Real Estate Talk: The Holiday Break
The Holidays are a good time to take it easy before selling in January
By Joseph Marovitch
This column usually consists of real estate concepts and we are about to begin a series of articles explaining the first process of purchasing to the latest process of investing, within the framework of a new normal. There may be a vaccine available but return to normal will not occur immediately, if ever.
However, it is not a bad thing to take a break and enjoy family and friends without the stress of a pandemic or insane world politics. There is good ahead as we overcome the pandemic with vaccines and adjusted social behaviour, and the world will go on with or without us.
Now can be a great time to place property on the market since interest rates are incredibly low and buyers outnumber sellers. However, the last 12 months have been extremely stressful and placing a property on the market, maintaining the house, and allowing strangers to enter while we are trying to have some semblance of holiday spirit may just tip the scale and lead to binge drinking or a stress fracture (hopefully not).
… if we take the rest of December to tone down, take walks, watch movies, and eat well (I still recommend routinely using the home gym), we may find that everything brightens up and January will look very promising.
Prices in real estate will rise, slow or fast, but upwards. It is not expected that interest rates will jump up any time soon since most retail business are having a tough year.
Therefore, if we take the rest of December to tone down, take walks, watch movies, and eat well (I still recommend routinely using the home gym), we may find that everything brightens up and January will look very promising.
Starting in January, we will be discussing the following processes: purchasing, selling, pre-approval, mortgages, inspection, warranty, latent defects, documents, environmental testing, staging, assessing the market campaign, pricing, open houses, visits, resale considerations, working with brokers and why, the OACIQ, certificates of location and much more.
Should you have real estate questions, whether pertinent to this article or not, do not hesitate to contact me via the question section below or via email, text or phone. I can always be found on LinkedIn or Facebook.
Next week we will discuss home gyms, their advantages and resale value in the new normal.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
Next article: Home gyms, the new trend
State of the market
Depending on the age category, there is either excitement or hesitation to purchase real estate. According to a recent study by the APCHQ (Association of Construction and Housing Professionals of Quebec), ages 18 to 34 are hesitant to purchase property at this time since the employment situation has been precarious and income is diminished for now.
However, for those in the older age category, there is an excitement that better times are on the way. For those older individuals who have a nest egg to support them through the pandemic, there has been little to spend on over the past few months and capitol has been accumulating.
‘Interest in retail space has been recently growing. The idea is to rent space for restaurants, bars, and stores because entrepreneurs expect an explosion of repressed wants and needs when the word is given that all is safe.’
The news has spread that there are several vaccines available to combat the virus and inoculation has begun. As time has passed during lock down, suppressed demand to eat, drink, and live has been growing to the point of bursting soon. Therefore, everyone is excited and preparing for the time when all can go back out into the world, socialize, and get the wheels of the economy rolling again.
Interest in retail space has been recently growing. The idea is to rent space for restaurants, bars, and stores because entrepreneurs expect an explosion of repressed wants and needs when the word is given that all is safe. It is expected that this feeling of freedom will move across the board to real estate, and the overall economy. We should see more property on the market, more consumers and more big-ticket purchase items.
Let us hope!
Have a great week and please stay safe!
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Other articles by Joseph Marovitch
Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or josephmarovitch@gmail.com
Thank you Joseph for the informative articles.
I am having trouble finding detailed information
on how to determine the economic value of a Plex.
If it is beyond the scope of your readers, though I am convinced some would be interested, maybe you could direct me in the right direction.
Thank you
Hi Julien,
The bank requires an evaluation when a mortgage is involved and the mortgage is being insured by the Canadian Mortgage and Housing Corporation. This means that if the borrower defaults on their mortgage, the bank will still receive their money from the CMHC. To insure the CMHC will cover the loan, the bank evaluation is usually higher than a market evaluation.
For the purpose of a market evaluation for the purpose of purchasing or selling, there is a formula to determine the rate of return called the capitalization rate:
Net Income / Purchase Price x 100 = Cap Rate
Most multi-residential income properties, meaning properties of six units or more, should have a cap rate of 5 or higher to be in a profitable zone. Therefore, if you formulate a cap rate of 3.5, this would indicate the property is priced too high to be a good investment. You would want to reduce the price to bring the cap rate to around a 5 or 5% return on investment.
Eg. Net Income $35.000 / Purchase Price $950,000 x 100 = Cap rate 3.6
– This property is priced too high and it will be difficult to make a profit, taking into account unforeseen maintenance issues or renters who default on their rent.
Eg, Net Income $35,000/ Purchase Price $675,000 x 100 = Cap rate 5.18
– This property is well priced and chances are very high that this property will receive several offers within 24 hours of being placed on the market, if marketed properly.
Note that in purchasing or selling an income property, the cap rate must be verified by being able to examine the current leases, all expenses and the condition of the building.
If the leases are not accurate, or the expenses are higher than stated, or if the building requires significant repair, any increased expenses or devaluation of the building will reduce the cap rate, in which case the price may have to be reduced, accepted as is, or the offer cancelled.