Category: Blog (20)

What to Look For When House-Hunting for Your First Property

Just because it’s your first property doesn’t mean that you can’t think of it as an investment! 

So, you’ve just toured “the one” and can already picture yourself living there.  The upcoming offer date is scheduled in your calendar.  Given your budget and the market conditions, your Realtor agrees that you have a good shot at getting into the market with this property.

Not so fast.

We have a wild proposition: Just because it’s your first property doesn’t mean that you can’t think of it as an investment!  Read on for the 13 tips that inspired our latest HGTV article. They’ll help you think like an investor, and look beyond that pretty backsplash or the nice hardwood floors to the things that people miss when considering their first property.

Focus on Gentrification

Properties located in areas that are experiencing gentrification will grow faster than ones in stagnant neighbourhoods, resulting in a higher capital appreciation rate.  This means that even though this is your starter home, you will build equity faster, and you will have more flexibility when purchasing your step-up home, a future investment property, or if you choose to refinance this property to draw out equity.  It also makes it more desirable for tenants down the road, should you choose to keep this property when you (eventually?) move out.

Distance to Transit

An easy way to create a shortlist of gentrifying neighbourhoods is to follow transit.  Subways, LRTs, and dedicated streetcar lines are key elements to an up-and-coming neighbourhood, and finding properties within a 10 minute walk of a transit stop gives a 15-20% boost in property values over similar neighbourhoods without transit access.  Even better is if you can get into a neighbourhood where a transit stop is slated to be opened in the future… but don’t count your chickens until shovels actually hit the ground!

Work/Live/Play

The world is reverting back to becoming more local again… hyper-local, in some cases.  Communities in which residents can work, live, and play all in the same area are becoming increasingly desirable, especially for Millennials and young families.  Having local shops and restaurants that are close by creates a sense of community and belonging.  Things to look for are Walkscore, Transit Score and Bike Score.

Can the Home Grow With Your Changing Needs?

Most young homeowners get into the market with a starter home, but it’s important to note whether your new home can accommodate your needs should your family grow from a partner to possible future children.  Are there flexible spaces that can be used for a home office, guest room, or home gym? Is the neighborhood appropriate for families?  Are there other similarly-aged kids on the street?  Are the kids going to need separate bedrooms?  Being forward-thinking may change your criteria, even for your first home.  Needing to sell your first home to upgrade to a larger second home incurs significant Realtor costs (and hassle), so perhaps it makes sense to future-proof now if possible.

School Zones

Speaking of being forward-thinking, one of the biggest criteria for young parents to consider is school catchment districts.  Good school zones can actually boost property values, especially if parents don’t feel the need to send their children to private schools.  Fraser Institute scores are what parents usually refer to, but keep in mind that those rankings are only based off of a standardized test for reading, writing, and math, and not necessarily an accurate reflection of whether it is a “good” school.  Speaking to other parents about the level of involvement of the teachers, how active the PTA is, extra-curriculars & programming offered by the school, etc. and aligning that to your families’ values will give you an indication of whether that school is right for you and your children.

Do I Stay Within My Budget?  Or Should I Buy More Than What I Need?

A mortgage is the single biggest expense for most families every month.  While it’s often important to stay within your budget, maybe it’s prudent to “buy more than what you currently need” so that it can accommodate your growing family, or maybe because you can eventually turn it into a viable investment property down the road.  One way to do this is employ a “House-Hacking” strategy, in which you turn your biggest liability (your own primary residence) into something that generates income for you.  This could help justify buying something larger and more expensive than what you currently need right now because it may actually leave you in a much more enviable financial state in the future than if you bought something smaller & more “affordable”.

“House-Hacking” – Rent Out Rooms or the Basement

As previously mentioned, “House-Hacking” provides extra income which helps with the bills and the mortgage.  There are various ways to do this: you could buy a 2bdrm condo and rent out the other room, you could buy a house and have roommates, you can live in one unit in a house and rent out the other units.  This strategy could “open the door” of home ownership into a larger house, better neighbourhood, higher paying tenants, and as a result, more gentrification and more equity growth.

Don’t Work with Uncle Joe

Professional Realtors have the wisdom and experience to shortlist the best properties to meet your needs now & into the future, and ensure you’re making the right financial decision in choosing the right property.  This is a big decision, so working with an expert can make for a smooth and seamless transaction.  In addition, Volition has a team of Investor Realtors, who not only have regular Realtor experience, but also provide an expert investor perspective, which is invaluable given that your home is likely the biggest investment you’ll ever make, and can even be your path to a more secure financial future.

Should I Buy a Condo?

Condos apartments and condo townhouses are often the starting point for most young people entering the housing market, for good reason: they are cheaper than houses, maintenance and repairs are included in the condo fees, and they are often in super-desirable walkable locations.  You just need to ask yourself whether the tradeoffs are worth it vs buying a house.  (Expert tip: Find out what is included in your condo fees and specifically what you are responsible for and what the condo corp is responsible for!)

Should I Buy a House?

While some people love condos for their convenience and simplicity, others see them as a stepping stone to owning their own house.  Houses offer more autonomy and flexibility, and often houses appreciate at a faster rate than condos  (Expert tip: it’s the land that is valuable that grows in value, not necessarily the house sitting on top of the land).  You can also more easily “House-Hack” a house than a condo, and you can often do more extensive renovations to create “forced appreciation”, whereas you are more limited in a condo.  Again, you don’t get something for nothing, so for all of these benefits, there are additional headaches that are solved by condo ownership!

Good Basement Ceiling Height

Higher ceilings automatically help a room feel larger and more open, which is particularly important if you are planning to use your basement for additional living space.  Perhaps even more interesting is having the appropriate ceiling height so that you can create a separate legal basement unit!  Each province and municipality has their own by-laws as to the minimum requirements for basement unit ceiling heights: for example, in Toronto, generally you need 1950mm (~6’5”) for a duplex, and 2150mm (~7’) for a triplex, but there are a bunch of stipulations around this (NOTE: you always need to verify your specific situation with an architect or a trained professional).  Volition has helped many homeowners create basement suites; make sure you consult with a local expert before embarking on this journey.

Multi-Generational Living

Credit: Lanescape

Due to kids living at home longer (and boomeranging back even after they initially leave!), homeowners deciding to age-in-place, and moving in ones’ parents as they need additional care, multi-generational living is becoming very common.  Thinking ahead to the extra space that will be required to accommodate privacy and separation under one roof may actually change a) what you decide to buy now or b) how you decide to renovate your house.  Having the ability to build a Laneway or Garden Suite adds extremely valuable living space to your property.  All of these options can also be great mortgage helpers (if you choose to rent out the space) and allow you to build forced equity into your home.

