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Investment property in Mississauga

July 17th, 2014

Should I buy a condo apartment or a freehold home in Mississauga?

investment propertyThis is a question that I get asked all the time!

A common perception is that investing in a freehold home in Mississauga makes more sense, given that historically freehold homes in Mississauga have appreciated more than apartments, plus there is also a lack of supply when it comes to freeholds.

When investing in older properties, one should think at least 10 years ahead. For example, a freehold home in Mississauga that is already 10 years old, will need a new roof, windows, appliances, furnace, A/C, flooring, bathrooms, paint etc. when it is time to sell it after 10 years. This should be applicable for most properties that are 20+ years in age.

A condo apartment on the other hand may not need an extensive overhaul. In the case of the latter, simply replacing floors, bathrooms, kitchen, appliances and paint should do the trick.

In both cases, putting 30% -35% down payment should be in enough to carry the monthly property expenses through rental income. However, a condo apartment (a decent 1 BR Mississauga condo sells for around $240K), needs a smaller down payment as compared to a freehold property (3 BR semi in Mississauga sells for around $530K).

Like with any other investment, real estate investing makes sense as long as one does not go overboard. 

A good investment property should be:

  1. in a great location
  2. affordable to buy as an investment property
  3. easy to rent, or in other words it should be popular with renters
  4. able to carry all of its expenses from the rental income
  5. easy to maintain/repair/improve
  6. easy to sell

Before buying an investment property, one should simultaneously plan an exit strategy. It is prudent to select the right person who can not only help secure the right property, but also help rent it to qualified tenants (very important). Sometimes passion/ desire for higher returns, takes over logical thinking and people make their decision based on the future growth without fully analyzing the subject matter.

Investment property and ROI

Investing is about generating wealth and return on investment (ROI) works best on leveraging. Real estate investing makes little sense when an investor puts 100% down when properties grow at a mere 3% to 5% on an average. Leveraging makes ROI mind boggling and helps create wealth.

A word of caution: Leveraging can also generate losses if the prices fall or the interest rates increase.

In my opinion, one should invest in properties that are most popular with renters.

Tell me, why should I rent if I can afford to buy with 5% down payment? 

Out flow on a 1 BR condo is $1,600 per month, as seen in the above blog link. 

The above figure also hints that maximum number of renters in Mississauga are available for properties that rent within $1,300 to $1,700 per month price range. So shouldn’t one fish where the fish is?

For more on selection of investment properties, both condos and freeholds, contact me at 905-339-5111

Related link: Historic Stats (includes all residential properties, both homes and condos) – Toronto MLS Sales and Average Prices

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Category: Investing, Realty Talk


Should I pay off mortgage loan on my Mississauga property?

July 8th, 2014

To pay off mortgage or not?

Should I pay off mortgage?Nothing like a mortgage free life. It is a great feeling to pay off mortgage loan and become debt free. Many people celebrate this event by throwing a mortgage burning party. I have attended a few such events where people pay off mortgage, and raise a toast to that!

Well, however nice it may sound, not many financial experts who I work with, fully agree whether it is good or not to pay off mortgage loan. 

Who should pay off mortgage if given an opportunity?

As per one of the financial planners, if someone’s income/ cash flow is not in abundance they should use windfall of cash/bonus/lottery prize etc. to pay off mortgage. In this case, person’s income is just enough to pay every day bills. A person who is also not risk averse, or feels happier seeing themselves mortgage free, should also pay off mortgage loan faster.

But someone who is young, debt free (except mortgage loans) and produces enough income to carry mortgage can consider other smarter ways of investing in real estate, only after speaking with his/her financial advisor.

Let’s look at an example:  Property value of a person’s current home is $300K. Mortgage is $150K. Equity=$150K. This person earns $70K and he has no other debts. He has also saved $150K in cash. Banks qualifies him to buy a $350K property. He has many choices.

Let’s discuss only two of them:

  1. He decides to pay off mortgage and live mortgage free. His property grows 30% in 10 years and it can be worth $390K in some 10 years
  2. Based on his mortgage approval he buys a rental property without selling his current property. He puts down $150K and buys a 2nd rental property worth $300K. His expenses on 2nd property are paid from the rental income. He spends zero money out of his pocket, in fact, he is left with some positive cash flow every month. After 10 years his properties are worth $780K, and his mortgage loans stand at $190k (assuming 25 years amortization, 3.5% interest p.a. and accelerated bi-weekly payments). His equity before selling expenses stand at $590K ($780 less $190K).

Can you imagine the kind of possibilities this extra money can be put to use in example 2, when this person decides not to pay off mortgage and invest in real estate instead?

Prevailing low interest rates combined with leveraging has made real estate investing very profitable.

Word of caution: before you venture out to investing your hard earned money, it is prudent to speak with you financial advisor, lawyer, tax consultant etc. first.

