Real estate industry prepares for a battle

Seven years ago, an advertising executive wanted to experience the bright lights and excitement of competing in a boxing match. So he launched Agency Wars – an event specifically for ad execs who wanted to show off their pugilistic skills.

This year, that same man is bringing the sweet science to the real estate industry.

“Over the period of those years, we’ve perfected the methodology. We have two teams, red and blue; we train the boxers as a team. For a lot of these people it’s the first time they’ve ever been in a boxing ring or gym,” Michael Clancy, founder of Agency Wars and now Toronto Real Estate Rumble, told CREW. “It’s reality show stuff; it’s amazing the transformation and drama they go through. You get in a ring, people throw punches at you, and it’s a transformative experience. We want it to be a really rewarding experience.”

A total of 24 amateur boxers – all from the real estate industry – have been chosen, following a rigorous tryout period, to take part at the event, which takes place Wednesday, November 22 in Toronto.

Clancy, who got into boxing at the age of 50, founded the events as a way for industry professionals to experience the allure of a big ticket boxing event.

“We want you to have that feeling. It’s like the ultimate fantasy. It’s a fantasy camp for boxing – you are going to work and train like a boxer for 12 weeks. We’re going to give the whole experience of the fight as well; the entourage, the robes, 600 spectators, ring card girls, cameras,” he said. “When I first put the show on I wanted to feel how Floyd Mayweather feels. We carefully put together something that gives the full experience that you’ll want to tell your grandkids about.”

The chosen boxers are currently embarking on a 10-week training program, which includes numerous weekly training sessions, nutritional counselling, and world-class coaching from elite-level boxers and trainers.

The real estate combatants will become legitimate amateur boxers, and the event is properly sanctioned by the Boxing Canada to ensure the utmost safety.

Boxers wear headgear and oversized gloves and, according to Clancy, the worst injuries that have occurred over seven years of running Agency Wars were bloody noses.

As for the real estate industry’s own iteration of the event, Clancy says those particular professionals will make perfect boxers.

“It’s very metaphorical for real estate guys: It’s a hard, competitive business and you don’t win every day,” he said.

The event is also raising money for two good causes: The We Foundation and imagine1day. It’s supported by a number of industry partners, incuding Garrison Hill Developments, Foundry Mortgage Capital, Concrete Mortgage Capital.

To find out more about the event, to purchase tickets, or to become a sponsor, check out the website here.

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Mortgage insurance premiums hiked once again

CMHC announced early Tuesday it is increasing its loan insurance premiums effective March 17.

“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, Senior Vice-President, Insurance. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”

According to the Crown Corporation, the average homebuyer will see a $5 increase to their monthly mortgage payment as a result. That $5 certainly adds up, however, to a total of $1,500 over the course of a 25 year mortgage.

The increase is the result of last year’s mortgage rule changes, CMHC claims.

“Capital requirements are an important factor in determining mortgage insurance premiums. The changes reflect OSFI’s new capital requirements that came into effect on January 1st of this year that require mortgage insurers to hold additional capital,” it said in a release.

“Capital holdings create a buffer against potential losses, helping to ensure the long term stability of the financial system.”


This latest hike comes less than two years after the most previous one, which was announced in April 2015.

See below for standard premium changes.

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Economic aftershocks of Brexit will keep Canada mortgage rates at record lows

BMO Capital Markets sounded the alarm on the implications of the “leave” vote in yesterday’s Brexit referendum, saying that the repercussions of the British electorate’s decision would certainly be felt across the Atlantic and the world over.

As reported by David Akin for the Toronto Sun, ever-plunging rates caused by the economic aftershocks of the British polls would mean that Canada’s housing markets might see continuous and even intensified activity.

“Indeed, if the ‘leave’ side prevails, global interest rates are likely to remain even lower for even longer amid the deep uncertainty over the U.K.’s and the EU’s economic fate and likely financial market volatility,” BMO chief economist Doug Porter said in a report.

“In that event, the [U.S.] Fed will remain on ice even longer and Canadian rates will again probe all-time lows, keeping mortgage rates at an extremely low ebb and thus further fanning the flames in the domestic housing market,” Porter added.

CIBC Capital Markets chief economist Avery Shenfeld agreed with the projections, adding that the ensuing market uncertainty over the next few quarters would make Canadian investors with global portfolios anxious.

“In the near term, a ‘leave’ vote would create market volatility that would spill over to Canada, and would likely weaken the British pound, making U.K. goods cheaper here and posing a challenge for Canadian exports to the U.K.,” Shenfeld said.

“Canada had been working on a free trade agreement with the EU, and would have to restart that process for a deal with the U.K. alone.”

Related stories:

Brexit could further inflame Canada’s already overheated housing—BMO
Buyers should not assume that current housing frenzy is sustainable – BoC

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Agent questions impact of foreign mortgages on Canadian debt levels

Worries around national average debt numbers are overblown, according to one real estate veteran who argues the stats could be inflated by mortgages held by foreigners.

