April 21, 2017
Ontario's Fair Housing Plan
Yesterday the province released it’s Fair Housing Plan, which is being marketed as the Provinces attempt to bring stability to the housing market by increasing supply, and protecting buyer’s and renter’s. Ultimately the main issue in our market is one of supply and not of foreign buyer’s snapping everything up, but people wanting to live in the area and buy a home. Unfortunately this plan isn’t likely to do much on the supply side.
Here’s the coles notes version of what is proposed:
- A 15% non-resident speculation tax on homes in the Greater Golden Horseshoe for people that are not citizens or permanent residents of Canada. The new tax will only apply to the transfer of land with one to six single family residences (i.e. detached, semi-detached, townhomes and condos). The trax comes in effect today (April 21, 2017). The tax can be rebated for those who later attain citizenship or permanent resident status.
- Expanding rent control to private units built after 1991. Rental increases will be dictated by the Province and their annual rent increase guideline.
- The Province will develop a standard lease document to be used by landlords and tenants. In particular they plan to tighten the provision in the Residential Tenancies Act that allows an eviction of a tenant when it is for the “landlords’s own use.”
- Creating a program to leverage surplus provincial land assets across the province for the development of affordable housing.
- Enabling the City of Toronto and potentially other municipalities to introduce a vacant homes property tax. The purpose of which is intended to get the owners to either sell or rent their properties outs, thus adding them to the housing stock.
- Reducing the property tax rate on multi-residential apartment buildings so it’s inline with other residential properties.
- Introducing a $125-million five year program to encourage construction of new rental apartment buildings by rebating some of the development charges.
- Empowering municipalities to use property tax rates to unlock development opportunities (i.e. imposing higher taxes on vacant land).
- Creating a Housing Supply Team made up of provincial staff who will work with developers and municipalities to find solutions to issues facing (holding up) specific housing development projects.
- Targeting issues of tax avoidance and speculation in the housing market of “paper flipping,” or as it’s called in the industry, assignment sales.
- Developing new rules and practices for real estate agents to ensure consumers are represented fairly (it’s about time!!!!). One of the targets identified is multiple representation (double ending) as well as increased standards.
September 22, 2016
Retirement and Real Estate
When you start to see things like a new Ontario pension plan being proposed (now on hold), warnings about Canadian debt levels and the continuing message that we’re living longer so need to consider working longer, it’s probably time to take notice that there’s a growing concern that Canadian’s won’t have the financial resources they need to retire.
The latest person to add their voice to the issue is the governor of the Bank of Canada, Stephen Poloz. His message: “Canadians must be ready to adjust their retirement expectations in the face of continuing ultra-low interest rates.” Socking away money in a retirement savings account, bonds, or GIC’s is no longer a guaranteed way to grow your wealth and ensure a comfortable retirement. http://www.cbc.ca/1.3770695
For many of us, not only are we having to worry about our own retirement, we’re now contemplating how to take care of ageing family members so they can live comfortably.
As life becomes more expensive, it’s important to pay attention to what the Governor is saying and become more active in our planning for the future. My personal strategy has been to start growing my real estate investment portfolio again.
The great thing about real estate, unlike other investments, is that you can leverage a relatively small amount of money to purchase a property that can then be rented out and paid off by someone else. A pretty amazing arrangement if you ask me. In a low-interest-rate environment like we are now, you get the added benefit of reduced carrying costs and potential for faster equity build-up. Over time, as you hold onto the property, your cash flow grows, your equity grows, and the property’s value increases. Sound interesting?
Whether you’re buying a property now to have a secure nest egg for the future, or to accumulate equity to help a child pay for university or a parent’s care, real estate is a great long-term investment that should be considered as part of any wealth building plan.
If you want to learn more about investing in real estate, or how real estate can help you achieve your financial goals, get in touch, I’d be happy to help.
February 24, 2016
Re-thinking the Home & Creating Individual Units for Each Generation
As Toronto home prices continue to rise, creative housing solutions are going to become a must. This iarticle is a great read when thinking about how you can use your home in creative ways and is one of the reasons I'm such a fan of the typical 2.5-3 storey homes in Toronto that provide great potential to convert into multiple units!
How Architects are Rethinking & Rebuilding the Family Home to Make it Last for Generations
February 5, 2016
Free Money From the Government
If you're planning on doing some upgrades to your home this year stay tuned. The Ontario government just announced a $100 million dollar investment to help homeowners conduct energy audits & then complete upgrades like improving insulation or replacing old furnaces and hot water heaters. Details will be released in the next few months. Check out the link below for the news release.
