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Five Family Fun Activities While Quarantined

While we all practice physical distancing, remain home and self-quarantine/isolation, let’s look at some ways we can all stay busy & active…and have some fun!

Together, we are facing a truly unprecedented situation. The global COVID-19 pandemic is affecting our families, our businesses, our communities, and our way of life.

#1 – Crafts, crafts & more crafts!

Not only is crafting a great activity to share with family members, there are quite a bit of other benefits too! Scientific studies even show that being concentrated in doing some form of crafting is beneficial for our state of mind. ��It helps us relax, gives us a sense of satisfaction, improves our mental agility & motor skills…and makes us feel happier! We found this site from Good Housekeeping that lists a bunch of activities for the whole family! Have fun crafting…and share some of your creations & craft ideas with us too!

DIY Thumbprint Family Tree (our personal favourite!)

#2 The Family that Cooks Together, Stays Together We’re well aware work, school, homework and other responsibilities can eat up so much of our time, it’s hard to gather together.  If your family is already making cooking together a priority, that’s awesome!  If not, NOW is the perfect time to do so! Cooking together gives families a time to bond; it nourishes our relationships and helps us connect with each other.   Settings aside one or two days a week to cook, experiment, create together…and then EAT, gives us something to look forward to!  Friday pizza day, Saturday game night…whatever works best for you and your family.  Get cookin’!

#3 Keeping Fit If you’re not already incorporating an exercise plan into your daily routine, again, NOW is the perfect time!  With everyone home and gyms closed across the province, there are so many ways everyone can keep fit.   Being physically active together helps your children build healthy habits for the future.   And in these trying times, cardiovascular health helps you improve sleep, reduce stress and even minimize illness.  Whatever activity you do, make your family fitness enjoyable…it’s as important as the physical activity itself. We found some really creative ideas on the Mommy Poppins website; let us know some of your favourites or list your own!

#4 Rearrange & redecorate your living space “Design is coming to grips with one’s real lifestyle, one’s real place in the world. Rooms should not be put together for show but to nourish one’s well-being.” —Albert Hadley

We couldn’t say it better ourselves! You don’t have to be a ‘designer’ to know what you love, want or need with regards to arranging your personal space. While we’re all spending more time at home, why not do some rearranging to help elevate our mood?  Research tells us that when we arrange items in a way that makes sense for us, we’re brought to a higher level of inner and outer harmony…like the idea behind ‘feng shui,  it’s all about creating the best energy for whatever activity is intended for a specific space.  It might also be a good time to de-clutter…it’s known to help one feel less anxious, more peaceful & confident.   Give it a try!

#5  Stay in Touch For many of us in today’s world, being isolated can be a little easier to manage thanks to social media and modern technology.  When we receive support from others, or offers of support, it can be an important element in feeling socially connected.  Phone calls or video-chats foster closeness but so can the occasional text or link share.  We all love to hang out with friends and loved ones, eat and drink together and form those ‘deeper connections’; and we can still keep those connections alive!  Schedule a video-luncheon or remote game night, create friend group chats or watch movies & shows with friends using Netflix Party.  There are also some fun apps aimed at friends & family fun such as Marco Polo, a video chat app and Houseparty, a party game social app.

For those not connected to social media, tangible offers to drop off food or supplies or a heartfelt card/note to see how someone is handling things goes a long way.

We’ve included a few other sites that may help you navigate your self-isolation or quarantine while flattening the curve.

Santé Montreal

Health Canada | Santé Canada

World Health Organization | Organisation mondiale de la Santé

On a personal note…Our hearts and wishes go out to anyone who has been impacted by this virus.

We are truly inspired by the selfless healthcare employees and other essential workers around the world who are on the front lines working tirelessly to care for and service people in need.

Matthew is a of your community and we are dedicated to supporting you all through this unprecedented time.   Stay healthy, stay home, practice social distancing and together, we will get through this.  

[matthewmessinamorinrealtor]

Tips to help win in a bidding war situation

In a seller’s market, it is extremely common to have multiple offers on a single property. Buyers find themselves making offers on many different homes before they are finally able to win the bidding war. This leads to a lot of wasted time, stress, and frustration for the buyer. While price is one of the biggest deciding factors when a seller decides to pick an offer, there are still several strategies a buyer can use to make their offer more attractive and increase their chances of winning once they have maxed out their purchase price.

