Frequently Asked Questions From Real Estate Investors

Investing in real estate always seems very high-risk high-reward, but that’s not entirely the case. It’s important that everyone who delves into it be comfortable with their purchase and have all the data they need. These are the questions that we’ve been asked the most in our culminated decades of experience, these answers will put you more at ease on your path.

When should I start?

You should start as soon as you can. When it comes to real estate, the sooner that you get in, the sooner you can take advantage of the returns. As an investor you need 20% down, you have the option to put it in increments; most investments don’t. You just need to decide when you’re ready.

How do I prepare?

Get educated when you’re thinking about starting. There are so many resources that you can take advantage of, you need to find whatever method is easiest for you to consume. Whether it be YouTube, Google, podcasts or books, there are almost innumerable sources of information on this topic. You should also surround yourself with your real estate all-star team. We advise starting with an independent mortgage broker because they can shop around for the best price and terms and set you up as an investor for potentially multiple properties down the line. Then you want to look for a realtor with expertise specific to the area you are shopping in (as there are so many micro markets in any city or town). Then you want a real estate lawyer, an insurance advisor and a contractor.

What do I need to know before I jump in?

This will not be a perfect investment, that actually does not exist. The numbers don’t always work out as they look like on paper. Be prepared to take a little risk, although it is a calculated risk with all of the data you’ve collected.

What is the best investment strategy?

The best investment strategy is different for everyone. The biggest return on investment is the buy, renovate and flip, but you’ll have to be able to handle such a big project. Many prefer a passive investment, something that’s already renovated and can be rented out as it appreciates in value. The best strategy is decided by what you want to do in the long-term, but also what your comfortable with.

How safe is the market?

I’ve seen decades of data, and within that we see the market go up and down as it trends upwards. Currently in Toronto of January 2020, we are in a secure market as properties are appreciating at 4–5% year over year. For the past 39 years we’ve seen appreciation average at 6.9% each year.

What fees and taxes do I have to pay?

You have to look at closing costs. We advise budgeting 3–3.5% of the purchase price to remain on the safe side. For Toronto, there is the Ontario Land Transfer Tax, the Municipal Land Transfer Tax, lawyers fees, closing adjustments. For pre-construction investments, you also have development charges and Tarion home warranty fees.

What if there is a problem within the market?

In the real estate market, you’re only really affected when you sell. Buy and hold is what we always preach at REC. When interest rates go up, the cost of borrowing also goes higher, which means that tenants who are thinking about buying are unable to purchase. So you have more tenants looking to rent, which is beneficial to investors. If the market goes down (and you’ve put away some money), put some joint ventures together to go on a bit of a shopping spree.

What should an investor know that’s possibly not obvious to them?

This process is actually harder than you think if you don’t get educated. There’s also a lot you can do with real estate: you can buy and rent it out, buy it and refinance it, and buy it and sell it. There are triple benefits to investing because the values go up, someone else is paying your mortgage down (so you’re building good equity), and you have cash flow covering your expenses. You don’t see these benefits in other types of investments.

Written by: Spencer Maxwell

The Wealth You Can Build Over Time From Real Estate

Real estate is one of the simplest ways to build wealth over time, you have the option to keep expanding and expanding. Patience is essentially the main thing that’s required of investors; we always preach the buy and hold strategy. We are a little biased as Toronto is our favourite place to invest, not just because we live and breathe this city, but we are constantly seeing the numbers go up steadily and strong in value. Canada is one of the safest places to invest, but there are strong opportunities across the globe. You will have to look at the precise market you wish to purchase in as not all locations are equal, there are even micro-markets with varying price factors in any city or town. Toronto is so especially appealing to us is because prices are consistently rising and the research dictates that it will continue to do so, but also due to it being more accessible than most markets. Flipping houses is a quick way to make money in this field, but the return on investment is substantially stronger if you play the waiting game. Real estate is not a get rich quick scheme, building wealth takes time; the longer you wait the more you will prosper.

The Toronto Real Estate Board (TREB) presents statistics of prices, solds, as well as new and available properties. They provide the information that analysts and realtors get their data for past and present values to understand trends and projections. In January of 1996, when TREB first began collecting real estate information, the average price of a home was $194,251 and now in November of 2019 we’re sitting at $843,647. In under 24 years, the values have more than quadrupled. Yes, that is quite a large amount of time, but it is a substantial amount of money that you are just comfortably waiting on to build. In the Greater Toronto Area, the price of an average home in November of 2016 was $777,091, in 2014 it was $577,386 and in 2009 prices were $416,713.We see these values strong as well across the majority of the States, especially in New York. If you look at prices for condos for each quarter in Manhattan there are consistently dramatic increases. The average price for the third quarter of 2019 was $1,654,000 while a decade ago the average price for a condo was $1,393,001. There was a massive dip in sales prices from Q2 to Q3, which was $2.389 million, a 31% dip. This is due to a large number of factors, including the season and sales volume. Losing money is a possibility in this market, but that depends on when you sell your property. You only lose money when you sell. 

