So perhaps you understand the concept of income-producing property.  And perhaps you’re interested in getting involved in what amounts to an incredible investment.  But how do you run the numbers on a potential opportunity?  Here is a quick guide on how to ‘do the math’.

The formula is simple: you want to analyze income versus expenses. A property with high income and low expenses is the ideal, which should be fairly obvious.  What may not be obvious immediately is the scope of line items you’ll want to account for when looking at a potential property. 

Income

Rents – The main source of income will likely come from your tenants’ rents.  In general, more units are better, because it mitigates your risk of income loss from vacancy (lack of tenants) and because it spreads fixed expenses out over more income streams.  In Toronto it is becoming somewhat hard to find properties that ‘carry’ themselves (cover all expenses with internal revenue) with only one rentable unit.  Though it is still possible, I would generally recommend looking at properties with more than one separate unit to rent.

Parking – You may be able to make a separate monthly income from any parking spaces you own – especially in the downtown area near desirable and high-traffic areas.

Laundry – Laundry and other coin-operated devices will serve as an additional source of income.  Be sure to make a realistic calculation of what these may add to your bottom line.

Other – If your tenants pay utilities, for example, you could count that as income – as it will negate the utilities expense on your cash flow statement.  Keep an eye out for rental agreements that include the tenant paying for some or all utilities.

Expenses

Debt Service – Also known as a mortgage, your monthly debt service will commonly be your largest expense on an income property.  Be sure to know your carrying costs in this category before you commit to a property.  Also watch for the direction lending rates are moving if you are going to select a variable mortgage product.

Taxes – You can’t avoid them, unfortunately, and they are never likely to go away - even when your debts are paid entirely.  Along with maintenance and insurance, be sure to factor these into your calculations for permanent ongoing costs.

Maintenance – No matter how new and fabulous a property appears, there are going to be ongoing maintenance costs.  Be realistic.

Insurance – You will have to have insurance on the property if you are financing the deal.  Banks require it so that you don’t burn their investment collateral to the ground – literally.  Ask your insurance professional for an estimate as rates vary greatly depending on the property.

Utililties – Make sure to account for utilities costs unless you’re absolutely certain you can get your tenants to pay for them.  They’ll fall back on you if you can’t.

The rest is fairly simple.  To get a rough idea of your cash flow (profit/loss) just simply add up your sources of income and take a small percentage off for vacancy and credit loss (tenants not paying their rent – it happens) and then subtract your expenses.  I would use 5% as a reasonable number for my vacancy loss when calculating.

Is the result a positive number?  Great!  If your numbers were accurate, then you stand to make money!  This may be a property to consider if all other factors look sound.

If you’re thinking about making a move, are you considering buying a condominium or a single-family home?

The number of condominium owners has risen dramatically in the last few years. Condos are a popular option because they are often more affordable, require fewer maintenance and landscaping chores, suit busy lifestyles, and serve well as a first home or downsizing from a larger house. Here are some differences to consider:

Condos
*There are usually fewer maintenance requirements.
* They can be less expensive than a single-family home.
* You own the space between the walls.
* There may be more security with neighbors close by.
* The exterior of the building, landscaping, surrounding roads, driveways and common areas are owned by the condo association, a group made up of all unit owners.
* Special assessments by the association for painting or repairs can add significant expense.

Single-Family Homes
* They usually offer more storage space.
* You own the interior as well as the exterior.
* You have to do the maintenance, landscaping and repairs.
* Unless you live in a gated community, you don’t have condo association dues.
* You don’t have to worry about special assessments.
* You have room to grow plants, flowers, trees, veggies, etc.

Look at your lifestyle and consider how your household may change over the next few years. Will you have enough space in a condo? Or will you be happier in a house with room for a garden?

Are you thinking of making some home improvements?

With large home improvement centers offering “do it yourself” classes on home repair and maintenance, homeowners are tackling big home improvement projects more and more.

Here are a few helpful tips to consider when deciding whether to take on home projects yourself or hire an expert for the task:

* Compare your own hourly wage to what you would pay per hour to have the job done.
* Consider how much longer it would take you to get the job done compared to an expert.
* Take into consideration the value of the time you would spend on the project. (Could that time be spent with family or on hobbies?)
* Determine whether you have the necessary equipment, or if you would need to rent tools for the project.
* Always think of the cost/benefit ratio when you plan a home improvement project.

