ImageEveryone is prone to making rookie mistakes – even investors. With all the hype, and excitement surrounding a purchase, some of use, even those that are highly analytical can rush into things and buy the wrong property, or not structure the deal correctly.

Let’s review some of the top mistakes we’ve seen rookies make . . .

1.    Chasing cash flow. Many first-timers are keen on the idea of quick cash flow, but that isn’t tantamount to long-term financial success. Instead of aiming for a quick buck, focus on winning low tenant turnover; the mortgage is still paid, the property is still earning appreciation and there are certain tax advantages.

2.    Fearing the unknown. Many first-time buyers wait too long to start and tend to over-analyze the property. The market in good areas is pretty hot, and properties will sell relatively quickly in most GTA neighbourhoods. We’ve seen many investors doing due diligence on a property before they even have it under contract – a mistake that could cost them the sale.

3.    Going it alone. While many first-time investors may find “The Lone Ranger” style of investing appealing, be careful about cutting corners to save money, as successful investing requires many helping hands. Your advisory team should include a mortgage broker, an investment savvy Realtor, a good insurance broker, an accountant with experience in real estate, a contractor, a property manager and a real estate lawyer.

4.   Flying without a flight plan. Everyone’s real estate investing needs are different. Create a plan that revolves around what you want, not what your contemporaries are doing. Don’t chase the “number of doors”, and don’t feel pressure to purchase more than you need.

5.    Winging it. Sinking between $250,000 and $500,000 into a property without an education in investment isn’t necessarily a wise move. Invest in yourself before your first property: do your research, read a book, take a course or attend an investor forum to learn about the business

6.    Nailing shut your exit. Diving into a property with no exit strategy spells trouble. Whether you are planning to fix it or flip it, have an exit strategy AND a plan B. Ask yourself before you buy, if I had to hold this property for 20 years, would I want to? Your answer should be a deciding factor in the purchase.

 

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Don’t Even Think About Buying A Condo Until You Read This…

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With over 25 years in the real estate business, and having sold thousands of condos over the years, we’ve seen it all, and we’ve learned a lot by making mistakes, and even more by watching the mistakes that others make. Here are the most common mistakes we’ve seen over the years, and more importantly, how to avoid making these same mistakes.

We walked in to a Condo Sales Centre, and bought on the spot, without doing our homework.

We get this a lot. Your buddy at work told you about a new project that he just bought in, your brother in law has made a killing on 2 condos he bought 3 years ago, and you feel like you’ll be left out if you don’t do something.

You go to the sales office with your Venti Latte in hand. The receptionist is nice, and the model suite looks amazing. The sales rep tells you that “they’re selling fast” and you sign the paperwork, even though your gut tells you that you should take your time.

What you don’t know is that the best suites were already sold 2 months ago, to friends and family of the builder, and to industry insiders and their clients, AND they were $30,000 less on average.

We registered online, and then waited in line to buy a condo. We didn’t get our first pick, or even the layout that we wanted, but we felt like we didn’t have a choice, and that we’d miss out.

Night club owners learned decades ago, that the best way to fill up an empty night club, is to make people wait in line to give the impression of demand. This leverages the “Principle of Exclusivity”. People want what everyone else wants. And the more exclusive, the more they want it.

Developers are experts at building hype for their projects through ads, signs, websites, and NOW even resorting to offering higher and higher commissions to rookie realtors in hopes that they will convince their clients to buy, and create a buying frenzy at organized “VIP” events.

We panicked and sold our condo too early. If we had waited just a little longer, we would have netted MUCH more on closing.

In this market, 40% – 60% of preconstruction condos are sold to investors. Many of them are buying long term, and intend to rent them upon completion. The others are merely speculators. The problem comes up at occupancy, and prior to closing. Many of these speculators either don’t want to close to avoid closing costs, or worse, CAN’T close because they can’t get financing. These sellers are more desperate, and because they are all trying to sell at the same time, this keeps prices LOW. It seems to happen with almost EVERY new building at the same time. The savvy investors are those that close on the purchase, rent out the suite for a 12 – 18 months, and once the dust settles sell for much more.