What’s so appealing about real estate is the ability to refinance, utilize mortgages, and purchase more and more properties with the equity that is already building. Let’s say you buy 2 properties and get tenants to cover the mortgage costs, after 3 years you can pull equity from those properties to get 4 more, then repeat the process after another 3 years to get 8 more, and after another 3 repeat that for 16 additional properties. In 12 years, you could have 30 properties which would be at a larger increase of today’s valuation of $843,647 (a current total value of $25,309,410), which would also continue to develop every year.

90% of millionaires across the globe have achieved their financial success through getting involved in real estate. Housing is one of the simplest ways to build wealth, it requires a large down payment and a significant degree of patience. Once you know where to put your money, it’s all about playing the waiting game.

Written by: Spencer Maxwell

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

Guest columnist Laura Stewart, REC Director of Sales. Piece originally from

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

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

First-Time Home Buyer Incentive


The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

1. Learn About the Program

2. Determine Your Eligibility

  • Contact a lender/mortgage professional
  • Review program requirements and ensure that this is for you.
  • Try the self-assessment tool.

3. Choose Your Incentive and Apply

  • Review the details and select the incentive that is right for you.
  • Read, print and sign the application documents in the resources section and take them to your lender.
  • Application submissions will be completed by your lender.
  • Notify your solicitor.
  • Call the 1-800 number to activate.

4. Repayment

  • Early payout options in full are available at any point in the duration of the 25 years.
  • Learn more about fair market value and how this will help you calculate repayment.
  • Calculate the fair market value of your home and multiply it by the percentage of the Incentive you received.

Common Mistakes Real Estate Investors Make

Throughout our culminated decades of experience at REC we’ve seen investors make a multitude of miscalculations, many of them being the same errors. It’s easy to get lost in this daunting experience, especially if you’re new to it. The 4 most common mistakes we see are people getting too emotional about the property, not running the numbers properly, not having an exit strategy and not taking action. Like everything else in this business, you are capable of just about anything as long as you proceed with your due diligence.

People get too emotional about the property. When it comes to the home you need to see it as an investment, it’s a transaction. The curb appeal isn’t what matters here. You have to look at the potential of the property. The wallpaper or the furnishings don’t matter, it’s what you can turn the property into. We’ve also seen people get too enveloped with emotion in negotiations to the point where objectivity is lost, sometimes where the numbers don’t even work out anymore. Any sense of pride or ego just creates a bigger hurdle to overcome. With any issue that arises with the property, maintenance can solve it. Whatever that costs will be a drop in the bucket compared to what the investment will climb to. Any problem that arises surrounding the property is not worth the stress, just think in the long-term.

A consistent problem we see is people not running the numbers correctly. So many underestimate their expenses, which include money for repairs, vacancies, land fees, etc. On the other side, we see many people overestimate their rents. To remain safe, we recommend that you overestimate expenses and underestimate rents as monetary issues won’t be at the forefront of your mind. Always air on the side of caution when it comes to large investments.

Planning your exit strategy is an absolute necessity when you’re deciding on the property you wish to purchase. You need to ask yourself when and how am I going to get my return? Will it be through refinancing or selling? If it’s pre-construction, will you be selling it when it’s built or renting it out? Make sure you know what you want out of the investment, this way you know when to expand your portfolio or when to comfortably get out. Educate yourself on current market conditions, financing rates, property values, but also reflect on personal factors (ie. an upcoming retirement or if you have child going to a post-secondary institution). We advise re-evaluating your plans every 5 years to make an estimated decision of what you want, as your goals might’ve changed.

The final necessary issue we see is not taking action. Yes, this can be an intimidating process, but if you’ve done all of the necessary steps you are ready to go. We’ve seen “paralysis through analysis” so many times, where people keep on hesitating as market prices rise. As soon as you’ve done your research and your expenses are in order, the best time is always now.

Written by: Spencer Maxwell

What You Need To Know Before Investing In Real Estate

Investing in real estate may seem like an overwhelming process, but it has the potential to be so rewarding. REC’s friend Sue Murphy as a prime example of what is possible in this field, in just a few years she went from 0 properties to 11. Beginning with a semi-detached house, she expanded her portfolio to a number of different types of homes to capitalize on the benefits of the industry. Yes, initially starting the process is scary but if you want a secure way to become successful this is one of your best opportunities.