Get a HELOC

No matter what the situation, it’s always advantageous to get a Home Equity Line Of Credit (HELOC) in addition to your mortgage.  When paired together, it is known as a Re-advanceable Mortgage.  What this means is that for every dollar paid into the principal portion of your mortgage, it automatically increases the credit limit of your HELOC.  Over time, as you pay $1,000, or $10,000, or $100,000 down on your mortgage, you will now have a $1,000, or $10,000, or $100,000 Line of Credit available to you at the lowest possible interest rates (since it is secured against your home).  This is advantageous if (rather when) you need to repair your leaky roof, replace your furnace in the middle of winter, or if your tenants don’t pay rent for a month.  This can also be key in employing advanced wealth strategies such as the Smith Maneuver to make your interest mortgage payments tax deductible, if you want to use the equity in your home to invest in a future property, etc.

Ready to take the next step? Book a complimentary Advisory Session with the Volition team to get started. 

 

Top Trends That Renters Are Looking for During Covid

Many office professionals will be spending more time at home than ever before.  

Covid has changed the real estate landscape, perhaps forever.  While we are trying to get back to normal (whatever normal is), certain trends have shifted.  “Work From Home” has become a part of our lifestyle, with big implications for homeowners and renters alike.  Even with a return to the office, many companies are reducing their office footprint, moving permanently to touch-down stations, and offering 2-3 day a week WFH arrangements, which means that many office professionals will be spending more time at home than ever before.  

Check out the 15 trends that inspired our recent HGTV article

Functional Working Space

Office, den, nook, whatever you want to call it… Renters are looking for somewhere to work at home other than their kitchen island or dining table.  This is especially important if there isn’t a separate bedroom in the apartment!

Bigger Spaces & More Bedrooms

There is a huge premium for larger spaces, larger bedrooms, and more bedrooms than ever before.  Being able to fit in a bigger queen bed and a desk is something that tenants keep asking for.  An additional bedroom allows couples to have separate “offices” when working from home (especially when on Zoom calls), or even if they need simply a little more of their own “personal” space.

Flex Space

To cure the boredom, renters have picked up many new interests and hobbies throughout the pandemic, and they are looking for flexible and adaptable spaces to continue to pursue their new-found interests, arts, crafts, and hobbies… and also act as their makeshift at-home gym!

Balconies & Outdoor Patios

Easy and quick access to outdoor space is at a premium during Covid.  Being stuck inside all day, renters value being able to step outside quickly and enjoy a coffee or read a book on an outdoor patio or balcony.

Dedicated Backyard

Renters still want that social connection, but in a safe environment.  A backyard space is a way for them to still have friends and family over for a BBQ or drinks.  One specific caveat is that they tend to want dedicated private outdoor space, not shared with other tenants! 

Live Greenery

Spending so much time indoors, renters are craving a fortifying breath of fresh air and sense of tranquility that live plants can bring.  While this is obviously more of a decor item than a feature of an apartment necessarily, outfitting your unit with planters and planter boxes indoors (or even outdoors on a balcony/patio) can give your unit that inexplicable sense of “home” over other units!  Bonus: Proximity to parks is also big on a renter’s list these days!

More Natural Light

More windows, larger windows, skylights – anything that counteracts that “boxed-in” feeling you get when spending 24hrs a day indoors!  Specifically, windows facing either South or West are more desirable, given that it is where sunlight generally comes from.

Well lit basement units

Modern pot lights and feature lighting provide well lit apartments.  This is especially true of basement units, which are typically darker and lack the natural light of above-grade units.  In the beginning of Covid when rents were on the decline, basement units were less desirable due to the smaller price differential compared to main/upper floor units, so providing nicer and better lit units was a way to attract tenants (although this has now since reverted back to normalcy and tenants are returning to rent basement units again).  

Separate entrances

There has been a big shift to wanting completely separate entrances.  Obviously, this is impossible when living in an apartment building or condo building.  But when living in a house with multiple units, renters are placing emphasis on not having to share entrances or amenities with anyone else.  This is one of the reasons that Laneway Suites have become incredibly desirable!

Separate HVAC

Renters LOVE when there is their own private Heating, Cooling, and Air Conditioning (HVAC) systems.  This means that you won’t be sharing any of the “same air” as other tenants in the building.  This is not cheap, though, and typically can only be put in when completing a large multi-unit renovation, such as the ones that Volition handles for clients.

Sound Separation

Sound separation was always highly sought after by  tenants, but even more so in the Work From Home era.  While your neighbour blaring his 80s Rock in the evening was always a potential concern, now you want to make sure that they aren’t disturbing you (or your Zoom call) in the middle of the workday.  In contrast to HVAC, soundproofing can be put in during a cosmetic renovation of a single unit within a multifamily property, since it only involves the redoing of drywall (and insertion of Roxul SAFE‘n’SOUND insulation and Resilient Channels to reduce vibration transmission behind the new ⅝” drywall).  Quality Vinyl Plank (QVP) flooring also adds to soundproofing.

Pet-friendly units

To combat the isolation, tenants are getting more pets for companionship during Covid.  Allowing pets could make your unit attract a wide audience of renters!  Quality Vinyl Plank flooring can make your unit more durable, since it resists scratching and resists moisture better than other types of flooring (and it looks great!). 

Bike Storage / Bike Parking / Bike Racks

As public transit is still a concern, there has been a massive uptick in the use of bikes, and therefore in the demand for bike storage.  Landlords are starting to cater to this demand by providing bike lockers, sheds, bike racks, or other bike parking solutions. 

Parking Spaces

Similarly, there has been a surge in demand for parking.  People have started purchasing vehicles (a reversal of the trend towards fewer Millennials owning cars!) since public transit has been less desirable during Covid.

Trend away from smaller units and “micro-suites”

Smaller units and Micro-Suites were popular amongst novice investors for the past decade or so, for their lower price point and easy rentability to first-time Millenial tenants venturing out on their own.  Volition has always deemed that types of units were never going to be a sustainable investment approach though (which is why Volition’s sophisticated investors never followed this trend), and this is now exacerbated with Covid.  Small micro-suites are now the least desirable units amongst prospective tenants and most difficult to rent out.

Looking for more education specific to Real Estate Investing in Toronto? Join our Investors Mastermind Meetup for monthly events: www.meetup.com/volition

Targeted Renovations to Improve Rent and Attract an A+ Tenant Profile

Upon a recent tenant turnover, one of Volition’s own wanted to take the opportunity to upgrade their unit to improve rents and attract an A+ tenant profile!
Before renovations:
  • Rent: $1,700
  • Tenant profile: B+
  • No laundry in the unit
  • Tiles in the bathroom and kitchen
  • General wear and tear

After renovations:
  • Rent: $1,825
  • Tenant profile: A+
  • Young professional couple; 1 working in tech, other graduating from UT Radiology Program; both have great credit and good income and savings.
  • Added ensuite laundry to kitchen
  • Upgraded the bathroom and kitchen flooring to modern vinyl flooring
  • Repainted the entire unit and fixed drywall blemishes

Check out the video walk-through of the unit after renovations!

Ready to take your investing to the next level? Book a complimentary Advisory Session to find out how Volition can help!

Danforth Project – Laneway Suite Part 2: Preliminary Design

Overview: Project Phases and Timelines

Welcome back to part 2 of the Danforth laneway suite blog series! As you may have heard from our Meetup with Lanescape, there are long lead times to build laneway suites and to conduct construction in general.