Quick Fact: Energy efficiency retrofits can save natural gas consumers money on their energy bills. Historically, every dollar invested in natural gas efficiency has resulted in $1.50 to $4 in savings for natural gas consumers.
January 29, 2016
Patience will Save You Money!!
HOME BUYERS, PATIENCE WILL SAVE YOU MONEY: It seems that during this time each year the Globe and Mail publishes a story about a crazy bidding war as buyer's flock into the market after the holidays. The reason these articles come out like clock work is because the same cycle keeps repeating itself. With less inventory than usual and buyers having taken a break over the holidays, they rush into the market all at once. Have a bit of patience and once more properties start coming up for sale, which they will, things will calm down and you'll find opportunities within the frenzy.
Toronto house hunters jumping in to the market early in 2016 - http://bit.ly/1PKmjX0
January 21, 2016
How to Become Financially Free Faster!
When people talk about financial freedom it’s often with the hope they’re going to win the lottery. We’ve all slightly held our breath as we scan our lotto ticket hoping to hear some bells go off and winning more than $20. While we can’t control if we win the lottery, we do have some influence over one thing that can get us to a place of financial freedom faster, our mortgage.
For most Canadians their biggest monthly expense is usually a mortgage payment or rent. In Toronto this cost can eat up anywhere from 40-60% of a household’s income and maybe even more! Now imagine if you were able to eliminate this cost and had 40-60% more of your money available each month as disposable income. You would definitely be freer!
While it’s not the same as winning the lottery, we’ve definitely hit a jackpot in the opportunity represented by years of super low mortgage rates (check out the graph above courtesy of ratehub.ca which shows the 5 year fixed and variable rate over the last 10 years. The drop in rates is even more dramatic when you go back to the 80’s when they were over 20%!!!). Right now you’re likely paying off more principle then interest and putting more money in your pocket rather than the bank’s. It’s because of low rates that the possibility of paying down your mortgage faster than ever feasible, and if you’re committed, doing so in record time.
So how can you do this?
Use some of these tips to chip away at your mortgage and hopefully realize financial freedom sooner, rather than later.
Tip 1: Add Additional Payments
As you add mortgage payments, you’re paying down the principle directly. The smaller your principle gets the less interest you’re paying and the amount of time to pay off the mortgage is reduced. An easy way to do this is rounding up your current mortgage payment so that you’re doing this automatically rather than when you think about it.
Tip 2: Reduce your Amortization Period
If you have a mortgage amortized over 25 years, reduce it to 20 (if you can, go to 15 years!) Be as aggressive as you can when setting up the amount of time that you will be paying off your mortgage. By lowering the amortization you’ll pay less interest and pay the mortgage off even faster. One way of doing this is by keeping your current amortization but setting the payments so they match those of a lower amortization period. This gives you the flexibility to reduce the payments if you ever need to.
Tip 3: Change Your Payment Frequency
If you’re currently paying your mortgage monthly, change to an Accelerated Bi-Weekly or Weekly Payment schedule. This type of payment schedule results in you making additional smaller payments that helps to payoff the principal sooner. For example, if you have a $600,000 mortgage amortized over 25 years with an interest rate of 3%, and were to switch to an accelerated payment plan, you’d save over $30,000 in interest and shave more than 2 years off the amortization period.
Tip 4: Make a Lump Sum Payment
If you receive a bonus or have extra savings or cash, make a lump some payment to lower your principal amount, which will lower the amount of time and interest it will take to pay off the mortgage. Most banks will allow you to make a lump sum payment of a certain percentage each year. Consider using a tax refund for this.
Taking the example above. If you had a mortgage of $600,000 amortized over 25 years at a rate of 3%, being paid monthly, and you were to make a one time payment of $5,000, over the life of the mortgage you’d save $5,458 in interest and shave 3 months off your mortgage. Now imagine if you did this on a yearly basis what it could do!
Tip 5: Allocate a Pay Raise to Your Mortgage
If you receive a pay raise, use a portion or the full amount each month as an extra payment. If you’ve been managing on your current salary, you won’t miss the increase in pay and better that it go toward helping you become mortgage free than buying stuff.
Use this online calculator to see how these tips can have an impact on reducing the life of your mortgage and the amount of interest you pay to the bank.
Tip 6: Buy an Investment Property
How could getting an extra mortgage help you become mortgage free you ask? By having a mortgage that tenants are paying for you and a property where the value is increasing, over time the market and someone else are going to be building equity for you. When the time is right, sell the property and use this equity to payoff or make a big ass lump sum payment on the mortgage of your primary residence!
