Eight Top Cottage Destinations in Ontario





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A home is the biggest transaction most of us will ever make. That’s why it’s important to work with an experienced and knowledgeable real estate agent. For more than 20 years, RE/MAX has been the leading real estate organization in Canada and beyond. With a presence in over 100 countries and territories, the RE/MAX network’s global footprint is unmatched by any other real estate brand. RE/MAX has always been an industry leader, adopting the latest technology and creating innovative marketing programs. RE/MAX was the first brand to expand its reach world-wide through a revolutionary global listing site, featuring listings from more than 80 countries, displayed in over 40 languages. Closer to home is RE/MAX’s deep commitment to the communities we operate in. Our exclusive Miracle Home Program allows RE/MAX agents to donate a portion of every home sale to Children’s Miracle Network.

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2022-05-21 14:04:29

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Should You Rent to a Bankrupt Tenant?

This week’s question comes from Andrew on the Real Estate Rookie Facebook Group. Andrew is asking: How would you handle a prospective tenant that has a bankruptcy on their record? 

Tenant screening is almost as important as rental property screening. A bad tenant can not only cost you potential rent but cause thousands or tens of thousands in damages if not handled correctly. This is why landlords are so strict when evaluating tenants, as a good tenant can mean next-to-nothing maintenance and a bad tenant can mean habitual headaches. It’s up to you whether or not a potential tenant meets your criteria. When evaluating, remember to stay within your legal limits!

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie, episode 184. My name is Ashley Kehr, and I am here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we give you the stories, the information, the inspiration you need to kickstart your real estate investing journey. So my wonderful co-host Ashley Kehr, what’s new? What’s going on?

Ashley:
Not much. We’re supposed to have great weather here in Buffalo this weekend, so that’s exciting. And then I think it’ll probably go back to another snowfall or something. But I had put an offer in on a campground last week and didn’t hear anything back from the people, they followed up, or I followed up with them, had my business partner follow up with them and then it ended up, they didn’t even see our offer. So they actually looked at it called us back a couple hours later, no, we’re not going to do it. So we went back, reran numbers and what, we submitted our second offer was, there was a lot of land with this property and we don’t need all of the land. So we actually submitted our next offer with less of the land where they can actually parcel off some of the land, sell that separately, or keep it for themselves. So hopefully that’s a big enough incentive for them to accept the offer. So we sent that second offer last night and hopefully…

Tony:
Fingers crossed.

Ashley:
It just gets accepted.

Tony:
Wait, so how many acres will it end up being if you, for what you submitted on this last offer?

Ashley:
So it was all together, total is 211 and we’d get about 107, I’d say.

Tony:
Oh, that’s awesome.

Ashley:
It’s kind of like a creek ravine that kind of makes a separation between where the campground is and the, some vacant land. And there’s still plenty of room to expand with that 100 acres too, if we ever wanted to.

Tony:
It’s so mind blowing to me, like how big these properties are that you’re looking at, because I always make fun, right? Because, in California where I live, it’s a new development. It was built in 2018 and literally every house that’s on an eighth of an acre, something stupid like that. So to hear 200 acres, it’s like my mind doesn’t, can’t compute.

Ashley:
Yeah.

Tony:
Well, fingers crossed, you guys get that one. That should be an exciting project for you.

Ashley:
Thank you very much, I’m excited for this one. So what’s new with you?

Tony:
Same, we’re chugging along on this resort and in Big Bear Lake. So me and the Alpha Geek Capital team, we’re doing all of our due diligence. So we had our first meeting with the attorneys yesterday to get the syndication paperwork kind of in place. And met with the CPA, who’s going to help us get that piece dialed in. So I’m hoping that by I like, or there’s some time travel happening now, but by second week of May, we should be able to actually open up the syndication and start doing the whole shebang. So it’ll be fun, it’ll be a really good learning experience for us. And, we’re excited and what’s even crazier Ashley, kind of funny, but kind of not. So, as we were kind of going through our due diligence and we were rerunning our financial model, we realized that there was a broken sale in the model.
So it was double charging, one of the expense line items. And it was a pretty big expense line item. And so when we caught that, we fixed it and the returns just went way up from what we originally expected. So it’s like, we did all this negotiating with this kind of broken financial model. Got it under contract at this price and now we fix it and the returns look even better. So it was, me and my partner were laughing about it, but it was, I guess, a lucky break for us.

Ashley:
Right, that you found it too and didn’t…

Tony:
Right.