Related Post:

Different Types-Different Styles

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Category: Investing, Realty Talk


First time buyers

June 26th, 2014

Prosperity and Property in Mississauga

First time buyers in MississaugaIt is a well known fact that Canada is among the prosperous countries in the world. The government plays a vital role in offering support to new immigrants and upcoming businesses to help them settle down. There are several special incentives, funding schemes, tax relief programs and pension support to make sure residents and citizens enjoy a comfortable life.

Neighbourhoods are self-contained with schools, shops, restaurants, medical facilities and scenic spots in the vicinity. What’s more, development is centred on not just present comforts but also future growth. 

The government offers several incentives to first time buyers. The Home Buyer’s Plan (HBP) and the First-Time Home Buyer’s Credit (HBTC) are designed to help newcomers invest in their first homes. 

First time buyers with a good credit history and a job are allowed to buy with a down payment of only 5%. There is a choice of housing from condos, townhouses, detached homes, semi-detached homes, single homes for immigrants from diverse backgrounds.

However, new immigrants often face a tug-of-war situation on certain home investment decisions. 

Should they rent or buy their first home? Should they settle for a condo or a house? Should they skip a smaller apartment and jump straight into a bigger home? The government has good incentives for newcomers and first time buyers. 

When you invest, you build equity even as you gain from price appreciation. There is a plethora of housing choices available. To get the best guidance, I would recommend talking with a locally experienced real estate broker so that they do not lose out in any way.

First time buyers especially need good guidance at every step. Check for testimonials online, research thoroughly and rely less on part-time salespeople or inexperienced friends.  A full time professional will be well versed with the dynamics of property investment in Mississauga and area and help you understand the market conditions.  
Some over ambitious newcomers or first time buyers tend to skip renting or investing in a small apartment and jump straight into a bigger home. That may not always serve well. Even if it is not on top of your agenda, you can slowly buy what is suitable in your 5% down payment budget and build equity. Later you can always upgrade to a bigger, more spacious home.

Before you take a decision on your first home investment, it pays to shortlist some important questions for yourself:

  • How much can you afford?
  • As a buyer will you pay real estate commission?
  • What is the minimum down payment for a newcomer?
  • Before buying your property how do you locate the best schools?
  • What are the government incentives for first time buyers in Ontario?
  • What is RRSP Home Buyer's Plan (HBP)?
  • Is there any HST home buying rebate?
  • Do first time buyers pay land transfer tax?
  • What is first time buyer tax credit?
  • As an investor do you qualify for first time buyer rebates?

I feel that affordability depends on most importantly your gross household income, your down payment and the mortgage interest rate. Lenders will also consider your assets and liabilities. Your own lifestyle and debt comfort zone also come into play. 

The "Welcome to Canada" program for permanent residents and newcomers allows you to purchase a home with 35% down payment. The down payment requirement may be reduced if you find permanent employment in Canada.

There are several incentives and schemes for first time buyers in Ontario. Below are some first time home buyer incentives/ rebates:

Resale homes are exempted from HST in Ontario. HST is payable on new builder homes and condos.

If you are a first time buyer, you qualify for rebate of up to $2,000. Certain conditions and restrictions apply for which you need to read up on the Land Transfer Tax

If all this sounds a bit daunting, simply call me at 905-339-5111. Prosperity may lie in your hands but for property, nothing serves better than to rely on experienced full time professionals.

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Category: Realty Talk


Tenant Selection for Landlords in Mississauga

June 11th, 2014

Tenant Selection

Finding good tenants is a task that is as challenging as finding the proverbial needle in the haystack. To weed out the unreliable ones, you can sometimes end up on the receiving end yourself. But in the process, it’s a win-win situation for the landlord, which is always what a Realtor aims for.

The other day I found a Google review against me from someone who was bitter about being turned down for rent because of unreliable credit history. Much as I would have liked to help him, his credentials did not allow me to put the landlord at a risk. This was my polite but firm reply:

Landlords in Mississauga

My deepest regret to those whose credit history falls short of the legal requirement and don’t qualify them to rent or own a property.

The laws of our country make it hard for those with unreliable credit history to rent or invest. Much as I would like to help those with no income or poor credit history, I am unable to. Sometimes putting a guarantor with a good job and credit history helps overcome this problem. But this option of tenant selection is largely dependent on the landlord’s discretion.

A big part of my tenant selection services is to protect landlords by filtering tenants. If the credit history falls short, income is inadequate or the personal or professional credentials of the person are in question, much as I would like to, I am unable to proceed further in the best interests of the landlord I represent. It is unfortunate that in the process, fingers are pointed at the wrong direction when things don’t turn out as expected.

However, as a Realtor with over 10 years of experience behind me, adherence to the Code of Ethics, respecting the laws of this country and protecting my landlord’s interest are of prime concern to me. I sincerely offer you my best wishes for success ahead.

It helps to remember that one cannot always please everyone. In an attempt to offer the best to your clients, you may unintentionally trip up another. Some may nurse their wounds in public. Others will value the effort you put in to pull him out of a difficult situation.  Experience in turning a negative setback into a positive one for all is what builds your credentials as a Realtor. 