Here are my top three tips to help you win your next bidding war.

 1.       Submit a pre-approval letter or proof of funds with your offer

A seller wants to know that the buyer will not have any issues getting financing once the offer is accepted. Accepting an offer and then having it fall through weeks later is a nightmare for the seller. They have wasted valuable time and energy and must start the process all over again. Having a pre-approval letter from your lender will put the seller’s mind at ease.

What can be an even bigger advantage is removing the financing condition all together. This can be done if you have enough funds to cover the price of the property. You would simply provide a proof of funds resulting in one less condition that can make the offer fall through.

 2.       Offer ideal terms for the seller

The terms stated in the offer are also very important for a seller. They might want to sell as fast as possible as they need the proceeds of the sale to pay for the next home they are moving to. Having the deed of sale and occupation date sooner rather than later might help your chances.

The sellers may not have found a place yet, or are only planning to move months down the road. These sellers will have a perfect date in mind for the deed of sale and occupation to make their lives easier, and to potentially save money.

Besides closing dates, you must respect the seller’s inclusions and exclusions. Do not ask for extra things in the seller’s home such as their appliances. Not only will this have a financial impact, but a psychological effect as well. Leave the inclusions and exclusions as is.

The best way to get to know the ideal terms for the seller, is to ensure your real estate broker has a conversation with their real estate broker. The seller’s broker will gladly communicate the best terms for their clients.

3.       Build a relationship with the seller

Now I am not saying to go meet them in person or have a telephone conversation, but having the seller get to know you can really increase your chances that they choose YOU, not just the offer.

I suggest a few different strategies to build rapport with the seller. First, you can write them a letter speaking about yourself and why you love their home so much. Do not start talking about how you intend to renovate or change the property in any way. Also mention how you intend to contribute to the community. Selling a home is an emotional process and sellers want to know their home is in good hands and that they are leaving their neighbours (potentially good friends) with a great new neighbour.  

To level up your letter, you can make a short video, less than a minute, which speaks directly to the seller. The content can be the same as the above-mentioned letter. This will help them put a face to the offer.

Lastly, have your real estate broker go present the offer. They are your best representative and advocate to not only clearly present the terms of the offer, but to also sell YOU. They will make sure to highlight you and all the great terms you have included in the offer that benefits the seller.

If you simply have your offer emailed to their broker, it will simply be words and numbers on a pdf. The seller will not be emotionally tied to you in any way.  

Bonus tip! Offer the seller free rent.

Here is one last pro tip that is a little more creative. A lot of sellers want to sell as fast as possible to get the equity out of their home for their next purchase, but they do not want to necessarily feel pressured to move out right away. You can offer to go to the notary within a relatively short period of time, but then only occupy the home at a later date. It is customary in Quebec to start paying ‘rent-back’ if the occupation date is more than seven to ten days after the deed of sale. Imagine giving the seller a few extra days or even weeks to get their personal affairs in order all while living rent free! This can take a huge load off the seller and save them money. There are several ways this type of deal can be structured, yet I just wanted to highlight the possibility of offering rent back for free or at an attractive rate.

 I sincerely hope utilizing these tips will be able to help you get the home of your dreams without losing it to another more attractive offer in a bidding war. If you have any questions or need any advice, please feel free to call, text, or email me anytime.

[matthewmessinamorinrealtor]

Multi-Family Math: The Cap Rate

Understanding the math and different metrics behind multi-family investments is essential in helping you make a decision in which property to purchase. Knowing your numbers will make the difference between a fruitful real estate career and a bad investment. One of the most common metric investors use is the capitalization rate, also known as ‘cap rate’. By the end of this article, you will understand the application of the cap rate and know how to easily calculate the cap rate for multifamily properties.

The Cap Rate Defined

Income is the revenue generated from the property in the form of rent. It can be from monthly rent, rent of a storage locker, rent for parking spots, and more. Operating expenses are typically the municipal and school taxes, insurance, energy costs (heating, electric), landscaping, and any other fixed or variable costs associated with running the property. It does not include debt service (the mortgage payments, capital + interests), depreciation and tax write-offs. Be careful not to confuse the net operating income with cash flow. Cash flow (CF) is equal to net operating income (NOI) minus debt service (CF = NOI – Debt service)

To get the net operating income, we must first remove the bad debt and inoccupation rates from the gross revenue. It is typically expressed as a percentage of the gross revenue (aka gross income). For example, if 3% of tenants are behind on their rent and the property has a 2% vacancy rate, then 5% (3% BD + 2% IR) should be subtracted from the gross revenue.

