Retiring early with real estate

Let your portfolio work for you: One investor gives his tips to become completely financially independent at any age.

By Sve Pavic, fulltime investor

Millennials have it tough financially- we’ve been told if we go to a respected University, study hard and get good grades we will land a great paying job. The reality? You graduate with loads of debt with no assistance or prospects of getting a great job and you return for more schooling thinking it will solve the problem. To add salt to the wound, house prices and rent keep increasing beyond reasonable affordability. As a millennial, I’m here to tell you that you can create your own financial freedom and you don’t need to settle and live in your parent’s basement into your 30s. In fact, I’m here to show you how we purchased our first house at 24, live for free by “house-hacking” and create passive cash flow for life.

What is house-hacking? The concept is simple yet powerful: purchase a house, create an income suite (e.g. basement apartment) and rent it out for passive income. The rental income from the apartment can either pay for the majority of your mortgage and living expenses, or you could even get paid to live for free. If you live in the main/ upstairs unit and rent out the basement, you can have the majority of your mortgage covered. If you go one step further and live in the basement/lower unit, you could not only live mortgage free but you could also have profit leftover in your pocket.

The first hurdle millennials and most people have to overcome is coming up with the downpayment. In our case, we lived below our means in order to save for a 5% downpayment. Another strategy is to borrow money from family, friends or private lenders. If required for financing, you could also ask them to act as a guarantor / co-signer.

Once we had the downpayment and financing confirmed, we purchased a detached fixer upper bungalow in the GTA which met all of the requirements for a potential basement apartment (e.g. ceiling height, separate entrance, zoning, parking, etc.). The house walkouts to a large backyard and backs on to ravine which is a major selling point for tenants. We built an open-concept legal 2 bedroom basement apartment with high-end looking finishes. We ensured we made the space look modern, bright and open so that it didn’t feel like a typical, dungy basement apartment. We started off by charging $1,250/mo (non-inclusive) with many applicants. Now we rent the unit for $1,450/mo (non-inclusive) and live mortgage-free.

Since then, we have refinanced the house based on the built-in equity and purchased another property which will be converted into a duplex. We are using this same strategy, except creating a 3-bedroom basement apartment and renting both units individually by room. The property is expected to cash flow more than $1,000/mo after all expenses. Once this duplex is complete, we will be refinancing and finding another property to expand our portfolio.

Rinse and Repeat until you reach your goals of financial freedom.

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Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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Building equity for multiple properties

by Haripal Pannu, real estate broker and investor

One real estate agent looks at pre-build investments for the first-time investor.

It’s always challenging to buy the first investment property because there is a lot that must be learned. There is a little bit of difference when it comes to buying real estate as your primary residence compared to buying it as your investment property.

If you are buying real estate as your primary residence you can get financing even with 5% down
(as long as you qualify) but for investment properties you typically need 20% down in some cases even 25% or more.

Some “A“ lenders (big banks) don’t finance an investment property after a certain number of properties; for investment properties there are other costs associated too if you are also buying a primary residence you get certain rebates and you can even buy under first-time home buyers plan while in case of investment property it is not possible. If you are buying a brand new investment it is very likely you are going to pay HST on top of purchase price (if you fulfil the conditions the HST you pay you will get it back one condition is that you cannot sell the property before one year period).

Let us look at where and what kind of investment property one should buy so that equity can build up fast and that equity can be used in future to buy more properties.

One thing which matters most in real estate is the location; excellent location makes all the difference where your property is located location is always the key. Do not buy a property in an area where you do not want to live. Good location must have public transit system accessible to everyone, good walk score and should be close to all amenities.

Check the vacancy rate in the area. A low vacancy rate in the area is an indicator that your property will be rented out quickly and more chances are that rent will increase in the near future.

Check employment rates in that area. Property prices are increasing at a very fast rate not only in the GTA but all over in Central and Southern Ontario and, as a result, more and more people are being forced to rent instead of owning.

Let us look at an example of a $400,000 pre-build condo property. We’ll assume it will be ready in 2-three years. By the time you take ownership of the condo you will see that property already has already appreciated by 3-4 % or approximately $50,000. If it is in a desirable location you will have no problem renting it out and in another 2-3 years you should have paid already approximately $15-20k of your mortgage and also at the same time your property is further appreciated by another approx. $30 – 40K. Now it is time to talk to your bank or your lender so that you can take money out and on your way to buy another property and in another 2-3 years next property and so on.

