Bank of Canada Rate Announcement - May 29th, 2013

As expected, there was no change in the Bank of Canada press release. Bank prime remains at 3%.  

This means no changes in variable rate mortgages or line of credit rates.

Five year money ranging from 2.79%-3.04% and 10 year money in the 3.69%-3.79% range.   

Below are the highlights of the Bank of Canada Announcement: 

• "The Bank expects global economic activity to grow modestly in 2013 before strengthening over the following two years"
• Canada's growth was stronger than initially projected in the first quarter
• Growth in household credit is slowing.    
• "Monetary policy stimulus currently in place will likely remain appropriate for a period of time"

The next Bank of Canada Announcement is scheduled for July 17th, 2013. 

Bank prime is 3.0%

 Click Here to Read the Full Announcement

If looking to invest in Barrie, Innisfil, Angus or Orillia Real Estate - call the experts who are investors and work with investors - Shannon Murree with RE/MAX Chay Realty Inc Brokerage was voted the Top Investor Agent by the Canadian Real Estate Wealth Magazine

InvestingInBarrie.com

Do You Have What It Takes to be a Landlord?

The following article is from Canadian Real Estate Wealth Magazine.

Despite the long list of potential hazards, the possible rewards of being a landlord often outweigh the downsides. Here are the top 10 reasons why you should become a landlord.

1.) You use tenants’ money to pay your mortgage and build your equity. You can raise the rent each year (with restrictions) and adjust for current market rent rates when a property becomes vacant. Long-term investors buy real estate that generates positive cash flow, and either hold it until the tenants have paid off the mortgage or until there’s a compelling reason to dispose of the income stream in return for a lump sum; for example, to buy something bigger/better or to create a retirement annuity income stream.

2.) Real estate assets can be leveraged to bargain for additional real estate investments. Unlike stocks, mutual funds, term deposits, etc., you do not have to pay for the whole real estate investment yourself. Lenders will give you the extra money you need (mortgage) in exchange for receiving interest and the property as collateral if you default on the scheduled payments. When the property’s value has increased enough, some lenders will let you borrow against that value (your equity), which you can use as downpayment to buy another property.

3.) Real estate is tangible and more easily collateralized than most other types of investments. Ask ex-shareholders of Northern Telecom, Enron, Bre-X, and other “blue chip” failures. Lenders generally offer a higher ratio of loan amount versus the value of a real estate property than they would offer on a portfolio of stocks, for example. The building and/or land will still exist if the worst should happen. Mainstream lenders also love the low-risk appeal of rental housing properties insured by the Canada Mortgage and Housing Corporation, and offer very attractive interest rates.

4.) A modest increase in rental income and/or decrease in operational costs can have a significant positive impact on property value. For example, increasing net operating income (by reducing costs and/or increasing rent) by $1,000 per year and applying a 6 per cent capitalization rate (better-than-average in today’s southern Ontario market) can add about $16,650 to the value of a property, using the Income Approach. This does not include appreciation for other reasons such as high demand for, and low supply of, rental space, improvement in the neighbourhood, etc.

5.) Several current tax policies (RCCA, capital gain, etc.) discourage longterm owners from selling their rental housing properties because the proceeds of a sale may only equal the cash flow they would receive from keeping the property for a few years. Combine this with the discouraging rent control policies which make investors/ developers unwilling to tie up their money in building a rental property. They may have to wait a decade or more for a return on their investment, when they can build a condominium and get their money back– often with a huge profit–in just a few years. So what’s good about that? Rental housing inventory is shrinking, resulting in high investor demand and high sale prices for existing inventory (seller’s market), and increases in average rent rates (low vacancy).

6.) A well-maintained and fully occupied rental property rarely depreciates. Unless they have been damaged by stigmatism or an eroding neighbourhood (eg. increase in crime), values have traditionally increased over the long term.

7.) If the very worst should happen, you still have a low (or no)-cost place to live.

8.) Legitimate and reasonable expenses reduce your taxable income. Tax deductions include mortgage and credit card interest, depreciation, a reasonable salary with employment deductions, a percentage of your local travel expenses, relevant long-distance travel (eg. trade show), portion of home office and workshop costs, etc.

9.) Despite the perceived stereotype, many landlords enjoy the satisfaction of helping to provide good-quality housing to self-sufficient people in need.

