I’ve been a real estate investor for a while, over a decade now, that’s how I got into the real estate industry then into being Realtor full time. Going in I knew it could be a rocky industry and it has been. I also knew there were many ways to generate income as an investor: both passive and active. I’ll skip the active here because what that really is is a job in itself, not investing and I want to concentrate on investing and one particular example of how well it can work, especially now.  

The example below is based on an actual property that I personally purchased in the last 6 months. I’m using it because I know all the numbers, inside and out, but I won’t disclose the property address and I don’t keep real estate in my name either. 

The subject property is a triplex in Phoenix. It’s three units: one two bedroom and two one bedroom units each with one back, plus a shared coin operated laundry.

Purchase price: 5,000 – 20% down – 5.5% private interest only loan for 5 years – I’ll  also provide an example of the results with a more typical 20% down – 4.5% 30 year fixed and fully amortized loan.

All Income: (monthly)

Rents: ,000 

Laundry Income: .00

Total: ,090.00

All Expenses: (monthly)

Mortgage payment: 2.00

Electricity: .00 (common area + laundry)

Water: 0.00

Taxes: ,230.00/12 = 2.5

Insurance: 0.00/12 = .5

Landscaping 0.00

Repairs .00 (average over the last 6 months)

Total: ,077.00

Monthly cash flow: ,013

Annual cash flow: ,156

Cash on cash:  42%

What if it was a more typical investor loan?

Mortgage: 5.00 + (taxes) + (insurance)

Monthly cash flow: 0.00

Annual cash flow: ,640

With a more traditional loan the investment is even better. 1. The cash flow is equally good, but because of the lower interest rate less goes toward interest payments. In addition a large portion of the monthly payment goes toward principal: the 1st year ,871 goes toward principal, in year 3, ,141 in principal pay-down and year 5, ,342.

At the same time annual rents tend to trend up, if not every year you should see an increase at least 1-3 times over 5 years, but there are many factors here.

I did not include deferred maintenance. I did not have any, but depending  on your finances it may be prudent to set aside or calculate in a monthly per unit amount for deferred maintenance and capital expenditures. This is stuff like replacement of air conditioning units, roof and so on.

Also how are you going to manage it? Management cost money? If you hire a management company it can be 10% of your gross income plus leasing feed. If you self manage there is still opportunity cost involved: there is always a cost, even if it’s not monetary. I left it off, because it’s different for me then you.

Vacancy is another cost not included here: this property has been leased and full for over 4 years, but you may want to add a 3-10% vacancy rate – maybe higher if you have a management company involved since it takes longer to lease that way.

Cash flow on a multifamily property needs to be higher then a single family home. It’s the nature of the beast. In a triplex, for instance, you have three of everything: three, kitchen, 3 heat-pumps, 3 water heaters and so on, in addition to, greater turnover. The higher cash flow makes up for that, theoretically.

It also comes down to how you manage your business, where it’s located etc. 

As you can see the results are pretty good here. Once you have a few of them plus they have some age, in addition to other sources of income then you are more in control of your finances rather then your boss.

Another thing I want to mention. That is about the value of the property. In this case it was purchased at regular market price, but what if in 5 or 10 years the market is bad? For one, I don’t have to sell it! The value can be the same – that is the price may go up at all. I don’t care: look at the cash flow. Even if I sell at the same price with the loss of my selling costs at 7% I still did very well, especially if I had the traditional loan and not the private loan.

Surprise like many suburbs were hit hard, but these are also the areas in the midst of a hot real estate grab. Inventory is at a long time low of 800 homes and months of inventory is down to 2.7 months, which is very low even compared to a low 3.9 months last year.

It means increasing prices. The average price is up to 3,271 from 3,926 last year and the more meaningful Median price up to 5,000 which is a significant rise in one year from 3,550 last year. 

 (Graph – Cromford Report)

It’s nice to have a balanced market, but in real estate it’s rare to have one; though the imbalance is not, usually, skewed too much: that’s an okay situation, but are we getting too much of a good thing now? Too fast of an improvement, is it really an improvement when it’s skewed so much? The market is not balanced.

Personally I don’t like it, this imbalance it makes everyone’s job more difficult and there is alot of aggrevation, animosity and bad feelings out there. Even something simple as working in your client’s best interest can earn you new nick names or have someone question your integrity. There can be only one buyer for any particular home and when many people want it – and there are few other choices – the results are not always good. 

It would seem good for the sellers, but how do you choose from 5,10,32 offers. It’s too much of a good thing. 

