How Freehold Prices Can Dominate Again

Published on 20th June 2019

Ever since the Foreign Buyer tax was announced in 2017, the freehold market has plummeted in price with very minor exceptions. Combine that with the lack of credit available as a result of the stress test and Toronto has had the softest freehold market in the last 10 years. That said, we do see some indications of the overall market picking back up some steam – we saw the biggest jump in the number of transactions (percentage wise) in the reports that came out for the month of May. If you missed the Market Watch video about how the real estate market is bouncing back faster than expected, be sure to catch that video here: May Market Watch

The Moment is Yours – I’ve been preaching to everyone in the last 6 months that if you own a condo and if you ever wanted to move into a detached freehold property, now is the time to consider taking action on the upgrade. Will this window of opportunity be here for long? I don’t think so. As they say, carpe diem – seize the day!

Below is a graph from Realosophy that I’ve added some notations to in order to show you the current trends. This graph is a good summary of the price gap that exists between a condo and a detached property.

source: Realosophy

Honey, I Shrunk the Gap! As you can see in the graph above, the price gap between a condo and a detached in the last 2 years has shrunk from $700K to $450K. This is all thanks to the demand for housing that we have experienced. The market shifted not because there was no demand, but it shifted because people lost the interest and the ability to buy detached and freehold homes.

Shifting Gears – Ultimately, that pushed the price point down for many buyers in terms of what they could afford (i.e., a condo). However, with the latest numbers and how the transactions are broken down (that we saw from the May market results), people are going to start noticing the shift in freehold demand.

Take a look at the change in demand for each asset class in the last five months of 2019 vs the same months in 2018 in the graph below.

source: Realosophy

You can see that the change in condo demand is actually negative. This isn’t to say that condos aren’t selling (and trust me they are selling FAST!). Rather, this indicates that the more expensive asset class, despite the mortgage stress test, is seeing significant, double-digit growth.

I ultimately attribute the start of this shift to the shrunken price gap between a detached and a condo. With so many people being able to sell their condo at a much higher price (vs what they paid for it years ago) and buying a detached at a lower price, this is one of the best times to be buying a detached home in the last 5 years.

What the Future Holds – Our inventory has not really changed much as we don’t build enough freehold properties in the GTA anymore, so it is expected that we will run out of inventory at some point. When this happens, demand will far surpass supply and this is when we will be seeing another surge in prices for detached freehold homes.

You can already see there is demand for freehold semis and towns as per the graph below showing the Months of Inventory for May 2019.

source: Richard Robbins

Sooner Than You Think! The lower the months of inventory, the stronger the demand (i.e., the shorter bar graphs represent asset classes with the highest demand). From the graph above, you can see that the semis are the strongest right now. Detaches were at 4.5 months of inventory 2 months ago, and here we were in May averaging 2.45 months of inventory! This is why I believe freeholds can dominate the transactions again sooner than we all thought. There is going to be a point when condos are going to keep increasing in price and the gap with detached homes could potentially get even smaller. When that point is reached, I’m expecting that we will start seeing substantial price increases in the freehold market.

The Wrap – So if you have ever aspired to own a detached home in Toronto, the opportunity is NOW, especially if you already own a condo. The ability to upgrade while the gap is the smallest is absolutely something you should jump on. If this is an opportunity you’d like to seize, then make sure you give us a call (416) 436 9436, to take advantage of this opportunity!

Bonus: Final Thoughts – I’ll leave you with a final note to think about as an added bonus. This year, I fully expect the Liberal government to pander to the Millennials, who represent the largest voting and real estate buying cohort that we have ever seen.  They will do this by removing the stress test. Imagine what is going to happen to the market if and when that happens!! Houston, be prepared for TAKE-OFF!!!

Until Next Time,
Zhen
(416) 436 9436

The Obvious Truth is More Obvious Now

Published on 13th June 2019

If you have been following my Insight Article posts, you will recall that I have talked a lot about the media’s attention-grabbing headlines. Despite their real motives of selling ads to advertisers in exchange for eyeballs (or in other words, readership), the media always has some kind of ability to sway the general public. This was true with the US elections and remains true for many other nations with political activity as well. It wouldn’t shock me if the media will play a big role in how we perceive our candidates in the upcoming Federal election.

So Why Is This Important? Well, we have 2 positive news from 2 different media outlets. The first and most obvious one is the numbers that came out for May 2019. In the month of May, we saw the largest growth in transactions over the past 2 years (up 19%). Keep in mind though, that up 19% translates to only 9,989 transactions which is still below the 10 year average. However, that doesn’t stop the media from writing about how the market is back and in full swing. For a deeper dive into this month’s stats, make sure you tune into the Market Watch for June (for May stats) by clicking on this link: CLICK HERE

News Correlations – Having a 19% increase in transactions is just the start. The second piece of news comes to us from HuffPost. The increase in buyer’s confidence could be attributable to HuffPost’s latest article, “Toronto Is The Fastest-Growing City In U.S., And That’s Not Good”. This article features 2 nice charts that seem to be shared everywhere now. I have provided them below for your reference:

 

Truth in Numbers – It doesn’t matter which photo you look at, and no matter how you slice it, it’s pretty obvious that Toronto is outpacing other major North American cities in terms of population growth. I’ve been preaching for a long long time now that we have a serious supply issue with all of the immigration coming into the city. Here are some further stats, based on the 2 graphs above.

