Trend for 2015 and beyond: Developers to build more Rental buildings.

More mid to high end rental buildings will soften demand for investor condos in 2015 and beyond.

Since Context built their rental building at Bay and Dundas we haven’t seen many more mid to high end rental buildings come up in Developers Building More RentalDowntown Toronto. Greenwin and a handful of other landlords have popped up a few here and there but up until now it’s been the new condo market that’s fulfilled the demand for mid to high end downtown rentals.

A recent article by the Toronto star reported that only 2.4% of Toronto’s condos are investor owned and rented. It’s hard to dispute hard evidence when I don’t have any real proof other than anecdotal evidence that this number is likely much higher. How much? While working as a Sales Representative for Brad J. Lamb Realty I was involved in hundreds of pre-construction condo sales…many more than I’d like to admit considering how I feel about them as an investment now! In some sales centres we’d sell upwards of 40% to investors. Buyers who have no intention of living there. Some keep them vacant and others rent them out but I just can’t believe that 97.6% of all Toronto condos are end user owned. It’s just not possible.

EDIT Dec 18th I misinterpreted the data. The figures are in line for FOREIGN investors. I misread as simply ‘Investor owned’. Sorry! 

Developers have finally caught on to the insane demand for mid to high end condo rentals and are rethinking their real estate investment strategy. In fact, some deep pocketed Funds are so convinced that building rental is the way to go that they’re pouring hundreds of millions into existing condo developments and buying up the whole thing. Recently, in an unprecedented move, a Private Equity Fund completely bought out the Selby Condos in downtown Toronto. Why would they do that after The Selby hosted the most successful selling event ever held in Toronto? Who the hell knows. All I know is that there are a lot of pissed off condo buyers and Realtors out there right now and one very happy Private Equity Fund who’s going to have a ton of high quality rentals to put on the market in 3-4yrs.

We’ll see this trend continue in the coming years and we’ll also see the demand for pre construction condos by investors decrease since the big boys are going ALL-IN on rental building. If you’re an investor, it’s best to stick to Freehold at this point. Single unit condo’s as investments don’t all make sense. Some do though.


Hey house flippers: Get more creative, or else!

Flipping houses 101 – $#!^ just got realugly house reno

We’ve just about had enough with the generic bullshit that wanna-be house flippers are slapping together these days. Seems as though this hot Seller’s market has tickled the lazy bone in investors.

Guess what: Buyers see right through you and aren’t making offers on your crappy renovations! Home Buyers have been through a lot in the past decade. Well, we’ve reached a tipping point and Buyers have become more educated. Not only are they making stronger buying decisions, they’ve started to realize they may have a bit more power than previously thought.

East of the DVP was prime for flipping a few years back and many took advantage with their boring “home depot” renovations with little thought to how people actually use homes. Now we’re seeing unique, well designed, and thoughtfully planned homes sell for absurd amounts of money…and rightfully so. Why shouldn’t the creativity of a savvy flipper be rewarded? After all the Buyer is being rewarded with a well built, efficient home right?

A warning to you flipper/investors: Get more creative or lose your Buyer and lose your shirt. Stop cutting corners. Spend more time and money in your architects and engineers and hire general contractors that share a common vision. We promise you’ll be rewarded with Buyers’ hard earned money…well the banks mortgage money anyway.

Happy flipping!


Toronto Tenant Awarded $10,000 in Discrimination Suit.

The Human Rights Tribunal in Ontario is heavily focused on upholding tenants rights and spends very little time addressing the many vulnerabilities of Landlords. 

There have been many cases where awful people like this woman have gotten away with murder resulting in massive losses for landlords and hundreds of wasted hours in court costing the municipality millions. However I’m not so sure why Landlords are so upset with this ruling that came out recently about a tenant who was refused because of her age. In fact the building she was trying to rent in had an official “we don’t rent to people under 18 policy”.  The Human Rights Tribunal ruled in favour of the Plantiff in this clear violation of the Residential Tenancies Act awarding a $10,000 settlement for the (now 18 year old) plaintiff. In fact, the Residential Tenancies Act forbids discrimination in any way.

