Unicorn of Investment Properties Sells Under The Radar
You’re a damn fool if you don’t go to market when selling your Toronto home (unless you’re a covert CSIS operative or something). You’d expect a company who profits from selling peoples’ homes to say this so I appreciate you being a bit skeptical about what I’m about to say. I don’t really care actually, if you’ve read this blog you know that this is a no BS zone and we spit the truth and nothing but the truth.
We get it…the idea of not having to deal with getting your home ready for sale is appealing but is it appealing enough for you to leave $100K in cash on the table? This is what may have happened to a home recently listed in Toronto. Because of the Real Estate and Business Brokers Act I cannot mention anything about the specific listing Broker or the actual home so I’ll do my best to describe the situation.
An out-of-area REALTOR recently listed a house and immediately changed the status to SOLD CONDITIONAL. Meaning, she sold it under the radar to a random buyer in a secret deal. Great for the BUYER because it likely sold at list price but is valued at, at least $100K more. A detached TRIPLEX that would yield positive cash flow with a million dollar purchase price and 25% down. The home has three beautifully renovated apartments, parking, and laundry in each unit. The freaking unicorn of investment properties. This definition of a turn-key property would have had a line up around the block of buyers from investors with all levels of experience, renovators looking to convert back to single family or ME who would have bought this place and lived mortgage free. (see now you know why it’s really got under my skin…this was to be MINE!)
I wish I could show you the property details but I just can’t. We’ve got enough heat from the regulatory bodies due to our stance on open data and Real Estate.
Why a Fool?
Money is fairly easy to borrow for qualified Buyers in a good cash position, inventory is VERY LOW, and the streets are crawling with HGTV fueled rookie investors looking to become the next Donald Trump. Investors are trading their high cap rate expectations for higher quality multi-residential units with more secure tenants. A good trade off for the long term. So if you have one of these properties don’t let some lazy REALTOR convince you to sell under the radar and pocket the quick commission. For goodness sake, GO TO MARKET.
Investors are trading their high cap rate expectations for higher quality multi-residential units with more secure tenants.
If you offer your investment property (or your home) for sale on the open market (aka our MLS system): You will most likely get more money than you expected. Any money you think you’re going to save on commission or effort saved on prepping for sale isn’t worth the risk. Don’t worry, we get that commissions are flexible. Just ask us.
If you’re a human being with a Facebook account you were likely inundated with the “experts of the day” re-posting and commenting on the latest Canadian retail casualty: Target.
First it was Sobeys closing 50 Canadian stores, now Target with 133, and Sony with 14. Sony is just a mere blip and I wonder why they ever had stores to begin with. Why are all these giant companies closing up shop? Could it be that online shopping has finally reached the tipping point level of adoption to actually make a dent in traditional shopping? I think it has. Some say I should include Sears in this pile but I think they have something up their sleeve. They’ve been getting oddly creative with the ads lately so let’s see what happens with them.
Grocery Gateway was first out of the gate in Canada and has seen a successful run over the past decade and now with Amazon Prime coming to Canada you can pretty much get anything you want delivered to your door within 48 hours and sometimes within a day if you’re close enough to a distribution centre. That’s Steve Bezos’ genius right there. He’s finally realizing his vision of same day delivery in some markets and achieving a level of customer service that most of these ill fated companies simply can’t touch.
These closures will inevitably affect the economy in the short term with over 20,000 employees now looking for work but Starbucks has stepped forward and is doing what they can to help absorb some of the blow by offering the newly unemployed opportunities.
The real question: Is traditional Retail finally dead? I think so. Torontonians are making serious efforts to avoid big box experiences. Communities are fighting big box expansion in urban environments (yay Leslieville!) and opting for more local options.
So what’s the solution for big retail landlords?
I believe that there is still loads of demand for retail space but I think business owners, corps, groups, etc.. need to realize that consumers are shopping online for more things than ever. The days of a store occupying millions of square feet across this country are over (sure the Walmarts, Costco’s of this world are still relevant due to their low prices…that’s it).
These newly vacant spaces should be broken down into smaller chunks and turned into “Local Market” type environments where, even in a space like at the Eaton Centre, a consumer can be presented with thousands of items brought to market by hundreds of local businesses. Sure, there’s even room for the big brands in there but they’ll have a smaller foot print. In fact, this is an opportunity for the big brands and the local business owner to work in the same enviornment together. The big brand can be the “draw” to the Local Market but the little business can be the unique “hook”.
What do you think?
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 Downtown 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.
Flipping houses 101 – $#!^ just got real
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.
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.
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.
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.
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.
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:
- Go to www.equifax.ca and download your credit report including your credit score
- Complete this Rental Application and have it ready. You can use it for any MLS listed property
- 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.
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
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.