The Great Migration – The red bar graph is the massive immigration that has made its way into Toronto from July 2017 to July 2018. To put things into perspective, we only had about 18,000 unit completions last year in all of the GTA. Clearly, there is a supply issue if you ask me. Then if you look at the purple bar graph to the right, there’s been an absurd number of people who have flocked to the Greater Toronto Area – 125K immigrants in a year’s time! Again, I’ll repeat the number of unit completions last year: 18,000!

So if that’s the case, and in order to fit 125K people into 18,000 units, that would mean 7 people in each unit… imagine that! That’s clearly not going to be the case but that paints the supply issue picture for you quite clearly.

With HuffPost writing about what we, as investors, already know as the obvious (the population increase), do you believe that buyer confidence is coming back? There hasn’t been any indication of the population increase slowing down anytime soon. Oh, and here’s the kicker – with so much red tape for development, and despite the number of cranes you see in the sky, we have 15% less construction commencements this year than last.

The Wrap – This is why I’ve been so bullish on the downtown Toronto market as of late. I hate saying this, but if you really do hope to get into the market before prices go up even more, then you should definitely invest in real estate now before it becomes even more out of reach. Seize the opportunities as they come. Give the PPTO team a call today to discuss your options!

Do You Really Need a Realtor?

Published on 6th June 2019

I’ve been a licensed Realtor for almost 8 years now, and the longer that I stay as a licensed Realtor, the things that I come across from other Realtors seem to get increasingly more ridiculous. Maybe that’s just the nature of being around enough Realtors and being exposed to the absurd things that some of them pull off. However, with each situation deemed to be ridiculous, the next case after that is usually even more ridiculous!

Realtor Overflow – Perhaps the training is getting further diluted despite the efforts by the Ontario Real Estate Association (OREA) requiring more course completions and charging more money to get licensed. Perhaps everyone getting their license is just unqualified. Or perhaps it’s the fact that passing the exam is literally a joke now because a simple search on Kijiji will show multiple people selling the test, guides, and guarantees of you passing the test for as low as $20. How about that, eh? What a deal! Fun fact – Ontario has the most Realtors-to-population, globally!

I’ve also seen a sign by the OREA office on Don Mills that clearly says, “Become a Realtor, No English required.” I don’t know who their target market is because people who can’t read English, in theory, shouldn’t be able to read that sign either… hmm. Anyways, my point is that being a Realtor really isn’t all that hard right now. If anything, it’s probably gotten easier with the old exams in circulation.

Do You Really Need a Realtor? So this begs the question – If we have so many unqualified Realtors out there, then should you actually hire a Realtor to buy and sell your house?

To be clear, although I am a Realtor, I actually dislike (most) Realtors. In the hierarchy of most despised professions, I’m pretty sure Realtors are only ranked lower than lawyers and used car salesmen.

Bring on the Good! With so many negative connotations associated with Realtors, should you actually hire one? The short answer is maybe, BUT if you do, make sure you hire a GOOD one.

PT vs FT – So let me break down how to spot a good Realtor for you. Some Realtors are part-time and I’m a believer that if you hire someone in the service industry, you should hire them if they are working at it on a full-time basis. You wouldn’t want a contractor to build your house if they only build houses for 10 hours per week. The same applies to Realtors. So right off the bat, you should rule Realtors in this bucket out.

Completed Deals – 62.1% of agents in 2018 did less than 3 transactions. Do you want to hire an agent that hasn’t sold more than 3 houses per year? The answer is probably no. So then what is the point of having a Realtor if 62.1% of them should not be hired?

Kickbacks – Further, there’s also an element of commission kickback incentives from agents who don’t know what they doing, and who are only Realtors because they need to put money on the table to feed their families. These activities result in some pretty ridiculous things.

Common Sense Checkpoint – Allow me to illustrate with an example. Last week, the condo that we listed ultimately ended up with 8 offers. This condo was clearly under priced at $699K and we were expecting offers over that. Any Realtor, actually even non-Realtors, are able to check sold history in the building to see that the last sale of a similar unit was $740K. The condo ultimately ended up selling for $790K, but here are 3 example offers that came in that made me question the common sense of the Realtors who submitted these offers.

