June 16, 2017
Vancouver's Affordability Issues Have Only Just Begun
Vancouver housing market "ain't seen nothing yet"
The Vancouver real estate market, far from reaching its peak in terms of unaffordability and lack of housing, is merely “dancing on the edges of a massive problem,” according to one leading development marketer.
Speaking to a packed audience at the Urban Development Institute luncheon on new home marketing at the Fairmont Hotel Vancouver June 8, Cameron McNeill of MLA Canada added, “We ain’t seen nothing yet.”
The panel of well-known development marketing bosses, which also included Scott Brown of Fifth Avenue Real Estate Marketing and Daryl Simpson of Bosa Properties, discussed how blistering demand and a trickling supply of new housing is affecting the affordability of homes in the region.
Event moderator and UDI chair Jon Stovell of Reliance Properties asked the panel whether onerous building permit requirements and slow processing times were affecting home prices – to which the reply was unanimously “yes, absolutely, 100%.”
Cameron McNeill said that the Metro Vancouver region is expected to grow by 250,000 people in next five years, and that it currently takes around six years to get a highrise residential project from conception to occupancy – “if it all goes well”. He said, “And that’s maybe 300 units. The city is 300,000 people bigger by that point.” However, McNeill's comments do not jive with Metro Vancouver's projections for population growth, which would estimate an additional 180,000 people over the next six years.
McNeill added, “We’re dancing on the edges of a massive, massive problem. And it’s not going to change. I just came back from Hong Kong and everybody I spoke to said to me, ‘That’s nothing.’ We ain’t seen nothing yet. This is just the tip of the iceberg for Vancouver.”
Daryl Simpson pointed out that population growth numbers, and therefore housing demand, would likely be even higher than projected, as projections are based solely on permanent residents and citizens. “One thing they rarely look at student visas and multiple-entry visas. There were 67,000 student visas in BC last year. And you have to think, if they’re flying to BC to study, these are students with means, maybe wealthy families. In 2016, there were 315,000 multiple entry visas – they last 10 years and allow people to fly back and forth. So you need to layer those on top of the permanent residents and citizen population growth.”
Scott Brown said, “You can’t fix demand. And if this is a housing crisis as the media says, where is the multi-stakeholder group figuring out how to speed up supply? If we were going to war we sure as hell would be working out how to arm up quickly. But we spend more time working out how to break things apart than how to fix things. We need to work together. We’re trying, but putting one project a time on the market, there’s so much demand, prices just keep escalating.”
Simpson added, “Look at the 450 acres in False Creek Flats, with 1,400 residential units in total earmarked for that area. That’s three homes per acre. That’s insane. Ask Ryan Holmes of Hootsuite what he needs, it’s not 450 acres of industrial land, its proximate residential units [so employees can afford to live in Vancouver close to work]. Ask Amazon, they’ll say the same thing. Go to Seattle, there are more residential units being built by Vancouver developers – Bosa, Westbank, Onni – right across the street from the Amazon HQ than will be built in the whole of the False Creek Flats.”
May 26, 2017
How to Make Your Mortgage Tax Deductible and Increase Your Net Worth
If you have home equity, there's a neat method to use it to make investments and write off the mortgage interest. Jorge and Alisa Aragon explain how
For US homeowners, mortgage interest is automatically tax deductible, but for Canadians, the write-off is not so straightforward. However, there is a way for you to deduct your mortgage interest while increasing your wealth, an approach known as the “Smith Manoeuvre”.
In order to make your mortgage interest tax deductible, homeowners must be able to prove that the money is being reinvested and is not being used for personal expenses.
A properly structured mortgage-centric tax strategy has several key elements – the most important of which is a multi-component, mortgage or home equity line of credit (HELOC). You will need a readvanceable or line-of-credit mortgage that lets you continuously extract equity as you pay your mortgage down.
Every time you make a payment and reduce your principal, you then immediately extract that equity and add it to your investment account. Since you have been able to deduct your mortgage interest, at the end of the year you will generate a tax refund that you can use to make a lump-sum payment on your mortgage –which makes even more funds available for investment.
It’s best to have a single collateral charge with at least two components – usually a fixed-term mortgage and an open line of credit – that can track and report interest independently. This is absolutely essential under Canada Revenue Agency (CRA) rules and guidelines. In addition, for the interest payment to be tax deductible on any money borrowed for investment purposes, it must have a reasonable expectation to be able to produce an income.
Second, the strategy must employ conservative leverage-investment techniques – which is why a financial advisor must be involved in order to comply with federal regulations. The financial advisor should be a Certified Financial Planner (CFP) who is experienced in leveraged investing and able to actively monitor a homeowner’s portfolio on an ongoing basis.
Homeowners who opt for a tax-deductible mortgage interest plan make their monthly or bi-monthly mortgage payments the same way they would when making any type of mortgage payment. The payments go towards reducing the principal amount of the mortgage, creating equity; which is subsequently available to be borrowed on the line of credit. From there, the equity available in the line of credit must then be transferred to an investment account, which can be done automatically by your Certified Financial Planner.
Essentially, the homeowner is borrowing from the paid portion of the mortgage for reinvestment purposes.
On average, a typical 25-year mortgage can become fully tax deductible in 22.5 years.
The Ideal Client
Ideal borrowers for an advanced mortgage and tax strategy are typically professionals or other high-income earners who have a conventional mortgage, and have at least 20 per cent of the cost of the home to put towards a down payment, or who have built up substantial equity.
As high-income earners, their total debt-servicing ratio will be quite low and they will have excellent credit (680+ Beacon scores). These borrowers are financially sophisticated homeowners that are keenly interested in establishing a secure financial future and comfortable retirement. They also have good investment knowledge.
The financial benefits of tax-deductible mortgage interest are indisputable and justify the risks to the right borrower. That said, a problem can arise if a homeowner spends the funds as opposed to reinvesting them. As well, any tax refunds should be used to pay down the mortgage as quickly as possible – thus making as much of the interest payment as possible tax deductible.
The short-term financial risk is liquidity (sometimes referred to as cash flow risk). Cash flow risk addresses the possibility that interest rates will sharply drive up the cost of borrowing at the same time as markets falter, resulting in a negative client monthly cash flow for a brief period of time.
This short-term risk is typically only prevalent in the first two to four years because, after this period of time, the homeowner has stockpiled enough equity through annual tax refunds that other liquidity options exist and the risk is fully mitigated.
Liquidity risk varies widely based on the balance sheet strength of the homeowner. Highly qualified homeowners are easy to manage as these borrowers have no difficulty meeting the short-term cash flow demand should the need arise.
Combining this tax deductible mortgage with a sound investment strategy can significantly increase your net worth over the long term. Talk to a mortgage expert for a free analysis of how the Smith Manoeuvre can work for you.
February 8, 2015
Buying a condo? Make sure you understand Strata Corporations
If you are buying a condo or any other strata property, it’s essential that you fully understand how strata corporations work. You may decide that you want to be on the council or you may decide to take more of a back seat. Either way, you need understand the system and processes in place to ensure your building is being well managed and your investment is protected.
Strata Corporation as Local Government
The Strata Property Act works like the Canadian constitution in how it divides powers, obligations and rights between owners and strata councils. In fact, it creates a structure that often mirrors our provincial and federal governments.
The owners in a strata corporation can be viewed as the legislative branch of government. General meetings are like legislative sessions, but instead of representing the interests of constituents, each owner represents the interests of their strata lot. The owners in a strata corporation control the budget and generally need to approve capital and unexpected expenditures and any significant changes by three-quarters or unanimous vote.
The strata council is the executive branch of the strata corporation. Strata councils manage day-to-day affairs, spend money approved by the owners and enter into agreements on behalf of the strata corporation. Strata councils also set the agenda for most general meetings, determine whether owners have breached bylaws and rules and hear rental restriction hardship exemption applications.
Like most government bodies, strata corporations are set up to be self-policing. If owners don’t like how their building is being run, they can elect a new strata council. When strata councils or owners fail to meet their legal obligations under the Strata Property Act and the bylaws, they can call on the courts to protect their rights or require another party to fulfill their obligations.
Access to Information
Under the Strata Property Act and regulations, strata corporations must maintain a comprehensive set of records. Owners may inspect or request copies of these records and strata corporations must produce the records, subject to some limitations, within one or two weeks.
Voting and Holding Office
Generally, every owner has the right to vote at a general meeting and stand for strata council, subject to a single exception. The Strata Property Act permits a strata corporation to pass a bylaw restricting an owner’s right to vote or stand for council if the strata corporation is entitled to file a lien against the owner’s strata lot.
