Category Archives: investing

The red-hot market that has a property type for every investor

Forget the GTA: This one booming market could be the next big thing, according to one veteran.

It’s being billed as Silicon Valley of the North and for good reason.  Due to many factors, including an influx of technology companies, Waterloo is one housing market that is ripe for the investor picking, according to Karl Innanen, managing director at Colliers International.

“Waterloo has become recognized as a diverse market – it has universities, it’s home to some of the largest insurance companies, its known for its technology and manufacturing sectors,” Innanen told Canadian Real Estate Wealth. “It’s not a one-horse town so it allows for great diversity in terms of investment options.”

It’s become a hot and, indeed, safe market for investors because of the large transactions and liquidity that has poured in over the past few years, according to Innanen.

The Waterloo Region is also unique in that it comprises three different cities that each offer their own investment options.

Waterloo offers opportunities for office investment; Cambridge is known for its industrial offersings; and Kitchener is home to many urban office opportunities.

And there are plenty of residential opportunities throughout the region for investors as well.

“Residential is front-and-centre in the Waterloo Region; there are 3,200 new homes built every year … and the demand is there (for rentals),” Innanen said. “There are a lot of condos being built; 2011 was the first time there were more apartments built than there were single-family homes.”

Innanen argues the Waterloo region is a better option for investors than the GTA.

“A lot of people are pushed out of the GTA because of product availability; Waterloo also offers higher returns (than the GTA),” he said. “You will get a 1% higher cap rate in the Waterloo region than the GTA for apartments. And apartments offer the lowest cap rates in the region.”

Source; Canadian Real Estate Wealth – by Justin da Rosa 26 Feb 2016

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Why Real Estate Is One of the Best Ways to Make Money

Why real estate is one of the best ways to make money

After a decade of saving and investing, I think real estate is one of the best ways to make money and build wealth.  Here is why.

There are many ways to turn a profit with real estate.

When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the good time. With real estate you can make money in many ways, I can name those 12 off the top of my head, and there are many more.

  • Rental income. That one is the main source of profit investors are going for when buying a rental, and doesn’t need an explanation.
  • Buying low. You turn an instant profit if you manage to buy a property for under market value. Think foreclosures, quick sales, and awesome negotiation skills.
  • Selling high. You can make extra money if you stage the property to attract buyers over market value. With stocks, you always buy and sell at market value. With real estate, you can try to beat the market.
  • Increasing equity. If you take a mortgage to finance a rental, you are increasing your equity with every mortgage payment. I put down 25% on my last rental and with mortgage repayments am around 33% equity at the moment, those 8% of the property value were paid by rents and are increasing my net worth every month.
  • Leverage increases returns. If you put 20% down on a property, you will still receive rental income based on 100% of the property value, making it a great return for your 20%. Say your property is worth $100,000 and you charge $750 in rent with $500 in mortgage, taxes and fees. You have a $250 profit on $20,000 down. That is $3,000 a year, or a cool 15% return on your deposit. Good luck trying to get an almost guaranteed 15% on stocks.
  • Leverage makes you profit on the full selling price. If that same $100,000 property you bought with $20,000 down sells for $120,000 a few years later, you get your $20,000 plus principal payments back, and a $20,000 profit. It is only a 20% profit over the full value of the property, but thanks to your leverage, you are making a profit of 100%, minus principal payments to the $80,000 mortgage. The bigger the leverage, the greater the return.
  • Renting smaller units. I rent three rooms by the room, to three tenants. I can charge more than if one family was renting the whole place. You can divide your family house into a duplex or a triplex and increase the rent.
  • Renting to businesses. Businesses are a different type of tenure and rents are generally higher. They are also safer if you choose a well known business to rent to.
  • Tax benefits on interest. Depending on your country of residence, you can often deduce the mortgage interest from the rental income, and create a tax free profit.
  • Tax benefits on improvements. You can also deduce the cost of the improvements from the rental income, while the added value to the property is yours to keep.
  • Profit from a lump sum on a refinance. So you bought your $100,000 place, and put $10,000 worth of improvements, that the tenants paid back with rents. The property is now worth $125,000 because your contractor did a great job, you can refinance to get the $25,000 cash and put 25% down on your next $100,000 rental!
  • Profit from extra cash flow on a refinance. If you are able to refinance the property to lower your mortgage bill payments while the rent stays the same, you are generating more cash flow every month. You can build a cushion for maintenance, save up for a deposit on a new rental, or have more passive income to live off.


