montblanc investments anyone done business?
- Thread starter mzaurrini
- Start date
QUOTE (mzaurrini @ Oct 29 2007, 09:24 AM) has anyone herd or done buisness with these guys please give me your thoughts.
Hello: I see that nobody has responded to your question. I am also interested in finding out more about Montblanc. Have you been able to get more info from other sources?
Thank You
Elisabet
Hello: I see that nobody has responded to your question. I am also interested in finding out more about Montblanc. Have you been able to get more info from other sources?
Thank You
Elisabet
Hi
I myself was interested in purchasing a property from them. They customer service wasnt the greatest, they dont seem to have answers to all your questions. The two points that concerned me most were:
1. They dont provide you with an independant property appraisal and neither do they let you do your own
2. They force you to use their financier/mortgage broker. You cant use your own broker.
So all in all, my experience hasnt been the greatest.
QUOTE (ekisielewski @ Nov 16 2007, 04:47 PM) Hello: I see that nobody has responded to your question. I am also interested in finding out more about Montblanc. Have you been able to get more info from other sources?
Thank You
Elisabet
I myself was interested in purchasing a property from them. They customer service wasnt the greatest, they dont seem to have answers to all your questions. The two points that concerned me most were:
1. They dont provide you with an independant property appraisal and neither do they let you do your own
2. They force you to use their financier/mortgage broker. You cant use your own broker.
So all in all, my experience hasnt been the greatest.
QUOTE (ekisielewski @ Nov 16 2007, 04:47 PM) Hello: I see that nobody has responded to your question. I am also interested in finding out more about Montblanc. Have you been able to get more info from other sources?
Thank You
Elisabet
If they won`t allow an independant appraisal I would be wondering what are they hiding. And I would not use their broker you don`t even know them.
Hear Hear Mike! I agree. When ever I buy ANY investment I better be able to confirm my own data before I write the cheque. That makes it an investment rather than a blind guess. If you want to pay for your own appraisal you should be allowed that`s for sure.
When it comes to investing, independents is critical. I recommend you take out your Due Diligence Checklists and Property Analyzer Forms from your Quickstart Program and get those questions answered!
When it comes to investing, independents is critical. I recommend you take out your Due Diligence Checklists and Property Analyzer Forms from your Quickstart Program and get those questions answered!
I invested with Montblanc three years ago in one of their condominium investments. It has gone well for me financially as the rents have covered the expenses and mortgage interest as promised.
The mortgage financing was with a big five bank that did the appraisal with one of the banks authorized appraisers so the value was there and Montblanc helped with the process. All in all - a good experience.
My brother and cousin have since each invested over the last year and have had similar good, professional service. They got so much information on the properties from Montblanc - comparables and local market information that it made an inch thick file of data. My wife and I have busy jobs and this has allowed us to own more cash flow producing real estate without the management headaches.
The mortgage financing was with a big five bank that did the appraisal with one of the banks authorized appraisers so the value was there and Montblanc helped with the process. All in all - a good experience.
My brother and cousin have since each invested over the last year and have had similar good, professional service. They got so much information on the properties from Montblanc - comparables and local market information that it made an inch thick file of data. My wife and I have busy jobs and this has allowed us to own more cash flow producing real estate without the management headaches.
I have received my monthly net rental income on time like clockwork. The property is on budget and performing as promised. Steady, regular monthly cash flow delivered every month.
QUOTE (pwilkinson @ Nov 9 2008, 09:01 AM) I have received my monthly net rental income on time like clockwork. The property is on budget and performing as promised. Steady, regular monthly cash flow delivered every month.
I don`t mean to offend you, but you have three posts on this forum and they are all in relation to this topic. You may have had an excellent experience with Montblanc, but your lack of history with REIN leaves the possibilty open that you are shilling. I am not accusing you of shilling, just stating that based on your limited history on this forum that is a possibility.
That being said, welcome to the board. There are lots of intelligent people on here and plenty of great info shared.
Does anyone have a link for Montblanc, I would like to check them out myself to see what they offer.
Neil
I don`t mean to offend you, but you have three posts on this forum and they are all in relation to this topic. You may have had an excellent experience with Montblanc, but your lack of history with REIN leaves the possibilty open that you are shilling. I am not accusing you of shilling, just stating that based on your limited history on this forum that is a possibility.
