Category Archives: real estate

New Real Estate Investors: Essential Tips for How to Start and Be Successful

new-real-estate-investors-tips

New real estate investors have a lot to think about before embarking on their journey. Canada enjoys one of the hottest housing markets in the world, even in the aftermath of the Coronavirus pandemic. What’s more, the Canadian real estate market is not only heating up in major urban centres such as Toronto, Vancouver, Montreal and Ottawa. Small cities in the Prairies and Maritimes, and rural communities country-wide are generating a big buzz in today’s economy, which means the potential for a windfall.

But smart investing involves more than shelling out a down payment on a house or a condominium. It requires industry know-how, investing prowess, patience and initial capital. When you are beginning, it can be an overwhelming experience.

Don’t know where to start? Here are eight essential tips for new real estate investors:

#1. Ask Yourself These Questions

Real estate investing requires a heavy commitment. It is not something you can decide overnight. From upfront capital costs to taxes to various expenses associated with owning a property, real estate investors are forced to take on a lot of responsibility.

Therefore, before you initiate the process of investing in the housing market, ask yourself these questions:

  • How much money are you planning to invest in real estate?
  • Do you have good credit?
  • What is your personal financial situation like?
  • What funds will you use for a down payment (retirement, savings, investments)?
  • How much debt do you plan to take on (if any) in order to finance your investment?
  • Do you have any experience in real estate investing?

Real estate investing is not easy, and it will occupy some time. Make sure you’ve thought through the hard questions before you begin, to ensure that you’re starting your journey with enough foresight and the necessary resources at hand.

#2. Know How You’ll Be Generating Your Income

When you are investing in real estate, there are several different ways of generating an income. Here are the four primary methods:

  • Appreciation: A property increases in value amid changing real estate conditions.
  • Ancillary: This is when you have a mini business within a larger real estate investment, such as a vending machine in a laundry room in the apartment building.
  • Cash Flow: You collect a stream of cash from a tenant.
  • Commission Income: Real estate specialists earn a commission on properties they helped a client buy or sell.

When selecting a market to purchase in, or a property to buy, consider the amount of income that you’ll potentially receive through each of these streams. Is it worth the initial investment?

#3 Order Home Inspections Before Buying

Home inspections are a critical component of buying a property. In a red-hot real estate market, a growing number of potential homebuyers are foregoing this essential step so they can and the home almost immediately. This could be bad news.

Home inspections are crucial because they raise any red flags, such as repairs and renovations, that could cost you a lot of money once you receive the deed to the property.

How devastating would it be if you learned that the foundation needs to be fixed? This would set you back as much as $10,000, which is nothing to sneeze at – especially when you’re a beginner investor.

#4 Get an Appraisal

Property appraisals are just as important as home inspections because they inform you what the home is worth, using analysis from past, current and predicted future valuations. Moreover, if you are renting out the property, an appraisal can provide you with a ballpark figure of how much to charge per month.

#5 Focus on One Property

In the world of investing, it is recommended that diversification is the key to success. But while this is sound advice, it does not apply to real estate investors when they are starting out.

When you are beginning your real estate investment journey, it might be prudent to concentrate on one property at a time. Allocating your time and energy to more than one house or unit may prove challenging when you’re just starting out, and increases the risk of making costly mistakes.

#6 Consider Exit Strategies

Like shares in a stock or units in a mutual fund, you need to have an exit point. Once an investment reaches a certain point, you can hit the ‘sell’ button and enjoy the profits.

What is your exit strategy with your real estate investment? This is a pertinent question to put forward when you are just starting out, because you do not want to risk losing when you are on top. From a market crash to a new tax, there are many different ways someone can lose their investment, even when it seems like you’re set to experience a big win.

Most savvy real estate investors will advise you to define your exist strategy before you’ve even purchased the property. Some of the most common real estate investment exist strategies include:

  • Fix & Flip
  • Buy & Hold
  • Wholesaling
  • Seller Financing
  • Rent to Own

Learn about your options and based on your timeline and resources, consider which strategy will bring you close to your financial goal.

#7 Know Your Tax Laws

Taxes on real estate investing are complicated. Hiring a tax attorney, real estate lawyer, or accountant for your property is an investment that will pay dividends in the future.

Should you choose to go solo, it would be prudent to have a fundamental understanding of the tax laws in place regarding real estate investments.

Here are some basic elements of real estate tax law in Canada. This should not be taken as legal advice, and it is always recommended that investors consult a lawyer, but this list should give you some things to think about:

  • When you purchase a property, you pay a provincial transfer tax, which varies from province to province.
  • New home acquisitions are subject to the GST.
  • The Canadian Income Tax Act slaps a 25 per cent penalty of the gross property rental income per year.
  • Investors can usually deduct two kinds of incurred expenses: capital expenses and operating expenses.
  • Non-residents selling a Canadian property are mandated to give the federal government 50 per cent of the sale.

#8 Have Six Months of Money Reserves

One of the best pieces of advice anyone will ever give you when it comes to real estate investing is to have a minimum of six months of money reserves per property.

Even if the housing market is soaring or your investment has been reliable for the last 18 months, it is always fiscally responsible to have reserves at hand. The market could slump at any time, it could take time to find a tenant, or an emergency repair may crop up. With an adequate reserve fund, you’ll have enough cash to ride it out through any of these scenarios.

This cash, which could also be placed in a yield-bearing account, will prevent you from accessing credit markets, too.

