Tag Archives: condo living

Is a rental property a good investment?

Q:  I own a condo in my hometown of Duncan, BC, but my partner and I have just bought a house across town and have moved into it together. Should I keep the condo as a rental property or sell it and invest the equity?

Every time I ask friends or family what I should do with the property, they tell me I should keep it because ‘property values keep going up and one day, I’ll just own it!’ But my rental income wouldn’t cover my cost for keeping the condo and I feel like sinking money into the unit every month just to keep it afloat is a bad idea, no matter what the long term gain might be.

The two-bedroom condo was built in 1993 and it’s in a highly rentable part of town (most units in the area are renter-occupied). I think I could charge about $800/month for it. Vacancy rate is pretty low here, so I probably wouldn’t have too much trouble finding a tenant. The building is well maintained (I chair the strata council) and has a solid contingency reserve. I expect strata fees to increase at a rate of about 2% per year for the foreseeable future.


A: One of the best things about investing in real estate is that it is generally much more empowering than investing in stocks. Stocks are difficult for a lot of people to understand, whereas real estate can be more intuitive.

It helps to understand what you’re investing in and when it comes to a property you’ve already lived in and a neighbourhood you know, I can appreciate the appeal, Harmony.

I prefer condo investing over detached houses, because condo expenses are pretty predictable. Expenses for a house can be a lot more sporadic.

I think that real estate investors are probably better off focusing on cash flow than capital appreciation. In other words, avoid owning on speculation to sell the property in the short-term for a profit. You appear to have a long-term cash flow approach, Harmony, but the cash flow–or lack thereof–seems to be a cause for concern.

A property that runs cash flow negative can still be a good investment though, so I think you need to consider why the rent won’t cover the costs. Do you have a short amortization on your mortgage? You may be able to reduce your costs by extending the amortization on the mortgage back to 25 years so that the property runs neutral or positive.


I like to project the after-tax cash flow and net equity for a rental property over a number of years in order to fairly evaluate the property. To me, this is a true representation of the investment, rather than simply looking at the cash flow in isolation or speculating on the appreciation in the property value.

If a property runs cash flow negative, you may be able to claim a deduction on your tax return that leads to a tax refund. I say “may” because the mortgage principal is not tax-deductible and once you back that out, your property might be running cash flow positive for tax purposes, Harmony.

After you have determined the tax implications of your rental property’s cash flow, you need to consider the change in the net equity. If your property is running cash flow negative by $2,000 after-tax annually but you’re paying down your mortgage principal by $4,000 annually in the process, that’s an important consideration.

But does that mean you’ve invested $2,000 and earned $4,000? Not really. You also have to take into account how much equity you have tied up in the property. In other words, if you have $48,000 in equity in the property and you’re cash flow negative $2,000, you’ve made a $50,000 investment to earn $4,000. That’s an 8% return. Add in a bit of property value appreciation and you might have a double-digit return (at least on paper) in this notional example.

On the other hand, are the rents just not high enough in the neighbourhood to justify the carrying costs on the property? It may just be a renter’s market. In some cases, the all-in return on a rental property just isn’t enough to beat out other alternative investment options. If the condo proceeds could enable you and your partner to put down a larger down payment on the house and avoid CMHC insurance premiums, or provide cash to make an RRSP or TFSA contribution, I think you need to be sure the cash flow/net equity return is enticing.

The point is, you can’t just focus on top-line cash flow for a rental property. Dig deeper, consider the tax implications, mortgage principal repayment and your existing equity.

And while I hate to be a pessimist, the realist in me can’t help but point out that your condo represents a reasonable back-up plan in the event things don’t work out with your partner. Also keep in mind that after two years of cohabitation, the same laws that apply to married couples apply to common law couples in B.C. when it comes to a division of assets. In your case, you may both be entitled to half the house as well as half the appreciation during your relationship on your condo. So consider a consultation with a family lawyer as well.

Source: MoneySense.ca –



Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

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Toronto Condo Maintenance Fee Study 2017


How much are you paying each month in condo maintenance fees and what do those fees truly pay for? If you don’t know the answer to that question, you might want to read this study.

Maintenance fees (MF) are a constant topic in condo real estate, both during your search process and once you own a home. Back in 2015, we released a study that revealed the truths and myths behind maintenance fees in Toronto condos. But two years is a long time, especially in today’s real estate climate, so we’ve come back with our Maintenance Fee Report 2.0.


But first, a bit of maintenance fee 101


Every homeowner will pay maintenance fees in one form or another. Whether you have a freehold house or a condo apartment, a homeowner’s maintenance fees cover a wide range of home upkeep costs from lawn care to roof repair.

