- Joined
- May 8, 2019
- Messages
- 51
Hi REIN members and followers,
First, I analyzed few macro economics factors (average incomes, housing affordability index, in-migration and demand, transportation expansion etc.) and came to the conclusion that the city of Montreal is a good area to invest in real estate.
Like taught in the book written by Don R. Campbell (Real Estate Investing in Canada), instead of spending hours and hours to calculate the total projected income and total debt service (Property Analyzer), for each property I am interested in, I started to use a coarse filter to discard the majority of properties quickly and effectively and keep only the ones with good chance of giving positive cash flow.
To explain the coarse filter I am referring, here's a short explanation from Don R. Campbell from his book (Real Estate Investing in Canada):
So the challenge I am facing here is the difficulty to get the Gross Annual Rent from the online websites displaying properties for sale.
I understand that only Real Estate Agents and Real Estate Brokers have access to the MLS (Multiple Listing Service) which would give the Gross Annual Rent when the property has been previously rented.
As an investor, I do not have access to the MLS database so to get that information I have to contact the real estate agents and brokers which I started to do. My concern is that I don't want to bother them and send them tons of emails or call them regularly to ask for the Gross Annual Rent. Is there someone who has a better way to proceed to apply the Authentic Canadian Real Estate (ACRE) system from the REIN network?
I am also planning to walk in the neighbourhood of my potential area to collect phone numbers of owners who are looking to sale their properties to ask them for the Gross Annual Rent and the Purchase Price to calculate the Cash Flow Zone % to then move to the next step of the analysis (Property Analyzer calculation).
Thank you and looking forward to hearing from you.
First, I analyzed few macro economics factors (average incomes, housing affordability index, in-migration and demand, transportation expansion etc.) and came to the conclusion that the city of Montreal is a good area to invest in real estate.
Like taught in the book written by Don R. Campbell (Real Estate Investing in Canada), instead of spending hours and hours to calculate the total projected income and total debt service (Property Analyzer), for each property I am interested in, I started to use a coarse filter to discard the majority of properties quickly and effectively and keep only the ones with good chance of giving positive cash flow.
To explain the coarse filter I am referring, here's a short explanation from Don R. Campbell from his book (Real Estate Investing in Canada):
This filter is a simple yet powerful mathematical formula that has been refined from a much larger and more complex analysis tool. It is your safety mechanism designed to keep you away from properties that will eat up your investment capital and give you nothing in return.
The complex formula took lots of time for an investor to work through, as it had many components such as interest rates, expense ratios, property price, property taxes, down payment, market demand and other factors. Then one day we analyzed the results of all these calculations, and a very clear mathematical pattern became obvious. Every time a property worked under this formula, there was a direct correlation between the amount of rent it generated and the purchase price.
So rather than completing a complex, detailed analysis right away on every property, you can now use the following formula as your first step in determining the potential of an investment property.
(Gross Annual Rent / Purchase Price) × 100 = Cash Flow Zone %
The key number is 10 percent. If the gross annual rent is 10 percent or more, you have a very good chance that the property will provide you with good positive cash flow. As that percentage increases, your cash flow will increase. As it decreases from 10 percent, your chance of that property providing you with positive cash flow decreases. If the gross annual rent of the property is 8 percent or more of the purchase price, then the property is still worth further investigation as it sits within the Cash Flow Zone.
So the challenge I am facing here is the difficulty to get the Gross Annual Rent from the online websites displaying properties for sale.
I understand that only Real Estate Agents and Real Estate Brokers have access to the MLS (Multiple Listing Service) which would give the Gross Annual Rent when the property has been previously rented.
As an investor, I do not have access to the MLS database so to get that information I have to contact the real estate agents and brokers which I started to do. My concern is that I don't want to bother them and send them tons of emails or call them regularly to ask for the Gross Annual Rent. Is there someone who has a better way to proceed to apply the Authentic Canadian Real Estate (ACRE) system from the REIN network?
I am also planning to walk in the neighbourhood of my potential area to collect phone numbers of owners who are looking to sale their properties to ask them for the Gross Annual Rent and the Purchase Price to calculate the Cash Flow Zone % to then move to the next step of the analysis (Property Analyzer calculation).
Thank you and looking forward to hearing from you.