They have a great blog for anyone currently in or contemplating a construction project: The Pandemic & Your Project: The Facts

There are three major phases for laneway suites as outlined below: preliminary design, design & approvals, and construction management.

Project timelines are continually subject to change, but our expectations “at time of print” are 4-6 months from project initiation to building permit approval, then another 6-10 months for construction (subject to winter conditions and builder availability).

We will focus on phase 1 in today’s blog: Preliminary Design.

The preliminary design phase offers a modest step towards making our laneway suite a reality. The deliverable at this phase includes a view of the existing site plan, three options of site and floor plans for consideration, as well as a pro forma and estimated project timelines.

In our case, we have a dilapidated barn at the rear of the property that both we and the Lanescape team fell in love with, and they were tasked with presenting various options on how to approach salvaging, adding, or removing the existing structure relative to the associated costing and zoning implications.

One of the first things Lanescape did was schedule a site visit to better understand the site conditions (including how easy or difficult it is to navigate, trench, and get materials on site) as well as take precise measurements. We also had an informal conversation on what we are looking to achieve and how to shape the design accordingly.

Option 1 – Salvage Existing Barn

In option 1, the barn can be grandfathered and would be quite nifty as the current height of 7 m is taller than the maximum height for new builds of 6 m, but there are a number of technical challenges including low headroom that made keeping the second floor impractical.

This rendering shows a hybrid solution where the main floor of the barn is preserved, but a new second story would be built, and required to be set back the minimum 1.5m at the lane, and cantilevered towards the main house at the backyard.

You can see how the second story is set back from the existing garage footprint at the right of this site plan:

And the resultant floor plan for a 1 bed + 2 den, 2 bath unit for tenants and a garage and workshop for owners. The entire main floor other than the foyer off the laneway can also be reclaimed for the owners’ use in the future and the upstairs turns into a 1 bed + 1 den, 1 bath rental unit.

Option 2 – Carte Blanche

Option 2 embraces the highest and best use of the laneway suite if we demolish the barn, and build a brand new structure in its place. This made us all a little sad 🙁

However, you can see in this site plan how this maximizes square footage plus creates the opportunity for an exterior parallel parking option in addition to the garage:

And a second option for the floor plan:

Which option do you prefer? What are your favourite and least favourite elements of the designs?

In the next part of the blog, I will review how we refined the floor plan and landed on our choice at the end of this phase.

Toronto Legal Luxury Triplex Conversion – Real Life Example!

It’s a lot harder to find a cashflowing property in Toronto… but it is very much possible if you’re looking at real estate through the right lens.

One of the things that we hear over and over is: Isn’t Toronto too expensive?  Isn’t Toronto too risky? There aren’t any good investment properties in Toronto.

To those people, we reply “It’s just because you aren’t working with the right Investor Realtor”.  

We get it.  Investing in Toronto is tough.  It’s a lot harder to invest in Toronto than it is to invest in Hamilton, or Windsor or Waterloo.  It’s a lot harder to find a cashflowing property in Toronto… but it is very much possible if you’re looking at real estate through the right lens.

Not everything in Toronto will be handed to you on a silver platter.  Because property prices are much higher, it means that mortgages are much higher… and as a result, it is harder to obtain cashflow positive properties.  While they do exist, and while we do find them for clients, they are far and few between.  This leads some investors to create those opportunities themselves.

Exterior After
Exterior Before

One of the best investments in Toronto is a Legal Luxury Triplex conversion.  It does take considerable resources to undertake, but for those who have the means, it is a solid way to invest.  Not only do you get the equity upside from the change of use from a single family to a legal triplex, but you already get increased rents.  And after refinancing at the higher property valuation after the renovation, you can often get back almost all of your renovation money back in the form of an equity takeout.

Bedroom After
Bedroom Before

Here is a recent real life example of a Legal Luxury Triplex conversion that a client completed:

  • Acquisition: $1.35M
  • Downpayment (20%): $270k
  • Mortgage (80%): $1.08M
  • Closing costs & LTT: $51k
  • Reno: $550k
  • Length of reno: 16 months
  • Carry costs: $80k
  • Total invested capital (downpayment, closing, LTT, reno, carry costs): $951k
  • ARV Market value: $2.2M
  • ARV as per appraisal: $2M
  • Refi mortgage (80%): $1.6M
  • Equity takeout: $520k
  • Net invested capital: $431k

The $520k equity takeout means that the investor gets back almost their ENTIRE renovation costs!!  Keep in mind that while the market value of the property may be $2.2M at the end (i.e. that is what it would be worth if you were to sell it), appraisers may only conservatively appraise it at $2M in order to protect the banks’ interest, which means that you won’t get the maximum refinance possible – c’est la vie.  That said, if you want to learn more about how Volition advises clients in order to get the highest possible appraisal value, click here!

Living Space After
Living Space Before

Here is the cashflow analysis after refi:

  • Rents: $8600
    • $3600 (2nd/3rd Floor: 3bdrm/2bath) 
    • $2800 (Main: 2bdrm/1bath) 
    • $2200 (Lower: 2bdrm/1bath) 
  • Expenses (property taxes, insurance, hydro, gas, water): $1200
  • Monthly Mortgage Payment: $5700
  • Cashflow: $1700

This is an incredible amount of cashflow even after the increased refi’d mortgage!  (Not to mention the additional $200k built in equity lift that we weren’t able to refinance – i.e. the differential between the $2.2M market value and the $2M appraised value).

At the same time, it took a lot of time and effort to create this opportunity.  We illustrate this example to demonstrate that there are indeed solid investment opportunities in Toronto if you have the capital, mortgage qualification, and savviness to make it happen.  Volition offers the Advisory services (to help you plan and strategize), Investment Realty services (to help you find that ideal property to execute this investment strategy on), and Design/Build services (we can manage the ENTIRE construction and conversion and approvals process for you) – everything you need to be successful.

Bathroom After
Bathroom Before

Lastly, some of our more sophisticated and aggressive investors choose to use this $500k+ Equity Takeout in order to roll forward and do another project.  Rinse & repeat.

It might not be for everyone, but if you think this might be for you, reach out to us and let’s have a conversation about it. Book an Advisory Session. 

15 Things to Know Before You Buy Your First Rental Property

Investing in real estate is not really “investing” as much as it is buying and running a business.

“More millionaires are made through real estate than anything else”.  Quotes like this make real estate investing sound easy, don’t they?  The reality is much different.  Investing in real estate is not really “investing” as much as it is buying and running a business.  Read on for the 15 tips that inspired our HGTV.ca article

1. Buy in a City with a Future, not a Past

You need to understand the economic fundamentals of the city that you’re investing in.  Just because a city’s real estate has historically grown by 10% per year in the past, doesn’t mean it will continue to do so.  Novice investors often start investing in smaller towns because it’s “cheaper” and you can get great “cashflow”, but they don’t realize the risk that they’ve now introduced due to tenant profile, smaller economies, stagnant populations, etc.  Your best prospects are to buy in cities that have strong economies, strong job growth, growing populations, and low vacancy rates. Shocker: even though Toronto is more expensive, it is actually LESS risky!