10.) Multi-residential investments are arguably the most stable, depression/recession-resistant, and relatively secure type of real estate investment you can make. Everyone needs a place to live; not everyone needs a place to work. Buying a place to live is not possible for many young people and remains elusive for many adults too. Some adults choose the apartment living lifestyle for its freedom from housing related issues.

Treat your investment like a business, and your tenants like valued customers; know your rights and those of your tenants; maintain tight control on your cash flow; act promptly in everything you do; surround yourself with high-quality industry professionals, and you’ll experience the success you’ve dreamed was possible, especially if you can expand your holdings.

From Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment, covering topics such as values and trends, mortgages, investment strategies, surveys of regional markets and general tips for buyers and sellers.

NOTE: Check out Top Investor Award 2013 Winners from the Canadian Real Estate Wealth Magazine - Top Investor Awards naming Shannon P. Murree, Sales Representative with RE/MAX Chay Realty Inc Brokerage the 2013 Winner as Top Real Estate INVESTOR Agent -Eastern Division 

Five more tricks to finding a bargain

Here are the last five of ten ways investor Gord Lemon urges you to beat the bushes for a deal. Ahem, a deal at a discount, no less. Note: They're in no order of preference or effectiveness, although all require initiative and, perhaps, a little luck.

The truth is, says Lemon, When it comes to finding more deals, it is not the lack of resources, but rather the lack of resourcefulness that truly prevents real estate investors from reaching their investment goals.

Go to your local landlord/tenant board
There are cases which are held on a regular basis at landlord/tenant boards across the country. These happen both in the courtroom and outside of the courtroom by a mediator. Attending these hearings from time to time gives you the opportunity to meet landlords or property managers who have just come from an experience they probably wish they had not had to go through. They may be very willing to talk to you about selling their property.

Go to foreclosure court
Going to foreclosure court can be a very interesting experience. You can witness foreclosure hearings which will be at various stages in their processes. Sometimes the owners are in attendance and sometimes not. The reason for attending, other than for your edification, is to potentially meet owners and be able to provide them some help. This may be financial help, advice to save their property or a deal to buy the property. Sincerely providing options to owners who are unfamiliar with the process can be invaluable to them. I encourage you to understand the foreclosure process in your province.

Placing ads
Utilize local papers and online ads like Kijiji and Craigslist to get your message out. Simple messages like: “I can buy your house fast!” “Need to sell your house today?” It can be as simple as “I Buy Houses.” These ads work well under the “Money to Lend” sections and attract people who are looking for cash to keep their houses. They may read your ad and realize if they just sold their house, it may relieve their financial pressures.

Fax Realtors
Create a simple message.
“I am looking for distressed houses in [your area of choice] that I can get for a minimum of 10% (or whatever your number is) under market value. I can buy cash and close quickly.” When you fax this to all the local real estate brokerages, you should get calls. This can be the initiation to creating some great relationships with Realtors who may be able to find you some great deals.

Word of mouth
There is no better advertising for you than word of mouth.

Just like in any type of sale, when a trusted friend, neighbour or business associate passes along your name to someone they feel can benefit from what you do, it comes as a great recommendation to the person receiving it. This can dramatically help in your sales process as your service and credibility have perhaps already been addressed. All you have to do now is fill the need and make the sale.

This was originally posted by Gord Lemon and source Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment, covering topics such as values and trends, mortgages, investment strategies, surveys of regional markets and general tips for buyers and sellers.

Shannon's note: establish a good relationship with REALTORS who will carry "pocket" listings and create "VIP Lists" so you'll be in the know. Ask and interview!

Additional NOTE: Check out Top Investor Award 2013 Winners from the Canadian Real Estate Wealth Magazine - Top Investor Awards naming Shannon P. Murree, Sales Representative with RE/MAX Chay Realty Inc Brokerage the 2013 Winner as Top Real Estate INVESTOR Agent -Eastern Division 

Investing: Rentals: What's your tenant profile?

Great tips from Paul!

Everyone has heard at least one horror story of "the tenant from hell," so much, in fact, that dealing with renters is the biggest fear potential investors face, writes industry expert Paul Kondakos. But that threat can be easily mitigated.

Owning an investment property is tantamount to owning a small business. To succeed in business, you have to ensure that you have a good client base that respects your business and pays bills on time.

