The fluctuating housing market can make purchasing a house a bit of a gamble. If you buy when prices are high and the value of your home goes down, most homeowners can just wait it out. Houses are long-term investments and eventually with time you know the market will rise again.
“If you bought at the market high and prices drop, you could be underwater on paper, which means you owe more than the home is worth. If you’re not planning to sell and you can meet your payments, you don’t lose,” says Scott Terrio, manager of consumer insolvency for debt relief experts Hoyes, Michalos & Associates. “It becomes a problem for someone who discovers they can’t carry the mortgage payment plus all their other debt, especially if they’ve lost a job, dealt with an illness or they’ve simply run out of credit.” In those instances, it may make fiscal sense for the homeowner to abandon their mortgage and walk away. The home goes into foreclosure — the home is turned over to the lender, who attempts to recover their investment by forcing the sale of the home and using the money to pay off most of the debt.
This happened frequently in the U.S. during the financial crash in 2008; lenders were forced to absorb the unrecovered debt. Could this happen in Canada? It’s not quite as simple here. “In Ontario and most other provinces, there are full recourse rules, which means you can’t walk away from your mortgage obligation without recourse from the lender, who can pursue mortgage shortfalls in court,” explains Terrio. However, homeowners can file a proposal or bankruptcy, which makes any shortfall unsecured (like other debt such as student loans, payday loans, car loans, line of credit and credit card debt). “Once a proposal or bankruptcy is filed, you can’t be sued for any shortfall, which is the difference between what you owe and what the lender can get for the house.”
What is the difference between filing a proposal and filing for bankruptcy? They’re both solutions to resolve debt and provide legal protection from creditors (for example, creditors stop wage garnishments). In bankruptcy, you surrender certain assets in exchange to discharge debt. When you file a proposal, you make an offer to settle debt for less than you owe.
“Proposals are filed more frequently with our clients now than bankruptcy,” explains Terrio. While you have to make a better offer to your creditor than what they would get if you filed bankruptcy, “it has less impact on your credit long-term and you can keep your belongings, which makes it a very realistic and favourable option for many.”
Researchers found the median price of homes in the 50 most populated metro areas across the country and “calculated monthly principal, interest, property tax and insurance payments buyers have to pay for a 30-year fixed rate mortgage,” says How Much.
They then calculated what salary would be needed to afford each home, assuming a 20 percent down payment and that the total housing payment would not make up more than 28 percent of gross income.
How Much: Annual income needed to buy a home
Based on the data, here are the top 10 cities where you to earn the most money to buy a typical home:
1. San Jose, California
Annual income needed to afford a home: $274,623
2. San Francisco, California
Annual income needed to afford a home: $213,727
3. San Diego, California
Annual income needed to afford a home: $130,986
4. Los Angeles, California
Annual income needed to afford a home: $114,908
5. Boston, Massachusetts
Annual income needed to afford a home: $109,411
6. Seattle, Washington
Annual income needed to afford a home: $109,275
7. New York, New York
Annual income needed to afford a home: $103,235
8. Washington, D.C.
Annual income needed to afford a home: $96,144
9. Denver, Colorado
Annual income needed to afford a home: $93,263
10. Portland, Oregon
Annual income needed to afford a home: $85,369
“Median household income across the United States recently reached a record high, which is great news for workers,” says How Much. “The bad news is that isn’t enough to afford a typical home in 25 out of the 50 cities on our map.” That’s especially true on the West Coast.
“Median household income across the United States recently reached a record high, which is great news for workers. The bad news is that isn’t enough to afford a typical home in 25 out of the 50 cities on our map.”-HowMuch.net
“The second tier of expensive locales is along the East Coast,” How Much reports, “led by the familiar hot spots of unaffordable housing like Boston, New York and Washington, D.C.”
In Portland and Denver, meanwhile, homes aren’t as expensive as they are in California or New York, but workers would still need to make about $85,000 a year to afford to buy.
Ahead of legalization, most property owners believe cannabis use will decrease the value of their residential assets
The majority of landlords polled in a new survey have responded negatively to cannabis use in rental units, going so far as to offer lower rent to tenants who agree to not smoking in units.