The sooner you jump in the further ahead you’ll be. What’s crucial to know about real estate is that it’s not a get rich quick scheme, it requires a healthy amount of patience to become fruitful. It generally requires time more than effort. The earlier you delve in, the sooner you will be to reaching your goals.

You don’t need to be a risk taker to invest, as long as you do your due diligence you’ll be safe. With proper research of the location, the types of homes in the area and knowledge of price trends, you will have a strong grasp of what you need to know to mitigate some of the risks. Minimizing risk to its smallest form creates security. You can eliminate fear by fulfilling all of the necessary requirements done by building a team of professionals to help walk you through the more intimidating parts. Having a broker might just be your best bet, as this is something you definitely don’t want to go to into blind. Don’t be afraid to ask for advice, there are always people willing to help.

It’s important to know that problems can arise. The home inspector can miss something or you can have an issue with the tenant, although these things are generally unlikely. If you deal with this immediately and have a lawyer at the ready just in case, you will be secure. Costs can arise, but they won’t be a fraction of what your investment will be worth.

There are 5 different types of properties to invest in, each with their own benefits and particulars to consider. Pre-construction is when you purchase the investment before a shovel breaks ground, it requires little work and this passive investment climbs in value as it’s being built; you are buying from a blueprint, so you don’t get the best sense of the project and your funds are tied up for approximately 4 years. An income property has 2 or more livable units which can be rented out individually, this is beneficial to gain a higher income and if a renter leaves you can offset the cost; keep in mind that it’s a more active investment and you will need to budget higher for maintenance. Lease to own is when an investor acquires a property for a tenant buyer who will eventually purchase it under pre-determined terms, this is a more passive investment that helps others purchase a home with a set exit strategy; it can be difficult to get qualified tenants and funds are tied up for about 4 years. Joint ventures are when investors partner up to purchase a property while leveraging their skills to benefit the other members of team (ie. doing repairs or financing), this allows you to purchase more and larger properties while having other people to fall back on if issues arise; it does offer less control and having the same goals is a necessity. Student housing is renting out temporary housing outside of major post-secondary institutions, this is beneficial due to the endless demand in a desirable area which generates consistent cashflow, but it does have high tenant turnover and costly repairs.

Diversification is another way to reduce risk. Let’s say that if fully detached houses in Brampton are not doing well, chances are small condos in the city core might being doing better. You want to avoid much of the same type of investment in the same location as this mitigates risk. We advise not to have too many pre-construction condos because if policy changes and the builders can no longer build, you could possibly be in a negative financial situation. Diversification creates a safety net just in case the market isn’t beneficial to certain properties in certain areas.

Keep in mind you have the option to refinance and invest again by taking the money out (a reverse mortgage) to put towards another property. This gives you the option to continuously build your portfolio. Gaining the capital required does take time, but this strategy is generally faster than simply saving your funds.

When you own a property you can win in three ways: appreciation, principal recapture and cash flow (if you have someone renting it out). Over time prices inevitably increase, meaning your property will always appreciate. In principal recapture the tenant pays off the mortgage, allowing you to leverage the equity you’re gaining. For example, if you’re $50k down, the tenant pays the mortgage, you end up with a $500,000 asset.

Investing in real estate is definitely overwhelming to jump into, but it’s something you can get comfortable with the more you do it. As you expand your portfolio it gets easier and easier. There is definitely risk involved, but if you do your research it outweighs the negatives by a substantial amount. If you’ve already done your due diligence then the best time to jump in is now.

Written by: Spencer Maxwell

Why The Greater Toronto Area Is A Safe Place To Invest

We at REC are a little biased. Some of us are born and raised in this city, while many of us are from far and wide. We all agree that the Greater Toronto Area (GTA) is one of our favourite places to invest from a real estate perspective. There are so many places across the globe that are up and coming or just a safe bet, but not to the caliber here. Toronto is ever expanding and continues to show potential, even in the decades to come.

How To Invest In Pre-Construction Condos

   Pre-construction condos are a constantly developing opportunity in the Greater Toronto Area, and really any urban setting in North America. This is when you purchase from a blueprint after the location has already been decided upon before development begins. You won’t be able to touch, see and smell the unit. It’s a passive investment that builds appreciation during construction. When you buy at the current value you wind up with future returns, while deposits are paid out in increments. The funds are tied up for about 4 years. The typical cost of entry is approximately $100,000. You have a floor plan and the builder will provide a very accurate concept of what the final product will look like. If you want to buy or invest in real estate in any populated environment, this might be the best possible option to take. This type of purchase is generally for people building out their portfolio, as it will take about 3 years until residency is possible.

