Money Laundering and Terrorist Financing Rules

Money Laundering and Terrorist Financing

Caution you have a duty to help protect the nation from the criminal acts

of Money Laundering and Terrorist Financing and as a licensed real estate

practitioner in the province of Ontario in Canada, we must go through a number

of steps and verification and documentation.

We do not want criminals buying here in Canada, and especially with

their Large Cash deposits (all cash offers)

realtors must report them to the authorities when and if discovered.

There are two points above, point one deals with FINTRAC and the second deals

with Large Cash Transactions.

Both must be reported through your brokerages compliance officer who will

prepare the appropriate paperwork and forward to the Federal government

authorities.

Realtors are trained and understand the guidelines to follow to conclude a

successful transaction which are subject to routine government audits to

determine compliance. There is a lot of paper work in real estate today and

your clients need to understand this and make sure everything is completed

accurately. Photocopies of identifications presented should be placed in your file

for the deal, all this needs to be done at the initial meeting(s) with the client(s)

and certainly prior to any offer being presented.

Every real estate transaction ( subject to a few exceptions) requires a “Receipt of

Funds” to be completed Form 635 OREA.

If a large cash transaction (over $10,000) is involved and an appropriate record

is prepared … ( this is one of the exceptions of receipt of funds) … However

a Large Cash Transaction Report is required when funds received exceed

$10,000. More details are available and the report on the FINTRAC website.

Large cash transactions must be reported within 15 days of the cash being

offered by the client or potential client.

The better brokerage policy would be to accept No Cash – which is a problem on many levels, from security and heightened responsibility – keep a good paper trail as required and complete a Receipt of Funds report.

Back to the initial discussion of money laundering  and terrorist financing, so every real estate brokerage must have a compliance officer.

The brokerage must provide on going training, have policies and make them routinely known to their sales force.

Suspicious Transactions, Large Cash Transactions (as above) must be reported.

Terrorist Property ; “Every real estate brokerage must report property in their possession or control that is owned or controlled by ( or on behalf of ) a terrorist organization. A list of known terrorist groups and individuals is available on the FINTRAC website.” (OREA course 3 general real estate, p.284)

Verification ;  “ Every brokerage must verify that the names of their clients are NOT on the Canadian or United Nations list of known terrorists or terrorist organizations.” ( OREA course 3 general real estate, p.284)

“The new requirements concerning identification verification and receipt of funds were effective June 23, 2008.”

You could check the Department of Justice website :

 http:// laws-lois.justice.gc.ca/eng/regulations/SOR-2001-360/page-6.html#h-12 ,

“Regulations Implementing United Nations Resolutions on the Suppression of Terrorism” SOR/2001-360 as pf October 17,2012…

Thank God there are many realtors out there keeping the Watch against terrorist real estate and financial activities. O Canada, We stand on guard for thy.

In the event real estate brokerages fall short of the requirements of FINTRAC there could be thousands of dollars of fines and penalties levied.

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Empire Rises Again, New York City

Nightline of the Empire State courtesy of Getty Images …

What’s good for the Empire State Building is good for New York and could be a good sign of things to come to the City’s properties.

The Income of  the Empire State Building is” poised to double within four years and more than triple by 2026,

according to a new securities filing related to the proposed public sale of the building”

wrote Craig Karmin in the Wall Street Journal.

The  increase in  income comes during a $550 million upgrade to the building.

The Malkins, the New York real estate family that manages “the skyscraper and is

spearheading the initial public offering, has been combining the more than 850 office spaces

in the building in an effort to attract larger and higher-paying tenants.”

New Tenants like Skanska ( a Swedish construction company) and Air China who are enjoying

the upgrading of the 1930’s property into a more energy-efficient building helping mitigate the

acceptance of the rising rents.

The  net operating income is” projected to rise to $160.6 million in June 2015, up from $76.8 million

in June 2012, according to Securities and Exchange documents filed on Monday. Income is seen rising

to $248.5 million by 2026, and balloons to $422 million by 2041.”

If all works out as planned and contracted then the valuation will goose step in

an upward direction over this period.

The rental income of the property has been disappointingly flat for the past several years although

it is said that the observation deck was profitable.

“This long-anticipated rise in the building’s income has caused some of the 2,800 current investors in

the Empire State building to wonder if they would be better off from an IPO or by voting against it.

The proposed plan requires 80% of the shares to approve it.”

The projections are based on a discounted cash-flow analysis conducted by Duff & Phelps,

which has issued its opinion that these valuations are fair to investors, according to the securities filings.

The new public company, which will be known as Empire State Realty Trust, would roll up the iconic

building with 17 other Malkin properties. These buildings are also projected to see rising rents over this period of time.