2. Don’t Buy Cheap, Buy Smart

Cheap is cheap for a reason.  If you don’t understand that reason, you shouldn’t be buying that property.  Only buy if you understand why it’s cheap, what risk it’s introducing, and if it’s part of your business model and your operational excellence to mitigate those risks.  For example, perhaps the reason that this property is $50,000 cheaper could be because its location lends itself to a lot of vacancy, or because of the amount of deferred maintenance by the previous owner, or because the tenant that you’re inheriting is a problem tenant.  Due your due diligence and be smart about your purchase… and don’t be misled by the cheap price tag.

3. Don’t Expect to Live Off Your Cashflow.

The reality is, you’re not going to retire off of the $300 or $500 of cashflow from the property… not yet.  Realistically speaking, cashflow generally gets recycled back into the property in order for you to hold for the long term.  Holding for the long term is the key to success – time allows for the mortgage to be paid down, the asset to appreciate, and rents to increase.  Game-changing cashflow is often when you have lots of equity in the property and you have a small (or no) mortgage.  You can use the “Multiplier Effect” to get to massive cashflow faster (described later)! 

4. It’s Not About “Timing” the Market, it’s About “Time IN” the Market.

Forget trying to buy low and sell high.  That’s not where the real money is made.  The real money is made by holding for the long term.  Staying in the market, through the ups and downs of the real estate cycle, is hands down the biggest determinant of success in real estate investing.  No one has a crystal ball, and therefore no one knows what is going to happen to the market tomorrow.  You can have a reasonable level of confidence, however, that the market will be solid over the long-term.  A property with good cashflow, low vacancy, and low headache tenants, is how you’re able to ride the ups and downs and stay in the market and not be forced to sell into a downturn. 

5. “You Make Money on the Buy”

Novices often interpret this to mean you need a killer deal or you need to find that diamond in the rough in order to make money in real estate, and this leads to inaction because the perfect property does not exist.  Once you understand the mechanisms through which wealth is built in real estate, the better way to interpret this statement is that you make money if you actually take massive action and buy a property, because the true wealth is built by holding real estate for the long term.  Does it really matter if you paid $800k or $810k for a property 10 years ago, if it’s worth $1.8M today?

6. It’s Not All About The Numbers

Contrary to popular belief, numbers don’t tell the whole story.  How could it?  How could it account for tenant profiles, risk, local economies, etc… and all the other critical key information not included in a standard proforma?  You need to look beyond the numbers to understand the full story of the property, the neighbourhood, and of the city that you’re investing in.  If something is too good to be true, it very well might be.  Remember: You don’t get something for nothing.

7. Multiplier Effect

You may be wondering, how do people grow their real estate portfolios to 2, 5, or 10 properties?  The answer is what Volition Properties has coined the “Multiplier Effect”.  After owning a property for several years, you can often take the equity out of that property via a refinance, and then you can use those funds as the downpayment for your next property.  Done right, and when investing in the right market, you may be able to massively accelerate the growth of your portfolio.  In Toronto, using the Multiplier Effect, Volition Properties’ clients have been able to double the size of their portfolios every 3-4 years.  Pro-tip: Make sure that your existing property still cashflows after your refinance!

8. Don’t use Uncle Joe as your Realtor.

You are buying an investment property.  You need an Investor Realtor, and you should rightfully have high expectations of your Investor Realtor, since they are a specialist.  The worst thing you can do is use Uncle Joe to help you buy an investment property.  Investor Realtors should be able to determine the best investment strategies for your particular market, run cashflow analysis for you, describe the tenant profiles for your area, and point out any areas of deferred maintenance (and ballpark costs to remediate).  Volition Properties has a team of Investors Realtors who specialize in investment real estate, each of whom is an investor and owns a portfolio of investment properties themselves. 

9. Top 5 Questions To Ask Your “Investor” Realtor

When interviewing your “Investor” Realtor, ask them these questions and see how confident they are in their responses.  1. How many investment properties do you personally own?  2. What is the tenant profile for this area?  3. What investment business models work in this neighbourhood?  4. What are the development opportunities to put this property to highest-and-best use?  5. Have you executed on at least 50 properties of this nature in your career?  If they stare at you dumbfounded as if you have three heads, walk away… quickly.

10. Understand your Tenant Profile

Tenants are the biggest risk factor to your business.  Better tenant profiles will pay their rent on time, treat the property with more respect, and be less headache. You need to have in-depth insights into whom it is that you’re targeting.  At Volition Properties, we actually identify our tenant profile first, then build our investment business model around them.  In Downtown Toronto, this means that our tenant profile is a young Millennial/GenZ, university-educated, 2-5 years out of school, making $60k-80k, working at a big company in downtown Toronto in professional services (health, accounting, consulting, finance, tech, etc.), who wants to live where they work and who wants to play where they live.  Who’s your target tenant profile?

11. Buy Near Transit

Transit is the single most desirable feature to look for in an investment property.  Your tenants will often not have vehicles, and thus will pay a premium to be within a 10 min walk of a dedicated transit station.  You’ll get a 15-20% greater lift in rents / property values than the rest of the market, and you’ll also be insulated by 15-20% reduction in rents / property values during a downturn.  A good long-term strategy is to look where future transit stations are being built and to buy close to them… it’s essentially an Investment Heat Map!  But only invest after shovels hit the ground… plans can always change! 

12. Join a Real Estate Investor Meetup Group

Your net-work is your net-worth.  Surrounding yourself with like minded people is the single most valuable investment you can make in yourself.  Other real estate investors can help provide you with guidance on how to navigate tricky tenant situations, or provide key contacts like Investor-focussed Mortgage Brokers, or can help advise on how to accelerate the growth of your portfolio so you can reach your goals faster.  A great place to start is the Toronto Real Estate Investors Mastermind, the largest and most active Investor Meetup in Toronto with over 3,200 sophisticated investors. 

13. Don’t Chase The Shiny Object

Choose a single investment city and stick to it, don’t always be chasing the shiny object.  Become an EXPERT in your chosen area, spend the energy to understand it thoroughly, and build your Investment Dream Team. Once you’ve committed to a particular city, stick with it.  This focus allows you to scale your efforts, build economies of scale, and to reuse the existing team that you’ve built.  A quote that I think is particularly pertinent: “Success isn’t that difficult; it merely involves taking twenty steps in a singular direction. Most people take one step in twenty directions.”

14. Real Estate Investing is NOT a Passive Investment

Like it or not, you are a small business owner.  You have functions such as advertising, marketing, customer relations, maintenance, accounting, tax, bookkeeping, insurance, finance, banking, accounts receivable/payable.  You’ll be making strategic and tactical decisions that will lead to the success or failure of your business venture.  Don’t fall into the trap of thinking that real estate is a passive investment.  A passive investment is buying a share of Apple or Google, where they have executive teams running the business.  In real estate investing, YOU are the one running the business.  Mentally prepare yourself for this before diving in.  Don’t forget: if you don’t have a Property Manager, you ARE the Property Manager.

