George Ross is Donald Trump’s Executive VP. He’s Trump’s senior advisor and has worked with Trump for 30 years. You’ve probably seen him on TV on ‘The Apprentice’. This week, he was quoted as saying Canada’s real estate market is undervalued, not overvalued. That’s quite the opposite of what the so-called experts have been saying for 8 or 9 years. (by the way, where are those experts now?)
If you listen to his interview, he makes some good points. Office properties have more upward potential than residential properties. But the residential market follows the Office or commercial market. He also says that buying a house for a quick flip isn’t a good strategy. It may sound good on the TV shows, but it’s a risky game to play. Mr. Ross says more fortunes have been lost in real estate than have been made.
BUY AND HOLD FOR AT LEAST 7 YEARS
If you’re a regular visitor to this site, you’ll know I am an advocate of investing in real estate. You’ll also know I’ve been preaching the strategy of buying and holding for at least 7 years. Why 7 years? This is how long it takes to amortize those hard costs for real estate transactions.
I’ll explain… You need to budget for a 10% overall cost to buy and sell a home. Sounds like a lot? Well, consider this. Buying a home involves Land Transfer Tax, lawyer fees and perhaps some renos or moving costs. Selling your home will cost you lawyer fees and paying for a Realtor. Let’s look at this example:
- Purchase price $400,000
- Selling price $500,000
- Buying costs
- Legal fees to buy $1,500
- Legal fees to sell $1,500
- Provincial Land Transfer tax $4,475
- Toronto Land Transfer tax $3,725
- Real estate commission to sell (5%) $25,000
- tax on real estate fees (HST 13%) $3,250
- TOTAL FEES $39,450
- NET PROFIT $60,550
- (that’s before capital gains… if this is not your principal residence, you must pay capital gains tax on the net profit)
- and let’s not forget mortgage penalty costs… if you are in the wrong product or with the wrong lender or bank, your penalties can be outrageous amounts… we’ve seen and exposed the ridiculously high penalties charged by banks…. $15,000, $20,000 and higher… this is not from some small bank or trust company…. these are coming direct from the BIG SIX BANKS..!
This is why your strategy when buying, should always be to plan to hold for 7 years… and if prices went up sooner and higher than expected, you can always sell early.. And if you plan to sell before your mortgage renewal date, you better make sure you understand how your penalty is calculated. Choosing the right mortgage product should be part of your overall plan.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis 416 224 0114 email@example.com