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Investing in the Ontario Real Estate Market

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The Ontario real estate market continues to record positive growth, with more than 11,000 residential units sold in January 2017, a 10.8 per cent increase from the previous year’s figures. The Toronto Real Estate Board (TREB) estimates that more than 110,000 homes will be sold in the area in 2017, with most sales occurring in Waterloo, Kitchener, Hamilton, Barrie and other popular areas. Unlike Vancouver and other cities which are experiencing a general slowdown in real estate development and uptake, demand for property is expected to grow in Ontario, with little chance for a crash in the near future. Homeowners looking to sell and people looking for a great investment will benefit from taking part in the Ontario real estate market where they can hope to realize huge returns.

Growth factors

Real estate investors in Ontario have realized record returns over the last several years. Several factors have contributed to the growth in real estate. These include:

 

  • Growth in GDP in central Canada including Ontario leading to higher purchasing power

  • A growing population leading to increased demand for housing

  • Rising in demand from previous renters who wish to become homeowners

  • Severe housing shortage in the Greater Toronto Area

  • An influx of Asian investors who continue to drive up home prices

  • Higher rates of employment and rising incomes

  • Changes in Canadian Mortgage laws

Growth in GDP

Ontario’s GDP has been growing consistently over the last several years, with economists estimating that it will grow by 2.4 per cent in 2017. Wage and salary increments of 2.8 per cent will lead to a rise in consumer purchasing power, and consumers are expected to add $21 billion to Ontario’s GDP by the end of 2017. A weakening Canadian dollar and improved economic prospects in the USA will lead to an increase in exports which will further raise the province’s GDP. Increased circulation of money will mean that more people have disposable income to invest in real estate, and savvy investors should definitely consider getting started on the property ladder.

Rising population leading to increased demand for housing

The Ontario population continues to grow and with it, the demand for single-family houses and condos. Increased demand is driving up property prices and investors looking to realize high returns should consider real estate as an investment.

Renters who wish to become homeowners

In large cities in Ontario, the average price for a studio apartment is $1,000 while a three bedroom house goes for around $1,500. Renters in smaller towns pay considerably less, with these units costing $489 and $800 respectively. With the demand for housing pushing these rents up, more and more people are looking to purchase their own homes, and investors will benefit from putting up units to take advantage of this growing market. Renters are willing to purchase units in smaller towns in spite of the long commute and investors should do their research into which small towns attract large numbers of this type of homeowner. I personally have found fantastic returns over the years in the bedroom communities surrounding the Toronto core.

The real estate bubble is not expected to burst

Real estate bubbles are notorious for bursting at the wrong moment, especially when a lot of investors have sunk considerable funds into properties. Given the growing GDP, increasing population and demand for housing, the real estate bubble is expected to continue growing well into 2017 and beyond, making this market ideal for investors who are looking to invest in real estate in both the short and long terms.

How to invest in real estate in Ontario

There are several investment strategies you can use. Before sinking funds into this type of investment, it is wise to take into account the macro-economics of the province. The best places to invest will be those with high population growth, a growing GDP, high rental rates, proximity to infrastructure and schools and those where large projects are underway. Aim for areas with high home purchase and rental rates as well as those with low vacancy rates. If all these factors are favourable, the following strategies will help you achieve your real estate investment goals:

 

This strategy involves purchasing a property that is slightly under market value and renting it out to parties who will help you to pay off the mortgage. The idea here is that you will hold the property for the long term, eventually pay off the mortgage and start to receive the rent as an income until you sell the property.

 

As mentioned earlier, larger numbers of people are looking to own rather than rent. However, credit issues or an inability to come up with the minimum deposit shut many of them out from conventional sources of financing. This is where a rent to own (RTO) property can be of help. The investor can purchase a property for who we call a ‘tenant-buyer’. There is a rental lease in place with the tenant-buyer just as you would have with any other tenant. There is also an RTO agreement in place, outlining all the particular details of the rent to own process between the investor and the RTO tenant-buyer. There is usually a deposit paid to the investor by the RTO tenant-buyer at the very beginning, before they move in, and then an extra monthly deposit, in addition to the monthly rent is paid by the tenant-buyer each month. This monthly deposit gets applied to the tenant-buyer’s downpayment when they purchase the property off the investor at a pre-determined date down the road, at a pre-determined price. A typical RTO term is about 3 years and can be a great “hands-off” real estate investment strategy.

