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First Time Buyer Frequently Asked Questions
Thursday, 15 December 2011, 10:11:46 AM

7 Frequently Asked First Time Buyer Questions


1. What Real Estate Agent is best for me / you?


2. What property can I afford?


3. What mortgage should I get? My bank or a mortgage broker?


4. What type of home should I buy? a house or a condominium?


5. Should I buy Preconstruction or Resale?


6. How do I choose a Lawyer?


7. What is the Process of buying a home?


1. What real estate agent is best for me / us?

An agent who is patient and has a great ability to communicate every stage of buying your first home. I am that realtor who is very passionate about the first time buyer process. These are not just words. Read my blog on why I love working with people starting out on the road to home ownership.

(click here to read “Do you remember your first time?)

Also there is absolutely no reason why one wouldn’t use the experience and guidance of a professional since it is the seller who pays the agent when you buy. So all you have to do is find an agent whom you’d like to work with as you’re about to spend a lot of time with them looking at places.

Other important questions for your prospective realtor;

a). Are you a full time agent or a part time agent? (Big difference, ask why?)

b). How long have you been a full time agent?

c). Do you own your own home?

d). Can they provide you with some numbers of previous first time buyer clients?

Finally, ask yourself, do you trust the agent your are considering? Like when I am selecting a tenant for one of my investment properties, once all due diligence is done, I ask myself, what does my gut tell me?

2. What can I afford?

This a very early step to take before looking at any homes. It lays out the parameters of what you can and can’t afford and will help shape your decisions around what and where you ultimately buy.

Both your real estate agent and your mortgage specialist can help you with questions such as:

a). FixedVariableOpened and Blended Mortgages – what does this all mean and which one for me?

b). Interest Rates - where are they going and where can I get the best rate?

c). What will my monthly payment be, can I afford it? Banks like to see your monthly housing costs to be about 32% of your gross monthly income.

3. What mortgage should I get? My Bank or a Mortgage Broker?

a). What type of Mortgage? This is a very individualistic question and really depends on who’s asking. Are you risk adverseHow long are you hoping to stay in your new home? etc etc. As you can see, very specific answers based on the individual(s) and their goals.

b). Bank or a Mortgage Broker? I regularly encounter first time buyers who wish to use their ownpersonal banks as their financier without really understanding the benefits of using a mortgage broker. Simply put, a bank can only offer you their own products whereas a broker has access to all the different financial institutions’ products. They’ll also have access to more creative lending products. This may be advantageous if you are self-employed for example.

4. What type of home should I buy? a house or a condominium?

Your agent will be able to guide you here and will show their experience in ascertaining you and your lifestyle, trying to find the work and social balance for you based on price and location preferred.

Such question as follows are good starting questions;

a). The responsibilities of tending to a home i.e. shoveling snow, maintenance etc, how do you feel about these?

b). Are you planning on having a family one day?

c). Where do your family and friends all reside?

d). Where do you work? currently what is your commute? do you wish this time to be decreased or are you okay with it being a little bit more?

e). Describe what you like to do on weekends?

f). What amenities do you absolutely need close to your home?

I could go on and on with these questions but I believe you get the idea. It’s getting to know you and who you are that helps me as an agent find you the right home for sale.

5. Should I buy Preconstruction or Resale?

Ask these questions to help determine which of these or both might be options for you;

a). Do you wish to know and see exactly what your are getting for your money?

b). Timeline? Are you comfortable waiting a few years before moving into your new home?

c). Do you wish to be able to negotiate the purchase price of your home?

d). Ask your realtor what are the risks of buying preconstruction versus the risks of buying resale?

read my page on 5 key tips on buying preconstuction homes in Toronto.

6. How do I choose a lawyer?

Ask your realtor for a few referrals and interview them. Ask them questions about;

a). Their costs?

b). Do they mind providing a retainer letter for the services?

c). Do they practice only Real Estate Law?

d). How long have they been practicing Real Estate Law?

e). Do I trust them?

7. What is the process of buying a home?

So now you’re ready to rock n’roll and find your new home! Ask your real estate agent what the entire process is going to look like once you’ve determined all these above steps.

An agent’s job is to be patient here and explain everything along the way.

Ask your agent do they have a booklet or material that you can read ahead of time to help you get ready.




