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I have sold a property at 4248 ETON ST in Burnaby
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Getting a US Mortgage as a Canadian
Buying property stateside is intriguing, often affordable, and considerably warmer. That’s why each year, as cold weather sets in, Canadian retirees go the way of the loon; according to Stats Canada, Canadian residents took 20 million overnight trips to the U.S. in 2010.
I know, I know – Cape Cod is not the south… but the charming property prompted me to look into the possibility further. What does buying a property in the U.S. entail?
The Cross-Border Contrasts
A good place to start is the variances between mortgage rules stateside and back home.
“There are few key differences due to the regulatory requirements, laws, and practices which govern the mortgage industry in the US,” says Alain Forget, vice president of sales for RBC.
Timing is an increasingly important element. “The average is 45 days to apply and secure a mortgage in the US, compared with a few days in Canada,” says Forget. “The main reasons is the number of steps in the process, including application, income and asset documentation, credit report, appraisal, title, credit loan review and approval, closing documents”
Getting a mortgage in the US requires a fair bit more documentation than in Canada. RBC has broken it down here. Expect to divulge details from your passport, Canadian-held accounts, and all Canadian property tax statements in addition to the usual income verification paperwork.
Expect to Pay More for Your Mortgage
Forget also points out that costs in the US can be higher – 3 to 4 per cent overall – when you factor in third-party expenses and pro services like property appraisal and title insurance. “This varies per state, for example Florida averages 2.5 to 3 per cent,” he adds.
There are also some key differences for the interest you’ll pay on your mortgage. “US mortgages are compounded monthly versus semi-annually in Canada,” says Forget. “They may also be tax deductible in the US for US citizens and permanent residents.”
How to Apply
If you don’t mind a few long-distance charges, Canadians are able to apply for a mortgage remotely via phone or email. This is usually done through a bank that has operations south of the border.
“They don’t need to have an account with RBC Bank USA to apply for a mortgage,” says Forget. “However we strongly recommend having a US account to facilitate the funding of the loan and monthly payment as well as to facilitate the transfer of the down payment for the closing.”
You can also pre-qualify before you start the vacation house hunt to give you leverage in the event you get into a bidding war with other snowbirds. “The closing should be done in person in the US, usually at the office of the title company,” adds Forget. “This requires minimum traveling across the border.”
Getting a Competitive Rate
In addition to finding a bank with the capability to deliver the mortgage in the state and county where the property is, you’ll want a Canadian-friendly lender. “Most US banks will not lend to foreign nationals like Canadians – or if they do, they might charge a foreign national premium which can be 1.5 to 2 per cent over the standard mortgage rate,” he says.
Working with a Canadian bank with reach into the US often means you don’t need an American social security number to qualify. The key to finding a competitive rate is looking to open mortgages or ones with various term options, Forget adds.
File Under: Things You’re Apt to Forget
Like property ownership in Canada, you’re going to want to make sure you have an account set up to seamlessly transfer funds between Canada and the US to cover those monthly utility bills and property taxes.
“It is also important to seek professional cross-border advice to understand the legal, tax and estate issues which affect Canadians owning US property, since a number of those issues are different between the two countries,” adds Forget.
See, nothing too daunting, right? Find a banking partner in Canada to help you navigate the legal and money stuff and the rest is all about the search.
If you're considering buying a property in the US, how do you get financing and what are the differences in mortgages between the two countries? Andrew Seale of RateSupermarket.ca offers first-hand advice.
I have sold a property at 1664 HIGHVIEW ST in Abbotsford
Get the Best Deal in a Sellers' Market
Buyers and sellers alike need to understand “fear of loss” psychology in home purchases
Whether you are thinking of buying or selling a home, understanding the current market is crucial. You need to know if you’re in a buyers’ market or a sellers’ market because that’s going to affect how your property is marketed and how much money you’re going to get for your home. If you understand the market, that will tell you what your home is worth and what you can expect if you’re a seller. If you’re a buyer, it is going to tell you what the appropriately priced offer on the property would be.