That being said, welcome to the board. There are lots of intelligent people on here and plenty of great info shared.
Does anyone have a link for Montblanc, I would like to check them out myself to see what they offer.
Neil
I tried but did not workout. I found the person I dealt with pushy, creating unnecessary urgency, and did not have appropriate answers to my questions. The person gave me an impression that we are somewhat compelled to do what they say in terms of appraising the property, arranging mortgage, inspecting the property, etc. Most importantly, no financial information on Montblanc investment is available, without which how can an investor assess worthniess of their three or six years rent guarantee.
I went to their office sometime back in October to see what they are offering, I have found quite a few flaws and mis reprensentation`s within their investments.
1) They dont allow you to get your own broker, and so the way it`s setup is that you end up with a 2nd mortgage that is to be paid back to montblanc at almost 7%
2) the numbers they give you are all botched and don`t add up, so make sure that you do your own calculations.
3) their operating costs increase every year but they dont increase the rent, they tell you they increase by 2.5% (illegal?) but its not in the rent figure itself for 09, 10 etc etc.
4) They dont have a breakdown of their operating costs, you dont know what the prop taxes are or the maint fee for that matter.
5) they tell you that the operating costs cover ALL costs, even if repairs where needed in the unit itself, their contract states otherwise.
6) They guarantee the rent for 3 years, well, 6 years now as of 2 weeks ago..but the rent is the same today as 5 years from now. The number that is written in the box that is the rent for the next 6 years, op costs keep increasing every year though, eating into whatever PCF you may have the year beofore.
**Do you due dilligance prior to signing with them, it could cost you. Once I saw how botched their numbers were that was an instant deal breaker for me.
1) They dont allow you to get your own broker, and so the way it`s setup is that you end up with a 2nd mortgage that is to be paid back to montblanc at almost 7%
2) the numbers they give you are all botched and don`t add up, so make sure that you do your own calculations.
3) their operating costs increase every year but they dont increase the rent, they tell you they increase by 2.5% (illegal?) but its not in the rent figure itself for 09, 10 etc etc.
4) They dont have a breakdown of their operating costs, you dont know what the prop taxes are or the maint fee for that matter.
5) they tell you that the operating costs cover ALL costs, even if repairs where needed in the unit itself, their contract states otherwise.
6) They guarantee the rent for 3 years, well, 6 years now as of 2 weeks ago..but the rent is the same today as 5 years from now. The number that is written in the box that is the rent for the next 6 years, op costs keep increasing every year though, eating into whatever PCF you may have the year beofore.
**Do you due dilligance prior to signing with them, it could cost you. Once I saw how botched their numbers were that was an instant deal breaker for me.
QUOTE (seeu22 @ Nov 9 2008, 10:42 AM) I don`t mean to offend you, but you have three posts on this forum and they are all in relation to this topic. You may have had an excellent experience with Montblanc, but your lack of history with REIN leaves the possibilty open that you are shilling. I am not accusing you of shilling, just stating that based on your limited history on this forum that is a possibility.
That being said, welcome to the board. There are lots of intelligent people on here and plenty of great info shared.
Does anyone have a link for Montblanc, I would like to check them out myself to see what they offer.
Neil
Neil - not sure if I posted this correctly, sorry, I am kinda new at this discussion board thing!
Neil,
To answer your question, I am in my early forties, married with three kids. I have worked for a large insurance company for the last twelve years as a financial operations analyst. Like most people I am doing my best to create some financial security for my family.
I find it strange that you feel just because I have had a positive experience with Montblanc and that they have fulfilled their promises and leaseback commitments with me that I am a "shill". If saying something positive about a company you have done business with automatically makes you a "shill" in your eyes Neil, then I guess I am a "shill" . I notice that the other actual customer with them, 21krunner, also says that they have kept their leaseback commitment with him too.
As to the appraiser issue, my brother in law works for one of the big five banks and to get a mortgage you must use an appraiser approved by the bank issuing the mortgage and not all appraisers are approved by all banks. Apparently, not all lawyers are approved by all banks to act on the banks behalf in issuing a mortgage either, which was news to me! In addition, he said that an appraisal is required by all banks before a mortgage is issued, the appraisal must be by a bank approved appraiser and the appraisal goes directly from the appraiser to the bank, not to the purchaser. According to him, this is standard policy at all banks in Canada.