Small communities now have lots to offer in terms of an active lifestyle, plus there are big savings to be had. Whether you’re a growing family looking for a great place to raise children or a retired couple hoping to stay active, you’ll want to consider several new communities springing up in small towns across Ontario. Not only do you get more for your dollar — from luxury homes backing onto a golf course to 50-foot lots and all of the standard “big city” features — but you also buy into an active lifestyle away from the hustle and bustle of the city. “My philosophy is to give people value for their money,” says Fabrizio Cortellucci, president and owner of Zancor Homes. “Sometimes people have this perception that when they go into rural Ontario they’re saving a lot of money but also getting an inferior product; I give them the exact same specs and features as I would in the Greater Toronto Area.” Zancor Homes currently has three developments under way in small towns: Brooklin’s Forest just north of Whitby, The Village of Pine River in Angus near Barrie and The Villages in Stayner in Wasaga Beach. Standard features include nine-foot main floor ceilings, hardwood flooring, fireplaces and oak staircases, all of which come at an overall savings of $100,000 to $200,000, says Cortellucci. A quaint life The private enclaves in the Village of Pine River, for example, are just a short drive from Barrie with easy access to Highway 400 and the new GO terminal. Meanwhile, families can enjoy the quaint life of Angus, with plenty of opportunities for golfing, skiing, canoeing, fishing and hiking. Prices range from $242,990 for a three-bedroom home with a double car garage on a 30-foot lot to $469,990 for a four-bedroom, three-car garage home on a 60-foot lot. In Welland, Ont. a community of 50,000 located in the centre of the Niagara Region, Ballantry Homes is appealing to retired couples and empty nesters at the other end of the spectrum with The Residences of Lochness Links. Surrounded by one of Niagara’s premier golf courses, the enclosed neighbourhood features townhome villas priced from $270,000 to $306,900 and detached bungalows ranging from $306,900 to $345,900. The first phase is designed for an older demographic looking for an active lifestyle in a quiet setting. “Mostly what people are looking for are the activities,” says Ballantry president David Hills. “People just want to have fun; it gives them something to do as opposed to sitting around and your excitement of the day is going to the local store for a newspaper.” Organized activities The Residences of Lochness Links offers a community centre with a fully equipped fitness centre, indoor swimming pool, whirlpool and sauna, tennis courts, party room and multi-purpose room. Owner-members enjoy all club privileges and are also invited to organized activities, from card games to aqua-fit classes to Tai Chi or hiking on nearby trails. The development is also close to the walking/biking trails of Merritt Island, and just a short drive from local wineries, the Niagara Fallsview Casino and a myriad of other entertainment/tourist outlets. “A lot of people think retirement community is old age, you’ve got to be in a wheelchair wheeling up and down, whereas a lot of our owners are in their 50s and they’re all active,” says Hill, noting that one resident remarked that she had participated in more activities during one year at Lochness than she had her entire life. “If this development was located in Toronto or Oakville, it would be much more expensive (for the same quality of living),” notes Hill.

The reasons for buying a condominium suite in Toronto are many and varied, and I continually find it interesting that so many sales are to international purchasers. I’ve been asked whether these buyers are different from Canadians in how they arrive at their purchase decisions. The major difference I notice is that international purchasers are more understanding of the condominium concept, because building vertically in major cities is something they’ve grown up with. It?s still a relatively new phenomenon in Canada, so we have more educating to do with our Canadian buyers. All purchasers obviously have faith in Toronto as a city worthy of their financial and lifestyle investment. Canada is one of the few countries that offers economic and political stability, which attracts a sizeable immigrant population. Many are first-time mature buyers/residents who see the possibility of fulfilling the dream of home ownership; others see the value of investing here. Toronto has been named the top major city in the world for quality of life, and thus, is more than often the preferred choice in Canada. Some buyers own properties in several places around the globe and choose to buy a condominium in Toronto to use part-time when they are here for business or pleasure. These people look for consistency of product and reputability of the builder and the management company, as they will most likely not be active in the condominium corporation. As for the types of condominiums they choose, it’s all relative. For one person, a pied-à-terre might be a compact one-bedroom suite, For another, it may be a sprawling penthouse. It depends on the buyer?s income bracket, whether it’s their sole home or a multiple property, etc. With Toronto earning a reputation as one of the world’s most coveted cities, we’ve also seen a huge demand for luxury condominiums. People who choose to move from a large home, whether it’s in Forest Hill or Dubai, want the conveniences of condominium living in grand surroundings. Another trend with international buyers is the demand for energy-efficient building characteristics because of the energy crises they see happening in their countries of origin. Take The Residences at The Ritz-Carlton, Toronto for example. The fact that the building will use a deep water cooling system through Enwave Energy Corporation to substantially lower energy costs has been a powerful selling feature. Toronto is more cosmopolitan than it was years ago. The attraction of international condominium purchasers adds an element of maturity to our beautiful city.

