In the digital era of real estate, the visual presentation of your property is a make-or-break factor in capturing the attention of potential buyers. According to the Real Estate Virtual Tour “Latest” Statistics, customers considered photographs and virtual tours very helpful, making listings sell 31% quicker.
Virtual tours are immersive, interactive, and visually engaging digital representations of properties. They allow prospective buyers to explore homes, apartments, and commercial spaces from the comfort of their own devices. They represent a powerful tool offering numerous advantages to buyers and sellers, reshaping the traditional real estate landscape. It has several benefits:
Professional photography ensures that your apartment building makes a striking first impression. High-quality images capture the essence of your property, enticing potential buyers to explore further.
Virtual Tours help potential buyers navigate the apartment building and get a feel for the layout and ambiance. This interactive experience enhances their connection with the property, setting the stage for a deeper engagement.
Professional photographers know how to highlight the unique features and angles of your apartment building. From the panoramic view of the city from the rooftop to the intricate details of a well-designed lobby, each aspect is expertly captured to showcase the property’s full potential.
Professional visuals convey authenticity and build trust with potential buyers. They get a comprehensive view of the property, reducing uncertainties and increasing their confidence in considering it for purchase.
In a digital-first world, most property searches begin online. Professional visuals attract local buyers and appeal to a broader audience, including international investors. This expanded reach can significantly enhance the visibility of your apartment building.
Skilled photographers and virtual tour creators curate a visual story that resonates with your property’s unique appeal. From capturing the charm of individual units to showcasing shared amenities, the visual narrative is crafted to entice and engage potential buyers.
In conclusion, visual excellence is a non-negotiable element of success in the competitive landscape of selling apartment buildings in Canada. Adopting virtual tours in the real estate industry marks a significant technological leap. These digital tours offer enhanced property visibility, time and cost efficiency, a global reach, and improved buyer decision-making. With visually compelling content, your property becomes more than a listing – an irresistible opportunity for discerning buyers.
Buying property is one of the biggest investments a person will ever make. Before putting your property on the market its recommended to help your prospective buyers feel more confident about purchasing by having their listing inspected first. Presenting a property in its prime condition is a strategic move that can significantly impact its marketability. As a real estate professional deeply familiar with the industry’s details you need to be careful in the use of pre-listing inspections because it can sometimes be an additional problem. But for you to understand more, here’s a list of guides for Pre-listing inspections.
Strategic Preparation
Before a multi-family property hits the market, it’s essential to conduct a thorough inspection to uncover any underlying issues. This proactive approach ensures that potential buyers encounter a property that’s not only visually appealing but also structurally sound.
Instilling Confidence
By addressing any maintenance issues upfront, a pre-listing inspection instills confidence in potential buyers. It demonstrates transparency and integrity on the seller’s part, fostering trust and paving the way for smoother negotiations.
Highlighting Value
A multi-family property with a clean bill of health stands out in a competitive market. Through strategic positioning and marketing, we can highlight the property’s value and showcase its investment potential to prospective buyers.
Navigating Regulations
Navigating the regulatory landscape in Canada can be complex, especially in the realm of multi-family properties. A pre-listing inspection ensures compliance with local building codes and regulations, mitigating risks and streamlining the transaction process.
Enhancing Efficiency
By addressing issues proactively, a pre-listing inspection minimizes the likelihood of surprises during the transaction process. This efficiency not only saves time but also reduces stress for both sellers and buyers, leading to a more positive overall experience.
In the competitive landscape of Canadian real estate, a pre-listing inspection for multi-family properties is a strategic move that can make all the difference. It’s not just about meeting expectations; it’s about exceeding them and positioning your property for success in the market. With a meticulous pre-listing inspection, we can ensure that your property stands out and shines in the market.
If you would like more information about multi-family real estate investing or have any questions, please make sure to post a comment below or contact us.
