Exit Strategies For Pre-Construction Investments

Pre-construction is one of the simplest and safest ways to accumulate wealth in real estate. This is when a property is purchased before construction occurs. For condos, the developer is filling units to ensure a strong occupancy upon completion. It’s important to know what your exit strategy is to determine what you are going to do with your developing funds. If you’re looking for a passive investment, this is the simplest method for cautious or new purchasers. Paying off the extended payment structure is generally the only concern a purchaser has, which is why it’s utilized so often. If you plan on selling it before occupancy is available, mortgage and tenants are not a concern.

1. What we recommend most is not really an exit strategy, but buying and holding the property long term. The best method to maximizing your potential in real estate is to hold onto the home. Values will rise and fall as they continuously go up. Historically, we’ve seen values in Toronto double every decade. Renting out the property to pay off the mortgage while your asset improves, taking out the equity to purchase more properties and repeating this process is our most advised path.

2. Our second most preferred option is to close and sell. This when the structure is fully completed and ready to be occupied. The value will increase from when you first purchased until it’s completion (which is approximately 3 years). This is after legal fees and closing costs are paid out and it’s now in your name. You then have ability to put it on the market and sell, either privately or using a realtor. The advantages over assignment are that you get full equity; while with assignment you only have partial equity. Be aware that you lose the asset and get no future growth.

3. You have the right to assign it to another party (if stated in the agreement on purchase) if you wish to sell it sooner. This gives you the option to sell the property before it’s completed. The price will have gone up due to the fact that it’s following the real estate cost trend and it’s steps closer to being finished. With all of the value you have the potential to gain if you wait, this is not the most profitable investment but you do get to avoid closing costs, including the land transfer taxes (in Canada), among other fees. You benefit from capitalizing on value increases without having to close on the property, but you give up long-term equity. The new assignee gains the asset, but also inherents the remaining costs.

Of these three options, our preferred method is always to buy and hold for the long term. This method requires the most waiting, therefore being the most profitable. You will be waiting about 2 – 3 years to “make a quick buck” with the other strategies. Keep in mind that there are fees included with each purchase aside from the down payment, including the land transfer taxes (among other builder’s fees). We always suggest using your accrued wealth to get more property and pursue a larger portfolio.

Written by: Spencer Maxwell

What You Need To Know About Closing Costs

When completely finalized the purchase of a property, closing costs are the last step in the transaction process. They are due before the keys are handed over, just before the title is transferred. In my experience, closing costs seem to be a concern of many purchasers. Yes, they aren’t inexpensive but not to the degree that most people assume they are. The cost also depends on the type of property you’re looking at as well, a resale has a few different things to consider over a new build. We recommend preparing to spend 5% of the purchase price for all of your closing costs. This is generally higher than necessary, but it’s better to remain safe rather than sorry.

Both Types Of Properties

Resale and new builds have much of the same fees and taxes. You need to budget for legal fees and disbursements (this covers all of the lawyer’s costs), this one-time fee is typically around $18,000. If you’re purchasing in Ontario there is the Ontario Land Transfer Tax and also the Toronto Land Transfer Tax, if it’s a unit within the city (it’s generally 4% of the purchase price for both). If you are a first time home buyer, there are rebates on each of them. Your appraisal fee is the cost that comes from the institution ensuring you can afford the mortgage. 

Resale Property

A resale property is a residence that has already been completed, being sold by the previous owner. The HST is already covered in the purchase price. Closing adjustments are the rest of the deposit, fees, taxes or down payment that the previous owner has already paid which you may be required to reimburse; this generally includes property taxes, utility bills and condominium fees.

New Build Property

New builds are soon-to-be or recently completed properties in which it will have its first resident. The first month’s condo fees (which will also be paid out at the first of each month) contributes to the general upkeep of the complex. If you’re renting out the unit, you get a rebate. For new houses, you will need completely new appliances and to get a fence, which will result in an additional $15,000. For condos, development levies are a government charge, essentially an additional tax, which is used to add funds to the community in which the property is being built in; this generally amounts to 7.2% of the purchase price.

Written by: Spencer Maxwell

The 6 Steps To Getting A Tenant

Guest writer Tyler Walbourne, REC Canada’s Head of Concierge Services

Getting the right tenant can be an intimidating process, but if you come at it with a game plan it will generate so much more ease. Knowing the areas of focus will save you a significant amount of time and stress. The goal is to find someone you’re comfortable with that will ideally treat your place as you would.