The Numbers

At the start of April there are only 14,175 residential properties on the market. If you remove the ones that fail to be ‘in the market’, then that number is even smaller.

As a result of this lack of supply many properties which have sat on the market for a year or longer are finally being sold. An example is a condo complex in Central Phoenix where 4 units have been for sale from 300-600 days all of which went under contract within the last 2 months, bringing the total for sale in that community to zero.

I’m seeing properties that tend to not sell well go under contract: properties next to commercial buildings or homes near large busy roads: these don’t sell as quickly if people have other choices and now they don’t so they choose less desirable properties instead: thus the current 79% success rate in sales versus a success rate of 67% last year.

Sales of Real Estate Are Down From 2011

Real Estate Falters As Pending Numbers Dip Below 2011

These could easily be the headlines in many papers who often fail to define a reason behind what is going on, that’s why I like to listen to NPR where they have more time to explain what is going on. 

So what is going on?

Pending properties and sales are down. There is no disputing that. In March 2012 8,767 properties sold while in March 2011 9,952 properties sold. For the same periods 11,964 properties are pending and 12,923 were pending last year.

Despite lower sales, prices are on the rise for active properties, pending and sold properties: all have registered an increase over the previous quarter and last year. 

This simply means it’s not a lack of demand, it’s a lack of inventory that’s driven both the pending and sold number down. 2.7 months of inventory is very low: too low.

Active listings price per square foot is now 5.31 compared to 2.53 last year. Pending price per square foot is nearly .00 higher than last year and monthly sales are over .00 higher from .13 last year to .99 this year. Amazing!

Distressed Properties Segment Continues To Decline

Bank owned properties make up only 6.7% of active inventory compared to 17% last year. That means only a few hundred are on the market. Better yet, sales of REO properties make up 21% of the market compared to 47% last year. 

Short sales are holding steady between 35-40%, though sales are down to 26% compared to 30% last quarter, but they are up from 19% last year.  It does look like they may have peaked as a percentage of both active and sold segments, but it’s too early to see that as a trend.

At this point the distressed market makes up less then 50% of all sold properties: 47%. It’s still high, but compare it to 66% last year and 59% last quarter.

Spring is a hot season for real estate activity each year, but this year much more so. This will continue for a few more months and taper off mid summer, in theory: that’s the traditional trend, but we’ll have to see how this year pans out.

It’s certainly a good time to sell if you need or want to. If that is where you’re headed get an estimated value of your home from one of our partner agents.

I’d like to wish allof you a Happy Easter. Hopefully there’s more 20 degree weather coming again.


The market? Stillcrazy. After the month I’ve had … well let’s just say if I wasn’t grey up topbefore, I sure would be now.  Thanks toall my current clients for hanging in there with me.


The Leafs are outagain (what else is new) so that can only mean one thing. Soccer time!  TFC Season six is now underway.  Can anyone say “CONCACAF champions”? 

Most investors’ primary concern is whether you can finance and insure aproperty with multiple units.  Whetherthey are “legal” or not is secondary. All suites have to meet fire code forinsurance purposes.  Also, having aretrofit certificate does not automatically make your units legal either.  In a city like Toronto, where the apartmentvacancy rate is low and real estate values are high, many people rely on therental income from a basement apartment to give them the edge they need to owna home. But what is a “legal” apartment? If the suites are not “legal”, how canit be made “legal”? In the process of legalizing the apartment, will I beinviting ‘trouble’? What if the City prescribes improvements that are prohibitivelyexpensive? What if the City decides that I can’t have an apartment? What doesthat mean for you and your existing tenants?
The following information comes mostly courtesy of Carson Dunlop HomeInspectors. They have done a nice job of trying to sort through all themisconceptions and clearly lay out what it takes for all of your apartments tobe legal.


Homeowners with a basement apartment would like to find out what itwould take to ‘legalize’ the apartment, but they want to find this out withouttipping off the authorities. The only way to know for sure what will berequired is to have inspections done by the appropriate authorities.

·        Does the apartment comply with the fire code?
·        Does the apartment comply with basic building code requirements?
·        Does the apartment comply with basic electrical safety requirements?
·        Has the apartment been ‘registered’?

The goal is to contain the fire in the unit that the fire started, longenough to get all of the occupants out of the house. This means that any walls,floors, ceilings and doors between units should control the fire for at least afew minutes. These components are given ‘ratings’ of how long they will survivea direct fire before burning through. A 30 minute rating means that thecomponent will control the fire for at least 30 minutes.

