QUOTE (bigbabba @ Nov 25 2008, 07:19 PM)
I have talked with montblanc back in oct, as some people have stated they dont allow your own broker or appraiser, you end up with 2 mortgages on a loan less then a $100k, one being payed back to them at almost 7%. The are the property management and the condo corporation. Their entire system is a full blown monopoly and for those reasons I would stay away.
also, make sure that you do your own calculations and research, they tried to tell me that if I buy property in London I will be seeing 6% increase in value yoy. I don't think so, not in this current market. They are very text book and dont deal with reality.
bigbabba,
bigbabba:
I am the president of Montblanc Investments.
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.
I would like to answer your concerns:
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 sometimes are able to offer to organize a second mortgage for up to 15% of the condominium, if the investor desires. This allows investors the flexibility of putting anywhere from 10% to 25% of 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 mortgage arranging work themselves or let us do it for them. So yes you can use your own mortgage broker if you wish, although we 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 are 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 today for a two year fixed rate first mortgage (not second mortgage) on an owner occupied dwelling (versus non-owner occupied) on www.canadamortgage.com is 6.45%.
All canadian financial institutions and banks have a list of bank approved, licenced appraisers that must be used when arranging a mortgage with that particular bank. Whichever bank is doing the first mortgage dictates the bank approved appraiser that must be used. It is not us or the buyer but the bank who dictates and approves the acceptable licenced appraiser to be used.
2) No one can tell you exactly where real estate values will be in 6 months or even in a year in a specific market, for a specific piece of real estate.
Even in specific markets, value changes can be affected by the specific neighbourhood improving and/or the building being upgraded etc. What one can do, is make estimates of what values will be based on an average, over a long time frame, like ten years. In low rent to price ratio markets that we focus on, my experience is that over a ten year period, these low rent to price ratio markets average between the inflation rate (2%-3% per year, tracking the gross rental income increases, to a high of 10% to 12%, if that low rent to price ratio market gets hot during the ten year time frame we recommend).
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. Then is it goes up 15% one year and down 4% the next, you don't care. I have an older, retired friend who owns over 100 residential condominium units free and clear, who followed this strategy over the last 25 years in accumulating his portfolio (and recommends the "never sell income producing residential real estate strategy" strongly both from a cash flow and tax point of view) and it made him wealthy and financially secure.
I have found that the best strategy for an arm chair investor, who cannot be a hands on property manager, is to invest in low rent to price ratio, individual titled condominiums and then wait for time to increase rents and values, this can mean a wait of five to ten years for appreciation to happen as rents go up yearly and the rent to price ratio increases.
3) We manage the property and the condominium so that we can offer a complete one stop, comprehensive service to an owner. If an investor wants to spend all the time and energy required to self manage their condominium investment, then our plan is probably not the right fit for them.
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 condominium on their own. It fits for some people and not for others.
I hope this helps clarify things.
Ross
Ross McBride
Montblanc Investments