The recent declines in the stock markets around the world have sent many people looking at their investment portfolios with grave concern. It’s dis-heartening that investors across the world in a different country can send our own North American markets into a tail spin. Fortunately this time around many investors saw the light at the end of the tunnel and instead of selling their investments and solidifying their losses, they chose to double-down and buy some deals in the marketplace. It never makes sense to sell your stocks when the market is down because then you’ll never have the opportunity to make your money back when the market comes back up again.
But wait, what if you were retired and the market stayed down for a few months and you actually needed to live off that money? Now, that decrease in your investment portfolio will affect your daily living and budgeting. But what if, you saw the writing on the wall and took some additional precautions before you retired to add one or a few investment properties to your overall portfolio so that if the stock market went down and you needed cash, you’d still have a steady stream of rental income coming in? That’s what I decided to do in 2008 when we had the last big crash, I started to think what if I had just turned 65 and the market crashed, then what. I started to build my own real estate portfolio to mitigate against any possible losses to my RRSP when I retired.
I’m happy that I have my RRSP but I am also happy that I own a few investment properties. It’s like I’m hedging my bets in retirement. And I feel a house is something more in my control. I wrote about investing in real estate as a back-up plan for your retirement in the Amazon Best-Seller, Success Today with Brian Tracy. I have joined a select group of entrepreneurs from around the world to co-author, Success Today: Common Sense but Uncommon Knowledge from Today’s Leading Entrepreneurs and Professionals to Help You Lead an Extraordinary Life of Health, Wealth and Success. You can purchase the book on Amazon at http://tinyurl.com/davellesbook. Please let me know what you think and if I can help you plan your own real estate retirement portfolio.
Are you having an affair with the idea of living in a condo townhouse? I have recently noticed that many of my clients are determined to live in a townhouse. The allure, of course, is to live in a house that’s newer and doesn’t require any work. It’s the house that acts like a condo. No snow shoveling required. No backyard lawn to mow. Just a great patio or rooftop terrace. Your car will even have covered parking. What more could you ask for? No wonder it seems to be the number one request from my clients, lately. The townhouse allows residents to have a house in the city close to transit.
The price range for townhouses can be anywhere from $300K+ to well over $1.5mill. The challenge is that townhouses on the cheaper end of the scale are so popular because they simply don’t come up for sale very often. According to TREB, the average days on market for a condo apartment in Toronto is 28 days whereas a condo townhouse is generally only 18 days. The number of listings for condo apartments is over 16,000 while there are only 3,500 condo townhouses on the market since January. Recently I’ve observed that many of the condo townhouses in prime locations are having offer dates and the sale prices are coming in 14%-21% of the asking price whereas condo apartments tend to come in under the asking price at 98% to list.
As people get used to living and raising their families in smaller spaces, the townhouse becomes a great option as it offers the qualities they like about houses, large, spacious, access to outdoors and offers the qualities they like about condos like having the snow removal and lawn care provided for them. I can definitely see the values of condo townhouses increasing as those who currently live in condos want to move up but don’t love the idea of moving into 100 year old house which happens to be most of the housing stock of most homes in Toronto these days. Of course the challenge with creating more condo townhouses is that the land costs are high, so it’s difficult for developers to justify building more of them.
Clearly the people who live in the condo townhouses seem to enjoy them so much, they rarely come on the market so for my clients it means many bidding wars and patiently waiting for just the right one to come on the market. For those who own them, it means they have a very valuable commodity right now in the market.
