Toronto builder's websites
The following links will take you to some interesting Builder's websites:
www.collegeparkcondos.com
www.cityplace.ca
www.capriliving.com
www.baker-re.com/thepointe.htm
www.windermerebythelake.com
www.libertyvillageto.com
www.statebuildinggroup.com
www.empirecommunities.com
www.18yonge.com
www.highparkcondo.com
www.bellagiobloor.com
www.baker-re.com/hudson.htm
www.baker-re.com/18yorkville.htm
www.pembertongroup.com
www.comrost-felcorp.com
www.waterparkcity.ca
www.themonet.com
www.citygate.ca
www.1citycentre.com
www.waterclubcondos.com
www.empirecondominiums.com
www.dnacondos.com
www.canderelstoneridge.com
www.mls.ca
www.tridel.com
www.menkes.com
www.monarchgroup.com
www.canderelstoneridge.com
December 3, 2004 in Buying a Home | Permalink | Comments (2)
Did Someone Say Bubble?
Canada's rocketing real estate market is defying pessimists -- heck, it's defying realists. KATHERINE MACKLEM explains why, thanks to a solid economy and nesting boomers, it's here to stay.
IN 2001, Lindsay and Chris Sukornyk bought a 130-year-old house in Toronto's chi-chi Yorkville area. The property had been well cared for, but it hadn't been updated since the 1940s. Protecting its heritage facade, they demolished it from the inside out. They stripped walls right down to the frame, tore out old wiring and plumbing, dug out the basement, reinforced the foundation and ripped off the home's back end to extend it and accommodate a third storey.
The couple, professionals who now are both 27 years old, had custom-made kitchen cabinets installed and bought top-of-the-line appliances. Washrooms were equipped with designer-name sinks, heated floors and exquisite tiles. They painted the walls Zen-calm colours and chose urban-chic furniture. They planted perennials in the backyard and laid a gravel path to the two-car parking spot. Then, after spending a couple of hundred thousand dollars and months living on the third floor with a hot plate and a beer fridge in lieu of a kitchen, they sold it.
The Sukornyks are a bit shy about explicitly spelling out how much they made, but suffice it to say they sold it for well into the seven figures, double what they'd paid for it. "It's insane," Lindsay says.
Sean Wesenberg encountered insanity of a different sort. Last February, he camped out overnight in a lineup snaking down Georgia Street. No, not for hot concert tickets -- rather, he spent the cold night on the sidewalk for a chance to bid on a condo in Vancouver's coveted Yaletown. The property, which is just now starting to go up, occupies the last parcel of land in the area available for new buildings. The developer was selling 500 units in two towers starting the following day at noon.
About 30 people were ahead of him when Wesenberg, armed with heavy winter clothing and a sleeping bag, joined the queue at 2 a.m. As night turned into day, the line swelled, with many people slipping into spots held by friends or agents in front of Wesenberg. When the sales office finally opened, 150 buyers were ahead of him -- and many of them bought two or three units. Finally, around 3 p.m., 13 hours after he staked out his spot on the sidewalk, Wesenberg was at the front of the line -- and all five of his top choices were gone. Instead, for $370,000, he signed his name to the last two-bedroom unit on a desirable corner.
Just last month, the developer put the units of a third planned tower up for sale. Some of them went for $30,000 more than the same-size condos in Wesenberg's building. "It's pretty crazy," Wesenberg, 33, says.
LIKE AN ITCH, real estate markets are intensely local. But just about everywhere in Canada residential markets are on fire -- and have been, in many areas, for several years. Since 2001, property values in most of the country have risen anywhere from 25 to 50 per cent. In parts of Montreal and Kelowna, B.C., they have doubled, or more, in just 12 months. Figures like these, combined with tales of fierce bidding wars, contribute to the fear that markets across Canada are warped, that prices are out of line with home values and that, yes, almost the whole country is in the midst of a real estate bubble. Yet, despite hair-raising sticker prices, many real estate experts reject the notion of a bubble. "This has been a market that has defied all real estate fundamentals," says Jeff Rubin, chief economist at CIBC World Markets. And the unusual conditions that are feeding it show little sign of abating.
