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INVESTING IN A SECOND PROPERTY

If you’re thinking about buying a piece of real estate as an investment property, market conditions are definitely in your favour. While the resale housing market has seen a tremendous amount of activity from first-time buyers in the past year, it’s also a perfect time for existing homeowners to invest in secondary residential properties. With record-low interest rates and significantly lower prices it’s hard to go wrong – unless, of course you lack the financial means to make the investment. After all, you have to be ready to meet all the obligations that come with owning more than your principal property. For instance, keep in mind that if you intend to rent out the second property, you’ll also have to be prepared to deal with tenants and handle maintenance costs. Leverage Secondary home ownership is an attractive investment option because it gives you even more leverage than you have with your principal residence. Leverage is when a relatively small amount of your money controls a much larger asset – like a property. The more leveraged you are, the greater the financial return on your down payment becomes if the value of your property increases. There are very few other investments which can be purchased with such a small percentage of your own money. For instance, let’s say you acquire a second property for $100,000, with a $15,000 down payment, and during the first year that you own it, the property increases by a value of three per cent for a $3,000 gain. As a result, the return on your down payment of $15,000 is 20 per cent – $3,000 divided by $15,000. Other Investments By comparison, let’s say you were to buy a term investment of $100,000 (in cash) for one year and it increased by $8,000 over the course of the first year. Since it cost you $100,000 in cash to buy it, the return on your investment is only eight per cent before taxes. Obviously, leveraging is a powerful way to make your money work for you. Getting Financing You should be aware that many lenders place non-owner occupied deals in the high-risk category and it’s not that unusual to find lenders who will not finance rental units at all – or those who will only finance them if they are insured. Obviously, lenders will want to know whether the property will carry itself. (Is there sufficient rent to cover the mortgage payment?) Don’t make the mistake of assuming that a rental income of $500 per month will carry a mortgage payment of $500 per month. Only a portion of the rent is used to pay the mortgage; the remainder must cover taxes, maintenance, vacancy, bad debt and expenses. (Many inexperienced purchasers think that owning rental properties will allow them to “get rich quickly” and when this does not happen, the owner becomes disillusioned and loses interest in the property.) Costs You should also be aware that the cost of obtaining a mortgage (for legal and appraisal fees) on a non-owner occupied property can be higher than the cost of obtaining a mortgage on an owner-occupied property, when more than one unit – such as a duplex or triplex is involved.    Interest rates charged on rental properties might also be higher because some lenders view these properties as being a higher risk. As mentioned above, the main responsibility of having a second property is being able to carry it financially. And if you’re like most people, you’ll probably have to rent it to someone as a result. This is also a great deal of responsibility because you will have to maintain the property in addition to your own principal residence, and you’ll be responsible for finding tenants who you trust and feel comfortable with. Some parents with grown children ready to go off to university or college choose to purchase secondary properties for their offspring to live in while they attend school. This gives them an excellent investment and they are assured that the occupants will take good care of the home.

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ELECTRICAL SAFETY AROUND THE HOME

Posted by Colleen Meiller | Posted in London Ontario Real Estate | Posted on 30-03-2010

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To most of us, electricity is simply flicking a switch or turning a dial to light up a room, cook supper or get instant entertainment. We take it for granted — that is, until there’s a power failure and we have to scramble to find flashlights, candles and matches in the dark.

Making your home safe and comfortable takes a deeper understanding. Let’s start by remembering that the electricity we receive in our homes is part of a powerful, intricate system made up of power lines and generators. It generally enters our homes through power lines to a main switch at 120 to 240 volts. The main switch is clearly marked with an “on” and “off” position and controls all the power in the house.

All lighting or general use circuits in a home are protected by either “circuit breakers” in newer homes or fuses in older ones. You should always disconnect the power by moving the main switch to the “off” position when changing fuses or doing electrical work around the house. Never open the door of the main switch — if you sense something is wrong, call your electricity supplier.

The panel box or fuse box from the main switch is the one that splits the power into circuits that go into all the rooms in your home. If you overload a circuit, say by plugging too many things in, the fuse may blow or the circuit breaker may trip, stopping the flow of power to that particular area.

In the basement If you’re looking for the breaker panels or fuse boxes in a home, you’ll usually find them in the basement. They require little if any maintenance. Fuse boxes require the right type and size of fuses. Overloading circuits could cause power loss, or even lead to a fire.

If you detect rust in the fuse box, or if a fuse repeatedly blows for no apparent reason, if there is overheating, discoloration of fuses or flickering lights, contact an electrician to solve the problem.

Fuse changing

  • Use a flashlight if the area where the fuse box is located is dark.
  • Never change a fuse while standing on a wet floor.
  • Unplug appliances on the overloaded circuit and turn off the main switch.
  • Install the proper size fuse–most lighting and general use circuits are fused at 15 amps.
  • Keep the fuse box or breaker panel cover closed to protect children and prevent dirt from accumulating.

Look after your cords

  • Pull the plug when removing from electrical outlet. Pulling on the cord will wear it out and may create a shock hazard.
  • Keep cords away from heat and water, which can damage the insulation and create a shock hazard.
  • Never run electrical cords under rugs, through doorways or anywhere subject to excessive wear. This may lead to a fire hazard.
  • Never break off the third prong on a plug so it can fit into a two-prong outlet. This will create a shock hazard.
  • Regularly inspect all cords and plugs. To avoid fire, short circuits or shocks, discard all cords and plugs that are worn or damaged.
  • Plugging several cords into an outlet, or using an extension cord as permanent wiring, indicates that your home wiring is outdated for your needs and that you should have more outlets wired in.
  • Prevent pets from chewing electric cords by rubbing the cords with a bar of strong laundry soap.

Use electrical appliances carefully

  • Before buying, make sure it has a certification mark or seal ensuring electrical safety when the appliance is used properly.
  • Follow all the manufacturers instructions.
  • Never use any electric appliances around water. Even if your  hands are wet, or you’re standing on a wet floor, you cold get a shock or other injury. For example, be careful when using hair blowers and radios in the bath area.
  • Don’t pry toast from a plugged-in toaster with a knife or a fork. If you want to avoid a shock, unplug the toaster first.
  • Never touch plugged-in appliances when your hands are wet. Always unplug them before cleaning.
  • If an appliance sparks, overheats or stalls, pull the plug and have it checked by a service person.

Other safety tips

  • Never touch power lines yourself or with any equipment. Take extra care when working near them. Before doing any digging, call your local hydro company to locate underground power lines. Cutting through one is dangerous and could black out an entire area.
  • When planting trees around your home, make sure they won’t grow up into power lines. Don’t attempt to prune or fell any trees near power lines yourself. Call your local hydro company. A tree falling into a power line can be very dangerous.
  • Power tools should have a three-prong plug or double insulation. Keep them in good condition and never use power tools on wet grass or other wet surfaces. If you need an extension cord, use a proper, three-prong, grounded cord.

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