Purchasing A Pre-Construction Condo: What It’s Like And What To Know

Guest columnist Laura Stewart, REC Director of Sales. Piece originally from Medium.com/@laurasplaylist.

I’ve been in real estate for over 5 years and in that time have had the pleasure of helping a few hundred individuals purchase pre-construction condos either for themselves or as an investment. Through all of these transactions I have gotten invaluable experience when it comes to the process as well as a great sense of the roadblocks people face when making such an important decision.

I’m writing this post from the perspective of purchasing a pre-construction condo as an investment, specifically in the Toronto area, in hope to shed some light on the process, provide some tips so you can avoid unnecessary angst and hopefully inspire some of you to take action.

What I realized is that you have to jump in right away if you are interested, getting in at the first stage is important. Prices go up so quickly, within even a week they can go up by more than a few thousand. As an investor if you purchase at even the second stage of the process you are putting more money down than you need. I was so hesitant even after doing my research, I knew the benefits and I did my due diligence but it’s still such an intimidating process. As soon as I signed the paper, I couldn’t have been more excited. All the anxiety and hesitation seemed silly. If you do your research and are financially prepared you’ve made a safe investment. 

When you’re looking into investing in real estate you quickly realize that every purchase you make compounds. Saving a dollar here and there adds up to a large amount over the years; especially not buying those extra shoes I really didn’t need. Affordability is definitely a concern for any first-time investor. What I did was create a secondary account that held 10% of my earnings for each month. It made it so much easier to create an investment fund because I never saw the money in my account, this helped me avoid any undue stress. It might be more comfortable for you to start off with a smaller property and ease into a larger purchase. Dipping your toe in before you dive might be the safest course of action.

Let’s start off with a simple understanding of what a pre-construction condo investment is. As a buyer, you are essentially purchasing a unit from a blueprint, 3–4 years in advance of it being completed, and you reserve it by making deposit payments over that same time frame.

There are 3 major factors you want to consider when buying a pre-construction investment:

1. Location — The old adage “location, location, location” is important for any investment property and perhaps even more so when it comes to a pre-construction condo. In many cases you are purchasing into a project that will not be built for another 3 to 4 years and with that comes a certain amount of uncertainty as to whether or not there will be demand for your unit once it’s built. What’s worked well for my clients, is purchasing in an area with a proven track record and that, more often than not, means in a downtown core, or in an area right on transit taking you to the downtown core. Yes, you will be paying a higher price per square foot for a unit in a high demand location, compared to something in the outskirts, but it is as close to a guarantee as you will have that your unit will not sit vacant for long once built.

2. Builder Reputation — Now that we know the location for which we are going to buy in, we now must pick among projects and the best way to do this is by researching the builders. Consider their reputation: Have they completed projects in the past? Have they completed their projects on time? Did they deliver what they promised? Do they have building permits already in place? You will weed out a number of projects simply by asking these questions.

3. Incentives — The third item you want to consider when purchasing a pre-construction condo is the incentives that are being offered by the developer. Most importantly, make sure you are receiving the following:

Right to lease during occupancy: There are two important dates when purchasing pre-construction, one is the occupancy date which allows the buyer to move into the unit without actually closing on the property yet. This doesn’t happen until the second date, registration. During this occupancy period, the developer is applying for condominium status with the city which can take 3–6 months. During this time period you will be paying property taxes and maintenance fees, so you want to ensure your ability to lease it out so you are not out of pocket those expenses.

Capped development charges/levies: At the time of registration, the city will impose additional taxes and fees onto the developer who then transfer those charges onto the buyer. It’s important to know what your closing costs are upfront so you can save appropriately during the 3–4 year construction period. Make sure these development charges are capped so that if the city imposes stricter fees, you the buyer, will not be forced to make up the difference. If the fees are lower than your capped amount, you will only be charged the lower amount.

Right to assign the unit: I always tell my investors that if they can close on their purchase, they should. The idea is to get a tenant in to start paying down the mortgage, perhaps giving you some additional cash flow while also reaping the benefits of passive appreciation. However, in a 3 year window, there are unforeseen problems that may arise and some buyers are just not able to secure a mortgage and close on their property. It’s extremely important then, to ensure that you have the right to sell you condo before it’s finished being built. Make sure you understand what criteria has to be met before the developer will allow this but it is usually after 80% of the building is sold and construction has commenced.

Now that we understand the 3 most important factors when purchasing pre-construction, I wanted to point out a few more considerations.

1. As an investor, you want to make sure that you are purchasing your unit as early in the sale process as possible; preferably at first access. The only way to do this is either by knowing the developer personally or by purchasing with a Platinum Sales Agent who is working the project. What happens is the developer will release a select number of units at initial pricing to those few Platinum Agents; once those units are sold, the developer will then release more units to a larger group of agents but at a higher price. This process happens a few times until the units are finally released to the general public at a much higher price. As long as you buy in the early stages of pricing, you as the investor will reap the benefits of the forced appreciation being implemented by the developer.

2. When assessing a project, be sure to look at the deposit structure as not all projects are the same. Make sure whatever structure it is, you feel comfortable with the payments.

3. HST is not included in the purchase price and the amount you will have to pay at closing will be roughly 7.0–7.5% of the price so be sure to have those funds available. Having said that, as long as you show the CRA that you have a 1 year lease agreement in place, they will provide you with a rebate.

