Real estate is not a one-size-fits-all strategy. Pierre Carapetian, a top 1 percent agent in Toronto and an avid real estate investor himself, shares what we should know about buying an investment property in Toronto. Here are his tips to profitable purchases.

1. Understand your goals
The type of product you invest in will depend on your goals as an investor. Are you investing for equity gains or are you looking for an investment that generates cash flow?

Cash Flow

Toronto’s lucrative condo market and rising interest rates have raised carrying costs, making it more challenging to find cash-flow positive properties. There are, however, strategic ways to improve your margins, like a higher downpayment or purchasing the right product. Your Realtor will know best.

Type of property to invest in: Resale

Equity Gains

If it’s equity gains you’re after, you’ll need to think long-term. Toronto condos are a great option as prices in the core have been stable and rising substantially. An experienced Realtor can help guide you to the right product and the right neighbourhood so that you can achieve higher equity gains.

Type of property to invest in: resale or pre-construction

2. Know your budget and closing costs
Ensure you know how much cash you will need and how much mortgage you can afford to carry. This will influence the types of properties to evaluate when investing. If this is your principal residence you are allowed to purchase with as little as 5 percent down. However, as an investor purchasing a secondary property you must have at least 20 percent down.

5 Percent vs. 20 Percent Downpayment

Different products have different downpayment structures:

Type of property to invest in with < 20 percent downpayment: resale
Type of property to invest in with 20 percent + downpayment: resale or pre-construction

Closing Expenses

Beyond your downpayment, you’ll also need to account for closing expenses. These include Land Transfer Taxes and, on pre-construction condos specifically, HST (capped at $24,000).

Use this Land Transfer Tax Calculator to find out how much you’ll owe. First-time buyers are also eligible for a partial Land Transfer Tax rebate.

When investing in a pre-construction condo, you’ll need to pay HST on the registration date (approximately four years after purchase) to a maximum of $24,000. With a one year lease in place though, this amount is fully refundable as you’re able to file for a full HST rebate.

3. Understanding price per square foot averages in the neighbourhood
Paying attention to the price per square foot is a great indicator of an investment’s profit potential. Look for properties that have a low price per square foot compared to a comparable unit trading in that same neighbourhood. This will also help you determine if the best deal is pre-construction or resale.

“If the average resale condo in King West is trading for $900 per square foot and the current pre-construction deal is selling for $1,100 per square foot, you’re likely going to generate higher returns investing in resale,” says Pierre.

4. Know how to spot a good deal
Beyond the price per square foot, there are many other factors to consider when spotting a profitable investment condo. Some of these include:

Does the builder have a good reputation?
Does the location or floorplan allow you to rent for a premium?
Is there future infrastructure development coming to the area?
We aren’t all real estate whisperers — if you don’t know how to spot a good deal, or maybe don’t have the time, hire an experienced Realtor to help you.

“I’m always scouring the market for profitable purchases that I can send along to my investor clients.”

5. Purchase investments where you can charge a premium in rent
There are key factors to look for as you search that will help guide you to a profitable investment property.

Rental prices favour condos along major transit/subway lines. You can also typically charge about the same rent for a two-bed, two-bath, 750-square-foot condo as you would a two-bed, two-bath 800-square-foot condo if they are in the same building. That 750-square-foot condo, however, will cost less to purchase, so you actually will improve your margins and lower your carrying costs.

6. Buy in gentrifying neighbourhoods
When it comes to equity gains, the biggest wins to be had are in pre-construction properties in up-and-coming neighbourhoods. If you can invest in areas when prices are low, you’ll reap the benefits in years to come as the area becomes more desirable.

Leslieville is a great example of how gentrification impacts property values. Condo prices there have increased 50 percent since 2014.* Investment opportunities in up-and-coming neighbourhoods where rental inventory is low will also allow you to charge a premium in rent.

PRO-TIP: Be on the look-out for investment opportunities on the Danforth along the subway line.

7. When purchasing, think long-term
When it comes to investing, it’s always wise to think long-term. The longer you hold your investment, the more equity you amass. As your investment’s market value goes up and your mortgage goes down, you’re able to leverage that equity into other investment condos. Learn about Pierre’s leveraging strategy and building a real estate portfolio.

PRO-TIP: Borrowing to invest can dramatically improve ROI.

8. Understand the tax implications
Knowing how your investment will affect your taxes — and the amount you owe — can make all the difference when purchasing property.

Capital Gains

When you sell your investment property, you are required to pay Capital Gains Tax. This means that 50 percent of your net profit will become taxable income. You are entitled to deduct expenses incurred during the investment from these gains (like interest on a loan and cash-flow losses).

HST

As we mentioned earlier, when investing in a pre-construction condo you’ll need to pay HST to a maximum of $24,000 when the building registers with the city (typically four years after your initial purchase). Your lawyer can file for a full HST rebate, refunded approximately four to six weeks later, provided you have a one year lease in place.