January 16, 2016
How to Hang a Picture
When getting a house ready to sell, one of the key things me and my staging team will look at is the placement of art and pictures. What we notice quickly, and what a buyer will notice, is when a picture hasn't been hung correctly. Art helps set the tone in a room, which is especially important when selling your home, so you want it to complement the space instead of distracting from it. Here's 6 tips to help combat the most common misplacements we see:
1. Hang a picture so that the centre is at eye level. 60 inches from the ground will usually get you in range of this. Very important if you're only hanging a single piece. A sore neck shouldn't result from looking up at your art.
2. Get the proportions right. You want to make sure the art work is appropriate for the size of the wall. A small piece on a big wall (unless you're an art gallery), is going to look odd, and if it's to big for the wall, it's going to look odd.
3. Select the right scale. This is especially important when you're hanging art above a sofa or bed. A good rule of thumb is that the piece should be about 2/3rds the length of the of the furniture it's going above. If you're using multiple pieces, include the length of each frame and space between them to figure this out.
4. Use proper picture hooks. Screws and bolts really should only be used for keeping the house together, not hanging a regular picture. The holes left from picture hanging hardware are so much easier to repair when you decide to move things around.
5. If you're hanging a row of pictures along the same line, use a level, or better yet a laser level, and mark your nail holes accordingly. To help determine spacing and positioning there's a couple of online calculators for this and even an App, Hang-a-pic (I haven't used it but it looks cool) www.datawranglers.com/tools/wallhanging.php www.pictureframe.com.au/picture-frames-wall-hanging-calculator.html (this one uses meters so get your conversion calculator out).
6. Get an extra set of eyes. Having someone hold a picture in place before sinking a nail into the wall makes it so much easier to determine the right positioning, height etc. with out leaving a trail of holes.
Bonus Tip: Make yourself a picture hanger. You can buy these in the store, but personally I think a homemade one is better. Take a flat piece of wood similar in shape and size to those old wooden rulers. Drive a nail through it about half an inch from the bottom so that a small part of the nail is coming out of the back. Voila, you have a picture hanger. Place it against the wall with your picture hanging on the nail and once you've found the right place, press against the frame and the nail will make a small hole where the nail for your picture hook needs to go. Check out this link for visual instructions on how to make one http://celebrateeverydaywithme.com/the-best-ever-picture-hanging-tip/
January 6, 2016
The Force is Strong in Toronto's Real Estate Market: 2015 in Review
Nope, that’s not frost quakes or the Millennium Falcon hitting light speed, it’s Toronto’s real estate market breaking records!! December 2015 ended as the second best on record for theToronto & GTA real estate markets, and was the cherry on top of the best ever year for real estate sales!
In the City the average price for a home is now $659,270 an 8% jump over 2014 (the number you might hear in the media is $622K, which is the average price for the GTA & not Toronto specific), and sales for the year were 7% higher.
With all this record breaking, it’s not surprising that the average price for a detached home broke the $1M mark and sits at $1,047,483. The average price for other housing types were: Semi - $736,082; Townhomes - $542,406; and Condos $405,589.
Especially in the core, condos are now the primary first time buyer and investor option, so no surprise to see the average price break the $400,000 mark and show a 5% increase over last year!
(For a historic look at average prices for the Toronto Real Estate Board check out the graph below).
As affordability has increasingly become an issue for people looking to purchase a freehold home in the City, it’s helped to propel price increases and demand into the GTA commuter communities as people seek out more affordable housing options.
Those looking for a home in the $300,000 to $600,000 price range represented the biggest group of Toronto and GTA buyers in 2015 and accounted for 48% of 2015 sales. Those shopping in the $600,000 - $900,000 range represented about 25% of sales and for buyers in the over $1M price category, this was about 11% of all sales.
So now the question remains, what does 2016 hold in store for our real estate market? Check back in for my thoughts and a review of some prevailing opinions…coming soon.
February 4, 2015
Winter Weather Isn't Slowing Down Toronto's Real Estate Market
In the words of the Globe & Mail, “Toronto’s Housing Market Get’s Off to a Surging Start in 2015.”
In the City sales were up 1.0% but prices increased by 5%. What was good to see was the level of new inventory increased faster than sales, at 9.0%.
For January the average price of a home in the City was $581,477. The average price for 2014 was $566,696 and it won’t be much of a surprise if we get very close to or exceed $600K in 2015!
While prices will increase, affordability will be helped with reduced interest rates. However, buyer’s should be cautious not to over extend themselves in a low interest rate environment, as rates will eventually go up, and with them the cost to carry a home. Current mortgage rates really are unprecedented, so it’s a good time get a mortgage and pay it off as quickly as possible!