FACTOR 1: MONEY IS DIRT CHEAP
Rubin, a provocative market watcher who sealed his reputation by calling Toronto's real estate bubble just before it burst in 1990, says the market in Canada would have run out of steam by now if factors that usually drive real estate cycles were driving this one. Normally, changes in things like the balance between buyers and sellers, or the ratio of renters to homeowners, or the amount of annual household income (itself affected by employment levels), will have a decisive impact on the housing market. But in today's world, with interest rates lower than they have been since the '60s, the only factor that counts is the record-low cost of a mortgage.
Don Saynor, one of the many renters who are leaping into home ownership, has been lured by the promise of money that is, in his words, "really really really cheap." Besides, he's still hurting from his stock market woes. His RRSP has improved over the past year, but still, he says of his losses, "it's, like, my God!" His interest in the real estate market was piqued when banks recently started offering no-down-payment mortgages, and he's found one bank that gives -- sort of -- five per cent of the purchase price back to the mortgage client (the interest rate, natch, is slightly higher than market). Thinking both about lifestyle and resale value, Saynor, a 38-year-old who works in advertising, is now searching for the perfect loft-style condo in Toronto for up to $350,000. He believes lofts will stay trendy. It no longer makes sense to fork over $1,200 a month to a landlord. "I'm sick of not paying myself," he says. Even though a mortgage will jack up Saynor's monthly housing cost by at least $1,000, it will be worth it, he says. "Basically, it's forced savings for me. I don't want to wait any more."
FACTOR #2: HOMES ARE CHEAP
(RELATIVELY SPEAKING)
Many buyers are like Saynor, eager to get in before property values reach the stratosphere. Those who a couple of years ago decided to wait for the market to cool are now kicking themselves. That's par for the course during the run-up in all real estate cycles. What's unusual this time around is that the main concern for many purchasers is not a property's sticker price. Rather, it's how much house they can afford to carry through their mortgage payments.
Every three months, economist Carl Gomez prepares a revealing report on what's called the Housing Affordability Index. If there is one statistic that explains today's real estate market conditions, this it is. Gomez, of Royal Bank of Canada, combines various sets of data to arrive at the percentage of household income that goes toward paying for the home. In Toronto, at the height of the 1990 bubble, when mortgage rates were averaging 13.25 per cent, the cost of carrying a house was an unfathomable 71 per cent of pre-tax household income. (Given that taxes easily eat up another 30 per cent, what did those people eat?) It's Vancouverites, though, who earn the dubious distinction of consistently having the least left over after paying their monthly housing bills (including utilities, taxes, etc.), a ratio that sits today at roughly 46 per cent. While it's the highest in the country, houses in Vancouver are actually 15 per cent more affordable than they were in 1997, Gomez says. Except for a tiny moment in '86, Vancouver's affordability index has always been above 40 per cent, peaking in '94 at 64 per cent. Just about everywhere else in Canada, the affordability rate today hovers around the very healthy level of 30 per cent.
On a market-wide basis, bankers begin to worry only when the ratio passes 35 per cent. Which implies that real estate markets just about everywhere in Canada have a way to go before they peak. Gomez rejects the word boom, because it suggests a subsequent bust. "I'd say this is a robust, strong housing market with some moderation ahead," he says. "But it won't collapse." Does that mean it's a good time to sell and not a good time to buy? "It's definitely a seller's market, but given the affordability, it's still a good time to buy," he says.
Rubin agrees it will be a while before this market turns sour. "It'll continue as long as interest rates continue to be low," he says. Contrary to popular wisdom -- and the bond market -- which expects interest rates to creep up in the near future, Rubin goes so far as to suggest there won't be a rate increase in the U.S. (which can trigger a copycat jump in Canada) at all this year. "Never in the history of the Federal Reserve Board has it raised rates during an election year," Rubin says. In Canada, not only are interest rates not going up, they may come down further, he predicts. "As long as interest rates stay at these levels, the housing market will continue to defy what normally are fundamental constraints."
