House Price Pressures

House Price Pressures

Most people would love to own a detached home in the city in which they live and work.  The challenge is that in some jurisdictions, this desire is out of reach

In Ontario, the average price of a detached home in Toronto is over $1 million whereas in London, Ontario it is less than $300,000 and in Barrie it is less than $500,000.

This difference in price is causing a few people I know to consider moving outside of the Greater Toronto Area.  Existing Toronto home owners intend to convert their significant equity in their Toronto homes into the purchase of a mortgage-free house in a smaller city along with putting some cash in the bank.  First time home buyers intend to buy something affordable anywhere near Toronto given that the Toronto market is out of reach for them.

The ripple effect of this trend is that home prices in smaller cities in Ontario, particularly those with some decent public transportation to Toronto, will continue to rise so long as Toronto's home prices remain so unattainable.

Owner User Property

Owner User Property

Any seasoned business owner who is making money should consider owning his own office or industrial premises.  The owner user buyer is currently driving Toronto's smaller commercial and industrial real estate market.

If you pay total rent of $7,500 per month, you can afford to purchase a $1 million office building.  That $7,500 per month will pay off the $1 million within the next 25 years such that you'll own the property free and clear at that point in time.  That is a good metric all on its own.

Assuming Toronto remains a destination point for new immigrants to Canada, that $1 million you pay today may be worth many multiples of that in 25 years.  Hence by merely shifting your rental payment into a mortgage payment and an operating costs payment, you have the potential to significantly improve that already good metric.  You have to pay a monthly amount anyway, so you might as well be paying it to yourself than to a third party landlord.

In contrast, if you are not a business owner but an investor, it does not make much sense to purchase Toronto's commercial and industrial real estate.  The returns are abysmal because rental rates have not kept pace with capital appreciation.  Hence you'll be lucky to earn a 4% return.  Your only hope is to bank on capital appreciation due to Toronto's demographics such that when you go to sell, the property will be worth much more than when you purchased.  That is more like gambling than investing.

Toronto's Finest

Toronto's finest

A man with a gun in his waistband, loitering outside a McDonald's restaurant.  His buddy accosting people in the parking lot.  Both seem stoned.

After our boys' hockey game last week, we stopped at the McDonald's at Weston Road and Finch to eat dinner.  A teammate and his dad joined us.  Our four children ate their Happy Meals and after playing with their toy cars in the restaurant, they all ran out to the parking lot to play tag.  Following them, my husband and I noticed two men loitering in the parking lot, one with a gun in his waistband, the other approaching people as they entered their vehicles.

We quickly calmly rounded up the kids and hightailed it out of there.

On the 400, I called 911.  The officer on the phone was excellent and a police unit was dispatched.  We spoke with two detectives later that evening and another a day later.  Within 24 hours the officers confirmed that the men were known to police and that both suffered from mental illness.  They advised that the gun was a cap gun.  All good information.

Toronto is fortunate to have the police force we do and we are fortunate to live in a city where our gun incident involved a cap gun instead of a real one.

The Beauty of Basement Apartments

The Beauty of Basement Apartments

If you are prepared to have someone rent your basement, there are a multitude of advantages that flow from having a basement apartment:

1.  Basement apartments were legalized across Ontario in 2012.  You need to ensure you meet the fire code and that the apartment is safe, but assuming you take care of those items, it is legal to rent your basement.

2.  Your tenant is helping you pay off your mortgage.  This means someone else is helping you become mortgage free.  Someone else is paying for you to accumulate wealth.

3.  The rental income you receive is generally tax free because even if you claim it, the expenses that can be attributed to the rental unit will usually more than offset the income.

4.  Rental income will help you buy a nicer house than you could have otherwise afforded, so you'll be living in a better neighbourhood or in a larger or more desirable home in exchange for renting out the basement.

5.  The resale value of your home will likely be higher because of the basement apartment, whether someone intends to continue to rent it out or wants to use it for some other purpose.

6.  Once you no longer need the rental income, the basement becomes suitable for teenagers, parents, a nanny, or expanding your living space for your own use.

There are many potential pitfalls to renting out your basement, but no one can deny that the benefits set out above are significant.  There is definitely beauty in basement apartments.

Tenants from Hell

Tenants from Hell

The concept of renting out part of your property to help pay the mortgage is an excellent one. As discussed in a previous post, there are many advantages that can flow from such an arrangement. As with everything in life, there are also disadvantages.