The survey conducted by real estate website Zoocasa was conducting in anticipation of cannabis legalization, coming into effect across Canada tomorrow (October 17).
A whopping 88 per cent of landlords say they plan to prohibit smoking in their buildings, with 65 per cent willing to consider lowering rent for tenants who don’t smoke cannabis inside their suites. Sixty-four per cent of Canadians agree that building management or strata councils should have the right to ban cannabis use.
Tenants seem to be on the same page – with only 35 per cent of respondents who identify as renters affirming their right to smoke cannabis inside their homes.
Stigma towards cannabis use remains high among homeowners and buyers, despite impending legalization; sixty-four per cent of property owners still believe smoking inside of homes with decrease the property’s value. Fifty-seven percent believe growing cannabis inside a home for personal use would decrease its resale value. Prospective buyers agree, with 52 per cent saying they’d be less likely to purchase a home if they knew marijuana had been cultivated there.
Cannabis retailers are also seen as less-than-desirable neighbors, with only 31 per cent of Canadians comfortable living near one. Fifty per cent of Generation Xers (those born between 1961 and 1981) believe a dispensary in the neighbourhood would devalue their home.
Zoocasa conducted the online survey of more than 1,300 Canadians from Sept. 27 to Oct. 3.
For years, no one quite knew what would become of the 200-acre historical agricultural property known as the Britannia Farm.
Now, it looks like plans to transform the property are closer to becoming reality.
City of Mississauga council approved changing the zoning of a 32 acre parcel of land located on Britannia Farm from institutional to mixed use. That means that the city and the Peel District School Board (which owns the farm) are now free to transform the parcel of land located on the northwest corner of Hurontario Street and Bristol and move forward with a proposal to have the land include a variety of housing types, including affordable housing.
The entirety of the Britannia Farm is currently zoned as institutional, with the exception of the Cooksville Creek.
This specific parcel on the Farm has been the subject of discussions for a number of years, as approval has been necessary for a variety of components to prepare the lands. Back in 2010, the Heritage Advisory Committee needed to give the PDSB approval to move three heritage properties from the 32 acre parcel to another area of the farm.
The historic properties on the site include the red brick Britannia Schoolhouse (c. 1870), Britannia Farmhouse (c. 1860 and 1870), two-storey Gardney-Dunton House (c. 1830) and Conniver Barn (c. 1880).
The purpose of moving the heritage buildings is to clear land in order to develop housing, as well as to move the properties to a section of the farm that will be used for educational purposes. The historical portion will also include an improved Farm lane, a historic corridor that links the various zones together and connects the Farm to Hurontario Street.
However, a report at the Heritage Advisory Committee on April 10 showcased images that suggested the heritage buildings could remain where they are. In these images, buildings were simply built around the heritage properties. Councillor Carolyn Parrish expressed displeasure with the idea of building around heritage buildings and said that it would be something that could be devastating to the significance of the properties.
Most community members who attended a public meeting back in October 2017 did approve of the idea of moving the heritage properties to another place on the farm. Parrish says that, at this point in time, approximately 99 per cent of the individuals within the community are convinced that this is a good project.
As for what will happen going forward, the PDSB will look at either selling the land to a developer or leasing the lands for continuous revenue streams. Once this happens, the city will receive studies and agreements for review. New housing is a possibility, as these may include a draft plan for subdivisions and/or condos and a site plan.
There will be other reports regarding stormwater management, a feasibility study and an environmental assessment among other documentation.
Phylis Hampshire, a resident that came forward during question period, asked if the citizens of Mississauga can somehow be assured that this will be the only proposed development on the land.
“It’s a very special piece of land in the middle of Mississauga, it would be nice if it could stay open,” says Hampshire.
“We adopted [the land] as a future outdoor education centre. The current Peel Board Chair has done everything in her power to keep that land the way it was intended by King William the Fourth, which was for the benefit of the children of Peel,” says Parrish. “As far as selling any more pieces of land off, it’s not going to happen. This piece at the front is just so they can finance 168 acres of outdoor education centre.”