The same holds true for succeeding in real estate investing, you have to ensure that you have a tenant profile that respects the property and pays its rent on time.

For most novice investors, the tenant profile is likely something that hasn't even crossed your mind, but it is actually one of the most important factors to determining your success. Some of it is tangible and some of it is intangible. As you become more experienced, you'll get a better feel of what makes a good tenant profile.

There are two occasions when you have to pay particular attention to the tenant profile. The first is when you are purchasing a new investment property. Assessing the tenant profile has to be a consideration because a bad tenant profile can cost the novice investor time, stress and money.

On a side note, for the more experienced investor a bad tenant profile isn't necessarily a bad thing as; (1) the experienced investor knows what they are getting into; (2) the property is usually priced accordingly, and (3) turning around the tenant profile can be a lucrative proposition.

Assuming Tenants - Talk to Every Tenant

When purchasing an investment property, the buyer has to assume the existing tenancies so you need to ensure that you are comfortable with what you are getting as you have no control over who is currently living in the property. The best way to learn about your prospective new tenants is to talk to them.

Be present at every inspection and try to schedule inspections for the weekend or evenings as most tenants tend to be around at that time. Depending on the reports required (eg. appraisal, building condition assessment, phase 1 environmental), you will likely have at least 2 occasions to meet and talk to them.

Always take personal notes so you can review and assess afterwards. Engage the tenant in small talk. This will not only reveal potential issues with the building, it will give you a good idea of the tenant's personality. Things to looks for:

    - Cleanliness of unit
    - Items that shouldn't be in unit (eg. washer/dryer, moped - I found one in my latest building inspection)
    - Pets (loud, neglected)
    - Does the tenant seem personable and cooperative?
    - Does the tenant like to complain alot?
    - Does the tenant work, do they have anyone that stays over, do they like living there, do they get along with their neighbours?

After a quick inspection and short conversation you can usually tell what type of tenant this is going to be. Once you have inspected all the units and hopefully met all the tenants and have taken good notes, you can review and decide on whether this is the type of tenant profile that you would be comfortable assuming.

Renting to New Tenants - How an $11.30 investment can save you thousands!

Here you have a lot more control of your tenant profile as you decide who gets to live in the property. This is where you need to be diligent and selective about who you let in as it will make all the difference between owning a profitable and headache-free investment or owning a money-losing and headache-filled one.

All too often, landlords are more concerned about filling vacancies than the quality of their tenant profile. In the short term they may fill a vacancy, but in the long term, it always, always costs them more. This I know from experience.

The ability to come up with first and last month's deposit should only be one of the criteria, and certainly not the only one. You need to learn as much about your prospective tenant as possible. My checklist includes the following:

    - Letter of employment or pay stub
    - Call employer to verify employment and get reference
    - Call previous landlord for reference
    - Tenant traits - Appearance, punctuality, demeanor
    - Do an online search (eg. work, hobbies, activities, asssociates, etc...)
    - Credit Check (Price: $10.00 + HST) - The single most important and effective way to forecast if you will get your rent on time every month. People earn good credit scores by being responsible and diligent with their financial obligations. I typically look for a score of 680 or higher.

While it may be tempting to fill a vacancy with a suspect tenant, you are ALWAYS better off to absorb the cost of the 1 month vacancy and hold out for a good tenant to occupy the unit.

What's the Big Deal About the Tenant Profile Anyway?

As mentioned earlier, having one bad tenant can significantly affect your investment and your stress levels. When I first started off, I was a lot more lax about who I let into my properties. The application, first and last, and a call to the previous landlord was about the extent of my due diligence. This lack of scrutiny ended up costing me tens of thousands of dollars and lots of stress.

Below is a sample calculation of how much one bad tenant can cost you:

______________________

Lost Rent (assume $800/month): $2,400+

Tribunal Filing Fee: $170

Tribunal Representation (if you don't go yourself): $200+

Sheriff: $330

Repairs and Renovations (almost every tenant I have evicted has left the unit in need of repair): $3,000

Intangible Costs: Stress, Your time, Tenant Profile

Total: $6,100 + Intangible Costs

______________________

I own and manage close to 100 doors right now and I find it easier to manage now, ever since I became more prudent with my due diligence and started checking credit scores, than I did when I owned substantially less doors but did not run credit checks.