Real estate investing has become a popular method of making money in a zero-interest-rate economy. Because the cost of borrowing is so cheap and the Canadian real estate market is booming, there is a great deal of interest in buying and selling properties, from semi-detached houses to one-bedroom condominiums. It can be a challenging experience when you are starting, but it can also be highly rewarding and profitable.

For more information on smart real estate investing tips, or for advice on which markets are ripe for investors, reach out to your local RE/MAX agent today!

Source; GlobalRemax.com – January 5th, 2021

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Home renovations: a primer on how to do them right

The bigger the home renovation, the bigger the risk something goes wrong. Fortunately, that can be avoided.

Niran Kulathungam, a financial life professional, real estate advisor and master coach with Legacy Global Inc., and owner of The Ascension Principle, has about 57 doors to his name. Moreover, as recipient of the REIN Multifamily Investor of the Year Award and Renovator of the Year Award in 2017, and winner of the Michael Millenaar Leadership Award in 2018, he’s far from a neophyte. Kulathungam says that whether renovations are undertaken for a fix and flip or because the owner intends to live in the home, a checklist is required at the outset.

“When you walk into a property, the first thing you do that most people don’t is detail the scope of the work. You might realize you need a new kitchen, but you should ask yourself a more important question: ‘How can I make this the most amazing, top-notch house on the street?’ I create a detailed budget and I figure out where the electrical outlets and lighting fixtures are going, and then I budget the cost for each of them. I budget for tiles and countertops, and I budget what it would cost to move stuff around. I budget for every single thing I’m going to do in that house.”

Kulathungam adheres to the ‘80:20 rule,’ which stipulates that, upon detailing the renovation plan, 20% of the improvements will comprise 80% of the value enhancement. Those improvements include renovations to the home’s exterior because of how important curb appeal is.

“Decisions to buy or rent a property are often made when the person drives by,” he said. “Would you be happy bringing your mother-in-law over to this house? Is it something you’d be proud of showing her or anybody else?”

Kitchen

Having a beautiful kitchen is a bare minimum requirement for any home that has a chance of selling in today’s housing market, but that often isn’t enough.

Just as Kulathungam asks himself how his renovated house will be the most beautiful on the street, he asks how his kitchen can exist in a class of its own?

“What about your kitchen says, ‘Wow!’ That’s where I tend to spend a little extra money. People still use cheap countertops in their kitchens, but in this day and age I always put in stone and quartz, and hardly ever any granite.”

Don’t think kitchen renovations begin and end with a nice countertop, added Kulathungam. The backsplash is a relatively inexpensive way to beautify, and differentiate, a kitchen.

“The proof is in the pudding on this one; I get good results with it. Standard practice right now is to do white subway tile for the backsplash. My question is: if every renovation has that, what can I do to stand apart? I will spend extra money on really nice backsplash because it will give me a return.”

Lighting

When it comes to lighting, don’t be miserly. Unlike most real estate investors, Kulathungam doesn’t mind spending more money on lighting if a high-end fixture or chandelier greets prospective buyers and renters upon their entry into the home, because it augurs yet more outstanding features to come.

“I want my kitchen and living room to rock,” said Kulathungam. “We renovated a bungalow in Stoney Creek and ended up vaulting the ceiling. By doing that, I dropped down three really nice lights, and to this day when anybody walks in, they go, ‘Wow!’ Lighting is crucial.”

Bathroom

To say the bathroom needs to look nice is an understatement — “you want to go for a spa-like feeling,” said Kulathungam.

That doesn’t just mean making good use of open space, especially if the home is a fix and flip; it means optimizing the things you cannot see. And what a wonderful surprise that could be for house hunters.

“Put in subfloor heating because it feels amazing and people absolutely love it. Lighting is, of course, important, and in some bathrooms I’ve done walk-in showers with glass walls and a sloped floor at the bottom leading into the drain. It’s more costly to do, but in a smaller bathroom it gives the appearance of space. If you renovate in an area where you attract families with young kids, you want bathtubs. If there aren’t young kids, then go with the walk-in.

“Put in nice taps, not cheap ones. If you renovate in Toronto, I would look at adding a towel warming rack. Although it isn’t that functional, it has that wow factor.”

Bedroom

According to Kulathungam, not much is needed to upgrade a master bedroom, however, because clutter is seldom spoken about in positive terms, and because bedrooms are proverbial sanctuaries, this room should feel commodious. Additionally, extensive closet space will make a believer out of even the most fastidious buyer.

“In downtown Toronto, closet space can be limiting. Put in barn sliding doors, with the slider outside the closet so that the entire door slides on the outside, instead of regular doors.”

Lighting inside closets, especially if you enlarge the space, is a great idea. Kulathungam recommends lighting that turns on when the door opens, and shuts when it closes. He also recommends figuring out where the television set will go and putting wiring in early on, as well as adding a modernizing feature.

“In the master bedroom and kitchen, put in some USB ports so that you can plug your cell phone directly into it,” said Kulathungam. “Little things like that go a long way towards doing a really nice renovation.”

Water issues

Identifying potential water issues is crucial because the house’s foundation, not to mention the costly renovations, could be compromised. Kulathungam begins his inspection of the house on its roof and works his way down each storey to the basement.

“Make sure downspouts are directed away from the foundation of the house,” he said, “and figure out what the issues are before you put flooring in.”

Condo renovations

These renovations are a little trickier than house renos, but many potential complications can be nipped in the bud early on in the process by simply being a good neighbour. For one, speak to the condo board right away and give them a heads up about what you’re planning to do in the unit, even though they can’t technically stop you, because certain things are allowed while others are prohibited. The structure falls under the purview of the condo board.