I Didn’t Know About the govt rebates and grants that can save condo buyers THOUSANDS.

It’s not surprising that most people don’t know about some of these programs, because they are not advertised or promoted. Both before and after you purchase a condo, there are rebates, and outright grants that are potentially available to condo buyers, but you have to use the right forms, depending on your situation, and you have to file them within very specific deadlines.

This can save you Thousands of Dollars, but only IF you know about them, and if you file them on time.

Our all new 2012 Condo Buyer Survival Guide is is now available, and best of all, it’s FREE.

Whether you’re buying your first condo, up sizing, downsizing, or investing, resale or preconstruction, this guide is sure to help. It’s customized for each person, and will include a detailed report on condos available in your area, AND a list of condos recently sold in your area, which can help give you a much better idea about real market values in the area.

Call or email me NOW for your Free Copy:  416.526.7700 or cougs37@gmail.com

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Past to future house prices in Canada

Teranet and National Bank publish a monthly House Price Index that tracks changes in house values across Canada. In my opinion, it’s a better measure of TRUE real estate values, as it measures ACTUAL homes and condos that sold at least twice in a given period, as opposed to looking at AVERAGE prices that can be affected by changes in the housing stock or by a small number of luxury property sales.
Instead of reporting on pri ces for a particular city, National Bank and Teranet have converted house prices into a standard index. To do this they first assign a base period, in this case June 2005, for which the index for all regions is set to 100. The index then captures just the appreciation or depreciation in house values for a particular market. Let’s have a look at some of the findings.
Winnipeg is number 1: House values in Winnipeg have increased 78% since June 2005 (the base year of the house price index), roughly 12% per year.
Vancouver: Vancouver house values were outperforming Winnipeg until 2008 when house values retreated by 12%. Since then house values have been increasing steadily and are averaging 11% per year.
Quebec City: A lot like Winnipeg, house values in Quebec City have been appreciating at a very consistent rate over the past 6 years. It’s interesting to note that house prices in Quebec City were not impacted at all by the economic crisis in 2008. House values have increased by 65% since June 2005 or roughly 10% per year.
Edmonton: Edmonton house values nearly doubled from June 2005 to September 2007. Prices declined for two years and have slowly started to recover. Since then, values have appreciated by 64% since 2005, or roughly 10% per year.
Montreal: House values in Montreal have appreciated at a steady rate every year, by 44% since June 2005 or roughly 7% per year.
Ottawa: values in Ottawa have appreciated by 38% since June 2005 or roughly 6% per year.
Toronto: Most people would be surprised to see that Toronto is among the worst performers in terms of appreciation in house values over the past six years. House values in Toronto have appreciated by 38% since June 2005 or roughly 6% per year.
Hamilton: The title for worst performing real estate market goes to Hamilton. House values have appreciated by 31% since June 2005 or roughly 5% per year. Hamilton also saw downturns in 2008 and 2010 but prices have recovered since then.

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Et Tu, FSBO Entrepreneur?

For Sale By Owner listings have plunged to
historic lows across North America, in spite of all projections to the
contrary. And in another blow to the FSBO market, the co-founder of
ForSaleByOwner.com turned to a real estate broker recently to sell his
Manhattan apartment.

Colby Sambrotto marketed his apartment
himself for six months through online ads. When it didn’t sell, he hired broker
BOND New York.

“I was floored,” says Bond New York
co-owner Bruno Ricciotti. After all, Ricciotti considers Sambrotto’s former
company a big player in the FSBO Market.

Listing agent Jesse Buckler raised the price
and lured multiple offers, ultimately selling for over asking at a whopping
$2.15 million.

Undaunted, Sambrotto plans to launch a new
FSBO website that will let sellers offer commissions to brokers who bring
buyers in.

Mike Says: ….Seems to me that there is
certainly money to be made selling ads to private sellers, even if it doesn’t
get the desired results. The newspapers have been doing it for decades . . …

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Too Many Condos? Not Necessarily, Says RBC.

 

Canadian condominium
construction is strong, but not necessarily excessive, since new units are
filling a gap by creating much needed rental stock, says a report by the Royal
Bank of Canada.