With a good tenant profile, tenancies tend to last longer and when tenants give notice to vacate, transitions are almost seamless. A good tenant will give proper notice, which then gives the landlord enough time to advertise and rent the unit (usually left in good condition) out to a new tenant without incurring the costs of a vacancy. This not only maximizes your revenues, but also minimizes your stress and headaches as a landlord.

In closing, pay close attention to your tenant profile as it is one of the most important elements to running a successful and profitable investment property.

Source: Paul Kondakos is a professional real estate investor and operates industry site RealtyHub.ca

Should you use your RRSP to buy a first house? Buying a first home can be tough. Under the Home Buyers’ Plan you can use your RRSP to help. Should you?

Buying a  first home can be a tough journey. Especially trying to come up with a 20 per cent down payment in order to avoid having to purchase mortgage loan insurance. 

Under the Home Buyers’ Plan (HBP), first time homeowners can borrow up to $25,000 tax free from their RRSPs to buy or build a home. If you are purchasing a home with a spouse, you can each withdraw $25,000 if you qualify. 

Here are a few things to consider: 

The Pros 
• If you can use your RRSPs under the plan to make that 20 per cent down payment, you might not only avoid paying the mortgage loan insurance, but you could also qualify for a lower interest rate. 
• With a larger down payment, your monthly mortgage payments will be smaller 
• This is one of the only ways to make a tax-free withdrawal from your RRSPs 
• Your RRSP can help you buy your first home if you don't have much in terms of savings. This is a great option for young adults. 
• There is no penalty for repaying more each year than what your scheduled payment amount is. 
• It is a tax-free and interest-free loan over a 15-year span. 

The Cons • You will lose years of compound growth, depending on how fast you reinvest your money. 
• The HBP means that you are taking on debt. Except, instead of owing to credit card companies or the bank, you owe it to yourself. 
• If you don’t make your repayment each year, the unpaid amount is fully taxed as income for that year. 
• If you declare bankruptcy, you will still need to make payments back into your RRSP each year. 

My Plan 
When it comes time to buy my first time, I will definitely be utilizing the HBP. The Vancouver real estate market is expensive. So for the past four years, I have been saving for part of my down payment by contributing to my RRSP. This allowed me to receive a tax refund each year, which I reinvested back into my RRSP. 

The reason why I am confident in using my RRSPs to help pay for my down payment is because I am an aggressive saver. I invest between $8,000 and $10,000 a year in my RRSP, so I know I will be able to contribute towards my future and have my retirement account back at its previous amount within just a few years. This means I will minimize my loss in compound growth, and fully benefit from avoiding the mortgage loan insurance by having a 20 per cent down payment. 

Plan eligibility • You have to be a first-time home buyer (or buying for somebody who is disabled) and a resident of Canada. 
• You must intend on living in the house purchased under the HBP within one year of purchase or completion. However, there is no minimum amount of time that you have to stay there. 
• You must have entered into a written agreement to buy or build a home. 
• You cannot own the home for more than 30 days before the withdrawal. 

Plan rules • Starting the second year following the year in which you made the withdrawal, you will need to start repaying the money back into your RRSP. 
• You have up to 15 years to repay the full amount, where each year 1/15th of the total amount is due. For example, if you withdrew the entire $25,000, you would have to make payments of $1,666 each year for the next 15 years. 
• RRSP contributions made less than 90 days before your withdrawal date cannot be used towards the HBP. This means you wouldn’t be able to make a last-minute contribution into your RRSP in order to take it out again for the HBP. 

For more information on eligibility and rules, please visit the CRA website. 

Repaying the HBP 
You don’t actually have to make your first payment until the second year following the year in which you made your withdrawal. For example, if you withdrew your money in 2010, you wouldn’t need to make your first payment until the tax year of 2012. 

The annual repayment amount is determined by the total amount you have borrowed from your RRSP, divided by 15. If you pay more than the minimum each year, future payments will be the remaining amount owing divided by the number of payment years you have left to go. 

Your notice of assessment will have all of your Home Buyers’ Plan information on it, including payments due, so you won’t have to calculate the payments yourself. 

Would you consider using the Home Buyers’ Plan? 
Krystal Yee is a marketing and graphic design professional living in Vancouver. She also blogs at Give Me Back My Five Bucks.

Investors helping 'drive' the market, says report

Investors helping 'drive' the market, says report

Written by  Jemima Codrington - Canadian Real Estate Magazine

Are investors the driving force behind Canada’s housing market?

