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Edward Zhang of Volition Properties was the guest speaker of this week’s “Vine Rant”, the Vine Group’s weekly VLOG providing updates on everything and anything real estate.  

Whether you are buying, selling or investing in your first rental property, the Toronto real estate market is still growing – but with limited supply to meet the demand.  Edward sheds some light on turn-key investment properties, market trends, and (perhaps most controversially) why investors shouldn’t focus JUST on cash-flow.

The Vine guys are top-notch (how else do you get to finance almost $2 BILLION worth of mortgages?), and are a strategic partner of the Volition team offering our clients mortgage solutions and financing/wealth advice to our clients.  Check this and other videos at the Vine Group’s weekly Vine Rant.

** OUR POPULAR ANNUAL INTRODUCTION TO REAL ESTATE INVESTING **

The holidays are done and the credit cards have been filled just as high as stockings. January is looking tight and KEEPING YOUR JOB is on your mind, let alone early retirement. If this is you don’t beat yourself up – in fact almost *50%* of consumers go into debt to pay for Christmas. THIS WAS ME 18 years ago. Faced with huge student debt, holiday costs and getting laid off during the dotcom crash. Good thing I had started investing in real estate and had a reliable second source of income. Since then, our investments have grown considerably over the years and the Volition Team has now helped invest over $110M in real estate!

What we will be teaching is our systematic method for investing in real estate based on our years of experience! STOP THE CYCLE! Do something in 2019 to achieve financial freedom. Learn to make real estate work for you!

During our session we’ll be answer questions like:

Where do I invest? How to identify the best places to invest. Small towns, big cities?
Is now the right time to invest? How to know if this is the right time to buy an investment property? Should I wait?
How do I buy the right property? Are condos good investments? Should I buy multifamily?
Where do I start with $50k, with $100k, with $300k? With different amount of investment funds, there are different strategies to take.
How does real estate actually make money? If you think it’s about buy low, sell high, you only understand a small part of real estate investing!

Make a change this year. Keep that promise to yourself that you’re going to learn to take control of your finances and make work optional. If you have ever thought about investing in real estate this, you don’t want to miss this session!

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Volition Properties
www.volitionprop.com

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto! ming@volitionprop.com

WHAT IS SO SPECIAL ABOUT THIS PARTICULAR CONDO PROJECT??

  • Located right beside the MASSIVE Toronto Eastern Waterfront redevelopment (next 25 years, $30 BILLION of funding, 40,000+ new residents)
  • NEXT DOOR to the GooglSmart City development by Sidewalk Labs (50,000+ jobs, new Google HQ)!
  • Steps from the East Harbour development60-acre master planned commercial/office/retail development the size of Yorkdale Mall and new Transit Hub for the Downtown Relief Subway Line (50,000+ jobs)!
  • 15% Deposit Structure within 1 year
  • Volition’s take:
    • We cannot stress ENOUGH how much of a GAME-CHANGER the Eastern Waterfront is.  And this condo project is located literally in the heart of the entire redevelopment.
    • At ~$1100/sqft, still offers tremendous value vs. nearby condos ($1200-1500/sqft+)
    • Check out the INVESTOR KIT for further details.

Lake Suites
Platinum Price List, Floor Plan are Available!

Investing in Toronto’s leading waterfront community.
Toronto’s waterfront is the largest urban redevelopment project currently underway in North America, and its revitalization is expected to take approximately 25 years and $30 billion of private and public funding to complete. This transformation will be home to over 40,000 residents, one million sq. metres of employment space and 300 hectares of parks and public spaces.
Development Detail:
Project Name:  Lake Suites
Developer: Greenland
Location:  Lake Shore Blvd E, Toronto
Major Intersection:  Lake Shore Blvd E & Lower Sherbourne St
Architect:  Hariri Pontarini Architect
Storeys/ Units:  39 storey
Maintenance Fees: TBD
Taxes:  0.9% of total purchase price
Locker:$7,500
Parking:  $65,000 (Available for 2 Bedroom and Larger only)
Estimated Completion: July 2022

PLATINUM INCENTIVE- FIRST TWO WEEKS ONLY
*Extended Deposit Structure
*Free Assignment (Value $5,000)
*Right to Lease During Interim Occupancy
*Capped Development LeviesExtended Deposit Structure
$5,000 on Signing
Balance to 5% in 30 Days
5% in 180 Days
5% in 365 Days
5% in April 1, 2022
5% on Occupancy

Highlights

  • Walk score of 93/100
  • Transit score 98/100
  • Located in the Waterfront Communities – The Island
  • 5 mins walk to Dockside Dr at Queens Quay East streetcar and less than 15 minutes ride to downtown Toronto
  • 5 mins walk to Corus Entertainment, Sugar Beach, Loblaws
  • 10 mns walk to St Lawrence Market
  • 15 mins walk to The Distillery Historic District
  • 15 mins ride to Ryerson University, UofT, George Brown College
  • 15 mins ride to Financial District
  • 20 mins ride to Hospital for Sick Children, Mt Sinai Hospital, and Toronto General Hospital
  • Easy access to Gardiner Express Way and DVP
  • Less than 15 mins walk to Union Subway Station, the Go Transit, ACC and more.