Dreaming of owning an apartment building in the great land of Canada? We’ve got your back with a straightforward guide, this will be your roadmap, breaking down the entire process into manageable steps. From figuring out which market is right for you to sealing the deal with a smart negotiation, we’ve got you covered. Learn from experts, explore real-life stories, and get hands-on tips to make informed decisions. It’s not just a list of steps; it’s your go-to resource for confidently navigating the journey to owning a profitable apartment building. Here are the steps of Buying an Apartment Building:
Step 1: Embrace the Cold Facts
Begin by cozying up to some market research – it’s like getting familiar with the lay of the land. Embrace the cold facts of the Canadian real estate scene. Market research is your guide for a smooth property journey. This step involves digging into information about different areas, property trends, and potential hotspots. It’s not just about data; it’s about making informed decisions based on a solid understanding of the market.
Step 2: Securing Funds
Wrap your head around financing; it’s understanding how to gather the money needed for your investment. Picture it as packing your essentials before a trip; ensuring you have the right resources is key. This step involves figuring out the best ways to gather funds for your property venture. It’s not just about money; it’s about having the financial foundation to make your investment dream a reality.
Step 3: Choose Your City Wisely
Cities have different vibes; choose one that fits your style – urban hustle or peaceful landscapes? Think of it like selecting the right flavor; your investment should match your taste. This step is like picking the perfect spot for your favorite activity. Whether you prefer city lights or calming scenery, aligning the location with your investment goals sets the stage for success.
Step 4: Budgeting
Grab your calculator – it’s time to dive into budgeting. Think of it like a new workout routine for your finances. Flex those financial muscles; they’re about to get a good workout. This step is your financial blueprint, ensuring you’re well-prepared for the financial side of property ownership.
Step 5: Prepare your Negotiation Skills
Get ready for negotiations – it’s a crucial skill. Become a master in the art of securing the best deal, and you’ll be the real estate pro. Think of negotiation like haggling at a market; it’s about finding a win-win. This step is your toolkit for getting the most out of a property deal. Imagine it as having a secret weapon – mastering negotiations opens doors to favorable terms and better prices. It’s not about being pushy; it’s about confidently navigating the deal-making dance.
Step 6: Inspect, Don’t Expect
Think of inspecting the property like a health checkup. Don’t assume everything’s perfect; look for hidden leaks or creaky floors before they turn into big dramas. It’s like giving your potential home a thorough examination. Uncovering issues in advance is your preventive medicine, ensuring you don’t face surprises down the road. It’s akin to peeking under the hood before buying a car – you want to know it runs smoothly. This step not only protects your investment but also sets you up for a drama-free ownership experience. So, check thoroughly, and don’t just cross your fingers and hope for the best!
Step 7: Legal Know-How
Get ready for some legal know-how. It’s like putting on your legal shoes to dance through the basics of property ownership. Think of local laws as the ABCs of real estate. It’s a bit like the hokey pokey – understanding where to put your legal foot in and take it out. This step ensures you’re on solid ground, following the rules of the property game. Just like learning the dance moves, grasping local laws protects you from missteps and ensures a smooth property journey. It’s not about fancy footwork; it’s about knowing the right steps to own your property adventure.
Step 8: Connect with Canadian Realtors
Team up with local realtors; they’re your guides in the Canadian real estate wilderness. Think of them as expert navigators in this unfamiliar terrain. Realtors know the ins and outs, helping you navigate the twists and turns of property transactions. It’s like having a GPS for real estate – they lead you to the right path, ensuring a smoother journey. Building a strong connection with realtors not only simplifies the process but also opens doors to opportunities you might not discover on your own. It’s a partnership that can make your property adventure less daunting and more rewarding.
Step 9: Insurance
Protect your investment. Get the right insurance. Because accidents can happen, even in the most polite country. Insurance is your safety net – it helps cover unexpected bumps on the property journey. Think of it like wearing a seatbelt; it may seem unnecessary until you need it. Choosing the right coverage is like having a reliable umbrella; it ensures you’re prepared for unexpected rainy days, providing peace of mind for a secure property venture.