For example: Gross income = $100 000 , and the bad debt (BD) + inoccupation rate (IR) = 5%

$100 000 – 5% = the effective net income (ENI) = $95000

From this effective net income (ENI), you would further subtract your operating expenses (sometimes written as OPEX) to get your net operating income (NOI).

To recap,

GI – (BD + IR) = ENI

ENI – OPEX = NOI

NOI – Debt service = Cash Flow

Now, the capitalization rate is simply defined as the NOI divided by the cost of the property as a percentage. For example, if you have a 5% cap rate market, you are paying $5 for every dollar of NOI. 

Here is an example: NOI = $100 000 and purchase price = $2 000 000

Cap rate = ($100 000/$2 000 000) x 100 = 5%

When and why we use the cap rate

The capitalization rate is used as a tool to value a property based on the net operating income. This is an income approach to evaluating a property. The cap rate is used in three main instances.

The first, it to determine the sale price of a property. For example, if your NOI is $100 000 and you want to sell your property at a 5CAP, you would divide your NOI of $100 000 by 5% and get a sale price of $2 000 000.

If you are an investor, a cap rate will help you determine the amount to offer for a property based on comparables sold in the market. For example, if properties in your market sell at a 7CAP (7%) and you determine that the NOI is $100 000, then you would offer $1 428 571.43 ($100 000/0.07 = $1 428 571.43). 

Lenders also use the cap rate in their underwriting process to guide decision making in lending capital.

A higher cap rate would indicate a bigger risk associated with the property (less demand for the asset affecting its value, older property, etc.) while a lower cap rate indicates a lower risk due to the increased demand of the product. To reiterate, the more you pay for a property as compared to its NOI, the lower the cap rate will be.

Risk factors in multi-residential real estate include the geographic location of the property, the tenant population, the terms of the lease (think tenant friendly vs landlord friendly laws) and general volatility of the market

Pros and limitations of the cap rate

The cap rate is quick and easy to calculate. Anyone can go onto their local MLS site and easily calculate dozens of properties to compare one from the other. While the cap rate is simple and fast to calculate, the first limitation is that it does not take into consideration the value-add potential of a property, meaning the potential to increase the income (rent) for the property. It also does not take into consideration the potential for appreciation of the property as seen with the internal rate of return (IRR).

Cap rates in Montreal

According to the first quarterly report of 2020 by CBRE, cap rates for high rise A properties are between 3.75%-4.25% and between 4.25%-4.75% for high rise B properties. For low rise properties, cap rates average between 4.50%-5.00% for class A and between 5.00%-5.50% for class B. These historically low cap rates are a result of investor interest in this asset class, combined with a low supply.

Now that you understand what a cap rate is and how to calculate it, I encourage you to visit your local MLS site and evaluate at least ten properties to determine their cap rates.

If you have any questions at all, please do not hesitate to contact me by phone, email, or through any social media platform.

#mutlifamily #multiresidential #multiplex #realestate #realestateinvesting

[matthewmessinamorinrealtor]

15 Signs You Have Outgrown Your Current Home

Outgrowing a home can happen in many different forms for a variety of reasons. From simply lacking the space your family needs to taxing commutes, there are a wide range of factors that indicate it is time to look for a new house. Keep reading for 15 signs that you have outgrown your current home.

 1. Your family has grown.

Whether you’ve added more children to your family or you plan to grow your family in the coming years, it is probably time to think about sizing up. When you have more kids than bedrooms, things in the house can get tense. Some children have no problem when it comes to sharing rooms while others require their own personal space.

 2. Your kids are getting older.

As your kids get older, it may become more difficult for them to share a room or live in a smaller space. They need a place to do homework, practice for sports, or leave their stuff for an extracurricular activity. They also need furniture that better fits their needs, including larger beds and dressers. If your house does not have the space to accommodate growing children, it is time to find a bigger home.

 3. You want a better school district.

When your kids reach school age, it is time to consider their educational needs. Your current home may be a great place for a family of young children or toddlers, but are you located within a good school district? Consider whether or not your kids will get the education they need and if they will be in the same school as their friends.