Tenant Selection Process

I represent many landlord investors in Mississauga among other cities in the GTA. My prime allegiance is to protect their investments, help them secure quality tenants and insure that their properties are well taken care of. Tenant selection process is an important part of my job because this builds confidence amongst landlord investors. Since their properties increase in value over time, it is crucial to select good tenants who can help make my landlords build their profits over time by relying on them to diligently pay rent on time.  

The landlord-tenant rules and the Residential Tenancies Act that governs the relationship between landlords and tenants have been made by the Ontario province. Landlords cannot discriminate against tenants as per the Human Rights Code of Ontario. Professionals Realtors step in to help them select the right tenants through a filtering process, they know what questions to ask and how to find the right tenant for the right landlord

Finding good tenants is not an easy. There is no dearth of people looking to rent. Yet, not everyone can qualify as an ideal tenant. So what do you do, short of throwing up your hands?

When things turn sour with a rejected tenant, it pays to remember that often a negative situation can turn out to be a positive one. Landlords are assured that the tenant selection process was stringent and trust the Realtor to protect his interests with more confidence.

With over a decade in the real estate business in Mississauga, my relationship with my landlords, investors and good tenants have been built on this level of trust, dedication and my ability to look out for their best interests over mine. Today, I have hundreds of happy landlords who vouch for my services time and again.

I thank you all for all the support and trust in my abilities and look forward to building property investment for others. For further information, please call me at your convenience.

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Category: Renting


Realtors in Mississauga -Part 2

May 29th, 2014

Realtors in Mississauga Choose the Right Realtor from the flood of Realtors

It’s common knowledge that the GTA is going through a real-estate boom. Houses are being sold at record prices, especially in the Greater Toronto Area. This spells good news in many sectors but also spawns a few concerns. One of them is the sheer volume of Realtors that now clutter the market.

Recently, I came across an article in the Financial Times that was eye opening for not just many Realtors out there but also home buyers and sellers. The number of people selling real estate has reached 108,706 within just the first quarter of the year, according to the Canadian Real Estate Association.

To put it another way, that’s one Realtor for every 245 Canadians over the age of 19. Toronto Real Estate Board (TREB) has more than 39,000 Realtors or about one for every 140 people in the Greater Toronto Area. Just over a year ago in December, 2012, that number was 35,000. That number grew from 31,000 a year earlier. TREB had about 20,000 members a decade ago.

OREA says the average student takes about 11 months to complete the course although they have up to 18 months after they start. Once registered with RECO, students have two years to complete the articling segment of the training program with a broker. The total program costs about $3,180 but that just makes you a salesperson. 

So you can see that it is pretty easy for anyone to become an agent.

Because of these lax educational requirements, the real estate industry is increasingly being dominated by part-time agents.

Rookie Agents and Part-Time Realtors in Mississauga

There is a good portion of new registrants who are licensed but inexperienced. They are Part-time Realtors who do just one or two good deals a year to subsidize their income as opposed to looking out for the interests of their client.

Many of these 20 something Part-Time Realtors are students out to make a fast buck. They are untrained and inexperienced to handle a range of complex real-estate related needs. Most of them don’t even have a university degree. The fact is, you don’t even need to be a high school graduate to be a licensed realtor.

Others are young people from diverse cultural backgrounds who have been unemployed for months. They don’t have better options and assume that a being a realtor is “easy” and lucrative. When nothing works, they get into real estate, thinking it’s a “get-rich-quick” way out.

“We see a very diverse mix in our classes. They’re made of a combination of high school graduates, folks at university doing it on the side, retirees and a diverse mix in terms of cultural background,” says Shelley Koral, director of the OREA College.

 A huge jump in the number of Realtors in just one year is a matter of concern. These days market has been flooded with discount brokerages where sales people who have done just a deal or two can quickly join the bandwagon.

“They are really only brokerages in name only,” says Mr. Soper, the CEO at Royal LePage Real Estate Services Inc. “They have hundreds or thousands of people, there is no training, there is no management.”

 There is yet another real estate brokerage model. These brokerages do not appoint their own agents but provide an online platform where agents from different brokerages come on board on a referral sharing basis. The brokerages make money by connecting prospective home buyers and sellers to this network of agents.

As per one of the estimates percentage of part-time agents represent approximately 78% of the total membership. Interestingly, over the past 12 months 27% of all agents registered with TREB have not sold a single house listed on the MLS. Two thirds of agents have sold fewer than 3 houses which means they are likely taking home an income similar to a minimum wage job.

At the end of the day, it is up to you to make your own choice when it comes to the biggest purchase or sale in your life. Who you want to represent you can make your future or put you at risk. Choose with care.

If you are looking for a committed, full-time, well-experienced Realtor in Mississauga, give me a call at 905-339-5111

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Category: Realty Talk