Why real estate is one of the best ways to make money

There is less risk in real estate leverage than in stock leverage

Stocks are volatile. Penny stocks and currencies even more so. Some trading companies will allow you to trade on leverage. That means if you buy 1,000,000 shares of a penny stock valued at $0.05, the trading company will not require that you fund your account with the full $50,000, it will let you buy the shares with only $5,000, BUT if the share goes down to $0.045, which it almost certainly will, you will get a margin call and your whole account balance will be wiped out.

With real estate, you can put the same $5,000 as a deposit on a $50,000 or even a $100,000 house, and rent it. If you have a renter, you don’t really care about the ups and downs of the market, as you are able to meet your monthly repayments. If the property sits empty for a while, all you have to do to keep it is pay the mortgage yourself. It isn’t fun, but it is much better than seeing your whole trading account annihilated by a margin call.

Real estate is what you do with it

I bought my first rental cash when I was 22, let the property rot and did not invest a dime in repairs in 10 years. The result? A low rent and quite a bad tenant. He was there before I bought the place and I wanted to have him out before renovating, but he beat me to the game, stayed for 10 years, died, I had to evict his widow, and managed to sell the place a few months later for double the money.

My last rental is a different story. I bought a brand new property, furnished it nicely, set up rental prices that are not outrageous but will drive away the worst tenants, and positions the place as an upscale flatshare for young professionals, instead of a bottom range share for first year students.

What you plan on doing with the property should determine the area you buy in, the type of unit you buy, the state of the property, and all details about said property. If you are not handy and hate to renovate, buy a new place or somewhere you can afford to hire out the renovation without tanking your operation. If you want to rent to families only, buy a nice family home in a good school district. For young professionals, find an affordable studio or 1 bed that is an easy commute from a dynamic zone of employment.

The same thing applies to managing the place yourself or not. Property managers will happily do the job for a fee, and if you are busy, that fee will be worth your time and then some. It will however decrease your profit. Choose to do it yourself, and you will have all sorts of headaches, and a source of income you can no longer call passive.

How you profit from real estate depends on YOU. When you buy a stock, you never know, for as much as you study the company, if its CEO isn’t about to leave and the next one will run the company to the ground, if there is a merger with a less profitable company in the pipeline, or if an earthquake will destroy the production plant in China. Your real estate investment will be a result of your own efforts to renovate a place, promote it, screen a proper tenant, and keep it up over the years. And real estate is tangible. When all the markets tank, you are trying to hold to your losing positions in hopes they will go up in a few months, or hurrying to sell at a loss before it gets worse. Real estate will bring you a monthly rent to cover the mortgage, even if you have negative equity. And in periods of economic turmoil, when people lose their houses to foreclosure or first time buyers are denied mortgages by the banks, you will have more potential renters than ever. When things go back to normal, home prices will increase and you can make a nice exit, sit it out until the next crisis, and go back in the game to buy low. Don’t want to time the market? Just buy. Now is as good a time as any, for all the reasons mentioned above.

Source: Huffington Post – Pauline Paquin; 02/16/2016 04:42 pm


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The next hot Southern Ontario spots?

If you’ve been priced out of Toronto, these are the areas you may want to invest in.

“The average investor has been priced out of Toronto,” Nick Vescio, a seasoned investor who focuses on Southern Ontario, told CREW.

Indeed. Toronto’s momentum held steady in January, according to the Toronto Real Estate Board.

Prices were up 11.21% year-over-year in January throughout the GTA. The average price in the city of Toronto last month was $636,728.

The average price for a detached home increased by 11.6% to $1,061,789; the average semi-detached increased 12.8% to $515,024; and the average condo increased by 3.1% to $319,855.

That’s great news for current investors, but so good for prospective buyers. Especially considering the forecasted interest in even more sales this year.

“It is clear that the handoff from 2015 to 2016 was a strong one.  This is not surprising given that recent polling conducted for TREB by Ipsos suggested 12 per cent of GTA households were seriously considering the purchase of a home in 2016,” Toronto Real Estate Board President Mark McLean said.  “Buying intentions are strong for this year as households continue to see home ownership as an affordable long-term investment.”

That doesn’t mean investors interested in Southern Ontario don’t have great opportunities.

For his part, Vescio focused on investing in Oakville before focusing on Hamilton – both decisions that resulted in his taking advantage of impressive price gains.

