No Comments

How to Make a Fortune Selling Your Building to a REIT

  1. How to Spot an Amateur Buyer
  2. What is a REIT
  3. Why Apartment Building Owners Should Know About REITs
  4. Advantages of Selling Your Apartment Building to a REIT
  5. Disadvantages of Selling Your Apartment Building to a REIT
  6. Conclusion

You worked hard, bought a couple apartment buildings, and now you want to cash out so you can spend more time with your family.

But how do you get out with the most money in your pocket? Who are the best people to talk to so you don’t waste time? And, if you can find the right people, how should you deal with them?

1. How to Spot an Amateur Buyer

If something looks too good to be true, it probably is. Don’t be looking for somebody who just won the lottery and seems like they’re willing to pay too much without any work. From my years buying and selling apartment buildings, it’s obvious not to go for something that seems too good to be true.

Amateur investors can be a tremendous waste of time and money. They talk big, but don’t follow through on commitments. Amateurs don’t know the most important aspects of a successful deal. As a result, they ask for work that is meaningless, and don’t pay attention to it when it’s done.

You can ensure you don’t run into problems like this by consulting an experienced multifamily real estate broker. A professional broker will guide you through the process in a way that commands respect from everyone you deal with.

Some buyers go into a deal with negative intent

Experienced broker protecting building owner from buyer with negative intentA common strategy is to “bait” a potential seller. Many brokers and buyers alike promise the moon, but don’t be fooled. They’ll get a seller to spend months of time and energy on them. By the time the seller finds out the buyer isn’t able to pay an agreed price, they’d eventually settle at a low price rather than go through all that hassle again with someone else.

Other buyers might talk about paying higher than market value or lie about their assets so they will be treated seriously, even if it’s only for a short time. It makes them feel important. You’d be surprised what people will do to feel important. Psychologists say it is mankind’s most important need.

Don’t get taken in by amateur or unscrupulous buyers. There are proven methods to know if the buyer you’re talking to really has the money and intent. An experienced multifamily real estate agent will recognize the signs, and can tell very quickly if you’re wasting your time or might even be getting into trouble.

Rule of thumb: If your building is worth 10 million dollars whoever you’re talking to needs to have 3 million in cash

In addition to a lot of cash a qualified buyer needs a very good credit rating. And it helps if they have a friendly banker who’s been lending to them for years.

A good broker knows all the ingredients to a win/win transaction and in what order they need to happen. A good deal has a flow to it. All the parts fall into place just when they need to in order to keep the deal moving.

Too often deals fall apart. People lose interest, their priorities change. That can happen for many reasons. Someone gets sick or has an accident. The fundamentals of the market change, or there‘s a natural disaster. Events like that are more common than they used to be.

One way to ensure your buyer is qualified and has the money is to work with a REIT. Most REITs are cash rich and looking to buy.

A large percentage of multifamily building purchases in Canada are made by REITs

2. What is a REIT?

A REIT (Real Estate Investment Trust, pronounced “reet”) is a company that combines the capital of many investors to own or finance income-producing real estate. REITs are unique in that they allow individuals to buy shares in commercial real estate portfolios. REITs can include many types of properties – industrial, office, retail, apartments, self-storage, hotel, and diversified real estate holdings.

In contrast to development firms, selling properties is not the main goal of REITs. The majority of profits generated by REITs is income from operating the property, including rent and direct payments. REITs must distribute a large portion of profits back to shareholders in the form of dividends.

REITs were modelled after mutual funds. They offer investors the benefits of commercial real estate investment along with the advantages of investing in a publicly traded stock. Each share of the company distributes a certain percentage of the money generated by the company’s properties.

Essentially, REITs let you invest in real estate “the easy way.”

Canadian REITs must pay at least 90% of their net income to investors

Experience real estate broker introducing building owner to the correct REITFor large companies, REITs are becoming increasingly popular as a relatively easy way to hold property and attract investment with tax benefits and flexibility that other types of investments just can’t match. For individuals, investing in REITs is an easy way to hold income-producing real estate while saving the cost, work, and risk of owning and managing your own properties.