Rental Rate:
1 Bedroom  from $2000 – $2400
1 + 1 Bedrooms from $2500 – $2800
2 Bedrooms from $2800 – $3600

How to Purchase a Unit:

  • Platinum price list and floor plans are available!
  • Unit selection will be on a first come first serve basis.

Click HERE for price list
Click HERE for floor plans
Click HERE for brochure
Click HERE for investor’s kit
Click HERE for Worksheet

If you have any questions, feel free to email, text, or call me at 647-895-8945.
_______________________________

Volition Properties Inc.
(647) 895-8945
info@volitionprop.com
www.volitionprop.com
**REIN Buyers Group’s Preferred Toronto Investor Realtor Team
**Certified Real Estate Investment Advisors (REIA)
**Silver Award Winners from the Canadian Real Estate Investment Network (REIN)
**Featured in the February 2015 edition of the Canadian Real Estate Investment (REIN) Magazine.

During last month’s Street Smart Tour, we checked out 3 awesome cashflowing investment properties.  All of them were in the $7800-8200/month rent range, which is amazing… but they were also in the $1.75-1.85M range 🙁

These are the types of properties that we aspire to as sophisticated real estate investors.  But unfortunately, the reality is that only the 1%ers can actually ever afford to purchase them.  Right? Right?? WRONG!!

 

You will be able to purchase them too!!  Eventually. Maybe not today, maybe not tomorrow, but eventually.  How do we know this? Because we understand the mechanisms through which one builds wealth in real estate, and because we know this, we understand the “Stepping Stone Approach” to eventually reach our “Gold Standard” property.  And this is what we want YOU to also understand.

 

The focus of this session is to help you understand the journey to eventually reach MASSIVE CASHFLOW… not the $100-200/month that you might get from your properties today, but the $5000-10000/month type of cashflow that will truly impact your life, perhaps allow you to retire early, and help you reach your Belize (i.e. Life Goals).

 

The “Stepping Stone Approach” is a very fundamental concept to understand in your journey to eventually reach MASSIVE CASHFLOW.  Essentially, it is the concept of starting with smaller assets, building equity over time, and then leveraging that equity to grow your portfolio.  Many others also teach this concept (or a similar concept); however, the MISSING piece that very few explain is the follow through to the end game. As a result, investors know how to grow their portfolios, but they don’t know what to do after that.  We will teach some core concepts in order to help you understand how to TRANSFORM that hard-earned equity into MASSIVE CASHFLOW.

 

This approach is a preferred alternative to simply buying a property and then paying it off over the course of 30 years!  

 

(SPOILER ALERT: The outcome is that we will own MORE PROPERTIES FULLY PAID OFF in LESS TIME!!)

 

We will track Tommy & Gina, starting off in the school of hard knocks (he works on the docks, she works the diner all day), as they progress in their real estate journey from owning a condo, to more properties, and eventually reaching a massive passive income stream through their real estate portfolio.  

 

There are times when they feel down on their luck, and it’s tough.  But what they don’t realize is that they’re already halfway there! They also realize that it doesn’t make a difference whether they “make it” or not, because when they reflect upon where they are, they are actually much farther ahead than they initially realize.  Through the ups and the downs, they vow to persevere, because they don’t want to be just another face in the crowd. They know they aren’t going to live forever, so they have to start early so that they have time on their side… and so they can retire early and live while they are still alive.

 

Tommy and Gina’s story is really the story of all of us.  Like them, we gotta make our own breaks and get started, because if we don’t start today to leverage the power of real estate, tomorrow’s getting harder, make no mistake.

 

We at Volition want you to take our education, personalize it and apply it to your own situation, and like Frankie “Do it your way”.  Never back down, because ultimately you are making progress NOT because you are lucky (because really, even luck ain’t that lucky), but because you stood tall and stood your ground.  But more importantly, you’ll know that it’s about taking action, even in the face of uncertainty, and doing it now or never. Then nothing… not the market, not interest rates, not Trump… will detract you from you achieving your dreams.  Jon Bon Jovi knows this. Timmy & Gina know this. We know this. Now you too will know this.

