start blowing them up to raise values?...um perhaps not)

3. Lenders and financial markets (especially outside of Canada) don't usually give the right amount of capital to lead to a stable market (i.e. Lend too much cheaply or lend too little very expensively. The flow of money, combined with the fact most collateral for loans are based on land, if land prices suddenly drop the flow of capital drastically slows down...leading to credit crisis that we see now.


In short: Monitor all fundamentals to determine what direction the market will be 2 years in the future.