My mortgage on my Montblanc condominium is with Scotiabank, which Montblanc helped arrange as part of their "turnkey" investment. I guess if you want to manage your own property, arrange your own mortgage, which would mean whatever bank you used would then dictate what appraiser you used, you are welcome too. It also means you don`t want a turnkey investment, which is what Montblanc does and what I wanted. I don`t have the time or expertise to manage a property. I look at it as equivalent to whether you want to buy a package holiday, which includes the airfare, hotel, transfers and food at one package price or organize your own trip where you book the airfare yourself, book the hotel yourself etc. Both are valid methods of arranging a holiday. Just depends which rout is best for you. If I didn`t have a more than full time job and three kids I might be able to look at being a more hands on real estate investor like some of the people on this site.
I think we can all agree that in the long run, well located, fairly priced, income producing residential real estate is a good way to build wealth over time. At least I think it is.
Thank God I didn`t buy mutual funds like my neighbour did last year!
I wish everyone success for 2009! Happy Holidays!
Paul
That being said, welcome to the board. There are lots of intelligent people on here and plenty of great info shared.
Does anyone have a link for Montblanc, I would like to check them out myself to see what they offer.
Neil
Neil - not sure if I posted this correctly, sorry, I am kinda new at this discussion board thing!
Neil,
To answer your question, I am in my early forties, married with three kids. I have worked for a large insurance company for the last twelve years as a financial operations analyst. Like most people I am doing my best to create some financial security for my family.
I find it strange that you feel just because I have had a positive experience with Montblanc and that they have fulfilled their promises and leaseback commitments with me that I am a "shill". If saying something positive about a company you have done business with automatically makes you a "shill" in your eyes Neil, then I guess I am a "shill" . I notice that the other actual customer with them, 21krunner, also says that they have kept their leaseback commitment with him too.
As to the appraiser issue, my brother in law works for one of the big five banks and to get a mortgage you must use an appraiser approved by the bank issuing the mortgage and not all appraisers are approved by all banks. Apparently, not all lawyers are approved by all banks to act on the banks behalf in issuing a mortgage either, which was news to me! In addition, he said that an appraisal is required by all banks before a mortgage is issued, the appraisal must be by a bank approved appraiser and the appraisal goes directly from the appraiser to the bank, not to the purchaser. According to him, this is standard policy at all banks in Canada.
My mortgage on my Montblanc condominium is with Scotiabank, which Montblanc helped arrange as part of their "turnkey" investment. I guess if you want to manage your own property, arrange your own mortgage, which would mean whatever bank you used would then dictate what appraiser you used, you are welcome too. It also means you don`t want a turnkey investment, which is what Montblanc does and what I wanted. I don`t have the time or expertise to manage a property. I look at it as equivalent to whether you want to buy a package holiday, which includes the airfare, hotel, transfers and food at one package price or organize your own trip where you book the airfare yourself, book the hotel yourself etc. Both are valid methods of arranging a holiday. Just depends which rout is best for you. If I didn`t have a more than full time job and three kids I might be able to look at being a more hands on real estate investor like some of the people on this site.
I think we can all agree that in the long run, well located, fairly priced, income producing residential real estate is a good way to build wealth over time. At least I think it is.
Thank God I didn`t buy mutual funds like my neighbour did last year!
I wish everyone success for 2009! Happy Holidays!
Paul
QUOTE (pwilkinson @ Dec 7 2008, 04:27 PM) Neil - not sure if I posted this correctly, sorry, I am kinda new at this discussion board thing!
Neil,
To answer your question, I am in my early forties, married with three kids. I have worked for a large insurance company for the last twelve years as a financial operations analyst. Like most people I am doing my best to create some financial security for my family.
I find it strange that you feel just because I have had a positive experience with Montblanc and that they have fulfilled their promises and leaseback commitments with me that I am a "shill". If saying something positive about a company you have done business with automatically makes you a "shill" in your eyes Neil, then I guess I am a "shill" . I notice that the other actual customer with them, 21krunner, also says that they have kept their leaseback commitment with him too.