 

Anyway, back to the current decade again – bring your notebooks and calculators… this is going to be a working session and less about airy-fairy theory and more about actual number crunching of various scenarios using pre-construction condo as the starting point, to see how to eventually get to a healthy passive income stream… and to also see how long it will realistically take to do so.

Nov 15, 6:30pm-10:00pm

RSVP NOW!!!

Entry Fee: The workshop is $20 at the door or $15 when you pay online!

Schedule:
6:30pm-7:00pm: Arrival, meet and greet and networking
7:00pm-9:00pm: Presentations begin at 7pm SHARP
9:00pm-10:00pm: Networking

—————————–

Volition Properties

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto!

Investing in Toronto Preconstruction Condos 101.

What should I invest in? Houses vs. Resale Condos vs. Preconstruction Condos.

Preconstruction condos have their place in real estate investing.  If you’ve worked with the Volition team, or if you’ve attended our meetups, you’ll know that we preach that freehold (i.e. land) is generally the best investment.  But land comes as a price… both in terms of monetary perspective and from a time/energy perspective.

Condos are easy.  You buy a condo, and if it’s in a half-decent location, it’s easy to rent it out, and it’s easy to manage it.  The building itself and the amenities is largely taken care of by the condo property management.  Your unit is generally fairly new and thus not likely to run into too many issues.  And if you’ve chosen your location carefully, you should be able to attract what we consider to the our A+ tenant profile (millennial, a couple of years out of school, making $60-80k, working for a large firm in downtown Toronto, etc.).  And again, if you’ve chosen a good location, then the economic fundamentals of the area will support economic growth, job growth, population growth, etc.  Pretty straightforward.

Houses are a bit trickier.  Funny enough, the reason you want to buy a house is not actually because of the house… It’s because of the land.  It’s the land is that is the appreciating asset.  The building is actually a depreciating asset, because it gets older over time.  But the hard part is that land is generally not an income generating asset (with the exception of a few use cases, like mobile home parks, etc.).  So you need a building on top of the land in order to generate some income.  And then you need to lease out that building in order to cover your expenses and hopefully generate some positive cashflow.  So now, not only are you managing tenants, but you now have a building that you are having to take care of and worry about.  Generally, freehold/land/houses have been a better investment in Toronto over the past 10-20 years (and even longer), averaging a 10% compound growth over the long term… this is why the nice Italian grandma who lives next door who bought her house for $20,000 40 years ago now owns a property that is worth $1.2M… (Recall the “Rule of 70”: at 10% growth, it will take 7 years for prices to double.  At 7% growth, it takes 10 years to double).  So here we go, $20k -> $40k, $40k -> $80k, $80k -> $160k, $160k -> $320k, $320k -> $640k, $640k -> $1.28M.  That is 6 doubling periods, which is equivalent to 42 years at 10% growth.  Therefore, I’ve just been able to prove that Toronto houses grew at 10%. QED.

Condos, on the other hand, have grown at about 7% compounded over the past 10 years.  That’s not bad either.  A real life example is the preconstruction condo I bought in 2008.  I bought it for $295k and a recent comparable sold for $550k in 2018.  That’s roughly a doubling period of 10 years, which generally equals a 7% growth.  QED.  Also not bad, considering at a 20% downpayment, a 7% growth actually equates to a 35% return annualized.

More specifically, I bought it in 2008, and it wasn’t built and I didn’t take possession until 2012.  It normally takes 4-5 years for a preconstruction to be built.  When I took possession, it was worth about $350k.  So at 7% growth applied between 2008 and 2012, that figure ends up being $387k.  The difference between the figures is accounted for due to the fact that condos were not very hot during that phase, so it was only closer to 5% growth.  Condos in the last couple years (2017-2018) really took off for a variety of reasons (I’ll leave that for a future article), so the growth in condos in 2017 and 2018 has been closer to 10%, which picks up the slack.

That was the background info.  Ok, now to preconstruction.  Why is preconstruction a good idea?

I’ll sum it up quickly.

 

Why Preconstruction Condos?