Reposted from http://righthome.wordpress.com
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It's a Small World Indeed, a Bottle of Wine and One Great Condo For Sale in the Heart of Kensington-Chinatown
Posted on Wed, 14 Sep 2011, 07:36:46 PM  in 18 Beverley Street Phoebe on Queen Real Estate Listing
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Good Morning Folks,

This week I'm emailing on two fronts. One which has absolutely nothing to do with real estate and the other all to do with it!

One tale is about how serendipitous our lives can sometimes be, whilst out doing my daily job last week I was floored by how small our world really is.

The second tale is to bring to your attention a great condo for sale in the heart of downtown Toronto. Ideal for many different buyers, either the younger professional who wants to be a few seconds from the financial, theatre and entertainment districts downtown, the artisan who's connected or wishes to be to the many arts facilities in the area such as the AGO and OCAD University or the retiree who wishes to have a place downtown walking distance to everywhere and not have to worry about any maintenance hassles. Check out this great 1+1 Bedroom condo in a most unique development at the Phoebe on Queen Street West.

 

 

If you would like anymore information please don't hesitate to contact me here with your queries.

 

So back to the tale about serendipity! Particularly in Toronto, with 3.5 million or so living downtown, chance occurrences are rare.

A large part of my job is to help keep home owners informed of the value of their homes or condos about once a year so as they can plan ahead and make their decisions about possibly selling or not. Last week, I had one of these evaluations for a lady whom I had called in the neighbourhood offering the service.

We were discussing certain possibilities of live in / rental investment properties in the area and various financing structures which could allow her to live virtually rent free whilst renting out 2-3 other units in the house. In the back of my mind I'm thinking about how I had done this in the last year for another client in the area.  As soon as I began thinking about it she started mentioning a good friend of hers whom had bought in the area about 9 months ago and she wanted to consider this as an option moving forward! Of course the cogs began turning in my mind.. and probing a little deeper in regards to location and number of units and type of renovation involved;

I asked, "Okay, what's your friend's name?" and of course what d’ya know!, my client and her friend are one and the same person! my jaw dropped in sheer amazement!

Coincidence or not, I'm always awed by the sheer power of these chances when they do occur in our lives and reaffirms to me how close we all really are, or could be :)

Feel free to comment with some of your zany and weird chance happenings below, there may well be a nice bottle of wine in it for the best one!

that's it for this week folks,

Enjoy the rest of the week and have a great weekend,

Sláinte.

Donal.


 

 

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An Unfortunate Reality of our Real Estate Market for Buyers
Posted on Thu, 25 Aug 2011, 11:26:58 AM  in Buying Real Estate in Toronto
Tags:,  ,  ,  ,  ,  ,    

okay, now for a break from the economics this week.

 

I wanted to share with you a story from the field! Like every occupation there are casualties of war so to speak and in my profession the wounds tend to go a little deeper due to the very emotional nature that tends to go along with buying or selling a home.

 

So let me tell you about a client of mine who is buying her first home, which adds even more emotion to the equation. Alva and I have been out for about a month now viewing condominiums in the downtown core here in Toronto and we've looked at a wide spectrum of places, in what I like to call the educational phase of buying a home. Without wanting to focus in on a particular condo too soon, I like to bring my clients out to see a great variety of places. It gives us both the opportunity to learn from each other what's a "definite must have" versus a "would like but can live without" characteristic of the home.

 

At one point Alva got very excited about a unit which we found quiet early on during our searching but we decided that it was too early in the process to move ahead with an offer. There was much more to see out there and so we continued on.

 

After another week I could see that Alva was getting a bit disheartened with the search. She just wasn't enamoured with anything that we were seeing and no longer was interested in the initial condo which was a hit.

 

And then it happened! a beautiful unit came out which was well priced and seemed ideal. There was an offer date with the listing meaning that the agent and the seller decided to hold off any offers from buyers until a certain date. Generally this tactic heightens demand for the condo and can result in multiple offers, yielding a greater price for the seller. As it happened, the eve we went to look at this unit, it was the eve when offers were to be presented and funnily enough no offers were registered.

 

Alva fell in love with the place and I thought that this was our opportunity to make an offer. Hopefully the seller and listing agent would be conducive to our offer due to the fact that the market had spoken and no other offers came in.

