First Rental Property

Greetings Everyone,

Welcome to my sixth installment of my ‘Business Life Story’ Article series.

You can read my previous installments here:

Business Life Story Part One
Business Life Story Part Two
Business Life Story Part Three
Business Life Story Part Four
Business Life Story Part Five

In this article, I am going to outline the time line of my property purchases, as well as some general thoughts on real estate and rental properties.

As you may already know, my first property purchase was a freehold townhouse in my hometown of Oakville, Ontario.  You can read about some of the details on my About the Author page.

This first rental property purchase was made in May 2005, and I ended up taking possession of the house in February 2006. This purchase has probably been the single smartest financial decision I have made thus far, as everything has worked out perfectly with this property —Knock on wood! (*knock*knock*)

The property has experienced very good appreciation over the past 5 years. The property is located in a very nice neighbourhood of Oakville with high income earners. There are new schools and a new hospital is being constructed very close by. I have been fortunate in that, I have always had quality tenants in this property.

When I first started blogging, I wasn’t sure how much of my personal information I wanted to share. As time went on, I realized that the more honest I am, the more people will want to read about what I have to write.

So here goes…
This first rental property was purchased in May 2005 as I mentioned above for $250,990. A few months ago (this article is being written in April 2010), a neighbour to this property (who owns a comparable property) sold for $365,000.

The next property purchase occurred in October 2008. With this property purchase, I was very much trying to re-create the same type of purchase as the first rental property, in that I was hoping to buy in an area that would see some solid appreciation over the long run.

My first rental property purchase was an emotional purchase, in that, I purchased the property with the belief that there would be good long term appreciation of the property.

Rental property number two was purchased with the same intent. It was definitely an emotional purchase again. Fortunately, I have made two very smart decisions on the first two properties, because I bought in areas with promise. These two areas that I bought in are also areas that people want to move to.

This second property that I purchased again was pre-construction (bought off of the plans of the Builder). This property is a condominium in the heart of the Toronto neighbourhood, The Junction. The Juntion is an up and coming neighbourhood that is receiving a lot of ‘buzz’.

The Junction has been talked about in many newspaper articles, including The New York Times.

This property is a one bedroom plus den condominium that was purchased for $223,245. This price includes a locker and a parking spot. The property is scheduled to close in September of 2010. The square footage of the condominium is 665 square feet. My long term plan for this property is to eventually have it as a rental property. I want to hold onto this property long term because I know that it is going to experience very good appreciation.

I am very confident that the price that I bought it for was a very good one. As many of the comparable one bedroom plus den units in Toronto that I have been looking at are selling anywhere from $265,000 to $320,000. Therefore, I believe that once this property closes, there will be instant equity built in. I am anxiously waiting to see what units start selling for on the resale market, once this property closes.

What do you think of my investment strategy thus far on my first two properties?  Please leave your comments below.

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Almost every real estate market has certain areas that are referred to as transitional areas.

A transitional area can also be referred to as an area of gentrification or an area of revitalization. It is in these areas that the real estate market is experiencing changes. The changes that are being experienced are changes for the better.

Transitional areas often times start off as a depressed area. When I say depressed, I mean that it is an area where properties are not maintained well by the owners, people generally don’t want to move in to that particular area, often there is visible crime, and there isn’t a general sense of pride of ownership demonstrated by the homeowners.

Transitional areas can be certain streets in a city or town, certain subdivisions or even entire neighbourhoods.

An area becomes a transitional area when it starts to experience a change for the better. With this change, there are a number of things that start to happen to the area.

You begin to see people with above average incomes move into this area. These people will purchase a home, spend some money to fix up the home, and they will begin to demonstrate pride of ownership towards their home. This pride of ownership is demonstrated by the care and attention they have put forth in order to make the exterior of their home look nice. During holiday seasons such as Halloween and Christmas, these owners will jb hublot king power around 15mm men 701 nx 0170 rx deployment around 18cm spend time, effort, and money dressing the exterior of their home up with decorations. In the spring and summer, these same owners will tend to their gardens, hang potted plants, and make sure that their yards are generally tidy and attractive looking.

When an area is in transition, there are a few signs that you can look for. First, you will start to see an assortment of well looked after houses, in which these new owners are moving. At the same time, just next door, you may see a run down house, where little care and attention has been put towards the home. For every 2 run down houses you see, you should be able to see one well maintained, attractive looking house. These numbers I give are just an approximation. As long as you are seeing an assortment of nice looking houses, mixed in with run down houses, this is a sign that you are in a transitional area.

Another indicator of a transitional area can be found by observing the type of cars that you see in the neighbourhood. In transitional areas that are experiencing revitalization, you will start to notice higher end cars, such as BMWs, Mercedes, and Audi. You start to notice these cars because people with higher than average incomes are moving into these areas, and generally speaking higher income earners might own higher end cars.

In these transitional areas, you often may notice construction taking place. An indicator of construction would be found when you see dump trucks, construction workers, and any sort of construction equipment. Construction will be taking place in these areas, as sometimes new houses or condo buildings are being built in the area. In addition, you will notice construction taking place on some of the run down houses. This would be a situation where someone has moved in from outside of the area, has an above average income, and is spending the time and money to make their house look nice.

You also might see notices for re-development from the town or city placed on certain properties, or you might see a number of properties fenced off and a re-development sign placed on the fence. When you see this, this simply means that a real estate developer has purchased this particular fenced off section, and the use of that land is going to change. More often than not in a case like this, new homes or condo buildings are being built on this land.

Whenever I am driving through an area that I believe to be a transitional area, there is always one indicator that I look for. If I notice a number of custom built homes, I know that I am in a transitional area. These homes would look very grand, large, and attractive and often out of place, when you compare them to the rest of the homes on the street. When you see several of these homes scattered throughout he streets or neighbourhood, you know that the area is in transition.

A transitional are that I purchased a property in was the Juction Area of Toronto Canada. Below is a map of the Junction.

This was an area that was riddled with crime, drugs, and prostitution. There are still parts of the area that quite rough. However, over the past several years, this area has experienced a lot of change. Many young families and higher income earners are moving into this area. People now want to live here. The pride of ownership is evident, and the sense of community here is strengthening with each passing day. Many new businesses and restaurants have moved into this area, and are continuing to move in each day. I had watched this area experience change over the past few years. As I keep myself educated with respect to the real estate markets, I knew this was an area where there would be tremendous long term potential. I read about the City of Toronto injecting money into this area in order to better it, and I read real estate reports that said that this area of Toronto would outpace other areas of Toronto in terms of property appreciation over the next few years. Finally, I had actually read an article in the New York Times that highlighted the Junction and the revitalization that is was undergoing.

Almost every real estate market has these transitional areas. If you know what signs to look for, you should have no trouble in identifying these areas.