March 20, 2014
Where's the Professionalism?
I came across these photos on MLS today. Besides taking such bad pictures, likely with a phone camera, what shocks me is this agent actually uploaded them to the public MLS and felt they would be a good representation of his client's property. Anybody that had some small sense of professionalism or self respect would never have even wasted the time to use these pictures but head back down to the unit and ensure they take new photos. Better yet, they would have actually hired a professional photographer. While bad pictures in real estate listings aren't something new, these are some of the worse I've seen. What is even more shocking is that the client hasn't fired this guy! What's the lesson here? When hiring an agent to manage your largest asset, do your due diligence, hire a professional and make sure you're part of the process, that way if you end up with someone like this you can get rid of them ASAP and save yourself a lot of stress!
March 19, 2014
Spring 2014 Interior Design Trends
With such a long winter and spending so much time indoors, you may be considering creating a change of scenery in your home with some design changes. For some ideas and inspiration check out these predictions for what is going to be hot in the world of interior design for 2014! If you're getting your home ready to sell some of these ideas might help add that little bit of extra emotion to make someone fall in love with your home!
March 11, 2014
Looking to Generate Some Extra Money with Your Home? Consider Starting Your Own Micro Hotel
Looking for some extra money to cover bills? Perhaps you have a guest room that hasn’t been getting a lot of use and you’d like to find a way to do something more productive with it? Or maybe you travel for work and are gone for days on end. If this is the case www.Airbnb.com might be something that interests you. A new take on the concept of a bed and breakfast (the breakfast is optional) www.Airbnb.com connects home owners and travelers looking for a place to stay on a short term basis.
To list your place on www.Airbnb.com is free and as part of their service, Airbnb takes care of the logistics and money side of the transaction, as well as providing screening tools and an insurance policy to help ensure things go smoothly for all parties. The great thing about Airbnb is that you can rent our your entire house/condo, a room, or even provide shared accommodation for the budget traveler.
As the manager of your new micro hotel you set the price for the accommodation you're offering, which can be offered on a nightly, weekly or monthly basis depending on how long you make the space available for. With a price in mind you create an ad that includes a description, neighbourhood info, and photos. As part of this you can also include your expectations and guidelines for guests in a section called “House Rules”. If you’re going to still be in the property while a guest is visiting, Airbnb has a profile section where you can let your prospective guests know a little about yourself and who they’ll be living with while they’re in your home.
One of your immediate concerns for trying out Airbnb might be safety and the protection of your property. Because of this, Airbnb provides what they term “sophisticated communication and screening tools”. These include setting up a list of reservation requirements that a prospective guest sees before they send you a booking request. These can include requiring the guest to send a trip itinerary/description, verification of their phone number, scanning of their Id, as well as social network access. You’ll also be able to communicate with the prospective guest and can ask any additional questions to assess your level of comfort with the person wanting to stay in your home. This can be done through Airbnb's secure “Voice Connect” system. In addition to these tools, there are also guest reviews for visitors that have used the service before and personal references can be requested.
With every booking of your home, Airbnb provides what they call a "Host Guarantee." The Host Guarantee is an insurance policy from Lloyd’s of London that is meant to provide additional peace of mind by covering up to $900,000 in damages caused by a guest (should something go wrong). As with any insurance policy there’s some exclusions, so make sure you’re aware of these.
Once you’re new little business is all set-up on the site and ready to go, as soon as you get your first reservation request you'll have 24hrs to confirm or decline before the request expires. Airbnb suggest that you respond to all requests, even if you decline the reservation as a non-response can negatively impact your rating and placement in search results on the website.
Now I’m sure the question on your mind at this point is how does the money thing work and what’s in it for Airbnb? After you've accepted a reservation, the guest is charged the full cost of the booking by Airbnb who keep these funds for 24hrs after the check-in date. Once this period has past, the funds are sent to you either via PayPal, bank transfer or cheque, minus a 3% fee. In addition to the rate you charge, guests are also charged a fee of 6%-12% to cover airbnb's customer support and the Host Guarantee insurance.
For people looking to travel to another City without having to pay hotel prices, or to meet new people by connecting with hosts and staying with them, Airbnb provides a great alternative to the traditional and often expensive hotel stay. For homeowners the service allows you to generate income for those times when you’re away or monetize space in your home that isn't being used.
While this is just a summary of the www.Airbnb.com service and some of the tools they have available to make the process for both travelers and hosts go as smoothly as possible, they have more resources and helpful information on their site that is worth checking out if you think this is something you’d be interested in doing.
