We in Real Estate Profession frequently are often asked many questions by the interested Buyers or Investors with regard to Real Estate Investment in the market of Canada and particularly in Greater Toronto Area (GTA) that include Toronto, Mississauga and surrounding cities.
One of these questions is, “Will real estate investment be a profitable investment in this market (GTA)”? The truth is, real estate investment works in every market. But you need to learn your market and adapt the techniques that it requires.
There are many ways to describe real estate markets, including “hot” versus “flat” or “rising” versus “falling” or “buyer’s” versus “seller’s.” All real estate markets are subject to fluctuations; but these fluctuations typically do not greatly influence the ability for the informed investor to make a profit.
Unlike the stock and commodities markets, real estate markets don’t rise and fall rapidly. For long-term investing, additional market factors are important to your buying decision. Investors who plan for short-term real estate market appreciation are speculating, which is outside of the basic model of low-risk investing.
Let’s be clear: There is no such thing as an ideal real estate market for investing. It tends to be more difficult to find bargains in rising markets, however, because if the market keeps rising, the probability of selling the property quickly for a large profit increases. In contrast, when property values are falling, more "bargains" become available.
Yet you need to assess the true value of these properties based on when you expect to sell the property. Thus, your purchase must be made at a steep discount to allow for a profitable sale later.
Some basic strategies can be used successfully in virtually all market conditions. Become educated in your local market first by understanding the large-scale trends-from national, regional, and specific neighborhoods. Learn about target neighborhoods, enlisting the aid of successful real estate professionals along the way.
These professionals will help interpret market indicators, such as the average length of time houses are sitting on the market this month versus last month or last year. Armed with this type of information, you will be able to make good and educated decisions.
Inventory, defined as the number of properties offered for sale, is a good indicator of current market trends. If inventory is low because of building restrictions or geography, then high demand will lead to rising prices. In rising markets, sellers often capitalize on the excitement of new listings to get properties under contract quickly, at premium asking prices.
In GTA, there sometime are also seasonal fluctuations in inventory, such as fewer listed properties in the winter months than in summer and a surge of listings in the spring.
Generally, seasonal drops in inventory reflect the trend to market properties more aggressively in spring and summer months when real estate markets are more active. Properties sell year-round, though investors should plan to reduce the price for winter listings or at least know that properties take longer to sell during those months.
While most markets in North America have risen over the last five years, however some of the markets in USA are flattening out, and some may have already dropped. This type of market offers great opportunity to the savvy investor. When property values are falling, inventory often rises, and many sellers become highly motivated when their properties fail to sell quickly.
Motivated sellers will do whatever it takes to sell their property. Whether sellers need to move from the area, are struggling financially, or have other pressing reasons to sell, they may well accept a below-market offer.
Investors know that a weak market can offer extraordinary deals, though flippers need to proceed with caution. In a falling market, even a few months’ delay can turn a sound deal into a headache. It always pays to know the market and purchase the property at a price low enough to net an eventual profit, even if the market continues to fall.
The common myth is that you cannot make money by in a bad real estate market. In a bad real estate market, you can often buy “junk” properties for (as an example) 50 Dollars and sell them for 60 Dollars. It’s all in how you do the math.
It is worth noting that markets can and will change. If the market rebounds after a purchase, then all is well for the investor. However, if the market takes a downturn after a purchase, there can be trouble ahead. Markets commonly show signs of slowing or turning over several months.
Sometimes the early signs come from national economic & political trends.
More important than guessing the future of a local market, you need to have a clear plan in mind when purchasing property. A smart investor knows exactly how he will exit the property before he buys. An even smarter investor will have a backup plan or two, in case the first course of action doesn't work.
In short, know your market and your plan before you begin to invest.
As you proceed through the home loan process you will encounter a variety of terms, many of which may be unfamiliar and confusing. To better navigate that process and make an informed, confident mortgage selection, take time to explore financing terminology. Some of the more common terms are briefly explained below to help you get started.
To find out more about Mortgage; please click here.
Without a title insurance policy, you may not be fully protected against errors in public records, hidden defects not disclosed by the public records, or mistakes in examination of the title of your new property. As a result, you may be held fully accountable for any prior liens, judgments or claims brought against your new property. However, your policy insures that if such an occasion arises, you will be defended free of charge against all covered claims and paid up to the amount of the policy to settle valid claims. With a title insurance policy, you need never worry that your new property's history will tarnish your bright future.
When buying a home in a major Canadian centre, you will often have to pay a tax referred to as land transfer tax, or sometimes as property purchase tax. The tax is usually calculated as a percentage of the purchase price, and the formula varies from province to province.
We have collected information and prepared a calculator to help you determine what the land transfer tax will be on the property you are looking at.
Unless you live in Alberta, Saskatchewan, or rural Nova Scotia, land transfer taxes (or property purchase tax) are a basic fact of life. These taxes, levied on properties that are changing hands, are the responsibility of the purchaser. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.
Many provinces have multi-tiered taxation systems that can prove complicated. If you purchase a property for $260,000 in Ontario, for example, .5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 - $250,000, while the $250,000 - $400,000 range is taxed at 1.5 per cent. Your total tax bill? $2,375.00.
To find out more about Land Transfer Tax and the Calculator; please click here.
- What is the Property Tax and whether Property taxes and qualified home interest are deductible on an individual's federal income tax return.
- What is the Land Transfer Tax.
- Many times, a home is the largest asset an individual has and is considered one of the safest investments available.
- A portion of each amortized mortgage payment goes toward the principal, which is an investment.
- A home is one of the few investments that you can enjoy by living in it.
- The majority of the time a REALTOR® can show you any home whether it is listed with a company, a builder, or even a For Sale by Owner.
- Working with a REALTOR® to purchase a For Sale by Owner is very advantageous because someone will be looking out for your best interests.
- An agent can explain the process of getting pre-approved, preparing you ahead of time with what documents are needed by lender.
- A pre-approval letter of mortgage may be a good idea before investing your time and money.
- Buyer representation is free! The seller's agent pays the buyer's agent!
- The right to conduct a property inspection, included in your sales contract, gives you the ability to negotiate with the seller regarding problems or walkway if the house fails the inspection.
- A Home Protection Plan can provide coverage for selected items such as central heat and air conditioning, interior plumbing, built in appliances, pool equipment, and other things. If the seller is not providing this coverage, you can purchase it yourself.
- Ask the real estate professional for a list of buyers that he or she has helped. Call several names to verify that you'll receive good service.
- Ask the real estate professional if they are familiar with the neighborhoods you want to live in. Ask how many homes they have shown there in the past year.
- Remember, not all agents are equal. The single most important question you can ask is "How long have you been in the business?" If the answer isn't 5 years or more, find another agent. Experience is what is required to protect you and your deal.