A new survey from RE/MAX, “RE/MAX Canadian Homebuying Trends Survey 2013-2014”, reveals that multi-time buyers are accounting for 41% of all home purchases in Canada. Combined with second-time buyers, the number of buyers purchasing property for the second time or more will account for 70% of home purchases.

Gurinder Sandhu, Executive VP Regional Director REMAX Ontario and Atlantic Canada, says investors fall under this umbrella.

“There are a fair number of investors in that multi-buyer category,” he said. “The challenge is we don’t know how many.
“We know based on discussions with our realtors that there is an increasing number, because over the past 17 years, real estate has been a sound investment.”

Sandhu was also quick to point out that immigration in urban areas is helping to prop up the condo market, despite fears that it’s in bubble territory.

“We still see demand for that product because it represents a product that is more affordable than others,” he said.
RE/MAX surveyed 1,109 purchasers who intended to buy over the next two years, and found that 39 per cent of those surveyed were multi-time buyers, 31per cent were second-time buyers and 30 per cent were first-time. The demographic is a shift from previous years as investors took the helm early last year and dove into the market.

"Between 2009 and 2011, first-time buyers were the engine driving housing activity, taking advantage of favourable conditions and a recovering economy," says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. "That changed in 2012, and even earlier in B.C., as prices reached a breaking point.”

But when quizzed about prices, the response was remarkably positive considering the current climate. 48 per cent of respondents believed housing values will rise, while 35 per cent believe they’ll remain the same. And according to the report, low vacancy rates and higher rents have driven some survey participants away from the rental market and into homeownership. When considering a property type, the majority of buyers were interested in larger properties, and lifestyle and investment were noted as “principle drivers” in the decision to purchase.

The survey also revealed a higher number of women active in home-buying. "Our Realtors   have definitely seen an upswing in the number of female homebuyers active in the market in recent years—and the survey confirms those anecdotal accounts," said Ash.

However the numbers stack up, the report generally indicates that mature, seasoned buyers are taking the helm and profiting from the current market. "Today's real estate consumer is more experienced and financially prudent than in the past," added Ash, “it seems the lessons of excess are being heeded."

Fewer investors, homeowners looking to sell: report

Fewer investors, homeowners looking to sell: report

Written by  Vernon Clement Jones - Canadian Real Estate Magazine

National home sales slipping 17 per cent in December from a year ago, according to new report from the Canadian Real Estate Association, suggesting investors are no more anxious to sell than homeowners.

"Sales activity continues to hold fairly steady at lower levels since mortgage rules were changed earlier in 2012, said CREA President Wayne Moen Tuesday, “but there are still some real differences in trends between and within local housing markets."
More generally, national home sales edged 0.5 per cent lower in December 2012 compared to November, and actual activity was down 17.4 per cent year-over-year.
A large part of the equation is the falling number of listings, said one analyst. They dropped 1.3 per cent from November to December, something that may encourage buyers now in the marketplace to act sooner rather than later. But the decline also points to the growing number of investors now opting to hold onto their current portfolios rather than sell up to access equity.

"While some will focus on the deep dive in sales from a year ago, it looks as though prices are providing a better read on the health of the sector, as homeowners are in no rush sell," write economists at BMO, referring to the new data. "Prices are easing gently, consistent with a soft landing through much of the country."

Fewer listings mean those investors looking to add to their holdings will likely be challenged, especially in terms of small multi-family properties.

Still, the challenge of new mortgage rules introduced in July remain, with many analysts writing off the possibility of a repeat of last winter’s brisk activity as buyers sought to get an jump on the spring competition.

That activity was spurred, in part, by unseasonably warm weather.

In 2012, a total of 453,372 homes traded hands over the Canadian MLS system, which represents a decline of 1.1 per cent from 2011 and 1.4 per cent below the 10-year average.
The downward trend is actually in line with projections for this year, with Jim Flaherty’s new mortgage rules bearing the brunt of any blame.
Still, investors anticipating an even greater shift to the current landlord's market may be disappointed.

The government isn't expected to further tighten rules this year. The Finance minister has suggested the government is satisfied that its move to lower the amortization on insured mortgages, along with other key changes – in addition to OSFI’s new lending guidelines – have already begun to de-accelerate consumer debt.