 

That night we drafted an offer and on doing comparable analysis on the most recent and similar units sold in the building,  I soon realised that this place was slightly underpriced and that the realistic selling price was greater than Alva's budget. I had a quick chat with the listing agent to discuss whether we should proceed. We decided to give it a shot and put an offer on paper along with a fantastic cover letter explaining to the seller all about Alva.

 

I knew the reality of what was likely to happen here. The situation where a client has fallen in love with a condo but it's priced below the actual market value and the realistic value is above the budget. Could we entice the seller with a great cover letter and the fact that no other offers came in to accept an offer slightly below what they were expecting?

 

I emailed the offer that night at about midnight, and of course you know the outcome. We were unsuccessful and the seller decided to suspend the listing and wait until the fall market where the strong likelihood  that more buyers would be in the market.

 

I watched my client go through a great deal emotionally. Searching for a month, finally finding a great place and falling in love with it. Believing there was a strong chance to buy it and then to realise that the seller really wanted more than the price tag indicated! This was the real kicker for Alva and she felt quiet angry about it all, she asked, "Why if they wanted  more didn't they put it in the asking price?! If they had then we wouldn't even have seen it and I wouldn't feel so disheartened right now!"

 

This is an unfortunate reality in our market today and I've seen many clients go through the same roller-coaster ride. It's hard to watch but in all cases I've seen my clients go on to find something else which they equally loved and made their home.

 

I write this now as Alva and I continue our search and move forward. I know that the right unit is out there and we will find it, plus I know that once we pass Labour Day weekend, activity picks up and more places will come on the market.

The lesson I learned from all of this is to always caution a client that if there is an offer date holding off potential buyers that there is a strong chance that the listing could be underpriced and until analysis takes place we won't really know what the situation is. The seller may well be seeking more than the list price and if so it may well be outside the client's budget.  I have learned another lesson in handling expectations!

 

Feel free to comment below on your experiences if you've found yourself in similar circumstances.

 

Have a great weekend folks and see you on the other side:)

Sláinte,

Donal.

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Affordability Index That!
Wednesday, 24 August 2011, 02:37:27 PM

Folks,

I have to say it’s fairly tough to keep these economic emails coming out in probably the second most relaxed month of the year after December. None the less, I said I’d do a quick blog last week on affordability indexes so here we go. I’ll keep it brief.

In my opinion this factor alone is one of the most vital to understanding where the real estate market is going. Although it’s not the only one, I feel that this indicator tells a lot more. For instance, in Vancouver, the real estate market has seen quiet a few ups and downs in the past few years particularly when we saw global markets fall in late 2008 and into 2009. You had a local market with growing GDP and increasing population due to job increases, (Largely due to the construction jobs and surrounding industries supporting the lead up to  the Vancouver Winter Olympics).

So why did Vancouver see such a drop in average home house prices when consumer confidence was rocked? And why didn’t other Canadian cities see the same drops with similar economic strengths?

Yip, you’re old affordability indexes tell the whole story..

Affordability index calculates what the average family with average income pays pre- tax towards theaverage home in a city. This assumes a 25 year amortization on a fixed 5 year rate and costs ofaverages taxes and utilities are also included.

In a nutshell:

(Source: Bank of Canada)

Oh, sorry I’m getting carried away in my past days of sums lessons :)

Okay, very simply, here are the two scenarios for two cities!

1. Toronto City at the time had an affordability index of about 48% as I recall.

This meant that, of every pre-tax dollar that the average family was earning, about 48% of that dollar was going towards mortgagetax and utility costs based on the average home value in that city.

2. So guess what it was in Vancouver in September of 2008?

Of every pre-tax dollar that the average Vancouver family was earning, about 82% of that dollar was going towards mortgagetax and utility costs based on the average home value in that city.

Conclusions :

Wow! so after taxes the average family in Vancouver didn’t really have much left for the groceries and general living expenses. This is a true reflection of a bubble. Something else gave way, and in this case consumer confidence due to global instability and the bubble began to deflate. Now thankfully due toremaining low interest rates and other economic fundamentals staying strong it wasn’t a total collapse in the Vancouver real estate market.

Now looking at Toronto’s 48%, while not ideal there was definitely less of a bubble and when consumer confidence was shaky, it managed to hold its own more steadily.