“I knock on the neighbours’ doors and give them my private cell phone number so that they can call me if they have any concerns,” Kulathungam. “I also offer to help them with their renovations by putting them in touch with my guys.”

Being a good neighbour doesn’t just stop there, though.

“In a condo, be respectful of your neighbours with respect to noise,” he added. “Make sure your guys renovate during normal work hours. I tell crews to keep music low and I tell them not to swear because noise carries in a condo.”

The cardinal rule of fix and flips

Plan ahead and always have a reserve budget, advises Kulathungam, because you may miss something lurking behind a wall. Most importantly, your name—your brand—is all over the property, so make sure you renovate it as if you’re its end user.

“Budget for things you did not initially budget for, and when you find a problem, don’t cover it up. Fix it. Your name is on the line. In this space, once you get a reputation as someone who can produce a great product—one where you don’t cut corners, one where you finish on budget and treat trades well, which helps you attract the best tradespeople on your subsequent projects—you also attract joint venture capital. If these lessons mean that you won’t make as much money on your first flip, rest assured that you will over the long haul, and you will create a name for yourself.”

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. 

Source: Canadian Real Estate Magazine – Neil Sharma 06 Jan 2021

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Micro unit financing made easy

Securing financing from A institutions for micro condos—categorized as anything below about 500 sq ft—has always been thorny, and with the COVID-19 pandemic taking a bite out of many downtown condo markets, it’s certain to remain so. However, it can still be done.

The big banks are chary about financing these units because they’re rarely end user-occupied, and nearly always purchased as income properties.

“They’re typically investor units or short-term rentals, essentially serving as hotel substitutes, and there are issues around financing,” said Toronto-based Simeon Papailias, co-founder and managing partner of REC Canada. “The bank always mitigates risk on a default scenario, and it’s not a very marketable property. They look at the heavier risk they take by lending on a micro-unit as opposed to a regular unit.

“There are special programs the five major banks rotate between themselves, depending on what the banks’ goals are for the year. CIBC can do it one year, then TD could the next. There are special programs made for this, and it’s something a prudent investor should know.” 

Alternatively, the B channel is a much less knotty way to secure micro condo financing, although the rate will be higher.

 “I had private financing with Home Trust, at the time, on a 380 sq ft micro-unit investment property in Yorkville back in 2011, when those units just started becoming more common in the marketplace,” continued Papailias. “Today, around 30% of most condo buildings are under 500 square feet, and the reason has everything to do with affordability.”

Locale is another variable, says Dustan Woodhouse, president of Mortgage Architects. A micro-unit in a building near a university or college, for example, is far more likely to receive funding than a similar-sized condo situated around fewer amenities.

Securing financing for a resale micro-unit is a little easier, he added.

“Pull title on the property,” said Woodhouse. “Pull title on that unit and pull title on four more units in the building and see who the lender is on the title. Then you’ll know who to call.”

The pandemic has left downtown condo markets reeling, but as any savvy investor knows, that’s when opportunity comes knocking.

“Prices on micro condos are dropping the furthest and the fastest over any other type of properties. On the one end of the spectrum, detached houses are rocketing upward, and at the other end of the spectrum you have micro condos dropping in price.”

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. 

Source: Canadian Real Estate Wealth – Neil Sharma 16 Dec 2020

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The Best Ways to Invest in Real Estate

Young adult welcoming older man into home

When it comes to investing in real estate, most people look at owning their primary residence with the hope and confidence the value of the property will rise in time as they build equity in their investment.

It’s a sound and fairly safe way to grow your investment if you keep your eye on the long-term. But for many novices they’re likely not aware growing an investment in real estate can take many other forms-everything from renting out a property or a vacation home to buying a home, fixing it up and selling it for a higher price to investing in a Real Estate Investment Trust (REIT).

A professional women and man walking down the sidewalk of a soon to be residential area.

As with any investment, each approach carries with it different risks–so you’ll want to thoroughly research your options to ensure you’re investing your money responsibly and strategically. 

“Realizing the dream of homeownership has proven over the years, decades and decades, to be one of the best investments available to Canadians. If you look historically and you had X number of dollars to put in a downpayment . . . what you put down and what you paid, your investment has outperformed most other vehicles that are available to Canadians,” said Costa Poulopoulos, Chair of the Canadian Real Estate Association, adding people are paying down their mortgage while the property value rises so they’re winning on both ways.

A middle aged couple looking at financial statements in a modern dinning room

“Another key point is you hear people talk about the stock market and mutual funds and RRSPs as go-to things. And sure there’s returns there and yields. But you can’t live in a mutual fund. So not only are you getting appreciation and a tremendous return on your initial investment but it’s actually serving two purposes-it’s a secure investment and it’s housing.

“There are many vehicles available for investing from the novice first time trying to figure out a secondary home and starting small to sophisticated investors, conglomerates, REITs, whatever the case may be.”

For example, Poulopoulos said many people buy properties to rent out. In this regard, the property value can appreciate over time but also you’re generating revenue.  

One of the key things to consider when buying rental properties is the financial costs including mortgage payment and paying for utilities to taxes. And of course, unless you’re hiring someone to take care of the property you do have responsibilities as a landlord you might personally have to handle.

A row of multi material town homes.

Romana King, a personal finance columnist and real estate expert, said it’s relatively simple to make money using real estate as the investment asset whether it’s speculation buying and flipping a home or investing sweat equity and flipping.

“Simple in that you don’t require a lot of specialized knowledge so you don’t have to go to school for anything. You don’t need a qualification. But with that said it’s not easy in that you do still have to treat it like a business so you really need to be aware of the numbers involved,” she said.