FACTOR #3: BOOMERS WANT TO RETIRE IN STYLE
And then there are the boomers, that generation which, just by sheer numbers, is irritatingly influential. Its front end, approaching 60 years of age, are downsizing, as 60-year-olds tend to do. But instead of moving into more modest homes, they still want "all the bells and whistles," says Phil Soper, president and CEO of Royal LePage. Meanwhile, the back end of the boomer generation, the 40-somethings, are in upgrade mode: if they aren't already living in the house of their dreams, they figure now is the time to go out and find it. In realtors' lingo, they are the move-up crowd, and they are putting a lot of pressure on the middle of the market.
It's pressure Clara Garfield and her husband know well. The two thirtysomething professionals began their search for a house in September 2002. They thought they'd spend a few months getting familiar with the central Toronto market, where they wanted to live, and then be in a position to buy a house the following spring. Their initial target price was $650,000. Wrong, and wrong. They visited more than 150 houses, even coming to recognize the faces of competing bidders. The months wore on. Garfield (not her real name) became pregnant. Houses were rejected for not having parking, for being too dark or needing too much work. Still, they placed offers on 10 different properties. In two cases, they were explicitly told the vendors would not accept list price. Each time, their bid was trumped. One house, listed at $669,000, sold for $900,000. "That was stretching reality," she says.
Garfield's baby was born. He's now a happy, gurgling, eight-month-old boy. "It's a long-running joke among our family and friends. Everyone else that was looking is already living in their house," she says. "There were points when we were so frustrated. We just wanted to buy a goddamn house." They kept looking, and a couple of weeks ago made yet another offer, this time on a well-maintained, three-storey Edwardian whose list price had just been lowered to $895,000. They offered precisely that on condition the property pass an inspection, which would happen two days later. The vendor accepted. The Garfields take possession in June. "In this market, you have no idea what will happen with the price," Garfield says. "But they probably could have got more money."
Amid the general optimism, there is one pocket of the real estate market causing some concern. That's condos in Toronto, which RBC's Gomez says are showing bubble-like signs. Resale prices, particularly among the new towers in or near downtown, have begun to drop while more buildings continue to go up. The fear is that a glut of these condos will trigger a price collapse in the sector. In Vancouver, Gomez says, the story is entirely different. Land is at such a premium, buyers will continue to snap up condos as fast as they become available -- even if that means spending the night on the sidewalk.
November 23, 2004 in Buying a Home | Permalink | Comments (0)
Toronto real estate resources
If you're buying or selling a house, whether it's for the first time or the fourth, you want to be well-informed about what's happening in the market, financing and the real estate industry. From this post, you can find out how to finance your new home, what the market trends have been over the past decade, the latest articles about the market and the real estate industry.
Some very good resource are available for you from the goverment and banking associations.
One is the CMHC's Step-by-Step Workbook for Homebuyers. Click here to go to the web site or here to download the workbook in Adobe Acrobat format.
Another is 'Mortgage Wise" from the Canadian Bankers Association (www.cba.ca). Click here to download the publication in Adobe Acrobat format.
You can also check out the Toronto Star's "Your First Home" section by clicking here.
For information on the Toronto Real Estate Board, click here.
November 21, 2004 in Buying a Home | Permalink | Comments (0)
Home Buyers' Plan Helps
More than 123,000 individuals participated in the Home Buyers' Plan (HBP) in 2002 and withdrew over $1.3 billion from their RRSP to purchase homes, reports the latest issue of Canada Mortgage and Housing Corporation's (CMHC), Mortgage Market Trends. "
The program take up has been heavily concentrated in large urban centers. Toronto and Montréal accounted for 25 and 19.4 per cent of all funds withdrawn, and 22.8 and 17.0 per cent of HBP participants respectively in 2002," said Ali Manouchehri, a senior economist at CMHC's Market Analysis Centre. "Some 1.3 million individuals have benefited from the program since 1992. Participants in this program have withdrawn over $13 billion from their RRSPs to purchase homes over the same period" he added.
Mortgage Market Trends also predicts a growing mortgage market this year and next. "A combination of continued economic growth and job creation, positive demographic factors, and low mortgage rates will sustain demand for homeownership in both new and resale housing markets leading to a 6-8 per cent annual rate of growth in residential mortgage credit next year following a robust 8-10 per cent rate of growth in 2004," according to Ali Manouchehri. "Residential mortgage credit will surpass $600 billion in 2005" he said.