Historical properties on the farm
The development of these lands is important, as they’re located near the future Hurontario LRT stop and the soon-to-be-reinvigorated Hurontario Street corridor. For that reason, the city says the parcel must be developed with attention to its surroundings. In short, it’s an attractive yet sensitive project. Since the parcel surrounds 170 acres of historic and cultural landscape and the connection to downtown, the development should include a number of criteria discussed in the Master Plan.
The Master Plan recommends student-focused environmental and agricultural programs, the establishment of landscape zones, a development parcel that will be 32 acres in size and phased public access in partnership with the city of Mississauga.
It is recommended that the proposed development include open spaces, parks, trees, and “a place to foster community.” For example, it is recommended that parking for any of the proposed developments be primarily underground and out of view from the public realm.
One issue that came to light was a part of the report that included development of a road within the park. Parrish cautioned staff at the city, saying “an area of caution I would give to [city staff], is when you talk about the potential opportunities for future road construction, it better not be on the 168 acres [of outdoor educational space].”
Since the Britannia Farm has just received approval for the mixed use zoning, the city has taken the first step in what could be a long process. In the future, there will be more discussion on the planning of the site with developers and potential for sale of the land.
It will be interesting to see what unfolds next.
“It’s a very proud day for me,” says Parrish who been on this project since she was a trustee on the school board with Councillor George Carlson.
Janet McDougall, chair of the public board, was acknowledged at the meeting for her significant contribution to the project over the years, and with McDougall retiring this year, it will be a legacy project for her as she enters retirement.
“Janet I want to congratulate you myself for all your years of service, thank you, and also for protecting this jewel that our residents are very protective of as well. It’s a piece of land that people don’t want to see altered in any way, you’ve respected that and we thank you for your plans,” says Mayor Bonnie Crombie.
Editor’s Note: A previous version of this story misidentified Janet McDougall as Janice Baker, Mississauga’s city manager. We regret the error.
I was determined to own property, in some form. Sadly, I couldn’t afford anything in my home city of Toronto, so I decided to buy a property in a neighbouring city and rent it out until, or if, I was ready to move.
After looking at several possibilities, I decided to buy in Hamilton because of transit options, affordable housing prices and a low vacancy rate.
I found a cute bungalow divided in two units. After all the paperwork went through, I found great tenants.
It’s now one year later, and I’ve learned a lot. Here are five lessons I learned:
Plan for Extra Costs
I needed way more money than I thought in order to buy and manage a rental property. The closing costs alone were thousands of dollars in cash. In Ontario, closing costs include land transfer tax, legal fees, a home inspection, pre-paid property tax and PST on Canada Mortgage and Housing Corporation insurance — if you put less than 20 per cent down. My closing costs totalled $6,000.
In the first year, I spent $2,700 on maintenance, and that’s for a small, fully-renovated house. Just recently, a windstorm knocked shingles off my roof. Totally unexpected and $500 to fix.
Budget for all anticipated expenses, and then add a few thousand dollars to be safe.
Figure Out the Rent
How do you know if you have enough money to be a landlord? Easy: use a spreadsheet. You need to know exactly how much your house costs to run so that you can charge sufficient rent.
And how embarrassing would it be if you forgot whether a tenant paid you first and last months’ rent? Think of an investment property like a business, and keep your books accordingly.
Don’t Forget Tax Time
I was shocked when I had to pay $1,500 this April to the Canada Revenue Agency (CRA). The CRA taxes rental income at your marginal tax rate. I now have an automated monthly savings set up to set aside tax money and avoid last-minute scrambling.
Check Your Tenant’s Credit Worthiness
What you need as a landlord is a tenant who pays their rent promptly each month. A credit score can tell you if a person has a history of paying their lenders on time. Ask for a credit report and employment letter to confirm that your tenant can pay their rent each month.
To Include Utilities or Not?
I decided to include utilities. I have two units but one meter, and I couldn’t figure out a way for each tenant to split it fairly without hassle. So I called the utility companies, asked them for the monthly average of the previous year, added 30 per cent, and included it in the rent.
You can also let the tenants pay utilities themselves. Because electric and gas are so expensive in Ontario, you don’t want to be on the hook unless you have to be. It’s a lot easier for tenants to leave the lights on when someone else is footing the bill.
