Category Archives: condo living

Condo flippers beware: The taxman is watching you, and has new tools at his disposal to ‘take action’

A condo building in downtown Toronto.Jack Boland/Toronto Sun/Postmedia Network

If you plan on selling a home or condo that you bought fairly recently, especially if you never actually moved into it, be wary as the tax man will be carefully watching how you report any gain on your tax return, lest it be seen as a “flip” and be fully taxable as income, rather than a half-taxable capital gain.

The Canada Revenue Agency’s ability to hunt you down over your real estate transactions has improved thanks to the recent $50-million boost in funding over five years announced in the 2019 federal budget to help “address tax non-compliance in real estate transactions.” The CRA uses advanced risk assessment tools, analytics and third-party data to detect and “take action” whenever it finds real estate transactions where the parties have failed to pay the required taxes. Specifically, the CRA is focusing on ensuring that taxpayers report all sales of their principal residence on their tax returns, properly report any capital gain derived from a real estate sale where the principal residence tax exemption does not apply, and report money made on real estate “flipping” as 100 per cent taxable income.

But what, exactly, constitutes a real estate flip? That was the subject of a recent Tax Court of Canada decision, released this week.

 

The case involved a transit operator for the Toronto Transit Commission who, along with his brother, bought and moved into a two-story, three-bedroom townhouse in Vaughan, Ontario, in 1999. His brother contributed toward the initial down payment, lived with him and together they equally shared all household expenses, including the mortgage payments. In 2003, the taxpayer’s brother met the woman who would become his future wife, whom he married in April 2007. She moved into the townhouse and they had a child together in February 2008.

Sometime prior to this, the taxpayer and his brother began discussing going their separate ways. The taxpayer testified that he wanted to sell the townhouse and move to a place that was smaller and closer to work. Indeed, in 2006 he found a smaller place, a two-bedroom condo, which was in the pre-construction phase. The tentative occupancy date of the condo was April 2008, but that date was pushed back several times, ultimately to 2010.

Prior to taking possession of the condo, however, circumstances changed. In December 2008, the brothers’ father passed away while in Jamaica, where he lived together with their mother for about six months each year. Following their father’s death, their mother did not feel safe living alone in Jamaica and in March 2009 she moved into her sons’ townhouse. The taxpayer testified that his brother and his family shared the master bedroom, while the taxpayer and their mother each occupied one of the remaining two bedrooms. This living situation didn’t last long and the taxpayer refinanced the mortgage on the townhouse in order to buy out his brother’s share of the property, enabling him and his family to move out.

In August 2010, the taxpayer took possession of the condo and immediately arranged to list it for sale, realizing that it would be too small for both he and his mother. No one lived in the condo in the interim. He sold it in October 2010 resulting in a net gain of $13,412, which the taxpayer reported as a capital gain, taxable at 50 per cent, on his 2010 tax return. The CRA reassessed him, finding that the $13,412 should have been reported as fully taxable income and slapped him with gross negligence penalties.

The common question of whether a gain from the sale of real estate is on account of income or on account of capital always comes down to the underlying facts. The courts will look to the surrounding circumstances and, perhaps most importantly, the taxpayer’s intention.

The judge reviewed the facts in light of the four factors previously enumerated by the Supreme Court of Canada by which these types of cases are decided: the taxpayer’s intention, whether the taxpayer was engaged in any way in the real estate industry, the nature and use of the property sold and the extent to which the property was financed.

The taxpayer testified that he purchased the condo with the full intention of living in it after his brother moved out of their shared townhouse; however, when his father died and his mother wished to return to Canada to live full-time, the taxpayer “changed his plans to move so that his mother could live with him at (the townhouse), which was a larger space.” He testified that since he could not afford to own both homes, he listed and sold the condo shortly after assuming title. As he testified, if not for his father’s death and his mother’s return to Canada, he would have carried out his plan to sell the townhouse and live in the condo as his primary residence.

The judge concluded that the taxpayer’s intention with respect to the condo was indeed to live in it as his primary residence. He had no secondary intention of putting the condo up for resale at the time of purchase.

The judge therefore concluded that the sale of the condo was properly reported as a capital gain and ordered the CRA to reassess on that basis and cancel the gross negligence penalties.

One final note is warranted: while justice was ultimately done and the taxpayer prevailed, it actually took him nine years and three separate visits to court to get relief. The CRA originally reassessed his 2010 capital gain as income back in 2014. The taxpayer filed a Notice of Objection to oppose the reassessment, which was reconfirmed by the CRA in January 2016. The taxpayer then had 90 days to appeal the CRA’s reassessment to the Tax Court. For a variety of reasons, he missed that deadline and ended up in Tax Court seeking an extension of the deadline to file an appeal. The Tax Court denied his request for an extension. He then went to the Federal Court of Appeal which, in June 2017, reversed the lower court’s decision and allowed an extension of time to appeal to Tax Court, which heard the case in March 2019 and released its decision this week.