Example #1 – An agent submits their offer with conditions (all set up for no conditions on this listing) and asking price. This Realtor called me constantly during the review process to see if he won the bid for their client. This is not that bad, and it’s quite common given the number of bad Realtors out there. The next 2 are ridiculous.

Example #2 – An agent submits their offer 3 hours after the offer date had passed, and significantly under the asking price with multiple conditions. This Realtor called me the next morning telling me their client was awaiting the acceptance and that my Seller was getting a great deal. Really?! Since he came in late, we had already accepted the 790k offer. I politely told this Realtor that he had missed his chance, and good luck with his buyer.

Example #3 – This one is a gem and it’s the most ridiculous I’ve seen… thus far anyways. A buyer represented by 2 different agents came in with 2 offers, and here’s the kicker – they each submitted a different offer price. Oh and here’s the kicker on top of the kicker – this buyer wanted me to show them the property personally, informing me that I could “double end” the deal plus some other unethical things. There are so many things wrong with this request, both ethically and legally, so I told him that I wouldn’t represent both the buy and sell side, and for this buyer to get a Realtor to represent him. Apparently, this buyer took my response way too seriously since they clearly ended up getting 2 Realtors!. Side Note: The offers weren’t even close to what it ended up selling for. The buyer and the 2 Realtors should be automatically docked some common sense points.

The Wrap – So after having read this week’s Insight Article, it probably makes you question whether you should hire a Realtor or not. If you are transacting in real estate, it is a good idea nonetheless to hire a GOOD Realtor who knows what they are doing because they should be able to facilitate the transactions, have the contacts to close the transaction, have access to projects before the public does, market and position your home, navigate multiple offers, and much more. Our PPTO team can do that and so much more!

I would say that 25% of Realtors who I have encountered are generally okay, and of that 25%, 10% are actually GOOD. That means there are 75% BAD Realtors out there, so that’s a ¾ chance that you’d pick a bad one. As with anything else, make sure you do your homework! Lucky for you though, you got yourself on the right mailing list because there are no bad apples here at PPTO!

Until Next Time Happy Real Estate-ing,
Zhen

Getting Top Dollar for Your Property

Published on 30th May 2019

Last week, we explored the strategies to navigate through multiple offers from the buy side. In this week’s Insight Article, we’ll take a look at how to navigate through multiple offers from the sell side so that you can get top dollar for your property.

Economics 101 – Real Estate, when you break it down, is a very simple game of economics: supply and demand. If you understand how to market the supply and demand, then you can use it to your advantage. We had a few listings this month and we navigated through each of them differently, with a different strategy for each. This is why it’s imperative that you hire a good Realtor to buy or sell because they should be able to pinpoint the best way to create demand for a property. Unfortunately though, 80% of the Realtors don’t do anything when they get a listing, other than putting it on MLS. The real estate profession is VERY saturated, but I digress – more insight on the profession next week!

I’ll use 2 of our recent listings as examples on how to position your property to create demand.

  • Prime downtown condo (multiple offers)
  • Old house in Newcastle (no multiple offers)

So we did our usual thing with pretty photos and got the listing ready. However, we did something different for this unit though – we forced all of the first weekend showings within a small window of time on the weekend, fully knowing that all interested buyers would run into one another while getting the keys. This created even MORE demand. We also marketed the unit for sale to the entire condo complex because we knew nosy neighbours would want to come and see the unit, thus adding to the in-demand feeling. That first weekend, we got over 50 showings! Of course, we held offers, and got the due diligence package ready for buyers in preparation for offer night. Offer night came and we got 6 registered offers, but actually 8 came through.

Photos of the unit are below.

The Offer Night – My client agreed to try a new offer night tactic with me. More often than not, Realtors allow buyers to improve their offer with multiple offer rounds, which often leads to long offer nights. What we did instead was that we used a strategy whereby the deal would be done in the most efficient way possible, and all buyers would only get one shot. At the forefront, this may seem counter-intuitive because most buyers in these multiple offer situations would always start low, with the intention of improving their offer in the subsequent offer rounds.

Heavy Hitters – However, what actually happened with our new strategy for this waterfront unit was that all of the real buyers came out to play and the ones who were not serious about winning the bid were immediately weeded out in the process. In a situation with 8 offers, 2 were pretty unspectacular (as expected). The remaining offers were all so strong that 3 of the offers even broke the price per square foot average for the building! At the end of it all, we got both the preferred closing date and the highest price that we wanted for our seller.

The moral of the story here is to create more demand if you can, even if there is already naturally high demand, especially if you know that the supply for your type of unit is on the low end.

Example #2 – Old House in Newcastle with No Multiple Offers – This property was on the far east side of Toronto (Newcastle), with a 1.5 hour drive from Toronto. As a result, the demand here is not huge. This property was also quite old with a furnace that needs an impending fix. The previous Realtor had been trying to sell it for about a year, with no success. So how do we create demand for this property?

