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Buildings for Sale in Toronto

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October 25, 2023 Addy Saeed Comments Off on Low Cap Rates and Rent Control in Ontario Operations, Seller's Guide

Low Cap Rates and Rent Control in Ontario

When it comes to real estate investments in Ontario, one of the key metrics that investors often consider is the capitalization rate, commonly referred to as the cap rate. This metric is crucial in evaluating the potential return on investment for a particular property. A low cap rate can be a topic of concern for investors, as it implies a different risk-return profile for the investment. In the context of Ontario real estate, low cap rates generally indicate that the property’s income is insufficient in relation to its market value. In other words, it implies that the property is priced high compared to the income it generates. This can be attributed to several factors, such as high demand for real estate, low supply, and low interest rates, which push property values up and subsequently reduce the cap rates.

Ontario has rent control in the form of the Residential Tenancies Act, and it also impacts market cap rates for properties. These rules affect both landlords and tenants and have a substantial impact on the rental market. Rent control is a government policy that regulates how much a landlord can increase the rent for a residential property. The primary goal of rent control is to protect tenants from unreasonable rent hikes, ensuring that housing remains affordable and preventing widespread displacement due to excessive rental increases.

In Ontario, rent control is governed by the Residential Tenancies Act. Under these rules, rent control applies to most private rental units, including apartments, single and semi-detached houses, and units in residential complexes. However, not all rental properties are subject to rent control. For instance:

New Rental Units
Newly built units or rental properties that underwent significant renovations on or after November 15, 2018, are not subject to rent control.

Social and Affordable Housing
Rent control does not apply to housing units that receive government subsidies or are part of affordable housing programs.

Landlords in Ontario are subject to rent control regulations. This means they can’t always charge the current market rent if it’s rising faster than what the government allows for rent increases. In such cases, the legal rent they can charge might be lower than what the property could actually fetch in the market. This unutilized potential rent remains untapped until the tenant moves out, which can affect the property’s cap rate negatively/lower. Property sellers can use this lower rent as leverage to justify a lower cap rate, showcasing the gap between the current rent and the market rate. In a seller’s market, where property inventory is limited, buyers might be willing to accept a slightly lower cap rate to secure a property with untapped income potential. This dynamic highlights the importance of understanding the local rental market and its impact on property valuation in Ontario. 

In the dynamic world of Ontario real estate, being aware of factors like capitalization rates and rent control is essential for both investors and tenants. Low cap rates can raise concerns, signalling property pricing is out of sync with income generation due to various market forces. On the other hand, rent control regulations are a vital aspect of maintaining affordable housing for tenants and ensuring that rent increases are fair and regulated. Whether you’re an investor looking for the right opportunity or a tenant seeking protection, understanding these elements is crucial for a balanced and informed approach to the Ontario real estate landscape. It’s all about finding the equilibrium where investors can thrive, and tenants can access affordable housing. So, whether you’re crunching the numbers as a property owner or looking for a rental home, these factors play a significant role in shaping the Ontario real estate experience.

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.

October 25, 2023 Addy Saeed Comments Off on Capital Expenditures? What are they and How to calculate them? Buyer's Guide, Operations, Seller's Guide

Capital Expenditures? What are they and How to calculate them?

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.

October 20, 2023 Addy Saeed Comments Off on Down payment requirements for Investing a Multi-Family Property Buyer's Guide, Operations

Down payment requirements for Investing a Multi-Family Property

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.

October 20, 2023 Addy Saeed Comments Off on What are Rental Surveys and Why are they important? Operations, Seller's Guide

What are Rental Surveys and Why are they important?


A Rental Survey can help you unlock the secrets to real estate success. Whether you’re in the process of buying a property or managing an existing one, these surveys are a must-have tool. It provides insights into your area’s current rental rates, trends, and occupancy levels. Plus, you’ll discover what attracts tenants the most, helping you boost your property’s value and returns. In a nutshell, market rental surveys are your key to maximizing your investment property’s potential.

These surveys are like treasure maps for real estate investors. It shows you what similar properties are charging for rent in your area and how your property stacks up against the competition. It can also help you establish the value of a property being considered for purchase and gauge the ability to increase your return.  In short, a market rental survey will help you maximize your investment property’s value.

It is a valuable tool that holds the answers to your questions. Are your rents on point, too low, or have room for an increase? Curious about what your competitors are up to? A rental survey has your back. It’s not just about the current state of your property; it’s a crystal ball into the future of rental rates. Without these insights, your investment strategy is like navigating without a map—a risky venture. But this takes time. Yet, the rewards are substantial. You get a comprehensive understanding of your property’s standing, identify potential areas for improvement, and strategize on maximizing its value. It’s like having a powerful tool at your disposal, guiding you through the twists and turns of your real estate journey. And yes, while it requires quarterly updates, the investment in time is a small price to pay for staying ahead in the game.

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