 

Source: Financial Post – Jamie Golombek July 5, 2019

 

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Financial Planning & Advice Group in Toronto.

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Advice for retirees who must answer the question: Buy, sell or rent?

It wasn’t that long ago when the outlook for retirees focused on baby boomers downsizing and moving into smaller homes in the country — trading an urban lifestyle with a relaxing, rural retirement.

Fast forward 20 years, and many retirees are opting to stay in their homes for longer: renovating, upgrading and improving accessibility along the way.

A comfortable home is a comfortable lifestyle that many are not willing, or wanting, to give up.

The definition of “old” has changed.

Joseph Segal, the founder of Kingswood Capital, has just put his tony 22,000-square -foot home in Vancouver’s west side up for sale, for $63 million.

Why? Because they are downsizing to a smaller home in Vancouver.

“I’m an old man,” said the 92-year-old Segal, and “it’s a big place.”

Many of us are living longer and have healthier lifespans with various sources of retirement income, and ultimately we will ask the question: should we buy a condo, downsize to a smaller home or cash in and rent?

All options have pros and cons.

Is a condo right for you? 

Buying a condo may mean downsizing our footprint, but in many cases it doesn’t mean downsizing the cost.

Retirement communities are being pitched to seniors across the country with promises of amenities such as entertainment, hospitals to retail.

Many choose to be closer to families along with the desire to live in accommodations that are maintenance free. It can be enticing.

On the other hand, the concern over new costs such as condo fees or retirement residence fees can be worrisome.

Is it time to downsize?

In a hot real estate market, the temptation to cash in and lock in your appreciation can be overwhelming.

But before you do, Ted Rechtschaffen, president and CEO of TriDelta Financial, said in a BNN interview to ask yourself: is the house I’m in now too large or too difficult for me to manage?

And consider where your wealth is concentrated. Do you have too much of your wealth tied up in real estate? You have to live somewhere. So do you buy or rent? Unless you plan on living in a home for at least 6 years, you might be better off renting.

Bottom line

I’ve never been a fan of trying to time the market. You have to get it right at least twice. Going in and getting out.

Consider your lifestyle, potential longevity and retirement funding options. Even if you don’t pick the peak of the market you are still holding on to the lottery ticket that doesn’t have an expiration date.

You get to cash in when you need to, or want to.

Source: CTV – Patricia Lovett-ReidChief Financial Commentator, CTV News

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When you break up a year after buying a condo together

Should you let your ex buy you out of a mortgage?

Q: My son and his common-law partner bought a condo together in Vancouver last year—which has since gone up in value. The relationship did not last and she would like to buy him out as both their names are on title. Are you aware of the steps involved to legally proceed with a real estate buy out and is it a wise move from an investment point of view?

— Norma R.

A: Hi Norma. I’m sorry to hear that your son is in this position. Break-ups are hard and can be exasperated when a division of assets is necessary.

I’m assuming your fear is that if your son accepts a buyout from his ex, he may then be priced out of Vancouver’s hot property market.

To minimize the impact of future property price appreciation, he should take the money and buy his own condo or home.

Your fear—that by giving up ownership of the condo he misses out on future appreciation—neglects how difficult decisions can be with someone you choose to no longer build a future with. Just imagine it’s five years from now. Your son has met someone new and he is happy. Very happy. He wants to buy a place with his new love and asks his ex if she could buy him out of this condo. His ex, on the other hand, has just gotten out of another relationship; she is unhappy, bitter and feeling defensive. How well do you think your son’s request will be taken? Probably not all that well. Of course, things could work out totally different, but that’s just it, we don’t know. For that reason, I’m of the belief that it’s always a good idea for each part of a dissolved partnership to sever emotional, physical and financial ties. As soon as possible. Remember, it’s already hard to make unemotional decisions about what to do with an asset when hurt or regret or anger or disappoint lingers, never mind when years have passed and life has unfolded in unpredictable ways.

The dilemma, then, is how to make sure that both your son and his ex are treated fairly when splitting this asset. This should be relatively easy, as long as they agree to pay for some expertise. The first is to pay for an appraiser who specializes in divorce settlements. This appraiser will be able to provide a “fair market value” report—a snapshot of what the property is currently worth if it were sold in as-is condition on this specific day. This FMV report would give a price or price range that your son’s ex could take to the bank in order to obtain mortgage financing. She would then be responsible for paying your son half of the condo’s FMV. He can accept this money free and clear, as he doesn’t have to pay taxes since the condo was his principal residence.

