Toronto considers licensing of landlords

Landlords may require a license to operate residential rentals in Toronto under a city council proposal. Rental buildings with at least 10 units would be covered by the scheme but condos and co-ops would not. The plan has been revealed in a city staff report.

The proposal is due to be discussed at a meeting Thursday, thestar.com reports, and if agreed the scheme could be in place by January 2017. It could mean a charge of around $15 per year per building to cover the cost of operation and landlords could face fines of up to $100,000 for failing to comply with regulations.

Rationality is the best tool during purchase season – expert

Canada’s red-hot housing markets have traditionally seen the strongest transaction volume during the warmer months, and the top official of a leading refinancing solutions provider advised would-be buyers and sellers to keep a cool head throughout the process to avoid any missteps.
 
“To make the most of this hot buying season -- play it smart, and play it safe,” Mortgages of Canada CEO and founder Samantha Brookes wrote in an analysis piece for HuffPost Business Canada.
 
Brookes warned that diving headlong into the bustling sector—which has been projected by CREA to grow by 1.1 per cent in terms of sales this year—is an approach rife with unnecessary risks.
 
“First and foremost, it is important to stay rational,” Brookes stated. “Yes, people will tell you that you have to buy quick when you are competing against several other buyers -- but you also have to buy smart.
 
Brookes recommended prospective market participants to balance their assumptions with the guidance of an industry professional.
 
“In order to do so, your best bet is to speak to a mortgage broker ahead of time and ask all the questions you can. You may have Googled anything and everything about the housing market, but a mortgage broker lives and breathes mortgages and can help you understand what information is important and what is just plain clouding your judgment,” she said.
 
In addition to solid advice, an expert could keep market participants up to speed on trends in the mortgage market and point consumers to the locale or property best suited to their needs.
 
“Get a handle on the local market without the pressure of feeling like you need to make an offer. You'll also learn more about the kinds of homes and neighbourhoods you like, or don't, and which features matter to you,” Brookes explained.
 
The analysis also warned sellers of the possibility of delinquent clients.
 
“It's also important to think ahead in order to take into account the implications of not taking the appropriate steps when navigating a hot market. Indeed, beyond not putting enough down, the other common mistake homebuyers make is not saving enough for their down payment in the first place,” Brookes wrote.

Source: http://www.canadianrealestatemagazine.ca/news/rationality-is-the-best-tool-during-purchase-season--expert-205540.aspx

Student turned investor bullish on hometown investment options

He learned about the opportunities provided by real estate investment while in school, and his properties in that market may soon help him become a full-timer.

“In London you can get 4- and 5-bedroom properties for around $175-300,000,” London-based investor Kevin Miller told Canadian Real Estate Wealth. “So we specialize in that market. It’s still obtainable to get your 300- and 400-dollar-a-month cash flows, even upwards to 800-dollar-a-month cash flow, in a single-family home.”
 
Miller, who is 24, started investing almost straight out of school.
 
“I got a job in an office right out of school but I didn’t really like that. When I lived at Fanshawe, I was charged $400 for my room per month,” Miller said. “I did the math; there were six rooms in that building, so the landlord was making $2,400 a month. So my very first year at school I thought, ‘This is definitely what I want to do.’”
 
Currently, Miller owns four separate investment properties but, perhaps surprisingly, he has been focusing mostly on single-family homes in London.
 
“To manage single-family homes, it seems a little bit easier to do it by myself; when I do expand, diversify, get a few more people working on my team, then I definitely think I’ll be able to jump into student rental,” he said. As of now, I do have one up at Fanshawe College area that’s a student rental, but it’s right on the verge. So it could be a single-family rental or it could be a 4-bedroom, and we’re getting $1,200 a month there.”
 
“So I got into that one at a $125,000,” Miller continued. “I’ve put about $15,000 into it, bringing me to about $140,000, and now I’m renting it out for $1,400 a month, which is a great return on investment considering that it was the first home that I bought when I was 20, so I only had to put 5 per cent down.”

Source: http://www.canadianrealestatemagazine.ca/news/student-turned-investor-bullish-on-hometown-investment-options-205413.aspx

Airbnb objections intensify in Vancouver—councillor

A Vancouver city councillor noted that calls for regulation and investigation of Airbnb have intensified among locals, many of which have voiced concerns that the rental-lodge network is using a disproportionate amount of the city’s low cost housing.
 
“The number of complaints is starting to rise,” Councillor Geoff Meggs told The Globe and Mail.
 
Recent studies revealed that Vancouver saw the number of listings shoot up to 4,728 at the end of 2015, from just 2,900 the year before. Nearly 70 per cent of these rentals are tagged as “whole unit” or “whole house”, a development which has led housing advocates and other local officials to petition for a deeper look into Airbnb’s system.
 
“We want as quick a timeline as possible,” added Meggs, who is championing a request this week for the city council to initiate further studies on the home rental giant.
 