  1. Resale is cashflow negative.  Condos right now are generally cashflow negative at 20% down (there are a few exceptions, but this is the general rule).  Cashflow negative is bad for many reasons.  It means that you are continuing to fund your investment out of your own pocket.  It also makes it harder to get financing for your next property because of your Debt Servicing.  Real estate is supposed to work hard for you, not the other way around!  It literally means that you have to work harder at your job just to keep your investments afloat!
  2. Potential for positive cashflow.  Rising rents allow for preconstruction to be cashflow positive after the building is constructed.  Rents rose 10.7% in Toronto last year according to Toronto Star or 15.7% according to Toronto Storeys, so if you grow current rents at even just 3-4% for 5 years, you’ll be into cashflow positive territory by the time you take possession.
  3. No tenants. As per a previous article we wrote entitled “Why Invest in Toronto“, tenants are the BIGGEST RISK TO YOUR BUSINESS!  It’s not “the market”, or interest rates, or Trump, or any one of the thousand things that regular average joe investors think… quite simply, it’s tenants.  Preconstruction allows you the luxury of not having to deal with tenants for 4-5 years while the building is being built.  AWESOME.
  4. Delayed Deposit Structure.  Most preconstruction condos have a delayed deposit structure, with 5% initially, then 5% in 90 days, 5% in 270 days, 5% in 720 days, or some variant.  This means that you don’t need all the capital upfront.  In fact, some developers (i.e. one developer in particular that we are working with and are Platinum VIP Brokers for) are offering an INSANE deposit structure: 5% initially, then $1000 a month until you make up another 5%.  For example, for a $600k 2bdrm, this would be $30k initially, then $1000 a month for 30 months.
  5. Mortgage.  As investors, the biggest roadblock we all face, at one time or another, is financing.  Some will hit their financing wall earlier, some later, but everyone will hit it eventually.  Preconstruction offers a way to continue to invest, and not have to continue to qualify for mortgages.  You don’t need a mortgage until the condo registers (i.e. 4-5 years down the road), which is amazing.  This can be great if you have too many mortgages already.  This also can be great if you cannot qualify for a mortgage right now, but anticipate that you will be able to in the future (new to Canada, bruised credit because of divorce, new job, don’t make enough salary now but will in the future, etc, etc, etc.  There are a dozen different use cases that follow under this category).  Also, precon doesn’t hit your credit bureau, so you could potentially buy preconstruction, and then CONTINUE to invest in regular buy-and-hold investment properties that need mortgages.
  6. VIP pricing/incentives.  As Platinum VIP Brokers, we have early ground-floor access to projects.  This is important, because it can often mean built in equity as soon as the NEXT phase is released.  We recently had one client purchase a preconstruction 800sqft condo at $1000/sqft, and within 3 months, the next phase pricing was released at $1200/sqft.  He made a paper gain of around $160k in 3 months, without hardly lifting a finger (well, he did have to sign his cheques, I suppose).  This is obviously not guaranteed, nor a typical case, but it can happen.  A more typical scenario is the price-per-sqft goes up maybe $25-50 for the next phase… but either way, it’s built in equity.  And then there’s the regular incentive crap that most people buy into… upgraded countertops or something like that.
  7. Today’s pricing. This ties into #1 and #2 above.  You are buying at today’s prices and will be getting tomorrow’s rents.  The problem with #1 above is that you are buying at today’s prices and getting today’s rents.  If you were able to get today’s rents and you bought at yesterday’s prices (i.e. you bought years ago), then you could also be in cashflow positive territory.  And in terms of valuation, you’re buying at today’s prices for a future built condo unit (which is traditionally worth more after it’s built).  Why is it worth more after it’s built?  I could write an entire article on why, but to keep it short and sweet, it’s because of expensive developer financing (the “mezzanine” financing in the early stages of a condo project is very expensive, and only after pre-selling 60-70% of a building can they switch over to a triple A lender at triple A lender rates).  Also, it’s due to uncertainty… you are only buying a piece of paper, a contract.  At the presales stage, you aren’t actually buying a unit.  So you don’t know if it’s actually going to be built, or if the developer is going to go bankrupt, etc.  Also, you don’t have a physical unit to inspect prior to purchase.  You are HOPING that it will be built like you think it will be, and as per the floorplans and feature sheets.

Because of some of these aspects, some investors tend to think that preconstruction condos are just for speculators, and that they don’t fall into the tried-and-true buy-and-hold investing model.

I disagree.  At the end of the day, real estate investing is all about identifying risk, figuring out your strategy, and mitigating risk.  There is definitely an element of uncertainty, but that uncertainty can be mitigated thru careful research and location selection.

For example, one of the areas that the Volition team is helping our clients with is in the Eastern Waterfront area.  Why?  Two words: Google Smartcity (or three words if you think that Smart City are two words).  Technically, it is Sidewalk Labs (Google’s sister company), but for all intents and purposes, we can think of them as Google.  They won a proposal from the City of Toronto to develop the eastern waterfront called Quayside, which is an area just east of Parliament and south of Lakeshore.  It’s potentially a gamechanger, with 50,000 new jobs, and the new Google Canadian HQ will be going in there as well.  You can read a descriptive Globe & Mail article about Google Smartcity here.  So we naturally selected a preconstruction development right beside it.  Boom.

