Real Estate as an Investment in Toronto

Quickly we're going to look at two vehicles for very different real estate investors.

New condos are still arguably a decent place (with some risk) to invest money over a short term horizon and look for a small but healthy bang for your buck.

If you are fortunate enough to be tied to a broker who has an in with a solid developer, you may be invited as an investor to buy into the development well before it is built. In most cases a developer need sell up to 70% of the units at preconstruction phase in order to tie up the financing they require.

Often this 70% can be sold through these relationships with buyers at this stage buying in for 10%-15% below the planned market value. The remaining 70% will get sold to the average Joe Buyer at a higher rate.

Many would argue that buying in at preconstruction should net you 25k-50k plus depending on the developer, location and when you pull th trigger to sell. Some developers will allow you to "assign" (sell the deed prior to closing to another party) and you should still be seeing a pretty penny for this hurried transaction.

Why does this work?

1. Since 70's there's been few buildings built as rentals. I'm talking about high rises. Most have been developed as condos so renters need somewhere to live

2. we still have 100k plus immigrants a year coming to Toronto to look for work. Before they buy a home many rent. You hold the stock!

A second investment is a small apartment building.

In the Toronto core these days, you're looking primarily at 5-6% returns. Not sexy but certainly better then the bank's GIC rate. You need to be prepared to work though. It's a job. The supply of these buildings is in tight order so Sellers are having their way. You need to look past the cap rate and look as a buy and hold. As such the real opportunity lies in the areas inflation If you can find a building buried in a residential area that is seeing growth...all the better.
The one downside is that rental escalations are tied to the CPI and last year that wasn't showing much growth. As a result, rent increases for existing tenants who wish to renew at a low .7%. But there are accounting advantages on taxes for both property and depreciation.

Much more can be said and needs to be addressed.

If you have the interest and time, please don't hesitate to call me direct.

Stay cool....

Michael Gruenstein MBA CSC
mgruenstein@trebnet.com

Toronto Housing Market: What's the Latest? Plus..some tips.

There hasnt been an abundance to write about.

Market in Toronto continues to churn out listings slowly.

Homes that show well and in sweetspots are still seeing multiple bids.

Interestingly, there may be a bit of a ceiling these days on just how high buyers are willing to bid upwards. We all know bank appraisals are getting a good deal more stringent.

Also days on market in a number of areas has slowly been on the rise.

Is this the typical slowdown we see each summer? Or is this the sign of ano inflated market begining some degree of a correction.

Economists will argue yr over yr prices have not been rising in a bubble formation as the litmus test is comparing wage growth relative to inflation of housing prices and theyve been rising together thus far. And we always talk about Toronto as a world class city with affordable (on relative scale) prices.

We do collectively know that interest rates cant stay this low BUT when will they go up? US debt levels, strong loonie, Eurozone nightmares, not so hot economic growth, a weak second quarter and slowdown economies in developing nations dont exactly scream for heightened rates.

BUT...they did infact raise rates at many banks yesterday on fixed rate mortgages.

2 litmus tests you should know around financing your home:

1. When you buy..know that a 2 percent increase in rates on a 4 percent mortgage will increase payments by 50 percent. Make sure if you think rates are going in that direction that you are confident in 5 yrs or less when you renew, that you can afford this increase.

2. This is a barometer as to whether you should rent or buy. Some use this. Take the monthly rental payments for the year. Divide the price of the house by these payments. If the number is less then 15..theres ano arguement that it may make sense to own a house. If the number comes in 20 or above..it makes sense to rent.

I didnt make this up and frankly i dont know who to credit. If you dont like it..dont use it!

As always, send in your questions/concerns to my email and my best!

See my website @ http://www.TheSmithsBuyAhouse.com.

Michael Gruenstein MBA CSC Sales Representative Re/Max Realtron http://www.TheSmithsBuyAHouse.com http://www.PropertiesintheGTA.ca Blog: http://mgruenstein.blogspot.com O:416.782.8882 C:416.271.2066 mgruenstein@trebnet.com