Ashley:
Give on the deal, cool. Well, that’s really exciting. And I can’t wait to kind of follow you along on this journey and it’s definitely going to be a great opportunity for anyone that invests in your syndication. I mean, you have more than enough experience and knowledge in the short term rental space, so.

Tony:
Oh, well, thank you, Ash. I appreciate that, and hopefully it all turns out well, so we’ll see. Well, cool. Well, we got a good question for today. This one came from the Real Estate Rookie Facebook Group. So if you guys are not in the Real Estate Rookie Facebook Group, it is literally one of the most active, the most engaging Facebook Groups out there for real estate investors, especially for the new ones. Every time I go in there and I try and answer a question I can’t, because someone’s already jumped in and answered it with probably just as good as I would’ve answered it. So if you’re looking for a community, the Real Estate Rookie Facebook Group is the place to be. But today’s question comes from Andrew Threatt. So I’m going to go ahead and read off Andrew’s question. And Andrew says, “how would you handle a prospective tenant that has a bankruptcy on their record?”
“I know it sounds obvious, but for context, I recently had a potential tenant reach out to me. He checks off all of the boxes so far based on his word”. And then he put in quotes, “I haven’t done the official background check yet, still in the pre-screening phase”. And Andrew goes on to say, “he’s a recent, divorcé and said, the bankruptcy is from his wife, taking out a couple of credit cards in his name without him knowing”. Any thoughts or input on how you would move forward with this? I plan to let him apply so I can conduct an official background check, but just want to see anyone else’s initial thoughts. So Ash, what are you thinking? Are you letting the recently divorced bankrupt tenant get the spot or how do you feel about that?

Ashley:
I don’t know. I mean, that’s so tricky because to have to say like, oh yeah, that’s not a big deal. I think the first thing is, do you think he’s being genuine and do you think that’s actually the reason? And that’s the hardest part is telling if, what somebody is saying is actually true. So, but also if you think about it, somebody who has gone through bankruptcy or foreclosure, their option is to rent. They’re not getting a bank loan, they’re not getting a mortgage on a new property to live. So going, they have to go and rent. So after, that they have no other option. So I would think that because they can, they have no other place to live. They don’t have an option to go buy a house or anything, that maybe as a rental, they’re going to be a renter and hopefully pay because they don’t have any other options at the point.
And then there’s also some, I think RentRedi, maybe does this. There are a couple property management software platforms that you can actually offer your tenants that when they pay rent, it reports it to their credit. So that way, they can establish better credit by making those rent payments on time. So maybe looking into something like that, and if the guy really is looking to rebuild his financial history, put a system like that in place so that if he does default, it’s just going to hurt his credit history even more.

Tony:
Yeah. And those are really good points, Ash. You’re right, if you almost have a guaranteed long term tenant, at least for a little while, right? While, that’s, this person’s kind of working up to rebuild their credit profile. So, really good points. I think the only thing I’d add to that is that Andrew, there are other things you can look out outside of just the bankruptcy to see if this person is potentially good tenant or not, right. So I think the first thing I would look at is their DTI. If they’re sitting like a 70% DTI, then maybe it’s not really the, those credit cards that were driving everything, right? If he filed this bankruptcy then went out and got a whole bunch of new debt, then it’s like, okay, maybe this person just isn’t great with their finances. But if they’ve got a really big salary and relatively no debt after this bankruptcy then maybe, what they’re saying is correct.
So other thing you can do, Andrew and I actually used to work as a leasing agent when I graduated from college. And this is what we would do at that company is we would charge different deposits based on that potential tenants risk profile. So if this guy recently had a bankruptcy, maybe instead of charging him, first and last, maybe it’s first and last plus something else. So that way, if there is some kind of issue where he’s not paying, at least you’ve got a bigger security deposit to hold onto. And the last thing I might look at is just his employment history. If he’s been bounced around from a different job, every 90 days, maybe he’s not the most stable person. But if he’s been at that same job for the last decade, I think that’s another just kind of thing to show that he’s a steady stable person. So even outside of this bankruptcy, I think there is some data points you can look at, to kind of assess whether or not there’s some risk with this guy maybe moving in and then not paying.

Ashley:
Tony, just to add on to the point, the second point that you made. I wouldn’t know this unless the law changed in New York state, but in some states in New York, including there is actually a limit on how much you can charge for a security deposit. Or if you can even charge the last month’s rent. So the security deposit has to equal the first month’s rent. So in New York, that’s not even an option anymore that you can actually charge an additional security deposit or more money down on the apartment. So really the only way I guess, to get around that is to increase the rent…

Tony:
The rent.