As to the appraiser issue, my brother in law works for one of the big five banks and to get a mortgage you must use an appraiser approved by the bank issuing the mortgage and not all appraisers are approved by all banks. Apparently, not all lawyers are approved by all banks to act on the banks behalf in issuing a mortgage either, which was news to me! In addition, he said that an appraisal is required by all banks before a mortgage is issued, the appraisal must be by a bank approved appraiser and the appraisal goes directly from the appraiser to the bank, not to the purchaser. According to him, this is standard policy at all banks in Canada.
My mortgage on my Montblanc condominium is with Scotiabank, which Montblanc helped arrange as part of their "turnkey" investment. I guess if you want to manage your own property, arrange your own mortgage, which would mean whatever bank you used would then dictate what appraiser you used, you are welcome too. It also means you don`t want a turnkey investment, which is what Montblanc does and what I wanted. I don`t have the time or expertise to manage a property. I look at it as equivalent to whether you want to buy a package holiday, which includes the airfare, hotel, transfers and food at one package price or organize your own trip where you book the airfare yourself, book the hotel yourself etc. Both are valid methods of arranging a holiday. Just depends which rout is best for you. If I didn`t have a more than full time job and three kids I might be able to look at being a more hands on real estate investor like some of the people on this site.
I think we can all agree that in the long run, well located, fairly priced, income producing residential real estate is a good way to build wealth over time. At least I think it is.
Thank God I didn`t buy mutual funds like my neighbour did last year!
I wish everyone success for 2009! Happy Holidays!
Paul
Thanks for the reply Paul. Shilling is very common on message boards. Someone comes up with a product and then gets their buddies to saturate the web with great reviews of this product. Your posts fit the typical shill type post, which is no posting history and a positive review right out of the gate. Thanks for coming back and clearing things up.
Please stick around and join the community here.
Neil
Neil,
To answer your question, I am in my early forties, married with three kids. I have worked for a large insurance company for the last twelve years as a financial operations analyst. Like most people I am doing my best to create some financial security for my family.
I find it strange that you feel just because I have had a positive experience with Montblanc and that they have fulfilled their promises and leaseback commitments with me that I am a "shill". If saying something positive about a company you have done business with automatically makes you a "shill" in your eyes Neil, then I guess I am a "shill" . I notice that the other actual customer with them, 21krunner, also says that they have kept their leaseback commitment with him too.
As to the appraiser issue, my brother in law works for one of the big five banks and to get a mortgage you must use an appraiser approved by the bank issuing the mortgage and not all appraisers are approved by all banks. Apparently, not all lawyers are approved by all banks to act on the banks behalf in issuing a mortgage either, which was news to me! In addition, he said that an appraisal is required by all banks before a mortgage is issued, the appraisal must be by a bank approved appraiser and the appraisal goes directly from the appraiser to the bank, not to the purchaser. According to him, this is standard policy at all banks in Canada.
My mortgage on my Montblanc condominium is with Scotiabank, which Montblanc helped arrange as part of their "turnkey" investment. I guess if you want to manage your own property, arrange your own mortgage, which would mean whatever bank you used would then dictate what appraiser you used, you are welcome too. It also means you don`t want a turnkey investment, which is what Montblanc does and what I wanted. I don`t have the time or expertise to manage a property. I look at it as equivalent to whether you want to buy a package holiday, which includes the airfare, hotel, transfers and food at one package price or organize your own trip where you book the airfare yourself, book the hotel yourself etc. Both are valid methods of arranging a holiday. Just depends which rout is best for you. If I didn`t have a more than full time job and three kids I might be able to look at being a more hands on real estate investor like some of the people on this site.
I think we can all agree that in the long run, well located, fairly priced, income producing residential real estate is a good way to build wealth over time. At least I think it is.
Thank God I didn`t buy mutual funds like my neighbour did last year!
I wish everyone success for 2009! Happy Holidays!
Paul
Thanks for the reply Paul. Shilling is very common on message boards. Someone comes up with a product and then gets their buddies to saturate the web with great reviews of this product. Your posts fit the typical shill type post, which is no posting history and a positive review right out of the gate. Thanks for coming back and clearing things up.
Please stick around and join the community here.
Neil
I don`t know Neil - his time elapsed response without further comment also fits the profile
QUOTE (bigbabba @ Nov 16 2008, 02:03 PM) I went to their office sometime back in October to see what they are offering, I have found quite a few flaws and mis reprensentation`s within their investments.
