Friday, October 20, 2017

How I turned my Finances Around…

March 12, 2012 by  
Filed under Buying Real Estate, Featured Posts

My story starts off typical – single female, living in a city where the cost of living is high, my debt load was at an uncomfortable $15K and I wasn’t a homeowner yet. At this point I was 31, I had a university degree and a good job but I still found it hard to save enough money to pay off my debt and save for a house. Blah, blah, blah…this is probably many people’s story if they moved out on their own right away and into an expensive city. But what makes my story extraordinary is the ending, mainly because I chose a plan to get out of debt, create time and financial freedom, and I stuck to it and no, I didn’t marry rich! The mere fact that I stuck to the plan is what made it work, not the plan itself. Why? Today most people quit on their plans very early, some even before 60 days whereas my plan took 60 months. The average person will try something for a bit, if it doesn’t work immediately, they jump to another strategy only to get the same results. My plan took me exactly 5 years where I went from living from pay cheque to pay cheque to being a homeowner, debt free and boss free.
My plan was super simple – I did two things: 1) I chose a profit making vehicle that I could do outside of my full time job to generate extra income. It was a home based business in the network marketing industry and I describe it as a mini-franchise; 2) I partnered with a family member to buy a rental property instead of my original plan, a downtown condo. We pulled together our pennies and purchased a triplex. I moved into one of the units and managed the other two apartments.
With the rental property, we put most of the profit that we made each year back into the house so we could gradually bump up the rental income on the units as they turned over. Most people ask me if I have nightmare land-lord stories but I honestly don’t. I think if you have above average quality rental units, with reasonable rental fees you will attract respectful people. Fast forward 5 years, when the mortgage came up for renewal we shopped around and secured an amazing interest rate. This reduced our monthly costs and bumped up our profits. We were also able to pull out equity on the home which we used for any remaining debt like car payments and down payments for future properties. So instead of buying a condo I created an income generating vehicle from my first home purchase.
During this 5 year period, I simply worked my network marketing business for about 4 to 5 hours a week. It wasn’t a lot of time but I was very consistent about my efforts. Of course, I didn’t know if this strategy would work before I started but I was determined to keep trying which was my true key to success. The product I represented was a consumable in the preventative health industry. It was high quality and sold itself. After about 3 years, the profits from my business covered my living expenses so I decided to take the plunge to do the business full time. I had been tracking my efforts and results so I knew if I had more time I would be able to increase my income. I have been doing my business full time for 2 years now and my take home income far exceeds what I would have made in my full time job. The best part is that I own my time so I can do other projects like real estate or businesses ventures whereas when I was working full time for 1 company I was putting all of my eggs in one basket.
This past 5 years is what Seth Godin, North America’s #1 business marketer, calls “The Dip”. The dip is the long haul that it takes to get from beginner’s luck to mastery. It’s the daily consistent action to build a system that works. It’s getting through the dark times when you are alone and all you want to do is give up but something deep inside tells you to keep slugging away. It’s ignoring the naysayers and your “procrastinating side”. Then eventually, you come out of this long valley to see sunlight and you can touch and feel your ultimate goal. You are there! You are at the place where everyone else wants to be! But only the people who go through the valley will make it. Are you willing to go through the valley or would you prefer to be average?

Toronto’s Impending Real Estate Bubble ?…. Sorry Hate to Burst your Bubble….

Pundits and so called experts have been predicting a crash in the Toronto Real estate market for well over a decade now. These claims appear to be more based on selling newspapers and advertising then based on fact. If one were to look at the facts , the facts paint a much different picture than all the recent doom and gloom portrayed in the media.

The Toronto Real Estate Board reported 4,337 transaction’s for the month of January 2011. The result was 13 percent lower than January 2010. When one reads this immediately it appears to be the sign that we are finally at the end of the road. The report however goes on to state that despite the drop in transactions the average sale price for a home in the GTA was $427, 037, which represents an increase of over four percent compared to the prior January. In essence prices are going up because there is not enough supply. It’s basic economics 101 , supply and demand.