When you’re thinking about buying your first home, it’s essential for you to be confident in your decision to buy instead of rent. However, you may not know about the many great reasons to buy a home! Here are just a few of them:

Smart investment
When you invest in a home, it offers the possibility for appreciation in value. The equity becomes yours when you’re still paying off your mortgage. You even get to live in it while your investment matures.
 
Tax advantages
Since both mortgage interest and property taxes are tax deductible, home ownership can save you significant amounts of money every year. Don’t forget about all the great rebates the Provincial government has implemented for first-time homebuyers.
 
Planned housing costs
You decide how much you spend on your home, including repairs and improvements. Unlike renters, homeowners with a fixed-rate loan can lock in their monthly housing costs.
 
Improvements to your taste
You can choose which improvements to make your own property, such as a deck, kitchen remodel, or new paint, instead of needing permission from your landlord.

Just a note to pass along some general real estate information you might find helpful.

One of the questions I am frequently asked is, “What is the difference between an interior designer and an interior decorator?”

Interior designers are professionally trained in the functionality, efficiency, and safety of a space, as well as the aesthetics or “look” of a room. This is different from an interior decorator, who works with surface decoration, such as color, texture, and pattern.

Before hiring a decorator or designer, ask yourself these questions:

* For whom is the space being designed?
* What activities will take place there?
* How long do I plan to live here?
* What is my time frame?
* What is my budget?

Answering these questions should help you decide whether to hire a decorator or designer–or do it yourself!

With so many choices and variables, how do you find the perfect fit? Before you start investing time driving around town with your agent, it’s a good idea to narrow down the playing field by looking at what would fit your needs best. Here’s where to look:

Look Inside

What do you already own that your new home would need to accommodate? If your dining room table is one that you cherish, use often and happens to be huge, then add “large dining room” to your list. Carry this logic through your space and you should come to some conclusions about what is essential in a new home. While you’re at it, take a look at your personal style; it can also give you valuable clues as to what you really want.

Look Outside

What is out in the world that catches your attention? Is it a brick exterior or cedar shingles that make a house feel like home to you? Consider the different styles of houses that you like, and see if there are any common elements among them. Another place to look is at the style and size of any new items you plan to acquire. Taking an outside inventory of what appeals to you can help narrow down your search.

Look at Your Requirements

It’s helpful to take a head count and look at what features are vital to each member of your family. How many of you are going to live there, and are any more expected shortly? How many of you need home offices or parking spaces or playgrounds? This will give you an idea of the size and number of rooms you require, as well as clues to locations or types of housing. Make sure you include pets and consider what’s best for them.

Taking stock of any special needs or limitations you have will also help you clarify your choices. If climbing stairs is not an option, a single storey dwelling is likely to be the best fit. If you’re not the handyman type and don’t have a large budget or the patience for renovations, you may want to skip past fixer-uppers, no matter how tempting a deal they are.

Look at Your Lifestyle

Look at your lifestyle to gain insight to your best locations. If you’re planning to stay awhile, and are also planning on children (or already have them), then you’ll want to find a neighborhood that’s kid friendly and has great schools. Another consideration should be your work commute. Will your new location support you in getting to work on time, in the usual way?