The “No Pets” is the most common form of discrimination. To be able to legally discriminate against potential Tenants with pets, the Act clearly states that the Landlord must have proven allergies to pets and must be living onsite. This does not apply to off-site Landlords.

I fully believe that a Landlord should be able to disapprove an application if they feel uneasy or uncomfortable for any reason. After all, it is their investment and they should be able to sleep easy knowing their investment is protected. An applicant can look brilliant on paper but a nightmare in real life. The secret is to keep your mouth shut and move on to the next application (if you’re lucky enough to have multiple parties interested).

A Landlord doesn’t have to disclose why an applcaiton might be denied. Just keep your mouth shut and you won’t get in trouble. So let’s consider this $10K slap on the wrist as a Stupid Tax. You deserved it, Landlord. Hope you’ll learn to keep your mouth shut next time.

Contact us if you’d like to learn more about being a great (and profitable) Landlord.


Renter? Here are 4 Tips to avoid getting scammed.

There’s no question the Toronto Real Estate market is on fire right now but what’s even hotter is the Toronto Rental Market. There are a ton of people scrambling to find their next dream rental and very few quality properties to choose from. Markets like this unfortunately bring out the scammers so here are some tips to avoid being scammed.

1. Pay a deposit before you view

The savage scammers are lifting photos of legit properties that are for sale and are listing them for Lease on popular sites like Craigslist and Kijiji. They’ll ask you for a deposit of up to $1000 prior to viewing the property to essentially “hold” it for you. They will make up some excuse why they can’t meet up with you and ask that you e-transfer it to them. Sounds pretty obvious but in a hot rental market, with potential homelessness looming over your head, some people tend to put their blinders on.

2. Low Price

Well, unless your rich uncle is doing you a solid by renting you his 5000sqft house for $500/mth it’s probably too good to be true and you’re about to get scammed. If someone is offering a place that’s seems really nice but it’s super cheap, there’s either a highway that goes directly through the living room or the property doesn’t exist. This is the same guy that will ask you to send money prior to viewing.  Here’s a screenshot of an actual scam for a condo in Mississauga:

 

 

 

 

 

 

 

 

 

 

 

 

 

3. “Landlord” avoids Face to Face

This guy will insist on consistently communicating via email and will make excuses why he/she can’t meet you there. The story is almost always about being transferred away for work and once you send the deposit via western union they will courier you the house keys. They almost always say DHL you the keys. Seems like DHL is the courier of choice in Nigeria!

4. Use our Scam Free Search Tool

Our Search Tool pulls up-to-date, REAL properties available for rent directly from the MLS and packages it nicely for you. You can search by neighbourhood, even research the neighbourhood, schools, transit, hotspots, etc… You see something you like? Awesome! You can save it as a favourite and when you log back in, you have a list of all the stuff you’ve checked out. When you’re ready, call us and we’ll show you the places you’ve picked (and maybe something you didn’t even know about yet!) We love working with Renters and will take the time to make sure you get the best possible pad.

 


How to Win at Real Estate: Buy & Hold

After writing: “4 ways to lose your shirt flipping Real Estate” we received a few emails describing how we are wrong and there are a lot of opportunities to make money flipping homes in Downtown Toronto neighbourhoods. Sorry to burst your bubble folks, but it just isn’t true and most of you get that. It all comes down to one thing: In this market investors are competing against end users. End users could care less about profit margins. They just want to get their kid in the right school catchment area and will pay through the arse to do it. Bye bye profit.

Now that we’ve got that out of the way let’s get to the point.

The least stressful and most effective way to build wealth in Real Estate is to Buy, and hang on tight.

The longer you hold, the more equity you build and your cash flow increases. If you ever need cash for other investments you can use your properties as tax free ATMs. As long as your rental  income covers expenses, you’re good. Fast forward a decade and your property is worth more, your rents are higher, and you’re skipping to the bank every month with a fist full of rent cheques.