REITs are one of the largest owners and operators of multifamily buildings in Canada. And given current market conditions they are predicted to undergo significant growth in 2019 and beyond. Due to the demand for housing rising while affordability declines, rental demand continues to rise. Residential REITs are expected to continue performing well in the future.

3. Why Apartment Building Owners Should Know About REITs

REITs are major owners and operators of apartment buildings in Canada. If you own one or more apartment buildings, here are some things you should know about selling to REITs:

(i) They are worth emulating

When it comes to profitable property management, REITs are world-class experts. REITs are extremely detail-oriented and take great care of the property, are efficient at tenant management, and have a solid capital plan including windows, heating, roofing, all things that need replacing, the date, the cost, everything.

Look at the front of the buildings owned and managed by REITs to see the type of envelope, foundation and parking used. Watch the advertisements for REIT-owned properties to learn more about the property and services they offer. If you manage your buildings as well as REITs do, your buildings will be easier to sell.

(ii) They buy apartment buildings

REITs are cash-rich, highly professional property buyers. Different REITs buy different types of apartment buildings, including new and older buildings, as well as individual buildings and entire retail portfolios. REITs raise money both from private investors and publicly traded shares.

4. Advantages of Selling Your Apartment Building to a REIT

If you are looking for a buyer for your real estate assets, a REIT could be your ideal candidate. Selling your property to a REIT has several important advantages, including long-term investment opportunity.

(i) REITs are actively seeking acquisition opportunities

As the real estate market continues to grow, REITs are actively seeking acquisition opportunities across all property types, including multi-family property. Selling your property to a REIT provides a great opportunity to get a satisfactory return on investment.

(ii) REITs have exceptional financial qualifications

REITs acquire properties in three different ways: cash, OP Units (privately placed units of the REIT’s Operating Partnership), or by using a combination of the two. Although REITs are open to paying with OP Units when the right assets are involved, paying with cash represents their easiest and most cost-effective option.

(iii) Always in a position to buy

In contrast to buyers who need a loan in order to purchase a property, REITs are almost always in a position to buy, and they have the capital. If you own more than one or two large buildings, REITs will be some of the best buyers for your whole portfolio at once.

5. Disadvantages of Selling Your Apartment Building to a REIT

Experienced real estate broker guiding building owner through complex bureaucracy

(i) Complex Bureaucracies

REITs are large companies with complex bureaucracies. They have a lot of checks and balances to protect their shareholders. Ability to navigate the bureaucracy is essential. It’s much easier to deal with them if your real estate agent knows the people involved on a first-name basis and has done business with them before. An experienced agent will know what they want and how they want it. Things happen more quickly.

(ii) Intense due diligence

Specialists from their expert acquisition team will be involved in nearly every part of the due diligence. No stone will be left unturned. Detailed analysis of every scrap of paper will be carried out, and every part of the building will be closely examined. The seller, the financial statements, and the building will all be under intense professional scrutiny.

(iii) REITs may consider only specific types of assets

Most REITs only consider assets of a certain size, type and location. And their preferences shift and change as decided by Executive Staff and the Board of Directors. REITs are not always interested in acquiring smaller buildings.

(iv) REITs are expert negotiators

REITs are typically headed by professional negotiators with industry-leading market data. Unless you have an experienced professional negotiator on your side you may be at a serious disadvantage.

6. Conclusion

If you are an apartment building owner looking to sell it’s important not to get taken in by amateurs or fakers. Selling your property to a REIT may provide a unique opportunity to obtain a sound return on investment.

As the Canadian real estate market continues to grow and expand, REITs are well positioned to grow with it. They are actively seeking acquisition opportunities across all property types. Some REITs may be focused on assets of a certain size, type and location. They are cash rich, but have professional acquisition teams that will put your property through an intense due diligence process.

If you are considering selling your multi-family apartment building to a Canadian REIT, it is important to consult an experienced multifamily real estate expert who knows the market and has personal connections with major Canadian REITs to help you negotiate the sales and settlement process.

Confidential

And finally, the right real estate broker can be completely discreet. Nobody needs to know you’ve just come into a large sum of money.