Deciding Rental Value

Rental values differ with the location and the style of home you are offering. The start of your tenant search begins with understanding what the value of your home is. Look at previously leased ads that are similar to what your property offers, this should include: the number of bedrooms, kitchen appliances, parking spaces, and size of the backyard.

Once you find a few comparable units, that will give you a range of what you should be listing the property for.

If you’re unsure on the price, contact a real estate agent for that particular area, you can find someone that would be more than happy to assist you.

Advertise

Now that we have a price range we then start creating the advertisement.

The rental listing should be marketed to as many relevant websites as possible. We recommend using at Facebook Marketplace, Kijiji, and Viewit.ca. Ensure that you include your email address on the ad.

The wording for the advertisement should be short and concise. Let the prospective tenants know what’s included in the home. Make sure to include features that will attract the average applicant.

An effective example:

This Stunning Newly Renovated Apartment Offers Downtown Living At Its Best. Little Italy Is One Of Toronto’s Most Sought After Areas. This One Bedroom 2 Bathroom All Brand New Appliances, An Ensuite Washroom And A Large Walk Out Deck With Installed Gas Line Perfect For Those Warm Summer Afternoons. TTC Is Located 1 Minute Walk Down The Street, With College Street Offering Some Of The Best Restaurants, Pubs And Nightlife.

What is included: Built-In Dishwasher, Fridge, Stove, Washer And Dryer, Gas Line On Patio For BBQ Set Up. Parking Included

Include a credit report, employment letter, and proof of payment to all rental applications.

Photos of a clean, presentable home are a necessity. This is what initially catches the eye of potential buyers. If your listing has no pictures, you can typically expect fewer appointments will be booked. Make sure to take the images during the day and open up all curtains to allow sunlight to enter the house.

Include photos of the front of the house, kitchen (with all appliances visible), all bedrooms, bathroom, and backyard space.

Showing The Home To Prospective Tenants

Now that your ad is up and running, the next step is showing the home to tenants.

Before you let anyone into the home, make sure all lights are on and all bedroom doors are open. Do not have any valuables or mess lying around. When you first meet the applicants, shake their hands and invite them into the unit. Try to make them as comfortable and relaxed as possible.

Do not guide them through the house. Instead, have them walk around on their own and stay close to the living/kitchen area. Let them approach you. Answer any questions they have and hand them a rental application on their way out.

Follow up with the showing after 24 hours to get their feedback on the home.

Do Your Due Diligence

The next step is to have the rental application and all essential documents completed. These documents are credit reports, proof of employment, and proof of income. Now we screen the prospective tenant. This should be executed with care and full concentration.

You must look at their employment income. Does it cover rent, groceries, living expenses? If the answer is no, then this home is not the right fit for them.

If the answer is yes, it is time to call their references. Previous landlords, employers and miscellaneous contacts provided on the rental application. You want to make sure they have stable employment and their character aligns with what you are looking for in a tenant.

Example questions include:

How long have they been employed with the company?

Do you see any change in their income and location in the near future?

Have they ever missed a rent payment?

Would you rent to this prospective tenant again?

One last recommendation is to Google the prospective tenant’s name to see if anything negative could dissuade you from allowing them to live in your property.

Drawing Up The Lease

We now have a qualified tenant who would like to rent your home. The Province of Ontario has a mandatory lease agreement that must be completed for every new applicant.

Make sure to complete all highlighted fields. It answers questions regarding damages, who to contact when an issue arises, how the rental installments can be paid and everything else to keep you comfortable.

You may want to include a schedule B to the lease if special circumstances arise; like if the tenant is paying a portion of the monthly hydro/gas bills.

Move-In Date

The prospective tenants are now moving into the home. Make sure to stop by and say hello on the day. Consider dropping off a bottle of wine congratulating them on the unit. Remember, the tenant is helping you pay off one of the biggest investments you will ever make. Treat them with respect and kindness.

Written by: Spencer Maxwell

13 Tips For New Realtors

There are so many things that we hear new realtors wish they knew right away to aid their careers right out of the gate. Real estate agents have so much to learn, it’s definitely an overwhelming process. Here is REC’s advice for any junior or seasoned professional to get over the initial hurdle to become the best agent they can be.