4. When you purchase a pre-construction condo in Ontario, you are automatically given a 10 Day Cooling Period. During these 10 calendar days, you now have time to do your due diligence which should include a lawyer review of the agreement. For any reason, if you do not wish to move forward with your purchase, you simply rescind the agreement with the developer. The lawyer will be looking for the following:

a. Are the incentives promised included in the agreement?

b. Are there any hidden fees?

c. Are pets and short term rentals allowed?

d. What are the critical dates that the developer needs to meet?

5. Try not to get caught up in choosing the “best” possible unit. If you can find a layout where there is little to no wasted square footage then go for it. Do not worry if the unit is located on a lower floor, doesn’t have sunlight or doesn’t have a view. There are usually $1,000 premiums per floor and up to $10,000 premiums for views. As tenants are looking to only stay for 1 to 2 years, they are more concerned with keeping their rents low, making it difficult for you to recoup some of those additional costs.

6. Roughly 1 year before occupancy, the developer will ask that you pick your colours and finishes for the unit. As an investor, I suggest going with the standard finishes included in your purchase price. Most units now come with laminate flooring, stainless steel appliances and at the very least, granite counter tops. Similar to floor premiums, tenants will not pay more simply because the finishes are better, so save your money and go with the basic package.

Now that you know what is involved in buying a pre-construction condo, get out there are do it! The longer you wait, the more expensive it will be, making it increasingly difficult to get into the market. Take a leap of faith, work with people who you trust and enjoy the process!

Written by: Laura Stewart

Toronto Real Estate Board 2019 Q3 Condo Report


Every quarter the Toronto Real Estate Board (TREB) releases their condo market statistics for the city. The committee serves the over 50,000 realtors of the Greater Toronto Area (GTA) to assist them in understanding where the market was, where it is and where it’s projected to head. The information comes from their Multiple Listing Service (MLS) which collects all the data of condominium sales. Job growth as well as an increase in population are the main factors contributing to these trends. The collection of data further evidences the continuing benefits of the Toronto market. Here is a breakdown of the third quarter condo market status report for the GTA.


The Greater Toronto Area consists of the City of Toronto, as well as the Peel, Durham, York and Halton regions. The City of Toronto holds the vast majority of sales with a 70% stake, demonstrated an increase of 5.6% to $628,074 from last year’s third quarter of $594,627. The second highest is in Peel (14%), while Halton (2%) falls in the smallest sales section. Condo apartment sales for this quarter reached an 11.1% increase to 6,407, while Q3 2018 was at 5,766. New listings are down by 1% from the same time last year, we had 9,538 units, while 2018 was 9,636. The average price now sits at an average of $584,564, while Q3 2018 was 5.8% lower at $552,766. 


For 2019, we see an increase in prices from 2018, along with positive decreases for already established investors. The active listings of the final month of the quarter were at 3,327, and last year’s was 3,845. We saw an average of 22 days on the market for these properties, while it was 24 last year. 


Year over year we see rising increases in prices in the condominium market. This is due to our widely increasing population and the deficit of properties being built. According to a statistics report by RBC Economics, we need an increase of an average 26,800 units built over the next few years to catch up with demand. These increasing prices make it more difficult for people to buy, while renting grows to be a more utilized option. Less condominium apartments were completed this year, which also influences the rise in prices. Employment rates are also a large factor, as employment growth in September is at 5% (it was at 1.5% at the same time last year), while the unemployment rate has improved to 5.8% (over the 6.1% of the same time last year). 

Written by: Spencer Maxwell

A History Of Toronto Transit

Toronto has a long and storied past, especially when it comes to our public transit system. Private companies initially owned the limited amount of lines, but this changed when the government saw the blossoming potential. Established in 1920, the Toronto Transportation Commission was established to oversee all public transportation within the city, eventually to be renamed the Toronto Transit Commission in 1954. Union Station being the first transportation hub, which was constructed in 1858.

A Glimpse Across Canada’s Real Estate Markets

We’re constantly seeing increasing growth across the vast majority of Canada’s cities. Great potential in the Canadian real estate market is not just limited to Toronto and Vancouver. Saskatoon, Halifax, London, Winnipeg and Montreal are all so welcoming to buyers and investors. Not every market is equally as strong, but there is so much potential to be a comfortable homeowner or successful investor all across Canada.


Winnipeg’s population continues to rise thanks to a high-degree of immigration and positive job growth, many of this is due to the attraction of it being a capital city. The unemployment rate sits at a steady 6.6%. Transit is more positive than the majority of Canada, with more focus on easing congestion on the roads, as policies were put into place over a decade ago. Farming, manufacturing and biotechnology are the industries of focus on this university-centric city. The average price of a home in Winnipeg is currently $295,500. According to statistics at this time in 2018, the rental vacancy rate was 2.9%. There is an upswing on prices of entry-level homes due to competitive bidding, with semi-detached and detached homes also rising. Consumer confidence is strong, not having the concerns of Western Canada excessive density. “This is a great place for buyers on any end of the spectrum, whether they’re first-time home buyers or boomers, people of any generation can find something that suits their specific needs in Winnipeg,” states Jeff Stern of RE/MAX Performance Realty.