March 7, 2014
Market Minute for February 2014
With the start of March break fingers crossed spring is around the corner. As you've probably heard in the media, Toronto's real estate market has been red hot. The Toronto Star captured the sentiment with it's recent headline, "Shortage of new listings fuelling desperation among Toronto home buyers." While overall sales were up in the Toronto market, they were primarily driven by condo sales where there is both a good supply of listings and buyers. In the freehold market a short supply of quality detached, semi's and townhouses kept prices increasing with the average price going up by 8.9% to $599,414. What's interesting to note is that for detached homes the average price increased by 15.7% to $955,314, while townhouses increased by over 20% to $545,043. Check out the infographic below for more details on what is happening in Toronot's real estate market.
While we should see more listing inventory over the next few months, it's expected that a seller's market is going to persist. With all this said, believe it or not there are still opportunities out there for buyers with some homes not selling on their offer date or only receiving a minimum number of offers, making it much more realistic to compete and mitigating some of the craziness you see when a property gets 25 bids!
March 4, 2014
Are You Planning for Retirement...Consider a Travel Triplex
With the deadline for RRSP contributions now behind us, retirement may have been at the forefront of your mind. Particularly when there seems to be an increase in the voices out there warning that more and more people will be working beyond retirement age not because they want to, but because they have to. When you hear statistics like 50% of Canadians will be carrying a mortgage into retirement, or 24% see their home as their source of retirement income, giving retirement a bit more thought, whether you're five or fifteen years away, could go a long way to ensuring you have the type of retirement you want and resources to fund it!
When it comes to downtown living and retirement, there is definitely a trend toward people planning to sell their current home (whether in the City or the suburbs) and downsizing to a condo so they can enjoy the amenities a big city has to offer. The other convenience retirees see with a condo is it allows them to travel (which tends to be at the top of the list for most people when they retire) without having to worry about security or maintenance. While a condo can be a great option for retirees, another option that can meet many of the same conveniences, but also be a funding source, is what I've called, a "Travel Triplex." I've used the term because alliteration makes things sound cooler, but what I'm really talking about here is any multi-unit property in which you can live in one unit and generate income from one or more other units in the property.
If you're planning to move to the City from the suburbs or even from a home to a condo, consider the benefits of purchasing an income property you can live in. Hopefully, you're home is paid for or almost paid for, or you have a big chunk of money for a down payment. The first thing this does is either let you purchase such a property outright or with a small mortgage that is paid for by tenants, rather than your retirement savings/pension. If you don't have a mortgage, the travel triplex allows the rents (or the majority of them) to cover your property's maintenance expenses, insurance, utilities, and of course travel! Depending on the income, such a property could actually become your pension plan if you don't have other resources. As a condo owner you don't have this option, and while you're not doing the maintenance to maintain the property, you're still paying for it via your monthly fees.
When comparing the idea of owning a travel triplex to the condo lifestyle, people like being able to lock the door of a condo and board a plane to their next destination. Well, you can do the same thing with an income property. It all comes down to tenant selection. Because you're going to be living in the property you'll take care as to whom you rent to, but if you pick someone that is willing to do outdoor maintenance and look after various aspects of the property, they essentially end up acting as a pseudo property manager. And while you're away, this person can look after the property for you. You may have to provide some compensation to the tenant, but you'd be doing the same in a condo. If you want to be even more enterprising and generate additional income, you could even rent out your unit during those times when you're away on a short term basis with a service like airbnb.com. The other option, which may cost you more, is to hire an actual property manager. Personally, I don’t think this is necessary if you only have the one property, but it all depends on your comfort level and financial resources.
In a triplex I used to own, I used this system of having one of my long term tenants manager things for me. He took care of the outdoor maintenance in the winter and summer, as well as stick handled various repairs for me. In return I gave him a break on the rent and when he asked for a longer garden hose to water the lawn and plants, I got it for him!
Another consideration you might be thinking about is that long term you want to be living in a property without stairs. This is a valid point, but when you're purchasing your travel triplex you can achieve this by ensuring there’s a ground floor unit that doesn't have stairs. You may even decide to live in an upper unit for a while and switch to the ground floor unit in your later years.
In Toronto's current real estate market, those who own a home have experienced the benefits of home ownership when it comes to appreciation in property values. The benefit of making a travel triplex part of your retirement assets is you have the potential to continue getting this benefit as a home owner, combined with the income potential to fund your retirement. In addition, your travel triplex becomes an asset that you can leave to your children, which may end up helping fund their retirement!