There are 3 things that you need to look at when delving into pre-construction: location, the builder and the incentives. When it comes to location, it’s an absolute necessity. I prefer the downtown core or a building in close proximity to transit lines, as that’s where demand is the highest. The next factor that must be looked at is the builder. We want to ensure that the builder has a strong reputation, that they are experienced. The purchaser wants to make sure they’re not a test subject for the builder’s first operation. Look at their other locations to see the quality of their work. The third thing we like to look at are the incentives being offered to the investor that make being part of the initial release more desirable. The range of 3–4 benefits will be what piques your interest as a purchaser. The incentives are about protecting you as an investor. Most of all, you want a clause for assignment. This gives you the ability to transfer the rights to sell the prospective property to someone else before completion, the clause is generally used in case of financial hardship. Most investors use it to flip the unit for profit before completion. The next incentive you want in the agreement of purchase and sale is the right to lease during occupancy. It allows the investor to rent out the unit between registration and occupancy. Generally, with this type of investment you have this option. This gives you the opportunity to rent out the apartment to a third-party. If you’re looking into this as an investment you want to ensure you have this, so a tenant can pay off your property. You will also have some cash flow which you can use to expand your real estate portfolio.

The Green Belt Legislation had a negative impact on building out, as the areas where you can build in Toronto are getting lower and lower each year. Laws are in place to ensure that there will always be natural land around the area. The best option is to build up, as urban sprawl is rapidly dwindling in the GTA. This is great to ensure that we retain a sense of nature in the city, but it does create a challenge for the rapidly increasing migration. There are so many people coming into the country. According to Statistics Canada, there are approximately 125,000–150,000 people coming into the GTA year over year. While interprovincial migration, is between 25,000–30,000. There is a massive call for housing. We have such a strong and diverse economy, so if it does dip it will go back up quickly.

When you purchase a pre-construction investment, you get a 10 day due-diligence cooling period. This gives the purchaser the option to back out without any repercussions and get the deposit back. After this time to reflect, there is no going back as the deposit is locked in. You can use the assignment clause to transfer the property to another individual, only when 90% of the building is sold. This is so you’re unable to compete with the builder.

Why do you want to buy pre-construction? This is one of the simplest ways to generate a profit in real estate. Though, it does take a while to see your investment develop into something you can build wealth from. The longer you wait, the bigger the payout will be. Put in the work and bide your time. We’ve seen prices double in as little as 10 years.

To begin the process of delving into pre-construction, you can buy a condo that’s around 500 square ft. This does sound small, but it lends itself to opportunity to expand your portfolio. When it comes to this kind of investment cash flow is not the end goal. You won’t make an excessive amount month to month, those funds are best put aside in case any issues arise. Passive appreciation and principal recapture are what will generate you the large payout you desire. Passive appreciation is the value of the property growing throughout the years. Principal recapture is the amount of capital being repaid down on the mortgage. You can leverage and re-leverage it to pull your money out and make the most out of your investment. One of the biggest benefits to purchasing a pre-construction condo is the ability to have a flexible down payment structure. The 20% needed as an investor, is broken up for a period of 2–3 years, which allows you to save and the ability to utilize it somewhere else.

You want to buy this investment in the initial stages. If you are purchasing when it hits advertising, it’s too late. If you invest right at launch, you will get preferential treatment and better pricing. The price can be a difference of $100,000.

It’s wise to purchase in an area that is up and coming, so the value will rapidly increase. If a subway station is being built it will increase in value more than other opportunities. If you are planning on buying and holding, it’s best to purchase a more general type of unit that will cast a wider net. This will make it easier to find tenants on an ongoing basis.

How do you know you’re getting a deal? You want to compare it to other projects, look into the builder’s reputation, ask for referrals and work with a platinum realtor. A platinum realtor is a Toronto agent who has a strong record with the skills and credentials required to best help you. Google the top 3 realtors in your area, if they do only 10 deals a year in this field, they mostly likely won’t have first access pricing.

It’s most important that you get educated. You need to take a leap of faith to get started. Take action now to see results for your future. This is how so many people develop long-term wealth. Google is such a useful tool and a great place to start, but it’s not everything. Build your network of a finance, realtor and legal team. Getting professionals with a proven track-record can be your biggest asset.