Style Garage Teal Couch, Flor carpet squares
Are you bored with your surroundings? You’re wondering if you should move? This advice may surprise you coming from a realtor but maybe you should re-furnish or change your accessories instead. I recently decided it was time for a change and instead of moving, I went shopping for new furniture & accessories. What a fun excuse to visit some of the cool furniture stores our city has to offer. My first visit was to Style Garage for the perfect teal couch. Yes I said teal. The world has been white & beige far too long and its time to branch out with colour. Glorious & fabulous colour. A friend had suggested that I check out Queen West Antiques close to Roncesvalles. I was a little sceptical at first because I’m really not that into antique furniture however I trusted her taste and thought if she’s sending me there it must have some interesting pieces. I walked in the store and immediately saw many mid century modern pieces which would work well in my home. And the best part was that you could negotiate the prices down too. Needless to say I was really impressed with the store. As they say Rome was not built in a day so it did take awhile to find all of the right pieces. With spring on its way, you’ll definitely want to freshen up your home. Painting the interior and adding new pillows and accessories is a great way to freshen things up inexpensively. I love Urban Barn, HomeSense and Bouclair as great stores to visit for accessories to freshen up your home. Carpet is another way to freshen things up. If you haven’t checked out Flor.com or their store on Cumberland, It’s time for an excursion. They offer inexpensive carpet squares which can be mixed and matched into unique patterns so you can have a one-of-a-kind carpet. They are also easy to wash making them extremely practical. Also, consider changing the accent colour in your home which can provide you with a little direction when shopping for pillows, throws and other home accessories. Happy shopping and send me pics of your finds!
Yes I know what you’re thinking that as a realtor my advice will always be to buy vs rent, however owning something just makes sense and one only need to do the math to discover that owning something makes sense.
So let’s do some math, if you were to finance a mortgage of $800,000 using a variable rate of 2% it would cost you $3,388 per month. If the rate goes up to 3%, it will cost you $3,786 per month. At 4%, the cost will be $4,208 per month.
For a family looking at an $800,000 mortgage, they would most likely rent a place that would cost them at least $3K, $4K or $5K per month meaning that they’ll be wasting between $36,000 – $60,000 per year instead of putting that money towards paying down principal & interest. I’m not sure why anyone would want to do that. By the time they decide to get back into the buying market, either the prices will be higher or the interest rates will be higher thereby costing them more per month to own a home no matter how you slice it. Even if you think the market will go down, it won’t go down by more than 5% and inevitably, interest rates will rise meaning it will simply cost you more to own the same property even if prices stay the same.
I think that everyone should consider your buying instead of renting. I think renting will only cost you money in the long run. Imagine being retired and being at the mercy of paying rent? Now imagine being retired and having a home that’s fully paid off. The choice is yours and I know which one I’d choose.
So you want to rent for awhile, eh? I hear it all the time. People who think they can rent for awhile and wait for the market to cool off so they can buy something later when the market cools. Unfortunately none of us has a crystal ball and none of us can time the market perfectly. Yet it amazes me that many people think they can do it all the time. No one would claim to be able to time the stock market so I’m not sure why they think they can time the real estate market. For years we’ve heard many well educated economists predict a market crash. Yet year after year, their prediction doesn’t happen. I’m not saying that the market will only go up because we know that all markets are cyclical. But the most educated economists are continually predicting the real estate market incorrectly. What makes it worse is when they suck the general public into believing that they can time the market and rent for awhile to take advantage of an impending softening of the market.
What usually ends up happening is that they are just delaying the inevitable home purchase and the market starts to run away from them. So now they can afford even less house than they could before. So by the time they have rented for awhile, they now have to accept something smaller than what they were first looking for. I’ve seen it time and time again, that people who wait to see if the market falls end up staying out of the market and wasting more money renting. When they buy into the market, they buy in at a higher price and have lost out on the appreciation they could have had over the years. As Will Rogers once said “Don’t wait to buy land. Buy land and wait”. Real estate is something that does appreciate over the long run so getting in as early as you can makes sense. Renting to wait out the market will only cost you money.
When I travel I love finding great places to stay on airbnb.com or vrbo.com. I’ve never stopped to think of how this short term rental phenomenon is impacting the condos in downtown Toronto. I am the president of my condo corporation and we’ve recently discovered a few units in our condo building were being rented through short term rental sites. In the condo declaration it clearly states that rental terms shorter than 6 months are not permitted. Now most people don’t read the condo declaration regularly to be concerned with all of the rules. However once the condo corporation becomes aware of the problem a terse letter will be sent to the owner/landlord in question to make them aware of the rules. If the first or second letters don’t change their behaviour than the condo corporation will have no choice but to get their lawyers. The resulting legal bills will be charged back to the offending unit.
Short-term rentals are becoming more of a problem in the city. I was recently out with clients who were complaining about the influx of new people they had started seeing in their west end condo building. I suggested that they search their address on a few short term rental web sites. Sure enough they went home and did exactly that and were shocked to learn that some of the units in their building were on kijiji being advertised as a short term rental.