London continues to be a strong place for Ontario home purchasers to feel secure. The population continues to trend at a steady 1% per year. The city benefits from diverse industries including health sciences, technology, manufacturing and agriculture (with more class A agricultural land than anywhere else in Canada), with solid job growth as unemployment remains at 2.9%. Public transportation is on the weak side, but improvements are in the planning stages. The average house price currently sits at $415,000, continuing to even rise through the recession. Consumer confidence is at an all-time high thanks to affordability, especially from an investor perspective. The rental vacancy rate sits firmly at 1.9%. “What people find really appealing is the small town vibe along with great prices, people just want to live here forever, and investors see the potential,” states Justin Konikow of Prime Real Estate Brokerage.


Halifax, Nova Scotia is poised for steady growth with an increase of 120,000 more residents in the next ten years. The city is mostly reliant on the government, but also has an emphasis on education, military and a highly utilized port. Like the majority of Canada, the transit situation is a work in progress. The average house price sits now at $310,000, the highest it’s been in a decade in a very competitive market. Consumer confidence is extremely high with so many people purchasing, the barrier for entry is not a challenge for first-time buyers. The rental vacancy rate is at 1.6%, with plans for additional units in order to keep up with demand. “Thanks to multiple demographics including more young retirees, further increases in immigration and millenials looking for more affordable housing, Halifax continues to be in high demand,” states Chris Musial of Royal LePage Atlantic.


Saskatoon has a population of 272,000, which continues to grow with many focusing on moving towards the suburbs. Job growth is holding steady, although not as strong as it was in the last few years. The main industries are oil, gas, minerals (mostly potash) and farming. Saskatoon is fortunate enough to have one of the best transit systems in the country, which is still always improving. The average house price is $350,000, although this current buyer’s market is looking into a decline after a boom in 2015 – 2016 with an abundance in inventory. Consumer confidence wavers, as it is a positive time for purchasers, but won’t improve for sellers in the next few years. The rental vacancy rate is at 9% due to so many leaving the province, there is such an excess that it’s too easy to find a rental property. “Now is a good time to invest if you plan to focus on the long-term game,” explains Michelle Butler of Royal LePage Vidorra.


The city of Montreal’s population sits now at 1,705,500, with a foreseen slow down in the coming years. Many find it appealing due to post-secondary institutes, the increasing job growth and real estate investment opportunities. The unemployment rate has improved over last year as it now sits at 5.5%. Transit is rather favourable with improvements along the way, including a light rail train which is now in progress. The city is reliant on technology (IT and software development), education, transportation, wholesale trade as well as the film and arts industries. The average house in the Metropolitan area price sits at around $411,000, which is up 5% over the same time last year. Consumer confidence continues to rise even higher, with more and more feeling that now is a good time to purchase. The rental vacancy rate for the city sits at a solid 1.9%. “Montreal is such a safe and exciting place to live, a stable economy along with a lively arts and entertainment sector, it’s unique in its opportunity,” emphasizes Angela Langtry of Century 21 Immo-Plus.

Written by: Spencer Maxwell

Toronto Q3 Rental Market Report

Every quarter (as well as every month) the Toronto Real Estate Board (TREB) releases their condo and rental market statistics for the city. The committee serves the over 50,000 realtors of the Greater Toronto Area (GTA) to assist them in understanding where the market was, where it is and where it’s projected to head. The information comes from their Multiple Listing Service (MLS) which collects all the data on all properties purchased, rented and leased. Job growth as well as an increase in population are the main factors contributing to these trends. The collection of data further evidences the continuing benefits of the Toronto market. Here is a breakdown of the third quarter rental market status report for the GTA.


From July to August of this year, we saw a supply of condo apartment rentals at 10,800, which is a 17.3% increase (9,205) from the same time last year. Rents have increased all over the GTA in all types of rental units. Bachelors went up by 2.7% from $1,854 to $1,903, one-bedrooms went up 4.5% from $2,163 to $2,262, two-bedrooms went up 4.2% from $2,822 to $2,941 and three-bedrooms went up 13.5% from $3,304 to $3,749. The rise in just a year is very dramatic in our increasingly populating city. Although, the elevation in prices is not as high as last year from the year before that. 


Rentals for townhouses have also greatly increased in volume and price. As of this quarter, we have 1,260 leased, an increase of 25.6% to last year’s 1,003. The average rent of a bachelor went up 61% from $1,025 to $1,650, one-bedrooms went up 10.5% from $1,858 to $2,052, two-bedrooms went up 10.3% from $2,316 to $2,554 and three-bedrooms went up 10% from $2,585 to $2,842. 


All rental transactions and leases for apartments and townhouses within the city remain higher and have increased more than any of the surrounding areas, which include the Peel, Durham and York regions. Throughout these areas we also see a booming increase in rentals and leases, which also dictates a rise in prices. The government agency Canadian Mortgage and Housing Corporation (CMHC) statistics show that of the GTA, Toronto has the largest share of rental apartments, at 35.3%, even though it has dipped by 0.1% from last quarter. Currently, the rental vacancy rate is 0.7%, which remains the same from last year; second to the Halton regions now 0.6%. 


There was also a 30.1% increase in the properties listed for rental from the third quarter of last year. TREB president Michael Collins has witnessed more confidence in investors realizing the potential of real estate over the past few years, as well as an increase in available properties, due to the large increase of those leasing out. The entire Greater Toronto area remains a strong place to invest, and the data suggests that it will continue for the foreseeable future. Our rapid increase demonstrates that the sooner you purchase the more advantageous it will be from an investor perspective. You can see by the numbers why REC consistently advocate the buy and hold strategy.