Young adult welcoming older man into home

That’s really important when it comes to real estate flipping. The homework required here is to make sure you understand what exactly is selling in that neighbourhood, what the current trends are in that neighbourhood and whether or not what you propose fits in with those two current snapshots.

Timing is also important. It can make the difference in achieving a great return or losing on your investment.

King said she is a big fan of investing in a rental property. 

“You can make money on rental purchases as long as you have a cash flow positive budget sheet. If you don’t and if there isn’t enough wiggle room in that budget then you’re buying a property that’s priced too high for you and you need to actually rethink your strategy. It’s still a good strategy but consider a lower price point. Even if you get lower rent all of those numbers have to make sense,” she added.

King advises people to save up a larger down payment and look for a multi-unit property to buy whether it’s a house that can be divided into two units or a triplex. That spreads your risk with more rental revenue.

She said REITs are incredible vehicles and they can be a great gateway into real estate investment. 

“It does give you a better idea of how extraordinary real estate investments can be. They can be fantastic holdings. It also helps you diversify a little bit,” added King. “I really love REITs. I love REITs for anyone who really wants to get into real estate investing but doesn’t want to do the work. That’s not a negative. Not everyone has time to do all the investigation and crunch the math and make sure you have cash flow positive. If you don’t want to do that, and you want to get the upside of real estate investment, REITs are awesome. They’re excellent.”

Young couple talking to an investor

Whether you’re a novice or a sophisticated and experienced investor, the real estate industry presents a golden opportunity to invest your money and grow that investment if one takes the time to research the many vehicles available. 

Source: The article above is for information purposes and is not legal or financial advice or a substitute for legal counsel.  Mario ToneguzziMario Toneguzzi, based in Calgary has 37 years of experience as a daily newspaper writer, columnist and editor. He worked for 35 years at the Calgary Herald

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CRA cracking down on abuse of principal residence exemptions, but their assessments aren’t written in stone

The sale of one's home offers Canadians the best opportunity for a major tax-free gain.
The sale of one’s home offers Canadians the best opportunity for a major tax-free gain. PHOTO BY DAVID ZALUBOWSKI/AP PHOTO FILES

There are very few things that are tax-free: investment income in your TFSA, lottery and casino winnings, purchasing six or more doughnuts (see what happens to the GST/HST next time you try it) and the gain from the sale of your principal residence are among the limited exceptions. With the odds of winning the lottery being slim at best, it’s the sale of one’s home that offers Canadians the best opportunity for a major tax-free gain.

In recent years, however, the Canada Revenue Agency has been cracking down on taxpayers who, in its view, are inappropriately claiming the principal residence exemption (PRE), particularly as it relates to flipping houses. If it’s determined that you’re regularly buying and selling homes, you can be denied the PRE, and be taxed on any profits as 100 per cent taxable business income, versus 50 per cent taxable capital gains. Take the recent case, decided in September, of an Ontario couple who bought and sold multiple homes between 2007 and 2012.

The couple, who live in the Ottawa area, bought and sold houses in each of 2007, 2008, 2009, 2011 and 2012 and claimed the PRE to shelter the gain on each sale from tax. The CRA disagreed and sought to tax the income from the disposition of each of the five houses as business income. The CRA also levied gross negligence penalties.

Homes #1, #2 and #3

The taxpayer operated a concrete pouring business, and later, a foundation repair business.

In August 2006, the couple bought House #1. After moving in and doing some renovations and painting, they soon became dissatisfied with the house — it was located close to an industrial site and large trucks passed the house from 6 a.m. until late at night. The noise from the trucks was loud and the vibrations made the house shake. As a result, the couple, having only lived there for approximately ten months, decided to move, selling the home for a gain of $69,801 in 2007.

They then constructed House #2, their “dream home,” with substantial upgrades, and moved in September of 2007; however, the couple “quickly became unhappy with the neighbourhood…(and)…became concerned for (their twin) girls’ security, due to a ‘coyote invasion.’” The couple sold the home, moving out in Aug. 2008 having lived there for eleven months. The profit from the 2008 sale was $273,434.

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The following month, the couple moved into House #3, which they had constructed. Soon after they moved in, the real estate agent who had sold them their prior home approached them and asked if he could show their new house to his clients who apparently made an offer that the taxpayer couldn’t refuse. It was sold in Sept. 2009 for a substantial profit of $403,776 above the cost of the land and construction.

Houses #4 and #5

In Dec. 2009, the couple moved into newly purchased House #4, a townhouse on which they had made improvements. It turned out that the townhouse “was not a good buy” for the couple: the taxpayer’s truck was too large to be parked properly in the laneway and the neighbours complained about the couple “having loud social gatherings.” In Jan. 2011, they sold the home for a profit of $54,913.

They then moved into Home #5, making some improvements and doing some landscaping. But, in the end, this home, too, was “not their dream home,” and they sold it and moved out in July 2012, making a profit of $187,574. After selling it, they moved into a sixth home, where they still resided at the time of the trial.

The decision

In determining whether the sale of real estate is considered business income, the courts have traditionally considered the following factors: the nature of the property sold and how the taxpayer used it; the length of the ownership period; the frequency or number of other similar transactions by the taxpayer; the work expended on or in connection with the property; the circumstances giving rise to the sale of the property; and the taxpayer’s motive regarding the sale of the property at the time of purchase.

At the time of each purchase, the couple argued that it was clear that their motivation was not to sell the houses, testifying that “if their motivations had been to sell the houses at a profit, they would have not customized the houses and added the many upgrades.”