Forced Demand, Does It Work? Luckily for us, this was an entry-level, single-family detached home around the mid-400’s. You must be thinking – a freehold, detached house in the mid-400’s?! I know right! The supply isn’t strong, but it isn’t weak either; I would say it’s balanced. With a property like this, most Realtors would recommend that you drop the price, put an offer date on the listing and hopefully because of that, it draws in traffic and sells quick. Try to create demand with multiple offers – that’s what the seller had generally heard from other Realtors before. That’s incorrect, at least for this type of product. You cannot create enough demand to force multiple offers on a property like this. On offer night, this often employed strategy will only make your property even less desirable because there will only be 1 offer, or 2 if you’re lucky. Our strategy was to re-adjust the price, increase the buyer’s commission and create a better product.

Going Against the Grain – Simple and nuanced things are what ultimately resulted in a sale within only 1 week. We re-adjusted the price by $5,000 to show good faith that we wanted to sell, hence creating demand. We increased the buy side Realtor’s commission, thereby creating Realtor commission demand because self-serving Realtors sometimes don’t even show their clients properties unless the commission is 2.5%. We also made some minor and inexpensive tweaks to the house to create a newer, more finished-looking product, such as re-painting the trims, new outlet covers, and giving the living room a feature wall.

The photos below are the before and after images, respectively, of the unit before and after making the minor tweaks. What a difference a few small changes make, eh?

 

The moral of the story here is that for certain assets in certain neighbourhoods, you simply cannot create enough demand for multiple offers. There is no one-size-fits-all strategy when it comes to buying and selling real estate. Every situation is different and it really does take the knowledge of an experienced Realtor to get the job done, and the job done well.

The Wrap – I hope that sheds some light on how to get top dollar for your property. Creating multiple offers is just one tactic, but it doesn’t always work. If you’re looking to sell your house in the future and you’re wondering what the best strategy is to get top dollar in this market, then make sure you reach out to us. Our team is here to help guide you through the process every step of the way!

Until next time, Happy Real Estate-ing
Zhen
(416) 436 9436
Zhen@PrimePropertiesTO.com

How to Navigate Through Multiple Offers

Published on 24th May 2019

Yes, They’re Baaack! Multiple offers are back again and they’re likely to stay for a while because we’re in a seller’s market. Without sounding like a nagging parent, these multiple offers are here to stay until the supply issue is resolved or until the demand dies down. Following the trends though, the supply issue is here to stay and the immigration will keep flowing in.

Fight or Flight – Anybody who doesn’t follow the real estate market as closely as we do are often shell-shocked when they decide to finally get into the market. Some stay in a state of disbelief and think we’re lying to them, while others may understand what is going on and just proceeds to navigate through it. The information discussed in this Insight Article is largely focused on properties that are under one million dollars, which includes condos that are in the downtown core and semis and towns in the GTA.

Offers Here, There, Everywhere – As Spring is in full swing right now, I’m encountering more and more multiple offers on good properties. These are 3-bedroom semis and towns with 2 car parking spots, and 1-bedroom or 1 + den condos with parking spots. All of these unit types are in super high demand right now.

Offer nights usually present themselves with 3-4 offers. This is not nearly as crazy as back in 2016, but still competitive nonetheless. In next’s week Insight Article, I’ll provide you with a behind the scenes perspective, based on a highly sought-after property listing.

Top 3 Tips You Should Know! For this week, the following are my tips on how to navigate through a multiple offer situation:

  1. Get a Good Realtor
    This may sound self-serving, but I’m completely serious. If you hire a new agent because they promised you some kind of commission rebate or you’re shopping around for an agent because you don’t see the value in having one, that’s ultimately your decision to make. Having a good Realtor on your side will give you good knowledge on pricing and non-biased, third-party advice on the offer date. Yes, you can use House Sigma and Bungol to see sold prices in the area but that’s only half the battle. As a buyer, you may have only had experience transacting real estate only 1 to 3 times at most, and oftentimes, not even in multiple offer situations. I encounter these multiple offer cases on a weekly basis, multiple times.
  2. Be Mortgage Approved
    Whenever I speak to a client, I always ask if they have spoken to a mortgage broker first. The main reason for that is because if your mortgage is approved, then you know what your upper limit is. I try to not make you spend the maximum amount that you have been approved for, but rather, I normally focus on the best value product that you could afford. Sometimes, I would propose a different area or a different asset class. Second, knowing the maximum mortgage amount that you are approved for will also help you during the multiple offer situation as more often than not, there will be a time to improve your offer during offer night. Third, if the situation calls for it, you are able to waive your financing conditions in order to improve the terms of your offer. That will go a long way if the multiple offer situation gets heated.
  3. Have the Deposit Ready on Offer Night
    Having the deposit ready on offer night will show that you have the money. Most of the time, money talks. You have to remember, until there is some kind of consideration for the contract, up to this point we’ve really only been pushing paper. Although both parties are legally bound to the contract even before the deposit cheque is received, the anxiety that many sellers have between receiving the deposit and accepting the offer is unreal. It’s like the old adage, “Show Me the Money.” That’s why having the deposit ready on offer night will go a really long way. Most of the time, a photo of the deposit is sufficient. If you are presenting it in person, then bring the deposit cheque with you. There is no harm in doing this because creating a bank draft is sometimes free, depending on your bank and your account type.