Written by: Spencer Maxwell

Laneway Homes: Toronto’s Newest Housing Trend

Laneway homes are small detached properties on a lot, generally behind another house opening up onto a back lane. These are beginning to grow in popularity across Toronto due to our ever increasing population. This is another of our creative methods of dealing with excessive density, which (as of now) is mostly a Canadian development. Its origin began in North Vancouver, followed by an increase in popularity in Ottawa and then adopted in Toronto. They were developed as early as 1930, beginning as carriage homes (detached properties that began as a horse stable and converted into a home). Heavily populated cities across the country are beginning to develop these homes more and more.

Getting this type of property was traditionally very difficult, policy changes as of 2018 had simplified the process by giving quick access to permits for those who qualify. Gregg Lintern, Chief Planner & Executive Director for the City of Toronto, in an interview with REC stated: “Simplifying the once difficult process of getting permits for laneway suites was to comfortably add gradual density to the city. This is the modern interpretation of Missing Middle Housing.” Which was utilized in the 30’s in the States to curb issues of developing population.

Architect Rohan Walters of Spaces By Rohan Inc. is excited about the appeal and benefits of these tight-fit properties for Torontonians. “They curtail urban sprawl due to adding a property on already utilized land. The landowner saves on taxation, increases the equity of the property and saves an annual average of $4,000 by staying within the same lot. Generally, family members are the ones utilizing these properties to retain a strong sense of familial stability.” The suites add a significant value to the lot, especially if one is renting out to tenants. They also effectively make the area safer by animating the street better through generating more informal surveillance in an urban environment.

The negatives of laneway homes are extremely limited. The majority of this focus is the perception, as they threaten the traditional white-picket fence ideal that some still maintain. It has no negative influence on property values or on zoning within the area. There’s been a noted concern of privacy and overlook in regards to neighbouring properties, but this is not an issue as laws of construction are extremely strict in order to avoid this.

Specific to Ontario, the new property cannot exceed more than 30% of the entire lot. There needs to be a minimum difference of 3.5 meters between the property and the street, as this will allow enough space for EMS services to travel through. The minimum distance from both properties requires at least 1.8 meters. Laneway homes cannot exceed more than 2 storeys, anything that will encroach on the initial property cannot be developed. There is some leeway with these properties, but this can only be accomplished by going through the Local Planning Appeal Tribunal (LPAT). The house must meet accessible building standards, manage water, the Ontario Building Code, Tier 2 of the Toronto Green Standards, the initial land has to accommodate a suite within an existing ancillary building and avoid the removal or damage of a protected tree. The zoning is more permissive in the older parts of the city due to more availability of space, while it is more of an issue in newer suburban sections as the evolving density leaves less area to expand with the focus already on detached dwelling.

The average square footage of a lane home is between 1,000 -1,500, but they can be up to 2,000. The average price of construction within Ontario is $400,000 – 500,000, although they can reach up to $900,000 on the premium end. The architecture style of these properties can be any type the owner and architect see fit; as long as everything is zoned correctly there are no restrictions. Laneway suites are a good mix of modern and traditional. It’s best that anyone building work with an established architect to ensure safety and quality.

Real Estate Budgeting Guide

Buying a home is probably the largest purchase you will ever make. Whether it’s for an investment property or you plan on living in the home for the foreseeable future, you’re going to need to budget. Affording your dream property or close to it seems like such an overwhelming feat but the sooner you start the less stressful it becomes. 

It’s very beneficial to track everything, all those minor and major expenses will impact you more than you think. All of the pointless things that you think you need become so costly over the years. A shirt you don’t need, an extra round of drinks or your daily coffee add up to more than you would care to know. All of those needless expenses can go into something productive. Think of it this way: you buy a coffee before work 5 days a week, that costs around $3.00, in 52 weeks that comes to $780. That’s money you could’ve saved and invested, that is probably a fraction of your needless spending. 

There are various money tracking apps that will help you see where all your spent funds are being utilized. It’s a very simple process and can assist you in budgeting better. Breaking down where your funds are being allocated helps with understanding where to focus your spending and presents a more concrete picture of where your money on unimportant things is going.

There are a large amount of fees that go into any real estate purchase, in order to help you control your spending it’s best to know all of the required fees. Break down each cost into your monthly and annual payments. These payments can be mortgage costs, moving, condo fees, renovations, furniture, property taxes and internet fees; among many others. Ask your real estate lawyer for all the legal expenses that can arise from the property, also be aware that some lawyers do have cheaper fees but that may not include photocopy and courier fees. A home inspector can inform you of unforeseen expenses. If they see any issues with the property, you can renegotiate for a better price. As an investor, they can aid you in improving the value of the property for when you sell after you’re happy with the appreciation of your buy-and-hold strategy. 

There are a number of costs associated with the purchasing process of the home, the breakdown of costs in Toronto are as follows:

Lawyers fees and disbursements are roughly $2000, but at no cost to the buyer agents as they are paid by the seller (sometimes by the developer if it’s a new construction). Independent mortgage brokers are generally free as they are paid by the lender you get the mortgage from. A home inspection fee is generally $500, while moving costs from a quality company are approximately $2000. Closing adjustments are required if the seller of the home has already prepaid property taxes past the date of title transferral, you would have to pay them a rebate of remaining fees to them, which is a prorated amount.