November 12, 2004 in Buying a Home | Permalink | Comments (0)
Real estate assets double
According to a recent Bank of Nova Scotia report, rising rates of home ownership and house prices have contributed to a 27 per cent national increase in overall household financial assets since mid-2001. Overall household net worth rose 17 per cent to $136,500 per capita over the same period. Home equity has traditionally been the single largest component of net worth in most households.
November 11, 2004 in Buying a Home | Permalink | Comments (0)
Toronto housing market peaking
More homes on market favours choosey buyers. Keep looking and run, don't walk, from bidding wars
It's official. The market has peaked.
That's the conclusion of Ted Tsiakopoulos of Canada Mortgage and Housing Corp.
In his Toronto Housing Outlook for 2005 report, the CMHC senior analyst predicts a "soft landing" for house prices.
"Toronto is enjoying pretty strong activity, but we're coming off the peak," he says.
So what does this mean if you're looking to buy or sell a home?
If you're a buyer, look for a condo in downtown Toronto, Tsiakopoulos advises.
A rising supply of condos — especially tiny "starter" suites — in some downtown neighbourhoods will lead to price declines.
"A lot of first-time buyers bought three years ago, now they're part of the repeat buying group, having outgrown their small condos."
Watch for buildings you like, then watch for an excess of unsold condos. Unsold pre-construction inventories are at near-record highs and builders and sellers will be offering lots of incentives to buy.
For sellers, the best place to be is in the 905 regions with a moderately priced semi or townhouse. With rising downtown prices and rising interest rates, value seekers will be turning to these more desirable properties, with demand outstripping supply. York Region is projected to have the greatest demand, where townhouse supply is the tightest, Tsiakopoulos says.
For the Toronto market, which in CMHC terms means Toronto, Oakville, Mississauga, Brampton, York and Durham regions, Tsiakopoulos predicts:
There will be a bulge in demand for resale homes, fuelled by demographics and supply. "Boomers are going into the market for a second time ... They have a lot of equity built up and now are in a position to move to a larger home.
"That means a lot of moderately priced resale homes will be coming onto the market."
First-time buyers will be a pickier group. "They're looking for more affordable product." As boomers move up, creating a larger-than-normal supply of resale homes, it makes it easier for first-timers to find something affordable.
Bidding wars will be rare, Tsiakopoulos predicts.
That said, high prices and rising interest rates are causing many first-time buyers to drop out of the market.
Demand, too, will decrease due to a general decline in migration to the Toronto area, caused by, you guessed it, high real estate prices.
Increasing interest rates mean shoppers will be seeking value and will avoid high priced homes. Price growth will slacken, with average resale home prices increasing by 7 per cent this year to $314,000 and 5 per cent or $330,000 in 2005. Condos have risen less than 3 per cent since 2003, partly because investors have been scared off by high rental vacancy rates.
There will be less demand for detached homes as value seekers turn to townhomes and semis.
High demand neighbourhoods like the Beaches will remain in demand and prices will grow, Tsiakopoulos says.
In these neighbourhoods, mortgage rates will have to increase 2 to 3 percentage points before prices are affected, though he expects downward pressure on expensive neighbourhoods prices by 2006-07.
He also thinks mortgage rates will increase 2 per cent by the end of 2006.
What's the best strategy to survive life after the real estate peak?
If you're selling, don't be greedy. Price your home fairly and be prepared for it to stay on the market longer.
If you're a buyer, run, don't walk, away from a bidding war. There will be a lot more homes on the market to choose from.
If you're buying as an investment, buy a house, semi or townhouse. Prices will appreciate more than high-rise condos.
If your buying to rent out, be prepared to lower your rent to attract tenants.
November 4, 2004 in Buying a Home | Permalink | Comments (0)
Toronto condo sales on a roll
Seduced by a raft of freebies and cut-rate pricing, condo hunters in the Toronto area are confounding analyst's predictions, snapping up units at a rate expected to translate into a year-end level close to the record set in 2002.
"The [sales] numbers for the industry are terrific, especially when everybody expected sales to slow down this year," says housing economist Mimi Ng of N. Barry Lyon Consultants. "Instead, they have been spectacular, and [2004] could be the second-best year on record."
