Gary Doyle
Sales Representative
Realty Executives of Sudbury Ltd.
I’m often asked, “How is the real estate market?” Homeowners are always curious as to the growth of the value, in most cases, of their largest investment. Whether you are a renter, homeowner or just leaving the nest, everyone has a vested interest in the real estate market. Vacancy rates affect not only how much a renter will pay for rent, but it also impacts purchase value on rental income property for investors. So, although you may not currently own a home, the real estate market does have an impact on your life.
You may get a variety of responses to the above question… the response may be as short and quick as “good” or “oh, I am very busy”. But I always like to give people a little more than that.
This is where our industry is driven by statistical analysis. You can get a snapshot of what the market is doing with a quick calculation – take the number of sales and dividing it by the number of new listings over a certain period. This is a more simplified version of the Absorption Rate calculation that we use to get a general read on the current state of the market and its trajectory.
For example, year to date in 2019, there has been 2634 sales and 4610 new listings in Greater Sudbury up until the end of October. This indicates that 57% of the homes listed have sold during this time.
So, what does that tell us? The ranges below give us a very good indication as to the current state of the market.
So, as you can see, year to date, we have experienced a balanced market, trending towards a sellers’ market. For the last 3 months, the ratio of sales to new listings has been 68%, so clearly, we have seen a shift to a sellers’ market. October numbers just in, we are seeing an almost 80% ratio, so the trend continues.
So next time you see me and ask how the market is doing, I will not only let you know, but I will most likely throw out there “hey, it’s a great time to sell!”
Now, buyers, don’t panic. Although the market has shifted in favour of sellers, you don’t have to overpay for a property. Just be sure to work with a Realtor® that is on their game and has a pulse on the market as things are moving at a very fast pace. Fast pace we like, overpaying we don’t!!
Whether you're buying or selling, we're on our game to help. Even if you're just curious as to the current state of the market, I'm always here to answer all the questions you have! Never hesitate to reach out at gdoyle@realtyexecutives.com.
Contributed by:
Gary Doyle
Cell - 705.691.6166
Office - 705.586.3334
gdoyle@realtyexecutives.com
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact me immediately at gdoyle@realtyexecutives.com.
“We should think about living on the lake” was the start of the conversation a few years ago.
Immediately, my thoughts went to “Lake” and “how far is this lake from the golf course?” Greater Sudbury has over 330 lakes to choose from, so a bit of panic started to set in as I envisioned never getting to play golf again. Calmness prevailed as I considered the fact that if my wife, Kellie, wanted to live on the lake and that is a lifestyle that she has always enjoyed - growing up with trailers, camps and cottages during the summer months - so far be it for me to just not give it a serious consideration. My response was “sure let’s take a look at what is out there, but I would like to stay within a 15-20 minute radius of town” (“town” aka “the golf course”!)
So, the search began to find our next home as we were currently the proud owners of a 4-bedroom, 3-bathroom home in New Sudbury and had recently become empty nesters as both children were now off the payroll and onto other provinces to build their life. We often found our current house too big as we used the kitchen, bedroom and TV room and the rest just awaited sparse visits from family and friends.
Now back to the search. I did not fish, boat or swim in cold water, so I really did not have any preferences as to what lake. I did know this, I really enjoyed having the sun in my backyard near the end of the day as that is when I would most likely be home to enjoy it. Therefore, a South/South-Western exposure was the main criteria for me and being within 20 mins of “town center”.
We looked at several properties until we found a bungalow with 2 bedrooms and a very nice Southern exposure lot with lots of privacy and only 8 Minutes from the Idywylde Golf Club (oops, I mean “town center”). The deal was struck and, the fact that we sold our home in New Sudbury in one day, things began to move along very quickly.