Finally, what is the ideal affordability index for a real estate market that has all the other factors such as growing GDPjob growthwage increases etc etc. We’re told 26% – 33% is ideal. Hence why average home prices in cities such as HamiltonKitchenerCambridge, Ajax and Barrie to name a few have grown very strongly in the last few years.

there you have it folks, you can all wake up now, class has ended :)

Enjoy your weekend,

Slainte,

Donal.

PS. To keep track of the quarterly reports on Affordability indexes in Canada, goto http://www.rbc.com/economics and subscribe top their newsletters or RSS feeds.




Reposted from http://righthome.wordpress.com
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Affordability Index That!
Posted on Wed, 17 Aug 2011, 10:57:29 AM  in Housing Affordability Index,  Real Estate Investing, etc.
Tags:,  ,  ,  ,    

Folks,

 

I have to say it's fairly tough to keep these economic emails coming out in probably the second most relaxed month of the year after December. None the less, I said I'd do a quick blog last week on affordability indexes so here we go. I'll keep it brief.

 

In my opinion this factor alone is one of the most vital to understanding where the real estate market is going. Although it's not the only one, I feel that this indicator tells a lot more. For instance, in Vancouver, the real estate market has seen quiet a few ups and downs in the past few years particularly when we saw global markets fall in late 2008 and into 2009. You had a local market with growing GDP and increasing population due to job increases, (Largely due to the construction jobs and surrounding industries supporting the lead up to  the Vancouver Winter Olympics).

 

So why did Vancouver see such a drop in average home house prices when consumer confidence was rocked? And why didn't other Canadian cities see the same drops with similar economic strengths?

 

Yip, you're old affordability indexes tell the whole story..

 

Affordability index calculates what the average family with average income pays pre- tax towards the average home in a city. This assumes a 25 year amortization on a fixed 5 year rate and costs of averages taxes and utilities are also included.

 

In a nutshell:

 

 

(Source: Bank of Canada)

 

Oh, sorry I'm getting carried away in my past days of sums lessons :)

 

Okay, very simply, here are the two scenarios for two cities!

 

1. Toronto City at the time had an affordability index of about 48% as I recall.

 

This meant that, of every pre-tax dollar that the average family was earning, about 48% of that dollar was going towards mortgage, tax and utility costs based on the average home value in that city.

 

2. So guess what it was in Vancouver in September of 2008?

 

Of every pre-tax dollar that the average Vancouver family was earning, about 82% of that dollar was going towards mortgage, tax and utility costs based on the average home value in that city.

 

Conclusions :

 

Wow! so after taxes the average family in Vancouver didn't really have much left for the groceries and general living expenses. This is a true reflection of a bubble. Something else gave way, and in this case consumer confidence due to global instability and the bubble began to deflate. Now thankfully due to remaining low interest rates and other economic fundamentals staying strong it wasn't a total collapse in the Vancouver real estate market.

 

 

Now looking at Toronto's 48%, while not ideal there was definitely less of a bubble and when consumer confidence was shaky, it managed to hold its own more steadily.

 

Finally, what is the ideal affordability index for a real estate market that has all the other factors such as growing GDP, job growth, wage increases etc etc. We're told 26% - 33% is ideal. Hence why average home prices in cities such as Hamilton, Kitchener, Cambridge, Ajax and Barrie to name a few have grown very strongly in the last few years.

 

there you have it folks, you can all wake up now, class has ended :)

 

Enjoy your weekend,

Slainte,

Donal.

 

PS. To keep track of the quarterly reports on Affordability indexes in Canada, goto http://www.rbc.com/economics and subscribe top their newsletters or RSS feeds.

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Who says you can’t determine a Real Estate Market? Part 33 1/3!
Tuesday, 16 August 2011, 02:41:56 PM

Well it’s the final instalment of the Who says you can’t determine a Real Estate Market!

In recap:

Stage 1: In the first 12 months, look for positive GDP growth of between 3-3.3% and positive Job Growth. (Click here to read the full details of these two indicators)

Stage 2: The next stage is from about month 12 to month 18. 4 indicators typified this stage.

1. Population Growth

2. Increased Rental Demand

3. Decreased Vacancy Rates

4. Increased Rents.

(Click here to read the full details of these two indicators)

Stage 3:

So what’s in store for stage 3?