Condo developers are naturally delighted to see the swarms of buyers. But they're not so happy about the ferocious competition and rising costs -- for everything from land to advertising -- gnawing away at their already pinched profit margins.
"They've had to readjust their revenue expectations," Ms. Ng notes. "They can't increase prices because of the competition. Consumers are in the driver's seat."
With all the momentum in the condo market, Ms. Ng's company projects that about 22,800 condo units will be completed in the Greater Toronto Area next year. But by 2006, builders will drastically cut back production, to a piddling 8,600 units.
A report released Monday by Toronto Dominion Bank highlighted the differences in the current condo market from that of the early 1990s, when a condo bubble burst leading to a 30 per cent drop in prices over four years.
This time, TD said, "the market is likely to get squeezed on both sides of the supply demand ledger in 2005-06, which will place downward pressure on prices. However, the extent of the drop is likely to be small -- about 2 per cent per year." Its conclusion?: "While the market will undeniably cool as interest rates rise, we do not expect a major downturn."
Even so, some might say there is a lemming-over-the-cliff aspect to the current situation. About 5,800 units in 26 new condo projects have just been launched -- or are poised to come on the market this winter -- by developers who faced a backlog of about 12,220 unsold suites in the GTA as of July.
With the market awash in condos, the average price in the GTA (excluding a few super-luxury sites that would skew the figures) barely moved in the past year. It went from $289 a square foot in September, 2003, to $298 last month -- a 3.1-per-cent increase, according to RealNet Canada Inc.'s high-rise price index.
Buyers are sniffing out the best deals and are flooding back into a bloated market, tirelessly shopping sales centres. And it shows. By the end of September this year, sales hit 10,218 units, compared with 7,973 units during the same period last year, Ms. Ng says, a hefty 28.1-per-cent increase.
Compounding developers' woes is the added competition from several hundred -- possibly several thousand -- rental apartments being reinvented as condos. Some, such as Minto Gardens' recently completed 34-storey tower at Yonge Street and Sheppard Avenue, are in late pregnancy.
Chris Sherriff-Scott, senior vice-president of Toronto-based MintoUrban Communities Inc., says the company "was disappointed [it] couldn't make the numbers work as a rental building, which [it] would have preferred."
Disappointed or not, Minto sold about 200 of the 377 condo units in the first two weeks of September for an average price of $300 a square foot, he says.
Another 957 apartment units could be transformed into condos next year if O'Shanter Development Company Ltd. wins its case at the Ontario Municipal Board. Jonathan Krehm, an O'Shanter principal, says the company has been trying to convert its mid-Toronto Brentwood Towers to condos since 2000. The city, which wants to preserve the stock of rental housing, is opposed.
Other recently conceived and some barely consummated rental projects could well be heading for condo registration. Virtually all apartment rental projects built in the GTA over the past two or three years have, in fact, been registered as condos, rather than rental buildings, even if that's how they start out development life. That allows companies the option of selling units if they get stuck with too many vacant apartments.
Two landmark rental buildings in downtown Toronto have already been converted to condo units -- the 1950s-era One Benvenuto Place, with 116 units and its celebrated Scaramouche restaurant, and The Lonsdale, with 110 units and four townhouses, built nearly 25 years ago.
Agents say units in the two buildings -- about a kilometre apart on Avenue Road, north and south of St. Clair Avenue West -- are selling briskly.
Buyers spurred by continuing low interest rates and confidence in the economy, rather than condo investors, are pushing up sales. Canada Mortgage and Housing Corp. has reported that the investor-owned share of condos in the GTA has remained static -- 19.6 per cent by late September, compared with 19.2 per cent in the same period of 2003.
Adding to the renewed buying fever is a huge shopping cart of incentives, including free cars and $10,000 shopping sprees. "It's like zero-per-cent financing on new cars," Ms Ng says. "The condo market is so competitive, with such little price growth, that developers have to offer incentives. There are some really good deals."
Developers must be wishing they could find some good deals themselves. They have to pay more for land, construction materials and labour, more in development charges (up by 110 per cent over last year in the City of Toronto), and more on advertising and promotion.
"Consumers are looking at everything on the market, so developers have to make sure people coming into their sales offices remember their projects," Ms. Ng says.
