Three Strategies to Earn on each DEAL $500

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The introduction of the new governmental measures on the “cooling” of the real estate market reached its goal, and the market “froze” for the whole summer. Many newspapers and other mass media sources are overloaded with messages about the correction of the real estate market in Ontario and its downfall. In many areas of our region the real estate prices have decreased. However, question arises: in comparison to what prices did this decrease occur? Virtually, the prices have lowered in relation to their level in February – March of the current year, when an incredible jump in prices was detected during the short period. But if, for comparison, we take October 2016th prices, then we can observe that in October of the current year the prices on independent houses did not change in average, and on townhouses even up to 7.5%. The record-breaker in price growth of 2017 are the condominiums. Their prices for the same period have increased up to 21%. In fact, this is not surprising at all, as condo prices have been fluctuating significantly for some time already. Statistical analysis for a relatively long period shows that the average rate of price growth in real estate is 6% per year.

When real investors make decision to purchase real estate, they never solely rely on its price growth. The main component in the decision making for the investment is CASH FLOW, conditioned by its invested property. That’s why a temporary “stillness” in the real estate market is a perfect chance for the investors to close profitable deals.

Let’s take the city of Barrie as an example. In a short little while the house prices have been slightly lower than in February – March of the current year. But this does not carry a huge importance with present conditions. More significant is the fact that in February – March the demand on these houses was substantially higher, and the houses were sold for the prices larger than they were initially set. Today’s goal of the investor and an agent is to find a motivated seller and buy a house for the price lower than it’s original value. The prevailing situation in the real estate market of Ontario even more impedes the purchases of houses with a positive CASH FLOW. Nevertheless, there are different strategies allowing to significantly increase it. In this article I would like to introduce three strategies, in my opinion, most efficient ones, bases on the current conditions.

Strategy 1: Duplex

01The creation of duplex, in other words, dividing the house into two separate apartments is not a new strategy. In the previous articles, I have been informing on how it’s done in different cities of Ontario. Below are the calculations based on the real house, where you can observe how a negative CASH FLOW has increased up to $700 a month after the creation of duplex.

 Single FamilyDuplex
House price$470,000$470,000
Downpayment$94,000$94,000
Renovations$0$30,000
Mortgage$376,000$376,000
Property Tax$3,600$3,900
Insurance$800$1000
Rent$1900$2600
Expenses$1850$1900
CASH FLOW$50$700

Strategy 2: Rent to own (RTO)

02I started applying this strategy in 2011, and at that time it was very beneficial due to a stable price growth in real estate. However, when this growth began to get characterized by a two-digit number, the popularity of RTO dramatically decreased. In the present time with a stabilized price growth and significant complications of conditions to receive a mortgage, this strategy regaining it’s appeal. Briefly speaking, in RTO the tenant is paying rent which is slightly higher than the average price, and by that he/she is earning credit for a future Down Payment to buy out a rented property. Additionally, tenant makes a deposit which allows him/her to buy this house in 2 – 3 years for the pre-established price, which usually gets determined based on the 5% annual price growth.

 

 Single FamilyRent To Own
House price$375,000$375,000
Downpayment$75,000$75,000
Deposit $10,000
Mortgage$300,000$300,000
Property Tax$3,000$3,000
Insurance$800$800
Rent$1,700$1950
Credit $400
Expenses$1550$1550
CASH FLOW$150$500
Buy out price after 3 years$440,000

Strategy 3: Buy & Hold

Recently, not only property prices, but also rent prices have increased. Today you can purchase a townhouse for $375,000 and rent it out for $1,700 a month. You can instantly tell that this investment will start bringing CASH FLOW immediately, even if it’s a minor one. After 5 years you can renew the mortgage on the remaining amount, therefore decreasing monthly payments to the bank. This, along with the increased monthly rent, will noticeably bring up your CASH FLOW.

 Single FamilyAfter 5 years
House price$375,000$375,000
Downpayment$75,000
Mortgage$300,000$263,000
Property Tax$3,000$3,000
Insurance$800$800
Rent$1,700$1805
Expenses$1500$1400
CASH FLOW$200$405

In conclusion, if you can purchase 5 houses, and in 5-10 years you will become financially independent, but this could happen even sooner than that. Naturally, the question arises: where to get these $500,000 for the

purchase of 5 properties. The simplest answer: use the money of others! You can get a full desired amount from a credit line under your house or under the invested properties. Only one thing needs to be done: make a decision and take a first step!

And remember:

Without money working FOR you….

…you will NEVER stop working FOR money


About me

Alex

I have a lot of experience in real-estate investment. My main focus to invest in Barrie, Hamilton, Thornhill Woods, Innisfil, Cambridge, Kitchener and etc. I implement different investment strategies: Rent To Own, Student Rental, Multi-unit Rentals, and Flipping.

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