1) They dont allow you to get your own broker, and so the way it`s setup is that you end up with a 2nd mortgage that is to be paid back to montblanc at almost 7%
2) the numbers they give you are all botched and don`t add up, so make sure that you do your own calculations.
3) their operating costs increase every year but they dont increase the rent, they tell you they increase by 2.5% (illegal?) but its not in the rent figure itself for 09, 10 etc etc.
4) They dont have a breakdown of their operating costs, you dont know what the prop taxes are or the maint fee for that matter.
5) they tell you that the operating costs cover ALL costs, even if repairs where needed in the unit itself, their contract states otherwise.
6) They guarantee the rent for 3 years, well, 6 years now as of 2 weeks ago..but the rent is the same today as 5 years from now. The number that is written in the box that is the rent for the next 6 years, op costs keep increasing every year though, eating into whatever PCF you may have the year beofore.
**Do you due dilligance prior to signing with them, it could cost you. Once I saw how botched their numbers were that was an instant deal breaker for me.
bigbabba:
I am the president of Montblanc Investments and from reading your post it is clear to me that whomever you dealt with from our organization, they did not do a good enough job at explaining clearly how our real estate investments work. Which is ultimately my responsibility as president.
As a preframe, experience wise, I have been in the real estate industry for 28 years and have developed or co-developed over 3,000 condominiums. I also co-founded a property management firm that now manages a residential portfolio in excess of 50,000 units. My experience is that the real estate industry is very large and diverse and there are many different real estate investing strategies that can be followed. Our particular real estate investing strategy/plan is one that I believe has merit for investors who cannot be hands-on property managers.
If it is alright with you, I would like to answer your 6 concerns in the same order to help explain and clarify our investments.
1) "They don`t allow you to use your own broker and 2nd mortgage at almost 7%"
Our residential real estate investments are designed to be turnkey or arm chair for the investor so as part of our service we organize first mortgage financing for 75% of the condominium with a major bank and offer to organize a second mortgage for up to 15% of your condominium if the investor desires. This allows investors the flexibility of putting anywhere from 10% to 25% if the investment as a downpayment. Some of our investors organize their own mortgage financing with their existing bank or through their own mortgage broker, it just depends whether they want to do the work or let us do it for them. So yes you can use your owm mortgage broker if you wish altjough I recommend to most people to let us organize it for them.
If the investor wishes to avail themselves of the second mortgage option, the current interest rates that we have been getting in the second mortgage market is between 6.5 and 6.95% for a fixed two year term. For second mortgages on a non-owner occupied condominium that is a relatively good rate these days. To put this in context, the most common posted rate for a two year fixed rate first mortgage (not second mortgage) on an owner occupied dwelling (versus non-owner occupied) on www.canadamortgage.com today is 6.45%.
2) "The numbers are all botched and don`t add up"
Our cash flow spreadsheets are all done using Microsoft Excel which makes it very hard (but not impossible) for there to be a mathematical error (I remember the days when all spreadsheets were done by hand using a calculator). I have double checked our spreadsheets and they seem mathematically correct. That being said, no one is perfect, including us, so please call me at 416-922-1261 ext. 210 and let me know where the error(s) you found were, so that I can correct them. Thanks
3) "Operating costs go up every year and rents don`t, though they say 2.5% (illegal?)"
I believe a fair estimate of operating expense increases is 2.5% a year based on my experience managing 1000`s of units, as it is an estimate based on experience, some people may say I am low, others high.
More importantly, my experience is that a fair estimate of rental rate increases in Ontario over a ten year time frame is also 2.5%.
The rental increase is made up of the annual allowed Ontario legal increase from the provincial government (which usually runs 1% to 3% - see chart below of Ontario legal increases for last ten years) plus rent increases we achieve as we renovate/improve the properties. As tenants turnover, we are legally allowed to reset the rent to a new level, which in some cases has been 10% to 35% higher than what the departing tenant was paying. It is the legal guideline rent increase plus the rent resets on turnover that combined together, deliver the total rent increase per year. All completley legal, within the regulations and one of the benefits of having a professional property management firm that fully understands what is legal.