February 27, 2014
Build Wealth in Your Home Like a Real Estate Investor
Real estate is the most expensive asset most people will purchase over their lifetime. It's also a major part of a person’s wealth. A newly released Statistics Canada report found that Canadians are getting richer and the key driver of this is an increase in the value of the average Canadian home. Between 2005 and 2012 the increase in value of a primary residence was 52%. This is pretty amazing considering that while you're eating breakfast your home is creating wealth for you. The other great thing about this is that when you sell your principle residence, there's no tax on the increased value! What other means of generating wealth allows you to do this without paying taxes (that's legal of course). The fact that you can buy a bricks and mortar investment and over time it increases in value, is one of the things that attracts people to real estate investing. While I can talk a lot about real estate investing I'll save that for another blog post, but as a home owner, how can you increase the wealth generated by your home?
When looking at real estate from an investment perspective, there are a few ways of generating wealth. The first, which we've covered above, is an increase in the property's value over time. I'd call this the icing on the cake, because while it is nice, it may not always be guaranteed and is not always predictable. There's lots of variables to consider to maximize your potential for value increase when purchasing a home, but I won’t go into that here.
The second way to generate wealth is cash flow. In this case you're looking to generate a rental income that covers your expenses and produces a "profit" at the end of the month. As a side note, even with positive cash flow, this only increases your wealth if you save it or reinvest. Over time as the tenant pays the mortgage down your cash flow increases, but you've also been building equity each month as the tenant pays down the mortgage principle.
As a home owner you probably don't have a tenant contributing to your mortgage, or paying for other expenses unless you have a basement apartment or live in multi-unit property. But there are other ways of building wealth that real estate investors use that any home owner can adopt.
I always try to tell my clients buying a home that mortgage rates compared to historic averages are historically low!! (check out this interactive graph to see for yourself http://bit.ly/1pEllvD) And as a buyer and homeowner this offers a unique opportunity to build wealth at an accelerated rate. Every month you make a mortgage payment part of your payment goes to the principle (the original amount you borrowed) and part goes to cover the interest on the loan. When rates are low, more of your payment goes toward paying the principle off than interest and the more principle you pay off, the more your equity grows. In this current interest rate environment you're building equity in your home at a faster rate than ever before. Just ask your parents what their interest rate was!
If you've never done it, it's a worthwhile exercise to put your mortgage details into a mortgage calculator and see how much money in interest you pay to the bank over the life of the mortgage. You might be shocked! So this brings us to the first way to increase the wealth in your home:
1) Pay your mortgage off faster: how do you do this? There's a couple of ways. The first is to decrease the amortization period. By reducing the amount of time over which the mortgage is calculated, you're payments will be slightly higher, but you'll pay your mortgage off faster and increase the amount of money you're stashing away in equity. Another option is to increase the frequency of payments from monthly to weekly, bi-weekly, or bi-monthly, with the best option being weekly. Again, this results in you paying more of the principle off at a faster rate. Thirdly, you can make lump sum payments. Banks have various ways for you to do this which includes making one time payments annually that amount to a certain percentage of the mortgage or doubling up your monthly mortgage payments over a certain period of time.
While all three of these options result in your mortgage being paid off faster, the reality is that option 1 and 2 are likely to be the most practical options. A lot of us start off with the intention of paying a chunk of our mortgage down, but are often derailed by life's expenses and end up finding it easier not to, or putting off making such a payment until the following year. When it comes to building wealth, saving money, etc., we tend to do much better when the "saving" is automatic and done for us. By reducing your amortization, increasing your payment frequency, or setting your payments higher than what they need to be, once you've made the initial arrangements, the money gets taken out of your account automatically and your equity growth plan is put on autopilot.
2) The second way to build wealth in your home is via sweat equity. If you've bought a home that is brand new or already renovated, this could be hard to do, but if you live in an older home and have the skills or time to learn how to do the various upgrades you want, then you're able to reap even more of the increase in value to your home as a result of reduced costs. This can be anything from doing the painting yourself to getting a relative with the necessary skills to help you or even working with a professional to complete certain parts of a project while you do others. Over the years I've done everything from painting, demolition (always fun), laying of floors, building a deck, tiling, and landscaping. If I can do these things I'm sure most people can.
While sweat equity is a great way to build wealth in your home, the real point of this blog post is to emphasize that mortgage rates are at historic lows (which most people know), but they will go up and when they do and it's time to refinance your mortgage, you'll be paying less of your principle and more interest. It's better to pay yourself more now while you can and take advantage of the current interest rate environment, than paying the bank in the future.
