Investing in condos. With and without buying.

Recently I came across a list of world’s fastest growing condo markets and was amazed:

1.       Toronto with 132 new condos currently being built

2.       Mexico City - 88

3.       New York - 86

4.       Chicago - 17

5.       Miami - 16

Huge gap between Toronto and any other city in the world! Of cause, Toronto still has a long way to go from 1875 high-rises to New York’s 6000, but nearly 100 000 people arriving to Toronto every year. Add to this many baby-boomers who prefer "no hassle" condo style of living, mix high-paid young professionals who enjoy being close to work and entertainment and you get yourself a great cocktail named "booming condo market". No wonder everyone if not investing, but at least talking about it! So what are the typical ways to invest? 

Well, first of all you can buy existing condo and rent it. In cities such as Toronto you most probably will get your mortgage and taxes covered by rental income. If you play your cards right, rent might even cover part or all of the condo fees. Though this investment option is very popular, one must remember to cover all payments out of pocket if property is vacant (usually 1 out every 18 months) and budget for repairs and maintenance (few hundreds every year). People who invest in this scenario are not looking for monthly cashflow, they buy for equity (property value) growth. It is profitable in booming market and there is no limit of how long you can hold such condo, as long as you have enough cash to keep it.

What if you want to take advantage of growing condo prices but don't want to be a landlord? Well, buying condo units before they even built might be your choice. This scenario requires significant amount of cash (25-35%) of unit price, but amount is usually paid in 3 stages, all before building is registered. Main advantage is that you don't need to get a mortgage until building is registered. Your goal would be to find a buyer by that time. Usually you invest for 1-3 years and take advantage of increasing property values AND lower purchase price. How much profit you make will depend on how early in the game you get your hands on this development. The earlier - the better. Good agent might be your best ally for this.

For folks who want as little headache as possible syndicate mortgages is probably the best way to go. This is when you will act as a bank and lend money to a builder. Projects may vary from 1 to 5 years. Look for the ones that offer quarterly interest payments and have reserved fund to pay it. This way you get some cashflow and large payment at the end of constructions. Additional bonus often offered by builders is preferred shopping for units in this construction. You will have a chance to buy before general public. That way you can invest $25 000 (usual minimal required) into syndicated mortgage and if you have more - buy some units at low price.

Whichever way you choose to invest, remember to consult with professionals, such as your lawyer. And let me know if you need any contacts ;)

Mortgage And Your Legal Name

Getting married soon? Congratulations!  If you are thinking of changing your legal name for this or any other reason keeps in mind what just happened to my friends.

Happy couple got married, bought a house, baby on its way… Dream comes true!  Well one of them changed their name. Now insurance company doesn’t want to register house insurance because one of the names on the title doesn’t match ID. In order to fix that they need to change name on the mortgage at the bank (numbers may vary but probably under a hundred backs) and to change title of the property.

If you ever refinance your property or moved your mortgage to another bank, you probably know that any changes to the title (unless you use bank’s lawyer who, for some reason, has special “inexpensive” powers) could be painfully expensive. Few hundreds, sometimes over a thousand backs expensive!

And what if you are doing well in real estate and own a few properties? Don’t take my word as legal advice, but may be it makes sense to talk to your lawyer about registering these properties under a company name (which you will own of cause)!

Do you have a lot of nice staff in your house?

If we didn’t have to work so hard to make the money, we wouldn’t have to spent the money to make us feel good about working so hard

This is your life: The Holstee Manifesto

Have you ever looked for a daily inspiration? Something that will keep you going day, after day, after day? The Holstee Manifesto is one of the best moving philosophies I came across!

Thinking of a mortgage?

Understanding the Financial Crisis

Ever wondered how US Real Estate crisis started and why? This is great video that will give a very good idea

Bubble or not?

Anyone living in Toronto gave this question some thoughts. It doesn’t matter if you are renting or own your home, arrived just a week ago or lived here all your life. Everyone wonders how high the prices can go and what’s next.

I came across an article about Support, Resistance and Rounded numbers which offered an interesting perspective to this question.  Support and resistance is one of the fundamental foundations of technical analysis. It is believed that securities (property value in our case) have predetermined price levels where they stop falling (i.e., find the support necessary to stop falling) and predetermined price levels where the stock will reverse its upward climb (i.e., when it meets a price level that resists further climb upward).

Traders never buy or sell simply based on support and resistance, as it just one of the tools in technical trader toolbox. However it can help identify entry and exit points, and increase the probability of making a winning trade.

On the other hand our society seems to favor rounded numbers to ten, hundred, thousand etc. Whether it is learning to count, our currency or the special emphasis we put on new years that start a new decade.

For example, let's suppose company XYZ is on a bullish tear and approaching 100 for the first time. This is a milestone for many companies and there is a tendency for traders to pause at this moment. Many stocks in this situation will find resistance at 100, and a short pullback may occur. After a few days the resistance level is often tested again. Either resistance will hold again, resulting in either stagnation or a pullback, or resistance will be broken.

So how is all this important to housing prices? Well, according to Toronto Real Estate Board the average selling price in the first 2 weeks of July 2011 was $464,277.  Looks like the next milestone to hit is a nice round number of half a million. At this point we either find resistance or break this barrier. So let’s keep an eye on this