The Benefits of an Investment Property

Posted on September 2, 2010 by Real Estate Guide| Leave a comment

By Kimme Myles

Having an income property in your investment portfolio is beneficial for a number of reasons. The most obvious of course is the income generated by the property as an additional cash flow source whether your property is a triplex or a 20 unit apartment building. You are also insulated from fluctuations in the real estate market as long as your property is earning positive cash flow.

However there is a certain amount of finesse involved in being successful.  Long before you even consider this type of purchase, make sure you’ve had conversations with professionals such as your banker or other lender, your accountant, and your realtor.  They will all be able to assist you in planning a budget and preparing your finances.

Your agent should be experienced in working with these types of properties and as such will assist you in reviewing the comparables and assessing value.  Not only is location important, preferably in a desirable area easily accessed by public transit but profitability is crucial.

The idea is to minimize expenses and maximize income in order to be profitable. You may find that certain buildings cost way too much to manage and maintain in comparison with the maximum income the property is capable of producing.  A simple formula to determine positive cash flow is to subtract the expenses (utilities, maintenance costs, management fees, insurance, mortgage and interest) from the income (rent). As with a large condominium building, it is necessary to have a “reserve fund” for when unexpected repairs or services become necessary such as when your building needs a new roof or furnace. This allotment of funds is included in what it costs to operate the property.

Keep in mind that when dealing with tenants, it is important to thoroughly understand the rules and regulations of the Residential Tenancies Act. You’ll want to know what to do when you have a tenant who is late in paying rent or worse, has stopped paying rent altogether. The eviction process is not as straightforward as one would think.

If you continually find ways to increase revenue and decrease expenses you’ll be sure to have a great investment property that you can potentially leverage into other real estate endeavors.


Kimme Myles is a Sales Representative with Royal LePage R.E.S./Johnston & Daniel Division.  Kimme is a regular contributor to the Muddy York Blog.  Kimme’s email address is kimmemyles@royallepage.ca and website is located at www.kimmemyles.com

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Interest Rates: Why the Sky Isn’t Falling

Posted on September 1, 2010 by Real Estate Guide| Leave a comment

By David Larock

What a roller coaster ride the last two years have been. In the spring of 2009, Canadian house prices fell across the board and transactions slowed as fears of a global economic downturn spread. But then, as if only pausing for breath, Canada’s real estate market revved up once again and the spring dip looked like nothing more than a good buying opportunity. So why is everyone so nervous? When I talk to realtors, fears of rising interest rates are among the first concerns raised. There is a widespread assumption that rates can only go up, and a related belief that higher rates will hammer the real estate market. In fact, I don’t think either fear is warranted. Here’s why:

Short-term (Variable) Rates Aren’t Going Anywhere Fast Because…

  • The central bank’s primary reason for raising rates is to control inflation. Our inflation rate (as measured by the consumer price index) was at 1% as of July 23, 2010, well below the central bank’s upper limit of 2%.
  • The effects of higher rates are felt only over time, so raising short-term interest rates gradually allows the central bank time to measure the impact of previous increases before tightening further.
  • The real estate market is cooling off. One of the central bank’s main concerns with leaving its overnight rate at emergency low levels was that it would fuel a housing bubble. Today’s more balanced housing market has rendered that concern moot for the time being.
  • While the Canadian economic recovery is in full swing, most of the rest of the world is not faring as well. In its recent commentary, our central bank has acknowledged that aggressive interest-rate hikes could stifle our momentum, especially against today’s backdrop of global economic uncertainty.
  • The US Fed is not expected to increase its short-term policy rate until 2012 at the earliest. If our central bank keeps raising rates independently of the Fed, our dollar will continue to appreciate and this will slow our economy further. Most experts do not believe that Canadian short-term rates can be sustained at much more than 1% above comparable US rates (and we’re already .75% higher today).

Moderately Higher Rates Won’t Hammer the Real Estate Market Because…

  • Contrary to popular belief, there is no strong correlation between rising interest rates and lower house prices. In fact, historical data show that rates and house prices rise together more often than not. Before you say I’m out to lunch, let me elaborate. I readily accept that, all being equal, higher rates hurt affordability and are bad for the housing market.  But all is not equal.  Rising rates generally occur in an improving economy, and the positive economic momentum that accompanies higher rates creates a net effect that has historically proven more positive than negative. (I will elaborate on this point in next week’s post.)
  • Job creation has far outpaced any forecasts and is considered one of the key factors in our rapid economic recovery (it’s dropping a little recently but after a very good run). If you’re looking for indicators that foretell the health of our real estate markets, historical data show that job creation (and rising incomes) are far more indicative than the direction of interest rates.
  • Canadians can afford higher rates. In a 2009 CAAMP survey based on 40,000 loans, totaling more than $10 billion to purchase houses across the country, the data showed that we borrowed far less than the maximum we could afford. For example, the highest acceptable GDS ratio that lenders are generally comfortable with is 35%, and in the survey, borrowers averaged only 21.8%. Lenders normally set the highest acceptable TDS ratio at 44%, while in the survey borrowers averaged a TDS of 32.3%. Results like this don’t usually correlate with people lining up at the banks to hand in their keys.