“People are making the connection now between diminishing housing and the Airbnb listings, but one thing that hasn’t changed is the city’s policy and enforcement,” according to a local advocate who declined to be named.
 
Certain Vancouverites have taken their stances a step further, with an apartment near City Hall on West 10th Avenue even going so far as to add “No Airbnb” signage due to protests raised by the tenants.
 
But while many locals have welcomed Airbnb’s newfound position in the spotlight, some doubt the possibility of significant progress.
 
“I’m skeptical that Airbnb is going to be willing to co-operate. I’m wondering how are they going to collect this data,” Simon Fraser University graduate student Karen Sawatzky said. Her research involves the rental network’s impact on the local market.

Source: http://www.canadianrealestatemagazine.ca/news/airbnb-objections-intensify-in-vancouvercouncillor-205269.aspx

Mortgage brokers the best guides in current fiscal climate

In a purchasing environment characterized by a recovering economy, intense consumer competition, and ever-increasing prices in the best-performing markets, mortgage specialists remain to be the best guides in the current fiscal climate, according to an industry analyst.
 
The temptation to buy right away and snap up the remaining almost-affordable properties in Toronto and Vancouver might be strong—especially for young professionals and other members of the millennial market who are increasingly feeling the pinch of lower purchasing power stemming from static wages and inexorably growing costs.
 
“On top of that, lenders are offering very low interest rates right now, so it’s hard to resist the lure of getting in while the market is up and rates are low,” analyst Melissa Dunne wrote in her Yahoo! Canada Finance breakdown piece.
 
Dunne pointed at offerings such as the Meridian Credit Union’s 1.69 per cent fixed mortgage rate (for one year) as understandably attractive for the younger set. However, a closer analysis of the fine print reveals that a home buyer going for this package would be locked into a fixed rate of 2.59 per cent over a period of five years after the first 12 months are up.
 
“So, homebuyers need to ask themselves: If my mortgage went up a few hundred dollars per month, can I pay that increased amount and for how long?” the analyst warned.
 
This is where the unique knowledge of a mortgage specialist would come in, Dunne said. Such a professional can give young buyers a more accurate and complete picture of their purchasing and payment prospects.
 
Meridian Credit Union agreed with the assessment.
 
“The ideal mortgage really depends on your risk appetite,” vice president of sales and service Wade Stayer said, adding that an informed choice on the prospective buyer’s part would benefit both the consumer and the loan originator in the long run.


Source: http://www.canadianrealestatemagazine.ca/news/mortgage-brokers-the-best-guides-in-current-fiscal-climate-205068.aspx

What is a syndicated mortgage?

For those looking to get into the real estate game without becoming a landlord, one alternative to the traditional bricks and mortar is mortgage investing. To help make sense of the mortgage investing landscape, CREW took a look at some of most popular options available, starting with syndicated mortgages.
A syndicated mortgage is where two or more investors invest in one specific mortgage. Typically they involve investors becoming the lender to a developer to build a project, such as a condo, low-rise, single family or commercial development, although a single residential mortgage can also be syndicated.
 
There are several things that differentiate syndicated mortgages from Mortgage Investment Corporations (MICs), including the fact that investors can choose which projects they wish to invest in. Syndicated mortgages also allow investors the additional security of having their name registered on title as a charge holder against the property, which gives them the opportunity to recoup their capital if the project fails.
 
Syndicated mortgages lending to developers has grown considerably since the 2008 recession because the big banks have required more equity from developers, causing them to look for third party lenders to make up the shortfall.
 
A syndicated mortgage provides developers with the capital and equity they need to take their project from conception to completion by working in conjunction with bank financing and developer equity. Typically, the developer uses the funds to pay for soft costs, such as consultants, zoning and architecture and marketing costs such as the sales centre.
 
The risk with these types of investments is knowing what projects to invest in and who you are lending your money to. Many syndicated mortgages are offered by firms that conduct all the due diligence on the developers and the projects and who offer investment opportunities through financial professionals, such as mortgage brokers, financial planners and other professionals, directly to consumers.

Syndicated mortgage investments are not securities, so they fall under the purview of the Financial Services Commission of Ontario, and therefore are open to most investors and not restricted by accredited investor rules. Investors are also able to use RRSP, TFSA, LIRA and other registered funds to invest in syndicated mortgages.
 
For Sean Greene, president of the Platinum Investment Real Estate Group the smaller investment amounts of syndicated mortgages make them attractive to the occasional investor.

“Even if you don’t have $300,000, maybe you have $25,000, you can still participate in that actual investment and I think that’s a benefit as opposed to a $250,000 mortgage and you only have $25,000 and if we couldn’t syndicate that.”

Soure: http://www.canadianrealestatemagazine.ca/strategy/what-is-a-syndicated-mortgage-191516.aspx

Real estate crowdfunding goes residential

Crowdfunding has arrived in the Toronto residential real estate market, but while these deals have the potential to be lucrative for investors, they’re not without risk.