The Empire State Building has been valued at $2.52 billion of the new company’s $4 billion valuation,

according to securities filings.

Why you may ask is the Iconic property coming to the market now?

Well according to Craig Karmin’s article it seems the catalyst to move now is “Leona Helmsley’s estate which

has a stake valued at $1 billion, needs to cash out its position in the building’s operating company.”

There are a number of good learning points in the above article…from the idea of an organized exit plan

for a syndicated joint venture arrangement and the requirement of the consent required from the shareholders.

The requirements of professional valuation estimates, the organized filings – what

was omitted was the associated costs estimates

with this organization cashing out and potentially inflow cash from investors.

Also the number of hours spent by lawyers to put it all together and orchestrated it in proper legal fashion.

The tax consequences of the above arrangement will require good tax advise from skilled tax lawyers and accountants.

It is interesting to stand back a bit and see all the moving parts in the

above organization, sale of the asset – as a new package individual purchasers should have all

the material reviewed so that their capital is

protected and they understand what they are purchasing.

New York is an amazing City and you will be more amazed when you visit the City – a mecca of commercial real estate.

Fifth Avenue retail properties with its absolutely fabulous rental rates and the volume of traffic gives stability to the prized valuations.

New York has many jewels and great properties in its variety of real estate categories.

The Empire State building remains one of  the significant icons of the City and with its

continuing upgrade will remain a good to great building representing the spirit and strength of the City…

What are your thoughts about the continuing strength of New York City?

Leave a comment below…

 

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Dashing Towards Opportunities

Dashing towards Opportunity

 

 

 

You can’t get a good yield in Toronto and there is not any decent product available. And what is available is crap at a high price – thereby creating a very low yield.

What does a small to medium-sized real estate investor do?

 

The opportunities are outside Toronto, maybe even outside the country they tell me.

First it’s the GTA (greater Toronto area) next its cities or smaller communities outside the GTA however still in Ontario – then they leap outside the country into the U.S. to the right to work states – places where they perceive there maybe opportunity for growth.

If the U.S. gets the right president with a growth and employment agenda, rather than a tax and spend agenda, this is the critical time – this is the fork in the road where a decision can make you wealthier over the next few years or be dead in the water.

 

In speaking to a lot of private investors the first thing that comes up is; what cap rate is it being offered? With the hope that the cap rate can capture the entire story

of the property – the investment – the opportunity.  The cap rate is certainly interesting and it does tit- a-late investors to look closer at the investment and consider getting attached. As their hope is to be able to draw this yield consistently over time to their advantage plus this have the asset gaining an increasing valuation over time. Taking the optimistic view of timely cash flows that are being provided in steady fashion. And having the benefit of a valuable asset that can be leveraged and refinanced or sold at a higher valuation.

This blue sky perspective is what draws us into the investment. Is this enough thinking? Should we only be driven by cap rates and yields promised.

 

Does location not matter?

Does risk associated with any type and category of real estate not matter?

Does the area’s demographical trends matter?

What about the grow prospects for the area, region?

Is there competition?

What about the infrastructure in the area, the region – its age and quality?

The vacancy factors in the area relative to the growth of the business environment?

What governmental restrictions, by laws, development freezes exist that may trap your investment for years to come?

What about environmental issues in the area, any history?

Is real estate all the same wherever you decide to buy it and all that really matters is the simple cap rate?

 

Or all you really need is Love? Does Love Conquer All?

 

What are your thoughts on the above?

What is your impression of the Picasso works above and do they fairly represent investors in our time?

Freely and emotionally (some would say mindlessly) running towards an investment opportunity with their money without the care of due diligence.

Believing that investing in real estate is as simple and easy as attaching yourself to an investment and sucking back the yields from the assets?

Leave your comments below, share your wisdom and experience with us…thank you in advance.

 

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Envoy Capitol Realty Inc.,brokerage    Toronto  / Canada

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Absolutely Nothing

Of all the blog sites and social media channels out there trying to attract our attention

to join, to post, to read, to comment and engage us so we get tied into them and habitually

revisit and drive up their traffic counts. And hopefully click and buy something from one of

their many advertisers who are really paying for it all.

As we  provide our free labour to enrich and enliven the sites.

Try to do this in moderation for your own sake…we contribute many posts and articles

to a real estate blog site called Active Rain which boasts a community of some 250,000 realtors to

others that are either involved in real estate or somehow support the industry.

One big Question is how many people in that community really read, comment or take seriously

all the blog posts that are dished out minute by minute throughout the day – it’s like a running newsreel

or a twitter screen. For what impact and for what purpose one may ask?