Step 10: Community Counts
Build strong ties with your neighbors; it’s essential. Go beyond being just a landlord – be a good neighbor. Building relationships is like planting seeds; they grow into a supportive community. Engage, listen, and contribute. Imagine it as tending to a garden – nurturing connections not only enriches your property value but also creates a positive living environment. Being a good neighbor is an investment that pays off in a harmonious and thriving community.
Step 11: Paperwork
Brace yourself for a paperwork marathon – loads of forms and details are coming your way. Take your time with the fine print; it’s crucial for navigating through official processes smoothly. Picture it as a detailed map – every form completed is a step closer to hassle-free dealings and ensuring your property journey stays on track. Precision in paperwork is like having a reliable compass, guiding you through the maze of details toward your goal.
Step 12: Celebrate
Congratulations, you’re a Canadian property owner! Celebrate like it’s Canada Day – fireworks, poutine, and maybe a few “sorrys” for good measure.
In conclusion, the completion of this 12 Steps makes yourself equipped with the essential tools for a successful property venture. Contact us if you need additional knowledge or interested in a personalized consultation. Your strategic moves will begin here leading to your success in purchasing the right property.
Are you contemplating the sale of your commercial property or investment building in Ontario, Canada? Before embarking on this pivotal journey, we must delve into the intricate details of our local market conditions and trends. Beyond the traditional “For Sale” sign, the key to a successful deal lies in having a meticulously crafted roadmap that guides you through the nuances of Ontario’s real estate landscape.
As a seasoned real estate broker practicing in Ontario, I understand the significance of local market research. It’s not merely about selling a property but strategically positioning it in a competitive market. Let’s explore strategic approaches to research your local market conditions and trends:
1. Realtor Consultation: Unlocking Ontario’s Real Estate Insights
In the dynamic world of Ontario’s commercial and investment real estate, consulting with a knowledgeable Realtor is akin to having access to a treasure trove of strategic insights. Our province’s real estate market has unique dynamics, and a seasoned Realtor becomes your trusted guide through the intricacies of commercial property transactions.
Investors in Ontario benefit significantly from Realtor consultations. They gain access to information crucial for navigating the nuances of commercial property transactions, allowing them to identify the most opportune moments for investment.
2. Online Real Estate Platforms: Ontario’s Virtual Hub for Property Data
Online platforms, such as local Multiple Listing Services (MLS), Costar, Altus, ICIWorld and prominent real estate websites, serve as Ontario’s virtual hub for gathering essential information on commercial properties. These platforms offer a comprehensive overview of recent property sales, current listings, and market trends specific to our province.
Leveraging these platforms provides investors with information and strategic advantage, enabling well-informed decisions that contribute to success in Ontario’s dynamic real estate market.
3. Attend Ontario Real Estate Events: Networking in the Heart of the Market
Attending local real estate events in Ontario is like stepping into an exclusive networking opportunity focused on our unique market. These events bring together professionals and investors to discuss trends and opportunities in the commercial property sector within the province.
Participating in these events provides firsthand insights that go beyond online information. It’s an opportunity to meet and connect with local real estate experts and fellow investors, gaining valuable knowledge that can lead to successful investments in Ontario.
4. Review Ontario Housing Reports: Equipping Yourself with Provincial Insights
Reviewing local housing reports specific to Ontario equips investors with crucial information about the demand for different types of buildings, emerging investment opportunities, and the market’s overall health. It’s akin to having a strategic playbook tailored to Ontario’s real estate landscape, guiding investors through the complexities of commercial ventures.
5. Community Surveys and Feedback: Tapping into Ontario’s Collective Wisdom
Engaging in community surveys and seeking feedback becomes a strategic tool for understanding the intricate dynamics of Ontario’s buildings and investments. This process offers valuable insights into preferences, needs, and potential opportunities in the commercial property landscape. It’s like tapping into the collective wisdom of local stakeholders, ensuring that commercial properties align with the aspirations and requirements of the Ontario community.
In conclusion, successfully selling a commercial property or investment building in Ontario demands a nuanced understanding of local market conditions and trends. As a real estate broker practicing in this vibrant province, I emphasize the need for a personalized roadmap rooted in detailed research.