The more properties you own, the more cash flow you will generate. In times of inflation real estate creates hedge against inflation. One can reap the rewards of equity build up, not to forget many tax advantages of owning real estate and advantages of appreciation real estate enjoys.

Word of caution before you buy a rental property: it is very important you do your due diligence.
Make sure numbers work out for you and seek help from a real estate expert. Owning your real estate is owning your own business and you are your own boss.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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New home market unfazed by housing policies

The new home market continues to boom, despite efforts to slow down real estate in this one hot city.

New homes in Toronto continue to see strong demand from buyers – especially in the condo sector.

“We continue to see that the province’s fair housing plan in effect since April has had little impact on the new home market,” BILD President and CEO Bryan Tuckey said in the association’s latest report. “Unlike the resale market which experienced a slow down last month, the numbers reflected in the new homes market are quite different. Prices continue to rise and supply continues to be low.

“Three out of four of the new homes purchased in the GTA so far this year have been condo apartments. With condo prices continuing to escalate, this segment of the market is becoming out of reach for many consumers.”

Multi-family condo sales increased 59% in May, according to the Building Industry and Land Development Association.

New home sales jumped 23% year-over-year in June with a total of 28,889 sales sold this year so far.

According to BILD, over 90% of June home sales were for condo apartments in high-rise, low-rise, mid-rise, and stacked townhomes.

June also saw a record number of new condo sales with 5,495 total units sold – an increase of 89% year-over-year.

“The record number of condominium apartment sales in June was the result of a ‘perfect storm’ of factors”, Patricia Arsenault, Altus Group’s Executive Vice-President of Research Consulting Services, said in the report. “These factors include: the sizeable number of units in new condo projects opened in May and June (over 8,500); demand from end-user buyers who might have preferred a single-family home but have adjusted their expectations due to lack of affordable supply; and heightened investor interest due to the rapid price increases for condo apartments in recent months.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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A hands-off investment that will diversify your portfolio

Being a landlord is time consuming and, at times, frustrating. One professional has an alternative real estate investment idea that some landlords may want to add to their assets.

Why would a residential real estate investor be tempted to add REITs (real estate investment trusts) to their portfolio?

We asked an expert in the field that very question.

“Diversification. Depending on the amount of wealth you have, how many investments are you going to have in your portfolio of homes – is it two, three, four? Are they in different geographies and sub-markets? Are they subject to different macro-environment risks that could impact value in one way or another?” Corrado Russo managing director, investments and global head of securities at Timbercreek Asset Management, told CREW. “Certainly buying REITs gives you A: Diversification across broader spectrum of markets and it also gives you broader spectrum of commercial real estate. There are different dynamics and growth prospects and risks when it comes to retail, office, industrial, storage, healthcare, data centres, that can all have different demands and characteristics.”

Investing in REITs allows investors to own assets in various markets and take advantage of the varying levels of risk and reward afforded in each, according to Russo.

So what is a REIT, for the uninitiated?

It’s a company that owns and, in many cases, operates income-producing real estate. They own commercial real estate properties and investors can become shareholders.

They allow a more hands-off approach to real estate investing.

“The other one is management intensity. If you’re buying these and managing them on your own what are the headaches involved? How are you managing them?” Russo said. “If you’re doing it yourself, how time consuming is that? Are you following best practices if you’re doing it yourself or if you have a small local person that’s doing it?”

REITs may not be for everyone; but for the real estate investor looking to diversify – or add a more hands-off asset to their portfolio – they may be worth a look.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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RBC raises fixed-term mortgage rates

Royal Bank of Canada has increased the interest rates on its fixed-term mortgage products.

RBC’s mortgage rates were all boosted by 20 basis points, up to 2.54 per cent (two-year rate), while 2.64 per cent (three-year rate), and 2.84 per cent (five-year rate). Said rates are for products with amortization periods not exceeding 25 years.

The rise came amid rising bond yields and enduring expectations that Canada’s central bank will hike its benchmark interest rate, which currently stands at 0.5 per cent. Should the Bank of Canada push through with the increase on Wednesday (July 12), it will be the first such movement in 7 years.