Imagine you’ve are one of those new immigrants to a city contributing to the population growth because you got a new job. Statistics show you’ll rent a place first to get a feel for your new home, but your not the only one moving to the city to take advantage of the growing jobs market. The available rentals in the city become thin on the ground therefore the pent up demand results in increased rental rates.

18 months to 2 years down the road you are settled into your job and you’re loving the new life. You’ve had much time to explore the city, see where your friends live and you’ve gotten a real feel for where you would like to live now.

So now you are considering purchasing! An this is the next real indicator.

1. The Demand for Property Purchase increases.

Assuming the affordability index is in check, (Don’t worry about this one, I’ll go into this in another blog post), then the demand for home purchasing increases in the city.

2. Then the result from this building demand creates an Increase in the Property prices. This trend can continue to occur for about 5 – 10 years on average. Global financial turmoil can slow down or speed up the process as we’ve seen over the past few years, but as long as a market has strong fundamental indicators occurring you are in good shape.

All of these indicators can occur temporarily and give false impressions about a market. So one of the next steps is to look at certain factors to determine whether or not the growth has a solid foundation beneath it. Next I’ll be going into the topic of the Affordability Index. This fundamental gives one very good insight into whether or not a market is close to bursting or whether it has some time left to grow.

So in final recap:

Stage 1: Year 1.

1. GDP growth

2. Job Growth

Stage 2: Year 2.

1. Population Growth

2. Increased Rental Demand

3. Decreased Vacancy Rates

4. Increased Rents.

Stage 3: year 3 onwards.

1. Property Purchase Demand

2. Increased Property Prices.

So there you have it folks, this is definitely simplified, it’s a macro picture of the business of assessing a real estate market. Once again thanks to www.reincanada.com for providing such great analysis as this in our monthly meetings.

Until next time,

Slainte,

Donal.




Reposted from http://righthome.wordpress.com
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Who says you can't determine a Real Estate Market? Part 33 1/3!
Posted on Tue, 09 Aug 2011, 08:40:50 PM  in Real Estate Investing,  Real Estate Markets, etc.
Tags:,  ,  ,  ,  ,  ,  ,  ,  ,  ,  ,    

Well it's the final instalment of the Who says you can't determine a Real Estate Market!

 

In recap:

 

Stage 1: In the first 12 months, look for positive GDP growth of between 3-3.3% and positive Job Growth. (Click here to read the full details of these two indicators)

 

Stage 2: The next stage is from about month 12 to month 18. 4 indicators typified this stage.

1. Population Growth

2. Increased Rental Demand

3. Decreased Vacancy Rates

4. Increased Rents.

(Click here to read the full details of these two indicators)

 

Stage 3:

So what's in store for stage 3?

 

Imagine you've are one of those new immigrants to a city contributing to the population growth because you got a new job. Statistics show you'll rent a place first to get a feel for your new home, but your not the only one moving to the city to take advantage of the growing jobs market. The available rentals in the city become thin on the ground therefore the pent up demand results in increased rental rates.

 

18 months to 2 years down the road you are settled into your job and you're loving the new life. You've had much time to explore the city, see where your friends live and you've gotten a real feel for where you would like to live now.

 

So now you are considering purchasing! An this is the next real indicator.

 

1. The Demand for Property Purchase increases.

Assuming the affordability index is in check, (Don't worry about this one, I'll go into this in another blog post), then the demand for home purchasing increases in the city.

 

2. Then the result from this building demand creates an Increase in the Property prices. This trend can continue to occur for about 5 - 10 years on average. Global financial turmoil can slow down or speed up the process as we've seen over the past few years, but as long as a market has strong fundamental indicators occurring you are in good shape.

All of these indicators can occur temporarily and give false impressions about a market. So one of the next steps is to look at certain factors to determine whether or not the growth has a solid foundation beneath it. Next I'll be going into the topic of the Affordability Index. This fundamental gives one very good insight into whether or not a market is close to bursting or whether it has some time left to grow.

 

So in final recap:

 

Stage 1: Year 1.

1. GDP growth

2. Job Growth

 

Stage 2: Year 2.

1. Population Growth

2. Increased Rental Demand

3. Decreased Vacancy Rates

4. Increased Rents.

 

Stage 3: year 3 onwards.

1. Property Purchase Demand

2. Increased Property Prices.

 

So there you have it folks, this is definitely simplified, it's a macro picture of the business of assessing a real estate market. Once again thanks to www.reincanada.com for providing such great analysis as this in our monthly meetings.