Only certain kind of debt are subject to a strata lien and a strata corporation must deliver a special demand for payment at least two weeks before denying an owner the right to vote or stand for council. Outstanding fines cannot be used to prevent an owner from voting or holding office.
Calling Meetings and Setting the Agenda
While a strata council can call a general meeting at any time, the Strata Property Act allows owners to call a special general meeting or require that a strata corporation include one or more resolutions on a meeting if owners representing at least 20% of the votes sign a petition requesting that one or more resolutions be put to the owners.
Where a demand is made under section 43 of the Strata Property Act, astrata corporation must call a special general meeting within four weeks and place the requested resolutions at the top of the meeting agenda. Where a demand is made under section 46 of the Strata Property Act, a strata corporation must include the requested resolutions in the agenda for the next general meeting.
Directing and Restricting Council
Owners have the power to direct a strata council to take certain action or restrict a strata council’s authority by passing a majority resolution under section 27 of the Strata Property Act.
Good Governance Protects Your Investment
In my law practice, I encourage strata corporations and owners to adopt good governance practices in order to strengthen their communities. Strata corporations and owners that obtain timely and knowledgeable legal advice are often able to avoid or minimize conflict and reduce liability while building healthy communities and a better return on their investment.
For additional information on this and other strata property topics, visit my free online strata law guide at www.stratalaw.ca. Finally, always remember that this article provides general reference information, not legal advice. If you have a legal problem, speak with a strata lawyer.
January 18, 2015
Don't Skip these 9 Winter Home Maintenance Tasks
In order to prepare for winter, there are a number of beneficial tasks that you can carry out to ensure that you have a safe and comfortable winter.
Furnace/boiler tune-up, replace filters: Before you experience an issue with the furnace or boiler, it is best t to call in a heating contractor to service the equipment. They will clean it out, test it for safety and replace all filters as needed. While you are at it, have the water heater inspected as well.
Clean gutters: If you live in a location with heavy vegetation, it is a good idea to have your gutters and drains cleaned often, while checking for leaks. Overflowing and or leaking gutters can cause moisture damage to the home, so be sure to have them properly maintained.
Shut off exterior hose bibs: Find out where all of your exterior hose bibs are located, turn them off and drain all the water before it gets too cold. Exposed, pressurized water can freeze and cause leaks.
Test your smoke detectors and replace all expired ones: I recommend checking your smoke detectors at last every six months. If they are six years or older, they are 50 per cent less effective, so replace then if you need to. Also, all smoke detectors should be interconnected and hard-wired so they can be heard on all levels of the home. An electrician can help with this if you are not comfortable with your electrical system.
Have the roof inspected: Although it is much safer in the summer, a good winter roof inspection by a licensed roofing contractor or inspector should be considered, especially if it has not been done recently.
Have the attic inspected and add weather stripping to the hatch: In my opinion, the winter is the ideal time to check the attic, especially when it is raining. You can look for leaks, evidence of pests, insulation levels and ventilation. To reduce your heating costs have a proper weather strip applied on the attic hatch.
Caulk windows and doors, add weather stripping: Although summer is the ideal time to do this task, you’ll be able to check for drafts much easier in the winter. Take a trip to the hardware store to purchase the right type of caulking for your needs. Any damaged weather stripping can be applied to exterior doors.
Remove all items and vegetation from the home: All plants growing or storage items against the home should be removed to prevent moisture issues. This is an easy way to maintain the exterior, while preventing damage. In addition, remove snow from the foundation wall and clean all exterior vents.
Repair minor interior items: Why not take the time to repair those miscellaneous items that have been in the back of your mind all year? Loose door handles, trim, handrails, cupboards, bathroom and kitchen caulking, etc, can all be done in the winter.
Of course, many of these tasks can be done before winter, yet it is better late than never.
Source: REW.ca, Sean Moss - registered home inspector
January 11, 2015
New Year? New Job? Here's How it Could Affect Your Mortgage
As we prepare to usher in 2015, many people start thinking about changing jobs. If you’re planning to apply for a mortgage in the coming year, then you may want to consider how mortgage lenders view your employment history as part of the underwriting process.
In an application for a new mortgage, transfer, or a refinance, lenders look at three years of employment history. Most of the time they are just looking to see how stable your position and the consistency of your income. Here’s how your employment history applies to different scenarios:
- Self-employed: If you’ve recently left a job to be self-employed, it could be more difficult for you to qualify for a mortgage because lenders generally want to see two years of income and tax returns for a . Some banks offer “stated income” loans that don’t require income verification but you’d generally need a down payment of 35 per cent or more. You would still need two years of being self-employed for a stated income loan. However, if you are putting down 35 per cent and your current field is consistent with what your experience is in, they may give you an exception. Otherwise, the lender would need to see when the company was registered.
- Salaried job: If you just started a new job, lenders usually want you to pass a three-month probationary period and be a full-time permanent employee. If you are working in the same field and get another salaried job, then you would only need to pass the three-month mark at your job to show that the job has some staying power.
- Job with hourly pay or bonus: If your pay relies on a bonus, or if you are hourly and work more than the normal hours indicated on your employment letter, then lenders will want to see a two year average of your income. I had a client who is a truck driver and because he was in his last job for over 10 years, I was able to use a two-year average, which of course included many hours of overtime. But he decided to go to another job and although he was actually working more overtime and getting a better pay, I could not use any of the extra income because there wasn’t enough history. Some exceptions can be made if the year to date is very strong.
If you plan to apply for a mortgage with a spouse who has stable employment and high enough income to qualify for the mortgage, then these scenarios become less of an issue.But a lot of clients in Vancouver need both incomes to qualify for the mortgage because home prices are so high.
When in doubt, consult a mortgage broker to see how changes to your employment or financial situation might impact your mortgage eligibility before you make the leap.
Source: REW.ca (Atrina Kouroshnia)
December 23, 2014
Buy vs Rent? Which is better long term?
To buy or to rent? It's one of the most hotly debated questions in any city - and nowhere more so than the Lower Mainland. Here, expensive housing means that buying is often a big trade-off between your money and your lifestyle.
While many believe that the benefits of owning your home far outweigh being beholden to a landlord, others argue that more money can be made over the long term by investing the savings made from renting.
So what are the pros and cons of renting versus buying - and which choice is ultimately going to offer the best long-term financial outcome for you?
Check the Vancity Mortgage Calculators and Investor Education Fund Buy-Rent Calculator
1) Live where you want.
When you find a neighbourhood you love, you can probably afford to live there as a renter, even though buying there might be out of the question.
And if you're new to town, renting is a terrific way to test-drive a neighbourhood. Decide you don't like the local shops, length of the commute to work, traffic noise, or view? No sweat at least, it's no more sweat than packing your stuff and moving somewhere else.
2) Stay flexible.
Let's face it, if your job or your round-the-world travel plans mean you'll only be in town for a couple of months or even a year, it makes sense not to be tied into a mortgage. Renting is also far more cost-effective than living in hotel even when you pay the extra for a fully furnished suite plus you get the convenience of extra space.
3) Maintenance? Not your problem.
When you're a tenant and something breaks, help should be no more than a phone call away, with no cost to you to fix it. Consider the expense associated with a leaky roof, water damage from a burst water pipe during a cold snap, or even replacing the shrubbery that expired in an heat wave while your were on vacation.
These are the kinds of sudden expenses home owners face and renters don't. And owners also have to factor the ongoing costs of maintenance into their budget, on top of their mortgage payments. Those are all included in your rent.
4) Avoid the extra costs of buying.
Aside from maintenance costs, buying a home involves a host of extra expenses that add thousands of dollars onto the purchase. These include legal fees, property transfer tax, inspections, sometimes GST and more. Renters escape these up-front costs entirely. (See our infographic on the extra costs of buying.)
5) Know what you'll pay.
And there's the stability of knowing exactly what your monthly outlay will be. In BC, 2014 rent increases are limited to 2.2% by law. Mortgage rates aren't. Although we've enjoyed historic low interest rates for a number of years, there's nothing to protect home owners from a return to higher rates in the future a particularly scary thought for anyone who's paid only a minimal down payment.
6) Invest the difference.