There has also been talk over the impending crash of the condo market due to over supply. Lets take a look. Completions of new condos in Q4 have lead to an increase in new units entering into the market place. The Toronto Real Estate Board reports that there was a 25% percent increase in the number of condominium apartments listed for rent on a year over year basis . However the report goes on to state that the number of rental transactions for condominium apartments increased at an even great rate of 29 percent. Demand is outstripping supply. Furthermore rental prices for popular one bedrooms have increased by 2.1 percent and 2.6 percent respectively compared to the last four months in 2009. Much like the resale housing market the condo rental market is also tightening, not contracting .

According to Realnet data a shrinking supply coupled with an increasing demand points to a shortage of new homes in the GTA’s future. Realnet projects the strain is expected to emerge in 2011 and full be manifested by 2014. It is projected that based on the current levels of immigration into Toronto between 130,000 -140,000 annually, the GTA will need to create 40,000 new homes per year just to keep up with current immigration levels ….. something to think about for sure.

The next time you read or hear the next person claiming the market is about to crash ……. think again !

Or for that matter simply just start thinking !!

HST and its Impact on the Ontario Real Estate Market

One of the most common questions I get asked is about the New HST tax and its impact on the real estate market in Ontario. This law is very new and many people are still unsure of its ramifications on the industry. A lot of industry experts are unclear, on what the legislation actually entails. If lawyers and accountants have only a vague understanding of the new Tax, imagine how confused the average Ontario resident must be.

According to a recent survey by Royal Lepage, most home buyers believe that HST applies to the sale price of resale properties. The survey goes on to show that this misconception is impacting buyer behavior, which has been a driving force in the recent slowdown on the market place.

So Exactly how does the new HST impact the Ontario Real estate Market?
There is no HST on resale properties. HST is only levied on preconstruction homes. HST will not be applicable to new homes costing under 400,000. For New homes costing between 400,000 to 500,000 home buyers in Ontario will receive rebates up to $24,000 to lessen the impact of the HST. For homebuyers purchasing homes over $500,000, they will have to bare the full brunt of the HST Tax . It is estimated that this will increase the purchase price of homes over 500,000 by as much as $30,000- $50,000.

The ramifications for purchasers of preconstruction homes who are investors and not end users is a little more complicated. If you claim that you are an investor who will not reside on the premises, HST will be applicable, but credits may be offered for up to 75%. If you are considering buying a pre construction property as an investment it is best to consult with an expert as to how the tax can effect your purchase.
While resale purchases are HST exempt it is estimated that the new tax will will add an additional $2,000 in closing costs to consumers on resale properties .

While maintenance fees, energy cost and closing costs will inevitably rise, the increased costs are significant but not dramatic. It is estimated by the Minister of Finance for Ontario that only 7% of preconstruction homes bought in Ontario are over 500,000.

The jury is still out on HST and the damage that it may or may not have done to the Toronto Real Estate Market. I think the damage has been more psychological, as the tax has left many consumers confused and scared. In my opinion the impact will be short term, and things should flatten out this fall and begin to rise again by next spring. Canada and Toronto have still way too much going for it for the politicians to mess it up.

Decluttering Pays!

September 9, 2010 by  
Filed under Real Estate, Selling Real Estate

Getting ready to list your condo for sale? Here are some great space saving tips to help you de-clutter:

- Compact living calls for compact furniture. Proportion is the key; pieces should be proportional to the space and each other.
- Go vertical and keep it simple. Keep the floor clear of clutter (e.g. floating shelves that you can mount over doorways, stagger or stack to fit unique spaces).
- Cultivate flow. Visually enlarge your space by installing one type of flooring throughout. Stick to one or two complementary paint colours. Light cool colours tend to make a space feel larger. Warmer colours make a space feel cozy.
- Colour choices are personal; take both the amount of natural light and what you love into consideration.
- Function reigns! You multi-task, expect the same from your belongings. Wherever possible, make sure benches, coffee tables, mirrors, bed frames etc. include (and hide) built-in storage. Consider a sofa bed, a bed that folds or one that can be stored vertically against a wall.
- Use what you have. Maximize locker space and functionality. Add a storage bench/planter on your balcony.
- Sell or donate what you do not need. Someone somewhere will thank you.


