Canadian real estate

Owning a home in Toronto can be a investment given the rapid rise of real estate values over the last decade and a half. However, relying on your home to fund your retirement is not a good idea. Why? Because you will always need a place to live. So, even if you sell your home and make a lot of money – you will still have to buy a smaller home or condo and, given value of the current market, there is no guarantee that you will have any money leftover to fund the kind of retirement you envision.
 
The better option for funding your retirement is saving a little at a time right from when you start working. Even if you are in your mid-forties or fifties and have yet begun setting aside retirement funds, it’s never too late to start. The best way to evaluate how much you will need for your retirement and how much you should start saving can only be assessed by sitting down and thinking about what you want for your retirement and how you plan to fund it. If you are looking for a low-key life without much travel, then you likely won’t need a whole lot set aside. However, if you would like to travel and have the ability to indulge in what you want, when you want it, then it is best to set aside a sum of money for your future years as soon as you can.
 
Unless you plan on selling your home and moving to a smaller, less expensive community or smaller condo when you retire, you should not rely on your home as your many mean of income after your end your career. Even if you think of using a reverse mortgage or HELOC to fund your retirement, you should think carefully about the consequences of such financial instruments before turning to them. In many instances those vehicles are meant to benefit the banks instead of the homeowners.
 
In short, your home should be considered your home. You should not look to it as your retirement security blanket. You will still need money to pay your taxes and utilities, buy your necessities and have some money leftover for travel and entertainment – those are things you can’t do with money from your home.

The Toronto property market has boomed over the last two decades. Anyone living in the area has seen their property value rise dramatically. However, is there still room for growth? Is investing in the Toronto market still a viable option for someone looking for a secure investment? The answers to those questions are a bit complicated.
 
Given the steep rise in Toronto home prices, first time buyers and average homeowners have become priced out of the hot and highly competitive market. Foreign buyers helped increase home values but that just made it harder for ordinary people to buy into the market. With the introduction of legislation curbing foreign property investments, property values have begun to drop and the Toronto real estate market has cooled considerably since the fall of 2017.
 
Given the cool down and drop in prices (in some areas by 22%), now is actually a good time to investment in the market. Yes, it is going through a correction at the moment, but if you are someone looking to buy a home and put down roots, regardless of whether the market corrects some more, in the long run, the property value will increase and if you can get in now with the lower prices, it is a very good thing.
 
However, there is the spectre of further drops in price given the recent political climate the threat of NAFTA falling apart – something that would definitely hurt the industry. So, if you are an investor looking to flip a property, then now might not be the best time, unless you are willing to risk further price drops from the time you purchase to the time you flip.
 
So, there are pros and cons to buying into the Toronto real estate market in 2018 – and they all depend on whether you are an investor or whether you are in it for the long-haul.

If you are a senior with a paid-for home in Toronto, you might be tempted to tap into all of the money accumulated in your home with a reverse mortgage. After all, if you bought in the 1980s you home could well be worth close to or over a million dollars depending on where it is located. Beware though, that however tempting a reverse mortgage might sound, it should be entered into very carefully, with the full awareness that you or your heirs could lose al of the equity in your home and have nothing to show for it in the end.
 
Reverse mortgages allow you to borrow a maximum amount of the equity in your home. Usually it can be up to 60%. The money can be paid out to you in a lump sum or monthly and it is tax-free. However, remember that while you may have this money up front, you will still be incurring monthly interest fees that you don’t have to pay back – but those interest fees can quickly climb to eat away at the remaining equity in your home. Furthermore, most reverse mortgages are valid for as long as you live in your home – meaning that if you are forced to move to an assisted living facility, you or your heirs will have to repay the loan in full. If you don’t have the money, then you will lose your home as well as any money saved up and won’t have any more money to fund the rest of your retirement needs.
 
Although you will never own more than the value of your home when you leave, if you have passed on and your heirs want to keep it, then they will owe the difference between the sale of the home and the value. For instance, if your finale mortgage value is $500,000 but your home only sells for $450,000, if your heirs want to keep the home, then they will owe the bank $50,000. But if they don’t want to keep the home, then they will not owe this money. However, if you must move to an assisted living facility, the sale of the home will cover the mortgage, but then you will be left with nothing to live on.
 
Also, keep in mind that financing a reverse mortgage is expensive up-front, with closing costs coming in at around 10% of the value of the mortgage.
 
Reverse mortgages sound like a good idea, but they should be entered into very cautiously and with your eyes wide open to their pitfalls.

Now that you have your first Toronto property and you have been paying towards it for a year or two – maybe more, you have definitely built-up equity in your place. The equity built adds value to your overall financial bottom line. Lately, with interest rates being as low as they have been for the last decade or more, many homeowners have been tempted to use the equity built up in their homes – is this a good thing or a bad thing? Well, the answer lies in how you use that equity.
 
There are some very good reasons to use the equity built up in your home – and all of those increase your overall net financial value over time.
 