Many owners are stretched and have no room for savings. Smart renters invest the money they save by renting, and make sure their RRSP and TFSA savings are at the maximum so they take full advantage of tax refunds and tax-free growth. It requires discipline and attention (and a trustworthy financial advisor), but the returns over the long term are very close for owning a home and investing in the stock market. John Andrew of the Queen's University Real Estate Roundtable did a study that found TSX annual returns from 1981 to 2012 were 5.45 per cent, excluding dividends, compared to 6.43 per cent for Vancouver housing over the same 30 years. Another study, quoted by Rob Carrick in the Globe and Mail cited stock exchange gains of 8.5 per cent over thirty years.
1) Enjoy the fact it's all yours.
It's a cultural thing with Canadians to want to buy a home about 70 per cent of us do. Pride of ownership, the ability to decorate how you like (even if your favourite wall colour is purple), and the stability of knowing no landlord can force you to move are big motivators.
2) Put your money to work.
Typically the biggest motivator is dollars and cents. Renting means every penny of your monthly payment is spent gone for good period. On the other hand, a portion of each month's mortgage payment goes to reducing your principal it's like putting cash into your own savings account rather than someone else's.
And with time your home's value will probably go up. Historically, housing values continue to rise steadily over time, thus creating a solid investment in your future. As they say in real estate, it's not timing the market, it's time spent in the market.
Then there's the leverage factor. Let's consider a hypothetical $400,000 apartment. A 20% down payment would mean an actual investment of $80,000. As your property value increases, however, you reap the benefit on the entire $400,000 so an annual increase of just 2.5% in property value translates to $10,000 or a whopping 12.5% return on your initial investment. Of course, you could always settle for something closer to the current return of 3% or less on a term note.
Most insiders agree that today's historic low mortgage rates show no sign of bumping up any time soon. And while a 25-year amortization on a mortgage may sound like a long time, it goes by fast and suddenly you're mortgage free with only property tax and maintenance to pay. Rent, on the other hand, never ends it only increases.
3) Benefit from competition for your dollar.
In today's competitive market, developers are offering increasingly innovative incentives for buyers considering a brand-new home. No strata fees for a year or more, legal expenses, exotic vacations, upgrade packages, custom vintage wines, even cars have made appearances as no-cost buyer incentives.
4) Make tax-free profits.
Final thought to ponder. Although an RRSP should be part of every retirement plan, you will always need a roof over your head. You're also forced to convert an RRSP at age 71 and begin withdrawing funds and paying tax on them. But only you choose when to sell your home. Best of all, when you do sell, that profit is tax free on your primary residence and after all, who doesn't like to get a tax-free windfall?
Vancity Mortgage Calculators
Investor Education Fund Buy or Rent Calculator
Let's do a sample calculation from the Investor Education Fund website, taking the example of a person trying to decide between purchasing a two-bedroom West End condo for $500,000 or renting a similar condo for $2,000 a month.
We plugged in the buying scenario of:
$500,000 purchase price;
a 20 per cent down payment;
buying costs of $7,500 (waived Property Transfer Tax as the assumption is this would be a first-time buyer);
a $400,000 25-year mortgage at 5 per cent (monthly payment would be $2,326, according to the Vancity calculator);
strata fees of $5,000 a year;
property taxes at $5,000 a year;
home insurance at $1,200 a year; and
various other standard parameters such as price growth and inflation.
Then we compared this with renting the same apartment:
$2,000 a month rent;
2 per cent annual rent increase; and
the renter investing all the savings (money not spent up front and on monthly fees such as strata fees and taxes, as well as the difference between rent and mortgage payments) into a 3 per cent return investment.
The graphic results below indicate that after 19 years, this particular person could be better off buying than renting.
However, this calculation makes some huge assumptions - such as a mortgage rate that averages 5 per cent over 25 years, and this person being a first-time buyer. A few adjustments in down payment, mortgage rate, strata fees, taxes, investment return and so on can make massive differences to the results. It is essential to work out what is best for you based on your individual factors.
- See more at: http://www.rew.ca/news/buy-vs-rent-which-is-better-long-term-1.1341666#sthash.QYsQye61.dpuf
Source: REW.ca, by Susan M. Boyce
December 23, 2014
Investing in Real Estate: Finding the best locations
By: Ken Davidson
I was recently asked by a real estate investor group to speak at one of their meetings. The topic of real estate is a broad one, so I asked if there was something specific they were interested in learning more about.
Not surprisingly, the topic they wanted to focus on was what to look for when finding the perfect community to invest in, i.e. what are the signs that identify the communities with the best investment potential?
I don't look at major cities. These markets are watched intensely by many in the industry who buy using different parameters and who are okay with a smaller ROI. Personally, I look at regional centers -- the smaller cities that form the hub for many outlying communities.
The following are important factors in determining if an area is a regional centre:
1. It is highly accessible. Access is key, and that usually comes along with a regional centre, but I look for good highways and airport access. How easy is it to get in and out of the community? This is important.
2. Investment from the private sector. If newer big box retailers are entering a community, the odds are that they have access to much better research on the community than I do. They want to be in a community that is growing and vibrant, and this is the same type of community I prefer to invest in.
3. Re-development of public infrastructure. I look for upgrades occurring in public buildings and other public assets in the community itself. If school districts are growing, hospitals are expanding and recreation centres are being constructed, the federal, provincial and municipal governments are probably investing money into the area.
4. The purchase price works. It might be obvious, but the purchase price always has to work. I make sure that the purchase price of properties in the community is going to give me my required ROI based on normalized market finance terms and conditions. We can all negotiate low interest, short-term, vendor-take-back financing, but when you’ve overpaid and it comes time to refinance, be prepared to open your wallet. Fantastic short-term financing is a bonus, not a plan.
5. Strong employment. I am in real estate for the long-term so I prefer middle class, working communities over boom-and-bust areas or tourist towns. I search the city’s economic page on their website and read local papers for news of new industries coming to town, transportation hubs, medical centres or other places where people are employed in large numbers.
6. Stable increase in population. If you are looking at investing in a community and the population is declining, you really have to determine what your exit strategies will be. Who is actually going to buy your property if the population is going down? Population growth is usually linked closely to new industry employment.
7. Talk with property managers in the area. When I go into a community I always interview local property managers. You need a great property manager on the ground to solve issues as they arise, quickly and efficiently, especially if you don’t live in that community yourself. You need a property manager who is willing to give you all the information you feel you need to be comfortable managing from afar.
During the interview ask for a list of the properties currently under their management and do a drive by. Find out what they feel about the local rental market and what they charge for rent. Inquire about what type of vacancies they have with their current projects and just get to know them in general.
8. Is the area large enough to create inventory? As a real estate investor, the areas I look at need to be large enough that I can buy enough inventory to justify the management and travel expenses created by it.
Are there enough properties that are going to become available over the next few years that will allow me to have more than one property in the community? If you only have one property in a community, the percentage of revenue allocated to managing it is significantly increased.
9. Expanding a remote market. When looking to expand outside of a market that is already a plane ride away from where I live, I try to stay within a one-hour drive from my hub city. This allows for ease and efficiency of business travel.
For instance, when I selected my target city in Ontario I tried to keep all properties within an hour’s drive in any direction. I then copied this model in Nova Scotia, British Columbia and parts of the US. I fly in, rent a car, drive to inspect my properties, meet with the necessary people, then return to the airport and fly on to my next hub community.
10. Speak with an advisor. There is always the chance that a community you are considering is experiencing the downward part of a cycle. If this is the case, and it’s a good vibrant community that has come out of similar cycles in the past and you believe it will in the future, there is a potential opportunity there as well. Speak with a trusted advisor and seek sage counsel before investing in a situation like this.
Ken Davidson is an investor and partner at BDO
December 2, 2014
Avoid These Mistakes When Buying an Investment Property
Owning an investment property can be a great way to create financial security for you and your family. Buying a condo, townhome, house or small multi-unit building has lots of advantages, including monthly rental income, property value appreciation, tax deductions and the ability to use the bank’s money to make more money for yourself.
However, you have to invest in an investment property with your eyes wide open. Here are some potentially expensive mistakes to avoid:
- Treating the property purely as an investment and not as a business. Owning an investment property is like owning a business. People think the only thing they have to do is buy it, rent it and forget it. Decisions will need to be made from time to time regarding maintenance and upgrades, rent reviews, new leases, etc. Even if you hire a property manager that will do the work, they can only do what is instructed.
- Unwittingly breaking a law. Before you buy, do some research. Make sure you understand landlord laws, your responsibilities and liabilities, and the ins and outs of leases.
- Not getting pre-approved first. Talk to a mortgage expert before you start your search so you know how much you can qualify for and you know what you are going to require.