Ashley:
Or charge some fees for, a higher pet fee every month or something like that. But, so that’s just one thing to be careful for. And like we’ve talked about before is make sure if you are going to self-manage and be a landlord that you know, what your local and state laws are and what the fair housing compliancies too.

Tony:
That’s a good point. And I guess I should preface that by saying that neither Ash or I are attorneys, nor do we pretend to play one on podcast. So talk to your…

Ashley:
And neither of us are self-managing rental folks right now.

Tony:
Right.

Ashley:
Like a couple years ago when I was self-managing I could very confidently roll off what the list estate laws are for New York and what good has to do, but I don’t think they’ve changed since then. But there could be that chance that they have, or that I don’t remember them correctly, but I do know that you can’t charge more than the security person less. And a great resource to go and look for this information is to Google your local housing authority. So in New York, so I live in Buffalo, the closest one in the Buffalo area is Belmont Housing and homesnewyork.org or.gov. And they’re the two local housing authorities. Belmont gives out the section 8 vouchers and they do tons of free or low cost landlord classes.
And then the same with the homesny.gov or.org website too. And they even publish a book every couple years with tenant landlord laws that they give out to one that’s for tenants and one that’s for landlords too. So definitely a great resource, if you guys want to check that out. And I think Tony, touching on your point, how to look at different things, that’s so important because I remember when people would ask me, well, what, what’s the income I need to make to get this? Or my, the biggest one was my credit score. Is this, is that going to be okay? Am I going to be able to rent? And you’re right, it’s like a majority of factors. It’s not just one thing that you should be looking at, like this guy’s bankruptcy. For example, if somebody had medical bills that they didn’t pay, we never even took that into account.
We didn’t even factor that. But if they have an auto loan, they’re not paying, we definitely take a look at that. And the software out there today, too, that you can use. So whether it’s through a property management website or not, it will account for all of those factors and you can go in, you can set your criteria and then they will tell you yep, this person passes your criteria or no, it doesn’t, based on the factors. So I think kind of taking out that personal opinion can definitely help you stay in compliance with fair housing laws by using these softwares, by setting your criteria like, okay, this is the minimum credit score. This is the minimum DTI, they have to have, this is what their income has to be, two and a half times what the rent is, things like that.
And then kind of the decision is out of your hands. Once in a while, I remember the software would be like, it needs review. Like it’s not a pass or a fail, but so check out property management software or different credit screening and background screening software too, you guys can use. Okay. Anything else Tony, to add to that?

Tony:
No, I think we hit everything, Ash.

Ashley:
Okay. Well, thank you guys so much for joining us on this week’s Rookie reply. If you guys have a success story or this podcast has made an impact on your life, and maybe you just got your first deal or your next deal, we would love to hear about it. So please leave us a review on your favorite podcast platform and also send us a DM with any questions you have or leave us a voicemail at 1-888-5-ROOKIE. I’m Ashley at @wealthfromrentals, and he’s Tony @tonyjrobinson. Thank you guys, and we’ll be back on Wednesday with a guest.

 

 

 

2022-05-21 06:02:32

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What The Fed Won’t Tell You

I’m about to tell you everything the Fed doesn’t want to say to you. 

Let’s start with the obvious: Most of us don’t like to see interest rates rise. Sure, it’s nice to make a little bit of extra money off our savings accounts, but the higher cost of mortgages, consumer loans, and all other forms of credit isn’t worth a few extra dollars of interest in our bank accounts. 

But here’s the thing.

The best way to quell inflation is to raise interest rates. This does two things:

  1. It increases the cost to borrow, so people don’t buy as much crap. 
  2. It increases the amount of money you make by saving, so people start to save more.

When people are spending less and saving more, demand decreases. When demand decreases, prices go down.

But how high do interest rates need to go to calm inflation?

The conventional wisdom is that nominal interest rates (the actual interest rate number) must be higher than the inflation rate to reduce inflation. This is because people need to understand that they are not losing value by holding cash. Rates higher than inflation will allow us to not lose money by saving.

With inflation at around 8%, you may be thinking that it means we need to raise rates from the current 1% mark to over 8%. But luckily, that’s not the case. As rates start to rise, inflation starts to subside, and there will be some point of equalization somewhere between the current 1% interest rate and the 8% inflation rate. 

Where is equilibrium? Nobody knows. 

It may be that raising rates to 2% is enough to drop inflation back to 2%, a number we should all be pretty comfortable with. But it’s also possible that we may need to raise rates to 4%, 5%, or more to achieve the desired goal. 