The Wrap – So those are the major tips on how to navigate through a multiple offer situation. There are obviously more minor strategies that one could utilize, but these major ones should be sufficient. In next week’s Insight Article, I’ll be providing you with some similar insight with multiple offers, but from the perspective of a seller and how to maximize a good property to get multiple offers and top dollar for your highly sought-after product.

Until Next Time, Happy Real Estate-ing,
Zhen

The Big Bad Bully Offer… May Disappear?!

Published on 15th May 2019

I’ve worked with many clients from different countries and over the years, I’ve learned that there are different ways in which real estate is sold. I can’t say which way is the better way because I’m limited to the parameters of how to trade within our region. However, what I can say is that our system is quite problematic when it comes to understanding how the market behaves, especially those who have not transacted in our market before.

Creative Selling – The very standard procedure (and what most people know) is to list the property at a reasonable market price, expect offers and then to hope that the property is sold at full listing price. However, the problem that we face (and has occurred) is such that when the inventory is low and the prices get heated, it results in a heavy seller’s market. All of this leads to really strange, and creative, ways in which a property can be sold, especially the second case below:

  1. Under-pricing the property and holding offers.
  2. Under-pricing the property, holding offers, and taking preemptive offers.

Proposal Pitched – Combined with the fairly useless training that you get as a Realtor before you get licensed (Realtors are a dime a dozen, need I say more?), the second case above creates a world of chaos. This is why the Ontario Real Estate Association (OREA) is proposing an elimination of preemptive offers. My thoughts are aligned with the elimination of preemptive offers.

In reality, preemptive offers are just a fancy, politically more correct, term for “bully offer”. It’s like the Raptors saying that Kawhi Leonard had “load management” instead of resting him “just because”, to avoid a fine from the league (for context, he didn’t play for a number of regular season games, which ultimately paid off because his healthy state helped us win game 7 in the second round of the playoffs!). Preemptive offers and bully offers are the same thing, but the former is just wrapped up in a nice ribbon. The elimination of this sugar-coated strategy is a good thing in my opinion.

The Big Bad Bully – A bully offer is one of the most frustrating things for buyers because if you’re represented by a Realtor who doesn’t fully understand the ridiculous process of navigating through a property listed in such a manner, you would generally end up being very disappointed with the whole experience.

How could you not, right? You see a beautiful property for what you think is a steal of a deal. You prepare to submit an offer that is slightly over what they are asking for, but then you find out, a few days before the listed offer date, that it was sold even before you had a chance. This is extremely frustrating as a buyer, especially when non-ethical listing Realtors are not notifying all of their potential buyers about the offers being submitted (usually, they do this because they are looking to double-end the deal, that is, earning both sides of the commission – the buy and the sell side). Yes, there are some fairly “corrupt” Realtors out there, unfortunately. That’s why I’m all for the elimination of bully offers by OREA.

Say What… Disgorgement? This proposal, however, seems a bit late because this was a huge issue in the overheated markets of 2017. In the current market though, I don’t really see these practices all that often anymore. That said, this proposal is still a good step towards creating an ethical buying process overall. The proposed punishment will be a fancy term called “disgorgement,” which basically means that whoever is executing a bully offer, both buy and sell side could lose their commissions earned.

The Wrap – This is a great step towards providing a more transparent buying process. Next up on OREA’s agenda should be better and more practical training to be licensed as a Realtor. Currently, new agents getting licensed know almost nothing about actually transacting, but that’s a topic for another day!

Until Next Time, Happy Real Estate-ing,
Zhen

How to Be Successful Investing In Real Estate

Published on 9th May 2019

“There is no such thing as a self-made man. You will reach your goals only with the help of others.” – George Shinn

Those are some very wise words from a famous entrepreneur, George Shinn. I 100% agree with him because nobody achieves success (whatever you deem success to be) without a group of people helping, either directly or indirectly. Whether it be mentors, people for spiritual support or business relationships, success is an accumulation of work and effort from more than one person despite what may be portrayed.

The same concept applies when you are an investor in real estate. You need a group of people around you that will support you because it is definitely not an easy journey. Plus, 97% of the people will think you’re crazy or tell you to be careful to not lose all of your money in the market. We’ve all been there in one way or another!