15. Consider Owner-Occupied

If you’re going to live in it, you have an incredible advantage!  An owner-occupied property that is still an investment property essentially is taking advantage of the House Hacking strategy, whereby you could live in one unit/room and rent out the units/rooms.  Owner-occupied can potentially mean less downpayment (as low as 10% in certain instances), lower mortgage interest rates, being able to use up to $35,000 of your RRSPs tax free towards the downpayment via the RRSP First-Time Home Buyer Plan, Land Transfer Tax rebates (for example, in Ontario up to $4000 and in Toronto up to an additional $4475), First-Time Home Buyer’s Tax Credit worth $750, as well as other benefits.  This makes a big difference for first-time investors!

Ready to take the next step? Book a complimentary Advisory session to plan the roadmap to your first investment property!

Danforth Project – Laneway Suite Part 1

Overview, Eligibility and Considerations

Overview

I am a laneway suite enthusiast and have been following the City of Toronto program since the 2019 launch, and we were eager to explore the possibility of a laneway suite in our own backyard.

Laneway suites are a unique solution to Toronto’s high real estate prices and a creative way to add gentle housing density and expand housing options in the city. They are secondary dwellings constructed on residential lots that abut a publicly designated laneway, and offer tremendous flexibility from rentals to work from home spaces to supporting intergenerational living.

For an in-depth article on laneway suites that informed our recent HGTV article, see our blog in partnership with Lanescape and Ambient Designs here: https://www.volitionprop.com/laneway-suites/

Eligibility

We reached out to Lanescape in April 2021 to request a property report while contemplating our purchase. There are many factors in determining a lot’s eligibility and it can be quite overwhelming. There is an article that explains key criteria and considerations if you would like to learn more.

The easiest method is to e-mail info@lanescape.ca as they offer free reports with a survey or address, and eligibility and an approximate buildable area can be provided without a site visit. That said, due diligence from multiple sources and additional documentation will be required to determine the final buildable area and options.

For those ready to build, I recommend commissioning a survey ASAP as there are long lead times (1-2 months), and it can be done after purchase and before closing. Without a survey, an architect will not be able to officially determine what can and cannot be built, and this applies to those interested in developing legal secondary suites, duplexes, or triplexes as well.

What we received is the following summary, along with a table outlining the property’s suitability relative to the conformance criteria:

“a prime candidate eligible for a laneway suite in conformance with the current by-laws. Our records indicate you could potentially construct a 2-storey structure measuring approximately 1340sf (670sf per storey). All dimensions and assumptions are to be confirmed via site plan or survey.”

Well, that’s awesome! 🙂 This is a very clean report that does not raise concerns about encroaching on mature protected trees (that said, there is one in the neighbour’s yard that will require consideration when trenching and servicing the laneway suite) or requiring an unobstructed walkway from the front street to the principal entrance of the laneway suite at the rear yard.

Potential Scope

Potential design options are included in the property report, and here is a sample of what can be achieved with and without parking for lots of similar size:

Considerations

1. Extended Travel Distance

What we do have to consider is the 62 m distance via laneway to the fire hydrant, as outlined in the blog referenced above: “An access route from an abutting street via the laneway that does not exceed 90 m measured from the street curb to the principal entrance of the laneway suite at the laneway. Note if this access route is longer than 45 m, you will be required to provide additional fire mitigating design provisions such as a fire alarm, sprinklers, or other protection measures.”

What this means is the extended travel distance needs to be mitigated in the fire alarm design as follows (and incurs additional electrical engineering fees): “In December 2020, the City of Toronto amended the existing emergency access requirements to laneway suites, permitting a maximum travel distance of up to 90 m via the laneway, should you provide fire mitigating design provisions. To achieve the extended distance, you will be required to incorporate an integrating smoke alarm system with a visual strobe indicator at the laneway. This system must be designed by a professional engineer.”

2. Rear Yard Depth, Additions, and Angular Plane

a.) Rear Yard Depth and Additions (or Subtractions!)

The key to a larger laneway suite is the available rear yard depth, measured from the rear main wall of the existing house to the rear lot line. It’s often thought that deeper lots automatically mean larger laneway suites, but that isn’t the case if the main house has long extensions that result in modest rear yard depths.

I’m a planner, so I wanted to consider the impact if we decided to add a two-storey extension, which in this case is an additional ~6’ as of right (i.e., not required to apply to the Committee of Adjustments for a minor variance – we would for a longer extension).

Since our main house is so modest (aka small), we are able to locate the laneway suite well beyond the 7.5 m minimum from the rear main wall, with our maximum laneway suite size almost the same square footage as the main house!

When designing a laneway suite on a property with long existing extensions, consider demolishing some or all of the extension as a tradeoff for a larger or more flexible laneway suite design.

In conversations with our investors, we note that demoing a one-storey extension in the main house can translate into gaining two storeys in a laneway suite, and a larger footprint since we can build right to the lot line (vs. the main house with an existing side setback) – more than doubling the existing square footage, and better bang for the buck!

b.) Angular Plane

One of the constraints is the consideration for the angular plane. It’s a bit technical:

The front main wall of a laneway suite may not penetrate a 45-degree angular plane projected towards the rear lot line, beginning from a height of 4m at a distance of 7.5m from the rear main wall of the house.

The best explanation is actually the simplest – the further your laneway suite is set back from the main house, the better – once you’re far back enough, all second storey walls can be fully upright (i.e., with no slope or dormers).

Source: Bridgemont Properties

If you managed to reach this point in the blog, I’m impressed!

We encourage you to take the time to educate yourself on laneway housing in Toronto. Two great options include joining the Toronto Real Estate Mastermind Meetup group to connect with like-minded individuals, and attending free monthly information sessions hosted by Lanescape.

Stay tuned for blogs on future phases of the laneway suite project 🙂 and join us on Wednesday, October 20th for “Laneway Suites are taking over the Toronto RE Market” with special guest speaker Lanescape. RSVP for free!

How to Make an Extra $50k When Selling Your Home

Volition was featured on HGTV.ca to share strategies for getting top dollar for your home – you can check it out here.

As usual, we have more to say. Read on for the extended version!

To get top dollar for your home, you need to be strategic.  We’re going to go beyond the “regular” advice (i.e. staging, remodelled kitchens, curb appeal, etc.) and challenge some of the preconceived assumptions around getting top dollar for your home.  Any run-of-the-mill Realtor can throw something up on MLS and hope for the best… What separates an average realtor from a great one is their strategy and their market knowledge, and their ability to create a personalized Market Strategy for your home.  Also keep in mind: Investor Realtors make the best Realtors!  Investor Realtors work with regular home-buyers and home-sellers as well, and are trained to have higher-order thinking skills and possess the ability to see value where others can’t, leading to better outcomes and higher sale prices for you as the seller.  