 

Another popular investment strategy with real estate investors is the flip. Flipping a property simply means purchasing a property below the market rate, renovating it and selling it for a profit after the renovation. An alternative form of flipping is the hybrid, which involves purchasing, renovating, and then holding it for a while until the market improves before selling. Sometimes these investors looking to utilize the hybrid approach will refinance after the renovations are complete, allowing them to pull out much of their initial capital investment, leaving very little of their own money in the property. This can be a great way to grow a portfolio of properties quite aggressively.

 

  • Joint venture partnership

Often times investors are lacking something that is required to grow their investment portfolio. Maybe they are out of the capital required for a downpayment on the next purchase, or perhaps they can no longer qualify for a mortgage. Perhaps they feel they are lacking knowledge in a particular area that they are interested in pursuing as an investment strategy. These are just some of the reason’s investors can decide to enter into a joint venture (JV) partnership.

Changes in Canadian mortgage rules

I feel it can never hurt to highlight these recent changes again, as conversations about these rule changes still comes up with my clients today. Investors should be aware of a few essential changes effected in 2016 that may affect their ability to invest in the property of their choice. Changes include the following:

 

  • All homeowners seeking an insured mortgage will be subject to a stress test regardless of the how much of the down payment they have come up with. Previously, only those who could not come up with at least 20 per cent of the downpayment were subject to a stress test but as of October 17, 2016, a mortgage stress test will be applied to all insured mortgages. This will significantly affect the amount of mortgage that borrowers can qualify for, and shut out many investors who would otherwise have had easier access to this type of funding.

  • From November 30, 2016, the government began to restrict insurance on low ratio mortgages unless they met certain criteria such as having an amortization period of at least 25 years, purchase price of less than $ 1 million among others.

  • All home sales must be reported to the Canadian Revenue Authority beginning in 2017 in order to prevent foreign investors from claiming exemption from capital gains tax by claiming to be residents.

  • Government will begin to look into methods of sharing risk with lenders. Currently, the government bears 100 per cent of the cost of mortgage insurance in the event of a borrowers default. It is therefore currently looking for ways to share this risk with lenders, which may translate into higher interest rates for borrowers.

The Ontario real estate market is expected to continue on an upward trajectory in 2017 and beyond. A number of factors will continue to push up demand for housing in Ontario, including a growing population, rising GDP, good employment prospects and high consumer purchasing power. Investors can take advantage of several investment strategies such as the ones we touched on above, along with many others.

Remember, the best time to start investing in real estate was yesterday. The second best time to start is today!

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

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The First Step to Property Investment – I Want To Invest, Now What

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Have you been considering real estate investing but aren’t sure where to start? There is no doubt that you have heard how much of Canada’s wealth stems from real estate. It’s a hugely successful area of investment, and it’s relatively easy in comparison to playing the stock market which can be far more complicated and volatile.  If it’s something you have thought about and don’t know where to begin, this is the place. The Home Guyz always want to see successful investors and they know the old saying, If you fail to plan, you plan to fail. These are the very initial steps you should take if you’re considering. It isn’t a how-to more of a where to begin.  The most important thing to understand if you’re considering real estate investing and becoming a landlord is that it takes time, you must understand that property investment isn’t a way to get rich fast, but rather a high-performing investment that grows consistently over time.

Here are 5 steps to get you started with the real estate investment process, because remember; fail to plan is planning to fail.

Step 1: Set Clear Goals. Make your goals clear, not just “I want to make money” have a target number that you want to reach by a certain time. Is this a five year goal, a 10 year goal or maybe something you want to use in retirement. Have a clear outline of why you want this, and your goal timeline.