“The national debt carried by Canadian consumers and the fact that Canada allows foreigners to borrow money for homes and that’s put into our debt [could have a major impact on debt levels],” Derek Austin, an agent with Century 21, told Canadian Real Estate Wealth. “Even 10 foreign borrowers taking out $10 million in mortgages each would throw the numbers out of whack.”

It’s an interesting take on the foreign investment trend and increased debt levels, which have both increasingly made headlines over the past year.

The average national household debt increased 5.1% in April, according to Statistics Canada. Mortgage debt showed the largest growth — up 6.2%.

And that trend is expected to continue, according to Doug Porter, chief economist for BMO Capital Markets.

“It’s tough to see anything turning this canoe around, as home prices continue to soar in Toronto and Vancouver, while there’s little prospect of a big bounce in personal incomes,” he told the Financial Post.

The impact foreign-owned mortgages have on national debt stats is unknown. Many may argue it has little effect, noting that many foreign buyers pay cash.

However, Austin isn’t so sure.

“The Royal Bank of Canada took away its limits on foreign mortgages,” he said. “Why would they do that if foreigners weren’t taking out mortgages?”

RBC announced in late 2015 that it will no longer limit mortgage size for immigrant buyers in Vancouver.

“We’re seeing a lot of affluent newcomers looking to buy high-purchase price homes,” Christine Shisler, RBC’s director of multicultural markets, told Reuters at the time. “Now we can actually service any mortgage amount.”

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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DLC to sell majority stake

Dominion Lending Centres plans to sell majority 60% stake to Calgary-based FCF Capital.

“This is a tremendous opportunity for Dominion Lending Centres to continue to provide exceptional mortgage services for Canadians and expand our reach into other growth areas,” Gary Mauris, President and CEO of Dominion Lending Centres, said. “We will continue to operate under the DLC group of companies with the same values, principles and operating approach that has made DLC Canada’s number one mortgage company.

“I’m excited for our organization to join forces with such a dynamic organization as FCF that will benefit our customers, our network of accredited mortgage professionals, our partners and our corporate team. This partnership will allow us to grow as a company in the markets we serve and both Chris and I look forward to leading the next chapter of DLC’s growth and expansion.”

DLC will continue to operate independently; Gary Mauris, president and CEO, and Chris Kayat, executive vice president, will carry on in their respective roles.

It’s another big move for the network, which earlier this year acquired rival Mortgage Architects.
The investment by FCF can be viewed as a vote of confidence in the brand and, indeed, the mortgage broker industry.

“FCF is delighted that the acquisition of a majority interest in DLC could form FCF’s first investment under its new investment thesis,” Stephen Reid, president and CEO of FCF Capital. “DLC represents excellence in the mortgage brokerage and leasing industry and our majority interest in it provides our shareholders with an opportunity to participate in this success story.

“We believe DLC’s highly committed and motivated management team will continue to grow the DLC brand.”

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 Easy Way to Create a Real Estate Empire (and … – Fool Canada

Many Canadians are attracted to the world of real estate.

There are countless stories of savvy investors who, after a few decades of hard work, now live on the rent generated by a nice portfolio of investment properties. These investors have ridden the bull market in virtually every Canadian market to handsome price gains as well.

Many investors who want to duplicate this path to wealth are out buying rental properties as we speak. But unfortunately, it’s unlikely they’ll see the level of success as the last generation did. Cap rates are much lower than before–a consequence of low interest rates–and it’s unlikely they’ll see the kind of capital appreciation enjoyed by their parents.

There’s a better solution. It offers the potential for better returns going forward, and investors don’t have to worry about any of the day-to-day operations.

Leverage REITs

You can probably tell where I’m going with this. I’m convinced Canada’s largest REITs are a better choice than a traditional rental property for many reasons. Often, the distributions are taxed at a better rate than straight rent received from a rental property. You get the benefit of professional management at a great price because of economies of scale. And REITs give retail investors access to areas of the market they normally wouldn’t be able to participate in, like commercial or industrial property.

There’s one advantage to buying physical rental property over REITs though, and that’s the ability to leverage. It’s possible–although usually not recommended–for an investor to purchase a rental for just 5% down. That kind of debt can lead to a succulent return on the original invested capital if done right, but it also adds significant risk. If underlying property values fall 5%, it would represent a 100% loss on the original investment.

It’s for this reason why most real estate investors put down 20%. That amount allows them to avoid expensive mortgage default insurance, and it builds in a little margin of safety. It’s still enough leverage that investors can capture the positive aspects of borrowing as well.

Investors can use leverage to buy REITs, and pretty easily, too. Most Canadian REITs are eligible for what brokers call reduced margin, which means you only have to maintain 30% of the stock price as equity in your account.

An investor could then supplement that by borrowing outside of their account. Say you had $50,000 in cash and the ability to borrow another $50,000 via a home equity line of credit for 3% annually. You could then take that $100,000 and easily use it to buy $200,000 worth of REITs. At a 50% debt-to-equity ratio, you wouldn’t have to worry so much about margin calls either. And depending on your broker, the cost to borrow could be as low as prime.

Of course, there’s a big risk factor. If the value of the underlying REITs falls significantly, you’ll either be forced to come up with more cash or sell at a loss.