2. Means of Egress – Escaping the home

A common exit is allowed if it is ‘fire separated’ from both of theunits with a 30 minute rating. If the common exit is not appropriately fireseparated, you can still use this common exit as long as there is a second exitfrom each dwelling unit and the fire alarms are interconnected (if one alarms,the others will alarm as well). Here is an example: There is a common exit areabut the common area does not have a 30 minute fire separation between both ofthe units. If there is an ‘acceptable’ window for an escape route and the smokealarms are interconnected, we are all set. The window sill must be within 3 feet of grade. We don’t want peoplejumping and breaking a leg. The smallest dimension is 18 inches. The opening isat least 600 square inches (30 inches by 20 inches for example) If there is awindow well on a basement window, it must extend 3 feet out from the housewall, to allow room to crawl out.

All units must have smoke alarms. The owner of the property isresponsible for ensuring that there are smoke alarms and that they aremaintained. The smoke alarms do not have to be interconnected unless the fireseparation to the common exit area does not have a 30 minute rating.  It must have at least a 15 minute rating. Acarbon monoxide detector (CO detector) may be required by the city.

An electrical inspection by the Electrical Safety Authority is required.The Electrical Safety Authority used to be called Ontario Hydro InspectionDepartment. All deficiencies must be addressed.

Inspections for fire code compliance cost between 0 and 0.
Inspections for electrical safety cost .

The Second Suites kit from City of Toronto is a useful reference.Contact Shelter, Housing and Support at 416-397-4502.

East York 416-397-4591
Etobicoke 416-394-2535
North York 416-395-7000
Scarborough 416-396-7071
Toronto 416-338-0338
York 416-394-2535

East York 416-396-3750
Etobicoke 416-394-8588
North York 416-395-7271
Scarborough 416-396-7644
Toronto 416-392-0150
York 416-394-2787

I took a bunch of photos of murals on Roosevelt Row about a week ago on that urban bike tour.

These murals below I took an a short bike ride a few days ago. These murals are just West of Central on McDowell Rd.

There are a few more then this, but these are the more interesting one. 

Murals On McDowell

During April, which is Bike Month, and before it gets too warm I’m going to get a lot of riding in, much of which will include taking photos.

A few weeks ago I wrote about the progress of a remodel we’re doing on Central Phoenix mid-century modern. Check out the before picture.

That remodel has been completed except for a few items. Below are three photos of the kitchen and living space. This is a one bedroom apartment so there is a limit of how many relevent photos I can take, but these will give you a good idea of what is there.

The change is rather dramatic. I like the skylight: I’m big on natural light and the expense and effort were worth it to me, despite what my handy man said.

The kitchen cabinets and fixtures are from Ikea. The stove is one thing we splurged on. A 5 burner gas stove which is awesome and visually striking.

The floor is a laminate from Ikea which I’ve been using in many of the apartments we have. I highly recommend this durable floor as it has withstood the test of time and action in many situations, even being soaked in water for over a day.

What do you think?

April is looking to be a great month, more so since it’s Bike Month – a month of great weather and many events to engage cyclists of all ages, but from the looks of things, all the people riding the streets, it’s always bike month. Check out what’s happening below by clicking on the title of the event.

Upcoming Events

March 31st

Safe Kids East Valley Bike Rodeo

Cardon Children’s Medical Center1400 S. Dobson Rd., Mesa. 9:00 a.m. to NoonBring your kids along with bike or scooter to practice safety… 

March 31st

Chandler Century Ride And Expo

Chandler Tumbleweed Park2100 S. Hamilton St., Chandler6:30 a.m. – 3:00 p.m.39 or 65 mile rides, 6:30 a.m. (fee)7.4 mile ride… 

April 1st

7th Annual Scottsdale Cycle The Arts

Scottsdale Museum of Contemporary Art7374 E. 2nd St., Scottsdale9:00 a.m. – NoonRegistration: 8:30 a.m.3- or 10-mile ride, art tour, bike… 

April 7th

REI Used Bike Drive

REI StoresTempe: 1405 W. Southern Ave.and Paradise Valley Mall: 12634 N. Paradise Village Pkwy.Donate your used bikes and bike parts.… 

April 14th

Great Arizona Bicycle Festival

Downtown Mesa101 W. Main St. 6:15 a.m. – 3:00 p.m.El Tour De Mesa Ride – 6:15 a.m.Mesa Ciclovia Ride -… 

April 14th

Peoria Pioneer Days Family Bike Ride

Old Town Peoria83rd Ave./Cinnabar St., Peoria 10:00 a.m. – 11:00 a.m.Registration: 9:30 a.m.6-mile police-escorted ride, Pioneer Days Parade, picnic.… 

April 15th

Glendale Family Bike Ride

Sahuaro Ranch Park9802 N. 59th Ave., Glendale 8 a.m. – 11 a.m.Registration: 7 a.m.6- or 15-mile ride, free t-shirts to… 

April 18th

Valley Bike To Work & School Day

Click here for an event near you.

