1. Mortgage interest rates

Low interest rates allow a greater proportion of renters to become homeowners, which in turn can lead to an increase in home sales and therefore push prices higher. That said they don’t significantly increase mortgage costs (on a $100K mortgage a quarter % increase in rates only increases the payments by about $14).

2. Net Wealth Effect Increase in Disposable Incomes

This is one of the most important indicators. If a town’s average disposable income is increasing faster than the national average real estate prices are poised to do the same thing. Key Indicators: a) increased average income; b) decreasing income tax rates; c) increasing retail sales. Be wary of towns where demand is driving values upward while the average income is remaining flat. Go to www.rbc.com, then to economics to find the housing affordability index. As a rule of thumb a well-balanced market for investors is a market that has a housing affordability index of about 33%.

3. Increased Job Growth and In-Migration

It pays to read the newspaper regularly in the towns you invest in. Be on the lookout for announcements of new jobs, major expansions, or new employers moving in. Find areas where the population is growing faster than the provincial average and gaining a good reputation. Also look for Immigration- people from other countries moving into the area, and Intra-migration- people moving from other parts of Canada into the area.

4. The Real Estate Doppler Effect

It is often much more profitable to invest in areas surrounding the boom than to buy property in the heart of it. Use this factor to identify areas that are poised for a strong increase in demands. Smaller cities, outside of areas that get the effect, usually take 6 months to catch up. Look for towns where redevelopment is occurring. Older untouched neighborhoods in these areas can sometimes be hidden gems that aren’t immediately affected by a boom.

5. Local, Regional and Provincial Political Climate

Business friendly politicians generally equal real estate friendly investment areas. Look for regions where development is wanted, not shunned. Look for areas with forward-looking economic development offices where they sell the area to potential employers. Progressive towns attract business while other towns lose it.

6. Critical Infrastructure expansion

Here’s another reason why reading local newspapers in areas that you pan to invest in will pay off for you big time. Look for planes, trains, highways, sewers, land annexation or expansion plans. But remember… DON’T BUY UNTIL YOU SEE SMOKE! Never buy based on rumors alone. Trains and rapid transport are huge (i.e.: towers that spring up at subway stops). Buy within 800 meters of the station, or exit/entrance etc.

6b. Increased cost of labor and materials

This occurs in areas of high in-migration and infrastructure expansion, labor and material costs will increase dramatically. Look for regions where there is a marked increase in these costs as a sign of future value increases. The value increases occur around six months after the cost of new building increases.

7. Areas of gentrification and renewal

If chosen correctly this consistently provides the biggest bang for investment dollars. This is best defined as areas that are moving up from one economic class to the next, often described as “tough, yet funky”. In these areas, you’ll witness a mix of run down to well-kept, recently fixed up properties. Often you’ll see these areas mentioned in the news. Every city and most towns have areas like this. The local perception is the hardest to change, so often locals miss the opportunity. Insight: Look for Doppler Effect gentrification areas. Never be first into an area you believe is going to be in transition. Renewal areas take more due diligence but are worth the effort.

THE ACTIVE FACTORS

These Factors we can influence. Each affects the overall value of a property.

8. Maximizing value and zoning opportunities

Sophisticated investors look first at properties physical attributes, and then they examine how they may be able to change the property to optimize profit way beyond just renovations. IE: an old hotel that is converted into loft apartments, taking a single family home and converting it to a duplex. You need to know zoning bylaws and tenant regulations to make the transition successful. A small percentage of properties will have this potential, but make sure you have the required finances and expertise before taking this on, or find a partner.

9. Buy wholesale; sell retail

You can buy properties at wholesale any day of the week in any town across the country. There are companies whose sole business is buying properties this way. I.E. Buying an apartment building and turning the apartments into condos in an area where condos sell for 80K, and you can buy the building and do the conversions for an average of 50K. Development of raw land also falls under this. Another way is to buy properties that are going to foreclosure. In Canada, accessing these properties is tougher than in other countries. In the US, it is very easy. The best market is the pre-foreclosure market where you proactively advertise to buy such properties.