That is not to say developers' entrepreneurial fires have gone out, just that they are much more selective about sites they will fight over, and prices they're prepared to pay.
And some of them are still good at bringing undeveloped and underdeveloped sites to life. For example, a project involving a 34-storey, 337-unit condo tower along with townhouses is proposed for Sherbourne and Wellesley streets, the former site of Wellesley General Hospital. Aykler Real Estate's 29-unit Steam Plant Lofts is also slated for that site.
And suburban developer The Times Group has bought the old Princess Margaret Hospital site on Sherbourne for an as yet undisclosed downtown project.
Intensive condo and other residential development is in the cards for industrial lands near the former General Motors plant at Eglinton and Warden avenues and on underutilized TTC lands at St. Clair Avenue East, says Mark Conway, a partner in N. Barry Lyon Consultants.
"Mattamy Homes and the Goldman Group have bought land on those sites, with condo towers, townhouses and single-family homes in mind," he says. "The City of Toronto has a land-use study under way."
Rod McPhail, the city's director of transportation planning, says the year-long study is nearly done, and a public consultation on Oct. 19 was likely the last. "Ultimately, new development there will change the face" of the area.
October 31, 2004 in Buying a Home | Permalink | Comments (2)
Toronto housing expected to cool
A balanced market better for buyers
More listings, higher priced homes and rising interest rates mean that the Toronto area housing market will start to cool in 2005. Sales will not be as robust as 2004, which is forecast to be the peak in existing home sales, says the Canada Mortgage and Housing Corporation.
"Look for few if any bidding wars, and multiple offers only in the most desirable neighbourhoods. In this environment, vendors should avoid over-pricing their homes," said Ted Tsiakopoulos, senior market analyst at the federal housing agency, in his annual housing forecast released yesterday.
While this year home sales are forecast to peak at a record 84,000 units, 2005 will be less frenzied, although still a good year at an estimated 82,000 sales, down 2.4 per cent, predicts Tsiakopoulos.
"A more balanced market puts prospective buyers in the driver's seat and points to slower pace in price growth ahead," said the analyst.
New home sales will take a bigger hit, diving from 42,000 forecast sales this year to 38,000 sales in 2005, down 9.5 per cent.
"With the share of first time buyers on a downtrend, homes will stay on the market longer," said the CMHC.
"The market will likely hover near the cusp between a balanced and a sellers' market, pointing to price increases slightly higher than the rate of inflation."
Price growth in 2005 is expected to be 5.1 per cent, with the average cost of a resale home at $330,000.
With fewer first-time buyers, repeat buyers will lead the market over the next several years. But this will be in an environment of deteriorating affordability. Multiple dwelling homes such as semis and townhomes are expected to capture a larger percentage of sales.
"More expensive detached housing in core areas, faced with increased price pressures, will fall outside the reach of prospective buyers."
New listings will grow and are expected to outpace sales in 2005. Year to date new listings are up nearly 10 per cent from the same time last year, and will grow another 8 per cent in 2005, as the surge of home completions means that vendors leave their existing homes and move into their new ones.
The new home market share of total sales is expected to trend lower from its high of 42 per cent in 2002 to just over 30 per cent in 2005.
"Higher new home prices, land constraints, new home completions and more choice in the resale market will all weigh on the new home market in 2005," said Tsiakopoulos.
Meanwhile, Toronto area housing starts have plateaued and will move lower next year as higher home prices start to hit pocketbooks.
The CMHC is forecasting that the posted 5-year mortgage rate will be 7 per cent by the end of 2005, compared to 6.3 per cent at the end of 2004.
- An article by Tony Wong published in The Toronto Star
October 29, 2004 in Buying a Home | Permalink | Comments (0)
What a few million can buy
James Spader, who co-stars with William Shatner in David E. Kelley's new ABC series Boston Legal, has purchased a Mediterranean-style home in the Hancock Park area for nearly $2.7 million (U.S.).
Spader, whose character, attorney Alan Shore, breathed new life into the eighth and final season of The Practice and earned the actor an Emmy, purchased a restored 1920s villa with four bedrooms, an updated kitchen and a guesthouse.