“Concerns have been raised about the growing
number of investors fuelling the growth in condo sales in recent years,” said
Robert Hogue, a senior economist with RBC in a report Thursday. He says
condominium units fill a need in the rental market because few apartment
buildings have been initiated in the last two decades.

RBC estimates about 20 per cent of all
condominiums are rented. In recent years, that figure could be higher, since
market research firm Urbanation Inc. estimates that 45 to 60 per cent of all
new units are being purchased by investors. Some of those investors will rent
their property out, while others will sell the unit on closing.

Vacancy rates in the Toronto market dropped
sharply to 1.6 per cent in April compared with 2.7 per cent a year earlier,
according to the Canada Mortgage and Housing Corporation.

Condominium sales have been on a tear in the
Toronto area, representing the largest market in North America. In the GTA
alone, there are 37,700 units currently under construction. Thanks largely to
condos, sales of new homes were also up by 53 per cent in June, compared with
the same month a year earlier of 3,050, according to figures released by
RealNet Canada Inc. Tuesday. Nearly two thirds of all sales in June were
condos, up from the historical norm of about 40 per cent.

However, Hogue said while the number of
completed units awaiting occupancy is at the highest level since the 1990s, the
percentage of unoccupied units are still below long-term averages.

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No Down Payment…No Problem (No Kidding)

 

We can now help you get into the home of your dreams sooner than ever even if you have NO down payment.

If you have a solid credit history, but limited funds for a down payment, you could qualify to use borrowed funds or one of various Cash Back Mortgage plans to help you with the minimum down payment of 5% which is required for insured mortgages.

This option is available for home purchases only ( not refinancing), and only for owner occupied homes or condos. So it’s not available for non owner-occupied investments, but if you plan to live in the home and rent the basement, for example, you can still qualify.

A friend of ours recently bought a home in East York, a bungalow with basement apartment, and even though she had no down payment at all (she did have enough for the closings costs, which is required), she lives upstairs, rents the basement, and her net mortgage payment is less than $1,000!

Call us first and we can help you figure out the best financing options out there. There are many other creative financing options that your bank may not tell you about.

We are still at an all time low for mortgage rates, and the time has never been better. Give us a call to find out your options.

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Real Estate Advice for Couples Planning a Divorce

Before we get into specifics, here are three tips that every divorcing spouse should read. First, make sure you keep paying your bills throughout your settlement period. While I appreciate the raw emotions involved in working through a divorce, refusing to pay joint bills is literally cutting off your nose to spite your face. Recent slow or missed payments will damage your credit and make it either prohibitively expensive or downright impossible to qualify for mortgage financing in the foreseeable future. The best advice I can give you is to make sure that all of the bills are paid (you can seek reimbursement for the expenses your spouse should have covered during the settlement phase, so keep your receipts!)

Second, separate your joint accounts as soon as possible and check your credit report to ensure that you did not miss anything. Regardless of what you and your ex-spouse have agreed about who is responsible for paying what bill, a missed payment on a joint account will hurt both your credit ratings equally. Also, if all or most of your credit has been in your spouse’s name, set up your own accounts as quickly as possible because it is much easier to get approved for a mortgage with an established credit history. 

  
Third, since no lender will provide you with a mortgage until all of your future financial obligations can be clearly understood, complete your separation/divorce agreement as a matter of priority. Also, because your soon-to-be ex-spouse can make a claim against any of your assets, lenders will not risk such a claim on your new home while divorce proceedings are still underway.  

More specifically, if you are looking to buy out your former husband/wife’s share of the matrimonial home, the first step is to agree on the property’s current market value. This can be done by hiring an appraiser, or by giving us a call for a free market evaluation. If an agreement on price can be reached, the net equity in the home can then be calculated by subtracting any debts secured against the property along with the estimated costs of disposition (selling costs are included because they must be incurred in order to liquidate the property). If a price cannot be mutually agreed upon, the house could be listed for sale and the proceeds divided at closing.