April 21st

Bicycle Summit Of Phoenix

Burton Barr Library1221 N Central Avenue, Phoenix10:00 a.m. – 4:00 p.m.Planning session for new bicycle lanes and routes in Phoenix.

Aprill 22nd

Valley Metro Great Bike Chase & Game

Chase Field401 E. Jefferson St., Phoenix10:30 a.m. – 1:00 p.m.AZ Diamondbacks vs. ATL BravesGame 1:10 p.m. – 4:00 p.m.… 

April 28th

Arizona Bicycle Club Desert Classic

Oggi’s Pizza & Brewery | 6681 W. Beardsley Rd., Glendale7:00 a.m. – 2:30 p.m.Registration: 6:30 a.m.31-, 50-, 62- and 100-mile rides. Cost:…

 Check out the official Bike Month website.

Being an agent who helps both buyers and sellers is rather enlightening and quite beneficial. Add to it being also a property owner, buyer and seller and you can see that we get to view it from all sides. I believe this is a benefit to us as agents and a benefit to our clients. We’re all the above in any market that has been around for over the last decade. 

In this market where inventory is at a long time low it would seem that sellers have the upper hand, and for the most part they do, but imagine having to deal with choosing from several equally good offers.

Imagine each party calling you to explain their situation and motivation vying to be the one to get the home? To be that one on this property after you, as the buyer, have already put in many offers and have lost to other buyers for no apparent reason, because, many times you don’t even know why: it may not be the price.

As a lising agent our goal is not only to get a good price for a client, but to make sure the transaction closes. I think many people miss that part. 

If you have multiple offers including financed offers and cash offers the cash offer may not be better even if the net to the client will be the same. A cash offer is not good if the buyer is not as motivated, more fickle then the with a loan or vice versa. A buyer who is getting a loan, but offers a higher price may be risky too if that offer is too high.  

Too high you say? Yes, an offer that is too high is risky because a loan has two additional parties involved: the lender who has the money and an appraiser who’s opinion can kill the transaction. In some cases it can be two appraisers, so even if the first one agrees with the buyer’s assessment of value the second one may not and this can derail the transaction.

So seller’s and their agents have much to deal with besides the basics of a transaction. There are issues that come up all the time in the midst of a transaction: a buyer gets excited and buyers furniture on credit which ends up declining them for a loan, a buyer gets a divorce, a seller burns down the house – yes it happened.

If you only knew…

There are easy, simple and smooth transactions, but truly those, no matter how nice are are rare: the norm is more real and in this market it’s not easy for anyone: the buyers, sellers, lenders, title companies and the Realtors and unbalanced market leaves a mark.

I’m grateful that, as an agent, I have been on all sides of real estate transactions – more than you know – good and bad – and that this experience helps us help our clients. That’s the value of experience.

On Monday of all days I got a call from a news reporter wanting to do an live on camera interview with me about the pending numbers, why they are down and what it means. Of course Monday is the busiest day of the week with all the pent up weekend listings and contracts needing escrows opened or replies: essentially 3 days of work need to be squeezed into one, so an interview was out of the questions, which was too bad for me.

I did tell him my opinion about the matter which I’d like to share with you since these numbers are confusing, though very symbolic.

First look at the active properties on the market. There are fewer properties:  inventory is low. In addition look at new listings this year compared to previous years. Follow that with the number of properties sold.  

The graph above shows pending properties with 2012 highlighted in yellow. Pending sales are down from 2011, not by much, but they are up significantly over many previous years. 

The reason they are down in 2012 is not because of the lack of demand. To this, anyone in the market as a buyer or seller, can attest: demand is there. Buyers want homes and are ready and willing and able to get them into under contract, but there is a lack of properties to do it with. That is the reason the number of pending home is down: lack of inventory to buy.

If it’s not there it can’t be bought and it can’t go pending.