Be Strategic

  1. Realtor Strategy: You need to be strategic about who you select as your Realtor.  Your Realtor is the quarterback for the entire transaction, so don’t hand out this responsibility lightly.  And definitely don’t go with someone just because they are “cheaper”: you may very well be stepping over pounds to pick up pennies.  The $5,000 you may save could mean that you’re leaving $25,000 or even $100,000 on the table – it’s not always “all things equal” because you may not be getting the absolute top sale price for your property.  You wouldn’t want a discount heart surgeon; why would you settle for anything but the best on the biggest financial transaction of your life?  Do your due diligence and find the best; you owe it to yourself.  What makes the best Realtor?  Keep reading to find out.
  2. Market Strategy: not to be confused with Marketing, a market strategy will help you understand the inner workings of your particular market, and give you deep insights into the current market environment, including important considerations such as supply/demand, mortgage interest rates, new government-imposed vacancy property taxes, pending tenant law policy changes, etc. – and more importantly, what this means for you and selling your home.  A good market strategy would then create an ideal target buyer persona and determine how to best position your home in light of the market conditions, and then cater all activities toward trying to attract that particular buyer profile.  If your expert Realtor develops a personalized Market Strategy for you and your home, then everything else flows naturally from this… marketing, renos, staging, descriptions.
  3. Reno Part 1 – Reno Strategy: Now that you know who the intended audience is, does your home already fit your particular buyer profile’s needs, or do you need to make upgrades to cater to their desires?  Don’t just make changes on a whim, or because you read an article about it.  Your Realtor expert should be able to clearly identify with laser precision what fixes or upgrades need to be done in order to attract the right buyer and what increased selling price you can expect as a result.  It’s even better if your Realtor expert has the renovation team internally (for example, Volition Properties has done many $25k kitchen upgrades resulting in an increased $75k sale price for clients!) or at least has partners who will do the renovations under the supervision of your Realtor expert.
  4. Reno Part 2 – Best Reno Bang For Buck:  That begs the question: will spending $25k on a kitchen remodel always yield an extra $75k in selling price?  Will I get a better ROI if I finish off the basement or if I improve curb appeal?  Contrary to popular belief, there is NO one size fits all answer – every property and every market is different.  Perhaps your property is a starter townhouse and your target buyer needs a move-in ready home because they won’t have any money left over for renos, in which case it makes sense to do renos prior to listing and you would see the ROI in the increased sale price.  There are lots of simple, general, easy to understand, but wrong, answers to this very popular question.  Get expert advice from your Realtor as your starting point.
  5. Reno Part 3 – Knowing When To Do Nothing At All:  Sometimes, you just aren’t going to get the money back, and the ROI isn’t worth it.  In a hot sellers market, perhaps you just need to get it listed ASAP to catch the hot market.  Timing could be everything, especially if you’re trying to get sold prior to new stricter mortgage regulations coming into effect, or other proposed changes that could affect the market.  Or maybe you do nothing because in your particular property in your particular neighbourhood, buyers require a blank canvas to put their own finishing touches on.  In addition to reno costs, other things to consider are time/energy spent, additional holding costs, living through renos or moving out, approvals/permits, and additional headache that you may not wish to take on.
  6. Listing Strategy: It’s not just maximum exposure that you want, you want the right exposure.  Your Realtor will create a Listing Strategy, which will demonstrate how they plan to target your ideal buyer, while simultaneously getting you maximum sale price.  What is your pricing strategy, should you have an offer date, and is this best served as an Exclusive Listing?  Should you be advertising in foreign language publications and marketing to overseas buyers?  How is your Realtor going to target their list of private buyers/investors?  Your Realtor’s marketing plan should demonstrate how they will be highlighting the property against current market needs (i.e. during Covid, outdoor space, walk-out/rooftop patios, and dedicated office nooks demand a huge premium).  Keep in mind – much of the “advertising” that regular Realtors do is really just to generate more business for themselves, and does very little to actually sell the property for a higher price.

Putting an Investor Hat On

  1. Be Flexible: Buyers may value certain things that aren’t important to you as the seller.  The key is to hone in on those aspects, and offer them to the buyer – especially since it’s no skin off your back.  This could include offering flexible timing on closing, or allowing the closing date to be extended at the buyers’ sole discretion (to a limit, that is). Perhaps if the buyer is planning for an extensive renovation, you could allow unfettered access to the property, allow permits to be drawn up and submitted prior to closing in your name, and then transferred to the buyer at closing.  You’re only limited by your imagination – Volition’s Investor Realtors have the depth of expertise necessary to conceive and negotiate these considerations to get you top dollar.
  2. Be Creative:  Creative deal-making can be an excellent way to get an extra boost in sale price.  If you don’t need the entire proceeds from the sale, you could offer the buyer a  Vendor Take Back, a form of Seller Financing in which you act like the bank and receive regular interest payments by lending the equity in your home to the buyer… and if this is not your Principle Residence, a VTB reduces your capital gains tax by deferring it over many years.  Other forms of creative deals include Rent-To-Own, Agreement For Sale, Sandwich Leases, Joint Venture with a contractor prior to sale, etc.  Caution: these are advanced-level strategies; make sure you are working with an expert Investor Realtor like Volition on these.
  3. Get Your Rents Up Before You Sell:  As an investment property, one of the primary ways that a buyer valuates the property is by looking at the rents it generates.  The higher the rents, the higher the ROI and therefore the higher the property value.  This means staying on top of rent increases every year.  Depending on your province, this also means investing in an area where there is a more transient tenant profile where you can increase the rents upon tenant turnover.  This also means looking for creative ways to boost income sources; for example, coin-operated laundry, renting out the garage separately, renting out parking spaces separately, etc.
  4. Create Value For The Buyer: this isn’t necessarily for the novice home owner, but you can create tremendous value though change of use.  Examples include putting in a basement rental suite, getting approvals for an extension or a laneway suite prior to sale, changing a single family home into a legal luxury triplex, severing/assembling a large plot of land for development use.  If your land is well-positioned for a land assembly by a big developer, perhaps band together with your neighbours in a united front to demand top dollar.  Change of use can, but doesn’t necessarily always involve, expensive renovations but time/energy will definitely be put into the planning process
  5. Work With Your Tenants: Investment properties can be more challenging to sell due to them being tenanted.  This often means that you can’t stage the property, access can be restricted, sometimes the units can be messy due the tenants, coordination of schedules can be difficult, etc.  One of the best tactics is to incentivize tenants: gift cards to Tim Hortons or Starbucks often work well in exchange for cooperation with showings, keeping their unit tidy for showings, vacating the unit for showings, agreeing to house their pets at their parents’ place for the listing period, etc.  More extreme action could include asking them to temporarily move out for the listing period and you put them up at an AirBnb as a mini vacation for a week, or maybe if you need the property completely vacant you could negotiate a mutually beneficial scenario.  Volition Investor Realtors are experts in navigating these tricky scenarios and mediating these discussions with your tenants for you.
  6. Is It All About The Money?:  Although as sellers we always want top dollar, it’s also worth considering the non-monetary aspects that are important to you.  A quick sale may be an important factor for you.  Minimized headache might be your most important consideration.  Perhaps reduced disruption to your lifestyle is paramount.  While maximum sale price is typically the #1 goal, have a frank discussion about this with your Realtor expert about what your priorities are, and this should be incorporated into your Listing Strategy as well.

Ready to sell? The Volition team is here to help. Get in touch with us at info@volitionprop.com

 

We are back with the second installment of the pre-reno walkthrough at the Danforth project!