As to your fear of losing out from an investment perspective, remember that he will be selling his portion of the condo to his ex and, if he chooses, buying a new condo in relatively similar markets. That puts him in a net-net position—what he gained in price appreciation on the sold condo will help with current, higher condo prices.

Finally, when it comes to the legal process please advise your son to pay a mediator or lawyer. A few hundred or even a few thousand spent on professional, unbiased advice is well worth the money spent. If he wants to focus on a quick resolution, look for a lawyer or mediator that specializes in uncontested divorces. These professionals realize that not everyone wants to battle over every cent in court and will work to find a fair, quick resolution. Also, by employing a legal professional you are assured that all the paperwork and documentation required to remove your son’s name from the property title and the mortgage documents will be complete and filed, leaving him free and clear to enjoy the rest of his life.

Source: MoneySense.ca – by   

 

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Is it cheaper to buy a house than a condo in the GTA? This expert thinks so

While many first-time buyers look to condos as a relatively affordable option, one Toronto housing market expert says that it is actually less expensive to buy a low-rise home in the GTA.

According to Realosophy Brokerage co-founder John Pasalis, when you control for the size difference between low-rise and condos in the GTA, condos are more expensive per-square-foot.

In the Maple neighbourhood of Vaughan a 1,385 square-foot rowhouse costs $685,000, while a condo of a similar size in the area would likely cost $684 per-square-foot, or $947,000. It’s just one example of a price difference that can be seen across markets in the GTA.

Pasalis believes that this discrepancy in prices can be chalked up, in part, to investor demand.

“The majority of new condominium construction is driven by investor demand — not demand from families,” he writes in a recent blog post. “Investors are willing to pay much more (on a per-square-foot basis) than end users are.”

Pasalis says that investors prefer smaller units, which typically have a better return on investment, which means that developers are creating units that are too small for families, at prices they cannot afford.

“When developers are pricing a unit, they’re thinking to themselves, why would I charge this much when I can get this much?” Pasalis tells BuzzBuzzNews. “And those prices don’t make sense for a two- to three-bedroom unit, which is likely why we’re not seeing as many of those units being built [in the GTA.]”

In order for a condo to be good-value-for-money for a young GTA family, Pasalis says that low-rise prices would have to increase at a much faster rate than they currently are.

“The rate of appreciation for low-rise homes in the 905 region isn’t going to be very high in 2018,” says Pasalis. “So I don’t see this trend changing in the next year or so.”

While Pasalis admits that for families with a budget of $400,000 or less, a condo may be the only option for homeownership, he says that those with one of $700,000 or more should consider their options.

“They can choose to buy a two-bedroom 1,000 square-foot condo in Maple for that price, or a three bedroom 1,385 square-foot row house with a finished basement and backyard. For most, it’s a pretty simple choice,” he says.

Source: BuzzBuzzHome.com –  

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Is Steeltown a steal for investors?

Source: Canadian Real Estate Wealth – Neil Sharma13 Nov 2017
With the cost of condos in Toronto surging, it’s only a matter of time before investors find the next hot market. And as it turns out, they might not have to go far.

Hamilton is enjoying a renaissance that’s, in part, being catalyzed by the astronomical cost of living in Canada’s largest city. While Hamilton’s amenities are no match for Toronto’s, they’re showing enough promise to lure millennial-aged Torontonians westward.

Brad Lamb, owner of Brad J. Lamb Realty Inc. and Lamb Development Corp., says investing in Toronto’s vertical homes is producing diminishing returns.

“It’s getting harder and harder in places like Toronto and Vancouver to buy a home, like a condo, and rent it and have it make any sense as an investment because you’re paying $1,000 per square foot,” he said. “You’re paying $500,000 for a one-bedroom condo apartment that’s 500 square feet and you’re going to rent it for $2,000 a month, but when you add up your mortgage, your condo fees and taxes, it doesn’t cover it. It certainly doesn’t cover in Vancouver, where that property is $650,000.”

Lamb says Hamilton has benefited from the black hole Toronto’s become. Steeltown has quietly cultivated a strong cultural scene in the city’s downtown, mostly in the James St. radius.