- Not factoring in running costs. The price of the home is only the first of a series of home ownership expenses. Before you rush off at buying consider some of the costs such as property taxes and strata fees if applicable.
- Working with a buyer’s agent. Work with a trusted real estate agent that has experience and knowledge on buying investment properties. Buying an investment property is about numbers while buying your own home is about an emotional purchase.
- Buying a property sight unseen. This could be a recipe for disaster. Unless you do a site inspection yourself or have your real estate agent who knows exactly what you want. This is a big investment surely you can take the time to inspect it.
- Not checking out the property adequately. Having the property professionally inspected can help avoid unexpected expenses. There are many potential problems with any home that you are not likely to pick up yourself.
- Not having enough funds to cover unexpected expenses. What if your property sits vacant for a few months? Will you have enough to cover your mortgage payments? What if you suddenly need a new roof or furnace? It’s wise, if possible, to keep an emergency fund of about 10% of the value of the property to carry you through the tough times.
- Not having a proper and efficient maintenance schedule in place. All properties, their fixtures and fittings wear out! Damage does occur. It is important to keep maintenance up and have it done on time.
- Expecting too much. If you expect to get rich quick, you may be tempted to set the rent too high and lose your tenants. Research comparable and be reasonable.
- Becoming a slave to the property. Decide how much your time means to you. If your investment property becomes a second full time job, is it really worth it? Factor in the cost of a property management company, if necessary.
- Not checking out tenants adequately. Ask for references (especially their past landlords) and follow them up. Run credit checks. If applicable, drive by the prospect’s current property and see how well it’s cared for.
- Not doing regular (at least annually) financial analysis. Remember, this is a business. All business owners regularly review their financials. Your property manager should provide you with monthly and annual statements of receipts and expenditures. Consider doing an annual market appraisal to see how the value of the property is going. Sometimes it is strategic to sell of some assets and purchase new ones.
One way to help make things go more smoothly is to join your local landlord association. These groups can update you on laws, supply sample lease agreements, recommend suppliers, etc.
These mistakes to avoid are not intended to discourage you from buy an investment property but to assist you to proceed with open eyes and know what you are getting into. Buying an investment property means work but it is a great way to create wealth and financial security for you and your family.
If you would like some help to analyze your financial ability to invest in an investment property give us a call.
Source: REW.ca, credit Jorge & Alisa Aragon
November 17, 2014
B.C. Residential outlook to remain strong - CMHC
Nary a negative word was said regarding the outlook for B.C. housing activity over the next two years at Canada Mortgage and Housing Corp.’s (CMHC) annual housing outlook conference on November 4.
CMHC analysts were more tortoise-like than bullish, so far as they heralded a steady market over the next 24 months, disturbed only by the potential of interest rate hikes in late 2015 and the impact affordability – or its lack – could have on transactions.
“Housing demand will remain strong,” opined Bob Dugan, CMHC’s chief economist, in an overview of national activity.
“Housing starts will follow resale activity,” Carol Frketich, B.C. regional economist, said of the provincial situation.
“What we’re seeing is a very balanced housing market,” concluded Robyn Adamache, senior market analyst for Vancouver with CMHC.
Housing starts in metropolitan Vancouver are expected to hit 18,700 in 2015, down from a forecast of 18,900 for 2014. Projections peg them to reach 19,250 in 2016.
Veteran condo marketer Bob Rennie was the keynote speaker at the CMHC housing outlook conference, and he dished his own take on Vancouver’s residential market as well as the state of discourse regarding housing issues in advance of civic elections on November 15.
“‘I am pro-affordability, and I am anti-development.’ I think that will get you elected today, and they don’t make sense – the two can’t go together,” he said.
Sizing up the main contenders for Vancouver Mayor Gregor Robertson’s job, Rennie dissed – without naming names – Non-Partisan Association mayoral candidate Kirk LaPointe for shying away from meeting with developers.
“He doesn’t live in Vancouver, vote in Vancouver or pay taxes in Vancouver and has never held political office,” Rennie said. “Not meeting with developers says to me, if elected as mayor, he will stay out of touch.”
Coalition of Progressive Electors (COPE) contender Meena Wong also came under fire for proposals such as a duty on vacant homes that would interfere with property rights.
“If we have a problem with vacant west-side homes, let’s deal with it as a community improvement issue, not the colour of someone’s skin,” Rennie said.
Rennie also pushed back against developers critical of burdensome community amenity contributions, which are assessed to fund community amenities. Reducing them could leave municipalities passing costs onto taxpayers, Rennie said, creating the politically unpalatable and divisive situation Melbourne faces.
“We are not going to solve homelessness, affordable rental or family housing without taking the planning and political risks,” he summarized. “We really need parental guidance out there, is my view. The city of Vancouver and every city and municipality is going to need to champion some form of development.”
Whatever worries plague the Vancouver housing market, at least there’s housing here to worry about.
That’s not always the case in other countries, where having a roof over your head (let alone four walls around you) is a greater concern. Without stable housing – as advocates in Vancouver know – multiple other basic needs risk not being met.
Providing stable housing in some of the world’s poorest communities is the goal of Vancouver-based World Housing community contribution company, a social enterprise launched last year that seeks partnerships with developers to build a unit of housing in less developed communities for each unit developed elsewhere.
Its first partner is Westbank Properties Corp., which is supporting the development of one unit of housing in Stung Meanchey, Cambodia, for each unit sold at Vancouver House – the 52-storey collaboration between Westbank and Danish architect Bjarke Ingels.
Sales to date of units in the 378-unit tower have resulted in gifts of 120 homes, while an additional 70 homes are built and awaiting donation.
The homes are 132 square feet each and elevated six feet off the ground. The cost of approximately $2,500 apiece includes a common washroom for every six dwellings.
Occupancy is overseen through the Cambodian Children’s Fund (CCF), which has secured leases of up to 20 years for the home sites.
Recipients are typically the families or guardians of schoolchildren. Children must attend school and be well cared for – not abused – for the families to be eligible.
“It makes a massive difference. It’s one of the many motivators to get the child into school on a regular basis,” said Scott Neeson, CCF founder and executive director.
World Housing expects to announce a second project in Taiwan later this month and is discussing partnerships with Canada and U.S. developers active in the San Diego, San Francisco and Waikiki markets.
November 11, 2014
Why you should consider commercial investing
Commercial real estate investing. This combination
of words seems to always evoke a heady mixture
of thoughts and emotions in my clients: attainable wealth, uncertainty, tentative excitement, fear, and an affluent retirement lifestyle. I would postulate that both the positive and negative thoughts evoked are usually the result of an incorrect assumption and a lack of knowledge with regards to investing in commercial properties.
A lack of knowledge is the biggest difference clients can face when considering the merits of commercial real estate investing and other types of investing, including residential. It takes real knowledge of retail, industrial, multi-family, the commercial real estate market, property management, financing, and more, to avoid making costly mistakes.
Most people investing in condominium units can afford to make a mistake or two. Usually the sums of money involved in such investments are smaller ($300,000-$500,000 is a typical investment condominium price) than in commercial real estate investments. Not only are the purchase prices of commercial properties higher than those of residential properties, but the amount of down payment you have to commit to a transaction is also more - often 30 to 50 per cent down.
At this point you might be wondering if you will ever be able to stomach the risk and take the plunge into commercial real estate investing. However, the two largest benefits commercial real estate investing offers over residential are as follows;
1. The landlord has more power than the tenant (anyone who is a residential landlord in Canada is aware that more often than not, landlords are at the mercy of their tenants); and
2. The owner has myriad opportunities to increase the value of the real estate asset by decreasing expenses, replacing a tenant with a better paying one, dividing space and charging more per square foot, changing the allowed use of the property, redeveloping the property, and so on.
If you really want to learn about commercial investing, ask investors who are actively in this property area. You should also reach out to Realtors, lawyers, and friends that are involved in this sector, and get them to tell of the bad stories they may not be keen to recall. Feel free to shoot us an e-mail or leave a comment in the section below.
When did they lose money? What went wrong? What would they do differently now if they faced the same situation. As I regularly say to my students: The most important thing in commercial real estate investing is to know what questions to ask and who to ask them of.
These questions alone will not only keep you out of trouble (i.e., keep you from losing money), but will likely allow you to create more wealth for yourself in commercial real estate.