The very first thing we recommend is getting an assistant. Everything can quickly build to an excessive degree, and they can be there to help at the very first step of the process. They can help you handle your schedule to streamline everything; maneuvering through all of the appointments, phone calls and listings. They are truly worth the cost, as any time something slips by it could be business potentially lost business that another realtor could quickly pounce on.

Practice your phone skills. You’re going to spend a lot of time talking to clients and potential buyers, it’s important to comfortably present your best and most authentic self. Learn to listen to their needs, and do everything in your power to attain what they are seeking. Much of your business will be making calls and getting clients to warm up to the idea of how you can benefit them.

Building rapport is a necessity for any successful real estate professional. The more time that clients can connect with you the more likely they will welcome your offers. On the phone, be personable, ask them how the family is, make yourself relatable. Be genuine. Ask if they are comfortable offering your services to other people. As soon as you get your license you should call everyone in your database to let them know that you can help them buy, sell and invest, and ask if it’s okay to contact them (asking for permission goes a long way).

Whenever you get on a call or have a meeting, we advise to ask for feedback. The only way to improve is to get constructive criticism; you won’t know where to improve if you aren’t informed on where you misstep. This is all about ensuring everyone can warm up to you as soon as possible.

We recommend getting Client Retentive Management software (CRM). This will help you keep better track of your appointments to know when and how to reach out. It gives you the option to add notes for personal touches of information to mention to clients that can really stick out to them. It’s another method to build strong rapport.

You want to dedicate time to prospecting new clients. We advise contacting everyone you know, I’m sure there’s a quite a few in your circle of friends who can benefit from your services. Don’t be afraid to knock on some doors, it’s a good way to meet potential buyers and warm yourself up to contacting people. Open houses are the tried-and-true way to accomplish this, you can connect with so many interested parties and meet people you can assist in the future. It’s recommended to hold events so people can see what you have to offer, piquing their interest in investing. The more clients you get the more it will snowball to potentially more clients.

Getting a mentor is something that is beneficial to anyone starting out in this field. Their journey can aid you in understanding all the minutiae, helping you to hit the ground running and help streamline your career from the very beginning. We advise that you work for free in this capacity, you can provide your teacher value, but what they can provide you can boost your career exponentially further than you could possibly have reached without early on. Any and all involvement can give you the boost you need to further become the professional you wish to be. There’s also the benefit of gaining any overflow business, they will do whatever they can to help you succeed due to the benefit you’re providing them. A mentor is absolutely invaluable.

Having a set schedule helps me to maintain productivity at its peak. We recommend prospecting clients from 9–11 am, calling all hot leads and setting up meetings. 11–12 return calls from any interested party. At 12–1 don’t forget to take a break and get something to eat, in this business we are so focused that we forget about food. 1–4 is a great time for meeting people face-to-face. Between 5–6, return more calls. 6–7:30 make sure that you eat again, and spend some family time, cooling off is a great way to refresh. From 7:30–9:30 appointment setups once again.

Start documenting your ups and downs now, and present it to the public. Don’t wait on it, people will connect with your authenticity right away. The more content you present the better people will connect to your journey. When you step into the mentor role this will have so much added value to whomever you are teaching.

New realtors should take very deal possible. Whether it be a million dollar home, a small one bedroom or helping a landlord find a tenant, this will help you hone your skills. No property is too big or too small to gain some practice. With more trial and error you’ll get more comfortable with the paperwork, more relaxed talking to people and just with the overall process.

Network with as many people as you can. The more people you meet the better off you will be. Face-to-face interactions are the strongest connections you can make; this the best way both parties can relate to one another. Hosting events is a good way to expand your network and generate positive word-of-mouth. It doesn’t always have to be “salesy,” if it’s engaging people will come to you, which will generate organic business.

You want to be in contact with people 36 times a year, you always want to be top-of-mind for invested and casual parties. 2 emails a month inquiring for interest and offering value is a quick way to show their importance to you, this is 24 easy touch points. 4–6 events annually demonstrate that you are a key player in this field. You should be calling those in your database a minimum of 6 times a year. It will be impossible for them not to realize how much you appreciate their business, letting them know how valuable they are to you.

Money management is a key component for any member in the field of real estate. You need to understand that when you get a commission cheque it’s not all yours. You need to pay the CRA (income tax and HST, approximately 33%), take into account future marketing dollars, money to save for general things down the line, and the rest to pay the bills.