For a freehold house, the everyday upkeep costs will vary from year to year, depending on the condition of the house and whether there’s a need for sudden repairs. Unexpected costs are the most common worry with owning a freehold house. When a pipe bursts or the furnace quits, you can be hit with a sizable bill.

For condos, the maintenance fees tend to follow the rate of inflation, acting as a fund for the on-going upkeep of your unit and building in a range of ways. That fund, if managed well, can keep unexpected costs away for good.

That’s the key benefit of the structure of condo maintenance fees over freehold: the potential to remove sudden, unexpected costs.

It’s not surprising that there are a lot of misconceptions surrounding condo maintenance fees. In this report, we’ve picked the most common concerns that our Condo Pros hear from clients and broken them down into true or false answers.


1. Maintenance fees have no legal increase limit




There is no legal regulation regarding the amount that a condo building’s maintenance fees can be increased annually. There is a general rule that maintenance fees increase to adjust with inflation and/or the needs of the building. Condo corporations are non-profit entities made up of unit owners within the building, not an outside group. The cost of operation adjusts for the true cost of maintaining the building. The condo board members who may vote to raise maintenance fees are in the same boat as all other owners in the building.













2. Lower maintenance fees mean lower monthly costs




Maintenance fees cover different elements from building to building. Some buildings include the cost of water, heat, hydro, insurance, and other elements in the maintenance fees. Others may not. If those elements are not included in the maintenance fees, you will have to pay them separately. That’s why it’s important to know exactly what your maintenance fees cover. A low maintenance fee does not necessarily mean low monthly costs.

The maintenance fee that includes water, heat, hydro, and A/C is obviously more expensive, but these elements must be paid regardless. If you’re paying for these elements separately, the total monthly costs could be much higher than if they were included in the maintenance fees.


3. Smaller boutique buildings are less expensive than high-rise towers




Condo building maintenance fees depend on a lot of factors. At the top of the list is the building’s footprint and the number of units. Between two buildings of a similar footprint, it doesn’t matter if the buildings are five-storeys or forty. It will cost the same amount to maintain and repair the roof. That cost is dispersed across the units. The more units, the broader the dispersal; and the lower the fee for each individual unit.

Building amenities are another key contributor with a range of factors. But it still has to do with the number of units. A concierge service shared between ten boutique units will be more expensive per unit compared to a concierge shared between 400 units.

Between two buildings of a similar footprint and similar amenities, the one with more units will tend to have lower maintenance fees. However, the building with more units will have a higher opportunity for wear and tear of common elements, which might in the long run cost more to maintain.


4. Maintenance fees always spike within 3-5 years for new buildings




Every building is managed differently. Builders often market new buildings with low maintenance fees to make them more appealing to buyers. Once the condo board takes over, it is common to see fees undergo slight increases as the board fills out the reserve fund. After an initial increase, however, fees should stabilize. In the case of well managed properties, maintenance fees even come down. For instance:


Toronto condos maintenance fee decreases

5. Low maintenance fees are a sign of value




Maintenance fees should be priced in accordance with the true cost of operating and maintaining the condo building. If that true cost is low, and the maintenance fee is low, then great. But if maintenance fees are low for the sake of attracting buyers, and are not adjusted to the true costs, then you could run the risk of a mismanaged reserve fund.

A better sign of value is smart building management. The maintenance fees fill the reserve fund and are used for big repairs, upgrades, etc. If a building is poorly managed, the reserve fund may deplete, at which point the condo board will have to issue “special assessments.”

During the condo search process, however, you may still want to look for buildings with low maintenance fees as a means of maximizing your purchasing power. With a lower all-in monthly maintenance fee, you can allocate more of your monthly budget towards a mortgage payment, thereby increasing the size of the mortgage you can carry. Just be mindful of the building’s true operating costs.


6. Cost of Parking Spot and Locker are included in maintenance fee




Parking spots and lockers are often separately titled properties, which means they have their own maintenance fee attached to them. If your parking spot or locker is separately titled, then you have to pay a separate fee on top of your condo maintenance fee.


Source: via Condos.ca as of Jan 4, 2018. All data is for 2017 unless otherwise noted.
Condos.ca has worked diligently to ensure the accuracy of this information and our calculations including the removal of any small samples and data anomalies that could skew results. However, we cannot guarantee the information with 100% certainty due to factors including but not limited to potential incorrect information entered by listing brokerages or agents on MLS. This information and the views and opinions expressed here are intended for educational purposes only. Condos.ca accepts no liability for the content of this study.
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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 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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What if an Irma-like hurricane hit New York?

It sounds like a Hollywood disaster movie.

A Category 5 hurricane churning in the mid-Atlantic suddenly veers northwest — and heads straight for New York City.