While getting through a divorce is often unpleasant and expensive, getting good advice can at least help save you money and unnecessary hassle. To ensure that you are left in the best possible position, try to involve your chosen legal, mortgage and real estate advisors as early in the process as possible, because you’ll be surprised at the difference we can make, especially when given a little time.  

 (Please note: You should not make any final decisions related to your separation/divorce without the advice of a lawyer. Although I can explain the concepts, point you in the right direction and provide the appropriate real estate or mortgage advice, I am not a legal expert.)

And lastly, if you haven’t already retained a lawyer, you should consider contacting Fairway Divorce at http://www.fairwaydivorce.com. They offer a flat fee service that can save you a lot of money.

A tough topic, but one that unfortunately is a fact of life for 37% of Canadian families. Hope this helps.     

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Bank of Canada Announcement – Rates Remain Unchanged

 

Would they or wouldn’t they?  This was the question on many Canadian lips for the last couple of weeks.  There has been much talk that a rise in interest rates in inevitable.  That may be so—but not today.

The Bank of Canada “is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. “

Despite all the buzz and speculation about interest rates, with reasonable Canadian economic growth, political turmoil in Libya and the price of oil, and a myriad of other factors, the Bank of Canada has held its status quo for interest rates, again.

This latest announcement marks the fourth consecutive time that Mark Carney has left rates unchanged; he is not without his reasons though.

The Global economy is moving along as expected, although “risks remain elevated’; perhaps the most prominent flag in this regard is the storm that is churning in Libya- and the possible surge in oil prices; This gives Canadian investors and consumers alike an unwelcome taste of déjà-vu- from the pre-recession days—when oil prices were widely forecast to reach between $200-$300/ barrel.

That said, the Canadian economy is  modestly beating growth forecasts;  the US economy continues to chug along, put in sustained motion by government stimulus; similarly, businesses are continuing to spend, and are starting to contribute  to  overall economic growth, through investment partially funded by government stimulus.

In terms of inflation, Canadian inflation levels are moving reasonably, and are keeping in line with what is expected- “Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy. “ Global inflation continues to grow—but at a manageable pace.

“Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.“

The changes to mortgage lending introduced by Jim Flaherty earlier this winter are set to take affect this month; there has been widespread concern that the combination of tighter lending restrictions, shorter amortizations and higher rates, might cause stress to an already heavily debt burdened typical Canadian consumer.   At least for now, they will get a reprieve from higher rates.

What will Carney’s next move be, and what will the implications be on Canadian borrowers and the economy alike?  Let the speculation begin for the next rate announcement- which comes down on April 12.

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Bank Power of Sale Properties Not Always A “Great Deal”

First you see that the lawn has not been cut and the weeds are taking over. Then you notice that the newspapers and mail are piling up on the front porch. The windows look dirty, and the house looks forlorn and neglected.

These are possible signs that a house may have come under power of sale – but don’t be fooled. Even properties that look majestic and pristine, including homes in high-end neighbourhoods, can be subject to a power of sale.

A power of sale is a forced sale of a property by a mortgagee (a bank, financial institution or other lender) due to a default of one or more obligations by the mortgagor (owner or borrower) under the mortgage.

The obligations include: paying principal and interest, paying municipal realty taxes, providing adequate insurance on the buildings, and keeping the property in good repair. When a mortgage goes into default, lenders have several options, and power of sale is just one of the legal remedies.

 “There’s a story behind every power of sale, and in many cases it’s a sad one,” says Michael Shaw, Real Estate Consultant with Royal LePage Signature in Toronto.

“For investors or lawyers, real estate is a piece of paper or a business proposition, and in a number of instances, if it doesn’t work out, the investors walk away,” says Shaw. “But most owners have an entirely different relationship with the property. Power of sale is very personal to them.”

In some cases, people have put only five or ten per cent down, and they become ill or lose their job, or both. As they fall behind on their payments, the lender will take over and sell the property to minimize their losses.

Shaw sees hundreds of power of sale situations each year, he estimates. But .  .”they are not necessarily a great deal for buyers or investors.” 