While no one can say with certainty what the future will hold, especially with the world in the midst of a massive credit deleveraging cycle, I think the alarmist rhetoric about dramatically higher rates in the near future is overblown (and I’ve been saying this since April when most of the bank’s economists were sounding the alarm bells). Make no mistake, the central bank would like to continue to raise interest rates to provide some additional breathing room for future monetary stimulus, probably from today’s .75% to about 2%. But Mr. Carney and his governors at the central bank won’t do this if it risks smothering the green shoots of our economic recovery. Instead of fast, knee-jerk rate hikes, my money is on gradual rate increases over time, which the data shows Canada’s borrowers can comfortably afford. On balance, even with higher rates, the sky should stay more or less where it belongs – comfortably over our heads.

David Larock is an independent full-time mortgage planner and industry insider. David’s website is located at www.integratedmortgageplanners.com

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What To Do When A Home Is Damaged Between Signing And Closing

Posted on August 30, 2010 by Real Estate Guide| Leave a comment

By Heather Rose

You’ve toured the house one last time before closing, arranged your finances, made moving arrangements and are all ready to close the deal and begin a new chapter of your life in a new home. Normally, home buyers wait a couple of months between signing the contract on a new home and when they are expected to take possession of the home, meaning physically move into the home.

While that time period shouldn’t be thought of as two months for something to go wrong, what is a home buyer to do if they find that, between the signing of the contract and closing, their new home has become damaged? A hole in the wall, scraped-up floors or a stained carpet – it could be anything – that definitely wasn’t there when you signed the contract.

In cases like this, the seller is at fault because the buyer signed the contract agreeing to purchase the house “as is”, but “as is” at the time of signing – not for the foreseeable future.

One problem with this situation is that it can be hard to prove the damage wasn’t there initially. A thorough inspection of the home if one way to avoid this issue, and this inspection can include photographs and the moving around of larger furniture that could be concealing any damage. Once that checks out, you’ll at least have some ammunition to help prove your case. This type of inspection and permission to do so can be added to the contract.

Quite often, in situations such as this, the only recourse for the buyer is through legal channels such as your lawyer or small claims court.

Other more significant issues can arise between signing and closing, like a fire that causes substantial damage. If the home is uninhabitable or trashed, the buyer can cancel and walk away or use the seller’s insurance money. If the damage is just costly, the buyer can claim for the cost of repairs.  Each situation is different and it is important to involve your legal counsel in these types of situations.

Heather Rose is a Toronto based Journalist, who is a regular contributor to the Muddy York Real Estate Blog.  Heather website is located at heatherroseportfolio.squarespace.com.

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Healthy Changes in Riverdale

Posted on August 20, 2010 by Real Estate Guide| Leave a comment

By Sandra Pate

You may have noticed a quaint old clapboard building recently appear on Broadview Avenue at the intersection of Langley Ave. Built circa 1906, it is the former clubhouse for St. Matthew’s Lawn Bowling Club. Designed by the city of Toronto’s architect, Robert McCallum, it was moved and repositioned to its new location from Gerrard street, where it sat beside the old Don Jail. Lifted off of its foundation, it was pulled up the hill, through the park, by a giant truck. What a sight it was to see!

The charming building apparently will be restored and renovated although we still don’t know what its future use will be. To my knowledge, it will be determined by city council with input from residents at town hall meetings to be held this year. After 101 years the lawn bowling club disbanded in May 2007.

The clubhouse was moved to accommodate the massive revamp of the Bridgepoint Hospital at the site of the Don Jail, circa 1860. Originally erected as Toronto’s “House of Refuge”, the public library tells us that it was established as a place for “vagrants, the dissolute and for idiots” to receive shelter and medical treatment. In the 1870s it was used as an isolation hospital for the smallpox epidemic, and during the 1880s and 1890s a part of the building was used to house the homeless elderly.  The eastern annex addition will be torn down and the original Don building will be restored. Bridgepoint’s website says “The exterior of the jail will be preserved and linked to the new hospital by a modern glass bridge. On the interior, the main focal point of the building, the rotunda, will be restored to its original architectural beauty. The glass floor, which was built over at some point in history, will be uncovered and the skylight, which was tiled over, will be re-exposed allowing natural light to pour into the rotunda.” The entrance and dramatic rotunda will serve as public gallery space for community uses, hospital events, public health-related announcements and lectures.