10. Stand out from the crowd

Quality marketing is a real estate investor’s best kept secret. You must be proficient to get above market rents and values for your properties. I.E. Two similar houses where one is properly marketed can easily sell for 5-10% more than the other can. Matching your message to your prospective target is critical.

11. Renovations and sweat equity

Areas in transition are great sources for homes that need improvements. Look for well-built but neglected homes. Keep the work simple and in line with what a renter or owner is looking for. Improvements can also be landscaping and exterior work.

12. Speculation, jumping the gun on a wish & a prayer!

Speculators forget about economic fundamentals, and neglect doing homework once again, proves emotions lead to bad decisions, and is the downfall of most real estate investors.

Match potential investment areas against the 12 components. In today’s market you are looking for at least 7 of the 12 components to be in-line before purchasing.

Other Possible Due Diligence Steps

* Pick up the local newspapers
* Drop by the public library
* Pay attention to business moves
* Study housing prices
* Look at vacancies
* Visit the local Chamber of Commerce
* Visit local business owners

-- Heather

Statistics Canada released detailed analysis of data from the 2006 Census on earnings and income on May 1st. Here is a summary of some of the key findings:

Little change in earnings during past quarter century

Median earnings of Canadians employed on a full-time basis for a full year changed little during the past quarter century, edging up from $41,348 in 1980 to $41,401 in 2005 (in 2005 constant dollars).
Earnings of full-time full-year earners rose for those at the top of the earnings distribution, stagnated for those in the middle and declined for those at the bottom.
For the purpose of this analysis, full-time full-year earners were divided into five groups based on their employment income levels, each group representing one-fifth, or 20%, of the total number of workers.
Between 1980 and 2005, median earnings among the top 20% of full-time full-year earners increased by 16.4%. In contrast, median earnings among those in the bottom one-fifth of the distribution fell 20.6%. Median earnings among those in the middle 20% stagnated, increasing by only 0.1%.
The more rapid growth at the top of the earnings distribution has led to an increase in the proportion of high earners over the past quarter century.
In 1980, 3.4% of full-time full-year earners received $100,000 or more (in 2005 constant dollars). By 2005, this proportion had almost doubled to 6.5%. As a result, more than half a million individuals earned $100,000 or more in 2005.
During this 25-year period, recent immigrants lost ground relative to their Canadian-born counterparts.
In 1980, recent immigrant men who had some employment income earned 85 cents for each dollar received by Canadian-born men. By 2005, the ratio had dropped to 63 cents. The corresponding numbers for recent immigrant women were 85 cents and 56 cents, respectively.
Earning disparities between recent immigrants and Canadian-born workers increased not only during the two previous decades, but also between 2000 and 2005.

Family earnings: Working couples with children had highest median earnings of all family types

Between 1980 and 2005, median earnings of economic families in which at least one partner, or the parent, was aged between 15 and 64 years increased by 9.3% to $63,715. Earning increases were greater for families than for individuals, mainly due to the increasing participation of female partners in the labour market.
Working couples with children had the highest median earnings of all family types in 2005, an estimated $75,997, up 20.6% from 1980. For lone-parent families headed by women, median earnings rose 10.9% to $30,958. Their male counterparts had median earnings of $47,943, a drop of 8.5% since 1980.

