How much do I need for a down payment?
The law requires a minimum of 20% of the purchase price as a down payment on an investment property. Some financial institutions may require a higher down payment based on their own internal policies, so make sure you check. Some folks will use a home line of credit to obtain the down payment, and the interest on that is tax deductible. You cannot use RRSP money under the first time homebuyer’s plan, as that is strictly for the purchase of your first home, not an investment property.
Can I use my own lawyer and financing contacts?
Absolutely! Most people feel more comfortable using their established contacts, however we have referrals for both legal and financing that have worked with us and our clients in the past and know our product well. The choice is yours.
What if I have to sell my unit?
While we strongly recommend a minimum 3-5 year hold to realize returns, we understand that “life happens”. Should the situation arise where you MUST sell, the best option is to list it on the open market with a local realtor to ensure you are getting the best market value possible.
Can I manage it myself?
The short answer is no. Our business model is built on the premise that your time is valuable, and rather than manage your property, you would rather be doing more important things. All of our properties are fully managed on your behalf, and your rent is guaranteed; something that self-management can never achieve.
Can I move in? Either myself or a family member?
Should you or an immediate family member wish to move in, you would need to follow the proper procedures as outlined by the Residential Tenancies Act. There are specific forms and notice periods that must be adhered to prior to owner occupation of an owned rental unit. For instance, if the tenant has a lease, you cannot remove them during the lease period. Further, if they are considered a “grandfathered” tenant (in place prior to condominium conversion), then they have the right to stay until they decide to move out. They cannot be removed even for an owner who wishes to occupy the unit.
What insurance do I need and do you provide it?
There are basically three types of insurance involved. The Condominium Corporation insures the buildings, grounds, exterior, mechanicals etc. This is paid for through your condominium maintenance fees. We strongly advise but cannot force tenants to obtain personal contents insurance. The remaining insurance is “unit owner” insurance which you must have in place on your property. This insures the part of the condominium that YOU own, which is from the walls in. We have obtained blanket policies at excellent group rates for all of our owner clients for their units. This amount is deducted once annually from your rental distribution.
How long is the rental guarantee for?
We guarantee your rent for as long as you own your unit and are contributing to The Simple Fund. Our initial Management Agreement is for two years and is in plain English, and it spells out clearly our obligations to you including the amount of rent you will receive and the repairs covered. The Agreement renews annually after that, and we implement rental increases as allowed by the province each year.
Can I see the unit I’m buying either before or after I purchase it?
We are not allowed to disturb the tenants unless it is for something required by law or for financing. They must have what is known as “quiet possession”. You can arrange through our office a site visit and can be shown a vacant unit (if there is one available). When you purchase a unit, your bank WILL conduct an independent appraisal of the specific unit you are buying to ensure the value is there for lending.
What does your management include?
Our management includes all aspects of property management, including rent collection & distribution, tenant management, repairs & maintenance, Landlord Tenant Tribunal appearances & much more. You do not have any dealings with your tenant or the management whatsoever. We also take care of all building & grounds maintenance, garbage removal etc.
What if the market goes down?
Since these are true investments, and not speculative sales (buy & flip), the intent is a long term hold strategy and investors know that over time, the markets go up and any adjustments can be ridden out. The rent you receive has no bearing on the market value of the property, and the mortgage continues to be paid down resulting in equity along with annual increases in rent, which again have no bearing on the resale value of your property. Perhaps the value doesn’t go up as much in any given year depending on the market, but you are still gaining equity through mortgage pay down.
What happens if the interest rates rise?
This is a loaded question, and you may see many opinions on whether or not rates will rise significantly or only a little or not at all in the coming years. Most experts agree that rates will remain very low for at least the next couple of years. Your rate will stay in place during the term of your mortgage, and at renewal, if the rate is a bit higher remember, you are renewing your mortgage at lower amount, and the rents will have increased as well. This should offset any minor interest rate increase and still allow for positive cash flow.
Can I buy multiple units?
Of course you can! Depending on our available inventory of course, but our goal is to help you build a solid portfolio of performing, cash flowing properties. It can start with just one property, and grow slowly over time, or if you are able to start with more properties, you will accelerate your portfolio growth.
What happens if The Simple Investor goes out of business?
Actually, some people quite bluntly ask Todd “What if YOU die?” (Seriously we’ve been asked this more times than we can count!) The simple answer is that you still own your properties and they are part of operating Condominium Corporations. The management company, SIREG Management Inc., continues on with the management. Also keep in mind there is a Board of Directors, which can elect to hire a new management company should they choose.
Will you manage my other properties that I own?
Sorry but we do not manage individual properties. We only manage our multi-residential properties that have met our stringent criteria for operating costs and tenant selection which allows us to effectively manage our costs. A typical property management company that manages individual properties must charge a percentage of the rent and pass along all extra charges to their clients. Our model is very unique and we are not a standard property management company. We do have many clients who own and manage their own properties or have them managed by a third party, but also own units with us and see our model as an excellent way to add to their portfolio without adding to their workload.