And even in the event that everything falls thru, the City of Toronto has mandated that it will be developing that area.  So even if it’s not Google who’s going to be developing it, someone will be.  And if it’s not that… George Brown is near there, Corus is nearby, it’s close to downtown, it’s near other developments and condo buildings that are already more expensive on a $/sqft basis meaning it still has upside potential.  And the area is definitely going to continue to gentrify.  And it’s still proximity to Distillery District, and to East Harbour (50,000 new jobs, new transit hub).  These are types of defensive measures that we take to mitigate “market” risk (again, refer back to our Whitepaper for the 4 Types of Risk in Real Estate Investing).

 

Ok, you’ve convinced me.  What do I do now?

So now we know why Preconstruction fits in as a investment strategy into your overall business strategy.  But how do you actually execute?

Buying Preconstruction is not actually as easy as it sounds.  It’s actually very challenging… if you aren’t working with the right agent.  I know it sounds cliché… and maybe it is.  But it’s also very true.  When trying to get early access and ground level pricing, developers in Toronto only give a select number of Platinum VIP agents access to units.  This is called “allocation”.  This is often because of that agent’s reputation and relationship with the developer.  So if you wanted to walk in off the street and get access to VIP pricing, good luck.  Similarly, if you wanted to work with your brother or aunt or sister-in-law’s chiropractor who is an agent on the side and wanted to get access to the best possible deals and best possible pricing, also good luck.  I’m not trying to being pretentious or condescending.  This is just the reality.  Those agents are only going to get access only after the presales early phases have already sold out, and now the developer can switch over to Triple A financing and start their construction, and then they can just sit and wait for the other unit to sell… now at a much higher premium.

So what do you do?  Align yourself with an agent who has early access, and one who can get allocation, and one who can be your advocate, and one who can get you assignment rights, and one who can cap your development fees, and one who can help you select effective floorplans that minimize wasted space, and one who can help you identify your tenant profiles & projected rents & projected cashflow & projected returns.

This article has focused on the why.  The next article will focus on the how, including touching on HST, HST rebates (and the forms to use to get the rebate back), assignments, occupancy, owner occupied vs. rental, pros/cons,and exit strategies (i.e. what if can’t qualify for a mortgage after it’s built?)… and most importantly, how Preconstruction Condos help new investors get started as part of a broader investment strategy using the “Stepping Stone Approach”, and how to build up to eventually owning land in Downtown Toronto!

 

Meetup: Pre-construction Condos – Do they make sense as an investment?

We actually delivered a meetup presentation specifically for Preconstruction Condos in May 2018.  Details of it are available here.  Contact us for the slides/video/audio.
https://www.meetup.com/Volition/events/rcztmpyxhbwb/ 

 

About Us

The Volition Investment Properties team are experts in Toronto real estate.  We’ve helped investors invest in over $110M+ in real estate, build over $47M+ in wealth, and generate $4.5M+ in cashflow.  We’ve also educated over 650+ investors at our Monthly Real Estate Investment Mastermind meetup (www.meetup.com/Volition).  Contact us today for a free 60 minute complimentary consultation to see how we can help you reach your real estate goals, so that you too can “Live Life By Design, Not By Default”.

 

 

September 20, 2018 – Volition Real Estate Investment Mastermind 

LANEWAY SUITES! Learn what it takes to build and invest in laneway homes!

Question: What’s our number one job as real estate investors??

Answer: **To put our money to its highest and best use!!**

 

With rising costs of property in Toronto, however, this is getting more and more difficult to do. Is the answer to look outside of Toronto for cheaper properties? No! As sophisticated investors, we know that along with lower prices comes increased risk. So what’s the answer? DENSIFICATION!!

Laneway housing in Toronto has been a LONG TIME COMING for us investors, and will allow us to maximize the returns on our properties. Laneway suites can offer some of the highest ROI in Toronto for existing landlords who already own freehold investment properties with a laneway (i.e. single family, duplex, triplex, fourplex, etc), where a unit which cost $[masked]k to build can be rented out for $2000 a month. That’s double the return of a condo.

Eldon Theodore, Partner at planning firm MHBC, will be joining us to discuss the opportunities and challenges around the activation and optimization of laneways through infill housing. We’ll discuss the benefits and shortfalls of the recent Laneway Suite Guidelines approved by City Council. We’ll run through real-life examples of applications to understand how to navigate this process!

