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In Canada we have two past times or conversations that get people heated up! One is the weather and the other is real estate. The last few years have given people lots to talk about – even those that are not directly in the real estate industry.

We speculate when the market crash or softening will happen; where prices and interest rates are headed and what will happen when the market does soften. We have all come to expect bigger and better, even when bigger and better is not necessarily affordable.

I personally don’t want bigger and better as I don’t want to be burdened with a huge mortgage but what do you do when you live in a house that you are outgrowing? What are your options?

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Every once in a while as investors, we come across an amazing deal and usually that deal is a deal because it needs a lot of work – otherwise known as a “handyman special”.

Then the question becomes what is the best way to financing this opportunity and which lenders will consider the “after repair” value and not the “as is” value.  Currently there are very few options that exist to renovate properties using the “after repair” value.

Options using the “as is” value literally suck!  You can do a purchase plus mortgage, where the lender will give up to 10% or $40,000 max. of the “as is” value for renovations and after all is said and done, you get to include that cost into the mortgage. However the caveat is that you must have those funds in your pocket to begin with. Another way might be to take it out of your existing HELOC or unsecured LOC, but then you are worried about timelines, paying it back, over-extending your lines of credit and worse if another opportunity comes along you have now tied up that money into the current property, waiting to flip it!

Furthermore, how far is 10% of the value going to get you? Not very far in most cases! The rest comes from your own pocket and if you are like me there are typically other uses for that money.

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I got a call today from an investor client, who is tired of losing out on bidding wars for existing homes and is considering putting an offer on a pre-construction stacked townhouse. Last year she had purchased a pre-construction condo as an investment but this year she was purchasing a stacked townhome as a second home for her son, who had just graduated school and did not have a job yet, which meant he could not qualify for a mortgage on his own. She had a pre-approval in place for 5% down on a purchase.

She was concerned that even with the 5% down she planned to put down. the builder was insisting on a 20% down payment and all of it was due in 90 days, with no firm closing date. She asked if there was a work-around. I suggested she show the pre-approval to the builder and see if she could reduce it.

She was taken by surprise by the demand for a 20% downpayment and so I thought this would be a timely article as many people are unaware of all the costs and demands that come with pre-construction. Here are some things to consider.

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This story takes place in modern day times! The story is about a real estate investor who has to decide between two properties. One property is in the bustling and over-priced city of Toronto and the other property is in a smaller community to the west known as Kitchener.

The Toronto property is in Guildwood – a sought after area of Scarborough but backs on to a Go Train track. The home is beautiful and offers a main floor with the potential for a basement apartment but it would need renovations to make it happen. The price is $749,000.

The property has been sitting on the market for 31 days in a sought after area because of it’s close proximity to the train tracks. What happens in a few years when my client wants to sell this property – will he have the same issues as the current owner? Even in a seller’s market? Probably!

The Kitchener property is in a sought after area with schools and shopping nearby and also has the potential to add a basement suite but the separate entrance would have to be built-in. The asking price is $325,000.

Seems like a no-brainer right? But let’s look at the numbers to see what makes more sense!

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Currently we are dealing with a “seller’s” market not a “buyer’s market so how do you differentiate between the two? How do you navigate the sellers market and still come out a winner? And how do you buy when the market is overheated?

So how do you figure out if it’s a seller’s market or a buyer’s market? The easiest way is to look at unsold inventory. If the inventory on the market is between four and six months you have an even playing field between a sellers and buyers market. Less than that and it is usually a sellers market and beyond that and it is usually a buyers market.

If you are shopping for a home currently you are probably coming up against too many bidding wars – that’s because the inventory is low and houses are selling for thousands over asking and usually in 1-2 days. So how do you navigate this current market and still come out a winner? Continue reading

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Private Lending has become a hot topic of late! Due to a variety of reasons, borrowers may need private loans due to insufficient income to qualify for a mortgage, debt consolidation, damaged credit and even people looking to borrow money against their equity. However in many cases the existing lender may not be willing to lend against that equity and therefore people turn to private loans for a solution. But it’s not always that easy or clear on how they work so let’s unravel the private lending world.

In Part 1, I will speak about the borrower and private lender. In Part 2, I will speak about how you as an investor can loan your money in private lending as an alternative to owning property.

 

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Property Tax adjustments

It’s not unusual for Purchasers to get settled in their new home and get a Property Tax reminder stating they owe the whole years worth of taxes. Frightful right?

Just after moving in to her new home, my client received a notice in regards to the property tax adjustment and as a First Time Home Buyer, we had discussed this could happen so she did not freak out –completely!

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Last week, I was contacted by a new client who lives and works in Richmond Hill. His renewal is up in November but he wanted to put some plans into place because he had just come into some money ($125,000 from an inheritance).

The balance on his mortgage is approximately $100,000 and he has approximately $500,000 of equity in his property.

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analyse

I recently worked with a first-time investor. He was referred to me by another investor client I have. He had no idea of how to start investing, what type of investment he wanted to do or in which area he wanted to start investing in. He had done the meet-up groups, signed up for various courses given by other investors, read many books and even spoke to other mortgage and real estate professionals, but he was still stuck on how to proceed. He was what we call in “analysis paralysis”. Continue reading

Creating the Life

The other day I was driving to do some errands with my 8 year old daughter and she commented on some really nice cars ­ I first thought “wow she has good taste” and then she said “mom, when I am old enough to drive you are going to buy me that right?” and I thought, where do kids get their needs and wants from? And are we shaping their needs and wants?  I explained that when she was old enough she was going to get a J.O.B. and earn what she wanted to have and not be given what she wanted.  She did not like that one bit, which inspired me to write this post.

What if anything are we teaching our children about wealth creation, about needs vs. wants and how to attain those needs rather than wants? Continue reading