Leveraging Realtor consultations for strategic insights, exploring online real estate platforms for a comprehensive market overview, and attending local real estate events for exclusive insights provide investors and property owners in Ontario with essential tools. Reviewing local housing reports and soliciting community surveys and feedback contribute to a holistic approach, ensuring that commercial properties stand out and thrive in the competitive Ontario landscape.
Ready to navigate the complexities of Ontario’s commercial real estate market? Contact me for a personalized consultation, and let’s shape your success story together. Your strategic move begins here in the heart of Ontario’s real estate landscape.
In the complex landscape of commercial real estate, particularly within the multi-family and investment sector, individuals often contemplate navigating transactions independently. However, the intricate nature of real estate transactions necessitates the expertise of a seasoned professional. This article explores the five compelling reasons why enlisting the services of a Multi-Family Real Estate Broker is instrumental in optimizing your commercial real estate endeavours.
Navigational Expertise in Commercial Real Estate:
A proficient Real Estate Broker is a knowledgeable guide, offering specialized insights into multi-family and investment opportunities. Their in-depth understanding of market dynamics and hands-on experience facilitate informed decision-making, ensuring clients secure optimal deals.
Negotiation Proficiency in Commercial Ventures:
Commercial negotiations demand finesse and insight, qualities inherently possessed by a skilled Real Estate Broker. Beyond the surface of pricing negotiations, these professionals provide valuable advice, steering clients away from potential pitfalls and ensuring mutually beneficial outcomes in lease agreements and premium property transactions.
Unlocking a Network of Business Allies:
Enlisting the services of a Real Estate Broker grants access to an extensive network of industry professionals, potential buyers or sellers, and service providers. This network, cultivated through years of experience, is a valuable asset, opening doors to growth opportunities and strategic collaborations.
Streamlining Paperwork and Legalities:
Buying or selling a property involves copious amounts of complex documentation and legal intricacies. A Real Estate Broker’s proficiency shines in meticulously handling these aspects. Beyond ensuring compliance, they serve as legal partners, decoding jargon and providing clarity and confidence in navigating the legal aspects of property transactions.
Efficient Time and Stress Management:
Acquiring or selling commercial properties involves many tasks that can be both time-consuming and stressful. A Real Estate Broker assumes the role of a strategic partner, effectively managing the intricacies of the process. The time savings allow investors to direct their focus to other critical aspects of their business without being encumbered by the exhaustive details of real estate transactions.
In summary, the decision to engage a Multi-Family Real Estate Broker is not merely a choice but a strategic move toward optimizing commercial real estate experiences. From expert guidance and negotiation finesse to an extensive network and streamlined legal processes, these professionals play a pivotal role in ensuring that each step taken in commercial real estate is calculated and poised for success.
Ready to elevate your multi-family and investment real estate ventures to new heights? Unlock the strategic advantages of working with a seasoned Real Estate Broker. Connect with us today to embark on a journey where expertise, negotiation finesse, and a vast network converge to redefine your success in commercial real estate. Your strategic move begins here—contact us for a personalized consultation, and let’s navigate the path to prosperity together.
When it comes to real estate investment in Canada, there’s a financial concept you need to grasp, and it is called “Capital Expenditures,” often referred to as “CapEx.” Think of CapEx as the expenses you’ll encounter to keep your property in good shape and improve its value over time. Understanding CapEx is vital. In this blog, we will break down Capital Expenditures, what they cover, and how to calculate them. By the end, you’ll know how to make better financial decisions, protect your investments, and ensure your real estate portfolio thrives for the long haul.
Capital Expenditures, often referred to as “CapEx,” represent the financial investments allocated to obtain, upgrade, or maintain a property, including equipment acquisition. These expenditures are categorized as CapEx if they involve new purchases or serve to extend the property’s lifespan, such as repairing the roof, installing a furnace, or repainting the building. Accurate assessment and consideration of both current and future CapEx are critical when determining a property’s value. Property owners must also incorporate CapEx into their rent calculations. Failing to account for or miscalculate CapEx could result in setting rent rates too low, leading to financial losses and negative cash flows for property owners.