The short-term rental problem is affecting many of the condos in our city. These vacation renters simply do not care as much about the welfare of the building so it’s important that owners be diligent in their efforts to root out the units being used for short term rentals in their buildings. So, if you live a condo building, spend some time searching on the short term rental sites to see if any of the units in your building are being rented out, then inform your property manager and board so they can start resolving the issue.
I hope that you answered yes but what does being a good neighbour really mean? Do you help your neighbour shovel snow if necessary? Are you responsive to their concerns if you share a wall, fence etc? Do you waive hello or keep to yourself? Do you keep the exterior of your house tidy so that the value of your neighbour’s home is maintained? I feel very lucky to have some great neighbours who help each other out when necessary.
When searching for a home, it’s important to notice the neighbour’s properties. Is their garbage on the porch? Does the roof look like it needs to be done? You might be able to choose the house that you purchase but you can’t change your neighbours so make sure the neighbours on either side of the house keep the exteriors tidy. Recently I noticed a house 2 doors down from a home I was showing, had a junkyard in the backyard. It was an immediate turn off to my client.
According to the Chicago-based Appraisal Institute, property values can be reduced by as much as 10% by having a lousy neighbour. According to the institute being a bad neighbour can be defined as annoying pets, unkempt yards, loud music, dangerous trees, or poorly maintained exteriors.
Once you have a bad neighbour, they can be very difficult to get rid of so make sure that when you are house hunting, you take a look around at who your neighbours are. And once you move into your home, make sure that you act as a good neighbour.
If you are putting your house on the market, contact me & consider asking your neighbours for their cooperation perhaps by offering them a bottle of wine to make sure their dog isn’t barking in the yard.
There has been much talk lately of changing the bidding war scenario of blind offers on houses to an auction format where everyone can see what the offers are. I disagree with the using the auction mentality to purchase a house. I have noticed a few houses in Toronto have gone the auction route. Some have met with success and others have not. The reason why I am against open bidding for a house is simple. I feel that with an auction for a house in Toronto, people would get carried away and allow their ego to take over and pay more for the house than they should. When people see someone raising a paddle to pay a certain amount for a house, I believe their ego will get the better of them and they will start to say things in their heads like, “well if that person can pay that much for the house, well so can I”. Time for rationale thought will disappear. When a buyer is in a blind bidding war scenario, they may not know the price but they aren’t sitting in the middle of the action and they don’t have to make a 30 second decision to spend more money.
They can sit in a separate room with a spouse/friend/parent and make a rationale decision. They can take the time to think about how much they can truly afford and if they really want to purchase this house.
In an auction scenario, the ego takes over. The next day, the lucky bidder may have buyer’s remorse. As much as buyers are upset with the blind bidding war process, the open bidding environment of an auction, will create a volatile situation where buyers pay more for property then they really should. Yes buyers do need protection from themselves. Maybe they will come to realize that bidding wars aren’t so bad.
When there is a huge demand for a house, there is usually a bidding war over the property. The bidding war occurs when either a specific date and time are identified or when 2 or more offers are received on the same property. Many buyers become discouraged after losing too many bidding wars. Buyers shouldn’t get discouraged; they just need to think more strategically. Bidding wars do test a buyers’ patience.
So how can a buyer win a bidding war?
- Become a Bully – I know in the age kids being cyber-bullied this sounds bad, but it’s not as bad as it sounds. Delivering a pre-emptive offer, commonly known as a bully offer within 24 hours of the property coming onto the market. This way most of your competition, and their agents, haven’t even had a chance to see the property yet. Utilize the element of surprise here. It goes without saying that a bully offer should not have any conditions such as financing or home inspection included. And in most cases, the offer should come in at least $75,000 over the asking price to make the sellers consider taking your offer seriously.Doing a bully offer requires stealth preparation and the buyer’s really need to have their ducks in a row. They must have seen at least 5 other properties to determine that this property is worth the extra effort. They (and their agent) must be watching the new listings and go out and see them immediately after they have been uploaded to the MLS. Finally the buyers must be comfortable buying a house without a home inspection or finance condition.