Eldon Theodore is a Partner at MHBC with a dual specialization in planning and urban design where he has been practicing for 16 years. Eldon holds an Honours Bachelor Degree in Urban and Regional Planning from the University of Waterloo and a Masters in Urban Design Studies from the University of Toronto. Eldon is also a LEED Accredited Professional and has been trained under the National Charrette Institute System for conducting community charrettes.

Join us on Thursday, September 20th to learn about TORONTO LANEWAY HOUSING!!

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Aug 16th, 6:30pm-10:00pm
RSVP NOW!!!

Entry Fee: The workshop is $20 at the door or $15 when you pay online!

Schedule:
6:30pm-7:00pm: Arrival, meet and greet and networking
7:00pm-9:00pm: Presentations begin at 7pm SHARP
9:00pm-10:00pm: Networking

—————————–

Volition Properties

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Contact us today for any questions about investing in real estate in Toronto!

 

Capital Gains

Simply put, capital gains occur when a property is sold for more than what it was purchased for.  A property that was purchased for $1M and sold for $1.2M will have $200k capital gains.  Only 50% of the capital gains is subject to tax, meaning only $100k is taxable.  This amount will be added to the owner’s taxable income for that year.  For all intents and purposes, this generally means that almost the entire $100k will be taxed at the marginal tax rate, which we can generally estimate at 50%.

So if you were to sell a property and make $200k in capital gains, you should estimate to set aside $50k (25%) to pay in taxes at the beginning of the following calendar year (e.g. if sold in 2018, 2018 taxes are filed in April 2019, taxes to be paid around April 2019).

 

Reducing Capital Gains

Going deeper… capital gains are actually calculated using the Disposition Proceeds MINUS Adjusted Cost Base MINUS Outlays & Expenses.

  • Disposition Proceeds are the funds you received for your property from the sale.
  • Adjusted Cost Base would be the purchase price of the property.  Renovations costs can also be included, as well as any expenses to acquire it, such as legal fees, Land Transfer Tax, etc.
  • Outlays and Expenses:  Costs associated with the sale of the property.  Lawyer fees, Realtor fees, etc.

So it’s important to keep good records / bookkeeping because you are actually able to reduce your Capital Gains by deducting the relevant expenses.

 

Recapture

Claiming depreciation on the building is a GREAT thing from an operational perspective (i.e. straight line depreciation of 4% of the cost of the building over the course of 25 years… and you/your accountant can designate the building value vs. land value to whatever is appropriate… I recommend making the building value as high as possible).  It effectively brings down your operating income down to zero, in 99% of the cases, meaning that you SHOULD be paying income taxes due to rental income (this is a separate topic altogether).  BUT, upon sale, if you sell the property for MORE than what you paid for it, then the CRA will say “hey, you can’t depreciate it after all, since it went UP in value!”.  This means that you have to pay the tax deduction that you took on the depreciation of the building back to the CRA.  But that’s ok, because you effectively had a tax free loan from the CRA during the entire time.  And it helps with cashflow from an operations perspective.

 

Principle Residence

Your PR is NOT subject to capital gains.  NOTE: Starting in 2016/2017, the CRA requires that the sale of a principle residence to be reported on your tax return.

 

% of Use

If you lived in one unit of a multi, an accountant would probably recommend to designate your unit as a % of the entire property as Principle Residence.  For example, 1 unit out of 3 would be 33.3% principle residence, 66.6% rental property.  This is not an exact science… you may be able to argue your principle residence portion as a actual % sqft of the whole, or # of floors… so let’s say that you lived on 2nd and 3rd, then you may be able to say that you are designating 50% as primary residence.  This is going to be up to you and your accountant.

 

Change of Use

If a property was previously your primary residence, and then you moved out and then turned it into a rental property, then it’s deemed a Change of Use.  It would be capital gains exempt under Principle Residence for the duration that you lived there, and then it would be subject to capital gains for the duration that it is a rental property.

At that point, you are supposed to technically get a appraiser to appraiser its market value at that point in time.  However, this is usually overkill and a waste of money, and a “Letter of Opinion” from a reputable Realtor (i.e. us!) would usually suffice.  We would pull comps and be able to defend the market value.  You would want the market value to be as HIGH as possible, so that more of the capital gains would be Principle Residence exempt.

 

Dirty Little Secret Rule

Oh, and there’s a very obscure little known rule whereby if you change your Primary Residence into a rental property (“Property #1), and you move somewhere else (“Property #2”)… let’s say that you are RENTING the Property #2 (i.e. you become a tenant)… or if Property #2 is not as valuable of a property with limited upside potential… you can continue to designate Property #1 as your primary residence for up to another 4 years, even though it is actually a rental property.

http://realestatetaxtips.ca/the-little-known-4-year-extension-on-principal-residence-exemption-after-you-move-out/

 

About Us

The Volition Investment Properties team are experts in Toronto real estate.  We’ve helped investors invest in over $110M+ in real estate, build over $47M+ in wealth, and generate $4.5M+ in cashflow.  We’ve also educated over 650+ investors at our Monthly Real Estate Investment Mastermind meetup (www.meetup.com/Volition).  Contact us today for a free 60 minute complimentary consultation to see how we can help you reach your real estate goals, so that you too can “Live Life By Design, Not By Default”.