If you do not rent out your property for the minimum one year, you are not eligible for the HST rebate.

9. Ensure you’re playing by the rules
Ensure you play by the rules when investing. This includes understanding the rules regarding short-term rentals (eg. Airbnb) in the building to flipping condos and the financial consequences that come with it.

If you sell your investment too quickly you run the risk of being taxed as a trader rather than as an investor, which means you can be taxed on 100 percent of your profits as it’s seen as business income. It is best to get legal and property advice from your lawyer and/or accountant regarding tax implications as a flipper.

When it comes to spotting profitable investment opportunities in Toronto, just remember: it’s not about buying something, it’s about buying the right thing. Equipped with these nine investment tips, you can rest assured you’ve invested with sound advice and guidance from one of Toronto’s top real estate brokers.

The Bank of Canada has stepped to the sidelines since it last hiked the overnight rate, which influences rates on the mortgage market, this past October.

Leaving the policy rate at 1.75 percent since then is a departure from the central bank’s gradual efforts to push interest rates higher: The Bank of Canada has embarked on five consecutive hikes, beginning in July 2017.

Though the bank has not been as aggressive of late as market watchers might have predicted if asked last year, in a report published this week, TD economists Beata Caranci and James Orlando suggest this tempered approach is indeed the right one for the Canadian economy.
For the past 10 or so years, they note, Canada has been able to count on the energy sector, housing, or both for economic growth. That isn’t the case today.

“Now we have a situation where both are going through what could be a prolonged adjustment period to a lower level of activity. This warrants a Bank of Canada pause,” reads their co-authored report titled “Patience is a Virtue.”

While lower oil prices and pipeline delays have been battering the Canadian economy, until relatively recently housing had picked up the slack. But with Canadian home prices posting their biggest decline since 1995, the economy is now facing another headwind, a situation TD nonetheless expects to clear up in the first half of the year.

“Our expectation is that evidence of housing stabilization and a rebound in the energy sector should become apparent in second quarter data, offering the central bank more confidence to resume its normalization process with interest rates thereafter,” the economists continue, saying the next rate hike is likely to occur in July.

However, TD notes that the data may not show the anticipated uptrends and risks may emerge.

“Household leverage and elevated sensitivity to interest rate changes have long been highlighted as the biggest risk to the economy,” the report states.

While TD’s view is generally in line with that of other big banks, there has been increasing speculation that the Bank of Canada may be encouraged to reverse at least one of its recent rate hikes in the event of a prolonged downturn in the housing market.
But BMO Chief Economist Douglas Porter isn’t buying that scenario.

“Another round of sour Canadian home sales figures, and a further cooling on household borrowing, seems to have awoken some of the big bears on Canadian housing,” Porter writes in a separate report.

“But before everyone goes all ‘sell Canada on the coming melt in housing’, we would just point to a variety of countering facts,” he adds.

For starters, policymakers were aiming at curbing out-of-control price gains when they implemented mortgage stress testing, hiked rates, and implemented foreign-homebuyer taxes in BC and Ontario — with that accomplished, more action isn’t likely for the time being.

Further, banks have begun cutting rates for five-year fixed-rate mortgages, the most popular type of mortgage for borrowers in Canada.

“As we have pointed out at every available occasion, do not forget that Canada is currently experiencing the strongest population growth in a generation,” Porter piles on.

In the 32 years since Promenade Mall opened on Bathurst Street in Vaughan, north of Toronto’s city limit, both the retail landscape and demand for suburban land has changed. The 2017 departure of bankrupt anchor tenant Sears, which occupied almost 20% of the mall’s space, was a further blow to the mall’s already declining traffic. Now, a redevelopment proposal looks to create an architectural centrepiece, while making the mall both less auto-centric and more transit and pedestrian-oriented, and introducing significant new residential density steps from the revitalized shopping centre.

Shortly before Sears’ bankruptcy filing, the property was acquired by Liberty Development, who are now advancing redevelopment plans. The Phase 1 Plan that was just submitted to the City of Vaughan contemplates modernization and expansion of the existing mall, physical improvements for existing retail tenants, and an increase in the number of potential shoppers. While some of this intensification is proposed through alterations to the existing mall, the bulk of the changes would involve building out of the sea of surface parking that currently encircles the property.

 

Designed by WZMH Architects, the first phase of the plan includes three residential apartment towers with heights of 28, 30, and 35 storeys, as well as a 28-storey, mixed-use building containing offices and a hotel, with a combined gross floor area of 144,613 square metres. The first phase would involve the demolition of 18,756 square metres of existing 89,479 square metres of space space in the south and east portions of the mall, while adding 15,773 square metres of new retail space.