“Homes in Hamilton can be had for a third of the price (as those in Toronto) and the proximity to Toronto makes it attractive,” Vescio said. “St. Catherines is the next Hamilton, though.”

The average price in St. Catherines was an attractive $285,451 in December of this year. And that was up 6.4% year-over-year.

Source: Canadian Real Estate Wealth – by Justin da Rosa05 Feb 2016

Thinking of purchasing, refinancing or investing? Contact the Ray C. McMillan Mortgage Team and get APPROVED!!!

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Have you committed one of the seven deadly sins?

No, I’m not referring to gluttony, wrath, or sloth. I’m talking about the Seven Deadly Sins of Real Estate Investing.

Ok, maybe they aren’t physically deadly – but they are possibly catastrophic to your business.

If you are concerned about the health of your investments, make sure to steer clear from these seven sins:

  1. Buying Based On Future Value
    Also known as “pro forma” numbers, many investors buy property based on what it “could” be worth, not what it is worth. Real estate agents are especially known for emphasizing the future possible value (they are the eternal optimists) but neglecting the facts on the ground. Make sure you don’t fall victim to this sin and always know exactly what the current value is and don’t buy anything for what could be.
  2. Blindly Following A Guru
    Real estate investing is not a system. Anytime I see that phrase I cringe just a little bit. The typical real estate guru would have you believe that by simply following a step-by-step system you can make millions in real estate. Millions can be made, but its not by following a system – it’s from following your brain. Investing is about solving problems, and if your “system” is unable to account for flexibility or challenges – your dead in the water.
  3. Being Unrealistic With the Math
    The one deadly sin nearly every investor has made is not being realistic with the math. Whether overestimating future value, underestimating the repair costs on a project, or simply not taking the time to actually do the numbers- poor math will destroy an investment.
  4. Relaxing on the Record Keeping
    For many investors, “record keeping” is nothing more than an attic full of vintage Barry Manilow albums (get it? “record keeping”… no? Okay, easy – I’m an investor, not a stand up comedian!) If you don’t know the health of your investments – how can you make informed decisions for the future of your investments? By keeping adequate records and staying up-to-date with your finances, you position yourself to know exactly how well your investments are performing while also ensuring the long-term stability of your investment plan. Additionally, keeping good records makes tax time a breeze as well as simplifying the process when applying for a loan. For more information on record keeping for investors, check out Arthur’s post on record keeping.
  5. Confusing Investing with Gambling
    Do you invest or do you gamble? Do you even know the difference? Buying something with the hopes that it may someday bring a profit is gambling (or speculating). Flipping, building spec homes, and investing in raw land often resemble gambling much closer than investing. Notice I didn’t say that gambling was one of the Seven Deadly Sins of Real Estate Investing. The sin is not in gambling, but in confusing the two. Each strategy requires a different skill set and different financial resources. Be sure of what you are trying to accomplish and make sure you have the tools necessary.
  6. Over Leveraging Yourself
    Perhaps the most common real estate sin over the first decade of this century, over leveraging is the act of carrying too much debt than what the properties can maintain. If you are financing everything to the point that there is no cashflow, it is very difficult to weather the storms when they rise up. Just ask the thousands of bankrupt investors who learned this lesson the hard way.
  7. Getting Bored and Getting Fancy
    The path to wealth through real estate investing is not difficult, but it also isn’t super fast. In an earlier post on BiggerPockets, I mentioned how real estate investing was like playing a game of Super Mario Bros. The game is fairly simple and straightforward, thus easy to master. The difficulty, however, is that once the system has been mastered it is easy to get bored and decide to get fancy. Many investors know that wealth and retirement can be created using real estate, but get bored and try to hurry the process up by speculating and buying deals that don’t fit their plan. This is a sure-fire way to lose most or all of one’s wealth. Remember, it can take years to build up a solid retirement portfolio but only one stupid mistake to lose it all.

Source: Business Insider; Sep. 10, 2012

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Student housing 2.0: How developers are filling a niche for kids, parents and investors

Varsity Properties

Frat house … just whisper those two little words and watch the neighbours cringe. For many, the mere idea of having a group of university students sharing a home on their street conjures up images of John Belushi’s wild and crazy antics at Delta Tau Chi in the classic 1978 comedy Animal House.