These tips can benefit any realtor who is just getting into the field. The name of the game is really about meeting people and building those connections into long-term bonds. It is rather overwhelming, but this will help you ease into becoming the best professional you can be.

Written by: Spencer Maxwell

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

Frequently Asked Questions From Home Sellers

Selling your home can be such an overwhelming process. There are so many minor and major details to consider in every step at either side of the real estate transaction. Through our team’s culmination of over a century in the business, these are the questions that we get asked the most frequently from sellers.

When Is The Best Time To List My Home For Sale?
As soon as your ready to move. If you want to get the best value for your property, the key is to give yourself as much time as possible to sell. More time means more potential buyers will probably see the home, likely resulting in more offers. This also gives you additional time to consider other options if the market or initial interest is slow.

Is There Any Seasonality To The Market?
Peak selling seasons vary from year to year in most market places and weather usually has a lot to do with that. Often early spring and early fall are the prime listing seasons as houses tend to “show” better in those months than they do in the heat of summer. Be aware that there are also more houses on the market during the prime seasons, resulting in more competition. While seasonality is a factor, it’s not something that should dominate your decision on when to sell.

What Makes A Home Sell?
A successful sale requires you to concentrate on five considerations: price, terms, conditions, location and market exposure. You cannot control all of them, you may have to overcompensate in one or more areas to offset a competitive disadvantage in another.

What About Market Conditions, Price Trends, Interest Rates And The Economy In General? Should They Have Any Bearing On When I List?
If you’re considering the sale of an income property, there are only two things to consider: the cash flow and, if you do sell, where is the money being invested. If you are just moving your investment to the market to get better cash flow, any time is good. If you are taking the money out of the real estate market to invest somewhere else, don’t forget to take capital gains taxes into consideration. This is something I would advise checking along with an accountant.

How Long Should It Take To Sell?
The average listing times vary from 30–180 days, according to the market conditions in a particular neighbourhood, the type of property and the price range. Of course, price, terms, conditions, location and exposure play an even greater role. Selling in any market is easier if you keep time on your side. Most professionals will tell you that pricing, conditions and aggressive marketing will shorten this greatly. If you are selling in a seller’s market, pricing for multiple offers can help you sell in just days.

What If I Can’t Sell My Current Home Before We Move?
This situation can arise for any number of reasons. Such as, getting the job promotion you’ve been waiting for may mean having to quickly relocate. You may even finally find your “dream home” and need to put an offer in before it sells to another buyer. Whatever the reason, don’t panic. You have some viable alternatives to the potential nightmare of double mortgage payments. If you don’t have to sell in order to buy a new home, renting your existing property may be a suitable option. Consider the advantages (additional income, income security) and disadvantages (maintaining tenants, not getting the equity and funds for the home). If you’re being transferred, you may be able to obtain a short-term rental in your new location while you’re becoming familiar with the new area.

What If I Decide To Sell My Home First?
We always advise that in a buyer’s market, you should sell your property and make sure to negotiate a longer closing. This will allow you time to be able to find another home to purchase without feeling rushed. In a seller’s market, one should buy their next home first. This should be done with a longer closing of 120–150 days (if possible) to allow time to sell your home in the interim. You should arrange for the possibility of bridge financing in the event that the closing date of the sale of your property is longer than the closing date of the purchase.

What Renovations Can I Do To Increase The Value Of My Home?
Renovating your home for your own personal tastes is very different from renovating to increase its value. 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. If you are considering doing renovations to increase value, this list will help you focus on the necessary sections:

  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.
  2. 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.
  3. 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.
  4. Fixtures: If you can’t change the cabinets in the kitchen and bathrooms,consider updating the cabinet hardware, light fixtures, counter tops and faucets. This gives the appearance that a full renovation has been completed, this can change the look and feel of your home.
  5. 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.