A Learning Experience
I learned that owning an investment property is much like having a child. Make sure you can comfortably afford it before you start trying, and if it’s exhausting you, consider hiring a nanny—that is, a property management company.
Source: Tangerine.ca – Written by Danielle Kubes Wednesday, July 11th, 2018
Veronica Dy and her husband had their retirement plan all mapped out.
They recently sold their large family home in San Gabriel, California, for $850,000 and walked away with $250,000 in net proceeds to put toward a smaller home in Los Angeles to be closer to their son’s family. They figured it would be easy to find a quaint, two-bedroom home where they could age in place without overspending on housing.
They thought wrong. The couples’ home search came up empty week after week, and the few properties within their budget – about $550,000 – are selling well over asking price almost immediately, Veronica Dy says.
Now, the couple spends roughly $3,200 per month – nearly half of their monthly household income – on rent and other housing-related expenses farther out from the city as they keep looking. While they’re trying to remain optimistic, the uncertainty of their situation makes Veronica Dy, 61, doubt that they’ll retire anytime soon.
“I was waiting to retire when I’m 62 but with our current circumstances, now we’re playing it by ear,” says Dy, who works in health care. “I look every day for houses, but there’s nothing on the market that’s affordable. I wanted to live closer to our son and help them with our grandchildren, but it’s going to be hard.”
The Dys’ struggles are shared by a growing number of older Americans who wrestle with whether to downsize or age in place. The answer, as it turns out, isn’t so simple.
In its just-released 2018 Survey of Home and Community Preferences, AARP found that 76 percent of Americans age 50 and older prefer to remain in their current home, and 77 percent would like to live in their community for as long as possible. However, just 59 percent of older Americans think they’ll be able to stay in their community, either in their current home (46 percent) or in a different home still within their area (13 percent).
Rising mortgage rates, sky-rocketing home prices, and inventory shortages at the lower end of the market are converging to create a new housing crisis – this time for baby boomers, housing experts warn.
Aging in place vs. downsizing: Which is best?
By 2016, there were roughly 74.1 million baby boomers (people born between 1946 and 1964) in the U.S, according to a Pew Research analysis of U.S. Census Bureau data. By 2030, when all baby boomers will be between 66 and 84 years old, Census predicts boomers’ numbers will drop to 60 million people.
As boomers age, an alarming trend has emerged: they’re entering their golden years with mortgage debt. Americans over the age of 60 were more than three times as likely to carry mortgage debt in 2015 compared to 1980, according to an analysis of Census data by the Center for Retirement Research at Boston College. Much of the increase in seniors’ mortgage borrowing is in households with below-median incomes and assets, and no pensions, the analysis found.
Generally, past generations aimed to have their mortgage paid off before retirement to better manage their reduced incomes later in life.
Carrying mortgage debt may offer one explanation as to why many baby boomers prefer to remain in their current homes. Other factors, such as retaining home equity, staying in familiar surroundings, or a lack of affordable options, also drive the decision to stay put.
Aging in place, however, can be harder to do if boomers’ homes aren’t equipped to meet their future needs, says Jennifer Molinsky, senior research associate at the Joint Center for Housing Studies of Harvard University.
“There’s a growing linkage between housing and health care, and being able to stay in your house longer,” Molinsky says. “Making your house accessible for [in-home health care] is ideal, but this is harder to manage in lower density areas because of limited transportation and accessibility to doctors in rural areas. Communities need to think about how these services interrelate with housing, because that’s a real challenge for the future.”
Tapping equity to stay put
Mobility and health issues pose the greatest barrier to seniors who want to stay in their current homes. Older homeowners may need to add amenities, such as bathroom grip bars, walk-in showers, wheelchair ramps, and wider hallways and doorways to accommodate walkers or wheelchairs as their mobility declines. Some of these improvements are simple, but when you start redoing bathrooms, for example, remodeling projects can add up quickly.
Seniors who own their homes outright or have significant home equity typically borrow against their homes to help pay for modifications, says Sam Preis, regional director of sales with BBMC Mortgage.