But have no fear, condo developers are doing their best to put drunken toga parties on the back burner. Judging by the new offerings, student living has gone upscale as brand new mid-rise and high-rise buildings sprout up in university towns. Not only are the suites furnished but the amenity spaces boast fitness studios, outdoor lounges and catering kitchens on par with condo buildings typically built for these kids’ parents and grandparents. To boot, investors can snap up a suite or two and then hand them over to a management company that will secure the tenants and cater to their every need.

“It’s an opportunity to own a piece of real estate that is revenue-generating from Day One and we expect it will be occupied for all time,” says A.J. Keilty, president and CEO of Varsity Properties of purpose-built student housing. “Universities are a fairly permanent thing. They don’t really move around or close down that much. In fact, I don’t think I’ve ever seen one [do that]. So when you have well-located real estate — in this case directly abutting and touching campus — you are always at the doorstep of a willing audience and people who need your product.”

Keilty knows of what he speaks, having studied commerce at Queen’s University in Kingston, Ont. while living in a typical frat house: seven bedrooms, one bathroom and masses of garbage. The landlord lived three hours away and didn’t respond quickly when repairs were necessary, he recalls, and that awakened a business idea. For the past 12 years, Varsity Properties has been “building communities for students and providing hotel services,” with 1,333 beds in hundreds of suites currently being managed at purpose-built student condo projects in three Ontario cities.

Right now, Keilty’s team is gearing up for University Studios (, an eight-storey, 308-unit building set to rise steps from Oshawa’s Durham College and University of Ontario Institute of Technology (UOIT). The bachelor units, co-developed by Podium Developments and Building Capital, will have suites ranging from 274 to 376 square feet (hence their “SmartStudios” moniker) though each room promises a private bathroom, study area, bed-table combo, storage space plus shared kitchen and washer-dryer. There’s a lounge and kitchen area on each floor for entertaining company, plus ground-floor amenities with four meeting rooms, a fitness facility, outdoor lounge and barbecue area. Once sales launch, in early 2016, parents or investors can pick up units starting at $149,990 and with maintenance fees starting at $115 per month. It’s anticipated each suite will net an average monthly rent of $1,000. Occupancy is Summer 2018.

“So when you have well-located real estate … you are always
at the doorstep of a willing audience and people who need your product.”

With 10,000 undergraduate and graduate students at UOIT and many seeking accommodation nearby, administrators are pleased with the action. Says Murray Lapp, UOIT’s vice-president of human resources and services: “The private sector is providing housing options that meet a variety of UOIT students’ needs, choices that complement the residence options they have on campus. It would be also be prudent for developers to ensure the availability of grocery and other service outlets on the ground floor of new off-campus facilities, where students can work and shop.”

Interestingly, it’s proud Moms and Dads who are pushing developers to build new digs for their kids.

“As parents, if we’re going to invest in our children, we want to give them the best chance of succeeding by putting them in an environment that’s safe and has all the student life programs to make them do well,” says David Choo, owner of Ashcroft Homes, which is behind the 26-storey, 329-unit Capital Hall Condos ( project, managed by Envie, near Ottawa’s Carleton University. “We see Envie as the brand that takes them from … second-year right to graduation to grad school to young professionals. It’s condo-style living with a ton of amenities all geared to that young adult.”

Choo is heavily invested in Ottawa, having topped off the 30th floor of a student rental building set to open in the spring. He’s now marketing Capital Hall next door, featuring furnished studios, one- and two-bedrooms ranging from 317 to 645 square feet and priced from $179,900 to $350,000 (its three- and four-bedroom units are rentals only). There will be 25,000 square feet of amenities including fitness, party and games rooms, courtyard, bicycle spaces, café, convenience store and a food market. Students will be able to walk, cycle or take the O-Train to school and access a social calendar of cooking classes, skating club and more. Occupancy is May 2018. Envie manages the building, which is 50 per cent sold.

“… If you invest in student condos,” says Choo, “you don’t have to worry how the economy is doing. There’s a steady stream of demand.”

Darryl Firsten, president of In8 Developments, is convinced that investing in student condos is a money-maker. His company has put up eight purpose-built student projects in Waterloo, Ont. Now In8 is touting a 20-storey, 223-unit project called The Capitol Condos ( near Queen’s, complete with gym, rooftop terrace, study lounge and restaurant. Suites range from 453 to 1,118 square feet and $239,900 to $449,900 with occupancy in September 2018. It’s 50 per cent sold and it’s managed by In8.