Incomes of families: Couples with children on top rung of income ladder

Couples with children, once the dominant type of economic family, no longer make up the majority of families. In 1981, couples with children accounted for 56.3% of all families with two or more people; by 2006, this proportion had declined to 46.2%.
In contrast, couples with no children accounted for 30.3% of the total in 1981; by 2006, their proportion had increased to 37.0%.
Although their share has declined, couples with children still have a higher median income than any other type of economic family. In 2005, their median income amounted to $82,943, up 21.6% from 1980, mostly due to the increase in the number of dual-earner families.
The median income for couples without children at home was $59,834, up 14.6% from 1980.
It is also possible to examine families in terms of age structure. Of the 3,252,990 couples without children at home in Canada, 24.8% were senior couples; that is, both partners were aged 65 and over. The median income of these senior couples was $45,674 in 2005, up 55.8% from 1980.
In 2006, the number of lone-parent families headed by women surpassed the 1-million mark, hitting 1,037,425. The 2006 Census also showed that 248,900 lone-parent families were headed by men, more than double the number in 1981.
Census data showed that the income gap between these two types of families narrowed slightly during the past 25 years.
The median income for lone-parent families headed by women in 2005 amounted to $36,765, still the lowest of all the major economic family types. However, this was 26.4% higher than it was in 1980. In contrast, the median income for lone-parent families headed by men declined 4.1% during this 25-year period, to $51,974.

Sources of income: Employment earnings account for four-fifths of income

For economic families as a whole, employment earnings represented the lion's share of income. Of every $100 of income received in 2005, employment earnings accounted for $78. Still, this was down from a quarter century earlier, when earnings accounted for almost $84.
In addition, government transfer payments, such as Old Age Security (OAS), Employment Insurance benefits, Child Benefits, and Goods and Services Tax credits, contributed $9.90 of every $100.00 in income in 2005.
Investment income represented $4.20 of every $100.00, while retirement income sources such as private pensions accounted for $5.90, more than double the level of only $2.30 in 1980.
This gain in the share of retirement income can be attributed to both an aging population, and increases in the average amount per recipient.

After-tax income: First-time data from the census

For the first time, the census collected information on the after-tax income of Canadians, that is, total income from all sources minus income tax. After-tax income depicts in a better fashion what families have available to spend.
The median after-tax income of all economic families in 2005 was $57,178, compared with the total or pre-tax median income of $66,343.
The after-tax income gap between different types of families is smaller than the total income gap because after-tax income reflects the fact that people with higher incomes generally have a higher tax rate. For example, on an after-tax basis, lone-parent families headed by women had a median after tax income that was 49.1% of that received by couples with children, compared with 44.3% based on pre-tax income.
Also for the first time, the census can calculate low-income rates based on after-tax income.
Census data showed that 11.4% of the total population, an estimated 3,484,625 people, lived in low income in 2005 using after-tax income.
Of these people, an estimated 879,955 young people aged 17 years and under were living in low-income families in 2005.
Low-income rates are highest among children and young people. In 2005, 14.5% of all children aged 5 and under were part of a low-income family. The rate dropped to 13.0% for children aged 6 to 14, and to 11.4% for teens aged 15 to 17.

EVENT ONE - Sub Area 3C

This event will give the public an opportunity to view and comment on proposed changes to the Official Development Plan for SEFC Sub-Area 3C. The draft amendments would increase the area’s maximum allowed heights, amend the optimum heights, and change the total allowed floor area.

Thursday, May 22 from 4:00pm – 7:00pm
TELUS World of Science Boardroom
1455 Quebec Street, Vancouver

For more information,
please visit http://vancouver.ca/sefc
or email kyra.lubell@vancouver.ca

============================================

EVENT TWO – Olympic Village Plaza

There are two opportunities to view and comment on the draft conceptual design for the Plaza in Area 2A of SEFC.

Saturday, May 24 from noon – 3:00pm
False Creek Community Centre, Lind Hall
Granville Island at 1318 Cartwright Street

Monday, May 26 from 4:00pm – 7:00pm
Vancouver Public Library, Promenade
Central Branch, 350 West Georgia Street

For more information,
please visit http://vancouver.ca/olympicvillage
or email robin.petri@vancouver.ca

With all the foreclosures going on down in Florida and many other states this is probably a question that many Canadians will find interesting.

As stated on the CRA's "Home Buyers' Plan (HBP)" web-page:
The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $20,000 from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.

The key words in the above statement are: qualifying home. What is a qualifying home within the meaning of the HBP?

On the same web-site, the answer provided is:
"For the purposes of the Home Buyers' Plan, a qualifying home is a housing unit located in Canada."