“Toronto’s real estate unaffordability shines a nice light on Hamilton, so investors are looking at alternate places to invest and prospective homeowners are looking for other places to live, where they can have a decent life in a nice home,” said Lamb. “Hamilton is a real city with a real urban vibe. It has a great parks system and an amazing amount of amenities. It’s a real city with a great food scene, and a great art scene, and a great music scene, so to me it makes sense that Hamilton is the next city. It’s a much more vibrant city now than ever. Every year it’s going to get larger, better, richer, and more expensive.”

The Hammer is a medium-sized city with over half a million residents, so it has retained its quaint, small-town charm, but Lamb believes it’s on the cusp of a population boom. Its downtown is lively on Friday and Saturday nights, and Lamb says business always follows in the tracks of younger people.

“Every month I see new things popping up that are very cool,” he said. “What gets me excited about a city is great retail. When you see young people out, it makes you want to visit and it makes businesses want to open there, because businesses want to be where young people are.”

Many millennials are flocking to Hamilton’s tech sector, where they’re paid good wages and promised bright futures, however, the linchpin is the city’s quality of life.

“Hamilton is going to experience a population growth much higher than what they’re projecting,” said Lamb. “More and more young people are frustrated with the cost of living in Toronto, and the inability of Toronto to create housing at a pace that is needed. I believe Hamilton will grow by 10,000 people a year.”

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GTA’s hottest market outside of downtown Toronto

Source: Canadian Real Estate Wealth –  Neil Sharma

Mississauga has become the GTA’s largest condo hub after Toronto, and its torrid pace of residential, infrastructure and amenity development are conspiring to make it ripe for investment.

In tandem with the Places to Grow Act, Mayor Bonnie Crombie has recalibrated the city’s growth plan to quickly turn it into an urban hub. Mississauga’s city centre already has a dazzling skyline, and it’s expecting 23 new mixed-use condominium towers.

Major builders like Daniels, Amacon, Camrost and Solmar all have major projects going up there that promise to bring life to what’s been a sleepy downtown. However, without a crucial piece of infrastructure, some of these developments might never have been conceived.

“The timing is largely a result of the LRT breaking ground next year,” Crombie told CREW. “It is 20-kilometres long with 22 stops, beginning in Port Credit, and then looping around downtown where there will be four stops. It will pull into the transit terminal – the second-biggest in the GTA – then go into Brampton.”

The city centre in Canada’s six-largest city has long been built around Square One Shopping Centre, which just received a major facelift and extension, but there are newer arrivals. Sheridan College has two campuses in or near the city centre, with a third in planning stages, and University of Toronto Mississauga isn’t very far away, either. Apartment buildings in the area are being outnumbered by condos, and students will naturally rent them.
Over the next two decades, Peel Region is expecting 300,000 new residents and 150,000 jobs, of which 60% are projected to be in Mississauga.

Zia Abbas, owner and president of Realty Point, a brokerage that’s grown to 26 franchises in only two years, says the cost per square foot in Mississauga’s condos make investing there a no-brainer.

“The average of any new launch in downtown Toronto is around $1,000 (per square foot),” he said, “with the cheapest I’ve seen in Liberty Village starting around $850 to $900 per square foot before parking. In Mississauga it’s between $640 and $670, parking included.”

Abbas says the LRT will add substantial value to the city centre’s condo cluster, and added that Mississauga has other hot spots too, like Erin Mills and the Hurontario and Eglinton neighbourhood.

“Compared to downtown Toronto where eight out of 10 people rely on transit infrastructure, in Mississauga it’s five out of 10, I’d say.”

But as Crombie’s vision for an urban Mississauga materializes, that number could start rivalling Toronto’s.

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Map Charts Toronto Condo Prices By Subway Stop

condo prices ttc stop toronto

When it comes to Toronto condo prices, location really is everything. Sure, buying any unit in the city is going to be expensive, but when you see how prices vary based on the TTC subway map, it’s obvious that Line 1 reigns supreme.

Toronto realtor Davelle Morrison recently put together this map of condo prices by TTC stop, which reveals the area around Summerhill Station as the most expensive place in the city. It’s followed closely by Museum, Bay, Bloor-Yonge, and Rosedale as other high cost areas.

condo prices ttc stop toronto

On the flip side, the most reasonable condo prices in Toronto can be found in less dense areas of the city like Scarborough and the eastern portion of North York, which includes stations like Wilson, Sheppard West, and Lawrence West.

Also interesting are the TTC stops that yield no data. The map charts condo prices within 0.3 kilometres of each station, which means that there are plenty of blank entries because there just aren’t condos within the radius under examination.

When you think about it, that’s kind of troubling in terms of Line 2. There are too many stations that lack the kind of density that urban planners laud as key to successful city building.

Source: BlogTo.com  Derek Flack

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