The good news is that, for now, experts agree a Cat 5-sized deluge appears to be a meteorological impossibility in the U.S. Northeast, given today’s sea temperatures and weather patterns.

The bad news: A storm doesn’t need to pack the wallop of a Harvey or an Irma to knock out the region. Superstorm Sandy, whose wind speed was a relatively tame 80 miles per hour when it reached New Jersey, did $70 billion of damage in October 2012. Irma made landfall in Puerto Rico at 185 mph.

But if there’s anything we know about climate change, it’s that the boundaries of what’s possible keep shifting. As yet another hurricane, Jose, grinds up the Eastern Seaboard, the black-swan scenarios offer alarming perspective. Imagine what the Great Hurricane of New York might look like:

Winds of 100 mph and 12 inches of rain at high tide push a 16-foot storm surge through the funnel-like entrance of New York Harbor. It wouldn’t take Irma’s killer gusts or Houston’s torrential 50 inches of rain to create a wall of water swamping 500 miles of New York City coastline. The Hudson and East rivers would cascade into Manhattan, overwhelming subways, sewers and roads. Corrosive seawater would fill the aging Lincoln and Holland tunnels to New Jersey, as well as the vulnerable railway tubes beneath the Hudson.

Crazy? Climate change means meteorologists and emergency managers must now consider scenarios they never confronted before. That’s especially true given the rising sea. The water level around New York is 1.1 feet higher today than in 1900 and could increase as much as 2 feet more by 2050.

Global Warming
“With global warming and sea-level rise, what we’re seeing is the effects of these storms amplified,” Ernest Moniz, energy secretary for President Barack Obama, told Bloomberg TV.

The potential risks, however remote for now, are enormous for the New York metro area. Sandy, which hit New Jersey as a “post-tropical” storm, flooded almost 90,000 buildings, with 443,000 New Yorkers living in inundated areas. In one part of Staten Island, floodwaters reached 14 feet. Bridges reopened quickly, but close to 2 million people lost power, and cell service for more than 1 million people was reduced or lost. Rebuilding is still going on five years later.

One of the legacies of Sandy was a change in the number of evacuation zones, which the city doubled to six. Roughly 3 million New Yorkers now live in one of those zones.

Megan Pribram, assistant commissioner for planning and preparedness at the city’s Office of Emergency Management, said for a storm on the scale of Harvey, the city would evacuate some low-lying coastal areas.

Unprecedented Rain
Harvey-sized rains would be unprecedented in the U.S. Northeast, according to Allan Frei, chairman of the geography department at Hunter College in Manhattan. The most serious flooding in the region was Hurricane Irene in 2011, when 15 or so inches of rain left parts of Vermont underwater.

A Category 3 hurricane — with winds up to 129 mph — hit the New York area in 1938, when “The Long Island Express” caused 18-foot surges. Another Cat 3, Hurricane Hazel, produced wind gusts of 113 mph in Battery Park in 1954, according to Nassau County’s Office of Emergency Management.

Still, Frei said climate change increases the odds that severe rainstorms like the one in Houston could strike New York City. And if New York ever got that much rain, “it would be absolutely devastating.”

“If a storm causes a big storm surge at the same time as it’s raining, and if it hits during high tide, that would be — I can’t even imagine,” Frei said. The sewer system would probably be blocked with debris, diminishing its capacity to drain the city, he said.

New York City is updating preparedness plans to incorporate the lessons of Harvey, said Daniel Zarrilli, senior director of climate policy and chief resilience officer for Mayor Bill de Blasio.
Part of that includes the tens of billions of dollars spent since Sandy.

Billions Spent
Hospitals and public-housing complexes have been refitted to offer more flood protection at a U.S. Federal Emergency Management Agency expense of more than $10 billion. Utility Consolidated Edison Inc. has spent $1 billion for upgrades to its underground steam, electric and gas infrastructure. A $340 million boardwalk in the Rockaways has been redesigned as a sea wall protecting beaches and homes. The city has planted trees and other vegetation in flood-prone neighborhoods to soak up runoff and ease the burden on the city’s sewer system.

The NY-NJ Metropolitan Storm Surge Working Group is pushing the U.S. Army Corps of Engineers to approve a $30 billion system of retractable sea barriers at the mouth of New York Harbor and in the Throgs Neck narrows north of the East River. Similar engineering projects now protect cities including New Orleans; Rotterdam, Holland, and St. Petersburg, Russia.

The system could protect about 800 miles of coast from Elizabeth, New Jersey, to the Bronx, and as much as $1 trillion in assets, said Robert Yaro, former executive director of the Regional Plan Association, a policy-research group.

“We in New York are far behind, and among the cities on Earth we have the most to lose,” Yaro said.

Source: Bloomberg 20 Sep 2017
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