Using the market on the Sunshine Coast right now as an example, we are in a seller’s market. In a seller’s market, you’re much better off listing your property at a price that is going to attract as many potential buyers as possible and try to create an environment where they have a “fear of loss” motivation; you should aim to capitalize on that and end up in a situation where you have multiple offers.
Fear of Loss Motivation
Here’s an example of “fear of loss” motivation – also colloquially known as FOMO, Fear of Missing Out.
Let’s say you’re looking at a newspaper ad because you’re shopping for a black Dodge Dakota. You look at 15 of them – they all have similar mileage, and they’re all around the same price.
If you are the person trying to sell a Dodge Dakota in that environment, the best thing to do is to position your Dodge Dakota to look the best and price it 5% cheaper than all the other ones. Then all the buyers will want to come have a look. Everyone will look at your price and then make offers because they don’t want to miss this opportunity to get this amazing deal.
It’s the same with houses. Even though you may think that your house is unique, and beautifully decorated, with all sorts of redeeming features, the reality is that when people are initially looking at the information available on the Internet, they typically don’t know any of that. They will call up their buyer’s agent and ask to see the home based on the first impression they’ve had from the photos.
Your listing agent has to make sure when they list your property that they have a good understanding of the market value of the house, and then position it in a way where it’s going to get the most exposure and the most interest as possible. Then what needs to happen, in this market, is the listing agent needs to maximize exposure.
This is what I do. I say we’re not going to accept any offers until “this date,” and I give two to three weeks for everyone who is potentially interested in it to come and see it.
Price it Right
A lot of people make the mistake of pricing their home too high, thinking it gives them room to negotiate. For example, if a house is worth $500,000 and they price it at $550,000 because they think they can negotiate and end up with $500,000. That’s the worst thing you can do because that’s going to put people off.
The average buyer is not a professional real estate agent, and they’re the ones deciding which properties they want to see based on their online research.
If you don’t make your home appear to be a really good deal, you’re going to lose a lot of potential buyers. When they come see your home, then they can find out that it’s got lovely decoration, it’s a great neighbourhood, it’s close to a school, and all the other great features. But until they come and physically see the home, it won’t really be on their list, so you can miss a lot of people. If their search parameters are set at prices under $500,000, your house won’t even show up at all.
Understanding and Expertise
You’re much better off understanding the market, understanding how people buy, and understanding the psychology of buyers and sellers. It’s very important. As a seller, it can make you tens of thousands of dollars, if not hundreds of thousands of dollars, in a market like Vancouver.
As a buyer, understanding this can save you the same kind of money. Right now, there are a lot of buyers in our local market using Vancouver agents, paying tens of thousands of dollars too much because the agent they’re working with doesn’t understand the local market. They’re coming from a market in Vancouver where sellers are selling for $2 million, and then buying a place on the Sunshine Coast for $600,000. They think they’re getting a great deal. If they were using a local agent who knew the market, they would probably get the same home for $550,000. But they don’t and $50,000, compounded annually at 3% is a huge amount of money. A local agent who knows the market and is working as a full-time agent in the thick of things can save you, or gain you, thousands of dollars.
8 Hacks for Buying a Home in BC on a Budget
It’s no small secret that the Vancouver housing market is a tough one to break into. Among millennials and young families alike, the idea of buying property within the city limits is a daunting one. However, for would-be homebuyers in the Lower Mainland, there are a few simple tricks that can make the market a lot friendlier.
1. Look outside Vancouver proper
You know what they say: location, location, location! The attractiveness of the area you buy in contributes to a fair chunk of a home’s asking price. Rather than look at popular areas in the city that are going to come with higher costs, consider your options outside of Vancouver proper. While the median sale price in downtown Vancouver in the first half of 2017 was $749,500 (and all but one of those attached units), in Coquitlam it was $675,750 (mostly attached), in New Westminster it was $502,000 (also mostly attached). In Surrey North and Central, the median sale price was only $551,000, with more than 40% of those detached homes. It’s clear that for those who can set up house outside of the city, there are huge savings to be had.