Here are some of the most common capital expenditures in real estate:
New HVAC equipment
Major appliances
A complete overhaul of the plumbing
A complete overhaul of the electrical work
Bathroom remodels
Kitchen remodels
New roofs
New windows
New flooring
Balcony repairs
Siding
Paving or repaving a parking lot
Waterproofing of building or envelope
Additions to the property
Minor repairs and maintenance are typically not classified as capital expenses. For instance, replacing an entire roof is a capital expense, whereas repairing a small roof section falls into regular operating costs. The new roof prolongs the property’s lifespan, while minor repairs merely maintain its current usefulness. Similarly, purchasing a new furnace is a capital expense, while replacing furnace components is standard repair work. Upgrading an electrical panel is likely a capital expense, but replacing a light fixture is not.
Calculating Capital Expenditures is very easy. As an investor, it’s your responsibility to estimate the replacement timeline for major items. To create a capital expenditure budget, list these big-ticket items and their expected lifespans. Additionally, assess the status of each item in its useful life. This comprehensive list helps you plan for each expenditure. Once you’ve identified each expenditure, you can now use this simple formula to get the Capital Expenditure.
Let me give you a better example; for instance, a new roof costs approximately $50,000 and typically lasts 20 years. To calculate the annual CapEx, divide $50,000 (total replacement cost) by 20 years (expected lifespan) to get $2500 per year for roof-related expenditures. Apply this method to all significant maintenance items to estimate your yearly spending. If needed, break these expenses into monthly budgets for greater convenience.
Since this money isn’t being spent yearly, it sits in a reserve account and can be invested in vehicles such as GIC, where your capital is protected and income guaranteed. This way, you can also use compounding interest to minimize your cash outlay and maximize your IRR for every dollar within the investment.
In conclusion, Capital expenditures are among the largest, yet necessary expenses tied to investment properties. It’s true; you must invest money to reap rewards, and CapEx is no different. You can’t avoid them, so it’s wise to budget for them. Successfully managing a real estate business means not only accounting for these expenses but also budgeting for them wisely.
Unlocking the doors to multifamily property ownership is a significant financial milestone, but it often comes with a complex web of financial requirements. Among these, the down payment is a crucial piece of the puzzle. Whether you’re a seasoned real estate investor or a newcomer to the multifamily market, understanding the intricacies of down payment requirements is paramount. In this guide, we will delve into the world of underwriting multifamily properties, shedding light on the factors that influence down payment demands and offering expert insights to help you navigate this critical aspect of property investment.
Investing in multifamily real estate comes with distinct requirements depending on the type of mortgage, commercial or residential, available for your rental property. The rules differ whether you’re eyeing a property with five units or more or one with precisely four units. Before choosing what type of rental property you will invest in, you need to know the basic qualities to qualify for a rental property mortgage. Here are a few things that you need to consider:
You must have a credit score, ideally above 680
Proof of earnings whether you’re employed, run a business or earn commissions.
Low debt profile, indicating that you have sufficient extra money to cover your mortgage payments.
Proof that you have sufficient funds to cover the rental property’s down payment and closing costs. Some lenders may also require you to have a reserve fund for expenses as well.
If you recall, choosing the type of rental property dictates different requirements. A property may be classified as residential or commercial based on local zoning by-laws. A simple way to tell if a residential rental property requires a residential or commercial mortgage is by reviewing the number of units in the property. Commercial rental properties are buildings with six or more units, while properties with one to five units (depending on the lender) are categorized as residential. In underwriting a rental property, mortgage terms for commercial properties can be more challenging than those for residential rental properties. This post won’t dive into the complexities of commercial property mortgages; instead, we’ll concentrate on understanding the down payment requirements for residential rental properties. The primary factors that dictate your down payment amount for such properties are the property’s price and the number of units it contains. So, how much do you usually need to put down for residential rental properties? Typically, it falls within the range of 5% to 35%.
To be eligible for a down payment of less than 20%, you must have 1-4 units and be within a residential zoning, the purchase price for the building cannot exceed $1 million, and It must be owner-occupied (you must live in one of the units for at least 1 year).