In theory, the right move would be to continue to raise rates a little at a time until we hit that equilibrium. And then perhaps a little bit more to push inflation down to a comfortable level. 

But there are a couple of real constraints that make things more complicated. Unfortunately, some of these constraints are at odds with each other. 

Let’s talk about two things the Fed doesn’t like to discuss publicly. 

Stagflation

The first is the risk of stagflation. You’ve probably heard this term, but for those who haven’t, it’s essentially a situation where we have both inflation and a recession. 

Inflation is typically a sign of a strong economy, but uncontrolled inflation can create a downward spiral that can destroy the economy for years or decades. 

An excellent example of this is Japan in the 1990s and 2000s. In 1991, the Japanese government spiked rates to curb inflation, popping their economic bubble.

japan's lost decade in GDP
Visualization of Japan’s “Lost Decade” of GDP decline following interest rate hikes in the 1990s. – ADB Institute

This plunged Japan into a low growth, high inflation environment for the next 20 years called the “Lost Decade.”

So, how do we avoid stagflation?  

Conventional wisdom says that to avoid stagflation, we need to raise rates quickly, shock the system, quash inflation, and get things back into the normal rhythm. 

Many people have suggested that this is the right move for the Fed to make at this time. Even if it plunges us into recession, it’s better than risking a spiral into stagflation, which could be a much worse and longer-lasting economic downturn. 

This brings us to the second constraint that we’re facing in this current economic crisis that makes things complicated.

Raising rates too high too quickly could cause an irreversible debt crisis. 

When we raise interest rates, bond yields (the interest paid to bondholders) rise. Since Treasury bonds are simply debt that the U.S. creates, raising interest rates means we need to pay more interest on our national debt. Just like when we take a mortgage on a rental property, the higher the interest rate, the harder it is to cash flow due to the higher interest payments. 

When interest rates and bond yields rise, the government spends more money on interest payments. This means we either have to borrow more money (again at the higher interest rate) to pay all that interest, or we need to spend less money on items such as welfare, defense, education, infrastructure, and other programs. 

The government is clearly not good at spending less money, at least historically speaking.

US government spending chart
Chart of United States government spending since 1980USAFacts.org

So what would likely happen is that we’d have to start issuing more debt to make our interest payments, which would increase our total interest payments, which would force us to increase debt even more, which forces us to print more money. Do you see the problem here?

The national debt spins out of control—even more so than it already is—and we risk having to either default or restructure. 

So there’s our dilemma.

We have to increase interest rates to reduce inflation, and we have to do it quickly to minimize the risk of stagflation. But, if we do it too drastically and too quickly, we run the risk of a national debt crisis. 

Final Thoughts

So, next time you hear about Jerome Powell and the Fed acting in ways that make it seem like they don’t know what they’re doing, keep in mind that things are a little more complicated than they might appear.  

Next time you hear the Fed admitting that a soft landing seems unlikely, this is why. Going for a soft landing (doing things slowly, hoping there’s no major economic fallout) will likely lead to stagflation. I don’t think a soft landing is in the cards this time around. Not even trying is probably for the better. 

Unfortunately, we’re in a position where we have a bunch of not-so-good choices, and nobody seems to want to admit it to the American people.  

While I don’t particularly enjoy making public predictions, I’ve planned for at least a couple more rate hikes in my business, likely at least a half point each. While that won’t be much fun for us as real estate investors, the alternative could be worse.

2022-05-20 15:12:36

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5 Great Reasons to Move to Manitoba





Residential Logo


  • Reasons to Move to Manitoba
RE/MAX Canada
RE/MAX Canada

Visit the blog

Follow us on Facebook,
Instagram &
Twitter

A home is the biggest transaction most of us will ever make. That’s why it’s important to work with an experienced and knowledgeable real estate agent. For more than 20 years, RE/MAX has been the leading real estate organization in Canada and beyond. With a presence in over 100 countries and territories, the RE/MAX network’s global footprint is unmatched by any other real estate brand. RE/MAX has always been an industry leader, adopting the latest technology and creating innovative marketing programs. RE/MAX was the first brand to expand its reach world-wide through a revolutionary global listing site, featuring listings from more than 80 countries, displayed in over 40 languages. Closer to home is RE/MAX’s deep commitment to the communities we operate in. Our exclusive Miracle Home Program allows RE/MAX agents to donate a portion of every home sale to Children’s Miracle Network.

Learn more about RE/MAX and real estate franchise opportunities in Ontario-Atlantic Region and Western Canada.