real estate investing: the key to long term wealth
TRANSCRIPT
Presented by: Sayo Nickerson and Matt KerrTeam Nickerson at Re/Max Real Estate Services
and Village North Properties
Why real estate is such a great investment vehicle
Why you want to invest in real estate for the long term
How to analyze a property
How to chose where to invest based on economic fundamentals
How to be a successful investor
It’s more than just the money.
Why Do You Want More Money?
KIPPERSKids In Parents’ Pockets Eroding Retirement
Savings
The Good Ol’ Days –Freedom 55
The 90’s – Freedom 65
GIC Rates: 5-6%
Today – Freedom 105
GIC Rates: 1%
“The fact is, you're not really in the game of building wealth until you own some real estate.”
David Bach. Author of “The Automatic Millionaire” #1 New York Times Best seller.
“It’s amazing the freedom Real Estate provides if you step up to the plate!”
Don Campbell. Author of “Real Estate Investing in Canada”
My Investment history…
First rental 2001
1st NEBC property 2012
First Vancouver Triplex
Now
• You can enjoy the benefits without having to sell
• You can add value to your property
• It's a slow-moving asset class that is evenly priced
Cash Flow Mortgage Appreciation
1-3% Paydown 9-10%
8-10% (at 2% growth)
TOTAL RETURNS OF 19-23% PER YEAR!
Rental Income
Minus (-)
Expenses
Equals (=)
Positive Cash Flow!
Must be a positive number or you don’t buy!
Income:
• Monthly Rent
• Garage
• Laundry
Expenses:
• Management Fee
• Insurance
• Property Taxes
• Maintenance Fees
• Repairs and
Maintenance
• Utilities (gas, hydro)
• Vacancy Allowance
25% down payment = $50,000
Mortgage of $150,000
Rent is $1250 per mth
Cash Flow
Each $50 in Monthly Cashflow = 1.2% Annual Return on your down payment
of $50,000
Good Ol’ Days - Interest Rates and Mortgage Paydown
$960 $225
Interest Payment Principal
6%
% of Payment going to Principal
23.4%
Today- Interest Rates and Mortgage Paydown
$709 $342
Interest Payment Principal
2.99%
% of Payment going to Principal
48.2%
Cheap Money from the BankMultiplies Your Earning Power
3% Interest
6% Interest
$709
$960
$342
$225Principal48.2%
Principal23.4%
Mortgage Payment on $150,000
Mortgage Paydown
Equity portion of your mortgage payments get bigger with every payment!
Mortgage Paydown
$342 in Monthly Mortgage Paydown = 8.2% Annual Return on your down payment of
$50,000
Appreciation
Each 1% Appreciation = 4%Annual Return
$50/Month
$342/Month
3%
1.2%
8.2%
12%
21.4%Total Return
Returns – 3% Appreciation
$50/Month
$342/Month
5%
1.2%
8.2%
20%
29.4%Total Return
Returns – 5% Appreciation
$50/Month
$342/Month
10%
1.2%
8.2%
40%
49.4%Total Return
Returns – 10% Appreciation
$200,000
Mortgage Reduction
Growth of 3% Per Year
$150,000
$412,000
What if I Invest $50,000 Today in an Investment Property?
$150,000
Capital Appreciation
($1000’s)
Years250
Growth of 3% Per Year
$2575
What Will My Rent be in 25 Years?
$1,250
Net Rent after 30% Expenses
$1800
Years250
1.25
1.75
2.25
2.75
($1000’s)
Secure Your Retirement With 5 Properties
$200,000
$750,000Mortgage Reduction
Growth of 3% Per Year
$150,000
Capital Appreciation
0
450
1000
1500
2000
750($1000’s)
$9,000Net Monthly
INCOME
25
$0
$2,060,000
Assuming at least break-even cash flow.
Years0
*Assuming rent today is $1250 and grows at 3%. Expenses 30%.