For owner-occupied rental buildings with 1-4 units, minimum down payment requirements are as follows:
Owner-occupied with 1-2 units, the down payment is 5%.
Owner-occupied with 3-4 units, the down payment is 10%.
For investment properties, with six or more units or properties worth more than $1,000,000, a commercial mortgage with a minimum down payment of 20% is required. If you apply for a CMHC loan for such a property, you may find that CMHC has appraised your property for less than your purchase price, forcing some buyers to make larger down payments of up to 35% of the purchase price. Governmental programs are available for affordable housing projects that can help reduce downpayment for such properties to 5% while offering amortization of 40 to 50 years.
In conclusion, understanding the nuances of down payment requirements is crucial for successful multifamily property investments. As you embark on your real estate journey, the knowledge gained from this guide will empower you to make informed decisions, ensuring that your investment endeavours are financially sound and strategically advantageous.
If you would like more information about multi-family real estate investing or have any questions, please make sure to post a comment below or contact us.
ESG stands for Environmental, Social, and Governance. It refers to a set of standards used by investors and organizations to evaluate a company’s performance and behavior in various sustainability and ethical issues.
In recent years, there has been a notable shift in the investment landscape as environmental, social, and governance (ESG) factors have gained prominence. This shift has extended beyond traditional sectors and is now significantly impacting the world of commercial real estate investments. Investors, stakeholders, and even governments are placing increased importance on sustainable and responsible business practices, driving the integration of ESG considerations into various industries, including the lucrative realm of commercial real estate.
The 3 aspects of ESG are:
Environmental (E): This aspect focuses on a company’s impact on the environment. It involves assessing how the company manages its use of natural resources, its carbon footprint, its commitment to reducing greenhouse gas emissions, waste management practices, and adherence to environmental regulations. Additionally, it considers the company’s efforts towards sustainability and the development of environmentally friendly products and services.
Social (S): The social aspect looks at a company’s treatment of its employees, customers, suppliers, and communities where it operates. It evaluates factors such as labor practices, employee relations, diversity and inclusion, customer satisfaction, community engagement, and philanthropy. Companies that prioritize fair labor practices and have a positive social impact often score well in this category.
Governance (G): Governance refers to the company’s internal policies, leadership structure, and adherence to ethical standards. This includes evaluating the independence and expertise of the board of directors, executive compensation, transparency in financial reporting, and measures to prevent corruption and unethical practices.
ESG factors have gained significant importance for investors due to several reasons:
Risk management: ESG factors can help investors identify and mitigate potential risks associated with their investments. Environmental risks, such as climate change impacts or regulatory changes, can affect the value and longevity of a property. Social risks, like community relations or labor practices, can impact a property’s reputation and operational stability. Strong governance practices help ensure proper management and transparency, reducing the risk of fraud or mismanagement.
Long-term performance: Commercial real estate investments are often long-term endeavors. Considering ESG factors ensures that properties are built, managed, and operated with an eye toward long-term sustainability. This can lead to reduced operational costs, increased tenant satisfaction, and enhanced property value over time.
Market Demand: ESG considerations are becoming increasingly important to tenants, investors, and regulators. Investors who prioritize ESG factors are likely to attract more socially conscious tenants and may also experience increased demand from institutional investors who incorporate ESG criteria into their investment decisions.
Regulatory Compliance: Many regions and jurisdictions are implementing stricter environmental regulations and building codes. Investors who account for ESG factors are better positioned to comply with these regulations, avoiding potential fines or operational disruptions.
Stakeholder relations: Investors that prioritize ESG factors are likely to have better relations with their stakeholders, including customers, employees, suppliers, and regulators. This can lead to enhanced brand reputation and increased customer loyalty.
Enhanced Reputation: Incorporating ESG principles can improve a real estate investor’s reputation. Demonstrating commitment to environmental and social responsibility can lead to positive public relations and better community relationships.