10 Golden Rules to Pre-Construction Condo Investing

September 9, 2010 by  
Filed under Investment Properties, Real Estate

Toronto has the strongest condominium market in North America, with immigration projected to remain strong throughout the next decade and given the affordability of out market place in comparisons to other major cities our condo market will continue to be a good place for investors at home and abroad to invest their money.

With soo many projects coming out all the time, it can be overwhelming to both the novice and seasoned investor alike. In an attempt to cut through all the clutter and projects, I am going to outline the 10 golden rules of Preconstruction investing.

1. Let your money work for you. Always buy in an area that’s gentrifying. When buying preconstruction you are buying 3-4 years out. Why pay a premium to be in an area that’s already developed? The greatest up tick will be found in areas that are undergoing rapid growth and gentrification.

2. The Toronto Condo Market is similar to that of a night club. You have to know someone to get in at the beginning. The key is to target the project that you are interested in and be the first to purchase. By being the first purchasers you ensure that you are paying the least and amount and that you have your choice of the best floor plan which generally sells out before a project goes to the public. You need an experienced agent who is in the know.

3. Always buy small when buying for investment. It is better to purchase two 500 square foot units from an investment perspective then it is to invest in one 1000 square foot unit. Smaller units are easier to sell or rent out, and there is less exposure to market fluctuations. With Toronto currently at a rate of about 500 psf, for preconstruction you will need to purchase small units in order to avoid a negative cash flow position, which is paramount.

4. Never buy at the high end of the market. When you are buying preconstruction you are essentially buying condo futures. While we can all gaze into out crystal ball and predict the future we can never be sure with 100% certainty that our predictions will come true. Those who buy at the high end, you will be the most exposed when the market softens or if there is a downturn at the time of the project completion. By buying astutely in the mid to low end of the market you are better positioned to sustain a market shift or correction.

5. Parking. There was a time when you would be considered a fool to buy a condo without parking. Well, times have changed. Toronto is going the way of other major cities like New York where it is becoming too expensive to drive. Not having a car is becoming a generational thing and more people living in Toronto do not own a car. Parking in preconstruction condos in Toronto are selling as high as $45,000 and from an investor’s perspective, it is simply isn’t worth the money. Most new condo’s all have autoshare or zip cars on site and are near a on a subway line. So my recco is to buy near or on transportation lines.

6. Avoid investing in the monster buildings. From a resale prospective when it comes time to sell your investment, you are going to get a higher price for you unit if you are selling to an end user as opposed to another investor. End users view smaller boutique , building and settings at a premium. It is preferable to resell to an end user as they will pay more for a property once they are emotionally attached to it, then an investor who is just looking at the numbers. Also when it comes time to sell if you purchase in a small building there is far less chance of competition, while in a 400 unit building there is a very strong chance that here may be several similar type units for sale. The competition will decrease the amount you will be able to sell your unit for. It is simple supply and demand.

7. Invest in something that is unique. There is so much inventory going up in Toronto, but most of it is cookie cutter type of stuff. Exceptional projects will always stand out and as a result they will better hold their value in a downturn and will command higher prices when the market is strong.

8. Budget to wait at least a year or two minimum after the condo project is completed. In most projects in the first year after its completion is the time where most investors are going to try and realize their profits and then cut and run. Wait till all the original investors are out, let the grass settle, and the paint to dry , before putting your unit on the market place. In the interim while you wait for the ideal time to strike , a tenant is living in your unit. Paying down your mortgage while your property quietly appreciates.

9. It may not be worth the premium to purchase on a higher floor. This may depend on the project, the views, and the charge per floor. Typically, the price you pay for a difference of 10 floors will be difficult to make up in rental income while you hold the property. On average it will cost 2000 premium per floor, while it is with paying to have a good view it generally will not be worth paying to be in the top floor. These types of units should be purchased buy end users who will feel inspired by the potential views.

10. Do not pay for upgrades. They are a great profit centre for builders and are generally over priced. Since you will not be living in the property why are you paying a premium for the enjoyment of future tenants? Most of the newer project all offer great standard features, like stainless steel appliances. The added upgrades are paid in full on the spot and are not rolled into the mortgage and therefore cannot be leveraged. You are better off to keep your money in your wallet. – RF

If I only had a Crystal Ball

The most frequently asked question I get from clients/friends and just about anyone that has any interest in real estate is “what’s the market going to do next”? If only I had a crystal ball to look into the future and tell them exactly what was going to happen!