Something we advise at REC is for our clients to prepare for an emergency. Issues with real estate can arise, it’s not that foreign of a concept but that shouldn’t scare you away as you have the potential to make so much more. A suggestion we prescribe is putting $150 a month towards a security fund, as this grows you will feel more secure and be prepared if a problem does occur.

Don’t just see your home as a property, see it for the investment that it actually is. Think of the return you will make as it appreciates. You’re not losing money on all of these additional costs, you are slowly building equity. Track where your money is going to get a better understanding of where your value is heading. This all can seem very intimidating, but if you budget appropriately you will be at your most comfortable.

Written by: Spencer Maxwell

Why Do You Need A Real Estate Lawyer At The Beginning Of The Process?

As soon as you decide on the home you wish to purchase, getting a real estate lawyer is one of the first calls you should make. They handle a wide array of concerns and are very helpful throughout the entire process. The reason so many people hold off on getting a real estate lawyer right away is because they are afraid of paying constant fees, but in actuality a single charge covers all of their services. Ensure that the professional solely focuses on the real estate field, as their expertise will be greater and there are certain documents only they are able to process. Whether you are buying or selling, they are an absolute necessity right away.


Only a real estate lawyer can register the deed for the property to the registry office. Probably the most notable thing they do is look over the Agreement of Purchase and Sale before it’s signed, they review the document to ensure that everything in its contents is legal with the goal of benefitting you. They dive deep into your mortgage documents, buyer agreement reviewal and listing agreement in order to clarify any language that may seem too complex or overwhelming. They can also create a neutral termination if neither party is pleased with the eventual arrangement. On the buyer’s side, they handle the title search, registration fee on the deed, assist in registering the mortgage, as well as send out cheques and couriers. For the seller, they generally only focus on the legal fees, which include disbursements and HST. They can also aid in title insurance, which protects the property owner and their lender(s) against loss to the property’s title or ownership.


What should a buyer expect a week from closing? The lawyer will get the agreement from the client or agent, along with a conversation on high-level requirements (which include mortgage instructions, moving and setting up utilities). They will handle the title search and discharge any remaining old mortgages a few days before closing. On closing, the client will have a cheque with the balance of funds (which include the land transfer tax and the down payment), there is an excessive amount of paperwork to be signed before the property is legally handed over. They will inform you of any remaining fees, which could include development charges which can increase but also capped. They will provide you a condo status report (if applicable) to keep you up to date on payments and inform you of the reserve fund which keeps the building in its prime state, as well as the declaration which denotes what you can and cannot do in the residence (ie. pets or short-term rentals).


No matter whether you are buying or selling, a real estate lawyer is required in the transaction. The sooner you get them, the safer you will be and the simpler the process will be. The price is generally around a $1000 in Ontario for the entirety of their legal services.

Written by: Spencer Maxwell

Top 5 Ways To Increase The Value Of Your Home

Improvements to the home can be rather expensive, but an increase in value has the potential to be substantially more profitable in the sale. It’s important to know which renovations will give you the best increases in value. It’s wise to research the type of improvements, because if you can comfortably by yourself we highly recommend that as some renovations aren’t that difficult, but can be costly to utilize a professional. Sometimes a professional is required, always for structural and electrical work. Always operate within your comfort zone, don’t do tasks that are too daunting by yourself know when to use a professional and when to do it on your own. Be aware of your finances, renovations can be expensive so ensure that you budget accordingly. Focus on one room or project at a time, as you can easily overwhelm yourself if you’re inexperienced. If this is a do-it-yourself project, get guidance on how to proceed from established professionals.


In our interview with Scott McGillivray of HGTV’s Income Property (which you can read here) stated “…sometimes it’s the smallest fixes that will have the best returns… some of my best flips have been super simple. It’s about securing the right property in the right market, cleaning it up. Honestly, you won’t see this on my shows. You won’t see me buy a property, throw all the furniture in the garbage, paint it, mop the floor, replace the appliances and put it back on the market because there’s not enough content there for a TV show. But you can make $20 – 40 grand on a property doing that and there’s nothing wrong with it. And so realistically, take on something that’s within your comfort zone. You don’t need massive renovations in order to make good returns. So you’re either going to do the bare bones, which is the buy, clean it up, stage it and sell it. That’s sort of the simpler way or you’re gonna go full on you’re going to rip it apart restructure it. That’s where you have to make your decision. And a lot of the times they say try simple things first, don’t go gangbusters on one small change. Maybe you’re painting the whole house, ripping out the carpets, sanding the hardwood. Pick something that’s not going to put you in a precarious situation where you’re running out of time, where you’re running out of money.”


Renovating your home for your own personal tastes is very different from renovating to increase its value for a flip. Installing an inground pool because your family can enjoy it for years has its own value, but when it comes to selling you may not get back your investment; as not all people want a pool due to the maintenance work and cost. If you are considering doing renovations to increase value, this is our list of 5 top things that will help you focus on the necessary sections: 