Your lifestyle can also determine the best layout for your home. Look at how you spend your time, how you relax and interact. You may find that the dining room is rarely used, while the family room is definitely the place to be. Similarly, look at how you entertain. Do you have overnight guests often enough that a guest room is a necessity? If your idea of a fun evening is cooking with your guests, then an open kitchen may top your list.

All in all, if you take the time to consider what’s really important to you, you should be able to define the type, size, attributes and location of houses that you want to look at. The results should be a lot less time looking, and a better chance of finding the house that is the right fit for you. Feel free to call or email me anytime for a complimentary list of homes meeting your search criteria.

Happy House Hunting!

We’ve heard it all before: buying in a neighbourhood that’s on the upswing is always a great investment. It’s a theory as old as real estate prospecting itself, and rest assured, it holds as true today as ever. But, it often seems hard to be sure if we’re choosing a location that truly is improving or just throwing our money at a bunch of hype.

So – how do we determine if a neighbourhood is actually improving? Other than listening to the ‘word on the street,’ here are a few tell-tale signs to watch for:

• Real Estate Activity. Are there lots of real estate signs in the area? Great… but you’re not done yet! Look carefully. An in-demand area will have many “SOLD” signs on the lawns. An area in decline will have listings that are lingering unsold, resulting in many signs, with few actual sales.
• Landscaping. This one’s easy to spot. Are people taking care of their yards and improving them with gardens and other attractive features? Hmm… could be a good sign!
• Commercial Investors. If the hip coffee retailer first moves into an area, it’s surely time to invest. New corporate inroads by big, reputable retailers into up-and-coming neighbourhoods often mean it’s a great time to invest residentially. For one thing, you can bet they’ve done their research.
• Home Improvements. If contractors are buzzing about, it means that the properties themselves are being upgraded (or at least well-maintained). If that’s the case, you’re almost surely dealing with an area on the rise – a great buy indicator.

All of the above are just hints. The best way to know is to put these clues into consideration along with other hard factors like researching the city’s future plans for the target area.

Here are the latest numbers reflecting the Toronto residential market’s activity:

Sales:  Again we are seeing close to double the number of sales year-over-year with 7,291 properties changing hands last month, versus only 4,120 the year previous, still reflecting the low-volume trough we experienced in early 2009.  That 77% positive change is powering the growth in asset value we are seeing in the market.  If you bought at this time in 2009, good for you.  This sellers’ market won’t last though, so get in now if you’re hoping to liquidate this spring.

New Listings: February also saw 12,726 new listings hit the market, up 24% from the number listed in 2009.  Considering the low volume of sales we were experiencing last year at this time due to the depressed market, this 24% change is still not nearly indicative of a market balance, and should be viewed as evidence of a sellers’ market.

I think that for vendors in 2010: definitely get your property listed in the early spring market.  You are in the perfect storm for selling and ‘trading-up’ in Toronto property because of aggressive mortgage rates, low inventory and the impending HST.

Active Listings:  Active listings (total single family homes currently on the market) are still down a whopping -32% year-over-year, with 14,514 properties on the market last month, meaning that the wave of sellers has not balanced the market yet.  I expect this trend will change in the early spring, which will make for an extremely active market.  I expect we also may see record sales volume before June if these market forces remain consistent.  Keep an eye out for that in coming months.

Days on the Market:  The trend is continuing toward much faster sales as well, generally benefiting sellers, with properties taking on average 51% less time on the market to sell, down from 45 days to only 22 days (!) this year, down significantly from last month.  You are encouraged to remember that this number represents the time until deals are firm and reported, and often includes a conditional sold period of up to 2 weeks.  Consequently, these properties are effectively off the market much sooner.  This is an unbelieveably short time for properties to sell in, on average.  Buyers will need to be very quick to snatch great properties.

Price:  Finally, sellers can rejoice once again -  the median price of homes in the GTA in February was $366,300, up from $312,900 in the same month of 2009, with detached homes trading at a premium, priced at $453,000 last month median value.

Growth in market volume will definitely continue this spring, and the next two months will likely see huge transaction numbers, with buyers getting involved before the HST deadline and with mortgage rates holding at their low levels.  Sellers should be considering looking at this market as a great opportunity to get value out of their current home through a refinance or by trading up into a larger property, thereby taking advantage of amazing power of positive leverage.