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Empty houses are driving up Toronto real estate market

People often speculate on reasons why the real estate has ballooned so heavily in the last couple years in Toronto, and across Canada. Everything from foreign buyers to decreased land availability has been blamed, and Statistics Canada sheds further light on why the housing market is on high alert.

The newest 2016 census shows that Toronto alone has over 99,000 unoccupied homes in the city. These statistics results reflect that a lack of occupancy is a top housing issue in the city and is growing at the same rate as the rising price of real estate. Across Canada, the number of unoccupied homes as grown and is highest in Toronto, followed by Montreal. Vancouver is trailing in third, potentially in part due to the new foreign buyer bylaws that have come into effect.

By comparing the number of total private dwellings and the total private dwellings occupied in each city as collected in the census, it is easy to see there is an unusual difference between occupied homes and total dwellings available. In the last 10 years, the amount of unoccupied dwellings have also grown 10.5 per cent in Toronto, and the problem continues to worsen. It appears that the highest rate of non-occupancy is in the Concord area of Vaughan, which was at 35 per cent. Downtown Toronto also had more homes that weren’t being occupied, especially in the fashion district at King St. W, with 21 per cent not regularly occupied.

In this circumstance, blaming foreign buyers isn’t a viable reason because local Canadians are most often the residents to fill out the statistics report. Other factors could be AirBnB or short-term rentals to explain the unoccupied rentals, but it is becoming more clear that speculation is a big part of the reason. Homeowners are hanging onto their homes while the red hot real estate market is at its highest, and people are waiting until the city hits its peak price. These people are often known as ‘flippers’ and are unnecessarily preventing families in desperate need of housing from getting a much-needed house.

Having statistics available to highlight housing issues can provide answers to convoluted real estate issues that are often kept under wraps by stakeholders. By crunching numbers, it is easy to see why unoccupied homes are negatively contributing to the real estate bubble in the city. House flippers and speculators need to sell or rent unoccupied homes to people who need them, and housing must be made more affordable. Hopefully the government takes the necessary steps to crack down on unoccupied homes, and the real estate market can balance as a result.

INVESTMENT BUG: The pros and cons of purchasing an investment property

We’re nearing the end of the second quarter now, and the real estate market is holding steady! And with more and more people looking at ways to invest their money and get the most for their return, I’ve had a few calls from clients considering investing their money in investment properties. I know from personal experience that the return on this type of investment can be great, and is definitely a great way to diversify your investment portfolio with an investment that will likely increase over time and pay for itself in monthly rental income, but I also know firsthand that the process isn’t as glamorous as it may come across on all our favourite real estate reality TV shows.

Firstly, let me make the difference between flipping properties, which has been popularized in the last few years, and owning an investment property. “Flipping” a property refers to the common practice of purchasing a “fixer-upper” property below market value with the intention of fixing it up to raise the value and re-selling in a relatively short period of time for a profit.

Owning an investment property that you plan to hold on to long term can be anything from purchasing a condo, duplex, triplex, building, etc. with the intention of renting out the unit or units on an ongoing basis.

If you’re looking at purchasing an investment property for the first time, it may be worth noting that most lenders won’t approve financing for properties of more than four units. So purchasing a triplex to rent out may be a good start, but maybe save the three-story low rise until you’re a little more experienced. Most lenders will require a minimum of 20% down, and if you’re looking to avoid mortgage insurance premiums, it might be worth it to put down more. Throw in land transfer taxes and closing costs, and you’ll see why it becomes super important to know your numbers and be sure of what your upfront expenses are going to be.

When it comes to tenants, I have one golden rule for all of my clients: you need the RIGHT tenant, not a tenant RIGHT NOW. In Ontario, the laws are usually on the side of the tenant, so do your background and pay the $29.99 for a credit check to cover your bases. If you don’t have a thick skin, develop one, quick! Complaints will come and you’ll need to know your tenants’ rights and your rights as well.

Be prepared for maintenance costs and repairs. Be prepared to put in work. Get yourself an agent who has knowledge of the type of investment property you’re looking to get into and who knows the area enough to work with you through area rental rates and capitalization rates. If you arm yourself with the right team and proper guidance, it could be the best financial decision you ever make.

 

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