An example

Let’s look at a real-life example of how an investor could do this using two of Canada’s largest REITs, H&R Real Estate Investment Trust (TSX:HR.UN) and RioCan Real Estate Investment Trust (TSX:REI.UN). H&R yields 6.9%, while RioCan pays 5.6%. Assuming equal amounts of the two, an investor would be looking at a 6.25% yield.

On a $200,000 investment (with $150,000 borrowed at an average rate of 3%), an investor would collect $12,500 per year in dividends, while paying out $4,500 in interest. Unlike with physical real estate, there are no other expenses. Gross profit would be $7,000, while net profit would be $7,000 minus taxes.

That’s a very attractive 14% return on the original $50,000 investment.

I picked H&R and RioCan because they’re two of the more solid REITs out there. Both have good management teams, diverse portfolios, reasonable balance sheets, and attractive payout ratios. If an investor wanted to take on more risk, there are others out there that could easily bump the total yield for the portfolio up to 8%.

And the best part? If you buy REITs, you’ll never have to fix a toilet again. Nice potential returns with no work? Sounds good to me.

Like REITs? Then you can’t afford to miss this!

We’d all love to have a steady stream of extra income, but who wants the hassle (and expense!) of buying and managing property and dealing with tenants? We have a much better option: real estate investment trusts (REITs) allow investors like us to purchase shares in a diversified portfolio of properties and earn a share of the profits!

Want to know more? Our just-released report, “Earn $6,000 Per Year in Rental Income Without Becoming a Landlord” has all the details. Just click here now to find out how to get your FREE copy today!

Fool contributor Nelson Smith owns shares of H&R Real Estate Investment Trust.

Many Canadians are attracted to the world of real estate.

There are countless stories of savvy investors who, after a few decades of hard work, now live on the rent generated by a nice portfolio of investment properties. These investors have ridden the bull market in virtually every Canadian market to handsome price gains as well.

Many investors who want to duplicate this path to wealth are out buying rental properties as we speak. But unfortunately, it’s unlikely they’ll see the level of success as the last generation did. Cap rates are much lower than before–a consequence of low interest rates–and…

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Influx of migrating Canadians could lead to big bucks for investors

One market’s woes could mean good fortune for investor’s in another major market, according to one industry veteran.

Real estate professionals are bullish on the Toronto market for investors this year, as savvy buyers could cash in on troubling times in western Canada.

“Toronto will definitely be a good spot for investors this year; I was just talking with a broker from another office about this and we think many people who currently live in Alberta will look to move to Toronto,” Ira Jelenik, an agent in Toronto, told REP. “A lot of those people will look to the rental market and prices in both freehold and condos will go up this year.”

That potential influx would just add to the always growing number of Torontonians.

“Along with immigration, a lot of people will be migrating from other provinces,” Jelenik said.
The oil industry taking its fair share of beatings last year, with many people out of work and struggling to cover the cost of rent or mortgage. The trend is expected to continue – and its one that has had a very real impact on the real estate industry.

In late November it was reported that agents in Fort McMurray were leaving the city in droves.
Phil Soper, chief executive officer of Royal LePage Real Estate Services, told the National Post at the time that Fort-McMurray based agents are leaving the area in hopes of taking advantage of markets that haven’t been hit as hard as the capital of oil country.

“Our offices in Edmonton are experiencing a transfer of agents from Fort McMurray and you’d expect that, because the region is experiencing the most severe change in economic fortune in Canada in years,” Soper told the Post.

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

Investment Hot Spots:
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Real estate investment trusts offer up to 10 per cent yields

Real estate investment trusts (REITs) are mechanisms that allow the public to earn generous rental income by investing in commercial real estate. REITs pay out distributions that consist of capital gains, foreign non-business income, other income, and return of capital. Two types of REITs, in particular, offer 8 up to 10 per cent ROI.

The Artis Real Estate Investment Trust (TSX.AX.UN), which is a diversified REIT for commercial properties, has its net operating income (NOI) across industrial properties (24.1 per cent), retail properties (25.6 per cent), and office properties (50.3 per cent).

Primarily invested in Canada with some assets in the United States (representing approximately 28 per cent of its NOI), Artis REIT enjoys a 95 per cent portfolio occupancy rate and 255 leasable properties with a total space of 26.2 million square feet.

Artis REIT’s adjusted funds from operations (AFFO) per unit amount to $1.30 in 2015, with $1.33 AFFO per unit in 2016, making its 8.3 per cent distribution yield safe. Also, unitholders can re-invest Artis REIT distributions at a 4 per cent discount, permitting greater flexibility.

On the other hand, the NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN) covers rental income from 123 properties – in particular, hospitals and health care facilities across Canada, Australia, Brazil, Germany, and New Zealand. Hospitals contribute 33 per cent of its NOI, while other medical office buildings contribute 67 per cent.

NorthWest Healthcare Properties REIT boasts of a 95.8 per cent occupancy rate, with a similarly high AFFO payout ratio of 95.7 per cent. Its distribution is covered with a 9.5 per cent yield at $8.4 per unit, but the high payout ratio means that investors should take care to keep an eye on its occupancy rate.

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

Investment Hot Spots:
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