Not being satisfied with this answer I did some more research on the Internet (inconclusive) and spoke briefly on the phone with David Ingram, a renowned International Income Tax expert.

To my question "What are the tax implications if I want to use my RRSP to buy a home in the United States" David's answer was that "there is no short answer" and that it depended on the individual's situation and in particular what is the person's status in the United States ("are you a citizen or do you have a visa?" were his exact words). My answer was "I am a Canadian citizen no I do not have a US visa" and to that David responded "then you can not have a primary residence in the States. You may own 100 properties there if you like but you can not live there on a permanent basis. This is a US regulation."

David is an extremely busy man and he charges $450 per hour for his consultations and he was unable to spend any more time with me, however the fact that he asked about details of my situation lead me to believe that there might be a way around the above limitations.

Can anyone shed more light on this subject?

The actual cost and payback for each project can vary, depending on both your home’s condition and overall real estate market values in your region of the country.

1. Make your kitchen really cook. The kitchen is still considered the heart of the home. Potential homebuyers make a beeline for this room when they first view a home for sale, so make sure your kitchen looks clean and reasonably updated. For a few hundred dollars, you can replace the kitchen faucet set, add new cabinet door handles and update old lighting fixtures with brighter, more energy-efficient ones.

If you've got a slightly larger budget, you can give the cabinets themselves a makeover. Rather than spring for a completely new cabinet system, which can be expensive, look into hiring a refacing company? Many companies can remove cabinet doors and drawers, refinish the cabinet boxes, and then add brand new doors and drawers. With a fresh coat of paint over the whole set, your cabinets will look like new.

2. Give appliances a facelift. If your kitchen appliances don't match, order new doors or face panels for them. Many dishwasher panels are white on one side and black on the other. All you may need to do is unscrew two screws, slide out the panel and flip it around.

A more cohesive looking kitchen makes a big difference in the buyer's mind -- and in the home’s resale price.

3. Buff up the bath. Next to the kitchen, bathrooms are often the most important rooms to update. They too, can be improved with very little cash. Even simple things like a new toilet seat and a pedestal sink are pretty easy for homeowners to install and they make a big difference in the look of the bath.

Replacing an old, discolored bathroom floor with easy-to-apply vinyl tiles or a small piece of sheet vinyl is also recommended. You may not even need to take up the old floor.

If your tub and shower are looking dingy, consider re-grouting the tile and replacing any chipped tiles. A more complete cover-up is a prefabricated tub and shower surround. These one-piece units may require professional installation but can still be cheaper than paying to re-tile walls and refinish a worn tub.

4. Step up your storage. Old houses, particularly, are notorious for their lack of closet space. If you have cramped storage areas, a good idea is to add wire and laminate closet systems to bedrooms, pantries and entry closets.

You can also get design details and parts for these systems at many large home improvement stores. Most closets can be updated in a weekend or less.

In the end, your closets will be more functional while you're living in the house and will make your home look more customized to potential buyers when you're ready to sell.

5. Look underfoot. Carpeting is another detail that can quickly update a home and make it look cleaner. A professional carpet cleaning is an inexpensive investment, especially if your rugs are in good shape and are neutral colors.

If your carpet is showing serious wear, cover it with inexpensive, strategically placed area rugs. Unless it is truly hideous, most Realtors don't suggest replacing wall-to-wall carpeting right before you sell your house. The new homeowners may want to choose their own carpeting after they move in.

6. Let there be light. If you have boring recessed lights in your dining and living rooms consider replacing one of the room's lights with an eye-catching chandelier. Home stores offer a wide range of inexpensive, but nice-looking, ceiling fixtures these days. If you have a ceiling fan and light, you can buy replacement fan blades (leaving the fan body in place) to update the fixture’s look.

7. Reframe your entry. Do you have a flimsy little knob on your main entry door? If so, spring for a substantial-looking handle-and-lock set. A nice, big piece of hardware on the front door signals to newcomers that this is a solid home.