2. Buy in a walkable, up-and-coming location
Consider buying a home in an up-and-coming neighbourhood and avoid excessive listing prices. With projects in walkable neighbourhoods such as Brentwood, Metrotown, Surrey Central and Port Moody, these areas could yield real estate gems. And with so many amenities at your fingertips, you’ll save on things like transit, vehicle costs and more.
3. Give up the parking spot
Another way to keep your costs low is to search out places without designated parking. Houses, townhouses and apartments without parking spots will nearly always have lower listing prices than their counterparts with driveways or underground spaces, which can easily cost an extra $50K. To keep things convenient, look for listings in walkable areas and that are close to transit corridors and handy car-sharing options.
4. Buy smaller
Forgoing a little space can save you a lot. Think carefully about how much room your family really needs before you commit to a larger home with a higher price tag. For instance, while you always imagined yourself in a fully detached home, you may find that a large townhouse fits the bill. And if you’re a first-time buyer entering the market, try a small one-bedroom or even a studio to get your foot on the property ladder. Assess your needs carefully before committing to square footage.
5. Buy larger and share – or become a landlord
On the opposite end of the size spectrum, look for places that would allow you to create additional suites to subsidize your mortgage. Having tenants does come with additional responsibilities, but multiple families living in a home makes it more affordable for all parties. Alternatively, you may want to apply for a Vancity Mixer mortgage and share your first purchase with family members or friends.This mortgage offers competitive rates plus the legal and insurance support you need to protect everyone’s best interests.
6. Purchase a fixer-upper
An oldie but a goodie, this nugget of wisdom still holds true. Buying a home with a few more cracks will help you save huge on asking price, whether you plan to renovate through contractors or put in the elbow grease yourself to build up that “sweat equity.”
7. Put gifts towards a down payment
Saving for a down payment is tough. One way to create savings is to put monetary gifts towards your down payment. With that goal in mind, ask friends and relatives for cash gifts if possible. Many couples even ask for cash wedding presents rather than items from a registry, with the intention of putting the proceeds towards a new home.
8. Take advantage of available resources
When you’re actively looking to buy a home, knowledge is power. Look to available resources like Vancity’s first time home buyer’s hub, which has tools to help you build your down payment, calculate how large of a mortgage you can afford and explore mortgage options. Planning ahead with expert advice will save you plenty of headaches down the road.
Breaking into the housing market is difficult, but it’s far from impossible. With careful planning and allowances for location and size where they can be made, home buyers on a budget can find the perfect place to call their own.
New property listed in Abbotsford West, Abbotsford
City’s New AirBnB Rules are a Step Too Far
There’s a better solution for the rental crisis than telling people what they can do with their homes, says agent Leo Wilk
The City of Vancouver is proposing (and we all know what that means) some new regulations on owners of real estate who use their residences or investments as income-generators on AirBnB or other vacation rental websites. Of course, this is yet another cash grab and they have claimed this will free up to 1,000 rentals in Vancouver.
The current rules are that zoning regulations do not allow short-term rentals under 30 days unless you are a licensed bed and breakfast. However, we all know people do not listen to the rules, and who is to blame them? I get it if you want to make everyone who uses property they own as am AirBnB have a licence – fair enough. But you cannot keep telling people what to do with their homes they own. Many people work very hard to afford a home in this city and then are told by the city what they can or cannot do. For me, that just does not make sense.
I know so many people who have a home worth a couple million who do not want a long-term tenant but need to AirBnB every now and then to help out. The City, along with many people, think that anyone who owns a home over a million is insanely rich. But those people work very hard to afford their homes and want to enjoy it without someone living below them.
