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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Investor: Buyers, investors would be ‘foolish’ not to use home inspections

In red hot markets, many are foregoing home inspections in a bid to quickly close on competitive properties. Do you make sure to use inspections?

Let us know in our poll today

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In red hot markets, many are foregoing home inspections in a bid to quickly close on competitive properties. One investor says that’s a mistake.

“Somebody who buys a home without a home inspection, that’s a foolish decision to make. You’re spending $500,000a t least on a piece of property; spending $500 on an inspection makes sense,” BC-based investor Hans McFarlane, told Canadian Real Estate Wealth. “People are skipping home inspections quite a bit, but no realtor, no professional is ever going to put their name on any document that says I recommend you skip an inspection.

“For a new investor, for someone who doesn’t have the resources to deal with the problems that need to be dealt with, it’s foolish to not get it done.”

In markets such as Toronto, many are skipping the home inspection in a bid to win bidding wars.

But that can be a costly mistake, according to mortgage broker and investment author Enza Venuto, who says a few hundred dollars can often save thousands in the long-run.

“If a person does not use a home inspector, they’re doing the wrong thing. They’re a must in today’s environment. Even on new properties, not just old properties, new construction require it as well. I know there’s Tarion, but sometimes issues arise and we recommend clients use a home inspector on homes and on condos,” she said.

And investors will have an easier time securing financing when they have the home inspected, according to Venuto.

“Even seasoned investors … if we don’t use an inspector, the lenders may want to know more details about the property,” she said.

Related stories:
Frenzied bidding wars in Toronto forcing buyers to rush offers
Stay rich, even during a downturn

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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Budget options for Canadian millennials in the age of soaring prices

With Canadian housing price growth having set new records this year, more and more millennials are branching out to other viable options aside from home ownership.

Among these alternatives, especially popular in red-hot Toronto, is cooperative purchases of homes between friends or relatives, The Canadian Press reported.

In its recent survey, RBC noted that co-ownership is a top choice among 24 per cent of millennials. HomeLife/Realty One Ltd. (Toronto) sales representative Alan Aronson said that a leading reason is that each of the buyers in a co-purchase can qualify for a larger mortgage, while sharing the remaining costs (such as land transfer taxes and insurance) among themselves.

However, Aronson warned that this route has its own share of risks, especially considering that relationships can and do become strained when it comes to money. For instance, if one party neglects their fiscal responsibilities, all the co-owners might be forced to sell the property early or might even lose it to the lenders.

Another option would be to rent, probably in perpetuity. Jason Heath of Objective Financial Partners said that this might indeed be the better choice in the most expensive markets, if one is willing to “ignore the practical and psychological benefits of home ownership.”

Instead of using one’s funds for down payment, one can instead invest it—and in the process avoid other, not initially obvious, expenses such as taxes and closing fees.

Earlier this month, Statistics Canada warned in its report that young workers nationwide are facing far worse conditions compared to professionals from older generations, with the youth unemployment rate over a period of 4 decades (from 1976 to 2015) being around 2.3 times higher than the rate among workers older than 25 years old.

This trend accompanied a severe decline in the take-home pay and the purchasing power of this demographic by the early 1980s, with young Canadian males (17 to 24 years old) experiencing a 15 per cent reduction in their real hourly wages, and young females suffering a 10 per cent drop.

Related Stories:

Young workers’ wage and job situation placing market at risk

Low down payments are ultimately detrimental to first-time buyers – CMHC head

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:
Alma, Chippawa, Dromore, Havre-Saint-Pierre, Chepstow

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Revitalizing a neighbourhood

Meet the investors that are currently creating Toronto’s next hot spot.

For the past 20 years, the intersection of Yonge and St. Clair has acted almost exclusively as a transit hub for the affluent neighbourhoods surrounding it, including Forest Hill and Rosedale.

That’s about to change.

“For the last 30 years it’s kind of gone sideways whereas surrounding neighbourhoods have improved. Our goal is to bring it back to some form of former glory,” Lucas Manuel, managing director of Slate Advisors, told Canadian Real Estate Wealth. “To do that first we bought everything there, which helps. We own all four corners and eight office buildings in total. Effectively that allows us … to make changes fast and not rely on our neighbours to come along for the ride.”

Slate, itself, currently has an occupancy rate of 95% within its buildings, and those that aren’t currently occupied are being kept vacant to allow for flexibility as the vision evolves, according to Manuel.

That vision is one that will transform the area into a go-to neighbourhood as opposed to a strict thoroughfare.

“They’re dying to have a good restaurant that they can go to, so that’s a huge focus of ours. On one of the corners, the northwest corner, we’re looking to put a big restaurant. Other locations as well,” Manuel said. “One doesn’t do it but once you get critical mass and give people a choice people will start coming back to Yonge and St. Clair.”

Slate has a master plan for the entire neighbourhood, and it is actively working with developers and other property owners to revitalize the area.

They are currently in talks to develop a business improvement area (BIA) to address some of the area’s needs.