It’s normal for the value of Real Estate to ebb and flow. A property you buy today may be worth less in the short term but that’s why this is a buy and hold game. A savvy investor knows not to panic when the market dips. Rental prices tend to be less volatile. As long as you’ve bought in a renter friendly location (close to subways, schools, trendy hoods) then you will likely have very little vacancy…and that’s what it’s all about. Taking those cheques to the bank every month. Every now and then evaluate the value of your property and see if it makes sense to sell and move into something with more cash flow potential.

Already have an investment property or want to get another one? Give us a shout and we’ll go over details.


Massive spike in bachelor apartment rentals in Toronto.

One and Two bedroom apartments also in huge demand but we’ve got a bit more supply than last year.

We’ve got an intense rental market here in Toronto. Quality condo units are hitting the market daily and the uber hot ones are being snapped up within days, sometimes hours of listing. The one bright light? Third Quarter 2013 stats show that Toronto Renters have 21.2% more listings to choose from.Bachelor apartments also known as studios, lead the pack with a 36.1% jump in number of available listings. We can credit this to the increased popularity of the “micro-condo”. A micro-condo is a space 275-400’ish square feet. We’re going to see this trend continue as more and more new developments just coming on line now are advertising these investor friendly spaces…and investors are buying.

The Numbers

Bachelor/Studio Apartments – $1,365/mth average up 2.2% from Q3 2012 – Likely the higher ROI per square foot. These suites are usually priced low to mid $200’s. You do the math. With only 162 units listed in all of the 416, young tenants are getting really competitive with this sector. Be prepared for a fight if you want one of these.

One Bedroom Apartments – $1,633/mth average up 1.8% from Q3 2012 – The previous category is stealing some potential tenants away from the one bedroom market. With almost a thousand more one beds listed this year when compared to last, tenants have lots more to choose from.

Two Bedroom Apartments – $2,173/mth average up 3.6% from Q3 2012 – This has always been a strong category, especially when close to universities and colleges. These ideal units for roommates can have the advantage of the bank of mom and dad covering the monthly rents. Very competitive so make sure you ducks are in a row when out looking.

Three Bedroom Apartments – $2,610/mth on average actually down 1.8% from Q3 2012 – There aren’t too many 3 bedroom apartments out there. Many that require the 3rd bedroom consider the 2 plus dens so they’d be lumped in with the previous category. Why pay an extra $500/mth when you can easily use a den as a bedroom. But because some people prefer the 3 bed options, especially families. Considering less than 2% of all rental inventory are 3 bedrooms, this can also get competitive at times.

In the Rental market? Here are 3 things you can do to make sure you’re prepared:

  1. Go to www.equifax.ca and download your credit report including your credit score
  2. Complete this Rental Application and have it ready. You can use it for any MLS listed property
  3. Speak to your employer and have them prepare an Employment Letter confirming your employment, income etc. If you’re self employed, get together your last three Notice of Assessments (NOA’s) from the CRA

That’s it! Give us a call, we’d love to help you find your next rental. Already a landlord? We can help you find a tenant too.

Written by: Ara Mamourian – Broker of Record – Spring Realty Inc.

 

 


Rookie Investors Taking Bigger Risks

Our clients want multi-unit houses. Got one?

Looks like rookie Toronto Real Estate investors have grown some balls and are looking for more expensive, riskier investments. We’ve been fielding calls from our Buyer clients all year looking for properties with positive cash flow. Investing in condos is fine and dandy but there’s no cash flow. (read this: Want cash flow, don’t buy a condo) They’re safe, super easy investments that usually break even monthly but at the end of each year a tenant has helped increase your equity position. It seems as though our investors are getting bored with ‘safe’. They want to drop more cash and actually see some monthly cash flow.