 

Until next time,

Slainte,

Donal.

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Who says you can’t determine a Real Estate Market? Part Deux!
Wednesday, 03 August 2011, 11:06:43 AM

Hello again folks,

so for round two of how to determine a real estate market! I’ll keep the preamble short and simply refer to my previous blog where I go into more detail about the initial economic indicators. In very quick synopsis;

The initial signs to notice would be.. stable GDP growth followed by consistent Job Growth. So what happens now? The next few pointers may all seem overly simplistic, but rest assured folks! this is all it takes, monitor economic trends such as these to know where your real estate market of choice is going!

The System Part 2(Stage B: 12 – 18 months)

1. Population Growth.

Refer to statistics Canada or the local economic development office to determine if indeed your area’s population growth is occurring at a rate which is faster than that of the provincial norm. If so then this is a great sign that people are both migrating from within and without the province to your area of choice.

2. An increased demand for rental properties.

By human nature we tend to want to try out our new environment and not lay roots immediately. So this increase in population tends to rent initially and see how things go as well as taking time to learn the city or town. This all creates a demand in the rental stock which in turn…

3. Decreases the Vacancy Rates:

The age old laws of economic supply and demand come into effect! More and more people require rental homes due to the job and population growth which ultimately creates a shortage of supply! A very strong vacancy rate from an investment perspective would be around 2-3%, meaning of all the rental stock in an area, only 2-3% are actually vacant at any given time.

4. Increased Rents:

All this demand for rental homes creates a pressure on current market rents and drives the rental prices higher.

So there you have it for Stage 2, but there is another underlying factor here which one can keep an eye on to ensure that this increased population can indeed afford to pay these increased rents. Ultimately it’s what people earn which dictates what they can pay for their rent. Statistics Canada also looks at a factor called “Average Weekly Earnings by Province and Territory” Note here how in Ontario, even through the economic difficulties seen since 2008, we’ve had strong consistent growth of our weekly earnings. This increase in wages combined with population increase and demand for rentals brings about the increased rents.

So  there you have it; Stage 2 of how determine a real estate market. It seems so simple but yet many purchasers fail to look at these core fundamentals when considering investing in real estate. I hope that now you are well on your way to understanding real estate markets and how if you focus on these elements you’re well ahead of the game.

Have a fantastic holiday weekend and stay tuned for the final leg of this blog series in the coming weeks. As Always, feel free to comment, to agree or disagree, I want to know your thoughts!

Sláinte,Donal.




Reposted from http://righthome.wordpress.com

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Who says you can’t determine a Real Estate Market?
Wednesday, 03 August 2011, 10:27:27 AM

Hello Folks,

I’ve been meaning to write this series of blogs for some time now so here we go! Over the coming weeks I’d like to walk you through some of the key economic fundamentals in determining a real estate market. We all know about speculative real estate purchasing, particularly here in Toronto over the last decade. It almost seemed a guarantee that if you bought a condominium that you would see at least 10 – 15% appreciation a year.  So what is the difference between speculative investing and investing in amarket which has a strong economic foundation?

Isn’t all investing speculative I hear you say? of course it is, but why not be a Warren Buffet about it. Do your due diligence into where you place your investments. With approximately 60 – 80% of condos being purchased in Toronto and the GTA being investor buys over the last decade how much of  these buyers do you suppose assessed the economics around their purchase rather than jumping on the wagon speculatively.

(These next two paragraphs are a little history about how I ended up learning this system of analysing markets.. to cut to chase.. scroll down to The System)

For thirteen years now, I’ve been on this learning kick into real estate and I have to admit that for about half of those years I had blinkers on and I was a speculative investor in property! Arriving in Canada and with more time on my hands, I began attending educational seminars and being somewhat naive at the time I realised quiet quickly that these “run to the back of the room before all the special deals are gone” seminars were not for me.

Fortunately I did attend one weekend long seminar in 2004 which really opened my eyes. I wasn’t being sold a quick turnquick flipbuy homes with no money down make a million in 0.5 seconds strategy. I was being sold a consistent system of economic due diligence and patience with real estate. I became a member of this group that weekend and I’ve watched this system hold its own in a global recessionwhich parallels the worst seen in the last century.