On top of that, there are many horrible renters out there and they are protected by the Residential Tenancy Act, which makes people not want to do long-term rentals. Ever had a hoarder in your rental? Makes short-term or AirBnB look even more attractive. But once that lease is signed it is a free-for-all, according to the Act.
To give you the quick lowdown, the proposed new rules are as such:
Owners and renters (although the owner probably would not allow a renter) would be allowed to rent part or all of their principal residence on a nightly basis, if they have a business licence. To get a short-term rental business licence you would need to prove it is your principal residence by submitting your property title or a tenancy agreement along with photo ID and recent government or utility mail. Laneway homes, secondary suites, investment units and second homes will not be allowed to be rented out short-term. The City will audit licence applications to prevent fraud – and I am sure this process will be done very fast, just like our building permits! Licensed operators would need to post their licence number in all online advertising. People operating rentals without a business licence will face fines and legal action – which of course equals money to the City.
Here is my quick solution.
If the City wants to free up long-term rentals, why don't they change the regulations on strata corporations who have rental restrictions? Make it so that you cannot restrict the amount of rentals allowed in buildings. This would literally solve the rental crisis overnight and thousands and thousands of rental condos would come to market.
On the flip side of that solution, however, I do think it would mean fewer condos for sale, because now all these people who are forced to sell when they need to upsize, downsize, move out of town, etc., can hold their properties and rent them out.
5 Terms Every Condo Investor Needs To Know!
For new investors, it’s easy to get overwhelmed by facts, figures, formulas, and different investment calculations. And, although many people are aware of condo investing terms, they have trouble defining them or deploying them properly.
Our goal today is to demystify the most important condo investing terms that you need to know. This will not only make you a better investor, but it will help you impress your boss at the next company meeting.
Although there are many different types of real estate investing, the fact is that there are several key terms that every condo investor should know.
Lucky for you, we’ve compiled them here in a handy list. Think you know them all? Keep reading and see!
Key Condo Investing Terms #1 – Return on Investment (ROI)
ROI, or return on investment, is an important formula to gauge how an investment performs. It’s a simple, quick calculation – easily done on a napkin – that lets you know how profitable an investment is.
The formula looks like this: ROI = (gain from investment – cost of investment) / cost of investment
For example, after four years you decide to sell the downtown Toronto condo you invested in. You bought it for $350,000 four years ago with a 20% down payment, or $70,000. It appreciated at an annual rate of 5.82%, which is the compounded annual growth in Toronto over the past 30 years. So that means your condo is now worth $440,127.
Let’s assume you sell it for $440,000 and have a remaining mortgage balance of $250,000. Your gain on investment is therefore, $190,000.
You also had expenses, including closing costs and upgrades, totaling $20,000. So your cost of investment is your down payment plus expenses, for a total of $90,000.
Now, let’s put these numbers into the formula:
- ROI = (190,000 – 90,000) / 90,000
- ROI = 100,000 / 90,000
- ROI = 1.11
- ROI = 111%
Over four years, your return on investment is 111%. That’s not bad! Some investors set a standard ROI they aim for and won’t buy anything that yields less than that.
Key Condo Investing Terms #2 – Pre-Construction Appreciation
One of the many reasons real estate is a great investment vehicle is long-term property appreciation. But, condos have a second opportunity for appreciation, through the wonders of pre-construction appreciation.
When you buy a condo before it’s constructed, you are paying today’s prices for a condo that won’t be constructed for several years. That means when your condo is move-in ready and you actually buy it (take out a mortgage), it’s already appreciated.
We won’t get into greater detail about the merits of pre-construction condos just now, as we have a lot more juicy stuff about this to share with you in the weeks to come.