Matthew Lee as Guest Speaker on Vine Rant VLOG

Matthew Lee of Volition Investment Properties was featured as the first ever guest speaker on the “Vine Rant”, the Vine Group’s weekly VLOG providing updates on everything and anything real estate.  While Vine Group provides up-to-date perspectives from a financing perspective, Matthew provides expert insights into the Toronto Real Estate Market from a Real Estate Investment Advisor and Investor Realtor perspective. 

Check this and other videos at the Vine Group’s weekly Vine Rant.

 

 

April 19, 2018 – Volition Real Estate Investment Mastermind
Reno For Renting, Flipping, And More!! Part 2 Of Our Popular Series!!

Renovating for Renting, Flipping, and more! How to maximize your money and reduce your headaches.  Join us on April 19th, to learn about renovating for your investment property from Alcina Sung, the Head of Volition Design and Construction.

It’s going to be packed full of great information, so if you’re ever planning to do a renovation on any of your properties, this is not one that you will want to miss!

 

Renovations are a critical element to understand as an investor, especially when looking at properties in Toronto. It is an essential skill to have in order to execute on Buy & Holds (in order to increase rents and increase cashflow and force appreciation), Buy-Reno-Rent-Refi (BRRR), as well as the ubiquitous Fix & Flip.

Part 1 (Nov 2017) of this presentation was very well received. Alcina focussed on the “Design” aspects of a renovation…. how to design your place to look like the pretty pictures you see on HGTV, Home & Garden, and Houzzz… but more importantly, how to do it in a very cost-conscientious way (i.e. with an INVESTOR mindset!).

Part 2 gets into the details of the construction phase. During this session, you’ll earn:

– What makes a great contractor? How to spot a bad contractor?
– What are best practices when working with a contractor?
– What is considered a Cosmetic renovation vs Permitted renovation?
– How much do I need for contingencies (time and money)?
– What are some “hidden cost” and unknowns to look out for?
– What are typical phases of the construction process?
– Roughly how long should renovations take?
– Roughly how much should renovations cost?
– What should a renovation contract look like?
– How should a reno differ if it’s for an investment property?
– Time is money!! So how to decrease downtime as you near the end of the renovation and how to line up subsequent activities (staging, photography, when to begin showings for potential tenants, etc.)?
How much force appreciation lift should I be expecting?

Alcina Sung brings to Rentier Toronto over 13 years of experience in Interior Designer and Construction Project Management. With her partner, Grace Wong, they have a combined 30 years of experience managing millions of dollars in projects. Residential projects they have worked on range from investment properties (flips, multiplexes, and new construction) to 10,000+ square feet luxury custom homes. Their services also include professional home staging for homeowners, real estate agents and builders.

Key commercial projects that they have worked on include: Winner’s Head Office, Heart and Stroke Foundation Head Office, Fossil Canada Head Office, Living Realty Head Office, Living Realty Flagship Yonge and Bloor Office, and various retail (Oakville Eyecare, Glass Monocle Eyecare, LCBO) and restaurants (Sugar Loaf, Cano).

Alcina joined the Volition Properties team in early 2016 and leads the Design and Construction division. Alcina and her husband, Ming Lim, are also active real estate investors with properties in Waterloo and throughout the GTA.

Schedule (New Format):
6:30pm-7:00pm: Arrival, meet and greet, get to know each other (optional).
7:00pm-9:00pm: Presentations begin at 7pm SHARP.
9:00pm-10:00pm: Networking (optional).

Volition Properties

Volition Properties is an award-winning Toronto boutique real estate investment firm that provides advisory and turnkey real estate investment services. Its mandate is to help real estate investors sustainably invest to build wealth in the Toronto real estate market by investing in low-risk, freehold, cash-flowing income properties over longer-term real estate cycles.

[Volition (vō-ˈli-shən): The power to make your own choices or decisions; free will. Living life by design, not by default.]

Entry:
——————-
Investment to tonight’s workshop is $20 at the door.
Save yourself $5 by paying online ($15) when you RSVP.

Toronto skyline

Why Invest In Toronto?

Toronto skyline

Why Invest In Toronto?