Also, if you're stuck with a basic steel front door, consider painting or faux-finishing it for more eye appeal. Remember to use a good metal primer approved for use over metal. For a cherry wood look use a burgundy base paint. After it dries, brush over the base-coat with a cherry wood stain. It can look amazing, and it only takes a few hours.

8. Consider curb appeal. Although it sounds obvious, a nicely mowed lawn, a few well-placed shrubs and a swept walkway makes a great first impression. What buyers see when they first drive by your home is tremendously important.

If you don't have a green thumb, consider hiring a landscaper to install some new sod, plant a few evergreen shrubs and give your front yard a good cleanup. These kinds of changes can instantly change people's perception of your home and therefore, increase its value. And hey, your neighbours will love you for it, too.

This modern reference site (kinda like wikipedia) has a page with News from the National (American?) Association of Realtors.

Sophisticated Real Estate investors dig much deeper behind the curtain to discover the hidden gems in any market conditions. Just like the stock market, not all towns see real estate values increase in a booming market and many actually under-perform or even drop. Your job as an investor is to pick areas providing the best returns for the lowest risk by cutting through the negative news and getting to the real numbers.

There is a simple and easy strategy for doing this and it is called:

Focus on the Fundamentals Not Emotions.

Successful real estate investing is all about identifying a town or neighbourhood that has a future, not a past. Sadly, many investors like to invest based on past performance and find themselves constantly chasing the market, responding emotionally to headlines. Although they call themselves investors they are, in reality, speculators because they don't understand the economics behind their property increases and decreases. There is a huge difference between investing and speculating, the main difference being unbiased knowledge and the second difference is having a long term outlook for their target area.

To dramatically reduce your risk, ask the following key questions, and don't fall in love with a property or a region. As soon as you fall in love with a region, you can find many ways to 'justify' your investment. Sophisticated investors don't care where the property is located - they just want to ensure that it is economically strong and that it has long term viability.

There are 12 major influences on the long-term values of property. Each of these affects real estate prices in both directions, and each one is an important component in finding which way real estate values will be going. Dig deep, the more yes's you get, the better the market will perform.

1. Is the area's average income increasing faster than provincial/state average?
2. Is the area's population growing faster than the provincial/state average?
3. Is the area creating jobs faster than the provincial/state average?
4. Does the area have more than one major employer?
5. Is real estate booming in the surrounding region more than where you're looking?
6. Will property values benefit from a major new development nearby?
7. Has the local and provincial/state political leadership created a 'growth atmosphere?'
8. Is the region's Economic Development Office helpful and pro-active?
9. Is the neighbourhood located in an area of renewal or gentrification? Or is it in a "war zone?"
10. Is there a major transportation improvement occurring nearby?
11. Is the area attractive to 'Baby Boomers?'
12. Is a short term perceived problem (negative media stories, short term layoffs) occurring that will disappear?

Don't get caught up in other people's opinions of the market. You can ask 10 different experts on what the market is going to do over the next 10 years and you get 15 different opinions. The only truth that matters is based in the numbers. Do your own homework, don't skip any steps in your investment system and most importantly keep your eye on what it is you want real estate to create for you over the next decade so you and your family can live the life you know you deserve.

Don R. Campbell

http://www.reincanada.com

House prices have soared in the last few years in B.C. What will happen next - will they continue to rise, flatten, decrease or crash? These questions are on everyone's mind - whether you're in the market or no.
The overall consensus of industry professionals (according to the BC Real Estate Association, BCREA) is that the prices will continue to rise at least until the Olympics (2010).

This rise, however, is expected to continue at a much slower pace, compared to the last few years (prices have doubled in the last 6-7 years).

In 2007 the average price of home in the Greater Vancouver Regional District was $564K, compared to $615K in 2008 (first half). This is an increase of 9% with a projected yearly increase of 18% at this pace.

The prices continue to increase, despite the fact that this year there are more sellers than buyers on the market. According to BCREA's chief economist Cameron Muir, this year there is 25.4% more sellers than last year, and "...rising inventories are providing more choice for consumers and exerting less upward pressure on home prices".