Step 2: Make Time. Depending on how you plan on investing will depend on the amount of time you need to put towards it. But one thing is clear, despite how you inves whether short term rentals, apartment landlords etc. all of it will take some of your time. So make sure you have time to give to the process. You may think that hiring a property manager will mean that you don’t have to put in the time, but that’s just not true. The process, especially at the start is time consuming. Consider the initial time consuming things to include:
-research
-bank meetings 

-lawyer meetings 

-finding and viewing property

-managing properties or the property manager

Step 3: Do Your Research. Do you fully understand all the financial elements? Gross yield vs net yield? how will this affect your taxes and what you’ll pay in capital gains? Do you understand the power of leverage- or do you know where and who to ask for help? You need to have a full understanding of all of this before you proceed with investing. These can be very very expensive lessons to learn along the way. Knowledge is power when it comes to real estate investing. 

Step 4: Create Your Budget. Like buying any house, you need a solid budget and you need to understand what you’re budgeting for. To start with your budget, it’s smart to speak with a professional, but in general you’ll need to have the money up front to pay for your deposit, lawyer fees, agent fees, taxes, and of course you’ll need contingency money for emergencies that may arise. The difference with a budget for real estate investing is that the budget you have must be over and above your own household and life expenses, so you’ll need to ensure that you have a solid grip of all of your regular expenses to ensure that the money you are using is able to be spent over and above your regular budget. So you must have a solid understanding of your existing financial situation. Which leads us nicely into our next point…

Step 5: Speak With A Mortgage Broker: You’ll want to understand what lending options are available to you, and what the various options are. A professional is the best way to go. Do not look for these options on the internet, this information will not be accurate to you and your situation, you don’t want to base your budget around a lending option that may not be available to you! Check out a Mortgage Broker we recommend.

Step 6: Finalize Your Personal Preferences (Now is a good time to look back at your goals!) You’ll need to be clear on what you want your property investment to be. Knowing what you want your goals to be will lead you into the type of property that will make that happen. Ask yourself all the questions…do you want a higher income or a higher yield? Do you want short term rental? Do you like the idea of a condo or does the lack of control not something you want to deal with? How hands-on do you want to be? What location are you looking for? And of course budget, which will immediately narrow many options and areas. All of these questions and factors are areas that you must be clear on, you must be able to answer these questions. This is a very good time to contact The Home Guyz as they always know the best areas and options, they know the right questions you need to ask, which leads us into the next step.

Step 7: Contact Your Real Estate Salesperson. You’ll need assistance with finding rental prices. This isn’t guess-work or even information you should pull from the internet. You will want to speak with actual rental agents who can let you know the prices you can get for certain renal properties. Plus an agent will have a good understanding of the demand and you’ll want to know listing prices vs. actual sold prices. They can talk to you about rental yields, days on market, vacancy rates and other factors you just can’t find without a professional. These are all factors you must take into consideration in order to be a successful landlord and real estate investor. Your agent can assist you with your preferences outlined in the previous step and they can help narrow your search, or even better, perhaps open up some great opportunities you perhaps weren’t aware of! They can help you identify risks you perhaps hadn’t thought of and work with you to find smart ways to overcome them.  Looking for a Realtor®


Investing in Real Estate is rarely a bad idea. It’s a good way to confidently grow your investment portfolio, and build long term wealth. But it is not risk free. Be prepared, The Home Guyz would love to discuss with you investment opportunities in the Ottawa area and beyond. 

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Investing in Urban Real Estate for Beginners

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No matter what type of urban property you’re considering, it’s important to first understand the ins and outs of urban real estate investment.

Why are more people investing in urban real estate

Many investors have shifted their focus from suburban properties to urban properties and there are many reasons for this. One big reason is that there are much more properties available in a city compared to a suburb, which can depend on the area in which you’re searching. For the most part, popular cities keep adding more and more infrastructure, which means there’s usually no shortage of properties to invest in.