$1800*
My Net Monthly Income From One Property in 25 Years
$21,600 a year of Retirement Income
$1,800 per Monthor
$21,600 per Year
$108,000 a year of Retirement Income
$9,000 per Monthor
$108,000 per Year
Step Outside of Your Comfort Zone
396 sq.ft. Studio Loft in Gastown with ParkingBuilt in 1997. Concrete Construction
2001: YES! 2014: NO!
Price: $100,000
Down Pmt: $20,000
Rent: $750/mth
Taxes: $39/mth
Strata Fees:$89/mth
Mortgage:$479/mth
Repairs: $60/mth
CASH FLOW: $83/mth
Price: $240,000 Down Pmt: $48,000 Rent: $1,100/mth
Taxes: $68/mth Strata Fees: $177/mth Mortgage: $910/mth Repairs: $88/mth
CASH FLOW: -$143/mth
Look for regions with Positive Cash Flow & the Highest Potential Appreciation.
How do we figure out where to invest?
Look to the Economic Fundamentals
GDP Growth
Job Growth
Population Growth
Increased Rents
Increased Purchase Demand
Increased Property Prices6
1
2
3
4
5
GDP growth in Western Canada comes from world demand for our resources – the 4 “F”s
Oil and Gas Agriculture
Forestry Mining
VANCOUVER $8.7 Billion invested in Greater Vancouver for
2010 Olympics (3.5M people) $11.3 Billion contract awarded to North
Vancouver in 2013 to be spent over 30 yrs -10,000 jobs
NORTHEAST BC $12 Billion invested in Northeast BC in 2012
alone (a region of 63,000 people) Petronas alone has invested $8 Billion into NE BC
Since 2012 Site C Dam project estimated at $7.9 Billion
Site C Dam will create33,000 direct and
indirect jobs!
Liquefied Natural Gas (LNG)
The Source of the Gas
Fort St. John
Dawson Creek
Northeast BC
Population Projection
Population of Peace RegionCurrently: 64,000
2020 Forecast: 123,000
Source: North Peace Economic Development Commission
Drilling in NE BC 2007
Drilling in NE BC Today
The Future of NE BC
Estimated Capital Investment
0
5
10
15
20
2013 2018 2023 2028
3 LNG Export Terminals
Pipeline Construction
LNG Export Terminal
Drilling
$C
Bill
ion
s
YOU ARE HERE
SOURCE: ARC Financial
Direct Natural Gas Jobs
Northeast BC needs to fill a minimum of 20,000 new jobs between now and 2020.
Diversified Employment Base
Source: North Peace Economic Development Commission 2014
Jobs Currently Available in FSJ and
Dawson Creek
2.4%
1.5%
Jobs Currently Available in
Vancouver
0.05%
Cash Flow keeps you in the game!
Mortgage Paydown is your ticket to long term wealth!
Appreciation is where you can win big!
VANCOUVER – 4plex
Price: $879,500
Monthly Rent: $4,400
Monthly Mortgage Payment: $3,410
Down Pmt: $175,900
Cashflow: $-302 per month
DAWSON CREEK – duplex
Price: $385,000
Monthly Rent: $4,000
Monthly Mortgage Payment: $1,489
Down Payment: $85,000
Cashflow: $532 per month
Sole Proprietor
◦ 100% ownership of the property
◦ 100% responsible for management of the property
◦ Highest risk, highest returns!
REITs and Limited Partnerships
◦ Fund, money is pooled, can use RRSPs
◦ Greater security, lower returns
Joint Ventureo when two parties come
together to equally benefit from ownership in a piece of real estate
o risk and reward is shared
o can be money/expert combo or money/renovator combo etc.
o most important is that it be win/win
• Good credit score and income so you an qualify for a mortgage (talk to Laura)
• Minimum of 20% down payment or a joint venture partner with $
• A good team of professionals to help you
• A long term outlook –minimum 5 years
Talk to a mortgage broker to see if you can
qualify for a mortgage
Figure out how much money you have to invest
Do the research to determine an area poised for
growth
Build a team to help you buy a property
Matt Marg Sayo Laurie Christina Doug
www.teamnickerson.com
604-263-2823