The entire overhaul is being done in phases, with the northeast corner expected to be completed by Christmas. The rest has a target of 2018.

And once those are completed, and other developers hop on board, there is nothing stopping the area from experiencing a retail and, indeed, further residential development.

“Nothing has interfered with the upward mobility of pricing in Rosedale and Forest Hill. It would be nice to think all the things we do kind of support that,” Manuel said. “What we’ve heard from residents in those neighbourhoods is a lot of excitement.”

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:
Pointe-du-Lac, Erieau, Rossway, Arcadia, St. Mary’s

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What’s in store for Canadian investors in 2017?

We have the answers to all your investment questions in our Property Forecast Guide — the industry’s very own crystal ball, which will appear in the January issue of CREW.

Think of the guide, which spans dozens of pages, as your handbook for investing in real estate in 2017. Want to know what’s in store for the economy? How about hot, up-and-coming areas? This guide will help you get rich – or even richer – by giving you the best research, right in your lap. Click here to Subscribe today and ensure you don’t miss out.

We spoke to veteran investors, respected economists and profiled every market and every trend that investors need to know about.

Below is just a sample of what you can expect.

Dan Campbell on GTA and the surrounding area

Tech Triangle (KWC)
Strong and growing economy, stable and growing post-secondary institutions, airport, expanding highways, increase Go Train service and now a rapid transit system all point to a strong year for the KWC real estate market. Rental demand will continue to grow, especially around the new LRT and Go Train stations as well as the renewed downtown cores. This region is growing into Millennial Central and that bodes well for market demand for decades to come.

Hamilton
It is still a market where investors and homeowners need to have very localized knowledge in order to ensure they aren`t buying in neighbourhoods that will underperform the market. 2017 should begin a slowing of demand from investors and landlords, but increased Go Train service, a renewal of Hamilton`s reputation and the promise of LRT will keep interest high.

Barrie and Orillia
Although two very separate cities, they are economically co-joined. In one year Barrie will lead in growth and housing demand, and in the following Orillia will. Orillia looks to grab the lead in 2017 with the Hydro One purchase of the local utility and the development of a high-tech research center bringing in above average salaried employees. The demand in Barrie’s mid-range market should continue to be strong as new mortgage rules push people out of Vaughn and Toronto.

GTA
Anything ground-oriented (single family homes, semis, townhomes) are poised to outperform the rest of the market, especially given the Provincial Places to Grow act limiting the amount of new-land sprawl, thus driving up the price of developable land within these constrained boundaries. Condo demand will continue with a movement to larger and therefore further from the core units beginning to feel the upward demand pressures as young families begin to grow and require more room. Units located within 800 Meters of TTC subway stations or 500 meters of street car stops will feel the highest demand increases in both rental and purchase in 2017.

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:
Woodstock, Saint-Hippolyte, Burtts Corner, Stoney Island, Meacham

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Have your say: Do you use property managers?

After one horrific account by a CREW reader, we want to know two things: Do you use a property manager and do you have any tenant nightmare stories?

A recent CREW story featured an investor who now swears by using property managers to take care of his properties after it was discovered a number of, shall we say, nefarious characters took up home in one of his rentals.

That got us thinking: How common is the use of property managers? Take our poll and let us know.
We also want to know if you have any tenant horror stories that have caused a major headache. Let us know in the comments below.

Of course, hiring a property manager doesn’t safeguard you from all potential issues. Property managers themselves can be a hindrance. As one CREW reader tells it:

“I wish to make it abundantly clear to all of our colleague landlords that there are some truly disastrous, bordering on criminally so, ‘professional property mangers’ in Vancouver, and some of them present themselves very deceptively, as the embodiment of ethical and competent managers,” the reader wrote in the comments section of CREW. “Be afraid. Do your diligence. Don’t sign anything that locks you in.”

So that begs another question: Have you had issues with property managers in the past? Let us know below.

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:
Mazenod, Mayflower, Barrow Bay, Milford Bay, Saint-Évariste-de-Forsyth

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The Playboy Mansion is up for sale but longtime resident Hugh Hefner wants to stay put

THE ASSOCIATED PRESS

Playboy Enterprise announced the West Los Angeles estate, the backdrop of many film shoots and wild parties, was listed on Monday for $200 million.

The 5-acre property features 29 rooms, a game house, home theatre, wine cellar and the famous swimming pool with a cave-like grotto where Playboy bunnies partied with celebrities. The mansion also comes with a rare zoo license.

As a condition of the sale, magazine founder Hefner would get to continue living there as he has since the company bought the mansion 45 years ago for just over $1 million, company spokesman John Vlautin said.

The sale comes as Playboy, which has been has seen its circulation plunge as it competed with more sexually explicit magazines and online porn, seeks to reinvent itself. In October, the magazine that helped launched the sexual revolution, announced that it will stop running photos of completely naked women in its U.S. print edition. The move followed a decision in August 2014 to ban full nudity on its website.

