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| | | | | | New Mortgage Products - 1) Joint Venture Secrets Series - Part 1
2) Changes to the Mortgage Financing Rules
3) Tales from the Legal Trenches
4) Final Thoughts - Warning, Not All Real Estate Deals Are As They Seem -
Welcome to the June edition of the Canadian Real Estate Insider. As warmer weather and the summer rapidly approach, we wanted to get this month's newsletter in your hands as soon as possible. This month will be the busiest month of the year for members of the Real Estate Investment network with the following events all planned to make you sophisticated Real Estate investors:
May 31 - REIN™ members workshop in Toronto
June 5 - REIN™ members workshop in Edmonton
June 8 - REIN™ members workshop in Calgary
June 9 & 10 - 15th Annual ACRE System program in Calgary (over 97% sold out!)
June 19 - REIN™ members workshop in Vancouver
June 22 - REIN™ members annual Western Canada field trip in Edmonton (8 buses full - waiting list only)
June 23 - REIN™ members Western Conference in Edmonton
June 26 - REIN™ members workshop in Toronto.
Make sure you check out the Events calendar for all the details of the upcoming events.
With all these events, you can see why we wanted to get the newsletter out to all our subscribers at the beginning of the month, so you do not miss any of the action & information in this coming month. Congratulations to the many of you who have used the information, downloaded free audio and tools directly to your computer and most importantly, implemented these strategies in your Real Estate investing business. This month's newsletter is filled with information and links to key information on the Canadian Real Estate Market. Make sure you read right to the end so you don't miss any details or key opportunities.
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Before we get to all the details of this newsletter, we wanted to bring to your attention a final notice. The Deadline’s Here! In fact, there are only 10 seats left to the upcoming ACRE System in Calgary June 9 - 10. This program provides you everything you need to take advantage of your local real estate market... no follow-up books, tapes or programs required to buy! Over $1.7 billion of real estate has been purchased using what we teach at ACRE System. No hype, no baloney, and definitely not another weekend filled with selling you stuff. Become a knowledgeable and confident Real Estate Investor. Never get fooled again.
To take advantage of the very special $200 Discount Offer PLUS the phenomenal 'success guarantee' and extra Bonuses you must pre-register by 4:00 PM, Wednesday, June 6th ... after that, the offer will expire, and the room will be full (it was 100% sold out the last 8 years in a row)! Click here to read all the details
To read some of the hundreds of comments from the most recent ACRE System here.
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1) Joint Venture Secrets Series - Part 1
By Russell Westcott & Don R. Campbell
This month, we are proud to introduce a series on Joint Venture Secrets. We imagine everyone who subscribes to our newsletter has most likely heard of the term Joint Ventures. If you haven't, you are most likely very new to the Real Estate game and haven't yet decided if Real Estate is for you or not. Creating Joint Venture relationships is a strategy used by the sophisticated Real Estate Investors to create massive Real Estate portfolios with little or none of your own money.
Having trained Real Estate investors for the past 15+ years, the one biggest reason, almost without exception, that people do not buy all the Real Estate they require to create their dream is the issue of not having enough investment capital. At one time or another investors (veteran and rookie alike) run into a capital drought. It may be short or long term. Unspohisticated investors allow the excuse of "I don't have any money" stop them from buying, while sophisticated investors find a solution... and that solution is Joint Ventures.
Joint ventures have been around for over a century in business and in real estate. They are a combination of strengths between two or more parties with a total equaling more than the sum of its parts. In real estate, joint venture relationships are especially effective ways for two or more parties to take more action than they would have if they had worked on their own. One part can be the capital provider, while the other brings expertise and the ability to find property (this is just one very simple example).
It is very important to note that there is a right way and a wrong way to build and operate joint venture relationships. It is important that you follow a proven system to completing your Joint Ventures. Make sure each and every step of your system has been tested and proven in today’s marketplace. No theory, just real life action steps. That way you can confidently become an investment money magnet. Great Joint Venture relationships are a wonderful addition to someone's business life, but a poorly thought out or poorly designed Joint Venture leads to frustration and poor results.
Successful Joint Ventures are based upon a 7 step system that includes:
1) Introduction and Foundation
2) Wealth Attraction Principles
3) Where and How to Find Joint Ventures and the REIN™ Filter System
4) Structuring the Deals
5) Legal structure and agreements
6) Closing the Deal and Pitfalls To Avoid
7) Follow-up and Duplication
Follow these 7 steps to ensure success in your Joint Ventures. This month, we are going to start with the basics and a few important fundamentals so we can help you create a stong foundation on which you can build successful joint Ventures.