Buyers who seek a power of sale situation may think they’ll get a great deal, but Shaw warns that power of sale is not always an attractive proposition. “Many people have misconceptions about the value of a power of sale home,” he says. “It’s not always a good deal. Some people see it as an opportunity to take advantage of someone else’s misfortune, but fortunately, the courts hold the lenders to a higher standard, requiring them to get a fair price, and in fact the best price, for the property.”

As with any purchase, a prospective buyer should understand the local market values, and make sure to do a thorough physical inspection before finalizing a purchase.

Mike’s team publishes a weekly report with a list of Power of Sale properties in the GTA. For a free copy, email him at cougs@rogers.com  or call 416.526.7700

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The Top 5 Renos That Can Add Value To Your Home

Spring is just around the corner, and with the uncertainty about the stock market, more and more people are focusing on home sweet home. Values have come up an average of 7% per year over the last 30 years, so people are not afraid to spend money on what has proven to be one of the best investments they have. The key is to know where to spend your money, and there are several areas to consider, which include both cosmetic and functional aspects.

Functional renovations like a new roof or new windows are a must, but won’t necessarily add value to your home because buyers expect a functional roof. The same can be said for plumbing, electrical, and heating/cooling. The key to adding value is focus on the things that are important to buyers, and not to over-improve. When deciding whether to proceed with functional renovations though, it’s also important to consider that significant government rebates are available for many energy efficiency improvements.

Most people know that kitchens, bathrooms and a fresh coat of paint inside and out, offer the best return on investment. According to the Appraisal Institute of Canada, you can expect to get back 75 to 100% of what you put into kitchens and bathrooms. Painting, because it costs so little, can get returns of 100% – 1,000% of your investment.

There are some improvements that we undertake simply for our own enjoyment, like a swimming pool, which in some markets can actually lower your market value, since most people do not want a pool. And although landscaping is important, it will likely offer a lower return in the area of 30% to 40%.

Consider as well that not all of your renovations need to be sizable. Even minor improvements like new light fixtures, cabinet hardware or faucets can give your home a contemporary look.

Here are the TOP 5 WAYS to add value to your home, even in a strong real estate market.

5) More space and light:  dark and cramped is never good, so a little light goes a long way. Consider knocking down some walls to open up your floor plan a little. Open rooms create an inviting atmosphere for entertaining, and is also great for young families who want to keep an eye on the little ones.

4) Home office: many people are now tele-commuting at least some of the time, and that number is growing. Creating a dedicated work space adds value, and may make a portion of your living expenses tax-deductible. Converting a small bedroom, or sunroom is a great way to take care of business in your pajamas. If you live in an older home, make sure that the electrical outlets have been updated with grounded outlets. Phone lines and data ports are also a big plus.

3) Curb appeal. A good first impression can add five to ten percent to the value of your home. If the exterior colour is dated, or needs repair, painting is a good place to start. It’s important, however, to choose colours and details that match the period and style of your home. If the driveway or walkway looks a little tired, paving is a good investment. As for landscaping, a manicured yard, front and rear, doesn’t hurt, but don’t go overboard. If you don’t have a green thumb, stick to common perennials and drought-tolerant plants.

2) Bathrooms. Updating or even adding bathrooms can add considerable value to any home, especially master baths. Although we’re seeing hardwood in some modern renovations, ceramic flooring is the best option as it handles water better, and not terribly expensive. If you’re trying to go modern, make sure that you retain a classic look that is in keeping with your area and style of home. Expect 75 – 150% return in this department, not to mention a faster sale.

1) You’ll probably notice that at most parties, people end up in the kitchen. By far this is the most important area of any home, and it’s known as the heart of your home for a good reason. When planning your reno, make sure to include plenty of counter and cabinet space. Granite or quartz counter-tops are very popular. Stainless steel appliances are still a hot ticket right now, but above all make sure that your appliances all match.

One of my personal preferences is the Bosch line of appliances, which are environment-friendly, and offer both quality and style. Expect 100% return on high quality appliances, not to mention that you get to enjoy them in your kitchen. For a free copy of my e-book, “Everything You Ever Wanted To Know About Real Estate But Were Afraid To Ask”, email me at cougs@rogers.com

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