With respect to the sales in 2007, 2008 and 2009, the taxpayer also argued that it was too late for the CRA to reassess those tax years as they should be considered “statute barred.” The CRA is generally prohibited from reassessing an individual taxpayer more than three years after the original reassessment unless it can be shown that the taxpayer made “a false statement attributable to misrepresentation arising from carelessness, neglect or wilful default.”

Each year, the taxpayer consulted his accountant to obtain professional advice at the time of filing his tax returns. He explained to his CPA that his intentions were to stay in the houses, but “for legitimate reasons and circumstances beyond his control, he and his spouse had decided to sell the houses.”

The judge agreed that there was no misrepresentation attributable to neglect, carelessness or willful default. “It is clear … that simply because a taxpayer has adopted a position that contradicts the (CRA’s) position does not in itself mean a taxpayer has made a misrepresentation that would allow the (CRA) to reassess after the normal period.” Thus, the CRA was precluded from reassessing the taxpayer on the sales of Home #1, #2 and #3 in the three statute-barred years.

The judge, however, was of the view that the taxpayer’s “primary intention at the time of purchase of both (House #4 and #5) was to resell them at a profit. If it was not his primary intention, then the possibility of reselling them at profit was certainly a secondary intention motivating him to purchase both houses.” She thus ruled that the PREs did not apply to the gains on the sales of Houses #4 and #5 and they were properly taxable as business income.

Finally, the judge dismissed all gross negligence penalties assessed by the CRA since the taxpayer, based on the advice of his accountant, was under the impression that he could claim the PRE each year. As she wrote, “In my view, the (CRA) did not establish that (the taxpayer) knowingly make a false statement or omission when filing his income tax returns for the 2011 and 2012 taxation years.”

Note that since 2016, you are required to report all dispositions of a principal residence on Schedule 3 of your tax return, making it much easier for the CRA to review your PRE claim.

Source: Financial Post November 6, 2020: Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto.

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What happens to a home or mortgage when someone dies? Many Canadians don’t know

What happens to a home or mortgage when someone dies? Many Canadians don

Despite our best efforts to distract ourselves from the inevitable – a cultural landscape built on invincible superheroes and the glorification of youth, a willingness to ignore the slow-motion destruction of the planet, the power wielded by religions that promise eternal life in exchange for free will – death, folks, is coming for us all.

Canadians who think their properties will automatically pass to their descendants when they die could be in for an unpleasant surprise if they come back to haunt them. As Bury explains, if a homeowner dies without a will, or with a will that somehow fails to specify who the deceased’s property is meant for, what happens to the home becomes a provincial decision. Each province has its own formula for distributing the deceased’s assets that takes priority over the dead person’s wishes.

Many readers, particularly those who help Canadians purchase homes, may have the impression that homeowners instinctively recognize the necessity of including their properties in their wills long before the reaper gives them a lift to the other side. But new data from Angus Reid and online estate planning platform Willful shows an alarming lack of knowledge among Canadians when it comes to what happens to their properties and their mortgages after they die.

When asked “Do you know what happens to your home if you pass away without a will?” only 21 percent of respondents provided the correct answer, that it will be distributed to an individual’s dependents according to a provincial formula. The remaining 79 percent included people who mistakenly think their properties will automatically go to their spouse or children (48 percent) or to the government (6 percent), while 24 percent admitted they don’t know.

That lack of understanding is undoubtedly related to the fact that only 51 percent of homeowners surveyed reported having up-to-date wills. Thirty-six percent reported not having a will at all.

Willful CEO Erin Bury found the latter figure shocking.

“I expected that that number would be much better once they owned a home because as soon as you accumulate a large asset or you get married or you have kids, those are the inflection points that cause you to think about getting a will,” Bury says.

The fact that Canadians are in the dark about after-death planning with regard to real estate is somewhat less surprising. There are always barriers preventing people from putting a will together, from an unwillingness to confront one’s own mortality, to the costs involved, to the one thing that is almost as common as death itself: the human propensity to procrastinate.

“It seems like one of those things you can put off until tomorrow,” Bury says. “I’m a journalism grad – I don’t do anything without a deadline – and you don’t have a deadline for creating your will.”

At least not one anyone can truly be aware of.

Implications of ignorance

A misunderstanding of what happens to a person’s property once they’ve died can cause extreme distress, both financial and emotional, for her surviving family members.

Canadians who think their properties will automatically pass to their descendants could be in for an unpleasant surprise if they come back to haunt them. As Bury explains, even when a will lists a spouse or child as a beneficiary, each province has its own formula for distributing the deceased’s assets that takes priority over the dead person’s wishes.

“It may not actually be divided the way that you would want,” she says. “And if you have a common law spouse, unless they’re a joint owner of the home, they are not accounted for under that provincial formula.”

In most cases, the executor identified in a person’s will will be instructed to sell the deceased’s assets, although the executor has the power to do what they feel is in the surviving family members’ best interest. If Bury dies – her example! – and leaves the home to her husband, it’s unlikely that her executor would do anything beyond transferring the title and mortgage.

If a person dies and names no executor, things slow down considerably. In this case, the court will appoint an administrator to the deceased’s case. The administrator plays the same role as an executor, but because they don’t have the power to act until the court appoints them, descendants hoping to sell the deceased’s home could be waiting weeks or months until an administrator is in place.

Having an executor in place is a far better course of action. Administrators, Bury says, will seek guidance from a person’s beneficiaries, “but they do not have to listen to them.”