Playboy CEO Scott Flanders says the sale would help the company “reinvest in the transformation of our business” while allowing the 89-year-old Hefner to continue living there.
“The Playboy Mansion has been a creative centre for Hef as his residence and workplace for the past 40 years, as it will continue to be if the property is sold,” Flanders said in a statement.

Hefner originally named a home he bought in Chicago in 1959 the Playboy Mansion, but he eventually made the Los Angeles estate, which he dubbed Playboy Mansion West, his permanent home.

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:
Creston, Saint-Urbain, L’Isle-Verte, Grande Prairie, Roebuck

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Are you properly managing your property managers?

Julie Broad, a noted author and industry veteran, thought she hit the jackpot when she found a Toronto-based property manager who only charged 5% of the rent and didn’t expense any fees for acquiring new tenants, outside of advertising costs.

Little did she know, however, that the “mom and pop shop” running her triplex was charging tenants $950 per month – even though rent only amounted to $890.

Looking back, Broad is not only dismayed by the scam, but she struggles with the fact that it may have continued for some time if she hadn’t moved into the house and started collecting rent on her own. As a result, she imparts several strategies to catch fraudsters before they can do any damage to an investor’s reputation and credibility.

These include:

Asking around. “Ideally, these would be investors in your area,” Broad said. “Ask: how long have you worked with them, why, what do you like and what don’t you like. If everyone keeps mentioning the same company, definitely call them.”
Conducting research. This not only involves an online search for complaints and negative reviews, but some investigative work as well. “Ask if they offer other services other than property management, and ask it that way, almost like you’re looking for them to offer other services,” she said. “In my opinion, you only want them to be property managers. If they have a maintenance company, how can you trust that when they say work needs to be done, they’re saying that because work really does need to be done or because they need to boost their revenue on the property side?”
Obtain references. “Ask for the address of some the properties they manage and find some listings on their website, then do drive-bys to see what kind of conditions they’re in and what kind of properties they are.” She also encourages investors to request names of clients and call them for a full evaluation.

Finally, Broad emphasizes that these tips are necessary for all investors – even those who may think they prefer managing their own properties.

“Life changes, and even if you manage your own properties today, you might move away, your job might get more intense, or something might happen where you can no longer do it,” she said. “It’s a good idea to always be in contact with a local property management company just in case you need them.”

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:
Courtland, Sainte-Rita, Alder Flats, Barkmere, Pictou Landing

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Guidelines for buying investment real estate

The first factor to consider when buying real estate for investment is

your budget

. Ensure that you have sufficient funds for the initial fees and the long-term expenses; the only thing worse than having no property at all is being unable to fully pay for your investment.

After checking your budget, the next step is to scan the market so that you can have a good idea of what future buyers might look for, thus establishing a profitable investment. Compare the prices of the properties you are considering with authoritative market projections and current design trends. Take into account the locale of your purchase: the community, the neighborhood, the existing amenities, and the accessibility of core facilities (e.g. hospitals and schools).

Consider fixer upper properties, as well. The initial expenses required to bring up the home to a presentable, salable condition would be small compared to the potential profits down the line; this is especially applicable if the property is already aesthetically pleasing and situated in a good neighborhood to begin with. Also, going for this option would guarantee that any hidden problems would be addressed prior to the sale, as such issues would otherwise be undetectable in a property that looks good only at first glance.

Most importantly, tap the help of a professional such as a real estate agent. Specialist knowledge would be invaluable in assessing the previous factors to ensure that you get the best long-term benefits for your purchase.

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:
Sandy Cove, Saint-Casimir, Tiverton, Chapel’s Cove, Royal Road

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Foreign investor stats revealed

(Bloomberg) — Foreign owners made up a bigger share of the condominium markets in Toronto and Vancouver over the last year, according to the nation’s housing agency.

Foreign owners of condos comprised 3.5 percent of the market in Vancouver and 3.3 percent in Toronto, according to a report from Canada Mortgage & Housing Corp. which surveyed property managers. That’s up from 2.3 percent in Vancouver last year and 2.4 percent in Toronto, Canada’s largest city. When narrowing to the downtown core, foreign buyers made up 5.4 percent of Vancouver condo buyers this year versus 3.4 last year and 5.8 percent of Toronto condo buyers versus 4.3 percent.

Politicians have been under pressure from many quarters including Vancouver Mayor Gregor Robertson, HSBC Holdings Plc and local residents to start monitoring offshore money that may be pushing up home prices, particularly in Vancouver. The average price for a detached home rose 9 percent to C$1.02 million ($760,000) in Toronto in November from a year ago while Vancouver home prices soared 18 percent to C$752,500.

So far, the agency’s data is limited to condominiums and based only on a survey of property managers. Offshore buyers can keep their location and identity secret, Evan Siddall, chief executive officer of CMHC said in a speech last month.

The Ottawa-based agency released the data as part of its Housing Market Insight series, and will publish about 40 more reports on different cities and housing topics throughout 2016.

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:
Anmore, Armagh, East Chester, Winchester Springs, Cape Traverse

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