Ontario Approved Rent Increases for past ten years:
3.0 % January 1 - December 31, 1998
3.0 % January 1 - December 31, 1999
2.6 % January 1 - December 31, 2000
2.9 % January 1 - December 31, 2001
3.9 % January 1 - December 31, 2002
2.9 % January 1 - December 31, 2003
2.9 % January 1 - December 31, 2004
1.5 % January 1 - December 31, 2005
2.1 % January 1 - December 31, 2006
2.6 % January 1 - December 31, 2007
Average legal rent increase for last ten years is 2.74% (which is above our 2.5% estimated
rent increase amount, which is also before rent increases due to resets on turnover)
4) "They don`t breakdown their operating expense and you don`t know your property taxes and maintenance fee"
We have the estimated tax and maintenance fee for each indiviudal condominium that is in the operating expenses for 2009.
5) "They tell you that operating costs cover all costs, even repairs inside the unit, their contract says otherwise"
This is another issue of professional property management. When there is a repair issue inside a unit, depending on what the repair issue is impacts how it is dealt with. If it a simple matter like a leaky faucet, the onsite property manager deals with it. If it is something large and not normal wear and tear, then the tenant or tenants insurer is often responsable and pays. Other normal wear and tear items like carpet and stoves/fridges are replaced out of our annual repair and maintenance budget.
6) "They guarantee the rent for3 years but stays the same as operating costs go up"
We do not guarantee the rent. We offer an optional leaseback program where if the owner wishes, we will leaseback the unit at a fixed base amount. The leaseback amount is a base amount that gives some owners extra assurance and peace of mind and the owner is free to end the leaseback arrangement whenever they wish. Some owners like the safety of the predetermined leaseback others don`t.
No one can tell you exactly where rents or expenses or values will be in 6 months or a year or even two years. I have found that you have to invest in low rent to price, individual titled condominiums and then be prepared to wait five to ten years for appreciation to happen. Many smart real estate investors believe the absolute best strategy is keep all your income real estate forever and let the rents fully pay off your mortgage so that eventually you own it free and clear as it continues to produce monthly rental income.
The bottom line is that our low rent to price ratio condominium investments are designed for the long term investor who does not have time to manage a rented condominium on their own.
Ross
Ross McBride
Montblanc Investments
1) They dont allow you to get your own broker, and so the way it`s setup is that you end up with a 2nd mortgage that is to be paid back to montblanc at almost 7%
2) the numbers they give you are all botched and don`t add up, so make sure that you do your own calculations.
3) their operating costs increase every year but they dont increase the rent, they tell you they increase by 2.5% (illegal?) but its not in the rent figure itself for 09, 10 etc etc.
4) They dont have a breakdown of their operating costs, you dont know what the prop taxes are or the maint fee for that matter.
5) they tell you that the operating costs cover ALL costs, even if repairs where needed in the unit itself, their contract states otherwise.
6) They guarantee the rent for 3 years, well, 6 years now as of 2 weeks ago..but the rent is the same today as 5 years from now. The number that is written in the box that is the rent for the next 6 years, op costs keep increasing every year though, eating into whatever PCF you may have the year beofore.
**Do you due dilligance prior to signing with them, it could cost you. Once I saw how botched their numbers were that was an instant deal breaker for me.
bigbabba:
I am the president of Montblanc Investments and from reading your post it is clear to me that whomever you dealt with from our organization, they did not do a good enough job at explaining clearly how our real estate investments work. Which is ultimately my responsibility as president.
As a preframe, experience wise, I have been in the real estate industry for 28 years and have developed or co-developed over 3,000 condominiums. I also co-founded a property management firm that now manages a residential portfolio in excess of 50,000 units. My experience is that the real estate industry is very large and diverse and there are many different real estate investing strategies that can be followed. Our particular real estate investing strategy/plan is one that I believe has merit for investors who cannot be hands-on property managers.
If it is alright with you, I would like to answer your 6 concerns in the same order to help explain and clarify our investments.
1) "They don`t allow you to use your own broker and 2nd mortgage at almost 7%"
Our residential real estate investments are designed to be turnkey or arm chair for the investor so as part of our service we organize first mortgage financing for 75% of the condominium with a major bank and offer to organize a second mortgage for up to 15% of your condominium if the investor desires. This allows investors the flexibility of putting anywhere from 10% to 25% if the investment as a downpayment. Some of our investors organize their own mortgage financing with their existing bank or through their own mortgage broker, it just depends whether they want to do the work or let us do it for them. So yes you can use your owm mortgage broker if you wish altjough I recommend to most people to let us organize it for them.