The survey also found that a majority of Canadian homeowners don’t know what happens to their mortgages when they die. Only 28 percent of respondents realize that their mortgage needs to be paid by the beneficiary who receives their properties.

“It does not disappear, unfortunately,” says Bury, although that’s exactly what 12 percent of survey respondents think happens to a mortgage when a borrower dies.

Property owners, particularly investors, must also keep in mind the tax bills awaiting their surviving family members. The CRA treats a dead individual’s assets as if they were all sold on the day prior to his death, meaning capital gains taxes on non-primary residents need to be paid – even if the home is left to a beneficiary. Joint ownership of a property with a spouse can provide a clean and legal work-around; otherwise, those left behind will need to foot the bill.

“Everyone works their entire life to leave this meaningful legacy for their beneficiaries,” Bury says, “and I’m not sure that Canadians really understand what’s going to end up in their beneficiaries’ pockets at the end of the day.”

It’s the unknowns that make death so scary. Having a will in place might not alleviate all of a person’s fears about the infinite void we’re all inching toward, but it can reduce the greatest one of all: Will my family be taken care of when I’m no longer around to protect them? 

Source: Mortgage Broker News by Clayton Jarvis 09 Oct 2020

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Canadian Cities Where It’s Cheaper to Buy a Home Today Vs. 5 Years Ago: REPORT

Canadian Cities Where It’s Cheaper to Buy a Home Today Vs. 5 Years Ago: REPORT

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National home sales and listings continued to climb in housing markets across the country this August, as some of the pressure from pent-up demand was released this summer when pandemic restrictions eased. Buyers returning to the market did so with refocused housing priorities; a growing number began looking to suburban and rural markets in search of greater square footage relative to what’s available in denser urban centres.

Despite the surge in demand, the Canada Housing and Mortgage Corporation (CMHC) recently reiterated their forecast that home prices are likely to dip in the coming months; citing pandemic-induced unemployment and slower in-bound migration weighing on demand, particularly in metropolitan cities like Toronto and Vancouver. 

To understand how current home prices compare to the past, Zoocasa used data from the Canadian Real Estate Association (CREA) to highlight trends in benchmark home prices for apartments and single-family houses in 15 Canadian regions over the past 5 years. We highlight the extent to which benchmark home prices grew or contracted in each region, offering a glimpse at regions where housing is more or less affordable today than it was 5 years ago. 

Overall, the Canadian benchmark apartment price rose a staggering 52% in 5 years, from $315,600 in August 2015 to $478,700 in August 2020. The benchmark price for single-family houses across Canada rose 40% from $486,800 to $683,400. That being said, a closer look at each area included in our analysis reveals that certain housing markets faced a much higher pace of price growth than others, with others noting benchmark price declines that resulted in housing becoming more affordable today than it was 5 years ago. 

Prairie Markets Including Calgary and Edmonton More Affordable Today Than 5 Years Ago

Overall, Prairie cities offer first-time home buyers some of the best affordability in the country, with benchmark prices under $250,000 for apartments and under $500,000 for single-family houses this August. In fact, the Prairies are one of the few regions where a benchmark apartment and single-family house is more affordable today than it was 5 years ago. 

In Calgary, Canada’s third most populous city, the benchmark apartment price was $248,500 in August 2020, dropping 14% or $41,900 since 2015. The benchmark single-family house in Calgary is now $466,000, which is 6% or $30,800 cheaper than the price 5 years ago. Similarly, in Edmonton, the benchmark apartment is 17%, or $37,300, cheaper than it was 5 years ago at $183,900 and the benchmark single-family house cost $377,300 in August this year, vs. $396,800 in August 2015, a drop of 5% or $19,500. 

Given their proximity to the Canadian Rockies, both Calgary and Edmonton offer good opportunities for buyers with remote-working flexibility seeking greater square footage and green space. Comparatively, the benchmark apartment price in Toronto is nearly double the price of the benchmark apartment in Calgary, and the benchmark single-family house in Toronto is more than double Calgary. Additionally, both Calgary and Edmonton have a much lower population density at approx. 1,900 people per square kilometer in Calgary and 1,400 people per square kilometer in Edmonton versus 4,700 people per square kilometer in Toronto.  

Elsewhere in the Prairies, compared to 5 years ago, the benchmark apartment price is 21% lower in Regina ($174,800), 13% lower in Saskatoon ($180,200), and 3% lower in Winnipeg ($196,800). Compared to 5 years ago, single-family house prices are 3% lower in Regina ($286,900) and Saskatoon ($319,400), but up 17% in Winnipeg to $300,500.

Benchmark Apartment Prices Rose Over 50% in 7 Markets Over the Past 5 Years 

Of the 15 markets included in our analysis, the benchmark price for apartments rose by more than 50% in 7 markets. Fraser Valley, BC, where the benchmark price increased 104% to $437,300, led the country in terms of the increase in benchmark prices for apartments over the past 5 years. 

Fraser Valley  was followed by a number of markets in Southern Ontario. Niagara Region led price growth in the area, with the benchmark price growing 87% to $354,400. This was followed by Greater Toronto where the benchmark price rose 78% to $592,900, Hamilton-Burlington where the price rose 74% to $471,100 and Guelph where there was a 73% increase in the benchmark apartment price to $379,000. 

This was followed by Victoria, where the benchmark apartment price grew 65% to $504,900 and Greater Vancouver where it rose 63% to $685,800. Although Greater Vancouver didn’t see the highest percentage growth in benchmark apartment price, it experienced the largest increase in dollar amount at +$265,100. 

Ottawa and Montreal also saw gains in the benchmark apartment price since five years ago, but at 46% and 35%, respectively.