How do you structure a joint venture? Each joint venture real estate transaction is unique. They are almost like fingerprints: each one is completely different from the others (although there are some simple templates you can follow). Each can be completely different because there are so many different variables, different people, different expectations and different goals. Each joint venture has key fundamentals that are shared in common. Your job is to look for commonalities, not to look for exceptions. Exceptions will occur no matter what you do. There will be exceptions. Your job as investors and joint venture partners is to simplify and systematize your JV system and then deal with the exceptions.
A legal definition for a Joint Ventures is "the joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by an agreement between parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only rather than a continuing business relationship." This is a little too wordy and "legalese" for our liking, however.
The definition that we use at REIN™ is "an agreement joining together two or more parties for the purpose of executing a particular real estate transaction. Each party has committed to perform certain duties and lives up to those written commitments."
A Joint Venture is not an ongoing partnership. You’re setting up parameters for one type of transaction. That one transaction could be 100 properties, but you’re setting up for one particular undertaking. The second part of the defination states "Each party has committed to perform certain duties and lives up to those commitments." This is crucial. If you say you’re going to do it, no matter how bad the deal is, if you’ve committed to do something, do it. And then when it comes time to renegotiate, renegotiate. But if you’ve made a commitment and it’s not a good deal in your favour, follow through, because you have to take responsibility for the deal you negotiated.
Next month we will discuss the REIN™ Joint Venture foundational principles.
2) Changes to Mortgage Financing Rules
By Peter Kinch
Every spring/summer the banks come out with their new spring market promotions aimed at making it easier for Canadians to get into home ownership. But this year the big announcements were not from the banks, they were from the Insurance Companies and the Canadian Government itself! And this year, they decided to make some major changes. In fact, we’ve seen more changes in the past few months than we’ve seen in the past 30 years!
The first major news was the introduction of a new Insurance player in the market: AIG United Guaranty. For the past 25 years, we’ve only had CMHC or GE (Genworth) to choose from for Mortgage Loan Default Insurance. Now, not only is there AIG, but talk of two more Insurance companies entering the fray, which will give us a total of five (5) by the end of the year. In light of the new competition, Genworth has come out and decided to match any of the new products that AIG proposes and they started by allowing up to 90% financing on rental properties. This is good news for investors, but to make it even better they will allow a 40 year Amortization.
Speaking of high Ratio Insurance, the biggest announcement came from the Government of Canada. They actually changed the definition of a Conventional loan in The Bank Act. For 30 years, 75% financing was a Conventional Mortgage - if you put down less than 25%, the mortgage loan had to have ‘default’ Insurance (ie CMHC or Genworth) to protect the bank - it was the law. Well, that law has now been changed from 75% to 80%. Now when you have a 20% down payment, it is considered a conventional mortgage and will not require high ratio insurance. At this point, not every lender has jumped on the bandwagon to offer it to investors, but it is certainly a sign of the times.
And remember, with all this positive news for real estate investors, it is important to note that even though it’s easier to put less money down, you still need to keep an eye on your debt service ratios. Putting less money down means the cost of carrying the property goes up and it will have an impact on your cash flow. If you are self-employed and need to have positive cash flow from your portfolio in order to qualify, then these new programs may not be very helpful – for now.
So keep an eye on your ratios and let’s hope the next major news is that the debt service ratio limit has been changed to 45%
Until then, happy investing,
Peter Kinch
You can hear financing expert Peter Kinch in the media across the country, or at the REIN™ Member Workshops and ACRE System.
3) Tales from the Legal Trenches
By Barry McGuire
This month's tale is titled:
STICK TO YOUR GUNS
Our member found a recently renovated home with three suites in the Norwood area of Edmonton. Obviously, a lot of work had been done and the home looked pretty good. However, as we did our diligence the title search showed a Notice registered by Capital Health. When we pulled a copy of the notice, it said that the home was condemned. Upon inquiry with the seller's lawyer, he said that the notice was filed before the renovations were done and we shouldn't worry about it. He was prepared to give his undertaking that he would get the notice removed from the title.
Normally we accept another lawyer’s undertaking because he is bound to do what he says he will do on pain of losing his license to practice law.
However, our experience with Capital Health Notices is that they are difficult to have removed. The seller's lawyer was relatively inexperienced and we could tell from how he was handling the rest of the file that he didn't really understand a number of issues. We didn't want to accept his undertaking. If he was going to have difficulty getting the notice removed, having his undertaking might make us feel good but it could lead to an extremely lengthy process, which wouldn't be good for our client. Further, neither the lender nor the Title Insurance Co. were interested in advancing the mortgage or insuring the loan without a lot more detail on the Capital Health Notice.
We suggested to the seller's lawyer that he get a letter from Capital Health indicating they would discharge their notice. He sent us a letter from Capital Health, addressed to the seller, that in essence said,
"Congratulations, you've done a great job, you got everything almost fixed up except for those last few items. Keep going and we look forward to hearing from you."