 We have Buyers with cash in hand ready to buy the following:

  • Legal Duplex under $850K anywhere in Toronto
  • Legal Tri/Quad under $1.2 anywhere in Toronto
  • 10-20 unit apartment buildings under $5 million anywhere in Toronto
  • Single family house fully renovated with basement apartment under $800K
  • Commercial Properties on Queen St East, King Street East, Gerrard St between Carlaw and Greenwood. 
  • Buildable land or building Central Toronto up to $15 million.

Do you or anyone you know, have any of the above? Get in touch so we can come take a look asap. You may be surprised how much your place is worth. Keep in mind the above suggested budgets are based on certain expected income. If your property doesn’t meet income expectations, the valuation will be lower. New to the game? Take a look at our Worlds’ Greatest Investment Guide.

Written by: Ara Mamourian – Broker of Record


4 Ways to Lose your Shirt Flipping Real Estate

Feel like King of the house flipping world after watching a marathon session of some HGTV renovation show? Well settle down there Sally. What you see on those shows isn’t likely going to be your experience. I’ve seen too many wannabe flippers lose their shirts in the Toronto Real Estate market.

Here are the top 4 reasons rookie flippers lose their shirts:

1. Poor Planning: A large contingency budget line item needs to be made with any home  renovation.  The larger the project, the more things can go wrong. Setting aside as much  as 20% as a contingency fund is important to ensure the job is done right. When working out the numbers prior to buying the asset this contingency needs to be factored in. If it results in an unacceptable return. Then pass. This fund is even more important when considering an older home. Poor financial planning is one thing but another big mistake by rookies is time management. If you think it’s going to take 3 months you’d better be sure you’ve added some time for surprises, late trades, no shows, etc…

2. Over Estimating Future Value: You may think you know neighbourhood values but if you’re not living and breathing real estate every day (like we do) it’s virtually impossible to determine a reasonable, post renovation sale price. You may think you’re home could be worth a million but what are renovated homes in the neighbourhood selling for? Do you really want to have the biggest, nicest house on the block? Let me answer that for you: NO! Consult a pro and don’t fall for the Agent that tells you the number you want to hear without showing you real proof of recent comparable sales.

3. The Home Depot effect: This falls in line with the first point. If you had actually priced out the renovation correctly there’s no way in hell paying retail for everything would have made sense. Most successful flippers and even some rookies are able to make money by taking advantage of relationships they have with tradespeople, contractors, and other skilled workers. These rookies walk into a retail outfit, drop their credit card with no real plan and expect to be cashing in, in a few months. If you’ve worked a random day job for the past decade then cashed in your life savings to become a flipper get ready to get hosed by most contractors that quote the jobs for you. Not saying they’re dishonest, but they’re not about to cut a deal for a guy that’s never given them any work before. They’re definitely not concerned with your ROI, that’s for sure.

4. Initial Overpayment: Without having the inside scoop on a property most investors (including rental properties and flippers) are paying more and more for these assets. The main reason is that investors are now competing with traditional buyers aka end users for the same properties. Many years ago, the average buyer wasn’t willing to take on a massive renovation to create their dream home so it was easier for an investor to stick to their numbers and not compete. Now, traditional buyers are willing to sink all they’ve got into a home to build their dream home. ROI is not a concern for them so adding an extra $40K to the offer price is worth knowing they can plant their family in the neighbourhood they love. Very important to stick to your plan (if you have one that is) and not throw cash at a property just to satisfy your need to be like those guys on TV. There are some good deals happening on the new release of TCHC properties right now. Contact us to stay in the investor loop.

Have you checked out The Worlds Greatest Investment Property Guide?

Have a flip story to share? We’d love to hear it, just comment below.

 


Worlds Greatest Investment Property Guide…Period.

To continue with our “Firsts” theme here’s one for the rookie property investor.