The good:
 
Using equity to finance improvements to your home
Using the equity in your home for renovations and updates is one of the best reasons to pull the money out of your home. Renovations – especially to bathrooms and kitchens can increase your home’s value by up to 25%.
 
Buying more property
If you use the equity in your home to fund additional property purchases, this is another very good thing as it will increase your net value as well as provide you with a steady source of passive income. However, you have to be prepared to deal with all of the ancillary issues that arise with owning income property.
 
Investing
Another good reason to use the equity in your home is to put it into secure investments that will grow at a higher rate than the rate of interest on your home. If you are confident that this is possible and you can achieve such returns, then using the equity to investment might be a good idea. However, if you are going to use it to gamble on iffy investments that have no real security, then you should leave your equity where it is.
 
Education
Borrowing the equity in your home is to further your education is another good investment. If you invest in your education, which in turn will lead to better career and salary prospects, then it is definitely a worthwhile investment – but, you must be determined to complete your education and to apply it for a better career and salary.
 
Debt consolidation
If your debts have spiraled out of control, it might be a good idea to consolidate all of them into your mortgage. However, you need to be extremely disciplined and stick to your budget so that you don’t once again fall into the credit trap – because then, it would have been a bad move on your part.
 
The bad:
 
You should never use the equity in your home to purchase anything that loses value such as cars, electronics, furniture, and vacations.
 
If you are not going to be able to gain anything except temporary pleasure or convenience from your purchases then they should never be made using the equity in your home.

Growing your Toronto property portfolio will take more planning and better nerves of steel than it would in other parts of the country simply because of the very high prices for real estate. If you are interested in building property assets, then it is incumbent that you get your feet wet as soon a possible.
 
Getting the down payment on your first property is the only way to property start on your road to real estate stardom. Once you have that first property, you should pay it down as quickly as possible. Building equity in your property will allow you to then leverage it towards your second property.
 
You don’t have to pay it off fully before using the value of the home to tap your next real estate down payment. Every year your property will increase in value. Add to that increase the fact that you will have paid off part of it and your stake in the property will growing exponentially. When you have enough equity in your existing property you can then borrow against it to fund your next property purchase.
 
As your next purchase will likely be an income property, that next property, if you play your cards right, will be able to finance both your mortgages so that you can save your money for other projects or your third real estate investment.
 
Owning property does come with risks and you must be ready to troubleshoot problems with plumbing, electricity, maintenance, etc… you must also be prepared to deal with difficult tenants. However, if you are able to manage, then your investments will pay off big-time in the end.

Moving from one Toronto home to another can either be daunting or a hassle-free endeavor – depending entirely on the amount of planning you put into it. The best way to ensure that your move goes smoothly is to plan it smartly. By “planning smartly” we mean setting up timelines and goals for each stage of the process. It is only with meticulous planning and prep that you will be able to achieve a stress-free move.
 
Once you have sold your home and you are anticipating moving into your brand new Toronto home, it is time to start planning. Make a list of all those items that need to be done before you leave your old residence. We’ve compiled a brief checklist of things you should plan for before you move:
 
2-3 month before:
Find movers
Sort your stuff into piles to give away, keep or sell
 
4 to 6 Weeks before moving
Set-up mail forwarding
Get boxes and moving supplies and begin packing
2 to 3 Weeks before moving
Get phone service set up at new home
Arrange for utilities at new home
Change address on driver’s licence
Get files and prescriptions from doctor
Change addresses on subscritions, clubs, associations
Alert family and friends on change of email address if applicable
 
2 to 7 days before moving
Pack a suitcase that you will be traveling with
Pack essentials
Clean premises
 
Day of move
Supervise movers
Walk through home to ensure nothing is missing
 
The more you do before your move date, the better off you’ll be when the big day arrives.

Downsizing from your large Toronto home to a smaller place is a very personal decision that will be driven by several factors including your short and long-term goals, your financial situation and what you want your lifestyle to be.
 
The hardest part when downsizing is letting go of the past and the memories built in your family home. Naturally after building a life and raising a family in a certain place, cutting those ties will be a difficult thing to do. If you were used to hosting large family gathering during the holidays, it will mean that those traditions will have to change. However, if you are prepared to make that shift, then downsizing can be very liberating.
 
If you want to travel or just have more free time for yourself, then moving to a smaller place is an easy decision – especially if you trade in for a condo complex with full amenities. Even if you trade in for a smaller house with less property and maintenance costs will free up your time to do other things.
 
If you are now on a fixed income and your taxes and the maintenance costs on your big home keep going up and you are unsure of how you will sustain it long term, then selling and moving to a smaller townhome or condo will liberate your cash flow and even give you some investment money.

The other option would be to sell your big place and to rent – yes, rent! Contrary to the mantra of only investing in real estate, if you have a significant gain from the sale of your house, then investing it with a reputable wealth management company can provide you with a steady income in interest while preserving your capital and freeing you up from maintenance and worries about taxes.
 
Most people find downsizing a hard decision to make, but once made, it is often cited as one of the best decisions that they have gone with.