  1.   Income Suite: The biggest and most effective way to add value to your home is to build an income suite within the property. Consider converting your basement into a rental and advertise your home as an investment property. Ensure that your neighbourhood has demand for this type of offering before you proceed and that it abides by all zoning laws. A consistent income stream is the most appealing to homeowners who want to increase their wealth. This project requires the most amount of work, but it can be the most beneficial to increasing sales price.
  1.   Kitchen: This is the most important room when it comes to valuation and it can make a significant impact on the value of the property. When considering a renovation, think modern and fresh. Update your cabinetry, install under cabinet lighting and install new appliances. To save on costs, look at options like Ikea as opposed to custom cabinetry.
  1.   Bathrooms: The second most important room(s) when it comes to valuation. Upgrading cabinets, counter tops and hardware for a fresh and modern look will increase your home’s marketability. If you can add an additional bathroom where there is dead space it will increase your home’s value even more. Do not sacrifice useful bedroom space for a bathroom. 
  1. Flooring: You will see an immediate increase in your value by installing hardwood floors. For cheaper fixes, consider refinishing existing hardwood floor or removing carpet and adding engineered laminate flooring throughout. In the bathroom, you’ll always see higher demand for tile over laminate.
  1. Fixtures: If you can’t change the cabinets in the kitchen and bathrooms, consider updating the cabinet hardware, light fixtures, counter tops, faucets and even just handles or door knobs. This gives the appearance that a full renovation has been completed, this can change the look and feel of your home. 

Bonus Tip: Believe it or not, the biggest return on your investment in terms of can be a simple paint job, it’s the most cost effective and provide the biggest return. 

Written by: Spencer Maxwell

Scott McGillivray Sits Down With REC

Scott McGillivray of HGTV’s Income Property sat down with us to provide his words of practical wisdom. He presents tactical strategies on how to start and remain successful in real estate. Scott divulges his story so readers can pursue their own dreams in building out a constantly evolving portfolio.


REC: So in terms of real estate, a lot of people are curious about your history. You have shows, books, co-founded the largest real estate investment group in Canada. I picture you as a kid building homes. Where did this all start from?

Scott: I know that I’ve always been ambitious. Just perpetually looking for something to do. Growing up, to be honest, I had no idea what I wanted. I just knew I wanted to strive on my end. I was kind of like Forrest Gump, as in I wasn’t sure what I wanted to do, but I knew I was going to try a whole bunch of things until I got good at them. So I started to make lists of things I  wanted to do and when I accomplished that list I would make another list and then I would just try things that I was completely unqualified at. In university, I was studying business and I was determined to be a business person. I knew I wanted to make money and I knew I wanted to work hard and I wanted to be successful but I also went through a lot of struggles. Our family was not in a good financial position. So I was already paying my way through school which I wouldn’t say was the norm. Lots of people’s parents help them with tuition but in my scenario my family couldn’t afford to do that. And that was frustrating, and I remember thinking, “Gosh, I don’t like being the poor kid, this sucks.” Then even after I graduated, my father got very ill and passed away. So even though I got through university, when I was looking for my first job I lost my father and I was so sidetracked and so distracted and it really kind of took me. I think I found my rock bottom. I could hardly pay my rent and I’m working like a dog. And that’s when it kind of dawned on me, if I could get on the other side of this rent situation [I would be alright]. I knew that the amount of rent we were paying was more than all the expenses my landlord had. I worked at a restaurant as a waiter and one of the clients was a real estate agent. This one in particular was super nice and very helpful, and I was trying to get her to find me a place for cheap rent and she’s like you should buy a place and I thought “that’s impossible, right?” What I ended up doing in my final years was instead of paying my student loan I used it as a down payment on a property. I got a primary with four extra basements, three bedrooms upstairs and two rooms in the basement. I lived in the basement, rented out the other four rooms and I lived there for free. 

REC: Were you scared at that time? 

Scott: I’m going to spare you the details because I could go into half an hour off of you know the months and months of dead ends and “you can’t do this, you’re crazy, you’re too young, you don’t have a job, you’ve got too much debt.” But it was a struggle and I was always searching for a reason why it wouldn’t work. And that’s when I realized I had the wrong mindset. If you want to find a way that something isn’t going to work, you’re always going to find it right? So instead of using my student loan to pay rent every month I used it as a down payment, that’s 15 months of prepaid rent in a place where I never paid rent again. I was making money living there renting to my friends, renting out the bedrooms, bringing in $2000 a month. I’m like “I’m crushing it rushing right now, this is what I should be doing.”

REC: So now you bought your first property. What happens? You just got the bug now? 

Scott: Oh, that was it. I was bitten and there was no going back. If I’d just gotten in sooner. I did the same thing everyone does. If I just bought more properties when I was younger I’d make enough money off of the rentals, but I really felt like it was too late. Every 22 year old thinks the same way. They’ve already missed all the big opportunities. And it wasn’t until I went to renew my mortgage that I realized I could pull equity out of that first house and I’d have another down payment. The down payment comes from the house I already have; not from working, paying taxes, covering expenses and then trying to pay off student loans. I thought it would take me seven or eight years to build up another down payment. I had one sitting right there in this house. 

REC: Do you remember approximately what you were able to pull out?

Scott: I know exactly how much it was, $31,000 in equity. I pulled out of that first property just about a year later, and I had done a little bit of work but the market was going up and I had converted it to a student rental. Mortgages were a little easier. Financing was a little easier. This was like 2000 – 2001. I actually spread that money out and bought two properties $15,000 down each. And so I bought two more properties and and then I kind of had a formula. I started working on them, renovating them. I built tenant lists, I’d put it postings at the university. I had this one posting that crushed it for me. Everyone else would put up a sign like “Three Bedroom House Looking For A Mature Student.” I put one big sign up and it said “Are You A Student Looking For A House? I’ll Buy One For You. Call Me.” There’s so many houses, all I need is the tenants because when they pay you first and last month’s rent I can cover my closing costs. I had hundreds of tenants on this list. Houses were cheaper but the rent was still solid. And I would take my tenants shopping to a house that was for sale. I had 25 student rental properties by 25. 