Let’s Talk

Experienced Multifamily real estate broker Seth BakerSeth Baker is an experienced multifamily real estate broker who will guide you through the corridors of power and wealth in a way that commands respect from everyone you deal with.

There are proven methods to know if the buyer you’re talking to really has the money and intent. Seth can recognize the signs, and tell very quickly if you’re wasting your time or might even be getting into trouble.

Seth knows all the ingredients to a win/win transaction and in what order they need to happen. He talks to decision makers at Canadian REITs regularly and knows what they need in order to approve a deal.

No Comments

Screening Tenants for Pets

After reviewing the pros and cons of allowing pets in your multifamily property, you may have decided that the increased revenue and attracting and retaining more tenants outweighs the cons.  To attract the right type of pet owner, you will need to screen your tenants to ensure that they are responsible and that their pets will not damage your building.  As the premier agent for apartment buildings for sale in British Columbia, here is an outline of how to screen your tenants and their pets.

Restrictions

Before even beginning to screen your tenant, you may want to think about placing restrictions on what type of pets you will and will not allow into your multifamily property.  These restrictions can include:

  • Size of dog.
  • Dog breeds – such as pit bulls or other perceived aggressive dog breeds.
  • The number of pets allowed in one suite.

By placing restrictions on your tenants and monitoring the type and number of pets that are allowed, you may save yourself a lot of problems down the road.

Create a list of Questions

A thorough screening starts by asking the right questions.  Some important questions that you should ask a possible tenant include:

  • How many pets do you own?
  • What is the pet’s breed and its size?
  • What is the age of your pet?
  • How long have you owned your pet?
  • Does your pet have its updated shots and vaccines?
  • Is your pet fixed?
  • Has your pet ever acted aggressively towards other animals or people?
  • Is your pet trained?

By getting answers to these questions, you will be in a better position to decide if this is a tenant and pet that you want in your multifamily building.

Identifying a Responsible Pet Owner

Besides asking pertinent questions about the pet, there are other ways to identify a responsible pet owner.  When meeting the owner, be sure to watch their body language and whether their pet listens to them and how friendly the pet is to strangers (you).

Here’s the Deal:

Before making any final decision about the tenant, remember to contact references and ask them the same questions as you asked the tenant.  You should also check with prior landlords, verify their income and place of employment and do a credit and background check.

Creating a Lease

Once you feel that you have thoroughly screened a tenant, it is time to create a lease.  When presenting a lease, it is important to address the following points:

  • Rent amount.
  • Pet damage deposit amount.
  • Nonrefundable pet fee.
  • Require renter’s insurance from the tenant to cover any damages or other problems such as dog bites.
  • Other pet rules such as picking up after their pet and disposing of waste in outdoor garbage bins only.

By screening and protecting yourself and the other tenants in a lease, you should be able to enjoy the pros that being a pet friendly multifamily property brings.  If you would like more information on how to create and implement a screening process for your property or are interested in some of the great multifamily investment opportunities that are available in and around the province, please contact me today.  I look forward to hearing from you soon.

 

 

No Comments

Pros and Cons of a Pet Friendly Policy

Deciding on whether you should allow pets in your multifamily dwelling can be a huge decision and a wide range of factors need to be considered before arriving at an answer.  Unfortunately, a fast or easy answer is not possible as there are both pros and cons to allowing pets.  As your premier agent specializing in apartment buildings for sale in British Columbia, I would like to present some of the pros and cons of having a pet friendly policy in your multifamily property.

Pros of a Pet Friendly Policy

Create More Interest

A pet friendly policy is a guaranteed way of generating more interest in your multifamily property.  In some cases, you will be able to attract up to 70% more possible tenants.

Increase rent

Not only does a pet friendly policy attract possible tenants, you as a property owner will also be able to ask for more rent.  This rent increase can be written into any rental policy with terms such as:

  • Non-refundable fees associated with pets.
  • An increase in a damage deposit in case of pet destruction.
  • A monthly rent attached to the pet itself.

Longer Stays

Tenants in pet friendly properties tend to stay longer.  Part of this is because finding a rental that has a pet friendly policy can be difficult at best.  The other part of the reason is moving pets around (especially dogs) can be stressful on both the owner and the pet.