Can I Sell My House Myself?
Some people have this notion that they can save a considerable amount of money by selling on their own. They look at the average commission on a house and think of friends and family who managed to get through the process with seemingly little trouble. It can be done, so why can’t I try? Approximately 1–2% of Canadian homeowners handle their own sale. But in order to join the ranks of successful salesperson, you need to realistically assess exactly what’s involved. The routine parts consist of pricing your home accurately, determining whether or not a buyer is qualified, creating and paying for your own advertising, familiarizing yourself with enough required real estate knowledge to understand (and possibly even prepare) a real estate contract, and coordinating the details of a close. The greatest downsides are the demand on your time, and the possibility that a mistake may cost you the money you’re trying to save. Listing agents know about the market trends, houses in your area, and those who are most likely to buy there. They also know how to reach the largest interested audience, trained in screening and negotiating potential buyers. They are almost always on-call and work on the weekends; being available to the whims of others.

Written by: Spencer Maxwell

An Update On Toronto’s AirBnB Rules

The rules for short-term rentals will be updated once again in the Spring of 2020. AirBnB is the most utilized platform that allows people to live in their residence as they would a hotel for no more than 27 days, with a maximum total of 180 days each year. Now owners will be required to register with the city and pay a Municipal Accommodation Tax (MAT) of 4%. There will also be a $50 annual registration fee added on. All properties will be issued a registration number which must be presented on all advertisements.

Initially, any homeowner could rent out any number of their properties for as long as they desired. The number of days has decreased and only a primary residence is allowed to be temporarily lived in. This was developed in an effort to create more affordable housing for citizens of the city through having more permanently rentable properties available, resulting in a slower climb of prices.

An exact date is not set yet, in the following days the City of Toronto will update it’s website: https://www.toronto.ca/community-people/housing-shelter/rental-housing-standards/short-term-rentals/. Investors should be prepared when this does arrive to avoid any potential charges. If your property is available on a short-term rental platform, it’s best to keep your eyes on the policy to see if there any additional changes.

Even with the new, stricter rules this is still a strong investment for people who want to gain additional income on their principal residence. We are already starting to see many owners of multiple properties move to having more permanent tenants. This has resulted in more legwork users, we’ll see in the coming weeks how this influences those who profit from short-term rentals.

Written by: Spencer Maxwell

Frequently Asked Questions From Home Buyers

Diving into real estate is definitely an intimidating process due to the knowledge and cost required. It’s understandable to be cautious, the more questions you ask, the better. In our collective centuries of experience, these are the concerns we hear most from first-time home buyers.

When Is The Best Time To Buy?

It seems everyone has an opinion about the “right time” to buy real estate. And the decision becomes especially challenging in a constantly altering market. If housing prices are falling, people tell you to wait until the market “bottoms out” before buying. If prices are going up, you feel inclined to buy now to avoid being left behind. Even the self-proclaimed experts can’t accurately predict when a market will reach a peak or drop. Buying a home isn’t just about finding a comfortable place to live for several years or longer, but to also build some equity along the way. Think of a home purchase as a long-term investment. No matter when you buy into the cycle, you will always do well over the long term. Rather than trying to “outguess the market,” your decision on timing should focus on current market conditions, and most importantly, your current financial situation.

Am I Ready To Buy A Home?

Have you demonstrated the ability to save money? Are you pleased with what you have saved so far? Are you ready to change your spending habits to enable you to deal with the additional costs of maintaining a home? Are you prepared to enter into a long-term commitment for your security? Is pride of ownership important to you? Would you enjoy taking care of your home? If you answered yes to the majority of these questions, you’re probably ready to own a home. It is a big step, but if you’ve spent time budgeting and doing the preliminary research then you are ready to start.

What About My “Dream Home?”

Most first-time buyers want their idea of a dream home immediately. But, as we search for available homes online, the reality of price eventually sets in. Our dream home probably sells for a lot more than we had hoped and the down payment alone is potentially more than we earn in a year. The best way to deal with this reality is to match your financial capabilities with a home that meets as many of your needs as possible. Because of this, many first-time buyers purchase what is commonly known as a “starter home.” There’s nothing wrong with this approach. In fact, it’s good sense to start with a home that won’t stretch your budget too thin. This way, any excess savings can be put toward reducing the principal amount of your mortgage, helping you to build equity that much faster and perhaps eventually allowing you to purchase your dream home.

Should I Buy Or Sell First?

There is no easy answer to this question. If you purchase a new home before you sell your home, you may find yourself owning two homes at the same time.

