Hi Folks!

[MooseHead]

Hi Thomas,

Thanks for the reply. I am currently in northern Ontario, specifically Fort Frances. I`ve been living here for about 2 months now. The low numbers for rents was just a number crunch to show I would be safe renting at extremely low rent and a high interest at 8% with a 15 year amortization.

The second set of numbers I crunched came up with about $7000 net cashflow a year which is a little more realistic. Monthly rents would be more around the: $500, $650, $1000 mark.

Properties are very cheap here. Fortunately, the area draws a lot of temporary professionals from across Ontario who aren`t looking to buy such as teachers, police officers, border services officers (myself), nurses, and construction workers. Many of them commit to a posting for a couple of years before moving back home.


Oh, I almost forgot!

The bank has countered my offer of $62,500 with $81,500 (which was expected). I put in a new offer at $64,000 and lined up a few more properties to go see with my real estate agent. We`ll see what they do from here. If they don`t come back with a reasonable counter I plan on walking. Give them a couple of weeks and they might come around. I`m sure they would like to get rid of the property before winter comes to avoid paying for the heating, driveway shoveling, insurance, etc.

Thanks again Thomas for the input, it is much appreciated.

Cheers,

MH - Chris

 

[bizaro86]

Based on your numbers, this sounds like a good (maybe great!) deal to me. I have 2 concerns, that might be worth considering.

1) How is the economy in this area? Is it growing (or at least stable), and is the population staying stable? You`d hate to end up with a property that you can`t rent to cover even the utilities/taxes, or at any price (ie, Detroit).

2) Does this fit with your life? You mentioned there are many transient professionals. Are you one of them? If you intend to live in this area for the forseeable future, that`s great. Otherwise, you should look into the availability of professional property management now. If you were to move to some other part of the province/country, you`d find it difficult to manage from a distance, and small town revenue properties aren`t always quick sales. If you`re ended up stuck with it, you`d want competent management.

Just some thoughts, it sounds like you`ve got a good head on your shoulders and a potentially great property.

Michael

 

[Thomas Beyer]

QUOTE (MooseHead @ Sep 12 2010, 07:01 PM) ..
The bank has countered my offer of $62,500 with $81,500 (which was expected). .. I`m sure they would like to get rid of the property before winter comes to avoid paying for the heating, driveway shoveling, insurance, etc.

..
keep in mind that one day YOU have to think like the bank ! i.e. you wish to sell ! Then you have to hire and pay for an onsite manager and gardener/snow shoveller .. so keep in mind the EXIT strategy which is VERY hard for a 4-plex in a very small town !!

15-20/door seems reasonable in any case !!

 

[vandriani]

One more thing to consider if you do purchase the property:

Caveat: I`m assuming that it is vacant

Rent the units at a fair market rental rate right out of the gate. Do not rent the units at a lower rate and expect to increase the rents substantially afterwards. Ontario has some very specific rules about rental increases.

 

[MooseHead]

Thanks guys for the great advice. The bank came back with a counter at $81,000 ($500 off their last counter) with "please advice if buyer does not respond". I had my agent advise them that I will not be placing a new offer on the property and decided to walk. We`ll see what happens, but it looks like I won`t be purchasing the property which is fine.

I`ve learnt a lot and I proved to myself I am able to walk away from a deal that isn`t working out without getting emotions involved.

Anyways,

I`ll keep on learning, living, and looking for new properties.

Thanks for all the help.

Cheers,

Chris

 

[MooseHead]

Property #2
Well after putting a stop on the negotiations for the triplex, I`ve found another property that I`m interested in. It is a 4plex with four seperate elec/gas meters zoned commercial. The 4plex is made up of 4 apartments for residential use and there is no longer a business in the front of the property (converted to 1 bdr apt). In addition to the 1 bdr apt, there are two 2 bdr apts and one 3 bdr apartment.

I`ve checked the zoning and here are the residential permitted uses:

C. RESIDENTIAL AND OTHER USES
a) Single-family dwelling.
b) Rooming house or boarding house.
c) Duplex dwelling.
d) Semi-detached dwelling.
e) Multiple-family dwelling including apartment houses and row houses.
f) Home occupation, of any nature which does not adversely affect the
amenities of the neighbourhood.
g) An office or consulting room of a physician or dentist, when located in
his or her residence, or on the ground floor of an apartment house in
which he or she is resident.
h) School, church, hospital, community centre.
i) A private club.
j) Accessory building incidental to any of the above uses.


I`m fairly certain it would fall under the multiple-family dwelling category. Here is the multifamily building and lot requirements:


MINIMUM LOT AREA AND FRONTAGE
Multiple-Family:
No multiple-family dwellings shall be erected unless both public water supply and
sanitary sewers are available.
Minimum lot area .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 sq. ft.
Minimum landscaped area . . . . . . . . . . . . . . . . . . . . . . . . . . . 40% of total lot area
Minimum frontage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 feet
EXCEPTIONS: A multiple-family dwelling may be erected upon a lot of 80 ft.
frontage if it was held in separate ownership on the date of passing of this by-law.)
Minimum open space in rear yard . . . . . . . . . . . . . . . 600 sq. ft. (combined uses)
Maximum total floor area . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80 times area of lot
Maximum lot occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25% of area of lot


The lot is only 5000 sq. ft. which is only half the requirement. The landlord had a pizzeria in the main unit before which changed the property to: combined commercial/residential which only requires a property size of 1000 sq. ft. I`m assuming he went and changed the unit to residential without looking up the zoning bylaws.

 

[bizaro86]

Interesting issue. Is there a type of zoning in your municipality that would allow for what the property is being used for, and could it be changed to that? Could you get an exemption, with a specific zoning category created for your property? In Calgary we have "Direct Control" districts, where council can modify existing zoning types to make exceptions to the usual rules.

I would get it sorted out before closing, probably by making "resolution of zoning satisfactory to the buyer" a condition on the purchase contract.

I suspect if you are purchasing small revenue properties in rural ON, you`ll have a lot of negotiating power.

Michael