Several loan products can help older homeowners pay for improvements that will make their homes livable for years to come. Preis recommends the following options:
Home equity loan – A home equity loan makes more sense if you have to make several modifications at once and need an upfront lump sum to pay for them.
Home equity line of credit, or HELOC – A HELOC works like a revolving line of credit that lets you withdraw on the line as often (or as little) as you need it for improvements in stages.
VA financing – Many older veterans who served in the military mistakenly think their VA benefits expire, but that’s not true, Preis points out. The VA offers cash-out refinancing, typically with no down payment requirement, to pay for home improvements. The VA also provides special grants for adapted housing for veterans with a service-connected disability. The grants help pay for a remodel or the purchase/building of a new home that accommodates their disability.
Reverse mortgages – A federally insured Home Equity Conversion Mortgage, or HECM, is the most common type of reverse mortgage. Insured by the Federal Housing Administration, HECMs allow people who are 62 or older to tap a portion of their home equity without having to move. You also can use a HECM to buy a home.
Low inventory, rising rates create barriers to downsizing
At the crux of boomers’ dilemma is the shortage of affordable homes on the market. That, along with rising mortgage rates – a trend that’s expected to continue – can create significant barriers to downsizing, says Laurie Goodman, vice president of housing finance policy and codirector of the Housing Finance Policy Center at the Urban Institute.
The national average rate for a 30-year fixed mortgage hit a record low of 3.41 percent in July 2016, according to historical data from Freddie Mac. As of Aug. 30, 2018, the average 30-year fixed rate was 4.52 percent – more than a full percentage point higher.
“Higher rates have a huge effect on mobility for everyone,” Goodman says.
Baby boomers who plan to stay in their current communities are likely to have the upper hand in competing for a smaller, less expensive home if they’ve paid off or have significant equity in their current home thanks to inflated appreciation. The key question is whether they’ll find the right home for their needs amid inventory shortages in the lower end of the market.
Seniors’ mobility could be impeded if they try to relocate to more expensive markets to be closer to family than where they currently live, especially given higher rates and rising prices, Goodman points out.
“There’s a limited supply of homes, along with rising prices – that’s a problem that’s not correcting and it’s getting worse and worse,” Goodman says.
Restrictive zoning laws and higher land costs are pushing builders to focus on producing luxury single-family homes (rather than economical multifamily projects) to remain profitable, Goodman says. The key to encouraging more building is a revamp of local zoning rules to enhance the variety of new housing projects, she adds.
Older Americans thinking outside the traditional housing box
In a lot of U.S. communities, a lack of housing variety complicates the picture for baby boomers who are seeking affordable options. And for some older folks, economic necessity is giving rise to creative solutions that buck tradition.
The AARP survey found that adults age 50 and older are open to housing alternatives, such as home sharing (32 percent), building an accessory dwelling unit (31 percent) and villages that provide services that enable aging in place (56 percent).
Whether it’s for economic viability or to gain companionship, seniors’ willingness to think outside the box is driving the growth of unconventional housing solutions, says Danielle Arigoni, director of livable communities with AARP. The “Golden Girls” style of roommates is one shared-housing arrangement gaining steam. There’s also intergenerational home-sharing; an online platform called Nesterly, for example, matches older adults with college students who are looking for roommates.
“An affordable housing crisis is brewing and, in many places, it’s already here,” Arigoni says. “[These solutions are] becoming less taboo and more accepted. And that’s partially just recognition of the financial realities we’re all accepting.”
The appetite for home-sharing is being driven by a resurgence in accessory dwelling units. An accessory dwelling unit is a smaller, secondary building that’s attached to the primary home or located on the same lot. This type of housing (think granny flat or mother-in-law suite) offers a livable solution for seniors who want to age in place and generate rental income, live near family, or eventually bring in-home care help down the road, Arigoni says. The key roadblock to add accessory dwelling units, though, is securing approval from local zoning or building authorities, she notes.