We are considering options for our basement, which include:

  1. Leave unfinished, but move the mechanicals and electrical panel
  2. Finish as a recreation room plus den, extra bedroom and bathroom
  3. Finish as a legal secondary suite

We initially planned to leave the basement alone, but we realized that installing a new furnace and hot water tank (and removing the existing boiler and rads) present an opportunity to move the mechanicals, and plan future room layouts so the mechanical engineer can plan HVAC systems accordingly.

We worked with the architect to assess feasibility for a legal secondary suite as well as potential floor plans for options 2 and 3.

Considerations for each option:

1. Leave unfinished

Pros:

  • Lowest-cost option
  • Creates a more usable basement for now (storage space without the “icky” feeling) and future (can do rough-ins for drains and space plan for the future)
  • Assess waterproofing options and effectiveness as there are leaks through the cinder blocks with every rainstorm

Cons:

  • Delayed gratification – no finished space to enjoy right away
  • Costs more to do later as there are efficiencies rolling the work into the same project
  • Inconvenient – will have to dedicate headspace to finish later, and live through renos after move-in

2. Finish as a recreation room plus office/workshop/den, and add extra bedroom and bathroom

Pros:

  • Best “quality of life” option – we gain an extra floor to use and to grow into
  • Will still increase the value of the house and as it will become a 3 + 1 bed, 2.5 bath family home
  • Don’t have to rent out part of our primary residence

Cons:

  • No rental income to offset additional expense
  • Locks us into a less flexible option
  • Additional costs if we decide to create a legal basement suite in the future, although we can reduce costs by roughing in a kitchen now

3. Finish as a legal secondary suite

I will begin by emphasizing it is critical to work closely with professionals if you are considering this approach!

Construction strategy is one of my specialties (and one of the perks for Volition clients, as we guide investors through optimizing renovation investments and maximizing rental income), but there are many requirements to meet in creating a legal secondary suite, and I consult with the experts (i.e., architects and engineers) to ensure compliance with fire and building codes.

Here is why 80% of Toronto’s basement apartments don’t comply with all the rules – look at the steps involved to create a legal one!

Source: https://www.secondsuites.info/resource-centre/

Legal secondary suite considerations would be multiple blogs on its own, but here is a flavour of what we contemplated with this option:

  • Basement walkout – does one exist or would it need to be created?
  • Side setback to the property line – 0.9 m minimum, but our house is grandfathered due to its age and 0.8 m is sufficient (this is where I rely on SMEs), but we would have to demo part of the chimney to comply
  • Minimum ceiling heights – if we have to underpin, it is not financially viable
  • HVAC – independent or shared system?
  • Fire separation requirements
  • Sound attenuation requirements
  • Egress (escape window)
  • Attractive layout for two use cases: tenants now, and us later with the option to reclaim for personal use

… and the list goes on!

The key determinant for us is whether we can reach the basement minimum finished ceiling height of 1.95 m (6’ 4¾” – but I said 6’ 5” in the video) without underpinning.

This is a tall order (see what I did there?) when we take the extra layer of drywall and resilient channel for fire separation and sound attenuation into consideration, which is why we were digging the holes shown in the video to determine how far down we can go by breaking the slab.

Source: https://www.ontario.ca/page/add-second-unit-your-house

Pros:

  • Rental income to offset the additional cost of finishing the basement
  • Apply our specialized knowledge to create a rare legal secondary suite, and increase the potential buyer pool with a mortgage helper if we sell in the future
  • Flexibility through thoughtful design to reclaim the space in the future with multiple use cases: age-in-place option for family members, in-law suite for personal/non-rental use, convert back to recreation space plus office/workshop

Cons:

  • Most expensive option due to conformance with requirements
  • Giving up personal space that we may need, and realizing we could have just gone with option 2 with less time and cost instead
  • Minor costs to reclaim the space for personal use (e.g., open wall from interior stairs to basement, will end up with an extra set of washer/dryers, may get rid of or reduce size kitchen in the future)

There is a lot to think about and we haven’t made a decision yet. What would you consider? What would you choose? 

Expert Tips That Will Help You Become a Homeowner Before 40

Accelerate your journey to homeownership.

Volition was featured on HGTV.ca to share our top tips for becoming a homeowner before 40 – you can check it out here.

As usual, we have more to say. Read on for the extended version!

We are going to steer clear of the typical stuff you often hear like start saving early, live frugally, don’t spend more when you get a raise, don’t order that avocado toast, etc. We want to broaden your thinking – especially because the traditional methods of getting into home ownership may not work in more competitive and more expensive markets.  These 10 expert tips will accelerate your journey to homeownership before you’re 40.

To help provide a frame of reference for the article, we’ve grouped the 10 tips into 3 groups: 

  • Tips #1-4 are Real Estate Strategies
  • Tips #5-7 are How To Get The Money
  • Tips #8-10 are Think Differently About Real Estate

1. House Hacking

Turn your biggest liability into your greatest asset – earn money from your home.  If you were thinking of a 1 bedroom condo, consider buying a 2 bedroom condo.  If you were thinking of a 2 bedroom or 2 bedroom + den condo, consider buying a small house.  This might seem counterintuitive, but the idea here is to buy MORE than what you need, rent part of it out, and lower your living expenses – including utilities and even wifi!  For example, let’s say that the difference between buying a 1bdrm condo and 2bdrm condo is $150,000, which equates to a $425 increase in monthly mortgage payments.  But consider this: if you could rent out your 2nd bedroom for $1200, you’re effectively ahead by $775 per month (even after the increased mortgage payment) and now you’re building equity on a larger asset!  Similarly, let’s say that you were able to buy a small house where your monthly costs including mortgage are $4200, you could live in the basement and rent the upstairs unit for $3000, then your monthly living costs would be only $1200 (and you would own a house instead of a condo!).  A larger purchase also provides you with more versatility as your needs change, i.e. you could move into the upper unit later.

2. Purchase a Triplex (or Convert a House into a Triplex)

A triplex is a 3 unit house: you could live in one unit and rent out the other two.  This is taking house-hacking to the next level… the price tag is high, but the reward is even higher!  Even though you’ll be spending more up front, the flip side is that you’ll be making significant rental income which helps immensely with the carry costs, and you’ll own a much more valuable house with much larger growth potential.  It is also more versatile since you can move between units as your needs change, or you can even combine two units if your family grows.  Typically with a triplex, your living costs would come down even further than in a smaller property: let’s say that you were able to buy a triplex and your monthly costs including mortgage are $5000, you could live in the basement and rent main floor unit for $2200 and the upper unit for $2200, then your monthly carry costs would be only $600!  

3. Buy a Property with Laneway / Garden Suite / Coach House Potential

A laneway house is a separate building that is located at the rear of your lot, and replaces where a laneway garage would normally go.  Enjoy the perks of having tenants without the downside of sharing walls!  No shared entrances, no shared laundry, no shared space.  In order to build this, you need a property that can accommodate a laneway suite (there are very specific requirements, so not all lots can), and the property needs to be located in a municipality such as Toronto and Vancouver that allows them to be built.  The price tag is steep: the cost of building one starts at about $400,000.  But the rental income that you get for that investment more than makes up for it; you could rent out a laneway house in Toronto for $3000+ per month, much more than a condo of the same amount!  The key here is to have the foresight and to consider futureproofing yourself – you may not have enough funds now, but over time as laneway suites become more popular and more attention is paid to them, lots that can accommodate laneway housing will carry a bigger premium.