So you think you’re ready to invest some of your hard earned cash in an income property. This may come as a surprise to you but most entry level investment properties aren’t actually cash flow positive. In fact, most single unit investments (condos) basically break even. But with anything less than 20-30% down expect to be taking an annual loss (some investors consider a $100-300/yr out of pocket to be acceptable). The break-even point is becoming even harder to achieve as condo prices have outpaced rental rates in recent years. But due to the lack of residential rental development, newly developed condo units are supplying much needed rental inventory. With well over 140 buildings under construction and dozens ready for occupancy each year, the demand is still outpacing supply with most types of units. Since the demand for rentals has exceeded supply , we’re seeing multiple offers from tenants on most downtown units thus bringing some units back to a neutral position. We wrote a piece a month ago outlining some rental figures.

Just in case you’re buying an investment property as your very first real estate purchase, have a look at the Worlds’ Greatest First Time Buyers’ Guide. It will provide you with loads of knowledge before getting started. Very important to remember that purchasing a property beyond your principal residence requires you to have a minimum of 20% as a cash down payment, plus closing costs to qualify for funding. If you don’t own your principal residence (or any other property for that matter) then you can qualify for as little as 5% down but then you’ll have problems covering your monthly costs with the rental income earned.

How much money do you need? Well that depends on the location and investment goal. Are you happy with someone paying down your mortgage and not earning positive cash flow? Or do you have a larger budget and can get into a duplex, triplex, or quad type of investment? These are the questions you need to ask yourself. The very first step is to see your mortgage broker and get a bank approval for your purchase. This is a show me the money moment, if you don’t have the cash you aint buying, plain and simple.

Accounting

Most people don’t even consider the tax implications of owning/managing/selling investment properties and they fail to consult their accountant. Our man, Grant the CGA has all of the info you could ever need about the tax implications of rental properties and he’d be happy to discuss them with you. All experienced investors (the smart ones do anyway) have a great tax consultant. This quick step can save you thousands of dollars and the headaches of dealing with the CRA. No surprises = stress free investing.

Property type

Again, this all depends on your budget and cash position. We will not get to this point in the discussion until you’ve spoken with your mortgage professional and obtained an approval and we strongly urge you have a discussion with your CGA. As Real Estate Sales Representatives and Brokers we do have the general knowledge to guide you but we cannot replace the specific skills and knowledge of a tax professional.

  • Single Unit Residential

    • Most likely a condo/loft/townhouse: This is usually the safest investment and ideal for first time investors. The price barrier is low, maintenance is low, and the demand for centrally located condo units is high.  You have the option of going with a pre-construction unit or consider resale. We’re leaning more towards resale in this market as the advantages to buying pre-con have essentially disappeared. The days of buying off plan and seeing a sharp spike in price on occupancy day are over. There are still some smart pre con opportunities but they are few and far between. Most pre con developers require a minimum of 15% down within the 1st year and a further 5% on occupancy. This cash is held in trust for years and really doesn’t earn any interest (well it does but it’s not that much). You could put that same amount of money down on an existing, resale unit today and have it earning rental income the following month. With the price of resale essentially the same as pre construction in most neighbourhoods it’s the logical choice for the local investor. Pre con as an investment could make sense for foreign investors needing to park money etc… not ideal for the local, small time investor.  Location is important here for two reasons: First, to attract a ton of potential tenants, Second; for resale value. With the condo market as tough as it has been over the past few months you need to protect yourself. Try and find a unit in less “condo heavy” communities (less competition when selling). Focus more on tight neighbourhoods:  Leslieville, Riverside, Riverdale, Leaside, Highpark, Roncesvalles, Danforth area are prime examples of great communities with fewer condos but high demand for rentals. Keep in mind, we don’t recommend you hold a condo beyond its 7th yr in business. Maintenance fees tend to creep up, demand from buyers decline as they focus on newer, shinier options.
  • Multi Unit Residential