REC: What will bring the highest return for someone who is thinking about doing something similar?

Scott: There’s a way I can get more. You need to see start doubling, tripling, quadrupling up on your income streams. Real estate is probably one of the best assets that does that. The first way I like to make money in real estate is on the purchase, I make my money right upfront. I put in lots of offers, I’m not usually offering list price, I’m offering something that’s below, what I know it will be appraised for. And I’m trying to find a motivated seller, you know and it doesn’t always work this way but I’d say more than one out of ten times I will get a property where someone is ready to sell it to me based on my conditions, not my price. I might start with a conventional offer. The house is listed for $400,000 and usually the scenario is that it’s probably only worth $380,000. And after 100 days on the market I might put in an offer for $315,000. At first people think I’m a jerk. I’m not putting the offer in because I’m expecting to get that offer, I’m putting that in because list price is just a suggestion. List price is irrelevant. [I’m hoping] I can make this place have cash flow as a rental at $360,000. Anything less than that is making money on the purchase. So I might negotiate a little bit, they might say “Oh no, we don’t like the price and we don’t like the closing and all these conditions.” So I might move up to $325,000, drop the closing to 30 days, waive my condition of financing and then start from there. Then I might go up to $330,000 and I might move my closing to 10 days. That’s if these people need to get out of this house quickly. I will help them do that. But it’s going to be at a discounted rate as it should be but most people in that situation find it’s a win/win. They’re okay with that. 

REC: What are the multiple streams of income you benefit from in real estate?

Scott: I like to make my money on the purchase. That way I know if I have to get it reappraised or I have to sell it even as is, there’s room for me to make some money. So you make your money on the front. Second way I make money is forced appreciation, which is doing a renovation that adds value and the value of that renovation is worth more than the price of it. So you put $50k in, it’s worth another $75k when you’re done. So now I’ve made money on the purchase. I’ve made money on the renovation and then I like to make money on rental income. So positive cash flow is the third way I’m making money. Fourth way I’m making money is principal recapture. So ideally your financing principle is being paid back. Fifth way I’m making money is market appreciation over time. I finance both in Canada and the United States and I can make money on the currency as well because as the currency changes I can just move my debt back and forth to different lines of credit. So I make money a sixth way. Six ways to make money when investing in North America. The seventh is in your tax benefits, I make money through companies, I make them through capital gains which is a savings compared to income tax.

REC: Talk a little bit about what the average Joe can do in terms of rentals. What’s two to three things that Scott would do right away? 

Scott: I don’t usually talk about this, but I think it’s important for every investor to know if you want to make fast money in real estate and you want to do it in a way that’s not going to put you in a risky situation, it’s sometimes the smallest fixes that will have the best returns. You see us on TV ripping all these places apart. I mean we’re going gangbusters and don’t get me wrong there’s money to be made there. And it’s well-earned and it’s hard work but some of my best flips have been super simple. It’s about securing the right property in the right market, cleaning it up. Honestly, you won’t see this on my shows. You won’t see me buy a property, throw all the furniture in the garbage, paint it, mop the floor, replace the appliances and put it back on the market because there’s not enough content there for a TV show. But you can make $20 – 40 grand on a property doing that and there’s nothing wrong with it. And so realistically, take on something that’s within your comfort zone. You don’t need massive renovations in order to make good returns. So you’re either going to do the bare bones, which is the buy, clean it up, stage it and sell it. That’s sort of the simpler way or you’re gonna go full on you’re going to rip it apart restructure it. That’s where you have to make your decision. And a lot of the times they say try simple things first, don’t go gangbusters on one small change. Maybe you’re painting the whole house, ripping out the carpets, sanding the hardwood. Pick something that’s not going to put you in a precarious situation where you’re running out of time, where you’re running out of money. Get this thing back on the market as soon as possible or clean it up and get a tenant into it. You know there’s fast money to be made, but the big money is all long term. 

REC: I’d love that you said the long term because the team always stresses that the most important strategy is the buy and hold. That’s really where the money is to be made. Why do you think a lot of people don’t see it? They want to get rich quick?

Scott: It’s because we’ve evolved for instant gratification. We’re always looking for the fastest way to be happy. And I don’t want to just go ahead and say the cliche: real estate is not get rich quick, there are ways to make a lot of money quickly and real estate is very risky. So it’s get rich or get broke, and you better have the stomach for it. You better have the stomach and you better have you better have deep pockets. You have to be able to weather some pretty heavy damage in the short term game. 

REC: I can’t tell you the amount of people that sit at this table in client meetings with us, and the first thing they want to do is take on a huge flip right away. They’re going to tear down a wall, it’s a bungalow and going to add a second story because they’ve seen it happen on TV. 

Scott: People see the results. Don’t forget about all the process that went into that. I’ve been a real estate investor for 19 years. People don’t look at the 19 years, they look at the 21 minutes. They’re like “Look at what happened in 21 minutes.” Actually there was 19 years ahead of that 21 minutes. 

REC: You guys didn’t just shoot content for 21 minutes.

Scott: There’s a lot more going on. 

REC: Why do income properties work in both hot or cold markets?