Spader sold his Beverly Hills-area home in December for about $3 million. He has had a home in his native Massachusetts.
The actor, 44, joined the cast of The Practice last fall. In Boston Legal, a spin-off of The Practice, he plays the same charismatic but morally questionable character. Spader has appeared in such films as Secretary (2002), Stargate (1994) and Sex, Lies and Videotape (1989).
Laker settles by the ocean
Chris Mihm, one of three new L.A. Lakers players who came from the Boston Celtics in a trade in August, has purchased a Manhattan Beach home for about $2.2 million (U.S.).
The 7-foot-tall Mihm, 25, signed a three-year, $11.4-million deal with the Lakers.
He bought a Mediterranean-style home equipped with five bedrooms and 5 1/2 bathrooms that measures 4,400 square feet. The house, which was built in 2002, also has an office, a family room with a corner fireplace, a pool, spa and firepit.
Producer lists piece of paradise
Sandy Gallin, producer of Broadway and TV shows such as Buffy, the Vampire Slayer, has built a gated Malibu home that he has listed at just under $30 million (U.S.).
Gallin, who has managed such stars as Dolly Parton and Neil Diamond, is known for buying, refurbishing and selling houses.
This Cape Cod-style house, at Paradise Cove, has private beach access by foot or golf cart to more than 85 metres of sandy beach. Reached at the end of a long, private drive, the home also has a pool and city-to-ocean views. There are six bedrooms and eight bathrooms in the 9,300-square-foot residence.
October 28, 2004 in Buying a Home | Permalink | Comments (0)
When a house is not a home
Investment in real estate is starting to look good again, even to people who couldn't fix a leaky faucet if their life depended on it.
With property prices continuing their nationwide ascent and confidence in stocks still wobbly in the wake of the political and economic crises of the past five years, many Canadians are looking to real estate as a way to diversify their investment portfolios.
Unlike mutual funds, which require as little time and effort as a signature below a dotted line, investing in real estate does take some legwork.
On the other hand, if you're in it for the long haul, there's no such thing as a bad time to invest, says Ozzie Jurock, a real estate analyst, lecturer and author based in Vancouver. "Don't worry about the market," he says. "The biggest mistakes are made in a hot market and the best deals often happen in lousy markets."
Mr. Jurock divides real estate speculators into three categories -- shark, flipper and genuine investor -- and says it's important to know which category best describes you, as "each one requires a different investment strategy."
The shark looks for -- and capitalizes on -- extreme distress sales. "If you can't see yourself buying a house where a girl just drowned, you're not a shark," he says.
Flippers purchase undervalued houses or homes in need of extensive repair, and resell them within a year or two.
Debra Gould used this strategy to advantage when she bought a home in Montreal in May, 2002, and resold it three months later at a $30,000 profit. The president of Six Elements Inc., a Toronto firm specializing in home staging or "fluffing," Ms. Gould used her decorating talents to polish the home's appearance before selling it.
To her clients interested in the flipping scene, Ms. Gould advises: "Buying a structurally sound but ugly house in a great location, and preferably one that needs lots of minor repairs and cosmetic changes like removing old carpets, wallpaper and lighting. These changes can make a huge difference to the perceived value of a property, often at minimal cost."
While it's true that flippers can make large gains, they can also land belly up if real estate prices take a dive after they purchase.
Genuine investors, on the other hand, take no such risk, Mr. Jurock says. The smart way to invest, in his view, is to buy property that gives you a positive cash flow right from the outset. That way, your investment doesn't depend on the whims of the market.
But how to ensure that positive cash flow?
For starters, look for an income-price ratio of 0.75 per cent or more, Mr. Jurock advises. That means a $100,000 property should generate at least $750 of monthly rental income. Some investors also use capitalization rates to gauge the soundness of a property. To calculate a property's cap rate, divide the projected operating income (after expenses and excluding the mortgage payment) by the purchase price, and multiply by 100. A cap rate in the double digits, such as 11 per cent, bodes well for your investment.
Mr. Jurock cautions against over relying on such figures, however, emphasizing that each property "tells its own story."
Key questions to ask yourself:
What is the tenant history?
Are the tenants paying market rates?
What capital improvements are needed?
How old is the building?