Manulife Asset Management senior economist Frances Donald told CBC News that the move by RBC is “another signal that economic and market agents are preparing for a rate hike next Wednesday… It also opens the door to a Bank of Canada rate hike because it implies that the economy is already going to absorb higher interest rates via the banks themselves.”

“We import higher rates via our bond curve from the United States, and the more we see higher rates around the rest of the world, the more the costs are going to rise for Canadian banks as well,” she explained, alluding to the recent boost in the U.S. Federal Reserve’s rates. More hikes are anticipated to come this year.

“We are clearly in the beginnings of a tightening cycle and these are not just influences from the Bank of Canada but from global sources as well.”

Related stories:
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Canadians are incapable of servicing higher mortgage costs – report

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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Qualifying rate to increase?

This is when one association is predicting the qualifying rate might jump.

A potential Bank of Canada benchmark rate increase has been the talk of the industry for the past few weeks, with many invested parties speculating on when the government will make the move.

For its part, the British Columbia Real Estate Association is predicting the Bank will hold off until 2018.

“While the likelihood of the Bank raising its target rate by the end of 2017 has certainly increased, we still expect the Bank to hold off until early 2018, particularly if oil prices remain low and inflation fails to pick up,” Cameron Muir, BCREA chief economist, wrote in his latest Mortgage Rate Forecast Report.

As a result, the association is also predicting the five-year qualifying rate will jump from 4.64%, as it stands today, to 4.74% in Q1 2018.

The average five-year mortgage rate, meanwhile — which sits around 2.61% — will jump to 2.79% by the end of Q3 2017, and then to 2.9% in Q4 and 3.05% in Q1 2018.

The qualifying rate is expected to hit 4.84% by Q4 2018 and the average five-year mortgage rate is predicted to reach 3.35%.

That’s the not-so-good news for those who plan to delaying buying a home until then. However, the rate increases will be the result of overall economic recovery.

“The Canadian economy has finally returned to good health following the rapid and dramatic decline of oil prices in late 2014 and the consequences of wildfires in Alberta last year. Since the third quarter of 2016, the Canadian economy has expanded at an average rate of 3.5 per cent, well above the Bank of Canada’s estimate of 1.7 per cent sustainable long-run growth,” Muir wrote. “After posting nearly 4 per cent growth in the first quarter of this year, we expect that real GDP growth will slow slightly to around 2.4 per cent in the second quarter with the economy ultimately growing 2.5 per cent this year and 2 per cent in 2018.

“If the economy continues to accelerate, and growth in real GDP is higher than currently expected by the Bank, slack in the economy could be eliminated by as early as the end of this year, which could push up the timetable for monetary tightening.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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Home Capital announces sale

Home Capital has announced an agreement with KingSett Capital to sell a commercial mortgage portfolio valued at around $1.2 billion.

“This transaction will help the company further stabilize its liquidity position and highlights the flexibility and options created by the quality of our assets,” Bonita Then, Interim President and CEO of Home Capital, said.
“Proceeds from the transaction are expected to have an immediate impact by enabling us to enhance our liquidity and reduce the outstanding debt under the Company’s $2 billion credit facility.”

Under the agreement terms, Kingsett will purchase the portfolio for 99.61% of outstanding principal value.

Home Capital expects to incur a loss of $15 million before income taxes on the deal.

The deal is the latest bid by the embattled channel lender to stabilize itself following Ontario Securities Commission allegations it misled investors in 2015 and recent dwindling deposits.

Last week, Home announced a settlement with the OSC and class action matters.

“Under its proposed settlement with the Commission, Home Capital will make a payment of $10 million and reimburse Commission costs in the amount of $500,000,” Home Capital said. “Gerald Soloway will be reprimanded, prohibited from acting as a director or officer of any reporting issuer for a period of four years and pay an administrative penalty in the amount of $1 million.

“Each of Robert Morton and Martin Reid will be reprimanded, prohibited from acting as a director or officer of any reporting issuer for a period of 2 years and pay an administrative penalty in the amount of $500,000.”

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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Interesting investment up for auction

“Power is a lot like real estate. It’s all about location, location, location. The closer you are to the source, the higher your property value.”

That line was uttered by Frank Underwood — in the critically acclaimed political drama House of Cards – whose house (in the show) is currently up for auction for $500,000.