Environmentally, the new hospital will be certified under the Leadership in Energy and Environmental Design (LEED®) Green Building Rating System. Among some of the highlights will be an overall 30% reduction of energy consumption and water usage, with roof water runoff to be used in landscape irrigation. The construction process promises to divert 75% of the waste by recycling and reusing.

When it opens in 2013, the new Bridgepoint Hospital will be a 10-storey, 680,000 square foot state-of-the-art facility with 472 beds to care for those afflicted by complex chronic diseases.  I am pleased that it will include the ‘Christine Sinclair Ambulatory Care Centre’. Chris, a client of mine, had ALS. A former Riverdale resident, she was a leader in her field as a Chartered Accountant, an accomplished athlete and a director of Bridgepoint Health for six years.

If you want to get involved or learn more about the facility their website is www.bridgepointhealth.ca.

Sandra Pate is a Broker with Royal LePage R.E.S. Ltd./JOHNSTON & DANIEL DIVISION, Brokerage.  Sandra is a regular contributor to the Muddy York Blog.  Sandra’s website is located at www.postcardhomes.com

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Canadians Focus On Savings After Recession

Posted on August 9, 2010 by Real Estate Guide| Leave a comment

According to financial services industry insiders, Canadians are putting more of their money in savings accounts and less in higher-risk investments. Normally, an increase of three to five percent in the amount of Canadians opening chequing and savings accounts is expected annually, but this year the number has grown by 20 per cent.

David McVay, a financial services consultant, told the Canadian Press that the change in Canadians opening up bank accounts is a substantial increase.

“Canadians are more conservative than they were in 2007,” McVay told CBC News. “We’re seeing a shift from stock investing into keeping more money in savings accounts because of the financial crisis,” he said.

Soon-to-retire baby boomers are trying to play it smart, rather than take risks that could have them putting off retirement even longer.

Banks are also picking up on Canadians’ uncertainty, and according to McVay, “the banks are marketing to the uncertainty that Canadians have about their savings and retirement plans caused by the financial crisis.” Banks can also make more money through savings accounts opposed to stocks or bonds that are doing poorly, and cater to consumers with points incentives and cash-back options.

Potential homeowners did take advantage of the better outlook during the early stages of recovery though, jumping on lower interest rates.

“We did see households, spurred by ultra-low interest rates, accumulating debt, largely for the purpose of homeownership,” said McVay, “but going forward that does need to slow and households do need to save more in order to rebalance their finances and bring down the potential vulnerabilities that households would face as interest rates rise.”

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Bike and Car Sharing Becoming A Part of Downtown Toronto Life

Posted on August 6, 2010 by Real Estate Guide| Leave a comment

Many downtown home and condominium owners don’t find it convenient to pay to store a car, never mind the cost of the car itself or the insurance. However, several innovative companies that offer car sharing have begun catering to Toronto.

Car sharing allows Torontonians with valid drivers licenses to pay a low hourly or daily rate to essentially rent a car. Drivers don’t pay any insurance, and when they need to fill up there’s a handy gas card inside of the car, providing free gas for wherever life takes them in an SUV, Mini Cooper or BMW.

It’s even considered green, allowing car-sharers an extra feeling of smugness over car owners as they learn that according to one leading company, each one of their over 6,000 cars takes up to 20 extra personally-owned cars – and their emissions – off our roads.

The convenience factor is extremely high: make a reservation online or on your cell phone, and then go find the car when it’s time. They’re parked all over the city, on streets or in public parking lots. You keep a small hotel key-like card in your wallet and use it to unlock the car when it’s time for your reservation, and the keys are inside. No talking to anyone, no waiting and best of all – no human error. Some companies even reward drivers with credit if they bring their vehicle to the car wash.

Now, a new company that might bring green transportation sharing to a new level in Toronto with bike sharing. The company, Bixi, will place 85 “stations” across the city where patrons can grab a bike, go where they need to go and return the bike to any station they choose – which is one of the biggest drawbacks to most car-sharing companies, where the car must be returned to its original parking space.

According to CBC, the program will cost riders $78 per year, $28 per month of $5 per day, along with a dollar here and there for each ride. But, the company needs about 1,000 subscribers by November 30th, otherwise the city can’t let them operate. If they get enough public awareness and sponsors, Bixi is expected to launch Spring 2011.

