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Nanaimo
Real Estate Investors Club Newsletter
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 Hi Folks!
I may be moving away from the Nanaimo REI club but, with your indulgence, I still have a few things to say.
I heard a rumour that a plan is afoot to bring cruise ships back to Port Alberni. If that's true, it's big news for that area. You might consider how the Alberni valley will be affected: business, real estate, tourism, economy, etc. More business means more people moving their and they will have to have a place to live. Consider positioning yourself appropriately.
Judging by all the news about what's happening in Nanaimo development-wise (see articles to the right), it's likely time to have the planner from the city come and speak to the club. I suggest to Pam and her partners, who are taking over the NREIC, that they invite Andrew Tucker to an up-coming meeting and give you all a run-down of where the hot areas in Nanaimo are.
As always, I suggest you keep learning about the best way to be a real estate investor. That includes keeping up on other ways to invest, like commercial. See the article below for a brief comparison of commercial and residential.
Title insurance is slowly coming to Canada. It's very common in the US where the odds of coming across a weirdly titled property are higher. IMO Canada (and BC) has a safer property titling system than the US. Yet, some lenders want title insurance as a prerequesite for loaning you money to buy a property. The last article below goes over one author's opinion of using title insurance in the US. For your consideration.
Denise and I have moved into a condo in Langford from a house with a big back yard. I will miss pulling weeds, cutting the lawn a few times every year and talking over the fence with our neighbours. We have great neighbours in our condo building, it's just harder to have random meetings with them because we're locked up in our boxes in a much more private manner. I know that keeping separation from others can be healthy, yet IMO that's not why I was put on this planet. Every time I tell someone new about the REI clubs, I get a great response. Please consider letting folks you know about your affiliation with the Nanaimo club so that you can build your network of trusted friends and the club can continue to grow and be healthy.
Take care,
Gord
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What is Better - Commercial Real Estate Investing Or Residential Real Estate Investing?
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By Dave Peniuk
My wife, Julie, and I often wonder if commercial real estate investing is the way to go. We've always focused on residential real estate - and it's been very lucrative. But, my parents previously developed, owned, and managed a mobile home park along with owning a variety of residential properties. Julie's parents have owned (and still own) a variety of commercial properties. And, we've watched them all make money, sometimes lots of money, from those investments.
We are often pulled towards the commercial side of things, not only because of what our parents have been involved with, but also due to our fascination with all things real estate. So, what's better - commercial or residential investing? Below I have noted a far from exhaustive list of pros and cons for both types of real estate investment. One type of investment may be better suited towards your own objectives and goals.
For the sake of simplicity, we'll consider commercial as office/retail/light industrial vs. residential which are smaller properties with less than 10 units used for the purposes of living only (not conducting business).
Residential Real Estate Investing - Pros - Simpler, easier to understand (we all have to live somewhere).
- If it's a quality property (especially single family home) that's moderately priced, it will have a larger market of willing buyers when you do decide to sell it.
- Generally, don't require a large down payment to own.
- Finding tenants is a simpler process than finding a commercial tenant.
- Lots of tax write-offs.
Residential Real Estate Investing - Cons Legislation in most places heavily favours the tenants not the landlords. It takes months to evict problem or non-paying tenants. Generally speaking, positive cash flow is limited when it comes to single family residential properties. Cannot charge landlord expenses back to tenants including management, taxes, insurance, etc.. 1 year leases are the norm - but tenants can easily break them with little consequence.
Commercial Real Estate Investing - Pros Can have Triple Net Rent - tenants pay rent plus landlord expenses (tax, insurance, management, etc.). Long-term leases (3-5+ years) are common. No rent increase restrictions. Non-paying tenant, in many cases, can be locked out swiftly. Less emphasis is placed on person to qualify for financing. More weight is placed on the building quality, tenants, and leases (revenue from the leases).
Commercial Real Estate Investing - Cons Generally require a larger % towards down payment (25-35% of the purchase price down is fairly standard). If financing a commercial property, there are many hoops to jump through, and with that, many associated costs. Not dissimilar to residential properties, if a unit becomes available, you may need to spend considerable dollars renovating it to suit your new tenant - to a larger scale than with residential (in some cases). Often takes much longer to fill a commercial unit than a residential (may take months vs. only weeks). Vacancy rates are traditionally higher for commercial properties.
Unfortunately, the above lists have probably just left you with more questions and not enough answers. I know that's what it does to me when I consider them!