February 6, 2014
Top 10 Home Buying and Selling Mistakes
The Real Estate Council of Ontario (RECO) recently published 10 common home buying and selling mistakes that consumers tend to make. I'd hazzard a guess that most people don't know what RECO is (including some agents!!), even though they play an important role in the real estate industry. RECO is responsible for regulating the real estate profession in Ontario; administering the legislation that governs trading in real estate; and protecting the public interest when it comes to real estate. This list is based on feedback that RECO receives from the home buyiing and selling public. Being aware of these 10 considerations as well as always working with a Professional Realtor, will hopefully help make your buying or selling experience that much better!
Top 10 Home Buying and Sell Mistakes:
1. Allowing Emotions to Overtake Common Sense
When you fall in love with a property it can be hard to walk away. Know your budget and don’t overpay.
As part of this you shouldn't forego a home inspection just to win a bidding war. (Your willingness to walk away from a deal is an important negotiation tool that your agent needs to have when negotiating on your behalf).
2. Hiring the First Salesperson you Meet
Toronto has nearly 40,000 agents, with a broad range of experience and approaches to the buying and selling process (Many of these agents are either part-time or do very little business in a year. You need to take this into account when looking to work with a professional). Meet with a few different representatives before settling on one, and make sure you feel comfortable with them and their approach to the process. Also be sure to get references and contact them to learn about their experience with the salesperson.
3. Not Making your Expectations Clear with Your Real Estate Professional
It’s important that you and your representative have a mutual understanding about what you’re looking
for and what services the brokerage will be responsible for and what you expect your agent to provide. Once you've agreed to work with someone, get their committment in writing.
4. Failing to Read and Understand Forms and Contracts
It can be tempting to speed the process along by signing forms that you haven’t read. But taking the time to understand what you’re signing can avoid a lot of problems later on. For example, you don’t want to find out that you’re on the hook for a six month listing agreement to sell your home if you only want your house on the market for three months. Most importantly you should have your agent walk through any documents requiring your signature before you sign and be sure you get a copy of whatever you sign.
5. Assuming everything is included
Don’t assume that the furnace, dishwasher or other items are included with the property. The seller may want to take the dishwasher with them to their new home and the furnace might be under a rental contract that you’ll be required to take over. Before making an offer, detail all items, known as chattels, in writing. Your offer can also include a clause stating that the seller will pay out any outstanding leases on the home’s major systems.
6. Forgetting about what’s within the walls
Granite countertops and new hardwood floors are appealing, but the insulation, wiring and plumbing are just as important when you’re evaluating a property. Ask your real estate representative to look into the age of the home’s systems and if there have been any upgrades. If extensive renovations have been done, your real estate professional can determine if the appropriate permits were issued.
7. Forgetting about what’s outside the walls
When you buy a house you’re also buying a place in a community. Some places are lively, others are
quiet. Some places are filled with kids while others are not. Visit the neighbourhood at different times of
the day to see if it fits your lifestyle. Talk to the neighbours about the community and the locations of
various amenities like grocery stores, schools and transit.
8. Not doing your research
If you’re concerned about buying a home with a troubled past, a simple Internet search for the address
can go a long way. This is also something you can ask the neighbours about.
9. Making verbal agreements
Verbal agreements aren’t a problem, until they become a problem. Putting everything in writing forces both
parties to be clear about their expectations and provides a record that can prevent disputes later on.
10. Underestimating closing costs
From land transfer taxes to title insurance to a home inspection, the costs of a real estate transaction
can add up quickly. Take the time to include estimates and other expenses in the full cost of buying or
selling a property. Your agent should be able to give you an estimate of these costs based on the type of property you're looking to buy and/or sell.
January 30, 2014
What the Real Estate Industry In Toronto Really Looks Like
The Toronto Real Estate Board (TREB) currently has over 38,000 agents trading in real estate. While this number is even shocking to those of us in the industry, even more shocking is how little in the way of real estate trades the majority of these agents do. The diagram above is both a warning to consumers and what I personally feel is a clear indication that for so many licensed agents, trading in real estate is a hobby, or part time endeavor that has the effect of lowering the standards and professionalism of our industry.
When 30% of licensed agents aren’t involved in a real estate deal and nearly another 40% of agents are only involved with 1 to 4 trades a year, this combined segment represents 70% of the real estate industry, or approximately 27,000 agents! Personally I feel this is not only bad for the industry, but bad for the consumer!!
I've always believed that the barrier to entry to a career in real estate is to low. Just about anyone who can show a piece of I.D, scrape together a couple thousand dollars and pass some very basic courses (don’t worry, if they fail the exam they can take it over multiple times) and presto, they're unleashed upon the public with the expectation and the promise of being able to help an unsuspecting consumer navigate one of the largest financial transactions of their life.