Without such magic I rely on my experience and wisdom. The market took off like gang busters in the beginning of 2010. There was a real sense of urgency amongst buyers, mostly fuelled by misconceptions about two things 1. HST 2. Rising interest rates. Buyers were scurrying around buying anything and everything and paying all the money for it. Sellers obviously reaped the benefit of this frenzy by taking in fantastic sale prices. As the year progressed, the urgency started to die down and buyers shifted from a “need to have it now” mentality to a “let’s sit back and get a deal” mentality. Sellers under pressure to sell therefore took less than their neighbours a few months earlier, but still achieved good selling prices year over year. Moving into the fall market, we are expecting a more “normalized” buy and sell trending, where there should be enough (or almost enough) product to satisfy the demand creating a more even playing field for buyers and sellers alike. Again, anything is possible, as Toronto is tops for real estate and quality of living, which continually attracts new buyers to the playing field. And the high demand neighbourhoods can only house so many people. Either way, staying on top of the market and knowing the values is the best way to get in or sell successfully.

A Slowing Market is a Healthy Market

September 9, 2010 by  
Filed under Buying Real Estate, Selling Real Estate

There has been a lot of talk in the market place lately about a slowing real estate market relative to year ago. This is based on a decline in the number of house sales which has given people the wrong impression. The general perception seems to that a slowing market is a bad thing, but is it?

On the contrary, a slowing market is a great thing for buyers!

In my opinion, this slowdown means that the real estate market is returning to a healthier state. It means that the potential for competition at the table when making offers should be less. Assuming that there is enough product on the market, this means that in most cases buyers won’t be faced with paying above asking price for the property.

As we move into the fall market, the number of new listings should increase also helping to reduce competition among buyers resulting in more palatable purchase prices relative to the first four months of 2010.

Buyers, if you are looking to get into the market September 2010 would be a great time!

7 Pitfalls to Avoid When Buying a Multi Unit Home

Buying a multifamily investment property can be a complex process. In order to maximize the return on your investment, when considering making a purchase, it is important to understand some of the basic pitfalls that can come back to bite you in the long run.

1. Not all income properties of the same size and even location are equal. For example take two properties located on the same street each with 6 units. Property A has 6 one bedroom , one bathroom units and Property B, has 6 2 bedroom 2 bathroom units. Which property is more desirable? When evaluating properties it is essential to analyze and understand the local rental market. When evaluating properties it is essential to take the mix of rental units into consideration as all things are not equal.

2. Square footage, are they accurate and are the rental units the right size? I have always held the mantra “trust but verify” In most listings the selling agent and vendor will provide square footages. However in the actual listing the listing agent will almost always have a disclaimer depicting that these are just estimates and they nor the vendor can be held liable for any errors. In situations where price per square foot is relevant in making an investment decision – pull out the tape measure and measure the unit yourself.

When evaluating a residential property it is also important to look at the size of the units themselves. Are the units desirable and efficiently laid out? A poorly laid out unit, or one that seems either over sized or undersized will have a higher turn over rate.

3. Beware of quoted vacancy rates. Most agents and experts will quote the vacancy rate when talking about the desirability of investing in a property. Vancay and tenant turnover rates are across the board averages, Properties on the same street can differ from one another as much as different neighborhoods can within a specific geographic area. Talk to local agents and residents, and do your due diligence. Spend some time researching classified rental ads on sites like Craig list.

4. Chattels and Fixtures included. When purchasing a multi family property you are not just purchasing the land and property you are also purchasing the fixtures as well. If you are looking at purchasing a 10 unit property, makes sure that in the agreement of purchase sale, the refrigerators, stoves, dishwashers, are all listed, and included in the agreement, and that such agreement stipulates that all appliances are in working order. To have to go out and replace appliances can become a costly proposition. Logically speaking if one or more of the units do not have appliances the price should be discounted accordingly.

