It could be small-city Canada, anywhere. Manufacturers have dried up and left town, and the population’s shrinking a little. But that hasn’t stopped condos from erupting like concrete mushrooms in recent years or the burbs from expanding. There’s the usual highway strip running through the heart of the place with hotels, bars, car dealerships and malls, plus the usual stores – Staples, Best Buy, Wal-Mart. The old downtown is still alive, but tattoo places now brush up against the mutual fund sales shops. Never a good sign. Gives tats a bad name.
Kelowna could be Guelph, Red Deer or Sherbrooke. Except this once-bustling Boomer destination in BC’s Okanagan Valley committed suicide along with Victoria, letting real estate values escalate to the point where the wrinklies stopped coming.
“As you know,” says Andy, “here in the Okanagan the housing market has been melting for some time. Since early 2011, I’ve been tracking houses which have devalued by over $700k and still they sit there. More foreclosures appear each week and developers are now laying-off their sales people. The local real estate cartel try to disguise the stats, but it’s obvious to everyone who opens their eyes…”for sale” signs everywhere!”
In the midst of this is a young realtor who, says Andy, “runs around here in a big bling Mercedes SUV.” It’s worth having a small look at AJ Hazzi, to see how an ambitious, competitive agent, who is also an amateur boxer and major consumer of hair gel, copes with a market that most people think is falling apart. His solution – dive in, and you don’t even need money!
“What you’re about to read is an extremely easy strategy to employ,” AJ wrote this week in the local media. “In fact by the time you’re done reading this you may wonder why you haven’t already done this a couple times over every year since you’ve been able. All it requires is for you to “tap” the existing equity in your home utilizing a line of credit.”
So, here’s the plan. First, borrow $200,000 against the equity in your home using a secured line of credit. Now take this money from the house and buy another house (a strategy right out of REIN’s play book). “It involves buying a property in the 160-190 range, one that would typically be a $250,000 property if not for the special selling circumstances,” says Mr. Gel. “What we are looking for here are distress sales, court ordered or estate sales, something that needs cosmetic help to reach its full potential.”
Okay, easy-peasy. Except for the land transfer tax, legals, appraisal and that stuff. No matter. We’re on the road to wealth, baby. God wants you to be rich.
“So lets fast forward for a moment, you’ve located a distress sale for 189,900 and made your offer, once you’ve negotiated the best price on the property say $180,000, you now have 20k left in your 200k budget to help this property get up to its full potential. Something in this price range can easily be totally overhauled for 10-20k even using professional contractors to do all the work. This is the fun part! Allowing 3-6 weeks for the renovations to complete, you have created a tremendous amount of what we call “sweat equity.” OK so now what? You’ve got a property that is now worth 250k and you are into it for $200,000 total after costs and renovations.”
Hey, how simple was that? Just spend ten or twenty thousand, and suddenly it turns into $50,000. Is AJ really Jesus, multiplying the loaves the fishes?
But wait. There’s more. Now hook up with an unethical mortgage broker, and the plan is almost complete.
“The mortgage broker will qualify you at 80% loan to value for a rental property. The property will bring in approximately 1300-1800 in rent which will more than offset the 850/mo mortgage and 150/mo property taxes. Once the loan against the clear title property is approved. The bank advances funds to your lawyer, your lawyer registers the mortgage to the property and a 200k cheque is waiting at the front desk of your legal beagle’s office.”
The hardest question, says Our Lord, is whether you should do it again, “or simply replace the equity you utilized from your primary residence and sit back and enjoy the fact that you have just created $50,000 in equity, hundreds of dollars in positive monthly cash-flow and a wealth building rental property that your tenant is paying off by almost 500 dollars per month, on a property that now stands you ZERO.”
So there you have it. Drain equity out of your declining home in a troubled market to buy an unwanted property that a distressed seller is dying to get rid of. Throw some paint around, create free money which you can then borrow because lenders are stupid or corrupt, and end up with $200,000 in debt, a tarted-up declining house and a tenant with a used F-150. Oh, and don’t forget to hire a miraculous agent.
“Some of you are thinking wow that’s brilliant! Some of your heads are spinning with information overload and have some major questions, either way please don’t hesitate to contact me for a one on one consultation.”
If the market isn’t dying, ethics are. Amen.