October 28, 2014
Best Grants and Rebates for Home Owners and Buyers
1.Home Buyers’ Plan
Qualifying home buyers can withdraw up to $25,000 (couples can withdraw up to $50,000) from their RRSPs for a down payment. Home buyers who have repaid their RRSP may be eligible to use the program a second time.
For more information go to Canada Revenue Agency at www.cra.gc.ca
Enter ‘Home Buyers’ Plan’ in the search box or call 1.800.959.8287
2. GST Rebate on New Homes
New home buyers can apply for a rebate for the 5 per cent GST if the purchase price is $350,000 or less. The rebate is equal to 36 per cent of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000. At $450,000 and above the rebate is nil.
For more information call 1.800.959.8287 or go to Canada Revenue Agency www.cra.gc.ca and enter ‘RC4028’ in the search box.
3. BC Property Transfer Tax (PTT) First-Time Home Buyers’Program
Qualifying first-time buyers may be exempt from paying the PTT of 1 per cent on the first $200,000 and 2 per cent on the remainder of the purchase price of a home priced up to $475,000. There is a proportional exemption for homes priced up to $500,000. At $450,000 and above the rebate is nil.
For more information go to BC Ministry of Small Business and Revenue at www.sbr.gov.bc.ca/business/Property_Taxes/Property_Transfer_Tax/ptt.htm or call 250.387.0604.
4. First-Time Home Buyers’ Tax Credit (HBTC)
This federal non-refundable income tax credit is for qualifying buyers of detached, attached, apartment condominiums, mobile homes or shares in a cooperative housing corporation. The calculation: multiply the lowest personal income tax rate for the year (15 per cent in 2012) x $5,000. For the 2013 tax year, the maximum credit is $750.
For more information go to Canada Revenue Agency at www.cra-arc.gc.ca or call 1.800.959.8281.
5. B.C. Home Owner Grant
Reduces property taxes for home owners with an assessed value of up to $1,100,000. The basic grant gives home owners:
• a maximum reduction of $570 in property taxes on principal residences in the Capital, Greater Vancouver and Fraser Valley regional districts;
• an additional grant of $200 to rural homeowners elsewhere in the province; and
• an additional grant of $275 to seniors aged 65+, those who are permanently disabled and war veterans of certain wars.
For more information go to BC Ministry of Small Business and Revenue at www.rev.gov.bc.ca/hog or contact your municipal tax office.
6. B.C. Property Tax Deferment Programs
Property Tax Deferment Program for Seniors. Qualifying home owners aged 55+ may be eligible to defer property taxes.
Financial Hardship Property Tax Deferment Program. Qualifying low-income home owners may be eligible to defer property taxes.
Property Tax Deferment Program for Families with Children. Qualifying low-income home owners who financially support children under age 18 may be eligible to defer property taxes.
For more information go to www.sbr.gov.bc.ca.
7. Canada Mortgage and Housing (CMHC) Residential Rehabilitation Assistance Program (RRAP) Grants
This federal program provides financial aid to qualifying low-income home owners to repair substandard housing. Eligible repairs include heating, structural, electrical, plumbing and fire safety. Grants are available for seniors, persons with disabilities, owners of rental properties and owners creating secondary and garden suites.
For more information go to www.cmhc-schl.gc.ca or call 1.800.668.2642.
8. Home Adaptations for Independence (HAFI)
A program jointly sponsored by the provincial and federal governments provides up to $20,000 to help eligible low-income seniors and disabled home owners and landlords to finance modifications to their homes to make them accessible and safer.
For more information go to BC Housing at www.bchousing.org/Options/Home_Renovations or call 604.646.7055 or toll-free 1.800.407.7757 extension 7055.
9. CMHC Mortgage Loan InsurancePremium Refund
Provides home buyers with CMHC mortgage insurance, a 10 per cent premium refund and possible extended amortization without surcharge when buyers purchase an energy efficient home or make energy saving renovations.
For more information go to www.cmhc.ca or call 604.731.5733.
10. Energy Saving Mortgages
Financial institutions offer a range of mortgages to home buyers and owners who make their homes more energy efficient. For example, home owners who have a home energy audit within 90 days of receiving an RBC Energy Saver™ Mortgage, may qualify for a rebate of $300 to their RBC account.
For more information go to www.rbcroyalbank.com/products/mortgages or call 1.800.769.2511.
11. Low Interest Renovation Loans
Financial institutions offer ‘green’ loans for home owners making energy efficient upgrades. VanCity’s Bright Ideas personal loan offers home owners up to $20,000 at prime + 1 per cent for up to 10 years for ‘green’ renovations. RBC’s Energy Saver loan offers 1 per cent off the interest rate for a fixed rate installment loan over $5,000 or a $100 rebate on a home energy audit on a fixed rate installment loan over $5,000.
For information visit your financial institution.For more information go to www.vancity.com/Loans/TypesOfLoans/BrightIdeas and www.rbcroyalbank.com/products/personalloans/energy-saver-loan.html
12. B.C. Hydro Appliance Rebates
Mail-in rebates for purchasers of ENERGY STAR clothes washers, refrigerators or freezers.
For more information go to www.bchydro.com/powersmart or call 1.800.224.9376.
13. B.C. Hydro Fridge Buy-Back Program
This ongoing program rebates BC Hydro customers $30 to turn in spare fridges in working condition.
For more information go to www.bchydro.com/powersmart or call 604.881.4357.
14. FortisBC Rebate Program
A range of rebates for home owners include a $75 rebate for upgrading to an ENERGY STAR clothes washer, $300 rebate on an Ener-Choice fireplace and a $1,000 rebate for switching to natural gas (from oil or propane) and installing an ENERGY STAR heating system.
For more information go to www.fortisbc.com/NaturalGas/Homes/Offers/Pages/default.aspx or call 1.888.224.2710.
15. FortisBC Rebate Program for Businesses
For commercial buildings, provides a rebate of up to $60,000 for the purchase of an energy efficient boiler, up to $15,000 for the purchase of a high-efficiency water heater and receive funding towards a new construction energy study.
For more information go to www.fortisbc.com/NaturalGas/Business/Offers/Pages/default.aspx or call 1.866.884.8833.
16. LiveSmartBC Small Business Program
Business Energy Advisors (BEAs) delivers free energy assessments. Help business owners tap into available product incentives and cash rebates for lighting, hot water, heating and ventilation improvements. Help business owners coordinate product installation. NOTE: this program expires March 31, 2014.
For more information go to www.livesmartbc.ca/incentives/small-business/index.html or call 1-866-430-8765.
17. City of Vancouver Rain Barrel Subsidy Program
The City of Vancouver provides a subsidy of 50 per cent of the cost of a rain barrel for Vancouver residents. With the subsidy, the rain barrel costs $75. Buy your rain barrel at the Transfer Station at 377 W. North Kent Ave., Vancouver, BC. Limit of two per resident. Bring proof of residency. There is also a limited time offer for short rain barrels for small yards. Cost $50.
For more information go
to http://vancouver.ca/engsvcs/watersewers/water/conservation/programs/rainbarrel.htm or call 604.736.2250.
Other municipalities have similar offers.
18. Local Government Water Conservation Incentives
Your municipality may provide grants and incentives to residents to help save water. For example, the City of Coquitlam offers residents a $100 rebate and the City of North Vancouver, District of North Vancouver, and District of West Vancouver offer a $50 rebate when residents install a low-flush toilet.
Visit your municipality’s website and enter ‘toilet rebate’ to see if there is a program.
19.Local Government Water Meter Programs
Your municipality may provide a program for voluntary water metering, so that you pay only for the amount of water that you use. Delta, Richmond and Surrey have programs and other municipalities may soon follow. Visit your municipality’s website and enter ‘water meter’ to find out if there is a program.
Source: Real Estate Board of Greater Vancouver.
October 22, 2014
Vancouver Property Tax is Outdated and Unfair
For Vancouver home buyers who get the shivers at high prices for
even run-down houses, there is also the haunting sight of a tax goblin.
The B.C. government’s property-transfer tax has become a growing burden for buyers in the Vancouver region’s housing market over the past 27 years. The province introduced the PTT as a way to generate revenue, especially targeting the upper crust of B.C. house purchasers.
But the province-wide formula for the tax hasn’t changed since 1987, when Vancouver-area homes were much cheaper. Today, on the purchase of a $5-million home, the buyer has to pay $98,000 for the PTT. On a $2-million home, the tax rings in at $38,000, and on a $1-million property, the extra outlay is $18,000.
The B.C. government collected $937-million in the 2013-14 fiscal year from the tax. Housing industry observers note that the province’s coffers get an added lift when wealthy buyers, including those offshore, acquire high-end homes.