How effective is this really for your business?

How interesting and valuable is it for a target market of real estate focused audience?

How much time should you spend, researching and writing articles for blog posts as

part of your overall marketing plan?

Is anyone really out there?

And do they really care about what you are doing,writing and posting?

Is it adding any measurable value for your audience ( are you really getting to them?) or to your business?

Well in forty-eight hours of leaving my last post out in Active Rain, trying to see if I could encourage anyone

in the community to come “Like” my brokerage’s Facebook page –

— I received  all of 2 comments that both these gentlemen were not on Facebook and therefore could not help out.

Ok, feedback is good and I am thankful to get it.

As you well know getting feedback in real estate seems to be

so hard to get, honest feedback that is almost impossible.

Maybe those in our industry are practicing what their mother told them many years ago;

“If you have nothing good to say — say nothing!”

So no feedback is a response, it means you missed – perhaps on many levels.

You did not do anything that compelled, inspired anyone into action.

You were not engaging your audience or exciting them, or your message was not clear enough to warrant action.

You have to try harder, refine your message ,

change the channel [find a better channel] to find the target market – audience.

Maybe your value proposition is not complete enough for your target audience.

Your not motivating them to Act, to comment , to call you or invest time and money

in your idea/concept/product or service.

Comments are FREE, leave one below – tell us what’s on your mind, your thoughts – with your experience

how do you engage and motivate?

What channels or sites have you found that are better delivery vehicles for your message, your services or products?

What works for you and your clients?

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Envoy Capitol Realty Inc., Brokerage     Toronto  / Canada

Joint Ventures Becoming Popular

     When times become more challenging and there is less money available on the street

and you want to diversify the risk and share the rewards, the easy answer seems to be joint venture – find partners.

This is a great structure for property investors but be careful the crooks and easy

money guys realize this as well and their operations may attract your money to their creative schemes.

If you are thinking about investing – do your homework first, get good advise and do not put all your money

into one single project/one investment proposal with the same group of promoters.

My financial planning friends suggest that you Do Not invest more than 10% of your investment capital with anyone

promotion/ scheme or opportunity. They are conservative and they want to protect you, even if you

have done your homework and sought the best advice that money can buy.

Every investment has risk – this is a natural law of all investments.

Don’t leave common sense behind.

The promoters need to put on slick and professional presentations to attract your interest and money.

No they are not all crooks, after your money but you have to be careful and smart, trust but verify!

 When evaluating a prospective real estate deals, there are a few items of concern and the following

is not an exhaustive list because every real estate deal is unique and the people involved in any deal

have a diversity of motives and weaknesses – they are only human after all.

There have been many successful joint ventures in the past and people have made wonderfully

good money being involved in them. So we do not want you to be paranoid to the extent that you do Nothing.

You must Do, to get ahead in life. Avoiding all action does not work for anyone.

Some deals will only get done through the coordination of a successful joint venture; the partnership.

And there are many advantages to them. So do not simply write them off as a den of thieves.

A. Try to keep emotions out of your investment decision, remain rational and approach it logically. Asking the 5 Ws is helpful in order to understand what you are investing in and how the money will really be made by the project. Clearly answering your questions with sufficient detail to satisfy your accountant or financial adviser.

You should understand the business plan, real estate is simple. If there are too many assumptions and they are complex or they need a knight in shining armour at the end to rescue the investment  and deliver the returns Be very worried. We recommend you let that one pass by and you run in the other direction.

B. Yes Time is of the essence with good investment opportunities, however if they place undue pressure upon you to commit to the investment – be careful , be cautious. You should come willingly into the investment after you have done your research and not driven by pressure or emotions evoked by the promoters.

C. High Yields, profits promised and guaranteed by the promoters and at the same time minimizing the concern

about risk. Yet telling you that was their past performance and asking you not to rely upon this information but we expect similar or better results – Wow!

If it sounds too good to be true – it usually is, be careful. 

D. How does the joint venture intend to own the asset being invested in/ purchased?

What’s the ownership structure of the valuable assets?

E. How is risk the downside shared by all partners, limited and general? What about cash-flow short fall how is that dealt with? What if the asset does not perform as expected can we get out, how fast?

F. Stand on solid ground, “believe me or just trust me” does not work. You need paperwork of the joint ventures progress and financials at least quarterly and an annual financial statement with proof of filings with the taxing authorities. These should be timely and in order.

Due diligence, asking questions and getting timely accurate and verifiable clear financial information and filings should be a central theme to your investment program. Using advisors; lawyers,accountants,financial planners and realtors to help you determine a good investment from a bad one are worth the money to prevent a major loss. However here to keep it in perspective you don’t want to spend all your money simply reviewing investment opportunities and have no money left to invest – there is no return in that.