The seller’s lawyer didn't know what those last few items were and didn't know what it would take to get them done. This discussion had been going on for 10 days and our member was being pressured by the seller and the realtors that he shouldn't worry so much, everything would get done and everything would be fine. In the end, it took a visit from the Capital Health inspector to point out what the last deficiencies were. They guaranteed if the last deficiencies were completed they would provide a discharge of the Notice. The cost and scope of the deficiencies were relatively small. We were then able to accept the seller's lawyers undertaking and with the deficiencies explained the lender decided to fund and the Title Insurance Co. issued a policy of title insurance.
Older areas have health, safety and work order conditions much more frequently than newer areas. Regulatory authorities are slow to take the very official step of registering something against the title. However, once they do they are very sticky about removing their registration. If your diligence turns up any sort of notice by any regulatory body, your very best protection is to accept only a discharge of the Notice.
Final Thoughts
Warning, not all real estate offerings are actual real estate investments.
Yes it's true. There is a real boom, not only in real estate across the country, but we are also noticing a BOOM in the number of 'so-called-experts' coming out of the woodwork selling the latest hot and new strategy. The sad part is they then follow-up and sell you what you think is a piece of real estate (when in fact it is not).
In our continuing effort to educate and inform investors across Canada we'd like to make you aware of what constitues a real property investment so that you know what you're getting into and can make a choice clearly. There is a BIG difference between a true real estate investment and an investment that looks like a real estate investment... and the number one thing is control.
The key to it being a true real estate investment is that you have 100% control and ownership of the title of land that you are purchasing. A good test is: "When I'm ready to exit, can I easily sell it on MLS?" If the answer is no, then you know that it is probably not a true real estate deal... it is a financial investment.
If you are provided an Offering Memorandum or offical prospectus, it is not a real estate investment; it is a financial transaction. Especially if the current owner has pieced it out into shares... make sure you figure out what you are REALLY paying for that share of a property. And is that at market or are they overpricing it by hiding it in share price?
If you have to sign a 'Credited Investor' document before you put your money in, it is a financial transaction, not a real estate transaction.
If the title is not registered at land titles in your name, then it is not a real estate transaction.
Providing RRSP funds as a 1st or 2nd mortgage is a financial transaction (you are the bank), not a real estate transaction.
The best thing about a true real estate investment is that you have 100% control of your future. You are not depending on anyone else to perform to make your investment grow, you have an unlimited market to sell into and you don't have to ask permission to sell.
This is all not to say that all of these types of transactions are bad. It is just designed to help you see what you are investing in, and that your due diligence shouldn't be any less than if you are buying a piece of real estate (in fact, it probably should be even more). Please don't get caught up in the hype of throwing money at anything that looks like a real estate deal. Take a breath, take a couple of days to do some true due diligence. That way you won't get caught in the hype and rush that some people like to create around these deals. Be cautious, be aware and you will do very, very well in the marketplace. And remember that you are in control with a true real estate investment... and control is where the real wealth is created.
See you the ACRE System Event June 9th & 10th.
====== IMPORTANT NOTICE ========
The ACRE System Program (15th anniversary) in Calgary, taught entirely by Canadian best-selling author Don R. Campbell, and special Canadian Real Estate guests (June 9th & 10th) is right around the corner. All of our new research will be released at this special weekend event. In fact there are only 15 seats avaialble for this event. This event will be held at the Calgary Stampede – Big 4 Building (1801 Big Four Tr. SE). If you want to hear the truth about want is going to happen in the Real Estate market you will not want to miss this event.
For all of the details and a special $200 subscriber discount click here.
To read some of the hundreds of comments from the most recent ACRE System click here.
We'd love to hear what you think of this issue.
Please send your comments, questions, and ideas for upcoming issues to:
info@reincanada.com Your feedback matters to us. What would you like to hear more about?
Don R. Campbell and The REIN™ Team
"Turning Real Estate Dreams Into Realities... One Investor At A Time!"
To Tap Into The Latest Canadian Real Estate Strategies Visit reincanada.com
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P.S. Make sure you listen to an exclusive interview with Don R. Campbell talking about what you will learn at the upcoming ACRE System program.
P.P.S. Your opportunity to be in a Canadian best selling book. Calling all Real Estate success stories. Here is a unique opportunity for you to be included in an upcoming Canadian best-selling book. Once again, be reminded of the link for all the details on how to get your story in our upcoming book. Thank you to all the people who have already submitted your story and we look forward to reading more. To read all the details and to submit your story click here.
P.P.P.S. The last two ACRE System in Vancouver & Toronto sold out 8 days before the event. If you are serious and want to learn the unbiased fundamentals of Real Estate make sure you are registered for the upcoming ACRE System event in Calgary. The Calgary event is already 97% sold out, and when all the spots are filled we will be starting a waiting list. To avoid disapointment, click here to read all the details.
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