    • A property with more than 2 apartments (or 2 min) have the greatest potential for positive cash flow each month but they do have a higher barrier to entry as they tend to cost more and require much more maintenance than a single unit condo investment. If you’re a first timer we’d hope you at least have people in your life that are experienced landlords and can help you when things get tough. Buying near, or on main streets make the best income properties. Main street properties tend to cost 10-20% less than those on quieter residential streets but achieve similar rents. Ensure the property isn’t too far from transit. Subway is ideal but communities with easy access to downtown via streetcar are also fantastic options. Certain ethnic communities are also fantastic options for income properties as families arrive in Canada they begin their journey as renters and some remain in the same property for a number of years.
  • Commercial

    • This option isn’t usually for your rookie. Finance companies do not treat commercial loans as they do residential.  They require much higher down payments (whether you’re a first timer or not. The financing process in general is quite a bit more intense. Could take up to 30 days to even confirm financing as more detailed appraisals are required. If you are newer to real estate investing but are confident and cash heavy, a small building with main floor office or retail with upper level residential would be an ideal option. Always good to be able to diversify and in this case you’ve got a nice mix of res/comm in one investment. Gerrard St East is a great place for this right now as we’re in the early to mid stages of gentrification.  Parkdale area is another good location with great growth potential.

Once we’ve zoned in on the right property type, have our financing approvals in place, and have discussed your tax consequences with your tax professional, we’re ready to get out there and start looking for money makers. One important thing to remember is that you’re not buying this place for yourself so try to put yourself in the shoes of a renter and not someone who may have different requirements as an experienced homeowner for a number of years.

Analyzing the Numbers

 

How to find a Tenant

You’d expect a Real Estate brokerage to insert the cookie cutter “Always us a Realtor to find a good quality tenant” line but we’ll spare you the BS. If you’re dedicated to your investment properties and have made property ownership your career than you’re more than capable of using tools like Craigslist, Kajiji, Facebook, and Twitter to find a great tenant.

For those that have other full time commitments, or are new to the rental game, cannot spend the time to create the ads, efficiently reply to prospective tenants, and would like the added benefit of MLS exposure then we’ve got your solution. At Spring Realty we have dedicated rental agents that can handle 100% of the tenant finding and vetting (which we’ll get to next). The fee for a rental agent at Spring Realty is the equivalent of one month’s rent plus HST. If we rent your space for $1200/mth our fee would be $1200. This can be paid from the initial tenant’s deposit of $2400 (1st and last) and the remainder is returned to you, the landlord.

To discuss your rental property purchase or if you’d like us to help you rent out your existing rental units, please get in touch to discuss. We’ve created an efficient system that includes a full social media campaign, high quality photos, and of course MLS exposure. If we can’t find you a tenant: it’s you, not us.

How to pick the right Tenant?

This is a great problem to have and a common one in Toronto these days. Having a lack of rental inventory has created quite the demand for rentals and it’s quite common to have 2-10 applications within a week on a single property. Here’s what we look for:

  1. Credit report from www.equifax.ca including credit score
  2. Employment Letter to confirm annual salary and length of employment. If self employed we ask and review their NOA’s for the last couple of years.
  3. The Spring Realty rental application which asks for references and other vital information

Once you’ve gone through all three of the above documents. You’ve likely settled on the top tenant. If you only have one application, don’t feel as though you need to take the 1st app that comes your way. Sometimes it’s better to listen to that feeling in your gut and walk away. The Residential tenancies act is set up so that it’s quite difficult to evict a bad tenant even if they’re not paying rent so let’s make sure we wait for the good one, even if that means you will have the place vacant for a few more weeks.

Once you’ve found that dream tenant it’s time to “get them to sign on the line that is dotted” (<– can you guess which movie that line is from?). Our lawyers have created an air tight Lease Agreement specifically for our clients which we’re happy to pass on to our clients.

Apologies for another insanely long post but it’s important to have all of the info you need in one place. If any of this confuses your or if you would like to chat about your options, get in touch and we’ll get started. If you have an invetsment property to sell, check out our post about Dealing with Tenants. Make your you’re connected with us on Facebook and Twitter too.