It’s of utmost importance when investing in apartment buildings to understand how to determine the current value of the asset and the principles of the valuation method.

So this short video, I walk you at a high level through the various valuation approaches used by appraisers and banks alike with emphasis on the ‘INCOME CAPITALIZATION APPROACH’ which used for multifamily properties.

YES, I’m going to talk about ‘CAP RATES’ and demystify them once for all! I’m also attaching an article I’ve written on this subject years ago which includes some tips.

First though, let me tell you the following:

DON’T GET HUNG UP ON CAP RATES!

That’s because you don’t get to choose the cap rate! Your banker and/or CMHC and the market decide what the cap is going to be.

If you really want to get hung up on something:

‘GET HUNG UP ON CASH FLOW!’

You must make the apartment building has a net positive cash flow.

LET THE...

One of the things I put a lot of emphasis on when I’m teaching multifamily investing or in my own business as an apartment building investor myself is on the NEED FOR A HIGH DEGREE OF PROFESSIONALISM.

Apartment building investors are expected to be very thorough in their planning and research phase before writing an offer to purchase. Stakeholders in the multifamily world expects investors to have done their homework much more than when investing in small rental properties one to four units because, of course, the stakes are higher. There’s much more capital at stake, not to mention your reputation.

I also advise my students to ensure they have multifamily professionals on their team before they venture into their first purchase of an apartment building starting with their realtor, mortgage broker, lender, building inspector and/or engineer and lawyer.

Well, for the first time ever I’m in the process of selling one of my properties and there...

If you're reading this post, it's very likely you've read or watched videos of previous posts of mine in which I talk about one my favourite reasons for investing in apartment buildings, that is the WEALTH MULTIPLIER EFFECT!.

You see, contrary to small rental properties containing one to fours units, for which the 'sales comparison' method is used to determine the value of the property, when you invest in larger apartment buildings of five or more units, the way the value of the asset is determined is called the 'income capitalization' approach, or 'cap rate' approach.

According to the cap rate valuation approach, the value of the property is arrived at by dividing the property's net operating income, or NOI, by your market's prevailing or average cap rate for comparable properties. To calculate the NOI, you subtract the property's operating expenses from the rental income.

The wealth multiplier effect, also sometimes called the 'big lift effect', kicks in whenever you increase...

In today’s post, I would like to talk about illegal suites in apartment buildings as something you need to watch out for, especially in older properties, when you are considering purchasing an apartment building. 

By illegal suites, I mean apartment units that were often added after the time of the initial construction of the building and for which the property owner may not have obtained a building permit from the municipality to add these new units.

This can have negative consequences from a financing point of view as the income from these illegal suites will not be taken into account by the bank and in the calculation of the net operating income (NOI). This means the bank will reduce the loan amount accordingly.

You see, in the world of multifamily investing, the value of the property is mainly derived from the property’s income, called NET OPERATING INCOMEor NOI. When the NOI is lower, so is the value of the property. Therefore, banks and CMHC want to see an...

Hi!

When I speak or teach about investing in apartment buildings, I'm often asked how much money do I need to get into the big leagues of real estate investing.

 Of course, the answer to that question will depend namely on the size of property you are looking at purchasing and based on the amount of capital you have available.  That's part of your planning phase before you start writing offers on multifamily properties.

 Please, if you have not done so already, make sure to download my Ebook: 'Multifamily Investing Secrets Revealed' as it will help you with your planning by having you answer five key questions (click here to download Ebook: https://www.multifamilyinvestingcanada.com/)

Accordingly, the answer I give people when they ask me how much capital they need to get started into investing in commercial residential properties, that is apartment buildings of five or more units, is a percentage of market value and it will also depend on the following...

I finally got a chance to rest after delivering my two annual 2.5-day live training workshops last October in Edmonton and Hamilton, both of which my students rated over 9 out of 10 for the second year in a row.

I feel very blessed and grateful to have the ability to do something I love which is to share my expertise in the area of multifamily investing with students who are committed to taking action in order to create a legacy and improve their lives.  

My training programs, online or live workshops, are a pure labour of love and the result of years of hard work to develop them with the assistance of a professional consultant.  

After years as a national speaker and trainer in this subject area and giving these live training programs I found a way to deliver the content in a fun way while at the same time creating a positive human experience that enhances one's learning ability.  

Learning about real estate investment and mortgage...

In this vlog post I discuss the concept of 'Lending Value' because in my days at CMHC as a multifamily underwriter I remember many an investor being stumped when they found out from their banker they were not getting the amount of financing they thought they could get.  

Very often that was because the lending value used by the bank, and more than not by CMHC, was not the same as the market value or the purchase price.

First let's define 'Lending Value'.  

For mortgage purposes, lending value is defined as the lesser of appraised value (by formal appraiser) and the sale price.

Banks and CMHC use the lending value to determine what portion of this lending value they will give you in financing. This portion is called the loan amount. The percentage of the lending value you get in financing is called loan-to-value. 

Not getting the expected amount of financing from your banker can be dramatic as this means investors have to come up with a larger down payment in...

 In my next post, I’ll be talking about the very important concept of ‘LENDING VALUE’ which often confuses novice multifamily investors.

 In the meantime, don't forget I still have seats available for my upcoming 2.5-day live multi-family investing workshops in Edmonton (Sept. 14 pm only to 16, 2018) and Hamilton (Sept. 28 pm to 30, 2018).

You can check it out HERE!

Enjoy what's left of summer! 

Cheers,

Pierre-Paul

Hi folks.  

It's Pierre-Paul Turgeon, Canada's Authority in multifamily investing and former Insider. I used to be an underwriter at Canada Mortgage and Housing Corporation (CMHC) and now I'm a full time apartment building investor with a portfolio of 160 doors worth over $22M. I'm also a national speaker, coach/trainer and author on this topic.

I just spontaneously shot this short introductory video while on a hike in the Canadian Rockies near my home. Sorry for my rugged look. I want to let you know that I'll start blogging regularly from now on on various topics related to investing in apartment buildings in order to help you out on your journey to invest in this type of asset.

I have amazing multi-family investing hacks and strategies I'm going to share with you that will shave years from your learning curve. I'll also be sharing interviews I did with other apartment building experts such as bankers, mortgage brokers, and other successful investors.  

I will also be...