The biggest worry is that you will rent to tenants from Hell. There are people out there who will do everything they can to avoid paying you rent while at the same time ruining your property. Unfortunately the Landlord and Tenant Board is not particularly effective at dealing with such a person in a fast and satisfactory manner if you are the landlord.

We once had a tenant who stayed for 12 months in our property without paying rent. First she had schizophrenia, then her mother died, then she lost her job, then her father died, then she was clinically depressed, then her cat died. The list of reasons she kept giving the tribunal for why she could not move out were never ending. Finally after twelve months and the assistance of a Sheriff, she was evicted and she and the cat moved back in with her parents. We never received any of the rent.

Beware of any of the following:

1. Tenants who want to move in tomorrow;

2. Tenants who want to give you a partial payment of rent in exchange for moving in and promise you payment via post-dated cheque once they are already in;

3. Tenants who do not have good references from their last place or the place before that;

4. Tenants who have bad credit for no good reason;

5. Tenants who have bizarre and potentially dangerous pets; and

6. Tenants who are unemployed with no source of income.

You want to find a tenant who will pay your rent on time and care for your property. Some methods of screening for such a tenant are:

1. Pull the tenant's credit score. The money you spend in pulling it will be more than paid back if you avoid someone who has bad credit;

2. Always call the tenant's references and talk with them on the phone. Ask them detailed and probing questions. Don't gloss over anything. Ask them if they would rent to the tenant again.

3. Call the tenant's employer and obtain confirmation they are still employed.

4. Call the tenant's bank and confirm their bank account is in good standing.

5. Insist that the tenant pay you money before you take the place off the market. No matter how vehemently the tenant assures you, until you have the tenant's money, your place is not rented.

6. Insist on cash or money orders if the move-in date is within the next two weeks.

7. Always sign a written lease and always include your property rules as part of that lease.

Although not foolproof, following the above rules will increase the chances that you attract good tenants who care for your property and pay their rent on time. If you are lucky, a few of those tenants will become good friends over time.

I Love My City - Toronto

Toronto is such a great city.

The only legitimate complaint we have is about the winter weather. I was in Las Vegas for the first time ever on business, there for exactly 25 hours. Yes, the weather there is much warmer, but no, I would not trade that city for ours any day of the week, any season of the year.

Five things Toronto has over Vegas:

1. Ethnic diversity that works.
2. Real culture.
3. An interesting downtown.
4. Sustainable growth dynamics.
5. No seedy smoky soulless casinos.

Travel makes you realize how lucky you are to live where you do.

las vegas 2.jpg

Eight Ways to WIN Toronto's Bidding Wars


Toronto real estate is not for the faint of heart.

Anyone wanting to purchase a house in Toronto for between $300,000 and $800,000 should expect to take part in a bidding war for pretty much every house and even some condominiums offered for sale.  How do you win a bidding war?  And when is winning actually losing?

The first step is to determine the maximum price you can afford to pay for a house. This will involve calculating how much of a down payment you have.  Often people borrow from friends and family to increase that deposit amount, which has its own challenges and considerations.  Then add the down payment to the amount you've been pre-approved for in mortgage financing.  Let's assume the total number is $500,000.  You then need to confirm you can afford to carry a $500,000 house and determine what lifestyle items will have to be eliminated to pay your monthly obligations including mortgage, property tax, insurance, utilities and maintenance.

The second step when looking at a specific house is to determine at what price you would be content it go to someone else.  Put another way, what is the maximum amount you would be happy to pay for that house before it would feel like you were over-paying.  Your realtor can help educate you by showing you what other similar houses sold for, but ultimately this is a personal decision.  You have to feel comfortable with the price you offer, and you have to be happy if you win the house for that price.

The third step is to make your offer as attractive to the seller as possible.  In a multiple offer situation:

1.  Go in with your best price up front.  You likely won't have a chance to better it.

2.  Remove all conditions if you can, meaning don't ask for a home inspection or time to confirm financing or time to sell your existing condominium.  Obviously this involves risk and if you are uncomfortable with any of the risk, don't proceed with the offer for that particular home.

3.  Accommodate the seller's preferred closing date, and ideally give them some flexibility to set the closing date within a specified window of time.

4.  Offer as high a deposit as you can afford.  This is not called upon until you "win" the house so this is fully refundable if you do not.  Ideally certify a cheque and include it with the offer.

5.  Make it personal.  Attach a photo and a note telling the seller why you would love to move into their beautiful home.