Then do the math: itemize all expenses -- mortgage, taxes, insurance, and maintenance/repair costs -- calculate the expected rental income, and subtract expenses from income. You're looking for a plus sign in front of the answer.
If you can't see yourself tinkering with those leaky faucets, you'll need to add property management fees (typically 7 to 9 per cent of rental income) to your expense sheet.
Still, Darren Weeks, president of the Edmonton-based wealth management company Fast Track to Cash Flow, says it's possible to find properties that yield a positive cash flow even after accounting for such fees.
"But you may have to get out of Canada's large cities to get such a property," he notes.
Mr. Jurock, in fact, recently bought some townhouses in Prince George, B.C., making a 10 per cent down payment on each $43,000 property.
With each unit bringing in $230 a month after all expenses, he says he feels "secure about the investment, even if it doesn't yield any capital gains down the line."
Feel ready to take on a small apartment building? Mr. Weeks says you'll need to think like a business person, with checks, balances and contingency plans in place. In his experience, "95 per cent of apartment buyers underestimate expenses and vacant-suite costs, so cash flow becomes a problem."
If you're taking your first bite out of the real estate investment pie, Mr. Weeks suggests you start with a more modest transaction, such as a single-family home.
"To know whether you're getting a good deal, you'll need to become an expert in the area where you're buying," he advises. "Find out what rent the market can actually bear, not what it 'could' bear under ideal circumstances."
You should also know that you'll be slapped with a 2.5 per cent GST bill if you buy a brand-new home. Until three years ago, only owner-occupants could get a rebate on this expense, says Toronto real estate lawyer Alan Silverstein.
In June, 2001, "the government changed the rules," he says. "If you hold the unit and can demonstrate you expect to rent it for a year, you can get the GST rebate after the year is over." This has "levelled the playing field for investors."
The tax perks of real estate investment don't stop there. "You can write off your expenses," Mr. Weeks says, "and you can claim depreciation on the property, even if it appreciates in value while you're holding it." Of course, you'll eventually face a tax bill of about 25 per cent of any capital gains you make when you do sell the property.
If the prospect of buying and selling homes makes you nervous but you'd still like a piece of the action, you may find your investment niche in real estate investment trusts, or REITs.
Using pooled capital from investors, REITs invest in various forms of real estate, usually income-producing assets that generate regular cash distributions. Here too, the tax breaks are considerable.
"All told, you can shelter about 40 to 60 per cent of the distribution," says Seymour Temkin, a senior business adviser and REIT specialist at the Goodmans LLP law firm in Toronto.
With the exception of REITs specializing in the hospitality sector, which tanked after 9/11, Mr. Temkin says REITs have yielded an average return of about 18 per cent over the past three years.
So why isn't everybody flocking?
"Many people believe interest rates will soar and REITs will run into trouble," he says.
For his part, Mr. Temkin foresees a more modest rise in interest rates - about 1.5 per cent -- and a healthy future for REITS. "They're an excellent choice for the long-term player."
Location 101
Having decided to play the real estate investment game, you may be wondering where on earth to make your first move.
Vancouver-based real estate guru Ozzie Jurock suggests you start by "looking for a high-employment area with a low vacancy rate."
Does this mean bright lights, big city? Not necessarily, Mr. Jurock says. "In some provinces, such as Ontario, you're better off looking in the suburbs or smaller towns." But above all, "avoid investing in an area with a high vacancy rate."
According to Douglas Gray, a real estate consultant and retired lawyer in Vancouver, the Canada Mortgage and Housing Corp. keeps statistics on expected rental rates in every part of Canada. "It's fantastically useful information, and it's available for free," he says.
Mr. Gray, whose second edition of Making Money in Real Estate is scheduled for publication in early 2005, also suggests that would-be real estate investors think like demographers, and ask questions such as: What is the baby boomers' next move? What areas will be attractive to downsizing seniors?
Other things to look for:
"An attractive enclave in a less valued part of a city -- the 'well-kept-secret' -- has a good chance of appreciating over the years," Mr. Gray says.
In terms of property prices, "an area that hasn't shown a big growth spurt yet. An area that seems to be on the cusp."
October 28, 2004 in Buying a Home | Permalink | Comments (0)