Crowdfunding is a way to finance a venture by raising small sums of capital online from a large pool of people, allowing small-time investors to carve out a slice of big projects that would normally be beyond their reach.

It has taken root in the Canadian commercial real estate sector in recent years, and now it’s growing as an alternative way to fund residential projects.

“I think there’s a lot of interest with individual investors with residential real estate given what’s happening in Toronto and Vancouver markets, specifically,” said Hitesh Rathod, CEO of real estate crowdfunding platform NexusCrowd Inc.

NexusCrowd successfully closed two commercial real estate deals in the Greater Toronto Area – a shopping mall in Mississauga, believed to be the first project of its kind in Canada, and 110,000 square feet of industrial properties in Mississauga and Toronto.

Now, it has its eyes set on the residential sphere, partnering with Downing Street Financial in its first debt transaction to develop a 25-acre multiphase residential condominium project in Ajax, Ont.

“What we’re trying to do is provide access to different types of investments within the real estate space on the development side, which is very hard to access for individual investors,” Mr. Rathod said.

That was the draw for Hockey Night in Canada producer Sherali Najak who, who has invested both of NexusCrowd’s campaigns and is eyeing the Ajax condo project.

Although he’s been playing the market since he was a teenager and is considered an accredited investor, he would never have access to a real estate deal of this scale on his own.

“It allowed me to invest with the big boys,” Mr. Najak said. “Or at least alongside the big boys.”

Another crowdfunding platform, Open Avenue, is offering investment opportunities in multifamily residential real estate projects in Kitchener, Ont., and president Tim McKillican says it will offer residential real estate deals in the GTA soon.

One of the appeals of crowdfunding, he says, is that it allows you to “invest directly into your community.”

That’s something Mr. Najak appreciates.

“Real estate for me is something that you can touch and feel,” he said. “I could drive right by there. I could see it. I could see the buildings that we’re buying … it was a kind of a neat feeling to be a part of that.”

The lure of these ventures is clear, said John Andrew, a real estate expert at the Queen’s University School of Business. Developers can raise funds at a lower borrowing rate than they could through a bank loan, while investors have the potential to earn more bang for their buck than by investing in a traditional real estate investment trust.

“High returns, diversification of your portfolio, all of those benefits are there, and probably at a lower transaction cost,” he said.

But, he added, it can be risky for an inexperienced investor to enter the real estate market, which is complex and high stakes.

“Do those small investors really understand what they’re getting into? Are they being given the appropriate amount of information? Do they understand that information? Are they getting any sort of independent professional advice?”

This has been a major concern in Vancouver, where at least two crowdfunded real estate deals are under investigation by the B.C. Securities Commission for allegedly enticing buyers to pay inflated prices without getting complete information on the risks or how demanding the rezoning process is.

That’s where new rules around crowdfunding come in.

New regulations introduced by securities regulators in most provinces widens the pool of potential crowdfunding investors, while placing some restrictions on how much they can spend.

Previously, crowdfunding was limited to accredited investors – those with a net worth of $5-million or $1-million in investable assets – who make up only about four per cent of the Canadian population, according to the Ontario Securities Commission.

Under Ontario’s new regulations, which came into effect on January, retail investors are able to invest up to $10,000 annually. Individuals earning at least $75,000, or $125,000 a household, can invest up to $30,000, or $100,000 annually if they receive advice from a portfolio manager, investment dealer or exempt market dealer.

Open Avenue’s Mr. McKillican welcomes the new regulations, which he says “strike the right balance between protecting investors as well as allowing opportunities for everyone to get involved in private real estate investment.”

“It gives us an opportunity to reach all types of investors as opposed to just accredited investors or wealthy investors,” he said.

“That’s the beauty of crowdfunding. We can target all types of investors and people can invest an amount that they’re comfortable with, so they don’t have to have a large income or a large bankroll to get involved and invest a small amount.”

NexusCrowd, however, has no intention of opening up investment opportunities to the average Joe.

The company exclusively targets “ultrahigh net-worth individuals who can write really large cheques or institutional investors,” Mr. Rathod said. What’s more, it only partners with developers who fund 50 per cent of a given project.

“The rationale for that is to ensure that our partners have significant skin in the game and their interests are aligned with our investors,” he said.

Whatever the business model, it’s still not clear whether crowdfunding real estate will grow in Canada to the degree it has in the United States, wherehundreds of millions in capital have been raised for real estate development, and where some savvy entrepreneurs have taken to crowdfunding single-family homes and flipping them for a profit.

“It is a very, very new area,” Mr. Andrew said. “I don’t think anybody really knows at this point whether this is going to be a big thing or even really be a viable alternative to traditional lending.”

As to whether he’ll keep investing in these ventures, Mr. Najak said, “it really comes down to the numbers.”

“Once I took the emotion out of it in terms of the platform and all the rhetoric around it, it’s basically about the deal.”

 

Source:  http://www.theglobeandmail.com/life/home-and-garden/real-estate/real-estate-crowdfunding-goes-residential/article29366528/