- Bid High – On offer night present your highest and best offer. Never assume that the sellers will come back and ask for a second round of offers. I always tell clients, when I contact you the next day after you have lost the house and I tell you what the eventual sale price is, what price will not piss you off. As in when you hear the eventual sale price, your reaction should not be, “Oh crap, we would have offered that amount”. A buyers reaction after they hear the sale price should be, “we would never have offered that amount”. So they can feel somewhat better that they lost the house.Buyers think they are saving money when they don’t bid as high as they can right out of the gate. Let me paint two scenarios for you:Scenario # 1 – House A is listed at $599,000. Buyer A offers $650,000, Buyer B offers $675,000, Buyers C offers $710,000. Buyer C then gets the house because their offer is very clearly above the others.
Scenario # 2 – House A is still offered at $599,000. Buyer A offers $650,000, Buyer B offers $675,000, and Buyer C offers $685,000. The offers are now so close together the Seller sends all offers back in the hopes of finding a clear winner. On the second round of offers, Buyer A offers $680,000, Buyer B offers $705,000, Buyer C offers $725,000. The sellers now choose Buyer C because the offer is significantly higher than the other offers. In scenario 1, Buyer C came out swinging and blew the competition away so Buyer C won the house and paid $710,000. In scenario 2, Buyer C chose to go in with a conservative offer. Because it didn`t blow the competition out of the water, Buyer C then had to pay even more for the house as it went into a second round. This scenario plays out in every multiple offer situation. The only way to win the offer is to pay the absolute most that you can to blow the competition out of the way. There is one caution however, you don`t want to bid so much for the house that your mortgage lender`s appraiser doesn`t appraise the value of the house.
You may think that I have convinced you to spend too much on the house but think about this real-life situation that happened to me. There was a great house in 2007 in the Yonge & Eglinton area that I wanted. I was one of 17 bidders. The house was listed at $529,000 and I lost out to a bidder who was willing to pay $641,000 for the house. Well of course I went home that night thinking, that guy was crazy to pay so much for the house. In 2008, I finally found another house to purchase, on the same street. I paid $639,000 for my house. A few months ago, the house that I had offered on in 2007 came back on the market. It was now listed for $849,000 and it looked as great as ever. After multiple offers, it sold for $1,051,000. And to think back in 2007, I thought the buyer of that house was crazy. He wasn’t crazy and has had the last laugh as he made a 64% profit or $410,000 in seven years.
As long as you plan on staying in the house at least 5 years, paying a little too much for the house won’t matter. At the end of the day, you will have a great place to live. Happy house hunting!!
Recently Staples Inc. reported that it would be closing 12% of its stores meaning a loss of nearly 225 stores in Canada & the United States. It’s CEO stated that with the increase of online shopping, they wouldn’t need as many stores. This same issue has plagued many retailers and put many people out of work.
Earlier this year, Indigo Books closed down their location at the Runnymede Theatre and Heather Reisman, the company’s CEO said,”… that many customers browse in-store, only to go home to purchase the items they want online at the cheapest possible price.” Indigo also recently closed down their location at Richmond & John. I think this is the sad fate of many of our retailers as online shopping continues to grow. Although online shopping is not the only reason for the closures impacting many retailers, it is a part of the problem. I’ve always seen retailers like Indigo not only as great places to shop but great places for residents in communities to gather. I remember noticing this past Christmas during the blackouts, many families without power in Indigo stores, reading books and enjoying each other’s company. With the closing of these stores, where will people gather?
With many stores closing, we will begin to lose our streetscape which is what makes our neighborhoods great. When most people purchase a home the first thing they mention is the need to be close to shops, restaurants, & cafes. The retailers provide a vibrancy that every neighbourhood needs. If more and more of these retailers close their doors, our neighbourhoods won’t seem as attractive and it will affect the values of our homes.
In addition to losing our streetscape, the loss of jobs from these closures will affect many in our communities. Remember all of the part-time jobs you held in highschool & university? Many of our youth are directly impacted by the closing of these retailers. It’s ironic that young people who are most likely to shop online are the ones most directly affected by the lack of jobs.
Many of my friends consider me slow to adapt to new technologies but sometimes I think we need to consider their future impact. So the next time you shop online, consider shopping at one of your local retailers to help ensure the vibrancy of your neighbourhood and your property values.