We get this question all the time! With prices high and competition fierce, why do investors still pour money in to the Toronto market? It doesn’t take skill to buy a property – if you’ve got the money, you can make a purchase; but what separates your average person from a sophisticated investor is being able to mitigate your investment risks.

 

What are the major risk factors?

1) Tenant Risk – the risk of having bad tenants
2) Market Risk – the exposure your invest has to market changes
3) Property Risk – the risk of the property itself
4) Investor Risk – the risk stemming from the lack of knowledge of the investor.


How is risk different in Ontario vs. the rest of Canada?

Ontario cities have a different risk profile compared to typical Canadian cities. A typical Canadian city has a balanced risk profile, with each major risk element being equally important. Therefore, your risk mitigation strategies would also be equally weighted. Ontario has laws which are much more favourable to tenants, making tenant risk much higher. If you have bad tenants in Ontario, it can take months and cost thousands before an eviction. This can impact your investments long-term sustainability.

So how does investing in Toronto help mitigate my risks?

Return is a direct function of risk and real estate is no exception. While investing in Toronto might come at a premium, your investments are less prone to the four major risk factors.

Tenant RiskWith tenants as your biggest risk to your investment portfolio, it’s key to invest in areas which attract the best tenants – not just “okay” tenants. Investing in the right areas in Toronto means you attract the best demographic – young, professional Millennials working in the downtown core. They are typically university educated; have stable well-paying jobs in Finance, Insurance, Consulting, Healthcare, and Tech; and earn salaries between $60k–$80k. This demographic is also willing to pay top dollar for great apartments, allowing you as an investor to maximize rent potential. Finally, this demographic is transient, which means they’ll move out after a few years. This is vitally important: due to rent control laws in Ontario, you’re only able to easily increase rent on tenant turnover. In contrast, investing in a small town can mean a more challenging tenant profile which means a larger risk to your investment portfolio. If you invest in the right areas in Toronto, you reduce your tenant risk and as a result, your investment is more easily held for the long term – which is where real wealth is generated.

Market Risk – Population growth drives real estate prices and jobs drive population growth. Toronto is the economic and job creation centre of Canada. Not only is Toronto the headquarters for many businesses, it’s spread across a diverse number of markets; there are no ties to a single industry. Toronto’s population boom is expected to continue given recent legislation. The Canadian government announced that we will be accepting one million immigrants over the next three years and approximately 50% of all new immigrants (roughly 150,000) settle in Toronto. This, in combination with domestic in-migration due to job growth in the professional services sectors, will contribute to continued demand in the Toronto market. Downtown Toronto’s strength in economic diversity and its attraction as a place to live and work was shown through its resilience during the market downturn in 2017. Additionally, Toronto’s strength is reflected in its rental vacancy rate, which at the time of writing, sits at 0.7%.

Property Risk – Problems can and will occur with the actual property itself (e.g. leaky faucets, blown furnaces, old roof, etc.). A cashflow positive property will help build your reserve fund to ensure that you can handle any unexpected expenses and hold for the long term.  Volition will help you identify the right investment property in the right areas of Toronto that will allow you to cashflow positive. The other way to mitigate property risk is by building the right team of professionals. A home inspection will provide you with insights into what you can expect with the major systems of the home in the next 5 years of ownership, which you can then budget for.  Renovations are an effective way to reduce property risk, as a well-renovated updated property has less propensity for things to go wrong. All Volition clients have access to our rolodex of dependable plumbers, electricians, and handymen, which helps make your business run like a well-oiled machine.

Investor Risk – “Risk comes from not knowing what you are doing.” – Warren Buffett. Reduce this Investor Risk by getting educated and networking. Attend one of our Volition monthly seminars – they’re a great place to become educated and develop a strong network of other investors. Ultimately, a sophisticated investor can turn an underperforming property in a  strong performing property, because they know which strategy to employ at any given time. Likewise, a sophisticated investor knows how to deal with any situation that arises, or has the network to lean on in the event that something is beyond their expertise. Treat your investments like a business.

 

I’m ready! How do I invest in Toronto?

The best way to invest in Toronto is by building a strong team. Volition is an award–winning investment firm and the Real Estate Investment Network (REIN) exclusive Investor Realtors in Toronto. We provide four areas of services for our clients:
1) Advisory – Guiding investors through the entire investment process
2) Realty – Finding and purchasing investment properties
3) Renovations – Build and renovate properties to maximize returns
4) Property Management – Help our clients hold for the long term

We help our clients live their life by design, not by default!

 

Contact us today for a FREE 60 minute consultation! We’ll review your investment goals and develop a plan on how to reach them. Email us at info@volitionprop.com to setup your appointment!

 

 

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