Benchmark Prices for Single-Family Houses Grew 50% or more in 7 Regions Over the Past 5 Years 

7 out of 15 markets included in our analysis also noted a 50% or higher increase in the benchmark price for single-family houses. 

Niagara Region experienced the highest growth, with the benchmark price for single-family houses almost doubling, with a staggering 95% increase in 5 years to $490,500. This was followed by Hamilton-Burligton (71%), Guelph (63%), Fraser Valley (62%), Ottawa (53%), Greater Toronto (51%), and Victoria (50%). 

Montreal, Greater Vancouver and Winnipeg single-family benchmark prices also rose, but at 46%, 28% and 17% respectively. 

Our infographic below maps and compares benchmark prices for apartments and single-family houses for each region included in our analysis in August 2020 and August 2015, noting the extent to which prices changed in each region. Further below, find a list of the top regions where it is cheaper to buy an apartment and a single-family house today than it was 5 years ago, and a list of the regions where benchmark prices for apartments and single-family houses have risen the most since August 2015.

Top 3 Regions Where it’s Cheaper to Purchase the Benchmark Apartment Today vs. 5 Years Ago (Based on %)

1. Regina 

Benchmark Apartment Price, August 2020: $174,800

5-Year % Difference: -21%

5-Year $ Difference: -$46,900

2. Edmonton

Benchmark Apartment Price, August 2020: $183,900

5-Year % Difference: -17%

5-Year $ Difference: -$37,300

3. St. John’s 

Benchmark Apartment Price, August 2020: $236,200

5-Year % Difference: -16%

5-Year $ Difference: -$43,700

Top 3 Regions Where it’s Cheaper to Purchase the Benchmark Single-Family House Today vs. 5 Years Ago (Based on %)

1. Calgary 

Benchmark Single-Family House Price, August 2020: $466,000

5-Year % Difference: -6%

5-Year $ Difference: -$30,800

2. St John’s

Benchmark Single-Family House Price, August 2020: $271,600

5-Year % Difference: -6%

5-Year $ Difference: -$17,600

3. Edmonton

Benchmark Single-Family House Price, August 2020: $377,300

5-Year % Difference: -5%

5-Year $ Difference: -$19,500

Top 3 Regions Where it’s More Expensive to Purchase the Benchmark Apartment Today vs. 5 Years Ago (Based on %) 

1. Fraser Valley

Benchmark Apartment Price, August 2020: $437,300

5-Year % Difference: +104%

5-Year $ Difference: +$223,400

2. Niagara Region

Benchmark Apartment Price, August 2020: $354,400

5-Year % Difference: +87%

5-Year $ Difference: +$165,100

3. Greater Toronto

Benchmark Apartment Price, August 2020: $592,900

5-Year % Difference: +78%

5-Year $ Difference: +$259,800

Top 3 Regions Where it’s More Expensive to Purchase the Benchmark Single-Family House Today vs. 5 Years Ago (Based on %) 

1. Niagara Region

Benchmark Single-Family House Price, August 2020: $490,500

5-Year % Difference: +95%

5-Year $ Difference: +$239,300

2. Hamilton-Burlington

Benchmark Single-Family House Price, August 2020: $751,300

5-Year % Difference: +71%

5-Year $ Difference: +$311,300

3. Guelph

Benchmark Single-Family House Price, August 2020: $651,600

5-Year % Difference: +63%

5-Year $ Difference: +$251,000

Sources

Benchmark apartment and benchmark single-family house prices were sourced from the Canadian Real Estate Association. 

Data use to calculate population density was sourced from Calgary Economic Development, City of Edmonton and City of Toronto.  

Source: Zoocasa – BY JANNINE RANE September 29, 2020

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New Home Checklist: 6 To-Do’s Before Settling In

A locksmith changing a door lock.

Moving into a new home is exciting–it represents a fresh start with new rooms to decorate, and a new neighbourhood to explore. However, setting up your house can also be exhausting and stressful. But don’t worry–we’ve compiled a helpful checklist of things to cross off before you settle in. And if you’re moving to a new city, your REALTOR® is a great resource for advice about tasks to take care of, who to tap for help and how tofind the best schools for your kids.

A man in a red shirt contemplates his finances.

1. Update your address and transfer utilities

Before you move in, you’ll need to update your address, which is linked to everything from your driver’s license to your health card. Be sure to inform everyone–your bank, insurance company, credit cards and loyalty programs–so you won’t miss important notices. You may also want to set up temporary mail-forwarding with Canada Post. While you’re at it, get in touch with utility companies several weeks before the move, so they can transfer and activate your electricity, gas, telephone and internet accounts over to the new place. 

A locksmith changing a door lock.

2. Change your locks and codes

Get some peace of mind–who knows how many keys to your house the previous owners gave out–by installing new deadbolts yourself for as little as $30 per lock, or calling a locksmith for about $100 for a service call. Make extra sets of keys for trusted family members or friends, in case you get locked out or need them to check the property when you’re away. Change your garage door and alarm codes, too.

A person replacing the battery in a smoke alarm.

3. Test your smoke and carbon monoxide detectors

Home safety experts recommend checking your home’s smoke and carbon monoxide detectors every six months, and changing the batteries then, too. Be sure there’s one on each floor of the house. Many local fire departments offer free inspections and testing, so ask your REALTOR® about this.

A family washing windows.