The town home, set in Washington D.C. on the show, actually resides in Baltimore, Maryland.

“Featured in the hit Netflix series House of Cards as Francis & Claire’s Home this grand all brick Victorian style home has been carefully restored and updated with original details throughout,” the listing reads. “The home features over 4,600 square feet of above grade living area, 12+ foot ceilings, 5 fireplaces, original Tennesee mable mantles, dual staircases, original pocket doors with etched glass and transoms, a 3 story light well which lets light and breeze into the whole house, a rear patio, and oversized 2 car garage with a roof top deck.”

The home, which is located at 1609 Park Ave. in Baltimore, boasts a main level living room, family room, and dining room complete with butler’s pantry.

It also features three other levels; a two car garage, rear patio, and rooftop deck.

The Victorian home was constructed in 1880.

The live auction for the home will take place on-site on July 27; online bids are not permitted.

Related stories:
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Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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The 5 priciest homes in one of the country’s hottest markets

Take a look at some of the country’s most luxurious homes currently for sale.

These are the most expensive homes currently for sale in and around the country’s hottest housing market.

As someone who covers housing for a living, there’s nothing quite like perusing some good old fashioned real estate porn. I’m sure you faithful readers can agree.

While modern builds with their sky-high windows or hard lofts with their sprawling floorplans are always fun to explore, there’s nothing quite like gandering at some of the country’s priciest homes.

And there seems to be a few more than usual currently on the market.

Pont2Homes, an online agency, rounded up the 10 most expensive homes currently for sale in and around Toronto. Check them out below.

1. A Yorkville Penthouse

Yorkville is one of the most sought-after neighbourhoods in Toronto (there are even rumours that Mike Babcock, current coach of the Toronto Maple Leafs, chose to coach in Toronto over Buffalo due to his wife’s desire to live in the posh ‘hood).

It’s home to some extravagant shopping spots and swanky restaurants; and also to the province’s current most expensive home.

Listed at a cool $36,000,00, this beauty is located at the top of the Four Seasons Hotel.

2. A Bridle Path mansion

“Millionaire’s row” is home to this 10 bedroom behemoth befit for Batman himself.

For a cool $35,000,000, this home includes a 5,000 square foot pavilion, a tennis court, a 50 foot indoor pool, and a hand-carved Louis XV fireplace.

3. A multi-million dollar country home

If city living isn’t your thing, this $24,950,000 equestrian estate in King City may be just what you’re looking for.

The rugged and rich outdoorsman (or outdoorswoman) will surely be drawn to the 80 acre property that is home to a pond and waterfall, skating hut, walnut grove, and groomed hiking trails.

4. A lakefront compound

If one home isn’t enough, this estate in Oro-Medonte is situated on a 17 acre lot with a 525 foot private beach on Lake Simcoe.

The lot is also home to two 12,500 square foot homes.

5. 10 bedrooms in Bridle Path

This estate has its own ballroom, a spa, a salon, and in in-home theatre.

All for the reasonable price of $19,380,000.

To see the bottom-half of the province’s top-ten, click here.

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Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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CREW poll: Pot growing in rentals

With a proposed marijuana legalization bill in the offing, should the government tweak the bill to ban people from growing in rented homes?

Take our poll today.

The Cannabis Act was introduced in the House of Commons earlier this week. Under the act, adults will be permitted to grow as many as four marijuana plants in their homes.

The announcement has one landlord group calling for reform already.

“Fundamentally we want marijuana growing to still be prohibited in rental units and in multiple-dwelling units, (ncouding) include condos (and) co-operatives,” The Canadian Federation of Apartment Associations President John Dickie told CBC News. “Because, from that point of view, there are impacts on the neighbours.”

There are also concerns about the impact grow-ops can have on the resale value of a home because of the stigma attached to those homes.

Growing plants in-house can also cause mould issues and increase the possibility of fire hazards, both of which could result in costly bills for homeowners.

Many lenders also shy away from financing former grow-op homes, according to several mortgage brokers.

“I think the government is obviously balancing a lot of issues here,” Dickie told CBC. “They do want to break the black market, and that’s important. But we think we can break the black market if they let people [only] grow it in their own owner-occupied homes, and the product is readily available in stores or by mail order.”

Related stories:
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Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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