Cons of a Pet Friendly Policy

Damage

The one obvious reason why a pet friendly policy may not be ideal is the fact that the chances of incurring property damage will increase.  This can be offset with an increased damage deposit, but unfortunately wear and tear in each suite will increase if you allow pets in your building.

Noise

Pets can be noisy and upset other tenants in your building.  This disruption can lead to other non-pet owning tenants relocating to avoid the noise.  Again, if you are going to adopt a pet friendly policy, you may want to include the amount of noise or the number of complaints in the original rental agreement.

Allergies

With pets often comes allergies.  This is especially true of any long-haired cat or dog breed.  Allergens can spread from suite to suite via air ducts and will affect the common areas.  Be sure to notify the tenants that you are a pet friendly building, so that they can plan accordingly.

Before arriving at any type of decision, it is wise to weigh the facts to decide if a pet friendly policy is right for your multifamily property.  If you would like more information on this topic or are interested in viewing some of the new and exciting multifamily properties that are available, please contact me today.  I look forward to hearing from you soon.

 

 

No Comments

Do Pet Friendly Properties Attract More Tenants?

If you have been looking for ways to attract and retain more tenants, then read on.  Since over 70 % of all renters are pet owners, creating a pet friendly property can really pay off.  As your premier agent for apartment buildings for sale in the Lower Mainland, here are a few ways to create a pet friendly multifamily building that will attract more tenants.

Revamp the Common Areas

If you are looking to attract dog and cat lovers, take the time to revamp the common areas, so that they are as pet friendly as your policy.  By preparing your common areas for pets, you will reduce the maintenance costs associated with accidents and will be greatly appreciated by your tenants.  Great ideas to make your common areas more pet friendly include:

  • Change the carpets to hardwood or concrete floors. This will reduce the wear and tear on the floor and make any accidents easier to clean up.
  • Remove any breakable items or items that may be damaged by pets.

Create a Dog Park

If you have unused space on your multifamily property, an outdoor off leash dog park is an excellent way to attract and keep tenants.  Fence in a portion of space to allow dog owners a convenient place to let their dogs run free.

Install Waste Stations

By installing waste receptacles and bag dispensers around your multifamily property, you will make it far easier for pet lovers to clean up after their dogs.  The added convenience will be appreciated by both pet and non-pet owners alike.

Review your Pet Policy

Before wholly committing to a pet friendly property, it is a good idea to review and tweak your pet policy.  It is best to fully outline your pet policy and how you screen for pets.  Be clear on what types of pets you will and will not allow as well as the process that a tenant will have to undergo, if they choose to acquire a pet after they move in.

As property manager, you will also have to outline how you will handle any behavioural issues such as complaints about a barking dog or a dog with aggressive tendencies.

Pay Attention to Details

Small details can go a long way.  Kind gestures such as putting a water bowl in the common areas, especially in the summer months will not go unnoticed.  A bowl of dog/cat treats at the front desk is another great way to keep your tenants and their pets happy.

Adopting a pet friendly policy can be a great way to attract and keep tenants.  If you feel a pet friendly approach is for you, then make sure to go all in and see how quickly your building fills up with happy pets and pet owners.  If you are interested in other tips on how to make your building pet friendly or would like to see the exciting multifamily properties that abound in the Lower Mainland, please contact me today.  I look forward to hearing from you soon.

No Comments

3 Proven Ways to Increase Your Multifamily Revenue

Like any investment, the end goal of your multifamily property is to generate revenue.  As the premier agent for apartment buildings for sale in British Columbia, I would like to share these 3 proven ways how you can increase the revenue on your multifamily investment.

Increase Rent

Study the rental markets in your area and set your rates accordingly.  You may want to consider adding incentives before raising rents.  Smart technology, new flooring or an accent wall can make a raise in rent more palatable for your tenants.  Before increasing any rent, make sure that you are aware of the maximum increase allotments or if your property is in a rent controlled area.

Here’s the Deal:

Be cautious about raising rents too quickly as turnover can be quite costly and time consuming.  Tenant retention can be as important to your stream of revenue as rent increases – act accordingly.