The PTT formula works like this: On the initial $200,000 of the purchase price, the home buyer must fork over 1 per cent of that first tier and then pay a 2-per-cent tax rate on the amount above $200,000.
The Real Estate Board of Greater Vancouver estimates that 96 per cent of properties in the region sold for at least $200,000 last year. That contrasts sharply with 5 per cent of properties in 1987 that changed hands for $200,000 or higher.
Far from being a targeted tax on the wealthy, the PTT’s net captures the vast majority of buyers of detached homes, townhouses and condos in Greater Vancouver, the board argues.
In this past February’s provincial budget, the B.C. Liberal government announced an improved break for eligible first-time home buyers. Those who qualify could save up to $7,500 on buying their first house, as long as that property is acquired for $475,000 or less, up from the previous threshold of $425,000.
B.C. Finance Minister Mike de Jong tweaked one aspect of the broader tax system in February to make up for the revenue lost from giving tax relief to some first-time home buyers. The province decreased the threshold for phasing out the homeowner grant from $1.295-million to $1.1-million in a property’s assessed value, effective the 2014 tax year. In short, the change means that more homeowners will be paying higher municipal property taxes annually.
Despite the tax burden, housing demand remains robust in Vancouver, says Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Group.
Mr. Scarrow doesn’t see a Vancouver housing bubble because many existing homeowners have lived in their abodes for at least 15 years, before the sharp run-up in prices. With small or non-existent mortgages, there isn’t financial pressure on those long-time homeowners to sell, and they can afford to hold out for higher offers when they do decide to move for whatever reason, he reckons.
“It comes down to huge demand globally and restricted supply locally,” Mr. Scarrow says.
The benchmark home price index last month hit a record $633,500 for detached homes, townhouses and condos sold in Greater Vancouver, which includes suburbs such as Richmond, Burnaby and Coquitlam. On Vancouver’s west side in September, the index hit a record of nearly $2.3-million for detached properties.
Having grown accustomed to a cash cow, the B.C. government isn’t about to dramatically revise the PTT formula any time soon. The province conservatively forecasts that revenue from the PTT will be $854-million in 2014-15. That would be down 9 per cent from the previous fiscal year but still more than double the revenue garnered in 2002-03. From the province’s viewpoint, the tried-and-true PTT isn’t a scary trick, but a valuable treat inside its revenue bag.
Source: Globe & Mail
October 3, 2014
10% increase in Fraser Valley Home Sales
MLS® sales in the Fraser Valley last month saw the most activity for September since 2009, with sales for all housing types rising 10.1 per cent year over year, according to Fraser Valley Real Estate Board (FVREB) figures released October 2.
Benchmark prices for all housing types fell 0.2 per cent compared with a month earlier but rose 1.3 per cent compared with September 2013.
Ray Werger, FVREB president, said, “An important factor underlying the housing market is consumer confidence and in our region that confidence has been bolstered by the stability of home prices. Since March, the benchmark price of our three main residential property types combined has remained flat, increasing by only 0.6 per cent.
“Long-term, the value of single-family detached homes has increased at a faster pace than it has for attached properties, particularly in areas such as Surrey, White Rock, Langley and Abbotsford where we’ve seen many new townhome and condo developments. The supply of new inventory has affected the price of resale product.”
Sales and Listings
Sales for detached, townhouses and condos reached 1,235 in September, compared with 1,113 in September 2013 and 1,125 in August 2014. Sales in all housing categories were up across the board, both month over month and year over year. Of September sales, 716 were detached houses (compared with 669 last September), 294 were townhouses (compared with 256 last year), and 225 were condos traded hands (up from 188 the year before).
Fraser Valley: What's Up, What's Down
| ||Sept/Aug 2014||Sept 2014/Sept 2013|
|Overall Home Sales
New listings were not only up from August, as expected, but were also up year over year, with 2,306 homes hitting the market last month, compared with 2028 in September 2013.
Active listings on the Fraser Valley market in September stood at 6,551 homes: 3,376 houses, 1,463 townhouses and 1,712 condos.
MLS Benchmark Prices
The combined MLS® Home Price Index benchmark price of all residential property types in September in the Fraser Valley was $433,700, an increase of 1.3 per cent compared with September 2013 but a decline of 0.2 per cent compared with a month earlier.
This slight month-over-month decline was driven by the region's sliding condo prices, which fell to $193,600 in September, a 1.6 per cent month-over-month decrease and a fall of 4.7 per cent year over year.
A single-family detached home in September was $569,800, exactly the same as August 2014 but an increase of 3.1 per cent compared to September 2013, when it was $552,900.
Townhouses were selling for $299,600, an increase of 1.1 per cent compared to $296,200 in September of last year, and in the last six months has increased by 0.8 per cent.
Fraser Valley MLS Benchmark Prices,
| ||Sept 2014||Aug 2014||Sept 2013|
See the full report, broken down by all communtities, here.
Source: REW.ca & FVREB.ca
September 29, 2014
How to Avoid Costly Home-Selling Slip-Ups
That's it! You've decided to sell your home. Whether it's your first home or fifth, selling your home can be stressful, emotionally challenging and time-consuming. It's easy to make mistakes that can end up being major ones that can cost you the sale.
Here are the most common mistakes that can lower your home value or even cost you the sale and how to avoid them.
1) Hiring an Agent for the Wrong Reason
Don't hire Uncle John's best friend without first checking if he is right for the job. You need to choose a real estate professional who knows your area as well as the housing market, in addition to having the marketing skills to make your home stand out. Russell suggests you go online and review ratings to help you make an educated decision, and get recommendations from people in your area.
2) Setting an Unrealistic Price
Probably the biggest mistake home owners make is setting an unrealistic price.
"Yes, it's been written to death but it bears mentioning again," says Russell. "Too many sellers overprice their homes, placing too much weight on what the price of a home similar to theirs is going for or they overinflate what their renovations are worth.
"Conditions vary from market to market. A similar house in Steveston versus elsewhere in Richmond will not be priced the same."
3) Poor Online Listing Photos
In today's technological world, many buyers look for homes online first. You do yourself a huge disservice if you don't have great photos of your home, as that is what online property hunters want. You need lots of images, at least one of every room and at different angles. They need to be high-quality, crisp and clear ones, taken preferably in natural light. The photos should showcase your home's best assets. It will set your house apart and help generate more interest. If your agent takes the photos and you are not happy with them, complain and ask for a professional photographer as part of the deal.
4) Not Doing Those Small Repairs First
You may have done some key renovations to increase your chances of a sale (see " Seven Renos to Get Your Home Sale Ready") but what about those little problems that you've stopped noticing? If an interested party comes through your home and finds broken handles, doors that don't shut properly or trim that hasn't been painted all the way through, they will be mentally adding up the cost of the fixes and will likely put in a lower offer. Or worse they are going to think twice before putting an offer at all. A home in need of repairs indicates to them that the owners don't really look after their home and they will be wondering what else is wrong with this house that they can't see.
5) Creating an Unwelcoming Ambience
If a Realtor and their clients pull up to a home with every light blazing out of the windows, chances are those prospective buyers will get a strong sense of your presence and have a harder time picturing themselves living in your home. On the flip side, don't leave the place in unwelcoming darkness or only light a small desk lamp - light it as if you are entertaining guests. And if it's high summer and viewers are seeing it in the daytime, ensure plenty of natural light floods in. (For more advice on ambience, décor and staging, see " Six Steps to Summer Selling.")
6) Hovering During a Showing
Prospective buyers do not feel comfortable if you are hovering around the house, or worse, following them around during a viewing. They get distracted, will feel like they cannot discuss your property openly and will leave before really having the chance to see your home properly. So get out of the house and leave the agent to do their job. Also, don't forget to take Rover with you some buyers are scared of dogs.
7) Showing Items that are Not Included
If you love grandma's heirloom chandelier that she willed you or that gorgeous mantel you paid a hefty sum for, and you plan on taking it with you take it down and replace it before you even list your home. Russell says those items, if left during the showing or even in the photographs, could become a bargaining issue. He has seen clients lose a sale because they would not sell those meaningful items to the prospective buyers.
8) Being Unavailable Ever
You must be flexible and accommodate potential buyers, even if it isn't convenient for you. Therefore, your home should always be neat and tidy and ready for a showing at the spur of the moment. First impressions are important. In addition, Realtors never know when an offer will come in, so you must ensure that if you are on holidays to provide a phone number that you can be reached at all times. Russell says he once had a client who never told him he was on a cruise and thus lost the sale.