The three proposed residential towers would contain a total of 1,066 units. The first two would respectively rise 35 and 30 storeys from a shared six-storey podium occupying the current footprint of the former Sears space. Their proposed total unit count is 748, including 363 one-bedroom units, 337 two-bedroom units, and 48 three-bedroom units. To the north of the existing mall entrance, the third residential tower is proposed to rise 28 storeys and contain 318 residential units, including 265 one-bedroom units and 53 two-bedroom units. The combined hotel and office building, would house 24,392 square metres of office uses and 15,203 square metres of hotel space, spread across 156 suites.

Significant public realm improvements are also on tap for the site. Landscape architects Schollen & Company have devised a plan that creates a pedestrian-friendly gateway plaza to the site’s Bathurst Street frontage, an outdoor amphitheatre at the west end of the property, and a pedestrianized north-south High Street fronted by commercial uses. Phase 1 is dashed in red below.

 

Vancouver will make changes to bylaws to make it easier to build laneway housing.

The City Council voted in favour of the changes this week which will help to achieve the Housing Vancouver target of 4,000 new laneway homes over the next 10 years.

“It’s great to see City Council support changes to get more laneway homes built in neighbourhoods across the city,” said Mayor Gregor Robertson. “We’ve heard loud and clear that Vancouver residents want more housing choices and laneway homes are a great option for middle-income households.”

The agreement on the changes means several benefits:

  • Streamlining approvals for one and a half storey laneway homes by introducing an outright review process similar to the current process for one storey laneway homes
  • Supporting more functional and flexible laneway home design by increasing allowable heights and updating the method of measuring height
  • Improving livability by introducing minimum room size requirements
  • Providing more flexibility for the location and design of one-storey laneway houses

Since 2009, the Laneway Housing Program has approved more than 3,900 laneway homes across the city.

“These changes are a result of consultation with the public through Housing Vancouver about housing needs, as well as focused engagement with owners and renters of laneway homes, industry engagement, and staff analysis,” says Paula Huber, Senior Planner. “By removing identified barriers to building a laneway home, we are making it easier and faster to build the type of housing we know people want and need.”

Canada is not just running out of residential real estate in its key markets — the country’s commercial and industrial real estate is also filling up fast.

Availability of industrial property across the country fell to a historically low level of 3.9 per cent in 2018, while supply tightened in eight of the 10 major commercial real estate markets, according to CBRE Group, Inc., the real estate services and investment firm.

Though Canada has 70.6 million square feet of available industrial space left across the country, leading to the highest net rent the country has ever seen, at $7.21 per sq ft in the second quarter.

“Availability in Canada’s major industrial markets continue to plummet, which is putting pressure on tenants,”  Werner Dietl, executive vice-president and GTA regional managing director at CBRE Canada, said in a report published Tuesday.

However, strong demand for industrial space in Canada has led to a 47.1 per cent increase in construction activity, CBRE said.

The new facilities should ideally be located close to city highways and near population centres, which has compelled some markets such as Montreal to increase its transit capacity in a bid to attract more commercial operations.

Demand for e-commerce, food distribution and warehousing were leading factors driving demand for industrial real estate in the country.

“It’s no secret that e-commerce is driving a lot of activity globally. With the change in of how people are shopping, we’re seeing a shift in how retailers are running. We also see it in the food sector, which is showing investments in more effective distribution.” Dietl said.

Toronto is currently the most constrained industrial market in North America, sitting at a 2.2 per cent availability, thanks to its ideal location and demographics that appeal to both foreign and local companies.

Vancouver is North America’s second tightest market, with 2.4 per cent of industrial availability left. The average net asking lease rates on the West Coast city stood at $11.59 per square feet, a 33 per cent increase rate since the start of 2017.

While Vancouver and Toronto markets were tight, Calgary marked its sixth consecutive quarter of rising vacancy rates, due to low unemployment rates and lower economic activity. However, the rise of e-commerce and cannabis facilities across the province has led to new construction, to offset the oil-led downturn. As much as 3.5 million sq ft. of industrial space is at the construction stage to meet rising demand in those sectors, CBRE estimates.

Toronto’s low rental vacancy rate has been pushing rents upwards for months, and last quarter was no exception.

The average rent for a 732 square-foot Toronto apartment rose 11.2 per cent year-over-year to $2,302 last quarter, according to a new report from Urbanation.

Meanwhile, condo lease transactions fell 8 per cent to just 7,754 as the rental market hit what Urbanation senior VP Shaun Hildebrand calls a “critically low level” of supply.

But there is some good news: The number of applications for new purpose-built rentals was 3.5 times greater than Q2 2017, with 5,920 new units proposed last quarter.

The reason for the uptick in applications? Developers are looking to capitalize on sky-high rents, says Hildebrand.