Since urban areas are more popular for rentals, it’s usually easy for real estate investors to find tenants for their properties. That is sometimes a problem in suburban neighbourhoods. Not having tenants means an investor might have to go for an extended period of time without income from their investments. Utility and maintenance fees, along with property taxes, must still be paid during this time.

When investing in an urban property, however, there is usually plenty of foot traffic. People are going to notice a property available for rent and there is always someone in need of a place to live.

Why you should invest in urban real estate

If you’re a first-time investor, then buying an urban real estate property could seem like a huge undertaking. Investing in urban real estate is similar to investing in any other type of property, though. You still have to do an extensive search to find the perfect property and provide maintenance when needed. There are, however, many benefits to investing in an urban property.

One of the great things about urban real estate is that there’s a huge diversity of different properties. If you aren’t ready to take on an entire home or commercial building, you could instead invest in a local condo. This will still yield some passive income and won’t require much work. That said, if you’re looking to make a living off your investment, then it’s important to find a property, or properties, that will yield a large profit.

In urban areas, there’s also a huge diversity of people, food and shopping options. The promise of diversity is a big reason many people choose to live in an urban setting. People also like the convenience of having public transport, plenty of parks and other amenities. Interest in urban living, especially with younger people, will probably keep growing. This means you could see huge profits on your investment in the future.

With so many people moving into urban areas, you might choose to buy a piece of property in the hopes of selling it at a future date. It’s important to do plenty of research on the area where you plan on investing. This will help ensure that you see a good return on your investment.

Another reason you should consider investing in urban area properties is that they are sometimes much cheaper than suburban properties, depending on where you look. This is great for those not looking to blow all their money on a first-time investment. Make sure any property you’re considering isn’t suspiciously cheap, though. This could mean there are major problems with the property, including the need for many repairs.

Finding the perfect property

As with investing in any type of property, it’s important to do plenty of research on urban real estate investments. This means checking out the property yourself to make sure there aren’t expensive repairs needed. You should also check for things like insect infestations, mould and any other problems. Any issues with a piece of property could mean you’re wasting money by having to pay for repairs or cleaning.

If you plan on buying a property to sell at a later date, be sure to heavily research the area. Check for housing trends and see if the area has increased in value over the years. You don’t want to accidentally purchase a piece of property that will end up dropping in value over time.

There are many benefits to visiting the neighbourhood in which you’re wanting to invest before settling on a piece of property. This will help you better understand the area and the amenities it has to offer. Don’t purchase a piece of property if you’ve noticed plenty of “For Sale” signs or businesses that have closed down, for example.

It’s always a good idea to consult with a real estate professional in the area. They will offer you the best advice and provide all the information needed on a specific neighbourhood and piece of property. When going to look at a property, have a maintenance professional check for any needed repairs. This could help save you a ton of money on your budget for renovations or avoid a property that needs too much work.

Make sure to get the best financing

Financing urban homes can be subject to different rules and regulations. Often times it pays to have a broker shop around for you to get you the product that supports and urban home, but also helps to maximize your lending amount.

We recommend all readers to call LendCity Mortgages for your urban property. They can be reached from their website in the link above or by calling them at 519-960-0370.

Be aware of these things

There are certain issues with urban properties of which you should be aware. The breaking of lease agreements, for example, is a bigger problem with urban properties than suburban properties. This is an easy problem to deal with, however. Just make sure that you’re properly vetting your tenants before allowing them to rent. This means doing proper background checks and looking at their rental history. Put reasonable consequences for breaking the lease early into the agreement—something that will help you recoup your costs.

Fixing and flipping a home could also be much more difficult in an urban area because there is less room and more red tape to get through. Working with a reputable local contractor will usually ensure that you won’t have too much trouble renovating a property.

With the right research and awareness, urban properties are a great investment.

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7 Tips for Investing in Distressed Properties

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Distressed properties are so cheap that the cost of repairs and renovations could be minimal compared to the potential profit. If you want to invest in a distressed property, it’s important to do plenty of research and be aware of the risks involved. Having a good strategy in place can ensure that purchasing a distressed property will result in larger profits.