On the other hand, if you sell your home first, and don’t find a new suitable home before you move out, you could be living in a hotel while paying storage costs for your furniture. On top of those expenses, you would also factor the cost of moving your belongings twice. The ideal situation is to time the sale and purchase to happen on the same closing date and with a little planning, this is possible, and very common. Firstly, you want to determine the market conditions in not only your neighbourhood, but that of the area you’re hoping to move to. If it’s a seller’s market, it would be advantageous to go find a new property first. Once that is locked in, you will then likely have an easier time selling your home and having the closing dates match as negotiations are in your best interests. If the market conditions favour buyers, you would be best to sell your home first and negotiate a longer closing date when possible. This allows you time to then find a new property and negotiate your closings to coincide with one another. Another common approach to use in a buyer’s market or in a balanced market, is to make your offer to purchase “conditional” upon the sale of your present home. This means that if your current home doesn’t sell, you are not obligated to complete your next purchase. In most markets, it remains difficult to convince the seller to accept an offer of this type as they have taken their home off the market, and if you are unable to sell your home, they are back at square one.

What Is Bridge Financing?

Let’s pretend your current home is for sale and during your search for new houses, you’ve actually managed to find your “dream home”, but the seller is not willing to accept a conditional offer on the sale of your existing home. In this scenario you may be forced to commit to your purchase or risk watching your dream home slip away. One way around this, is to arrange bridge financing through a financial institution. If your lender is confident that your current home will sell in a reasonable time frame, they may consider advancing you the money to purchase your new home, using the equity in your current home as security. You would in effect own both homes for a short period, and the added costs are usually negligible. For example, bridge financing on a $400,000 home for 30 days at 2% is only $800. The added benefit of this method is that you aren’t forced to move everything on one day, oftentimes resulting in a much less daunting experience. You definitely want to arrange this with your lender ahead of time before signing any agreements to purchase.

What type of programs and rebates are there for first time home buyers? 

Home Buyer’s Plan: This exists only for first time home buyers. You can borrow up to $25,000 from your RSP for each purchaser who qualifies. If you haven’t put your allotted annual amount into your RSP but instead have money in your GIC, mutual funds or in cash, you can usually top up your RSP based on your unused contribution limit.

Land Transfer Tax Rates for Ontario:

New home buyers in Ontario may qualify for a rebate of all or part of the land transfer tax. The specifications for this refund are:

  • Purchaser must be at least 18 years of age
  • You can not have owned a home or interest in a home anywhere in the world
  • Your spouse can not have owned a home or interest in a home anywhere in the world while he or she was your spouse

Some important items to note:

  • The method of acquiring the home (eg. purchase gift or through inheritance) is not relevant to qualifying for a rebate
  • You cannot re-qualify as a first-time home buyer
  • If you claim an immediate refund at the time of registering your home, this may offset any tax that would have been payable
  • If you do not claim the refund at registration and do so afterward, the tax must be paid at registration and you must submit your refund request to the Ministry of Finance

Here’s how to calculate your potential rebate:

  • Effective January 1, 2017, the tax rates for land transfer tax will depend on the date of the agreement of purchase and sale
  • As of now, the tax rates on the value of the consideration are as follows:
    purchase price of home marginal tax rate for $55,000 and under is 0.5%, $55,000.01 to $250,000.00 is 1.0%, $250,000.01 to $400,000.00 is 1.5%, $400,000.01 to $2,000,000.00 2.0%, over $2,000,0000 is 2.5%
  • Land transfer tax rebates for Toronto: As of March 1, 2017, first time home buyers in the City of Toronto may qualify for a tax rebate up to $4,475

The purchaser must:

  • Be 18 years of age or older
  • Occupy the home as their principal residence no later than 9 months after the date of conveyance (transferring property to another owner) or disposition (how the exchange is arranged)
  • Not have previously owned a home or had any ownership interest in a home, anywhere in the world, at any time
  • Be a Canadian citizen or permanent resident of Canada or have become so within 18 months of conveyance or disposition
  • Not have a spouse who has owned a home or had ownership in a home, anywhere in the world, while they were the purchaser’s spouse
  • Have submitted the claim for a rebate within 18 months of the purchase
Written by: Spencer Maxwell

How The Transparency Of The Real Estate Market Can Benefit Buyers, Sellers And Investors

Buying a home is very likely anyone’s largest lifetime purchase, knowing all of the data possible is definitely something every purchaser would prefer to know going in. The Supreme Court of Canada has recently decided to allow public access to all of the records on sale prices, ownership history and trends within Toronto and the surrounding areas. This information that has been available to realtors for years through the data the Multiple Listing Service from the Toronto Real Estate Board (TREB). There are websites which the general public can use to decipher values, but this provides the most accurate and up-to-date data. Many real estate agents have concerns about this being public knowledge, which doesn’t actually negatively impact the aid they provide, but consumers can now have a concrete understanding of why the values are the way they are. The more information a purchaser has the less concern they will have in this stressful process.