Source: REW.ca, Michelle Hopkins
September 23, 2014
Best Fall Reno's to Increase the Value of Your Home
Do you love your home but find it is looking rather dated? Perhaps you’re considering selling and want to raise your property’s value? Either way, it is time to take the plunge and modernize your home. Always think about the resale value of your renovations, says Colleen Brome, a ReMax realtor and interior decorator.
“You don’t want to put in thousands of dollars worth of renovations that aren’t going to pay off once you decide to sell,” says Brome, a 30-year veteran of the industry.
Here are some home improvements that will increase the value of your property.
New or replacement fireplaces
The wood-burning fireplace is as nostalgic as the famous Norman Rockwell’s 1927 Tea Time painting of a couple sipping tea by the roaring fire. But today, that painting would be in front of a high efficiency fireplace. Wood-burning ones are more toxic, polluting, less efficient and sometimes dangerous. Most popular for new construction and retrofits is by far the gas fireplace.
A gas fireplace is one of the most desirable assets a home can have, both for resale value and for setting the tone and ambience. “Besides the aesthetics of a gas fireplace, it’s a lot less maintenance and can increase the value of your home when you go to sell it,” Brome says, adding that on the West Coast, home owners are going for the contemporary, often linear, gas fireplaces.
Gas fireplaces have made huge advances in popularity thanks to recent increases in efficiency as well as advances in design. A gas fireplace delivers the best of both worlds – all the comfort without the mess and maintenance.
High-efficiency fireplace inserts
According to Robert Koby, owner of Vancouver Gas Fireplaces, gas fireplace inserts’increase a fireplace's efficiency.
“They are installed in existing masonry fireplaces or approved metal fireboxes,” adds Koby. “Most inserts are efficient heaters and are available with a number of features such as fans, thermostatic control, ceramic fiber logs for a realistic glowing effect, and a variety of trim options.”
Completely wall-integrated gas fireplaces are the most widespread by far, adds Koby.
To retrofit an older gas fireplace that doesn’t emit heat can run roughly $4,000 to $5,000. “That because it usually involves replacing the whole unit and cutting into the tile surround,” adds Koby. “The manufacturers are coming out with retrofits that you virtually only see the glass, you don’t see the metal or trim.”
Many of interior designer Patricia Gray’s clients are installing frameless units.
“This allows us to have the non-combustible material (stone, marble, tile etc.) to come to the edge of the fire opening. It eliminates the heavy black trim,” says Gray, who runs her own design company Patricia Gray, Interior Design. “More often than not, clients are asking for bronze glass crystals and a linear burner, rather than logs.”
One of the costliest and most important considerations is what flooring to put down. Selecting flooring that is durable, attractive, easy to maintain and healthy can be overwhelming because of the endless choices available today.
Brome adheres to the rule of threes when discussing flooring options with clients: never more than three different flooring materials in your home. The reason is simple; more than three and your home will look too busy and choppy.
“It’s all about flow. If you think of your flooring as the canvas for the rest of your décor, then imagine a seamless flow from room to room,” she adds. “Nothing creates that look better than choosing the same type of flooring throughout the common areas.”
If you have a small home or room, avoid using carpet. Carpeting can make the room look smaller. Laminate wood or hardwood is a much better choice because it tricks the eye into thinking the room is larger. Tiles can also fool us into believing the room is bigger than it is. Also, choosing horizontal lines to the floor will emphasize its width.
Lighting is often overlooked because people don’t realize the potential it has to transform a space. Lighting creates ambience and welcomes guests to your home. Often, new lighting dictates the tone for the rest of the home. Over the years, technology has provides us with endless choices to define our space.
At the forefront today are LEDs (Light Emitting Diodes). Functional, energy-efficient and safer than their forefathers, LEDs dominate the industry and are what builders are putting in new constructions. When planning your renovation, change that old hallway light fixture for an LED that will not only save you money but look fabulous as well.
Faucets and Hardware
Another often forgotten elements of design is faucets and hardware. Although chrome still dominates the market, gold-coloured finishes and brass are back. And the brass is not the brash colour that was in vogue in the ’70s (think brass beds), but more a 21st-century brass.
“There’s a resurgence of brass but it’s a champagne, brushed brass that is elegant,” says Brome. “Trends come and go and even though some people shudder at the idea of gold hardware, there are some really beautiful gold-finished hardware and faucets that are more muted and sleek looking.
However, silver colours and modern shapes are still the most popular, Gray says. “When it comes to lever handles, the most requested are those with square back plate, polished chrome, satin nickel, stainless steel.”
For a clean, uniform look, Gray suggests home owners have matching door hardware throughout the home.
Finally, both Brome and Gray suggest that your renovation wish list begin with functional upgrades that make your home a healthier and more comfortable one, and then choose improvements that create a more modern, aesthetically pleasing home that will attract buyers when the time comes to sell.
September 9, 2014
Balanced Market in the Fraser Valley: FVREB
Real estate sales in the Fraser Valley saw the best August since 2011 as the market continued to outpace the last three years, according to the Fraser Valley Real Estate Board figures released September 3.
Overall sales (including commercial, agricultural and industrial) fell 19 per cent compared with July but increased 3 per cent compared with the same month last year.
However, August’s overall sales figure was 10 per cent lower than the 10-year average for August. That’s a position that’s been typical of this year, with the exception of July when sales topped the 10-year average by 1.4 per cent.
And for houses, townhouses and condos, the typical summer slowdown saw home sales down nearly 21 per cent compared with July. Total home sales were virtually the same as August 2013, falling just 1 per cent year over year.
Single-family home prices in the Fraser Valley have risen 3.4 per cent since last August, townhouse prices have remained flat and condo prices have fallen 3.5 per cent.
The report also revealed that record-low interest rates are causing buyers to go for houses and townhouses instead of the less expensive condos.
Sales and Listings
Sales for detached, townhouses and condos reached 1,125 in August, compared to 1,136 in August 2013. Of August sales, 669 were detached houses, and they were the only category to increase over last August.
A total of 264 townhouses sold, compared to 286 last August, and 192 condos traded hands, down from 220 the year before.
Fraser Valley: What’s Up, What’s Down
|Overall Home Sales
New listings are down from July, as expected. The numbers are typical for August, with 1,956 homes hitting the market last month, 1,948 in August 2013 and 1,937 in August 2012.
There are currently 6,698 homes on the market: 3,469 houses, 1,483 townhouses and 1,746 condos.
It’s interesting to compare the demand for the different housing types. Board president Wenger says, “We have only five months’ supply of detached homes currently and nine months’ supply of condos.”
This chart shows each housing type and its percentage of the August sales, new listings and active listings. Detached houses (green) account for most of the market and their new listings are not keeping up with sales, resulting in fewer active listings. With condos (blue), on the other hand, new listings are outpacing sales, resulting in more condos on the market.
In August 2013, 55.4 per cent of sales were houses, 25.1 per cent were townhouses and 19.4 per cent were condos.
MLS Benchmark Prices
Today’s historically low interest rates have a lot to do with the popularity of houses and townhouses, says FVREB president Rey Werger.
“With interest rates as competitive as they are combined with the increase of affordable, new townhome developments in Cloverdale and Langley in particular, we’re seeing first‐time buyers bypass the condo phase to jump immediately to a larger, more expensive townhouse or a smaller single family home.”
Single-family home prices have risen 3.4 per cent since last August, while townhouse prices have increased just 0.1 per cent and condo prices have dropped by 3.5 per cent.
Fraser Valley MLS® Benchmark Prices, % Change
| ||August 2014||July 2014||August 2013|
HERE IS A LINK TO THE FULL MARKET REPORT - AUGUST 2014
September 9, 2014
Greater Vancouver August Home Sales Up 10%, Prices Up 5%
The Greater Vancouver property market continued its steady climb in August, as home sales increased 10 per cent and prices rose 5 per cent year over year, according to the latest Real Estate Board of Greater Vancouver (REBGV) figures released September 3.
REBGV president Ray Harris said, “The volume of home sales has been higher than we’ve seen in the last three years, yet below the record-breaking levels of the past decade.”
Sales and Listings
Since July of 2013, Greater Vancouver MLS® home sales have closely tracked the 10-year average. In August the region’s 2,771 sales beat the average by 4.3 per cent.
Of the properties for sale, 1,051 were detached houses, 444 were attached (townhouses or duplexes) and 1,018 were apartments.