If you are wondering when you should move into a bigger Toronto house, the answer is actually not that complicated: when you feel ready. I know – this is much easier said than done. Understanding whether you are ready or not depends on several factors:
 
Your after tax/deductions salary
The appreciation in your current property
The area you want to move to
What you want in a larger home
Whether your current living situation is sustainable
 
Your after tax/deductions salary
The first item on this list is probably the most important one. If your take-home pay has not changed since you first bought your home, then you have to properly evaluate whether you would be able to realistic finance a larger property. If you have plenty of room left over at the end of the month for saving and spending, then you might be able to do it, but the only way to really determine whether you can support a larger home is put the numbers done and to project what your living expenses would be. Find out how much of a mortgage you would have to carry for a larger home, find out what the taxes would be, look into the utilities and maintenance costs and put all of these on your projected budget. If you can sustain the increase in maintenance and carrying costs, then you might be ready to move to a bigger house.
 
The appreciation in your current property
If you current property has increased dramatically in value, then even if your salary hasn’t increased a large amount, the gain can be applied to a larger home to bring down the mortgage you would have to take out on it – making it more manageable and feasible to move to a larger place.
 
The area you want to move to
If the property values in the area you want to move to have increased beyond what you can support financially (even with an increase in your own property), then you might want to reconsider moving or you might want to choose a different area. To ensure an easy and stress-free move, it is critical that you choose a property that is financially sustainable. The last thing you would want it to be house-poor.
 
What you want in a larger home
If you want your next home to have all the bells and whistles and be an executive-style property, then you should have the salary to sustain it, the increase in property value to give you the deposit you need and be found in an area that is affordable for you. However, if what you want is relatively modest and you are willing to put in some work to personalize it, then you can probably find something that will get you into a larger home sooner.
 
Whether your currently living situation is sustainable
The last factor on our list is also quite critical. If you are living in a two bedroom condo with three kids and another on the way, then you might need a larger place sooner than a family that is already in a three-bedroom home but want an ensuite or finished basement.
 
In the end, only you can determine whether you are ready to move to a bigger place. However, we hope that our list of things to look for has been of help.

If you are like most Toronto homeowners, at one point you will likely find yourself thinking about moving to a large home. However, given the current high price of real estate in the GTA, this is easier said than done. It is understandable for people to wonder how they will ever be able to climb the house ladder if they don’t earn enough to finance the large deposits. There is a simple way of moving up this seemingly unscalable climb if you are on the outside – the trick is to simply get in the door. Really.
 
As long as you are able to put together the deposit for your first home, then the rest will be easier. Once you have one property, you can use the appreciation value in that home towards financing a larger one.
 
For instance: if you purchase a condo for $200,000 and you put a $40,000 deposit on it your mortgage is $160,000. In a few years the condo will appreciate in value to about $320,000. Assuming that you have paid toward your mortgage you should have reduced your mortgage to about $145,000 and you should realize a gain about about $160,000 after closing costs (realtor, notary, moving charges, etc…) . The $160,000 can now be used as a 25% deposit on a home worth $600,000 or a 35% deposit on a home worth $450,000 – both values purchase you a much bigger place than the initial condo you started out with.
 
By trading up every few years, you can realize your dreams of larger home ownership regardless of what you start out with. Assuming that your salary will rise as your work experience and careers grow, sustaining a larger home will become easier. On the other hand, if you are happy in a smaller place, then you can use the profit from your sale to buy something in a less expensive, up-and-coming area, thereby further reducing your mortgage.
 
Regardless of how you play the game, real estate investment is usually a solid financial vehicle.

If you are a first-time Toronto home buyer, you must be wondering how to finance your first place. With the cost of renting nearly on par with actually buying a home, saving for a downpayment can be challenging. Since you need to put down a minimum of 5% for a high-ratio mortgage, you’ll need to figure out based on your income, ability to save and desire to own property and your timeline for getting into your own place, then it’s a matter of building a strategy.
 
The best way to determine what you can afford and how quickly you can raise a downpayment for your first place is by creating a realistic budget and projecting how much you can save every month and how much that will total in one year. Next you have to figure out if you want your first place to be a condo or a single family dwelling as that will definitely impact the price of the property you will buy and how much you will need to save for the down payment.
 
Several factors will affect how much your first property will cost – property type, location and condition. Generally the further out from the city, the lower the cost. Condos will be less expensive than townhouses, which in turn are less costly than detached homes. Resale properties also tend to be more affordable than new ones.
 
If you want to move into your own place as soon as possible, then set your house-hunting budget at a modest amount – say something under $300K. It will mean a down payment of $15K. If you can only save $5000 a year, then it will take you 3 years to gather the money. If you can save more, then it will be less. However, keep in mind that you will also need to save up the closing costs, which tend to run another $5,000-$15, 000 due to notary fees, welcome taxes, back taxes, insurance, etc…
 
Financing your first home is always the toughest part – but after that moving up is simple as you can draw on the equity of your existing property to fund your next home. As long as you are disciplined and have a goal in mind, you can make your dreams of home-ownership a reality.