Building Pillars of Success – Mental and emotional support is one aspect, but there is also a strategic group of people that you need to surround yourself or connected with in order to be successful. This group of people, or what I call your “Power Team”, should consist of the following people:

  • Investment Realtor
  • Portfolio Planning Mortgage Broker
  • Real Estate lawyer
  • Real Estate Specific Tax Accountant
  • Responsive Property Management
  • Reliable Contractor

Depending on the strategy, I would say #4, #5 and #6 are somewhat optional, but you definitely need the first 3. In my real estate journey, I’ve come across really good professional contacts who I have personally used and if you are a client of mine, I’m always happy to share my million dollar Rolodex with you. Even if you are not a client, I may still share it if you ask nicely ;).

Words of Wisdom – Before I break down the importance of each professional listed above for you, there are two really good pieces of advice that I wish I knew when I got started in real estate investing:

  1. If the professional you’re working with isn’t working in the respective profession on a full time basis, then you will never be their priority. As a result, make sure you find a full time professional for each profession in your Power Team.
  2. Build relationship equity with your Power Team. When I find a deal, who do you think I will call first – the people I have a good relationship with or just a random stranger who gave me their business card that one time?

Now that you have that advice in mind, and without further adieu, here’s a break down of each profession and why each of these professionals plays an important part in determining your success.

Investment Realtor – This one is fairly obvious. If you’re working with me, I will be finding stellar investment opportunities and deals to help build your portfolio. A good investment Realtor should also understand the general processes of all the other professionals in this list, especially if you are trying to create a portfolio with multiple properties. Plus, a good investment Realtor should be your go-to person for everything else. Ultimately, you want to choose a Realtor who also invests and has their own Power Team. Oh, hello, that’s me!

Portfolio Planning Mortgage Broker – Many people overlook this profession, especially those who plan to own multiple properties. A good mortgage broker will know which bank to send you to first because they want to plan accordingly for your next property, not just the current one at hand. I can tell you that if your strategy is to buy and hold, then you definitely don’t want to go to TD first because they will collateralize your mortgage, which will affect your ability to buy properties in the future. So make sure you have a great mortgage broker.

Real Estate Lawyer – You need a real estate lawyer to transact but a good lawyer should also be able to help you with joint venture agreements and be available via phone without billing you every single time you need a quick chat with them. You won’t find lawyers who won’t bill you for their hours, but if you put in enough “relationship equity” and have that business relationship going, this could go very far in your investment path.

Real Estate Specific Tax Accountant – As your portfolio grows, you’ll very likely pay more taxes. Speaking to a tax accountant who specializes in real estate will set you up for success, so that you are making the most tax efficient decisions. Tax efficiency is key. A good tax accountant should save you money via tax efficiencies, so don’t cheap out!

Responsive Property Management – A responsive property management company will save you from all of the headaches you think you will or may have as a landlord. These are the people who give you peace of mind to enjoy your investments without worrying about tenant problems. Once you find a responsive management company, filling and managing tenants will become a breeze.

Reliable Contractor – If you need to go through renovations or have already gone through renovations, then you’ll understand how difficult it is to get a reliable contractor who shows up and will complete the task at hand and on time. This becomes especially critical if you are carrying your investment property, paying the mortgage, waiting for your property to be tenant-ready, but the contractor has delayed your project. A good, reliable contractor is worth every penny.

The Wrap – With all of that said, and despite the knowledge that someone may have, you ultimately need to choose someone who you can work with. Growing this Power Team is certainly not an overnight task. Realistically, this team will go through ebbs and flows before you arrive at your winning team. But success starts now and success starts here. Reach out to our team to start building your winning team today!

New Milestone: Toronto Rent is Now the HIGHEST in Canada!

Published on 2nd May 2019

Renting out a property is not easy right now. Last week, I talked about how an entire pre-construction condo got leased in only 3 weeks – that’s over 500 units! If you missed that Insight Article, you can read it here: CLICK HERE. This week, I’m going to continue to elaborate on the strength of the rental market and you’ll continue to see why there is a huge lack of supply that is driving these prices up.

We Made It! Toronto officially just became the MOST expensive city in all of Canada for renting a 1-bedroom unit, including all apartments and condos, at $2,254 per month, according to rentals.ca. That beats out Vancouver! Can you believe it?! We just hit a new milestone folks.

Despite a fairly stagnant and flat quarter-to-quarter movement of only 1.8%, Toronto somehow made it to #1. If you’re reading this Insight Article post, you’re probably either a real estate investor or potential real estate investor. In any case, this is all good news for you.

The Spikes – Over the past two years, we’ve seen over 10% increase in rental rates. If we keep up the 1.8% per quarter increase mentioned above, we won’t hit double-digit rental rate increases again. However, one thing you should keep in mind is that rental rates tend to spike quite violently in the spring and summer time when everybody is moving.

As of right now, the chart below shows the average rental rates by quarter in many of the major cities in Canada.