We took possession in mid-January and it was cold and snowy, but we weren’t long realizing a whole other aspect to living on the lake – winter fun! We would take our dog Charlie onto the frozen lake for great walks where he could run free, the neighbours were out building skating rinks, we saw cross country skiers and snow bikes glide by, the mini villages of ice fishing huts and, of course, the drop-ins of family and friends roaring in on their snowmobiles for a visit. It never even occurred to me that I would be interested or even able to do all this stuff, nor did I even see winter as an actual asset for lakefront living!
Then it was our first summer and the experience was even more fantastic. We would come home from a day of work through the front door and immediately into a quick change to shorts and sandals and out the back door to “camp”. Did I go fishing? Sure did and I can tell you, after 3 years, I have still not caught a fish even though my neighbour two docks down pulls them out of the water every day. Did I go swimming in that chilly water? Absolutely, but only after a wood fired sauna. Of course, you know what’s next, we had to buy a pontoon boat to really enjoy the entire lake and all the new and old friends who lived on the lake.
I will say this - for a guy that had no interest in living on the lake, I am now usually the first guy out of the “town center” locker room after a round so I can get home as quickly as possible to enjoy a relaxing beverage with Kellie where I can thank her for giving me the nudge while soak in the sunset from our dock.
All the best till next time and be sure to get out and enjoy the lakes!
If you have every considered living on the lake or finding that perfect family camp to add to your lifestyle, give me a call today!
Contributed by:
Gary Doyle
Cell - 705.691.6166
Office - 705.586.3334
gdoyle@realtyexecutives.com
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact me immediately at gdoyle@realtyexecutives.com.
For this blog entry, I’m continuing the conversation about the Rental Income/Multi-Family sector in Sudbury while putting more focus on the formula side of things.
Rental income is high due to low vacancy rates in Greater Sudbury, therefore providing above average returns on investments. Though rents are high, purchase prices remain steady and, in most cases, buyers can purchase a Rental Income Multi Family property, finance it and still have a positive cash flow - you just have to know how to calculate it!
But before I get too deep into it, if you’re considering entering into the world of investment properties, as I mentioned in my previous Multi-Family blog entry, I highly recommend partnering with a Realtor® that has very good understanding of rental income properties and all of the important factors that are involved in this type of transaction.
So how do we know what is a good price to pay for one of these types of properties?
Today, I am going to talk about Capitalization Rate (also known as "Cap Rate"), which is a financial formula that provides a net operating return percentage before financing. When a seller lists a property on the MLS™ system, you should see the Gross Income (annual total rental income) and Expenses (combined annual property taxes, insurance, utilities,etc.). The Net Operating Income (often referred to as “NOI”) is Gross Income minus Expenses. To determine the Capitalization Rate, you take the Net Operating Income divided by the purchase price to get a percentage result. This formula is what you see in the picture above!
Here's an easier look at these:
Net Operating Income (NOI) = Gross Income - Expenses
Capitalization Rate (Cap Rate or CR) = NOI ÷ Purchase Price (value)
As an example, if you have a building with an NOI of $51,000 and the purchase price is $625,000, the Cap Rate would be 8.16% ($51,000 ÷ $625,000 = 8.16%). This basically says that, if you paid cash for this property, you would realize an 8.16% return annually on your investment (also known as “ROI”). This along with building appreciation and future rent increases provide an investor a good return.
Whenever I see a new listing, I always do a quick calculation to determine the Capitalization Rate to see if the financials are in line with the Sudbury market. You will see ranges from 4%-12%, with the average normally being in the 7%-9% range. I often receive calls from Buyers that are quickly drawn to the higher returns (who doesn’t want a 12% ROI!), but I talk them through the fact that higher returns can often come with higher risk. Some of these risks can be one, or an accumulation of, location, tenants and building structure.