What’s Up, What’s Down — At a Glance
| ||Aug / July2014|| Aug 2014 / Aug 2013|
New listings dropped for the fourth month in a row — they went down 20 per cent from 4,925 in July to 3,940 in August. They currently stand at 8.4 per cent below the 10-year average for August new listings.
With consistently low new inventory, the sales-to-listings ratio remains near the 20 per cent threshold that would put Greater Vancouver into a seller’s market. August’s sales-to-listings ratio was 18.7 per cent, down from 19.6 per cent in July, which qualifies as being at the high end of a balanced market.
Benchmark Price (MLS® Home Price Index)
The composite benchmark price for the REBGV region now stands at $631,600. It’s a number that really doesn’t tell you anything except that home prices are generally rising for all housing types in all areas. It’s up 19.5 per cent over five years, and 5.0 per cent over one year.
The MLS benchmark price is a calculation of the value of a typical home of its type for the neighbourhood. Because it’s tied to housing type and area, it varies widely for the Greater Vancouver region. A good idea of home prices in a specific location is contained in the detailed MLS Home Price Index that the REBGV publishes.
August composite benchmark prices by housing type are as follows:
Greater Vancouver MLS® Benchmark Prices % Change
| ||August 2014||July 2014||August 2013|
September 9, 2014
Real-Estate Investing Tip: Buy & Hold
Real estate investing – and in particular, flipping – is getting a ton of attention these days. With the housing market making a recovery in the US and more reality TV shows coming out every month, everyone seems to get excited about the potential of a quick buck.
Nothing is as it seems on TV, though. Not long ago, a production company contacted me to discuss our business and see if they could make it into a TV show. She was the third company in less than six months to contact us about this – but you won’t be seeing us on HGTV any time soon. The conclusion of all the production companies that approached us has been that what we do, as buy-and-hold investors, is boring.
It’s true that there’s not a lot of drama or sex appeal in basic buy-and-hold investing. But there are a lot of ways to make money and build your wealth over time.
So, what is buy and hold real estate investing? It’s simply when you buy a piece of property, rent it out and hold it.
It’s the most common method of real estate investing, but most people think you’re holding on in hopes of the price going up (appreciation). Yes, that is one way that you make money, but there are actually three ways you make money as a buy and hold investor.
Appreciation is what captivates an audience. Who doesn’t love hearing stories about home prices doubling and people making big bucks on a quick flip? It’s a great story. And we do a lot of market research and carefully select the areas we buy in so we often see solid growth in the value of the properties we buy. But to a smart buy-and-hold real estate investor, the price going up is only icing on already tasty cake.
2) Cash flow
Rather than focusing on appreciation, we’re actually focused on a longer-term strategy that sees us making cash flow each month. This simply means we bring in more money through rent than we spend on mortgage, repairs, taxes, insurance and property management.
3) Paying down your mortgage
Finally, we are building our equity by other people (our renters) paying down our mortgages.
And that’s it. Appreciation is obviously pretty nice, but it’s not the foundation of buy-and-hold investing.
Doing the Math
Let’s look at a basic example. Pretend you found a nice property for $100,000 two years ago, and you bought it for 25% down ($25,000). Today, here’s how your investment looks:
1) Depreciation: Bad news, your property went down in value by 5% in those two years. It’s now worth $95,000. So this was a bad investment, right? Not necessarily.
2) Cash flow: Rent each month is $1,000. Your mortgage, insurance, taxes and miscellaneous expenses are $800 a month. Income minus expenses = $200 a month. 24 months x $200 = $4,800 in income so far.
3) Paying down your mortgage: Assuming you have a mortgage at a 5% fixed rate and 25-year amortization, at the end of the two years you will owe $71,805 on your $75,000 mortgage. You have now built an additional $3,195 equity into the property ($75,000 – $71,805 = $3,195) using the rent money you collected to pay down the mortgage.
So, your property may be worth less than you bought it for, but you’ve still made $7,995 from it in two years (adding together the positive monthly cash flow and the principal your renters have paid down).
The best part is you haven’t actually realized a gain or a loss because that only happens when you sell. You really haven’t lost the 5% that the property went down in value. Focus instead on the fact that you’ve made a 32% return ($7,995 divided by $25,000 invested) on your money after two years. And if you hold onto the property and ride the market cycle back up, when you do go to sell you’ll likely enjoy a nice lift in value to add to the other two ways you’ve made money.
Plus, the big, beautiful bonus of buy-and-hold investing is that you’ll have been enjoying some nice tax deductions along the way that can help offset income you’re making with this property and other sources of income too!
July 5, 2014
More Than Just an Interest Rate - Optional Features When Committing to a Mortgage
Finding the right mortgage is about more than
just finding the best interest rate. There are countless different mortgages available, each offering a different combination of options that may or may not suit you, depending on your needs and expectations.
At first glance, it may be hard to digest everything that’s included in the fine print of your mortgage contract. However, this is something you’re agreeing to for any number of years, so it’s extremely important to do your due diligence and find out exactly what you’re signing up for.
If this is your first mortgage, especially, there are likely also some features you may not even know about yet. Before you sign on the dotted line, here are some optional features you should consider having included in (or excluded from) your mortgage.
Collateral or Non-Collateral Charge
If you think there’s a chance you’ll refinance your mortgage sometime during your mortgage term, you’ll want to get a non-collateral mortgage. Some lenders try to pass off their opposite – the collateral mortgage – as a good financial tool, because it’s a readvanceable mortgage product that allows your lender to lend you more money as your property value increases, without having to refinance your mortgage. However, the downside to that is a collateral mortgage cannot be transferred to another lender – not even at the end of your term. If you want to get out of it, you’ll have to pay a real estate lawyer to help you. Note that most banks offer both options, but TD Bank and Tangerine only offer collateral mortgages; there is no way to opt-in or opt-out – you’re just in.
Discounted Mortgage Penalty
You may or may not know by now that if you break your mortgage contract before your term is up, you’ll be subject to a mortgage penalty. If you have a variable rate mortgage, it’s just three months’ interest. If you have a fixed rate mortgage, however, it’s the greater of three months’ interest or the interest rate differential (IRD) – and the IRD can become expensive fast. If there’s any chance you’ll break your mortgage contract before your term is up for renewal, you should try to find a lender who uses a discounted mortgage penalty. Only 13 or so lenders offer it in Canada – mostly credit unions and wholesale lenders – but rather than using the posted rate penalty calculation most of the big banks use, the discounted penalty option gives you what approximates as a “fair” penalty – just enough to compensate the lender for you breaking your contract early.
If you have a portable mortgage – one that can be transferred from your current home to a new home you buy – and you plan to take advantage of that option one day, you should also consider getting a mortgage that offers an extended number of days to port your mortgage. Typically, you only get 30 days to port your mortgage. If that’s what was in your agreement and your port happened to take 31 days, you’d be subject to the mortgage penalty outlined in the feature above (and probably not the discounted type, unless you find a mortgage with both options). Fortunately, extended ports can go up to 60, 90 and even 120 days. By finding a mortgage product that offers this feature, you can confirm your lender is willing to offer some flexibility when porting its mortgages.
Most fixed rate mortgage products compound the interest on a semi-annual basis, however, some variable rate mortgage products do it monthly. The more frequently your interest is compounded, the more interest you’ll end up paying. Fortunately, you can pick and choose until you find a mortgage with semi-annual compounding – you just needed to know you could (and should) ask for it!
This feature is exactly what it sounds like. Let’s say your mortgage payment was $1,000/month. If your mortgage came with a double-up payments feature, you could pay $2,000/month instead, without penalty. It’s essentially just another lump sum prepayment option, but it’s a specific amount (double your regular payment amount) versus the regular lump sum prepayment option, which is quoted as a much smaller percentage of your existing payment amount (e.g. up to 15%). Very few lenders offer this feature, but if you think you’re going to have extra money coming in, it’s a great way to pay down your mortgage sooner and without penalty.
Finally, this one may seem obvious, but you’ll probably want to get a mortgage you have online access to – a place where you can login and see your balance, amortization schedule, make prepayments, etc. The big banks all offer this, of course, but some of the smaller lenders and wholesale lenders don’t. If having this type of access is important to you and how you conduct your daily finances, confirm it’s an option with your lender.
You may not need all these features, but you also can’t predict how life could change in the next three, five or 10 years. Mortgage broker Rob McLister’s advice: If you can check some of these boxes and not have the mortgage rate change, take advantage of that and get all the right features for you.