If the investor wishes to avail themselves of the second mortgage option, the current interest rates that we have been getting in the second mortgage market is between 6.5 and 6.95% for a fixed two year term. For second mortgages on a non-owner occupied condominium that is a relatively good rate these days. To put this in context, the most common posted rate for a two year fixed rate first mortgage (not second mortgage) on an owner occupied dwelling (versus non-owner occupied) on www.canadamortgage.com today is 6.45%.
2) "The numbers are all botched and don`t add up"
Our cash flow spreadsheets are all done using Microsoft Excel which makes it very hard (but not impossible) for there to be a mathematical error (I remember the days when all spreadsheets were done by hand using a calculator). I have double checked our spreadsheets and they seem mathematically correct. That being said, no one is perfect, including us, so please call me at 416-922-1261 ext. 210 and let me know where the error(s) you found were, so that I can correct them. Thanks
3) "Operating costs go up every year and rents don`t, though they say 2.5% (illegal?)"
I believe a fair estimate of operating expense increases is 2.5% a year based on my experience managing 1000`s of units, as it is an estimate based on experience, some people may say I am low, others high.
More importantly, my experience is that a fair estimate of rental rate increases in Ontario over a ten year time frame is also 2.5%.
The rental increase is made up of the annual allowed Ontario legal increase from the provincial government (which usually runs 1% to 3% - see chart below of Ontario legal increases for last ten years) plus rent increases we achieve as we renovate/improve the properties. As tenants turnover, we are legally allowed to reset the rent to a new level, which in some cases has been 10% to 35% higher than what the departing tenant was paying. It is the legal guideline rent increase plus the rent resets on turnover that combined together, deliver the total rent increase per year. All completley legal, within the regulations and one of the benefits of having a professional property management firm that fully understands what is legal.
Ontario Approved Rent Increases for past ten years:
3.0 % January 1 - December 31, 1998
3.0 % January 1 - December 31, 1999
2.6 % January 1 - December 31, 2000
2.9 % January 1 - December 31, 2001
3.9 % January 1 - December 31, 2002
2.9 % January 1 - December 31, 2003
2.9 % January 1 - December 31, 2004
1.5 % January 1 - December 31, 2005
2.1 % January 1 - December 31, 2006
2.6 % January 1 - December 31, 2007
Average legal rent increase for last ten years is 2.74% (which is above our 2.5% estimated
rent increase amount, which is also before rent increases due to resets on turnover)
4) "They don`t breakdown their operating expense and you don`t know your property taxes and maintenance fee"
We have the estimated tax and maintenance fee for each indiviudal condominium that is in the operating expenses for 2009.
5) "They tell you that operating costs cover all costs, even repairs inside the unit, their contract says otherwise"
This is another issue of professional property management. When there is a repair issue inside a unit, depending on what the repair issue is impacts how it is dealt with. If it a simple matter like a leaky faucet, the onsite property manager deals with it. If it is something large and not normal wear and tear, then the tenant or tenants insurer is often responsable and pays. Other normal wear and tear items like carpet and stoves/fridges are replaced out of our annual repair and maintenance budget.
6) "They guarantee the rent for3 years but stays the same as operating costs go up"
We do not guarantee the rent. We offer an optional leaseback program where if the owner wishes, we will leaseback the unit at a fixed base amount. The leaseback amount is a base amount that gives some owners extra assurance and peace of mind and the owner is free to end the leaseback arrangement whenever they wish. Some owners like the safety of the predetermined leaseback others don`t.
No one can tell you exactly where rents or expenses or values will be in 6 months or a year or even two years. I have found that you have to invest in low rent to price, individual titled condominiums and then be prepared to wait five to ten years for appreciation to happen. Many smart real estate investors believe the absolute best strategy is keep all your income real estate forever and let the rents fully pay off your mortgage so that eventually you own it free and clear as it continues to produce monthly rental income.
The bottom line is that our low rent to price ratio condominium investments are designed for the long term investor who does not have time to manage a rented condominium on their own.
Ross
Ross McBride
Montblanc Investments