4. Furnished Rental

Currently there are headwinds for the Short Term Rental (AirBnb) or Medium Term Rental market, but chances are that it won’t stay this way forever.  If you have available rooms/units and want a way to boost your rental income, employing a non-traditional approach to your rental strategy could provide you with what you need.  It is not for everyone: it is very hands-on, some municipalities have licensing restrictions on what you are allowed to rent out short term, and demand for STRs is relatively low right now due to Covid.  Employing this rental strategy, however, may actually allow you to reduce your cost of living down to $0 (or even make you cashflow positive while living there)!  The cost of furniture adds to the initial outlay, but can pay dividends in the future since it can help immensely with the cost of carrying the property and there is flexibility on how often (or not) you rent it out.

5. Turn Your Parents into Real Estate Investors 

If your parents want to help you out in getting started with your house purchase, they don’t have to act like your personal piggy bank.  Oftentimes, the better way to structure it is a win-win scenario, so it’s not a handout!  If they have a Line of Credit, or (even better) a Home Equity Line of Credit, they could lend funds to you for your down payment, and in return, you would pay their interest on the borrowed funds.  To structure it as win-win, you could pay them a premium on top of their own interest payments.  For example, if they borrow at Prime, you could pay them back Prime + 0.5% or Prime + 1%.  Or you can structure it in a Joint Venture model (more on this below) whereby they help with the purchase, you do all the work and manage the property as a rental, and you both share in the equity upside.  If you are creative and resourceful enough, there are countless ways to make this work.  But make sure it’s all in writing!

6. Co-Living

Shared ownership with family or friends to buy something bigger to accommodate everyone’s living needs can be a great solution.  We have clients who have purchased together in groups of 2-6.  It can be trickier, and everything needs to be well defined and documented beforehand (sharing of expenses, major repairs, upside capital appreciation, decision making / voting rights), but done right, this can provide an excellent opportunity for younger individuals to get into a bigger and more valuable house, with more upside potential.  This comes with the added complexity (and risk) of owning with other people, so clear, direct, and regular communication is key (e.g. scheduled regular meetings to review living arrangements, rules of the house, deciding on who gets which bedroom, what happens if one person wants out, etc.).  Note that buying in groups of more than 4 can get tricky from a mortgage perspective, so make sure you speak with your mortgage professional early.

7. Joint Ventures

Joint Ventures are a way of using OPM (Other People’s Money) to buy real estate.  When purchasing real estate, you need all of the 4 M’s: Money (downpayment), Mortgage, Mastery, and Management (Asset Management, not just Property Management).  Whereas in a normal real estate purchase where one individual (or a couple) brings all of these things in order to buy a house, the reality is that these things can come from different people.  In a traditional JV, if you are willing to provide the Mastery and Management, then your co-venturer would provide the Money and Mortgage, and you would both share 50/50 in cashflow, mortgage paydown, and equity upside of the property.  Often, this does require you to have a proven track record so that you can demonstrate you know what you’re doing, but there are many investors who used JV money when purchasing their very first property – these people spent all of their time & energy learning about how to invest in real estate by joining real estate investment groups like the Toronto Real Estate Mastermind, the largest & most active real estate meetup group in Toronto with over 3,000 members.

8. Stepping Stone Approach

The biggest advantage that young people have is that they have time on their side.  Buying property early, even something smaller like a condo, has a compounding growth effect that will work in your favour.  Just as an example, buying a $500,000 condo now can potentially mean it being worth $700,000 in 5 years.  This compounding growth effect, which Einstein himself described as “the most powerful force in the universe”, builds tremendous equity which makes it much easier to upgrade to a house by the time you are 40.  Jumping straight into buying your dream home might not be a reality when you are starting out; consider a stepping stone approach instead, rather than waiting and waiting.  This is not a call to arms over FOMO – this is to demonstrate that taking action and getting in early is generally the best strategy.  The Toronto market has grown 7-10% every year, so that $500,000 townhouse you were eyeballing 7 years ago is now $1,000,000… while your $100,000 downpayment that you had ready 7 years ago but didn’t use is now worth $115,000 while sitting in your savings account.  The rest of Einstein’s quote: “Compound interest is the 8th wonder of the world.  He who understands it, earns it; he who doesn’t, pays it”.

9. Build an Expert Team

You are the CEO of your house.  Your job as CEO is to ensure that you have the absolute best team.  This is probably going to be the biggest purchase you will ever make in your life – don’t settle for second-rate team members.  Do you really want to entrust the fate of your financial future on using Uncle Joe as your Realtor?  You pay the same amount to most Realtors, so why not go with the best… or the one who truly offers the most value?  If you are considering a house with a basement unit, work with a Realtor who knows what to look for to ensure that it’s a legal basement unit.  Similarly, if you are considering a laneway house, work with a Realtor who knows the requirements and criteria for laneways so that you won’t be unpleasantly surprised later.  Demand this level of excellence and value-add from all of your service providers: Realtor, mortgage broker, insurance broker, accountant, real estate lawyer, contractor, etc.  When you start thinking about it in this way, you start realizing that home ownership isn’t a one-person show; the team that you surround yourself with can help you ensure that your purchase goes smoothly, and more importantly, ensure that it’s a well-considered part of your overall plan and financial future.

10. Invest In Real Estate, Even If You Stay As A Renter

Real estate investing can be one of the most lucrative ways to grow your wealth.  If you don’t necessarily NEED to live in the property that you purchase, then you can continue to be a renter – there is nothing wrong with that!  In fact, several of our clients have purchased investment properties in downtown Toronto, but continue to live as renters because they have apartments with very reasonable rents and financially, it just makes more sense to not live in their own property!  Keep in mind that your own home is a luxury, not a necessity (and as such, it is often a liability, not an asset).  With your equity growing in your investment properties and with renters paying your mortgage, you may eventually reach a point where that equity can help you purchase your own home by the time you’re 40… in a way that is sustainable and not a major financial burden!

Volition Properties

It’s hard for young people to buy real estate, especially with rising prices, escalating uncertainty in the market, and not knowing what you don’t know. 

Volition Properties sets out to demystify the real estate process. We get it – buying real estate is daunting.  It has many more zeros than your typical retail store purchase.  Volition is unique in that we aren’t just Realtors, we provide Advisory Services on your home purchase, which is immeasurably valuable when dealing with the biggest purchase in your life.  We can advise on your real estate needs and how it fits into your overall lifestyle, investment, and financial goals… beyond just the single transaction you will make with us.”  One great way to get started is to join a real estate meetup, such as the Toronto Real Estate Mastermind

Connect With Us And Start Your Real Estate Investment Journey

Whether you’re a first time investor or a seasoned pro, our experts can help!



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