Bigger is… Less Expensive – You can see that Vaughan has hit the top end because the unit sizes for condos in Vaughan are on larger end. Toronto condos units tend to be on the smaller end relative to units in the surrounding suburbs.

When we further break down unit types in Toronto, you can see exactly how each unit performs in the downtown core. Similar to purchasing a unit in a pre-construction project, the smaller the unit, the higher the per square foot cost tends to be. Rental rates work very much the same way.

My Recommendation = Your GAIN – Now for those of you who have been following my recommendations to buy in the downtown core (in areas close to major employment hubs), here is an even further break down by postal codes of how rental rates fair in each area (pictured below). If you have taken action on my recommendations, you’ll be fairly happy with your investment knowing the rental rates right now.

Taking the next step and breaking down the numbers even further, everyone who has invested in the Entertainment District with me in particular can see that rental rates in newly-finished buildings are the highest out of all pre-construction condos.

As you can see in the graph above, 4 out of the top 5 buildings are in the Entertainment District. I swear, I didn’t have a crystal ball – just some good ol’ statistical analysis and a wealth of real estate knowledge!

The Wrap – Every year, I hear that there is too much construction and too much supply but every year, I continue to see the demand outpace the supply. I suspect we’ll see something similar to what we saw last year but just a bit less aggressive on the appreciation front. If you’re looking for the next best area to capitalize on the real estate market, give me call or shoot me an email and I’m sure we can plan your next strategic move.

Rental Demand: Too Much or Too Little Supply?

Published on 25th April 2019

Those who are looking to invest in rental properties often have a lot of questions. Of course, this is for a good reason because you definitely do want to make sure that you are fully comfortable before you commit to a purchase as big as a rental property. There are a few recurring questions that I have been getting from many investors; they are as follows:

  • Do we have too much supply?
  • What happens if I buy in a project and there are not enough people in the rental market to fill my unit?
  • What if I have to reduce my rental rate to to get a tenant and how would this impact my investment returns?

Summing Up Supply – When it comes to supply, we 100% do not have enough housing for the amount of immigration that is coming into the GTA. I’ve said this countless times in many different ways and outlets, and I completely stand by it. Despite what people think when they see construction and cranes, the development process has been slowed down by the significant increase in government red tape since 2017. It has effectively doubled the time that it takes to complete a condo construction project from the ground up. So despite the construction that you may see during your daily commute which may form your opinion on our supply, we are actually at an all-time low for construction in a city that is expected to double its population by 2040.

Case Studies Deep Dive – To show you what I mean, I have provided two case studies of this rental shortage below. The data below is the leasing information from two condo projects, Noir by Menkes (87 Peter St, Entertainment District) and Grid by CentreCourt (181 Dundas St E, East Core).

The data that I’ve used is hosted here if you want to have a look.

Pre-con Leased Data

Case Study #1 – Noir by Menkes – Let’s look at 87 Peter Street first. Below, you’ll find some relevant information about the building

  • Floors: 49
  • Units: 550
  • Square Footage: 454 – 996 SQFT

As a building is slowly completed, there is a period called occupancy where the owner of the unit has the ability to move in or lease out the property before getting a mortgage on it. The occupancy date is often different for each unit, and as the building becomes more and more complete, a greater number of units become available for lease and to move in. So you can imagine, within a few months, 550 units become available for lease or move in. Lots of supply… right?

Unfortunately, that is actually not the case.

Not all of the leasing and move in activity is tracked because some owners will rent it out on their own via Kijiji or they purchased the unit for personal use. However, by the time the building has become available (from the first occupancy date), 225 units have been listed for lease on MLS. Guess how many were leased out? 194 of them!! That’s 86%. Tale a look at the chart below.

Of the 225 units available that were listed, only 5 are still on the market right now. The leased numbers are slightly lower than they should be because there are quite a few units that fall under the “Terminated” category; terminated means that the owner tried to lease it too early and the builder asked them to take it off of MLS. These 22 units were very likely leased out afterwards.

Of the 194 units leased, this was the breakdown:

You can see that the average days on the market for a lease listing is 2 weeks! PLUS, they were all basically leased for 100% of the asking price. Too much supply or not enough? This case study certainly makes that clear!

These numbers basically tell us that if the entire building came online, all 550 units could be leased out in 2 to 3 weeks for full asking price. That’s 550 units!

Case Study #2 – Grid by CentreCourt – Here is the other example. Let’s look at 181 Dundas St E. I picked this building for the second case study because CentreCourt did not have an occupancy period. This means that all 528 units became available for lease or move in on the same day. Think about that, literally 528 units becoming available, all at the same time.

Here is some info about 181 Dundas St. East (Grid):

  • Floors: 47
  • Units: 528
  • Square Footage: 441 – 640 SQFT

For Grid, a total of 364 units were listed on MLS. Of the 364 units, 261, or 72%, of the listings were leased.