“[Investors] get a brand new condo, Tarion warranty, it’s managed, it’s fully rented and furnished,” Firsten says. “It’s a worry-free investment.”

This has Ali Naqvi intrigued. The Markham, Ont., resident, 43, owns several condos and uses a certain calculation to determine worthy investments. This one seems like a good buy, especially because it’s managed by an outside company. Though Naqvi admits he’s a tad wary of renting to students, “I have enough comfort to know that some of the lease agreements that we’re going to do will tie in students and their parents to be responsible for XYZ. So if they destroy the apartment, they’re going to be responsible for it. That’s how I’m going to structure it.”

Source: Suzanne Wintrob, Special to National Post | January 18, 2016

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Profiting From Investment Real Estate


  • Learn how to find the right location and chose the right property to flip for profit.
  • Which mortgage products are best suited for real estate investors.
  • Alternative lending for hard to place real estate investment deals
  • Locating profitable rental properties.


RSVP to Sam Marji or Ray McMillan. to confirm your attendance

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The new biggest challenge for investors

Until recently, I always believed the toughest part of investing in real estate was finding the “right” income property (eg. good geographic metrics, under market rents, purpose built, good shape, good location, etc.).  In the past, my ability to find “diamonds in the rough” is what made me an effective and successful investor.  However, my opinion has now changed.

Looking back over my past few deals I realize that in today’s environment, putting the right financing in place for an investment property is now more difficult than finding a good investment property and dictates your ultimate success or failure.


Most novice investors just assume that the bank is going to use the purchase price when determining Loan-to-value.  They look at how much money they have available and work backwards.  If they have $300,000, they can use $250,000 for the down payment and $50,000 for closing costs.  This means they can buy a property for $1 million and the bank will give them a mortgage of $750,000 based on a 75% LTV. However this couldn’t be further from the truth today.

How did this situation come about?

Historically low interest rates in Canada have been the catalyst leading to:

  • Cheap cost of funds
  • Market cap compression
  • Increased demand for real estate as alternative investments (Bonds, T-Bills, GIC’s) offer poor returns
  • Limited supply

As an investor looking to acquire an income property, you welcome low interest rates but cheap cost of funds is a double edged sword.  On the one hand you want as low an interest rate as possible to minimize expenses.  However, there is a direct correlation between cost of funds and market caps.  Both move in sync which means as interest rates go down, market caps follow suit (which means the price goes up).

Why does this matter?

Market cap compression directly affects cash flow.  For instance, most income properties on the market in Toronto, and in surrounding areas, are being listed with cap rates of 4% to 4.5% (and in prime Toronto locations sub-3% market caps).  The problem is that there is a big disconnect between actual valuations dictated by the market and the criteria that banks use to value an income properties for financing purposes.

Just this week I approached two majors banks regarding an income property in a prime Toronto location and was told they use a cap rate of 6% to determine value.  A 6% cap rate on a good income property in Toronto is like a unicorn — they just don’t exist.

The numbers

Most people, like myself, like to see the real math and numbers to truly understand a concept.  So here it is.

Assume a property nets $40,000.  Based on a 4% cap, a seller would list that property for $1,000,000.  Bring that same property to the bank for financing and based on a 6% cap, that same property would be valued at $667,000.  The bank will typically offer 75% LTV which would translate into a mortgage of $500,000. The purchaser would have to come up with the balance, or $500,000 in cash, to complete the transaction.  One of the great benefits of investing in real estate historically has been the ability to leverage and borrow from the bank.

As if that wasn’t a big enough obstacle…

To make things even tougher, most banks have their own internal guidelines when determining a property’s cash flow and they differ significantly from what you see on the property’s fact sheet when it is for sale.

For example, most real estate agents will assign $400-$500 in annual repairs and maintenance per unit under expenses on the income statement.  Banks and CMHC tend to use $800-$900 per unit. If you plan to manage the property yourself, it doesn’t matter, they will assign a 4% (of gross) management expense. 

Capital expenditures warrant another 1.5% to 2% of gross.  What does this mean?  It means that if you apply these guidelines the cash flow gets even weaker making it tougher to get the financing you need.

Unless you are a REIT or have deep pockets, the erosion of leverage makes it almost impossible for the average investor to enter this market.

The solution?

That will be my next entry. Stay tuned…

Author: Paul Kondakos, BA, LL.B, MBA – Professional Real Estate Investor by CRE 27 Nov 2015

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

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