“[The rise in applications] is a direct response to the growth in rents,” Hildebrand tells Livabl. “It offsets a lot of the negative impacts of rent control [on purpose-built rental construction.]”

While Hildebrand says that he believes the level of construction is still too low, he believes that last quarter’s increase signals a move in the right direction.

“If we continue along this path, we eventually will get to the point where we get to a balanced market,” he says. “Not anytime soon, but if we continue this trajectory, then yes.”

Hildebrand says it is critical not to rely on condo investors to supply the city with rental stock, especially since there are some signs that investors may be selling their units instead of placing them on the rental market.

“When we look at the percentage of condo units that were added into the rental pool last quarter, that percentage has been declining,” he says. “Fewer investors are holding onto their units after they get built.”

As for the much-decried rent control legislation — which came into effect last April, as part of the province’s Fair Housing Plan — Hildebrand says that, while rental construction does seem to be on the rise, the policy is still negatively impacting the market in other ways.

“Rent control is still an issue because tenant turnover has been declining,” he says. “Reasonable rate of rent growth has been jeopardized because tenants aren’t moving as often.”

Hildebrand says that with fewer units being rented out, and fewer being turned over, the city becomes caught in what he calls a “supply trap,” with less activity across the board, placing an upward pressure on rent prices.

Still, he is hopeful that the market could be in what he calls the “early stages of an upward trajectory.”

“We’re still going to be undersupplied for a long, long time,” he says. “It’s going to take awhile to see supply reach a level that will satisfy the amount of demand.”

There were 1,752 total new home sales in July 2017, with 137 Low Rise sales, down -85% from July 2016 (down -86% from 10yr avg) and 1,615 High Rise sales, down -34% from July 2016 (up +4% from 10yr avg).

The New Home Benchmark Price tracks the average Low and High Rise home or unit price in the Greater Toronto Area for a particular month and compares it to the previous month in the same year and to the same month in the previous year.

As of July 2017, there were 117 active Low Rise sites in the Greater Toronto Area and the total unsold inventory was 1,713 lots. The total number of active High Rise sites was 246, with a total unsold inventory of 6,088 units.

Source : Altus 

No matter where you live, a low-rise home on a quiet suburban street or in the heart of downtown in a 40-storey tower, it’s always important to be respectful of your neighbours. With that in mind, we want to share a list of a few things you should never do when you live in a condo.

If you already live in a condo, you probably know someone in your building that does at least one or all of the faux pas on this list. If you do any of them, stop it. If you plan on moving into a condo for the first time, keep these things in mind so you can live in peace among your neighbours.

1) NEVER flick cigarettes off your balcony

It’s annoying enough to see people flicking cigarette butts on the street, don’t do it off your balcony or out a window. If you must smoke, use an ashtray and either bring the ashtray inside or cover it so the wind doesn’t blows the ashes and butts off your balcony. Throwing cigarettes on the ground or on someone else’s property is littering and it can also be dangerous. Cigarettes that are still burning can melt plastic or start fires.

2) NEVER leave bags in the garbage chute room

In most condos, each floor has a small room where you access the garbage chute. New condos have a sorter so you can dump compost, garbage, and recyclables. Occasionally, the chute will be out of service, and what a lot of people do is just leave the stinky garbage in the room and walk away like it’s not their issue anymore. If the chute is not operational, just take your garbage back to your unit and drop it off later! If everyone’s garbage piles up, it gets disgusting.

3) NEVER be too loud after 11 pm

Most condos have their own set of rules, but generally, any noise after 11 pm is unacceptable. It’s the same as on low-rise residential streets. In most new condos, the soundproofing is excellent, but people have the ability to get pretty loud, whether they’re blasting music or hosting a party with a lot of people.

4) NEVER store possessions in the hall or in your parking space

There are a few reasons you should never store your possessions in common areas; your clutter doesn’t look good in any setting, things could get stolen or damaged, and it could be a safety hazard. Generally, your stuff shouldn’t affect other people’s daily lives.

5) NEVER open the door for strangers

You may feel rude doing this, but letting people into the building that you don’t know or haven’t seen before can also be a safety issue. Condos are private residences, so if the person entering doesn’t live there and isn’t visiting someone, what are they doing? If the condo has a concierge, then this is their responsibility. If not, you should politely ask visitors to buzz in, and if they are in fact visiting someone, then that resident will let them into the building.

6) NEVER takeover an elevator 

Some condos only have two or three elevators. If you take one to move a series of items in or out of your unit, then that throws off all the other elevators. You should always reserve the service elevator if you know you’re going to need it. Don’t inconvenience your neighbours with your selfishness!

Overall, you should just be respectful when you live in a condo or anywhere else for that matter. If anything you’re going to do affects someone else negatively, then just don’t do it. Be cool, and live in harmony with your fellow condo dwellers!