5. Zoning. Your right to use, live in, build on, renovate, add on to, conduct business,
and lease out , will all be set out in the zoning. Know your rights and limitations before offering to purchase a property. Applying for zoning variances can be done but it can be a timely and expensive proposition. Be aware of any and all potential issues from the outset. Height and restriction and setbacks will not only govern new construction but will also limit renovations conversions and building additions.

Owning a property that is not compliant to the current zoning could potentially open up all sorts of cans of worms, from insurance and mortgage issues to issues with the city or local fire departments. The bottom line is to do your research and make sure that you are asking all the right questions.

6. Rental Income. The most important aspect when evaluating an Income producing property is to ensure that the rents and income provided by the vendor are accurate and in line with current market realities. DO YOUR HOMEWORK. Ask to review the lease agreements to ensure that ensure that the units are in fact rented. Cross reference these numbers with the income statements provided. Then go research the local rental market. Are the rents being charged over, below or at the market value? Answering this question will give you greater in your ultimate decision to move forward or to sit this one out.

7. Environmental. This issue is becoming more and more of a hot topic as of late. Most people assume that environmental issues surround commercial properties, but they can also affect residential and multi residential purchasers. Once you purchase a property you as the owner may be liable partially or entirely liable should an environmental issue come up at any time. If you are purchasing an older property in an older area, there is a good chance that there could be a buried oil tank or asbestos around some old pipes. You will be responsible for all of the clean up. In older properties it can be wise to have an ‘environmental phase one report’ included as a condition in your agreement of purchase and sale.

Buying and investing in real estate and investment properties can be financially rewarding, the key whether you are a first time investor or seasoned pro is to make sure that you have an experienced team working you to make sure that you are not missing anything that could cost you in the long run. – RF

What Am I Signing here?

July 20, 2010 by  
Filed under Buying Real Estate, Recent Posts

There is something about signing an agreement that people shy away from.

When you’re a first time home buyer it seems strange to sign a contract with your real estate agent! The truth is, a Buyer Representation Agreement protects you the buyer and should be signed at your earliest opportunity.

A  B.R.A. is a written representation agreement between a client and a real estate company.  It states very clearly that the company’s legal duty is to ensure the client’s interests are protected and promoted at every possible opportunity.

In other words, under an Agency Agreement, the company must ALWAYS put YOUR interests first– above everything else except the law.

FACT:  If you do not wish to be represented under a Buyer Agency relationship, the company you choose automatically must work for the Seller during the transaction.  It’s either one or the other.  Almost every home Seller on the market has already has an agent in place. In fact, this is one of the mandatory conditions of being listed on the MLS system.   So if the Buyer does not have an Agency Agreement in place, their Realtor must work for the Seller as a “sub-agent” by law.  In a situation like this, all information gained about your situation, including financial information and what you are willing to spend may be shared with the Seller to enhance his or her negotiating position!

On the other hand, if a company works as your exclusive Buyer’s Agent, it owes you full confidentiality (they will not tell the Seller anything) and its duty is to make sure you are fully protected.  You’ll be advised about the true market value of homes and about the best strategy to purchase your ideal home for the best price possible.

Do I really need a stager?

Things have changed; the majority of buyers out there are looking for a home that is move-in ready. People these days are so busy they don’t want to spend their weekends fixing up a home. Plus, all of the decorating shows on TV are changing the market and Buyers expectations. You may not agree with it but there’s no point fighting it either.

Potential buyers appreciate an uncluttered home that allows them to visualize their possessions in place.

The goal of staging is to neutralize and showcase your home’s best features by adding and arranging key “props”, both furniture and accessories, so it appeals to more people…a larger market demographic ensures you will get the best price. Some things that you “never got around to” can often be fixed at a minimal cost. For example, a damaged base board or a dangling ceiling fan in the bathroom that you always meant to fix.

The second goal of staging is to create the image of a lifestyle that potential buyers wish they were living. You want an emotional connection between the buyer and your home.
Lastly, the beauty of staging is that you can achieve a dramatic result at a reasonable cost…an outlay of $3,000+ can make a significant difference in the sale price. As more homes come to market, buyers have more choice and it becomes increasingly important  to feature your home in the best possible light.
- Adrienne Farquhar