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CategoryReal Estate Trends

Posted Case study

Investing in a multi-unit properties? Take care…

Recently, I noticed something very strange happening with multi-unit properties and I want to share two experiences with you…

I was approached to refinance 2 separate and different Multi-unit properties by 2 completely different borrowers.    Both properties were in the Greater Toronto area.   They were both in great condition and were bringing in good rental income.

Property 1 was purchased in 2008 for $385k.  There are 3 legal rental units.   It generates good rental income of $3700/month. The owner paid utilities.

Property 2 was purchased in 2006 for $610k.  There are 3 legal rental units.  It generates rental income of $3400/mth…. The tenants paid utilities…(it should be noted that Property 2 is in a more expensive part of town where real estate prices are higher).

Fast forward to today…. Based on current appraised values, Property 1 is currently worth $460k, Property 2 is currently worth $660k.   Keep in mind that these are actual rents for both properties.

So how can this happen?  It’s clear to me… the buyer’s of Property 2 overpaid in 2006….Property 1 is in a less expensive part of town but the rental income and condition of the property are more relevant when dealing with investment properties….

How can you avoid this mistake?  Seek out the help of a good Mortgage Broker… A good broker can seek out the opinions of a recognized real estate appraiser… and even crunch the numbers with an experienced Lender to determine the property’s Lending Value…

As an aside, the average sale price of a single family home in GTA in 2006 was $350k…. today, it’s around $427k.   Multi-unit dwellings can be attractive but consider single family homes if you want to invest in real estate.  Always discuss the purchase with a trusted group of advisors… including your Mortgage Broker.

 

Posted Mortgage News

Vacancy rates fall in Canada…there’s an opportunity here.

Here’s some interesting stats  from Canada Mortgage and Housing Corp.    Apartment vacancy rates are down…

The national vacancy rate is 2.6% compared with 2.8% from October 2009.  CMHC attributes this to the economic recovery.. according to CBCnews.ca.

We are also hearing reports of Real Estate Investment Trusts (REITs) buying up properties as they expect  the rental market to remain strong.

And here’s one more article about the Florida housing market… 90,000 homes and condos were bought by International Investors…  read more here.

Add in historical low mortgage rates and this looks like a good time to buy an investment property…. Consider that a $250,000 mortgage will carry for around $1072/mth based on a 5 year fixed rate of 3.79% (lower rates are available but we’re using a higher rate for illustration purposes).      Something to consider….

Posted Mortgage News

Annual Mortgage borrowing stats are strong

The Canadian Association of Accredited Mortgage Professionals (CAAMP) released it’s Annual State of the Residential Mortgage Market in Canada, today.   The stats show that mortgage defaults are not a concern….and Canadians can absorb up to another $300/mth in higher mortgage costs…and we have 72% equity in our homes… wow, that’s quite impressive….

I’m amazed at how the media is reporting these stats… look at this headline “Canadian Mortgage Debt tops $1-Trillion for first time”. Well, here are the highlights of the report… the numbers look good to me…

• 35% of all mortgage holders have either increased their payments or made a lump sum
payment on their mortgage in the last 12 months
• Vast majority of Canadians have ability to afford higher mortgage payments. 84% said
they could handle monthly increases of $300 or more in their monthly payments
• 90% of Canadian homeowners have at least 10% equity in their homes, 81% have over
20% equity
• 70% of Canadians are satisfied with their mortgage terms
• Despite low Bank of Canada interest rates reflected in low variable rate mortgages, a
majority (66%) of Canadians still have a five year fixed mortgage, 29% have variable
mortgages and 4% a combination
• Overall, 22% of mortgages have an amortization of greater than 25 years compared to
18% last year
• Overall home equity is 72%. For homeowners with mortgages, equity level averages
50%
• Mortgage rates continue to drop. Average mortgage rate is 4.22% versus 4.55% last
year. For those who took out a mortgage in the last year, the average rate was 3.75%,
72% of those renewing saw a decrease in their mortgage rate
• Overall, mortgage brokers account for 25% of all mortgages and for new mortgages in the
past year, this number rises to 40%
• As of August 2010, there was over $1 trillion in outstanding residential mortgage credit in
Canada
• Mortgage arrears rate remains stable at 0.42%, lower than for most of the 1990s

Posted 5 Comments on CREA and Competition Bureau reach agreement on MLS Real Estate Trends

CREA and Competition Bureau reach agreement on MLS

A deal was struck earlier this week that will make it easier for seller’s to list their homes on MLS… The Competition Bureau hopes we will see some changes in real estate commissions….click here for the CBC article.

Currently, a seller pays 5% or 6% to sell their home… and that’s been the standard for many years… But with new technology and the internet, we have seen For Sale By Owner companies popping up everywhere.    These companies have not been able to access MLS without employing a realtor.

We all want to save money and pay less… but there is a saying…’you get what you pay for’..    For some, paying a reduced flat fee, and handling viewings, the negotiations, etc, could be worth savings…. but others may not have the expertise, the knowledge or the time to deal with this….

In the end, I think choice is good.   It remains to be seen how many people will move away from the traditional real estate agent and handle things on their own…   Just beware of something that sounds too good to be true…

 

Posted 8 Comments on Canadians buying Florida property… what to consider Real Estate Trends

Canadians buying Florida property… what to consider

I must admit, the idea of owning a property in Florida sounds kinda nice… and who wouldn’t want to buy real estate at rock bottom prices…?  We did some investigating to see if the opportunities are as good as we hear.

Here’s what we found out based on our inquiries and research:

  • Property values are down between 50% and 70%…wow!
  • But there are some challenges to buying and financing these properties…
  • Most lenders don’t want to entertain offering a mortgage to foreign buyers…
  • There is one Lender that will lend in Florida and a few other States to Canadians… up to 50% of the Purchase price with a minimum mortgage of $200,000CAD.
  • you can also look at taking equity out from your Canadian property or paying cash.
  • There is also a big concern with the Homeowner’s Association and condos..click here for 7 Questions to ask before buying a condo in the U.S.

Bottom line…  house values have dropped significantly…  they could drop even further but there is more potential for an increase vs a decrease over the next 7 years….. add in record low interest rates and a healthy demand for rentals and it’s probably a good time to buy in the Florida and other parts of the U.S.

Keep in mind that any real estate investment should come with a plan to hold for at least 7 years…(click here to read why)