Future-Proofing Investments: By considering ESG factors, investors can future-proof their investments against changing market dynamics. As sustainability practices become more mainstream, properties that lag behind in ESG performance could face lower demand and potentially depreciating value.
As a result of these benefits, ESG considerations have become an essential part of investment strategies for many investors who seek not only financial returns but also sustainable and socially responsible outcomes.
Today, we will be reviewing different levers used when reviewing multi-family properties in Ontario. The property being used is an actual property that is currently for sale in Mississauga that I’m using as an example.
We are now offering services to investors who are interested in investing in real estate without the hassle of managing it. We would invest along side any investors looking to invest in multi-family properties and would asset manage the asset to ensure the asset can achieve the target value creation projected at acquisition. Our compensation is tied to the property achieving those targets hence aligning us along with the clients long term goals.
If you’re interested in finding out more, please feel free to reach out directly.
This is the first time since 2008 that there was a drop in average price for the Toronto market. It’s an exciting and terrifying opportunity as this is the time when buyers either will choose not to act or act and make the most money on their real estate purchases. I still talk to my clients that made purchases in the small slump of 2008 who thank me for helping them through to making the purchase as they saved so much money by purchasing when everyone else was holding off.
Let me explain…
There are two main emotions that run a market. Greed and Fear… Greed to get/make more or fear to avoid loosing what we have… This is very much true for real estate too… Sellers want to net the most money possible while buyers want to pay the least amount.
In a market run by greed, the fear of loosing out drives a lot of decisions.
Imagine, if you will, a market running on greed, the buyers keep paying higher and higher amounts because they see it as a profitable prospectus with little downside. Buyers keep paying more and more because they don’t want to miss out on making money on the product (real estate) when they will sell/flip it. Buyers want to desperately enter the market but there aren’t enough products available as sellers are also holding off on selling their property as prices keep going up. This greed and need for housing fuels the market and pushes the value even further up. Greed is high and fear of loosing money is low so there is lots of confidence in the market and prices keeps climbing to new records.
Now, let’s introduce the provincial liberal government who in an effort to get some votes in the next election, pander to the tenants in the city, and introduce laws for rent control and taxes for non-residents. The news of Home Trust Mortgages failing creates a market of uncertainty and buyers suddenly start to pull back.
This pull back is evident from the market report issued by Toronto Real Estate last month that showed overall year over year number of transactions down by 20.3% and number of days up from 11 to 15 days. There are also a lot more listings available in the market right now too. Last month we saw 25,837 new listings enter the market as compared to 17,356 from 2016. The prices were still shown as up 14.9% to $863,910 compared to 752,100 from 2016 but down from April 2017‘s record setting $920,791.
What does this all mean?
Number of transactions are dropping… Prices have dropped and are expected to drop further…
Let’s take a look at what prompted this change… Here are the factors that are at play here…
When looking at the market today, there isn’t much that has changed in the fundamentals. One of the big reason prices were being driven up is immigration as we don’t have enough homes being built to sustain the incoming population and this still holds true. The non-resident tax and paper flipping restrictions introduced are designed to primarily impact pre-construction market tax evasion as there aren’t many international buyers, that I know, looking to invest their money in resale market and deal with tenants. The Home Trust meltdown had a market exposure of under 2% across Canada which is hardly a trickle for the Toronto market… So why did the prices pull back?
Market perception: Perception is reality!
We saw the early signs of market slow down back in April in the weeks leading up to the Liberal announcement to help Toronto Real Estate cool down. There are different ways I keep track of market activity… Showings on listings is the main one we use as it gives us a live feed into what the buyers are doing in the market. We definitely saw a slow down in our showings and even postponed listing properties in April as not many buyers would come to see them.
Another vehicle I use is my online advertising metrics: The effectiveness of an advert is measured by how many times it’s exposed to the public before a request is made by a prospect/buyer for more information. In March, one of our advert was getting an inquiry after 240 impressions and we saw that number jumped up to 473 impressions per inquiry in April, back to 224 in May and is now sitting at 1753 impressions per inquiry. This shows how buyers who are looking for properties are reacting to market perceptions. It’s worth noting that the numbers are from two different adverts; both were for income properties for sale, one in Cabbagetown (Ask $2.2M – March and April numbers) and second an income property for sale in Annex (Ask $3.4M – April, May and June numbers).