Whether downsizing or staying put is in your future, housing expenses will undoubtedly play a huge part of your overall retirement picture. Preis, with BBC Mortgage, suggests crafting a financial plan for retirement (if you haven’t already). Sit down with a financial advisor, a mortgage lender (if you plan to finance a home purchase or tap your home’s equity), and your accountant to figure out what options will help you live comfortably while maximizing your retirement income, Preis says.
The decision to downsize or age in place isn’t just about affordability or the place you call home. Consider how close you’ll be to family, friends, doctors, hospitals, transportation, parks, cultural attractions, and other key amenities that make a community truly livable, Arigoni says.
For Terri Ronci, renting out her in-demand Toronto condo meant having the financial freedom to seek out a career change.
After years in advertising she wanted to go back to school to pursue other interests and return to her hometown of Montreal.
“I had a really great conversation with my dad who (said), imagine if you could rent that place for more than you’d have to pay out, it might give you that cushion and (be) a retirement nest egg,” she said.
“If you sell it, that money is available now, but in the long term, think about the steady income that this investment will bring in, along with the fact the selling price will go up. It’s the best way to maximize the return on your investment.”
Ronci, 40, decided to rent – and the decision paid off. She was able to cover her mortgage and expenses with the rent she got off her condo, and have enough money leftover to pursue the lifestyle changes she was after.
In Ronci’s case, having a well-situated apartment and trustworthy property managers made renting her condo on the side a lucrative and stress-free process.
But while an income property can be rewarding, would-be landlords need to think about what they’re buying and the kind of return they’ll get for their efforts, said Milton, Ont-based realtor Andrew Roach.
“When I talk to my investment clients, we sit down and we say, what are you willing to invest … and we’re not talking just about money,” said Roach, 38, who owns multiple properties on his own or through side ventures.
“When buying a property people are investing more than just their hard-earned money. They’re also investing their time and energy.”
A property manager and the careful screening of your tenants will go a long way toward safeguarding your free time, but it’s often the finances that can trip people up the most.
““You have to make sure the income being produced, the cash flow, can support the debt, said Brenda Burjaw, director of commercial services at Meridian Credit Union Limited.
Whether you’re renting out one condo to supplement your income or a slate of properties, she adds, the money side is the same.
You have to do your due diligence up front to make sure the property will give you the return you want, you should be clear on your risk tolerance (since that will guide your strategy) and you need to carefully budget to make sure you can cover off the operating cost of running the unit – both in terms of capital needs for big expenses and to service the debt outstanding on your mortgage.
Operating costs are the part of the equation that you can have some level of control over by budgeting for repairs and maintenance, said Burjaw.
“You need to be mindful of always having some sort of a reserve set aside for when you have to re-lease the unit – paint it, replace an appliance, fix a window,” she said.
“Each year a prudent property owner should look and budget what the coming year operating costs are going to look like, and find efficiencies where possible.”
A condo is a good option for anyone who is low risk or doesn’t want to spend much time worrying about their side property because condo fees take care of a lot of the maintenance. If your tenant agrees, you can also automate payments and appointment bookings by signing up with a company like Get Digs, which lets renters pay with their credit cards and make sure landlords get the rent on time.
That will keep you from having to chase tenants for their rent, since legislation brought in in places like Ontario means you’re no longer allowed to ask tenants for post-dated cheques to cover their rent for the year ahead.
Property managers can help ease the burden, for a fee, and so can having a go-to list of people to call in an emergency to replace a window or fix a leaky toilet.
If you choose to outsource that work, you’ll need to factor property management fees into your budget and consider how that will impact your cash flow.
You should also be thinking about whether your tenant will pay the hydro bills and whether you can charge extra for amenities like parking.
When you’re estimating your costs and possible return, it’s also important to be conservative, said Pauline Lierman, director of market research with Urbanation Inc., a firm that tracks the rental condo and new purpose build market in Toronto.
“You have to look at what the balance sheet of the condo is, what the maintenance fees are,” she said.
“Be aware of what the type of unit you have in your building is renting (at), be aware of who else around you may be adding new units going forward.”
But while careful math and planning is needed to make sure a rental side hustle pays off, for landlords like Ronci, the result is worth it.
“If you’re wanting to make a change in your life, an investment like this can give you the break or pause you need to breathe.”