The System(StageA:  1 – 12 Months)

What are these first few key economic identifiers into determining a real estate market?

1. GDP Growth: over a given period, what is the gross market value of all the goods and services which have been produced by a country.

This average broken down is a sum of all towns, districts and cities across Canada.

1.a. What is a good GDP Growth? the sweet spot for  GDP growth is in the region of 3 – 3.3%. Above this inflation begins to play a part and measures to slow down possible rapid growth are generally considered and implemented.

If the GDP growth is strong what is the next identifier to look out for?

2. Job Growth: the economic development office for your area will be a good source for this information as will Statistics Canada. Look at the provincial average increase in job growth and if your area of interest is growing faster than the provincial average you should definitely continue analysing the area as this a key economic fundamental.

2.a. How diverse is the employment industry? how many major employers are in the area or are definitely moving in?

There you have it. This is the first stage of determining a real estate market. I hope you found it educational and got passed the preamble, I’m Irish!, I can’t but help add the story ':)'

In the coming weeks I’ll be emailing you with the following indicators in the market to focus on for a long term approach to successful ownership of real estate.

Have a great weekend,

Sláinte,

Donal.




Reposted from http://righthome.wordpress.com

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Who says you can't determine a Real Estate Market? Part Deux!
Posted on Fri, 29 Jul 2011, 08:40:01 AM  in Real Estate Investing,  Market Interest Rates and Economics, etc.
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Hello again folks,

so for round two of how to determine a real estate market! I’ll keep the preamble short and simply refer to my previous blog where I go into more detail about the initial economic indicators. In very quick synopsis;

The initial signs to notice would be.. stable GDP growth followed by consistent Job Growth. So what happens now? The next few pointers may all seem overly simplistic, but rest assured folks! this is all it takes, monitor economic trends such as these to know where your real estate market of choice is going!

The System Part 2: (Stage B: 12 - 18 months)

  1. Population Growth.

Refer to statistics Canada or the local economic development office to determine if indeed your area’s population growth is occurring at a rate which is faster than that of the provincial norm. If so then this is a great sign that people are both migrating from within and without the province to your area of choice.

  1. An increased demand for rental properties.

By human nature we tend to want to try out our new environment and not lay roots immediately. So this increase in population tends to rent initially and see how things go as well as taking time to learn the city or town. This all creates a demand in the rental stock which in turn...

  1. Decreases the Vacancy Rates:

The age old laws of economic supply and demand come into effect! More and more people require rental homes due to the job and population growth which ultimately creates a shortage of supply! A very strong vacancy rate from an investment perspective would be around 2-3%, meaning of all the rental stock in an area, only 2-3% are actually vacant at any given time.

  1. Increased Rents:

All this demand for rental homes creates a pressure on current market rents and drives the rental prices higher.

So there you have it for Stage 2, but there is another underlying factor here which one can keep an eye on to ensure that this increased population can indeed afford to pay these increased rents. Ultimately it’s what people earn which dictates what they can pay for their rent. Statistics Canada also looks at a factor called “Average Weekly Earnings by Province and Territory” Note here how in Ontario, even through the economic difficulties seen since 2008, we’ve had strong consistent growth of our weekly earnings. This increase in wages combined with population increase and demand for rentals brings about the increased rents.

So  there you have it; Stage 2 of how determine a real estate market. It seems so simple but yet many purchasers fail to look at these core fundamentals when considering investing in real estate. I hope that now you are well on your way to understanding real estate markets and how if you focus on these elements you’re well ahead of the game.

Have a fantastic holiday weekend and stay tuned for the final leg of this blog series in the coming weeks. As Always, feel free to comment, to agree or disagree, I want to know your thoughts!

 

Sláinte,

Donal.

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Donal Ward-McCarthy is a Realtor who works primarily in condos and residential, buying selling and leasing in Toronto. Neighbourhoods such as: The Annex , Beaconsfield Village , Bloordale , Wallace / Emerson , Bloor West , Brockton Village , Carleton Village & Weston Pellam Park , City Place , Distillery District , Dovercourt and Bloorcourt Village , Dufferin Grove , Fort York , High Park , The Junction , Junction Triangle , Liberty Village , Little Italy , Niagara , Parkdale , Roncesvalles , St. Lawrence , Trinity Bellwoods , West Bend

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