You can learn more about Bixi in Toronto here: www.toronto.ca/legdocs/mmis/2010/cc/bgrd/backgroundfile-30125.pdf

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Toronto Condominiums: Low Maintenance and Affordable.

Posted on August 3, 2010 by Real Estate Guide| Leave a comment

Toronto homeowners appreciate condominium living, according to a recent TD Canada Trust Poll. The fourth annual TD Canada Trust Condo Poll found that Torontonians think very highly of condominium ownership, because it means less maintenance, lower prices and being closer to the hub of all the action – downtown.

“Torontonians continue to see the value in purchasing a condo, whether it is a place to call home for themselves or for their children,” said the associate vice president of Real Estate and Secure Lending at TD Canda Trust, Chris Wisniewski. “Affordability and stable monthly expenses can make condos very attractive for first-time buyers and investors,” he said in a press release.

Some of the highlights included that living downtown is a large motivation for purchasing a condominium, but the biggest reason is lower maintenance when compared to a house: 39 per cent of respondents chose this reason. Nineteen per cent chose affordability for their motivating factor, while 15 per cent chose downsizing in preparation for retirement.

The majority of respondents, 82 per cent, in the city of Toronto said they wouldn’t want to spend more than $400,000 for a two bedroom condominium, but these same people considered paying higher condominium fees fair. Only 17 per cent of respondents across Canada would pay more than $400 monthly in fees, while 26 per cent in Toronto would.

Condominiums are also seen as a great investment, with 38 per cent of respondents in Toronto saying they’d purchase a condo they wouldn’t necessarily live in.

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Worst First-Time Buyer Mistakes

Posted on August 1, 2010 by Real Estate Guide| Leave a comment

In the rush to become homeowners, some first-time buyers are skipping the pleasantries and plunging in head-first. Avoid these mistakes to save headaches later.

Not looking ahead

All you have to do is spend a day sitting around on your parents’ porch to hear all about how their neighbourhood has gone downhill. You might move out to the country and have a local farmers’ beautiful horses running wild just beyond a wire fence, who cheerfully come up to the fence to eat the carrots you offer them. In five years, that field could be a house with an owner who has a special affinity for garden “art”, outdoor knick-knacks, car parts and garden gnomes. Look towards the future of your neighbourhood, proposed developments, zoning laws, plans for any vast open spaces and any potential changes to your street.

Compromising a bit too much

Compromising is good, but not on the things that are most important. You’ll might always have to compromise when it comes to a resale home (the home with the in-ground pool or the home with the sunroom?). However, don’t purchase that perfect single bedroom home while you intend to have children in the future.

Not hiring a real estate agent

A real estate agent will set you up for success, but you can’t win if you don’t play. Realtors have the knowledge to get your current home sold while they help you find the home of your dreams. Some buyers decide to work with the seller’s agent only, but these agents are ethically bound to work for both the seller’s and buyer’s best interest, which might not bode as well for a buyer.

Not getting a home inspection

Even with all the press the consequences of not inspecting are getting, people are still failing to go through with a home inspection. While it’s tempting to close and become a homeowner for the first-time, your dream first home shouldn’t be a nightmare. It’s worth it, even just for peace of mind.

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When getting ready to sell, where do you start?

Posted on July 27, 2010 by Real Estate Guide| Leave a comment

If you’re thinking of selling your home in the near future, now is the time to perform some upkeep on the house before the real staging begins.

Check your Curb Appeal
Well in advance is when you can start on checking your curb appeal. This gives you enough time to make any repairs to the exterior of the home, fix bald spots on the lawn, repave the driveway and ensure your garden is attractive and welcoming. Curb appeal makes that important first impression, so it should be first on the list.

Walls and Roof
How do the walls and roof look from the outside? A pair of binoculars might help you spot damage that might be otherwise difficult to see. If these aren’t spotted and fixed, a buyer’s home inspection might catch them.

Basement and Garage
The basement and garage will also be on a home inspector’s list. The garage may just need a deep clean and de-clutter, but it will save you from having to do it later when you’re busy prepping your home for open houses. The basement is the most important of these two because of the structural foundation it provides a home. Any cracks or leaks should be repaired immediately.   Home inspections for sellers are always an option to consider. If it’s in your budget, an inspection can help you spot and fix problems before a buyer’s home inspection catches them, making the whole process go that much more smoothly – and quickly.

The Canadian Homeowner’s Inspection Checklist is available from the Canada Mortgage and Housing Corporation for $19.95 on their website, and offers information and solutions on what to check for periodically in and around your home. This guidance can prove especially useful if you intend to sell in the near future.

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