Do your research for every distressed property you find

If you’ve found a distressed property for a good price, it’s important to do plenty of research before buying. Consider having a specialist inspect the property and check for any and all needed repairs. This will help you avoid the need for unexpected repairs down the line. You don’t want to end up investing in a piece of property that’s beyond repair.

Researching the neighbourhood is just as important. Even if the price is right, you’ll want to make sure the property is in an area where homes sell. Speaking with a reputable real estate agent in your area is the best way of finding out information on a particular neighbourhood.

Take an on-hand approach

It’s important to stay aware of whatever’s being done to your property. While construction and renovations are being done, you should frequently visit the property. Make sure your contractors keep you updated on the progress of any renovations. Knowing that everything is going smoothly will give you peace of mind. If there are any issues, you’ll want to find out about them right away.

Investing in a distressed property takes a lot of time and energy. Make sure it’ll be worth it by staying on top of repairs and renovations.

Do proper planning

Before you start looking at properties, it’s important to develop a good strategy. This will include deciding where to look and how much you’re willing to spend on renovations. Developing a strategy with a local real estate professional and the contractor could help assure that you’re making all the right decisions. Develop a timeline for how long repairs and renovations should take. Try to decide on a specific date when the property will be ready to sell.

Since distressed properties are usually a bit more unpredictable than other investments, be sure to prepare for any situation. You’ll need to push your expected sale date forward if repairs and renovations take longer than expected, for example. This means not promising a specific move-in date to potential buyers unless you’re absolutely sure that the property will be ready.

Know that there are risks

Being optimistic about any property that you’re invested in is a good thing—however, don’t ignore the risks. Distressed properties are usually in bad shape. Don’t invest if you can’t put in the right amount of time and money.

If you were hoping to receive financing for a distressed property investment, then you might be disappointed. There aren’t many lenders out there who will offer financing for a distressed property. That’s why it’s a good idea to have a backup plan.

If you are looking for financing call LendCity Mortgages at 519-960-0370. They have access to construction lenders that will move forward on a distressed property.

Selling a distressed property can also take time, even if it looks great. The market can fluctuate. That is why it’s a good idea to have a real estate agent on your side. A good real estate agent can help you decide on the best time to sell.

Have an exit strategy

Since there are many risks involved with distressed properties, it’s good to have a pre-determined exit strategy. This is true for any real estate investment, but especially with distressed properties. Don’t spend all your money on buying the property and repairs. Have some money set aside in case you need to exit the deal. Exiting will definitely result in a monetary loss, but is sometimes better than sitting on a property and waiting for it to sell.

Hire the right renovation company

Renovations are a big part of investing in a distressed property, so you’ll want to make sure you hire the best local contractors. A good contracting company can take care of all your repair and renovation needs in a timely manner. When it comes to finding the right contracting company, consider asking other investors. They might have good recommendations for inexpensive contracting companies in the area.

Online research could also result in finding the perfect contracting company. Check each company’s reviews and contact them for estimates. These estimates will also help you better develop your budget.

Have a proper budget in place

Most investors buy distressed properties through an auction. This is why it’s important to decide how much you’re willing to bid without going over. Besides just the cost of the property itself, there are also plenty of monetary considerations that need to be made with distressed properties. You’ll need to make sure you have enough money left over for repairs and renovations. The cost of marketing and landscaping, taxes and insurance should also be considered.

Is investing in a distressed property worth it?

Distressed properties are enticing to investors, mostly because they’re much cheaper than other properties. If you have the right strategy, then investing in a distressed property could be quite profitable. Depending on the distressed property, there could be less competition, which means you’ll end up spending even less.

Be willing to take the risk of owning a distressed property if you’re going to purchase one. If you’re not willing to take the risk, then consider putting off your investment and saving up for a safer option. Distressed properties take a lot of time and work, making them difficult investments for new investors. If you’re a new investor interested in a distressed property, consider consulting with experienced investors. Pick their brain for tips on making money from a distressed property investment.

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