So why does it matter that 27,000 agents only do 0 - 4 deals a year? With such limited involvement actually trading in real estate, how can these agents actually develop the skills, knowledge and experience to effectively represent and protect their clients best interests. The Ontario Real Estate Association, which is responsible for licensing agents, continues to pump them out and there are now companies that require almost no investment from an agent trading under the brokerage banner. It's feasible for someone to keep their real estate license, pursue another job and wait for someone needing the services of a realtor to fall into their lap! The problem here is that these moonlighting agents are not likely to be keeping up with the market nor developing the skill set to effectively represent their clients.
An even more cynical perspective to consider is that for these moonlighting agents who receive little to no income from being licensed, when the prospect of being paid for simply being a realtor in name comes along, whose best interest do you think they’re going to be acting in? Are they going to be willing to tell a client they should walk away from a deal because it no longer makes sense or it’s the right thing to do?
I've painted some broad strokes here but I continually come across agents whose level of incompetence is astounding when the stakes for their client and mine are so high! It's for this reason I work with the industry leader in Toronto, Re/Max Hallmark Realty. New agents aren't unleashed upon the world without extensive training and both them and experienced agents have access to a vast network of expertise and training that is unparalleled in the industry. Being a professional realtor means committing to it as a full time career, continually developing your skills, staying on top of the market as well as changes in the industry, legal issues, and ensuring you're always able to protect your client’s best interests.
The take away from this is that consumers have to do their due diligence when it comes to hiring an agent. If you're going to work with someone for the biggest transaction of your life then your level of comfort with their skills and ability should be reflected in your process to hire them. At the end of the day, a skilled agent will be able to find you the home you want, make sure you're making wise decisions, stick handle any issues that arise, and protect you when the other side is falling short!
January 27, 2014
Understand How Credit Scoring Works and How it Can Impact Your Ability to Get a Mortgage
When it comes to applying for a mortgage having a good credit rating is one of the key factors in being approved. Putting other variables aside (i.e. income), having a good credit rating will enable you to access the best mortgage rates. With a poor rating your bank will want to charge you a higher interest rate and as a result your cost to borrow and monthly payments go up!
Investing some time to improve your credit rating and maintain a good one, can go a long way in saving you money over the long term. Credit scoring works by looking at five main categories based on your past activity and credit habits. Each category has a different weight/importance in the overall determination. The five categories and their associated weights are:
1. Payment History – 35%: This category is given the most weight as the lender is looking at your past history and patterns of payment, with more weight being given to more recent history. If you’ve consistently been late with payments or missed a payment this will affect your score negatively. Likewise, consistently making your payments on time will build your score. If this has been a problem for you then start working on making payments when due and your credit rating will improve over time.
2. Credit Balance – 30% - Here lenders are looking to see how much of your available credit you are actually using. It’s better to have a few credit cards with low balances than one or two cards where you’re at or close to the limit. It’s suggested you try and use use only 35% of a card's available credit. Remember the bank is looking to see that you can use credit responsibly and not spend it all just because it’s available….priority one for them is ensuring that you’ll be able to make your mortgage payments over the long term!
3. Credit History – 15%: Generally the longer you’ve had access to credit and your accounts have been maintained in good standing, the better your credit score.
4. Credit Inquiries – 10%: Credit inquiries have a minimal to no impact on your actual score, however having a number of credit inquiries in a short period of time can indicate that you’re shopping around for credit which may result in you being deemed a higher risk, especially if you have a limited credit history. If you’re shopping around for a mortgage with different lenders try to do this within a two week period as these inquiries will usually be combined and treated as a single one.
5. Types of Credit – 10%: Lenders will look at your mix of loans, credit accounts vs retail accounts, etc. If you have a number of the buy-now-pay later type “cards” i.e. the future shop or the brick, this can indicate to the bank a future risk if this is your preferred method of paying for things.
If you're thinking of getting a mortgage or doing any type of financial planning, it's a good idea to review your credit report to make sure it's accurate as well as where you currently stand in terms of your credit score. If you keep the five items above in mind and use your credit accordingly, you'll be able to improve your rating or ensure you keep a good one.
To order a free copy of your credit score contact either Equifax or Transunion Canada:
Equifax - 1-800-465-7166
January 27, 2014
"Five Great Ideas Toronto Never Built"
Toronto's had some great plans and projects on the books that never came to fruition. The Toronto Star has profiled five of these projects which makes for an interesting read and what could have been. Funny enough one of the ideas is the Downtown Relief Line which first came up in 1910! http://bit.ly/1f778A8
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