Scott: Because people need somewhere to live. When a real estate crisis hits like it did in 2008 in the United States, people couldn’t get mortgages. People couldn’t afford mortgages and anyone who could was scared to get one. They still need to live somewhere, they all became renters. If you look at rental rates during any real estate crisis they don’t go down. And I tell people this is the biggest secret in real estate success: long term is not to look at the real estate cycle that goes up and down because that scares people; the real estate market is going to go up and down all the way up. Rental rates are a straight line. It doesn’t go down. It doesn’t go crazy. It’s just a straight line that goes up slowly. It’s the consistency that allows real estate investing to be a safe bet. If you’re investing only for the value of the property it’s going to go up. It could go down. Your speculating, but if you look at rental rates those are your most secure returns. So if you invest based on rental income and cash flow you’ve basically mitigated a lot of the risk in real estate and that’s why I like to do it. 

REC: Are you always looking around transit lines near universities, like student housing? Do these still excite you? 

Scott: Of course they excite me. Anything with cash flow, I don’t discriminate. I’ve bought $100,000 houses in Cleveland that I rent for $4 – 5,000 dollars a month. They make positive cash flow. They rent and they cash flow so I don’t discriminate. Do I like student rentals? Absolutely. They’re like the highest cash flowing properties that are out there. I would always advise somebody that you know student rentals are a license to print money. Very recession proof. People are not going to all of a sudden say, “You know what. No more education.” The enrollment is up, the amount of international students is way above their projections. There’s a crisis in student housing right now which for real estate investors is a huge opportunity. Everybody’s worried about the next big thing. The only people who are gonna make money on that are the people who are already in the thing. Get into the thing before it’s crazy out of control. Even like student housing for the last seven or eight years people have been like, “Wow student housing hasn’t been great.” It’s still cash flowing. I’ve been in it now for so long and then all of a sudden the last two or three years, the number of international students applying to Canadian institutions is exploding. They’re years ahead of their projections and all of a sudden my student housing rental rates are skyrocketing. I’m going from $520 a room up to $750. I’m just enjoying the places I’ve rented. The mortgages are being paid down, you have cash flow. Nothing’s really leaving your pocket. I’m like I guess I won’t sell any. I just keep them now. Buy and hold and hold and hold and hold.

REC: In terms of those that already have 5, 7, 8 or 12 income properties, what’s a passive investment that Scott likes to invest in? Some advice. 

Scott: So I mean there’s a session that I call advanced strategies for real estate investors, when you’re starting off getting one property or two properties. It’s like you can hold the entire model together with some bubble gum and duct tape and you’re gonna be okay. I got a mortgage here. Get a line of credit. I put a renovation on my credit card. You’re gonna survive that. It’s not super effective though. When you’re getting into half a dozen properties or more you’re talking the million dollar mark. It’s time to get more strategic. And this is where you need advance strategies. You need proper tax planning. You need to know how to re-leverage your money three to four times over. For every $500,000 you have, you should be able to invest in about $2 million worth of assets at least. And there’s ways to use that $500,000 earning you interest and then still being able to tap into it. I like to train folks who are what I call amateur investors, people who think “Oh I have to go out and get a mortgage to buy a rental property.” People come to me all the time and say “I can’t be a real estate investor anymore, I can’t get a mortgage.” I’m like “Oh, so you’re an amateur. Only amateurs run out and try to get mortgages on rental properties.” That’s the last thing you get on a rental property.

REC: Do you mind if I ask what are you telling these people?

Scott: What I usually tell them is if you’re having trouble getting financing you’re doing it all wrong. If you have a reasonable portfolio of properties or you’ve got equity in properties, it’s about understanding how to do high net worth, like total equity plans in terms of being able to leverage your full value through favourable lines of credit. So if you want to buy a $500,000 property you should be able to go get $500,000 today, you don’t have to qualify for it. You gain $500,000, you buy the property. And if you need to put $50,000 or the work into it, I pull another $50,000 over here and it’s in the form of a line of credit. So my original investment is still earning income. I’m basically leveraging against an asset that’s still earning. So I’m making money on my money while I take more money to make money. This is the idea of multiple streams of income, layer that on top of the seven ways to make money in real estate. You’re now making money an eighth way as well. A lot of people will take equity out of their house, take $500,000 out and they’ll use that to buy a property, which is not an effective way to buy rentals. You could have your $500,000 in securities or equities. So you’re earning hopefully 5 – 8% on that. And then you can get a $400,000 other line of credit which is 80% loan to value against the $500,000. Use that as a down payment on two to three properties, 80% loan to value and get mortgages on the back end of all of them, so you get the mortgages last if needed. And now you’ve turned $500,000 of equity into a $500,000 investment and you’ve got $400,000 to secure, let’s say, a $2 million property. You’re now controlling $2.5 million worth of assets. 

REC: Now that’s quite advanced. 

Scott: It’s very advanced because of the unit. A financial advisor who understands this model is thinking: “Don’t forget about the cost of financing. You need to make sure that every time you move your money into something that it’s earning more than the cost of the leverage you’re putting against it you’re still going to have to debt finance along the way.” So it’s an advanced strategy. I don’t like to start with this because this is where people get caught up, they think it sounds too complicated

REC: Now they think real estate investing is too complicated. This is not for someone who’s just thinking about just getting into investing.

Scott: Yes, if you’ve got a million dollars in real estate or more, we need to have a conversation about advanced strategies or you’re throwing money away. And you’re probably having troubles with financing which you shouldn’t be having troubles with.

Written by: Spencer Maxwell