This is not only beneficial in a massive way to anyone with an interest in purchasing, but the government as well. Similar to Vancouver and Montreal, Ontario has an issue with money laundering in the housing market. There was approximately $2.8 billion of undisclosed investments that went into Ontario in 2018, while most of it is likely legal, a large portion of it is definitely unlawful. This came to the attention of the government when approximately $1 billion of laundered funds were discovered in the Vancouver real estate market in 2016. With this information public, everyone can now see where this money is being allocated with a much stronger chance of catching criminal activity hidden behind corporate shell accounts. A substantial amount of funds will inevitably go back to the government, which will benefit the average citizen. This will greatly aid real estate buyers and investors, as the money laundering is driving prices up while also taking properties off the market. This will eventually moderately decrease prices and leave more opportunities for those looking to improve their portfolio. 

This information is such a useful tool for home buyers to be able to decipher what the exact value of the property should be. Real estate prices can fluctuate all across each city in different markets, now you can find out how and why the values are the way they are and purchase according to the market’s actual value. This also benefits home sellers as they will have a more clear understanding of what they should sell their home for. This will likely result in less days on the market and less of a concern if the sale price is too high or low. 

TREB has stated their concerns over issues of privacy, but the general home buyer has no issue with the information being presented. The Supreme Court of Canada weighs the minor concerns over the much larger benefits.This transparency creates a stronger amount of comfort, more balance in the real estate economy and a heavier degree of funding going back into the economy. Providing all of the information is a strong course of action to develop more confident buyers and warm people up to the idea of pursuing multiple properties. When purchasing or selling real estate, the more information you have the much better you will be off in your investment.

Written by: Spencer Maxwell

Toronto Real Estate Board November 2019 Market Summary

The Greater Toronto Area (GTA) market values continue to benefit investors, demonstrated by the strong rise in values from the same time last year. The Toronto Real Estate Board (TREB) is a committee that serves the over 50,000 realtors of the Greater Toronto Area (GTA), assisting them in understanding where the market was, where it is and where it’s projected to head. This information is pulled from their Multiple Listing Service (MLS) which collects all the data of property sales.

According to TREB president Michael Collins, the increases in sales is due (in part) to the growing comfort of policies (including Ontario Fair Housing Plan and the mortgage stress test) which had caused initial hesitation a number of years ago. Collins also states that many are buying property types or in areas that better suit their financial situations, as the desire to buy property in Toronto remains strong. Jason Mercer, TREB’s Chief Market Analyst, notes that an increase in purchases have been due in large part to decreased mortgage rates, which accounts for more competition and a further increase in market prices.

We continue to see an increase in sales year-over-year in all types of properties, due to our ever increasing population, thus driving sales prices higher. The average days on market were 24 for this month, while November 2018 was 27. 

New and active listings saw fairly significant decreases due to the rising demand of the city and its surrounding areas. New listings were down 17.9% from the same time last year, from 10,538 to 8,650. Active listings dropped a heavy 27.2%, from 16,420 to 11,958. 

Detached homes were the most purchased property for this month, strongly leading the charge with 3,263 sold. Semi-detached homes sales reached 669, townhouses were 1,173 and condo apartments were 1,902. Through the MLS we’ve seen 7,090 properties sold for November of

2019, which is a 14.2% increase over last November’s 6,206. 

The average price has increased 7.1% over the same time last year, from $787,349 to $843,637. Detached homes went up 3.5% from $1,008,768 to $1,044,138. Semi-detached homes grew 5.7% from $791.760 to $837,573. Townhouses improved 3% from $647,418 to $666,744. Condo apartments increased by 11.1% from $556,723 to $617,658.

We keep seeing prices increase year-over-year and month-to-month. The statistics prove that this trend will continue due to population increases, current policies and a steady decrease in unemployment. The City of Toronto and surrounding markets continue to benefit long-term and newer investors.
Written by: Spencer Maxwell