6.  Be completely available during the offer presentation and for a few hours thereafter. It is critical you are able to react immediately to any requests the seller makes.

7.  Cross your fingers but be emotionally prepared to lose at least five times before winning a house.  Don't get emotionally caught up in securing only this house.  View it as a numbers game.  If right now there are an average of six offers for every house in your price bracket, then statistically you won't secure your house until the sixth time.  Make that assumption so you don't become bitterly disappointed when you lose.

8.  Rest assured that if it is meant to be, it will be.  Don't give up, persist, continue to battle, and ultimately you will find what you are looking for and it will choose you.

Good luck!

Curb Appeal

A home with curb appeal sells for more money.  More importantly, it makes your home welcoming to the world and makes you happy when you look at it.

There are many ways to create curb appeal.  The house below, done by HGTV, shows a house before that is mundane and the transformed house after that is charming and beautiful.  How did they do it?

1.  Focus first on the front door.  Adding colour to your front door makes it pop and stand out.  A welcoming door makes people want to come closer to the house.  It acts as an invitation.  Adding windows in the door and details such as nice hardware and some contrast piques interest.  Finish with a prominent home number to brand your home.

2.  Placing outdoor furniture somewhere so that someone can imagine sitting on it and breathing in the fresh air is another method of creating curb appeal for your house.  If you can capture someone's imagination with your outdoor furniture, thus creating interest and an invitation for someone to stroll up to your door and sit down to enjoy the view, you will have increased your curb appeal.

3.  Softening while also defining your home exterior with plants and different types of landscaping will show you take care of your residence.  Contrast in landscaping creates interest.  You ideally want to encourage someone to walk up your steps or pathway to your home. That is the message you are aiming for and it can be achieved with various materials and elevations.

HGTV did an excellent job increasing the curb appeal of the house illustrated in the photos.  Using the ideas above, you too can increase your home's curb appeal.

Staging A Home Always Adds Value.

Staging a home always adds value.

Most people have trouble imagining what is not there already.  If they cannot actually see it, they cannot see it at all.  As a result, a home that is beautifully staged will always sell faster and for more money than one that is not.

If you are staging your own home, there are six rules to follow.  I warn you they are simple to understand but much harder to follow:

1.  Remove the clutter.  Remove the packed rooms.  Take out everything and add back only what you want to be there.  Think minimal.  And be ready to store what no longer fits pending sale.  This is the most important rule and the hardest to follow.  Often you are too close to the space.  Ask an outsider for help to give you perspective on whether the afghan that your grandma made should stay or go.  There is little room for sentimental when staging.

2.  Remove the personal photos everywhere.  Depersonalize the space. Make it more generic, more a space that someone can imagine themselves living in as opposed to you and your family living in.  Think upscale hotel but warmer.  Think lobby of a beautiful building but on a smaller scale.  Think of a space in which you would want to relax.

3.  Use colour.  Colour adds life to a house.  The best investment before selling your house is a new paint job with beautiful colours.  Failing the time or energy for that, colour accents like pillows and artwork and carpets work well.  Use splashes of colour to create personality in a room.

4.  Add fresh flowers and plants.  Make the house breathe.  Bring outdoors inside.  Make the purchasers perceive that the house is a healthy living environment.

5.  Increase the lighting.  Put 100 watt bulbs in your lights.  Make sure they are all working.  You may have noticed that good realtors usually come early to a home and turn on all the lights because it makes the house look better and brighter and more welcoming.  Ensure each room is bright, and add lamps where it is not now bright.

6.  Create a serene, relaxing, spa-like atmosphere in the house.  Small touches in the bathroom like rolled up towels and subtle scents, candles and benches are effective.  Aim for serene, relaxing colours in the bedrooms that are inviting to people and make them want to stay.  Create a zen-like experience in the whole house as best you can.

If you are able to implement the above rules, you will know that you did everything you could to ensure your house sells for the highest and best price.  That will likely make you feel zen-like.

Long Live Red in Toronto.

Torontonians love red.

Builders can never go wrong choosing red brick when building a house in Toronto.  It is rich less classy.  Walk Cabbagetown's neighbourhood or Hazelton Avenue for evidence.  The prettiest houses in town are more often than not red.

Red is a spectacular colour.  I was walking yesterday and came upon four cardinals, two males who were bright red and two females who were brown with red accents.  They were beautiful, particularly with the dazzling white snow as their back drop.

Long live red in Toronto.