 4. You are losing sleep.

It may not seem like an obvious sign, but losing sleep can signal that you have outgrown your home. Having a crying baby without a room of their own can be draining for new parents. So can older children that argue or get into scuffles caused by sharing space. You may also just feel cramped or uncomfortable in your current home, which causes you to toss and turn at night.

 5. You have already renovated your space.

It is possible to make a smaller home work for a growing family – for a while. You may have already converted your dining room or office into a bedroom for your children or taken out walls to open up your space. If you have already completed renovations or DIY projects and still find yourself needing more room, it is time to look for a bigger house.

 6. You need room for your parents or in-laws.

When aging family members move into your home, it is important that they have some level of privacy and independence. Having multiple generations in one home is great for family bonding and connection, but it can quickly lead to tension and irritation. Avoid the drama by ensuring everyone has their own space.

 7. You work from home.

If you recently started working from home, it is crucial to have a dedicated office space. Working in living areas or bedrooms can lead to distraction and cause frustration when you are trying to get work done. Look for a home that has an office with a door, so you can get work done in peace and quiet.

 8. Your closet space is gone.

Closet space is a key indicator that you have outgrown your home. When you have no room left for your daily essentials, it is time to move into a bigger house. If you have already combed through your belongings, getting rid of anything that is unnecessary, and still find yourself without enough closet or storage space, your house is too small.

 9. You have too many people sharing a bathroom.

Bathrooms are another sure sign it is time to move into a bigger house. When too many people share one bathroom, it leads to morning traffic jams, arguments, and constant irritation. Starting your day with bickering and shoving in the bathroom is less than ideal. Consider looking for a home that limits the amount of sharing per bathroom.

 10. You don’t have room for guests.

When you grow your family or convert a bedroom into an office, you remove a potential guest room from your home. Guests now have to sleep on a couch or bunk with someone else when they come to visit. This will greatly decrease the visits you receive from your family and friends and indicates that it is time to find a bigger home.

 11. You’ve added new pets to the family.

Pets are fun and exciting, but they also require space. Your new puppy needs a backyard to run in, and your new lizard needs room for a proper tank or enclosure. No matter what pets you decide to bring into your family, it is important to provide the room they need to grow and thrive. It is also essential to their safety, ensuring they are out of the way of danger.

 12. You keep bumping into things.

How many times have you stubbed your toe on the coffee table because it is too close to your couch? Do you find yourself shimming in between your bed and dresser to lay down at night? These inconveniences may seem small, but they build up over time. If your home does not have enough room for you to comfortably maneuver, it is too small.  

 13. Your commute is too long.

If you have recently changed jobs and find yourself sitting in the car for hours each day, it is likely time to move. A long commute can be draining, especially after a full day of work. Moving closer to your job can give you more time at home and less stress along the way.

 14. Your neighbors have all moved away.

If your neighborhood no longer feels familiar, it may be a sign that you have outgrown your current home. Is your neighborhood full of young parents, empty nesters, or retirees?

When your neighbors and friends all move away to houses that better fit their needs, consider if it is time for you to do the same.

 15. Your house doesn’t feel like home.

Overall, it is important that your house feels like home. If you feel cramped or crowded in your space, it will leave you feeling uncomfortable and anxious. You may not even be able to put a finger on the reason why you feel so uneasy. Moving to a bigger home that better fits the needs of your family can help put your mind at rest and make you feel at home again.

[matthewmessinamorinrealtor]

Is Buying a Multifamily Home in Montreal a Good Investment?

Discover how to find good deals in today’s real estate market.

As a commercial real estate broker, I often get asked;

Is it a good investment to purchase a multifamily1 home in Montreal?

The short answer is yes, depending on your investment goals and your ability to look for potential! Are you hoping to pull out your down payment within a specific time frame? Are you looking for a passive or active investment? Is cash-flow the most important thing for you, or is building equity just as good?

Another important factor to consider is the type and size of the multifamily home.  In the eyes of most financial institutions, a small2 multifamily home is less than 6 units (or apartments) while a large multifamily property has 6 and above (this is also considered a ‘commercial property’ although the units are residential). The reason this differentiation is so important is because financial institutions will decide to lend you funds to purchase the property based on your personal debt ratios3 as opposed to the property’s market value based on the revenues generated by that property. This has two major implications: one, you are limited by how many small multifamily properties you can purchase, and two, it is more difficult to force the appreciation of the small multifamily property’s value because it is based on comparables4 sold (parity method5) as opposed to the revenue generated (income method6).