Every investment vehicle has it's good points and bad points. This goes for stocks, bonds, businesses and real estate. The thing to do is figure out what vehicles suit your objectives, and then do your research.
Sign up for Dave and Julie's free monthly newsletter and get a free starter tips guide where you'll learn: * Three easy ways to make money in real estate (so easy you'll be making money while you sleep!), * How to buy properties in Canada with limited cash, * Your property type * The easiest way to get financing, * How to select a location and begin the search for your next (or first) property purchase.
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| Do You Really Need Title Insurance in Real Estate Investing?
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By Dave Dinkel
Title insurance is not available in all parts of the world and in those countries title disputes are settled through court action. Unfortunately, those court actions can take a long time and the outcomes are never guaranteed. In the United States, title insurance is a mainstay of transferring a property, but is it really necessary?
In the countries where title insurance doesn't exist, very few properties have mortgages. The buyers have to buy with cash or collateral far in excess of the values of the property. In some foreign countries where buyers can get property loans, they must be cross-collateralized with 2 - 3 additional real properties. In the United States conventional lenders (banks) will not loan on a property unless it has what is referred to as marketable title that comes with a title insurance policy.
Ironically, REO (bank-owned) properties are often sold with insurable titles which differs from marketable titles in that there can be title defects or deficiencies that must be assumed by the buyer. These are handled in the title policy as exceptions or exemptions, and they could still exist after the title transfer and until they have been cured sometime in the future by the buyer.
What this means to a buyer of an REO is that he may get an insurable title, but not necessarily a marketable title. A non-marketable title means that somewhere in the ownership of that property, either by the buyer or by someone he sells to, a conventional lender will likely not finance the property. The lender will need a cure for the title deficiency before they will close and finance the property. These deficiencies can be as simple as old code violations or liens, open permits that weren't closed, or as major as the seller in previous title transfers didn't own the property.
For the average investor it is safe to say that as a buyer he should always require a marketable title on a purchase. This insures he will have no problem selling the property to another buyer who is getting conventional financing in the future. A property owner can get a title policy issued, with deficiencies cured, at any time after he owns a property so buying a property with an insurable title only is not a deal killer in most situations. However, the actual cost to cure the deficiency can be the deal killer.
There are instances when a marketable title transfer is not possible. The most common example is at public auctions where foreclosed properties are sold. These can be sheriff sales, county auctions, Federal agencies' sales, or any authorized governmental authority that has legal power to sell confiscated or foreclosed properties. These properties will always have title "gaps" as the original owners did not voluntarily transfer their properties. A deed in lieu of foreclosure is a voluntary transfer by the seller and will not be sold at auction but taken in as an REO immediately.
Often foreclosure properties are boarded, abandoned or have owners who will not allow anyone inside. The investor has to assume the condition of the property but he can do title research to determine possible title defects. There are available online services, many used by attorneys that show the chain of title, the property transfers in the public record, and very importantly, recorded liens against the property. What they may not show is pending code violations that could become liens. Because of this lack of recorded public information, all title policies have exceptions for information not contained in the public record.
An investor can do the title inspection from the public records and get a general idea about the problems and issues with his perspective purchase. However, it is suggested that the property's value be discounted heavily for title issues as a bargaining tool with the seller. It is not uncommon for a title to be clouded by the simple action of improper service by a lender in a foreclosure action or a foreclosure taking place where the plaintiff wasn't entitled to foreclose on the property. Any title issue can ultimately be corrected through the courts by what is known as a Quiet Title Action.
In summary, title insurance is a very inexpensive form of insurance to prevent having the inability to sell a property after the buyer paid for the property and the seller moved on. While an investor can do the title research himself, it is highly advised to have a competent attorney do the research and issue a title policy. If there is a problem after the title has been transferred to the buyer, the buyer-investor may be able to make a claim against the issuing title company and get his insured amount back. This insured amount is usually the purchase price or more if the policy was written for an amount in excess of the purchase price.
About Author: Dave Dinkel has over 35 years experience in real estate investing which has given him a unique perspective into the real estate market. Dave is the author of the best-selling e-courses http://www.fsbopowersellingsystem.com/ and many other e-courses for investors and homeowners. Dave's focus in the past few years is educating the public in a manner that doesn't amount to paying for a master's degree. His recent contribution to this end is the e-course 48 Ways to Create a Massive Buyers List which can be seen at http://www.MakingaBuyersList.com]http://www.MakingaBuyersList.com.
Article Source: Do You Really Need Title Insurance in Real Estate Investing? |
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