Key Condo Investing Terms #3 – Net Operating Income (NOI)
NOI, or net operating income, like ROI, is a great tool for calculating how profitable your properties will be. Although it may sound a little technical, the formula is actually quite easy:
NOI = Revenue – Expenses
This is an annual calculation and assumes you own a property free and clear. Expenses include all your operating expenses such as taxes, insurance, utilities, maintenance, etc.
Imagine you bought a property that produces $21,600 per year in rent ($1,900 per month). Your monthly expenses include the following: property taxes at $200, condo fees at $150, and insurance is $50. This is $400 a month, or $4,800 yearly.
That would mean that your NOI = 21,600 – 4,800 = $16,800. Calculating the NOI is an easy way to compare properties and maximize your cash flow.
Key Condo Investing Terms #4 – Capitalization Rate (Cap Rate)
Now that you know how to calculate the NOI, we can move on to something a little more complicated. The cap rate is another way of calculating the rate of return on your investment properties.
Although this formula is expressed as a percentage, many investors use only the number when referring to a cap rate. For instance, “the condo one of my clients just sold had a 5 cap!”
Here’s how it works: Cap Rate = NOI / Current Market Value
So let’s use the NOI we calculated earlier – $16,800 NOI. And, let’s assume a $350,000 market value of your condo investment.
So, your cap rate = $16,800 / $350,000 = 0.048
Expressed as a percentage, your capitalization rate is 4.8%, or a respectable 4 cap! This calculation is a great way to compare investment opportunities.
Key Condo Investing Terms #5 – Refinancing
Refinancing is a crucial part of all real estate investing, and can save you thousands of dollars per year. Like most other investing concepts, refinancing seems a little scary if you’re not familiar with it, but it is a very straight-forward process.
Refinancing is simply negotiating a presumably better interest rate and/or terms for your property. It is usually done for one of two reasons: either to get a better interest rate, or to free up capital for your next investment. And the beautiful freeing up capital for your next investment, is that you can pull it out free of capitals gains by refinancing. Capital gains aren’t actually realized until the property is sold, whether that is in 1 year or 100 years.
We’ll be going deeper into detail about the power of refinancing next week. In the meantime, consider talking to a mortgage broker to see if your properties are worth refinancing.
The above list of condo investing terms is by no means comprehensive. But, these five terms are some of the most important you need to know as a condo investor.
If you’re consistently putting these concepts into practice, you’ll be in a much better position to analyze and evaluate your existing and future condo investments – which, in turn, means more money in your pocket.
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Low Supply Keeps BC Housing Prices Climbing
Average sale price increases in every real estate board in the province in June
Sales may be down from last year’s record-breaking activity, but that doesn’t mean home prices across the province are falling, according to the latest figures from the British Columbia Real Estate Association (BCREA) released July 13.
The BCREA reported that 11,671 BC homes were sold on the Multiple Listing Service® (MLS®) in June, a fall of 9.6% from June last year, and down 5.9% compared with May’s surge.
However, the average MLS® sale price in BC was $725,778, up 4.4% from the same month last year, and rising on an annual basis in every one of the 11 BC real estate board areas.
“Although home sales remain well off the record pace set last year, demand is still quite robust," said Brendon Ogmundson, BCREA economist. "That demand is supported by a strong provincial economy and vigorous job growth.”
He added, “Supply remains a challenge, which means most areas are seeing tight market conditions and significant upward pressure on prices.”
The number of total active listings across the province was down 6.2% to 29,651 units compared with June 2016.
Chilliwack was the board to see the highest annual price growth, up 18.3% year over year, followed by Kootenay, Victoria and Vancouver Island. Greater Vancouver saw the lowest average price increase of the 11 BC boards, a rise of 2.7% since last June.
Sales activity painted a different picture – revealing that it is largely supply, rather than sales volumes, that dictates price points. Along with Greater Vancouver, where sales were down around 12% in June year over year, Chilliwack saw an 11% annual sales decrease. In both Vancouver Island and Victoria, where prices are climbing robustly, year-over-year transactions declined 13-14%.