Here is an interesting fact: Centrecourt did not allow Realtors to post the units that were available for lease until the entire building was registered. This is why about 20% of the listings were terminated – many Realtors don’t know what they’re doing and listed it prematurely! Case in point, get a good Realtor who knows what they are doing.

Regardless, if you look at the spread on the leased units, the numbers are not as strong as Noir, with your average days on market at a little over 3 weeks and leased around 99% instead of 100% of the list price. Grid was not as strong as Noir, but still very strong leased numbers nevertheless, considering the fact that all 528 units became available at the same time. This case study literally tells you that over 500 units in the same building can be leased out in a little over 3 weeks! What are your views on the rental demand now after going through these 2 case studies?

The Wrap – So if you are wondering whether there is too much supply in the GTA right now, rest assured because the answer is that we do not have enough. When you’re investing in pre-construction condos, you need to understand the fundamentals of the area that you are investing in. The two case studies that we just covered in this week’s Insight Article post were condos with high demand as they are near many employers and universities. Remember, not every pre-construction project is worth investing in. To find out which ones are worth your time and money, please do not hesitate to reach out to me – Zhen 416-436-9436 or subscribe to my weekly VIP newsletter by clicking here: SIGN ME UP!

Until Next time, Happy Real Estate-ing
Zhen

Following the Treasure Trail

Published on 18th April 2019

Oftentimes when investing, especially the first property, we over-complicate things and so in this week’s Insight Post, I wanted to take the time to simplify it for you. Even for myself, I know how things can easily get out of hand when you’re evaluating investments. I have spreadsheets upon spreadsheets of calculators with different metrics to evaluate properties ranging from the 1% rule, cash-on-cash return, cash flow calculators, etc. However, investing can sometimes be as simple as looking at the treasure map that the government has provided us with. Cue: Our transit map.

The Millenials – With the rising price of properties, the largest cohort of buyers right now, the millennials, are looking for convenience and lifestyle. I bet if you poll 100 millennials, 95 of them would say that they are looking to buy or rent for lifestyle and convenience, which typically means a condo with some sort of transit nearby.

SUBWAYS! Having access to a subway station is great, but not everyone can afford that in their investment strategy as prices for these condos have shot up significantly in the last 3 years and continue to do so. There are only a few pockets along the TTC Yellow subway line (Union Station access) that is less than $1,000 per square foot. These stations include the Vaughan Metropolitan Centre extension and Downsview. Some projects still have inventory right now so give us a call if you want to see the price list (416-436-9436).

The NEW Transit Strategy for Your Portfolio – Sometimes even $1,000 per square foot is out of the budget. As much as you would want to invest in a condo near a subway station, if you want to still stay within the budget for your investment, you should instead consider looking at the GO train map.

Betting on Subways – As fancy as Ford’s new transit development seems to look, I wouldn’t buy anything with the anticipation of those proposed subway stations being built. If you’re a bonafide Torontonian and have been here long enough, you’ll know the back and forth that goes on with all government proposed transit plans. It’s an on and off dilemma that gets debated forever before any kind of actual execution or even breaking ground.

Think about how long the Vaughan extension took – it was officially funded in 2006! That’s 13 years ago for 6 subway stations. For some reference, that was before the first iPhone was released and before the first season of when Game of Thrones aired and the Raptors still had Vince Carter on our team! The matter of the fact is that it takes a really long time to build subways in Toronto. Who knows when we’ll get the other extensions.

GO Time – As a result, if you want transit access projects, then you need to consider the following GO train map (see image below). If you follow the map, there are condo projects that are located 5 minute walk away from a GO Train station that are just as worthwhile investing in as the projects with subway access.

Recently, Aspen Ridge just launched a project right beside Mount Joy Go Station in Markham (located on Markham Rd, Markham’s quaint Main Street area) for $700 per square foot, INCLUDING PARKING. The commute via GO Train is 1 hour, which is very reasonable if you’re able to get a 1 bedroom unit in the high 300’s or 2 bedrooms in the low 500’s. If you want further information on this project, do reach out to us at PPTO and we will set you up with this project.

Another GO Station to keep an eye on is the Oakville stop by Trafalgar. There are many projects being planned there right now and could become a very dense area as Oakville’s GO Station is only 40 minutes from Union Station. Plus, you’re in the prestigious Oakville suburb near the waterfront.

The Wrap – So these are the options for entry-level housing as the growth in the GTA continues at a rapid pace. Our population is to double by 2040, so you could just imagine what is going to happen to our real estate prices if we cannot build enough transit and housing for this massive wave of immigration. I’ll let you decide, whether to stay on the sidelines or to take action before the storm. If you want to make a move, reach out to Zhen at 416-436-9436 and we can schedule a quick chat about your options.