Buying a property was getting more and more expensive each day hence buyers were opting to rent more which is why our vacancy rate in the city is below 1%. There is some pent up demand among the renters which is waiting for property prices to drop so they can jump into the market as well. There are also buyers that can purchase now who are holding back as they aren’t sure what will happen to the market.
The big question now is… where will the market go from here? Is it going down further or will it bounce back?
I don’t know the right answer as I’m just a student of Real Estate in Toronto but do believe in the following…
I do know that based on the fundamentals that I have studied, there is nothing wrong with the market… The prices are inflated… yes! which is a result of low supply and high demand. With increasing supply, we will see a drop in pricing as sellers will be forced to become more competitive.
I also know that there will be more buyers entering the market place who have been renting and waiting for this as the prices come down. Buyers have, after a long time, choice of properties to pick from and are able to negotiate with seller. This may take sometime as buyers will fear that the market will go down further and will keep holding off.
In my humble opinion, I don’t think we are going to see massive price drops in the Toronto market. I believe that we will see a price drop in the next coming months and sellers who aren’t willing to sell at a lower price will start taking their properties off the market and renting them (remember we have a really low vacancy rate). This may again create an environment where supply will be limited and demand will start to increase causing prices to start going back up. Conversely, we might start to see a very balanced market where prices will drop over the next six to eighteen months (based on articles I’ve read) and we will have a market with average days on market close to 25 and about 2 months of inventory.
So… What to do in this market?
It goes without saying; find yourself a real estate professional who knows how to deal with this shifting market. Due to low barriers to entry in real estate sales, the number of agents have swelled in Toronto and everyone has a friend who is an agent. It’s important that you find an agent that does this full time and has proven record showing that he can get the property sold or negotiate well on your behalf to get you the best price possible.
If you are a seller and have a property coming for sale soon, you will need to review your expectations from the sale. If you have your next property purchased already, double check your numbers and review the details thoroughly. What will you net from the sale if you don’t get the number you have? What’s the least amount of money you need to close your next home? You will probably have to bring your property to the market a lot sooner than you were anticipating. If you haven’t purchased yet, wait till you have your property sold before signing any agreements of purchase. If you haven’t gotten an evaluation of your current property, you should get one as soon as possible. This is a solicitation to help you; only if you’re not under an agency agreement.
As a seller, if you have to sell in the near future…
Don’t expect to see offers lined up right after listing your property for sale. Don’t set offer dates for your listings rather list at a competitive price and leave offers open at anytime.
Don’t expect to get that crazy number you had in mind. With more listings available for buyers, chances of crazy offers are low unless you have a very rare house, listed at a VERY discounted price, is immaculate and highly desirable, and you find two buyers that are just in love with the place… Chances of this happening are low…
Expect to do some work on your home before selling it. Properties aren’t only judged based on price, rather also on how they look and any work that needs to be done. Everything that needs to be fixed becomes a $10,000 problem. If you have a property that is a fixer upper, chances are that you will have to get that work done to make it attractive to buyers coming through.
Expect that buyers will be buying properties on conditional offers which means your property will likely be inspected.
Be bold when everyone is scared
As a buyer, it’s simple but not very easy… You have to be bold when others are scared.
I sold my private residence earlier this year as I truly believed this was coming. I’ve been keeping tabs on the market and touring properties over the past couple of months and am now making offers on properties at prices that listing agents would’ve laughed at before. No… these are not low ball offers by any means but full asking price offers on their listings that didn’t get offers on offer night. I’m hoping to secure a home for my family this weekend.
The idea is to get out there and start looking now! There might be a very small window for buyers to take advantage of this market. If you have a home to sell, I would highly recommend selling it first before buying your next place.
Following are some videos that show the details of what’s happening in the market that will help you get more detailed information on the market. If you want to talk about this market, you can always reach out to me