4. Get your home squeaky clean

Before moving all your belongings in, take some time to deep clean all the nooks and crannies, or hire a professional to do it for you for about $100. Don’t forget to get your carpets steamed–cleaning services charge about $65 an hour, or you can rent a machine for about $80 and do it yourself. This is also a great time to put on a fresh coat of paint throughout the house and get rid of an lingering pet smells.

5. Get to know your new home’s systems

Becoming a homeowner means understanding how everything works so you can maintain your investment. Know where your property’s HVAC (air conditioning and heating) system, circuit-breaker and main water shut-off valves are located, plus how to turn them on and off in an emergency. It’s a good idea to get your home’s systems inspected (if your home inspector didn’t already do so). 

Pro tip: Check your water meter at the beginning and end of a two-hour period during which no water is being used. If the reading changes, you likely have a leak that needs fixing.

A man taking out his garbage.

6. Make a home maintenance schedule

Your home inspection report might contain suggestions for repairs to carry out, as well as tips for when and how to perform seasonal maintenance checks to your house.  Set up a filing system for manuals and instructions, and create a to-do list you can refer to throughout the year. It’s recommended you save about 1% of your home’s purchase price each year for repairs. Since you’ll probably need the services of a plumber, electrician, exterminator or landscaper at some point, research local businesses. 

Your REALTOR® can also help you navigate the whole moving process and also recommend reputable tradespeople, so don’t hesitate to reach out so all your questions get answered as you celebrate this new chapter in your life.

Source: Realtor.ca –  Wendy Helfenbaum

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Home sales fell 14% in March as COVID-19 settled in, CREA says


A pedestrian wearing a mask walks past a real estate sign in Toronto. The coronavirus pandemic put a chill on home sales across the country in March. (Michael Wilson/CBC)

Home sales fell by 14 per cent in March as COVID-19 lockdowns slowed the market to a crawl, the Canadian Real Estate Association says.

The group that represents 130,000 realtors across the country said Wednesday that the month started out strong but slowed dramatically in the second half, “as the economic turmoil and physical distancing rules surrounding the COVID-19 pandemic caused both buyers and sellers to increasingly retreat to the sidelines.”

Sales were down just about everywhere from February’s level, including in the following cities:

  • Greater Toronto Area, down 20.8 per cent.
  • Montreal, down 13.3 per cent.
  • Greater Vancouver area, down 2.9 per cent.
  • The Fraser Valley, down 13.6 per cent.
  • Calgary, down 26.3 per cent.
  • Edmonton, down 13.2 per cent.
  • Winnipeg, down 7.3 per cent.
  • Hamilton-Burlington, down 24.9 per cent.
  • Ottawa, down 7.9 per cent.

“March 2020 will be remembered around the planet for a long time,” CREA president Jason Stephen said. “Canadian home sales and listings were increasing heading into what was expected to be a busy spring [but] after Friday the 13th, everything went sideways.”

CREA’s senior economist Shaun Cathcart said the month started out strong and then completely froze in the second half, which threw the overall monthly figure out of whack.

“Preliminary data from the first week of April suggest both sales and new listings were only about half of what would be normal for that time of year,” he said.

On the price side, the average sale price for a home that sold during the month was just over $540,000. That’s basically unchanged from the average selling price in February, but it is up by 12.5 per cent compared to the average seen in March of last year.

Source: CBC.ca – Apr 15, 2020 9:47 AM ET 
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Condo Investors: How a retail director turned a $75,000 wedding gift into a $1.4-million portfolio

Her first investment was a $289,000 pre-construction condo in CityPlace
The buyer

Sandy Silva, a 39-year-old sales director at Tulip Retail, a software platform for retail companies, with her seven-year-old son, Xavier.

The backstory

In 1999, Sandy started dating her soon-to-be husband, Ryan, in Waterloo. She studied economics at Wilfrid Laurier University while he took political science at the University of Waterloo. In 2002, they got engaged, and Sandy’s father gave them an early wedding gift of $75,000. Sandy and Ryan used that money for a down payment on a $289,000 pre-construction two-bedroom condo in CityPlace. In 2005, they got married and moved into the unit.

Within a few years, they were thinking about having children, and being near family became a priority. At the time, they both worked in Toronto: she was a buyer for Sporting Life and he was a supervisor at an automotive manufacturing company. They used their combined savings, along with equity from refinancing their condo, to buy a $470,000 detached house in Brampton, where Sandy’s parents lived. Meanwhile, to make some extra cash, they rented out their CityPlace condo for $2,150 a month.

The value of their properties increased enough, after four years, that they decided to leverage their equity to scoop up more real estate. They knew, from having lived in the Waterloo Region during their college years, that demand exceeded supply in the area. Ryan also had family in Waterloo, which meant someone could take care of their investment properties. So they bought two detached houses in Waterloo for a combined $462,000 and rented them to university students for a total of $4,675 a month. The rental income was enough to pay their mortgage and turn a profit. In 2013, Xavier was born.

Three years later, Sandy and Ryan separated. Ryan sold the two Waterloo homes for a total of $540,000 and split the $78,000 profit with Sandy. He also kept the place in Brampton. Sandy held on to the CityPlace condo and took $250,000 in equity from the Brampton property, which she used to invest in Rent Frock Repeat, a designer dress rental company.

The bottom line

Sandy recently joined Tulip Retail as a sales director. She lives part time at her CityPlace condo, which is now worth $850,000, otherwise she stays at her parents’ place in Brampton with Xavier. And Sandy’s not done investing. She recently bought a one-bedroom condo in Vaughan—which she plans to use as a rental property—for $525,000. Her portfolio is now worth $1.375 million. Before the end of 2020, Sandy would like to buy a place in Brampton.

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