Increase Occupancy

It is estimated that each month that you have a vacant unit in your property, you are losing 8.3% of your potential yearly income.  These losses can add up quickly and greatly impact your annual revenue, especially if you have more than one unit vacant.  The minute one of your units becomes vacant, act quickly to get it back on the rental market.  Make sure to:

  • Have your lead maintenance worker ready to do any needed repairs, painting or other jobs as soon as the tenants move out.
  • Begin placing a wide variety of ads the day after the old tenants have moved out.
  • Try to match interest to your suites to the rental market. If you are not getting any interest from possible tenants, you may need to lower your rental price or add other incentives.

Add Revenue Streams

Look for other ways to increase your monthly revenue stream.  Some excellent ways to not only add revenue, but also increase the value and interest in your multifamily property include:

  • Storage lockers.
  • A bike room.
  • Upgraded features and appliances – smart thermostat, in suite laundry etc.

By boosting occupancy and increasing rent while looking at adding additional revenue streams will help to provide additional income to your multifamily property.  If you are interested in other ways to increase your investment profits or would like to see some of the new and exciting multifamily properties that are available around the province, please contact me today.  I look forward to working with you soon.

 

 

No Comments

5 Landlord Estate Planning Mistakes to Avoid

Avoiding mistakes in your estate planning could save you hundreds of thousands of dollars in taxes and years of expensive lawsuits after you die.  If you own and invest in apartment buildings, you need to avoid these 5 disastrous estate planning mistakes.

As an example, take landlords Betty and Jim.  Betty and Jim have lived in the same home in Burnaby since they got married in the 1960s.  They raised their three children, Ray, Julie and Dave, who now all have their own families. 
Read more

No Comments

Five Things Nobody Told You About Wills

Avoiding mistakes in your estate planning could save you hundreds of thousands of dollars in taxes and years of expensive lawsuits. If you own and invest in apartment buildings, you need to know about these Five Things Nobody Told You About Wills.

In this article, we’ll take landlords Betty and Jim as an example. Betty and Jim have lived in the same home in Burnaby since they got married in the 1960s. They raised their three children, Ray, Julie and Dave, who now all have their own families. Jim’s plumbing business took off in the 1970s.

In 1985, Jim’s company got hired to replace the pipes in an older apartment building. Jim found out that the building was for sale,
Read more

No Comments

21 Hilarious Excerpts from Tenant Complaints

Some days, being a landlord can be a thankless job.  Have a laugh with these 21 Hilarious Excerpts from Tenant Complaints:

1. I wish to complain that my father hurt his ankle very badly when he put his foot in the hole in his back passage.

2. The lavatory is blocked, this is caused by the boys next door throwing their balls on the roof.

3. This is to let you know that there is a smell coming from the man next door.
Read more

No Comments

6 Landlord Jokes that will Make You Laugh (or Cry)

Apartment building owners work hard! Enjoy a break and a chuckle with these 6 Landlord Jokes that will Make You Laugh:

 

A large family, with seven children, had just moved to Vancouver. They were having a difficult time finding an apartment to live in. Many apartments were large enough, but the landlords objected to the large family. After several days of searching, the father asked the mother to take the four younger children to visit the cemetery, while he took the older three to find an apartment. After they had looked most of the morning they found a place that was just right.
Then the landlord asked the usual question, “How many children do you have?”
Read more

No Comments

9 Things You Should Know About Off-Market Apartment Buildings

Want to know a secret? Apartment buildings are being sold in your area…transactions you’ve never seen or heard about.

Off-market deals make up a significant percentage of apartment building transactions in British Columbia. Buying or selling an apartment building off-market can offer advantages and disadvantages. Market knowledge, strong relationships, reputation and patience all lead to success or failure.
Read more

No Comments

BC Landlords Can Benefit From This New Law

Legislators in Ottawa just dropped an atomic bomb on housing in Canada. BC landlords can benefit, if they play their cards right.

In October, legislative changes rocked mortgage lending Canada-wide. Middle-class Canadians attempting to buy their first home saw buying power destroyed by 24% or more. Changes to the mortgage rules make it harder for home-buyers to get into the market or qualify for mortgage insurance.

These same mortgage rules may prove highly beneficial to landlords.
Read more