Here is a fictional example to illustrate the difference between the parity method and the income method for evaluating a property’s value.

You purchase a duplex in Lachine for $500000 and decide to sell it a year later. Two other duplexes on the same street have both sold for $510000 within the last month, an increase of 2%. Using the parity method, your duplex is now worth around $510000, regardless if you increased the rents or not.

Now, imagine you purchase an eight-dwelling multifamily home in Villeray for $1000000 and increase the rents by $5 per month, per dwelling. This will instantly increase your property’s value by $12000, regardless of what other similar properties in the area sold for.

You are probably thinking “What!? How did that happen?”

This happened using what is called the net income multiplicator, or NIM.

The NIM is calculated by dividing the sale price of a property by the net revenue8 generated by that property. For example, if a property sold for $1000000 and its annual net revenue is $50000, it has an NIM of 20x. Meaning, the property sold at 20 times its net revenue. Going back to our fictitious example of the 8-plex in Villeray, if the average NIM is 25 in the area and the net revenue is $40000, then the value of the property is $1000000. That means that for every dollar generated, the value of the property increases by $25 dollars! Put a $1 in, get $25 out. This is the magic of real estate!

NIMs have never been so high in Montreal and it is scaring some investors away. For savvier investors, they see enormous potential to increase the value of a property exponentially through optimization7. Optimization is the ability to increase the value of your property by increasing the revenue (i.e. increasing rent, renting a parking space, etc.) and decreasing expenses (insurance premium, heating paid by tenants, etc.). Optimization is the key to turning the expensive multiplex into a great investment. Let’s say you raised the rents by $5 in an area where properties sold at 15 times the NIM. This means you will only increase the value of your property by $7200 ($5 x 8 units x 12 months x 15NIM). Now let’s say you raise the rents by the same $5 amount but in an area with an average NIM of 25. This will end up increasing the value by $12000 ($5 x 8 units x 12 months x 25)! Starting to see how a high NIM can actually be a good thing?

Another reason the inexperienced real estate investor is shying away from investing in multifamily properties today is because of the all-time low capitalization rates9. Ah, the famous cap rate! Simply put, it determines your return on investment and is expressed as a percentage. For example, if you have a cap rate of 5% (aka a ‘5CAP’), it means that for every $20 you put in, you get $1 out (1/20 x 100). You should also know that the cap rate has an inverse relationship with the NIM (1/NIM).

Again, where some people see a low cap rate, others still find ways to find ‘a good deal’. This is where experience and vision comes into play, but will be a discussion for another day. I just wanted to quickly highlight the relationship between the NIM and capitalization rates.

In conclusion, purchasing a multifamily property in Montreal this year is a good investment, and I would argue…better than ever! Today’s real estate investor may be paying a historically higher ticket price for a property, but they also have the opportunity to optimize and rapidly build a large amount of equity because of the high NIM.

“Opportunities are presented to us each and every day, but do we see them?”

               – Catherine Pulsifer

So the next questions are, how do we find a property that has the greatest potential for optimization, and what optimization techniques can be used to exponentially increase the value of that property?

Contact me anytime to discover the answers to these questions.

You can also fill out the form below and I will send you a list of properties I believe have potential for optimization.

Definitions:

Multifamily dwelling, multiplex: Also known as an apartment building. Strictly speaking, a commercial multifamily unit has 5 dwellings and more while a residential multifamily property has less than 5 dwellings. Financial institutions consider lending money for properties by grouping them in different ways i.e. 1-4, 5-6, 7+. Debt ratio: The debt ratio is calculated by dividing total liabilities (things that cost money) by total assets (things that create money). In this example, a liability may be a car that you lease or a mortgage payment. An asset is something you own and generates value. If your debt ratio is too high, banks will not lend you money. Property comparable: This is a similar property recently sold in the same area. Parity method (comparative value): This method looks at other similar properties sold (see ‘comparables’) to determine the value of the subject property. Income method (economic value): This method determines the value of the property based on the revenues generated. Optimization: This is achieved achieved by increasing the revenues and decreasing the expenses of a property. Net revenue: The revenue generated by the leases, minus the operating expenses of the building (i.e. property taxes, management fees, etc.). Capitalization rate (‘cap rate’): The cap rate is the rate of potential return on a real estate investment. It is calculated by dividing the expected annual income generated by the property, minus operating expenses, by its total value.