As examples, the purchase price of properties in less desirable areas of Greater Sudbury are lower, thus resulting in a higher Cap Rate. But, remember, when it comes time to sell, your buyer market is reduced as some buyers just aren’t interested in investing in areas where it is in a downward cycle or viewed as "less desirable". Tenants can also a big factor in the equation as there are good and bad tenants and the latter will add stress and potentially devalue a building due to the lack of care they provide to a property. Finally, a poor building structure may have a purchase price lower than market value but do you need to add in the cost of new windows, shingles, heating system, foundation repairs, cast iron plumbing replacement or any other large capital expenses that can come up after completion?
The Capitalization Rate is helpful as a starting point for a quick snapshot of a properties financial potential but shouldn't be the only factor in determining whether the property is the right investment. Some experienced buyers typically have their own financial analysis that they rely on and will add several more factors to the Cap Rate calculation that will reduce the return percentage. Some of these expenses may be Vacancy Rate percentages, Reserve Funds set aside for future requirements, Property Management, Maintenance and Repair, and Snow/Garbage Removal. All of these are legitimate expenses but, to compare apples to apples in MLS™ listings, for the most part, these expenses are rarely listed and every owner is going to approach ownership in a different way – more hands-on versus outsourcing day-to-day operations, for example.
A buyer’s risk tolerance will best determine the right property for the buyer. The key being purchasing a property that balances risk with financial performance and that is where partnering with an experienced Realtor® is to your absolute advantage and benefit.
Whether you’re a seasoned veteran in the world of income property ownership or If you’re thinking about taking that first step into investing but not sure how to get started, I have a ton of experience in Multi-Family, Investment and Commercial real estate.
Never be shy to reach out to discuss your vision and goals so we can start to build, or enhance, your real estate investment portfolio. It’s never too late to start!
Contributed by:
Gary Doyle
Cell - 705.691.6166
Office - 705.586.3334
gdoyle@realtyexecutives.com
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact me immediately at
Sometimes buyers and sellers are presented with a multiple offer situation. This blog article will look at this real estate transaction scenario from a buyer’s perspective.
“Multiple offers”, also known as “competing offers” or even referred to as “bidding wars”, may occur for a variety of reasons - low inventory of listings, a listing strategy to withhold offers till a certain date or when a property is priced below current market value. Recognizing a well priced property often results in two or more potential buyers who are quick to respond by submitting a written offer at the same time.
So, as a buyer when faced with this scenario, do you compete or shy away? Does this mean you will be overpaying for a property? How do you make sure your still protected?
Here is where the value of working with an experienced Realtor® comes into the process. In my opinion, if you have found a property that you would like to purchase, there is no reason not to compete in a multiple offer situation. With your Realtor®, you have looked at properties while acquiring solid market knowledge along the way and have now found the one you want. Because of this familiarity with the market conditions, you have a very good understanding of value based on your previous viewings and, once you have reviewed sold comparable properties, you’re in a position to feel confident you are making an informed decision on how much you would like to offer on this property. I recommend that buyers put ‘their best foot forward” in a multiple offer situation so that, if you do not have the offer that the seller has chosen, you don’t have any regrets. Just to clarify, “best foot forward” means an offer that you have a clear understanding of the price and conditions that aligns with your comfort level based on the research, experience and guidance from your Realtor®.
A word of caution when ‘jumping in’ on a multiple offer situation. Although each situation is different, it is not mandatory to improve your offer by sacrificing clauses and conditions that will protect you as the buyer. A couple examples of these would be buyers removing their financing and/or home inspection conditions and, although it was somewhat commonplace over a decade ago, there are some real serious risks in today’s marketplace.
When it comes to the financing condition, a Buyer may be under the impression that their financing has been pre-approved and gives the instructions to their Realtor® to proceed without a condition that would allow a Buyer to verify that the financing portion of the agreement was indeed secure. In today’s financing world, there are huge risks with this due to much stricter lending practices than the past. Pre-approval means you’re conditionally approved, but the house hasn’t been yet and the info you provided to the lender must still be confirmed.