If you are in the investment, it may be  too late to start asking questions.

Great preparation should result in better yields with much less concern.

Keeping an eye on your investments with timely reviews of progress should help alert you to any potential dangers.

All opportunities are not scams, but they exist and you want to avoid them by working harder and staying alert.

Only invest in things you understand is priceless advice, the rest is speculation.

And if you are okay with speculation, then be prepared to win some and loss some.

What are your thoughts? Share your wisdom by leaving a comment below.

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How I Get Inspired

A colleague of mine asked me how I get inspired?

Why I asked?

“Well frankly speaking I am bored and I can’t seem to get going out of this bad grove.”

Not being productive at home or at work and the days are just passing by quickly.

I am nowhere near my targets for production and it may get worst before it gets better

he said, I may even lose my job over this.

“And one of our competitors just layed off 150 of their employees, my company may follow suit

you know monkey see monkey do. We must remain competitive.”

“It’s negative and I am sliding backward” he says.

Help!

Ok , Here are somethings  you must do to get over this state of  inaction.

First : re-focus, re-group and re-think your goals and how you achieved success in the past.

You know like when your computer starts to slow down or act up —-> we reboot, reset.

Turn it off for a moment and turn it back on and it works faster and better.

A vacation helps, even a short 2 days away from it all.

You need that mental escape, try it. It really works.

Second : Gain a different or new perspective.

Go to a lecture, take in a movie in a new genre or a one day course in a new topic.

You can do this by reading a subject or topic that you do not normally read or explore.

Read a biography of a successful person or a legend or anyone who started from

humble beginnings and struggled lost,

won, lost, won and finally discovered and appreciated their achievement.

Third: Who or what has motivated you in the past.

Do you have a friend or a mentor, a coach you can speak to about the issue to help resolve it with some of their ideas?

Sometimes just talking about it helps.

Does a book inspire you and motivate you to think and think big?

Finally find a quite place, to think and plan – which you will follow-up with some ACTION. 

Recall Newton’s first law of motion;

First Law —> ” Every object in a state of uniform motion tends to remain in that state of motion

unless an external force is applied to it.” Also known simply as the “Law of Inertia”.

We all need a little push to get rolling …

Think actionable items and start tomorrow morning with the first step and keep going!

If you need a little push, call or text us at Envoy Capitol Realty Inc., Brokerage and we will get you going.

What are your thoughts?

How do you get going, what motivates you?

Leave a comment below or send us an email at ;  captialmoves@gmail.com

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Envoy Capitol Realty inc., Brokerage     Toronto , Canada

 

Yes it costs Money!

Beyond the agreed sale price of the property you bought and/or sold,

you as a buyer will pay more for all the closing costs of the transaction and

you as a seller will net less money than the price you agreed to accept.

These are real out-of-pocket transaction costs and real estate can get expensive.

Real Estate commissions or flat fees are most likely on the top of the list and

they have become a target by most consumers and  government (i.e. Competition Bureau).

We also have realtors using commissions as a marketing tool to differentiate themselves

from the competition and claiming that they can do both an effective

and professional job with lower compensation

with the mantra of : ” how low can you go” — beating in the heads of consumers.

In Toronto generally speaking the industry’s standard commissions range from  1% to 5%

from discount services to full service brokerages and for flat fees ranging from $49 dollars for

a mere posting on MLS to firms that charge from $250/hr to $500/hr for their professional

services starting with an upfront retainer of $5,000 to $10,000 all depending on the size

and complexity of your deal.

The more services you need the more money you should be prepared to pay – simple.

Realtors by Ontario law ( REBBA 2002) can not charge you both a percentage and a flat fee,

one or the other only as compensation, however costs/ expenses are a different issue.

The next item on the check list is  legal fees, again these are negotiable like real estate commissions however

the typical range is from about $750 and up – based upon the size of your deal and its complexity.

Plus of course disbursements ; these are the costs that your lawyer’s office incurs on your behalf.

The next big one is Land Transfer Taxes which escalate up from .5% to 2% in Ontario to double that

in the City of Toronto upon the close of the transaction of the property when the property changes ownership.

When you are a seller, you may well need to spend extra money on staging, cleaning, painting,

landscaping and de-cluttering your space.

Make sure you budget for this, get estimates – but the minimum is probably about a thousand dollars plus.

What about dealing with deferred maintain and repair issues, don’t just hide it from sight – deal with it – fix it!

And of course on top of it all, is the moving expense. The physical cost of moving all your stuff over the years.

The pressure and stress on you which is incalculable, but it’s a cost.

Make sure you did with real movers, people who know what they are doing.

Get 3 quotes minimum, make sure they are insured/bonded and come with good references.

And the cost of your time to arrange and do all the above, here again you can’t put a number on it.

Good luck with it all.

Maybe all this is an opportunity for someone to start a business to cater to

those that plan to sell/buy or simply move on in life.

What are your thoughts and is there an easier/ better way?

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Envoy Capitol Realty Inc., Brokerage        Toronto  / Canada

 

Stopping Progress

Does culture and in real estate we are talking architecture, really matter?

The provincial government of Ontario has enacted the Heritage Act and with

this City by City and town by town – anyone can submit an application to

ask to have a property designated as heritage, which is different I am told

from historical. What it does however is stop any request / application to

redevelop or develop a property to current and modern standards.

This is a problem for many as we want modern efficient, and environmentally green

buildings with better technology which also uses less energy.

Safer buildings in conformity to the current Building Codes and Fire Code of Ontario.

Younger families, bigger families want bigger and brighter homes with all the

current amenities and technology.

How will this effect house prices (building lots) if you can not build more than what is already there?

Can a 70 to 100-year-old property be retrofitted enough to satisfy

new households? What about the issues with older properties from underground oil tanks to asbestos insulated piping

running throughout the house or the mould in the attic or other unknown substances…

Challenges all around for these older properties in the best locations of our City with some of the

highest prices because of the land value.

Heritage is important and progress is important – achieving a nice balance between the two is magic!

What are your thoughts about the place you live and work,and does heritage matter?

Do we just take culture and heritage for granted and feel sorry when it is gone forever?

Leave your thoughts below, thanks in advance.

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Envoy Capitol Realty Inc., Brokerage       Toronto / Canada

A Better System Needed Now

Transparency has been hazy for a long time now in the area of the bidding process

the professionals deal with this in a straight up manner while the others in the

business of  real estate seem to leverage it to their short-sighted advantage.

In the long-term hurting everyone in the process by creating mistrust among all the

participants in real estate; realtors ,sellers and buyers.

If the appraisal can’t support the value the bank will not be lending the required funds to close

and complete the transaction, it is that basic.

It doesn’t matter what the agreement of purchase and sale may say the Price it was bought at

and or what the client thinks or may think it is worth or what you think it is worth.

However to artificially create or out right lie about there being other offers for the property

simply to create an emotionally charged response by a potential buyer for your listed property

should be deemed fraud, it is unethical – charges should be laid.

But how do you fix this broken system ?

One idea I put forward many years ago now – was to issue a reference number for each registered offer

and it should be on the system for all to see with corresponding real estate brokerage company name on the

mls system accessible by realtors.

Any thoughts on this, leave your comment below or talk to your local board.

We can do better and a better system works for all.

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Turning Tenancy into Millions

Wow, paying only $20-23 a month for decades for a 2,600 square foot apartment in the upscale Nepean Sea Road  neighbourhood (Mumbai, India), where rents are typically over $2000 a month. Orbit – a real estate developer is planning to convert this old property into a garage for a project they are constructing next door, a 29 storey residential condo.

After  3 years of negotiating with the last tenant in the building, the developer has agreed to pay about $2.5 million to have the tenant leave. It’s still a good deal for the landlord says the article by Pooja Thakur of Bloomberg Businessweek entitled; Mumbai’s Boom Turns Renters into Millionaries. Apparently the new 5 bedroom units are selling for about $12 million. The developer is suggesting he may stand to make as much as 4 times the value of his equity in the project after it is all said and done – time value of money notwithstanding.

One could say that this is how rent control can help tenants in the end to becoming wealthy, if they stay (survive) around long enough in miserable conditions to get the pay-day. Here’s a little historical background ;

“The Bombay rent control act of 1947 was introduced to provide relief to the city’s migrants after the partition of colonial India. Rents at about 19,000 buildings were set at 1940 levels to prevent owners from charging excessive rates during a time of distress. In Mumbai, the measures have been amended and the act rechristened the Maharashtra Rent Control Bill, which allows for 5 percent annual rent increases.

Like other colonial-era buildings, Mukund Mansion, built-in 1923, is crumbling. Owners often can’t afford to maintain their buildings on the rents they receive. Barred from evicting tenants by the rent control statutes, their only way to cash in on rising property values is to sell the building to a developer who can afford to buy them out.”

The long waiting game with a happy ending it seems.

What are your thoughts?

Does your area have rent control and who does it really help?

Leave your comments below…

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Envoy Capitol Realty Inc., Brokerage                      Toronto / Canada