The other example may be the foregoing of a home inspection as an attempt to have your offer look better than the next. Now maybe you are a home builder, an electrician or an overall self-proclaimed home specialist and, now that you’ve given the property your best “once over”, you’re comfortable without further inspection. But a “once over” is not a thorough, unbiased inspection and major issues can be missed. Worse, if you’re not a seasoned building expert, are you willing to put yourself at risk of the potential deficiencies that may be exposed after you get the keys?
These are the discussions that take place between a buyer and their Realtor® prior to creating a competing offer that aligns with a buyer’s comfort level and specific needs. A Realtor® has the experience to guide you through the multiple offer situation and allow you to “jump in and put your best foot forward” and not “shy away” from missing “the one” without at least saying “we tried our best”.
Although not all situations are “bidding wars” when buying, it’s a good idea to start with an experienced agent that is working with you right from the moment you start looking for your future home so you’re properly prepared to make confident and knowledgeable decisions together when the time is right to “jump in”. Never hesitate to contact me at gdoyle@realtyexecutives.com or call me at 705.691.6166 for any questions you may have and get prepared for the moment you find "the one".
Contributed by:
Gary Doyle
Cell - 705.691.6166
Office - 705-586.3334
gdoyle@realtyexecutives.com
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact me immediately at gdoyle@realtyexecutives.com.
Well, it has been an interesting start to the 2019 real estate market in Sudbury!
Since the first week in January my phone has not stopped ringing with buyers and investors calling about the Multi-Family market in Sudbury. What is Multi Family you ask? Rental income properties of the residential nature.
Why Sudbury? What makes the Sudbury area attractive to Buyers is the fact that rental income is very good, with an average two-bedroom apartment renting for over $1000 per month, plus utilities in most cases. Further, Greater Sudbury is also experiencing a low vacancy rate as the “stress test” the Canadian government has forced onto lenders over the last two years has stalled a lot of renters from moving into home ownership. But, the impact of the “stress test” on the market conditions as a whole is a topic for another day.
In regards to Multi-Family investment, this factor above, along with still historic low interest rates is providing investors an opportunity to invest in real estate and generate a positive cash flow even after borrowing costs. I’m even seeing a lot of Southern Ontario buyers targeting Sudbury as a place they are looking to invest in because of the high return on investment in the North that is not available in the Southern Ontario market due to much higher purchase prices.
The basis of purchasing investment properties is that, over the course of time, a real estate investment will appreciate while the tenants are paying down the debt. If you are considering venturing into this area of investment, I would highly recommend working with an experienced Realtor® who will help you navigate through all of the factors that will help you maximize your return on investment.
But, before you CLICK HERE to rush to my website to check out all the income property listings, here is just a quick snapshot of a few of the key items that are necessary for a successful transaction:
With all that above, these types of purchases usually come down to one basic item - the financials of the property. In order to professionally assess, verify and manage the due diligences required on these properties, I can’t emphasis enough the importance of partnering with an expert Realtor® to assist so that you are able to meet or exceed the financial benchmarks of the current Sudbury market.
The Multi Family investment model is a project, small business and or investment that you can add to your present portfolio or current career path which is a nice option to have so maybe down the road it will provide you a good secondary source of income and equity.
I am are ready to sit down and help you with this assessment to ensure a successful outcome for your future! Never hesitate to contact me at gdoyle@realtyexecutives.com or call me at 705.691.6166 for any questions you may have regarding Multi-Family investment properties or any other real estate needs.
Contributed by:
Gary Doyle
Cell - 705.691.6166
Office - 705.586.3334
gdoyle@realtyexecutives.com
Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the official policy or position of any other salespersons, staff or affiliates of Realty Executives of Sudbury LTD. Brokerage, Realty Executives International, the Sudbury Real Estate Board, Ontario Real Estate Association, Canadian Real Estate Association or any of their subsidiaries. For any concerns pertaining to the content herein, please contact me immediately at gdoyle@realtyexecutives.com.