Muir also commented that the high demand, which is still noticeable, can be attributed, mostly to people moving from other provinces as well as British Columbia's economy being on the rise.
In my opinion - this may be a cause of serious concern as the "economy being on the rise" is mostly due to construction which does create a pyramid or avalanche effect where more workers come to the province to build more homes while at the same time also depleting the housing inventory (as they do need a home to stay while here).

On the bright side, one of the Vancouver realtors commented that it is much easier to get in the market this year - not because it is cheaper but because there is less competition between buyers and no "bidding wars".This years houses are sold in 30 to 90 days, whereas last year it would be sold in a matter of days.
Most mortgage and real estate professionals agree that the rate of rise of real estate prices should slow down in the coming months as more and more buyer prefer to wait out and see what the remaining half of 2008 brings.

It's easy to spend thousands cultivating an idyllic lawn and garden. But a little ingenuity and patience will go a long way in keeping some green in your wallet.

Traditional thinking says you should expect to pay anywhere from 5% to 10% of your home's value on landscaping. Even at the low end of that range, you're looking at spending $20,000 if you live in the median-value Canadian home worth $300,000.

That's tough to stomach no matter how much you love the outdoors. Thankfully, you can do it right and still spend a fraction of that amount. Here's how:

Get the most visual bang for your buck: First of all, realize that budget gardening can still be beautiful. Let's say you've got less than $1,000 to spend. The first things you should focus on are improving your soil and adding trees. You can spend $500 on plants, but they're not going to grow in clay or sand, amend your soil with compost and other ingredients to improve its quality. Buying soil, in comparison, can cost as much as $35 a yard plus delivery. 

Take advantage of freebies

• Your city, your friend: Some cities in North America often give away free trees, mulch and compost. In Seattle, for example, groups of neighbours can request 10-40 trees from the city in exchange for planting and maintaining them.
• Demolition sites: These are great sources for bricks and stones, but make sure you have permission to remove them.
• Fellow gardeners: See something you like in a neighbour's yard? Offer to trade cuttings. Also, set up seed exchanges with other gardeners or check out existing exchanges online such as www.gardenweb.com and www.gardenhere.com .

Avoid costly mistakes: Really think about how you're going to use your outdoor space. If you plan a water feature but are annoyed by the noise of babbling brooks, you’re going to spend more money ripping it out and replacing it with something else later.  Take the time to educate yourself and you'll avoid common pitfalls such as planting a tree too close to your house.

Work with what you have: Preserving existing plants and trees can help you save the cost, materials and resources needed to establish a new planting. Educate yourself about plant care and pruning; that 12-foot magnolia in the back yard would likely cost you $65 and five years of growing to replace.  Similarly, knowing which areas in your yard are flood-prone and which are always in the sun can help you buy the right plants for the right conditions. Some areas might be better for swing sets or patios.

Hire yourself: The best way to save money in landscaping is to do as much work as possible yourself. A 3-gallon bush may cost $20, but the price skyrockets to $30 or $40 when it's planted by a landscaping professional. A $3-to-$4 perennial will cost about $12 installed.

Know when to hire the pros: There are times when it makes sense to hire a pro.  It is suggested to hire help for jobs that take more muscle or design skill than you have, such as creating hardscapes, while you take on more manageable tasks such as planting small shrubs and perennials.

When using pros, try to get a packaged deal: Check out nurseries that offer landscaping services. Many will offer discounts on plant material to their landscaping customers. Some nurseries offer 20% discounts on all plant material for one year to their clients.

Hire a consultant: A full landscape design that includes drawings and a planting plan can cost anywhere from a couple of hundred dollars to more than $1,000, depending on the complexity of the design and the overall budget of the project. A less-expensive route is to draw your own plan and hire a landscape designer to review it.

Take a phased approach: Divide your plan into phases and pay as you go with funds on hand. You'll save on loan or credit costs and be able to evaluate your progress and adjust plans before moving to the next phase.

Time your purchases: Buy trees, shrubs, perennials, soil and mulch late in the season when retailers want to be rid of them. Depending on your region that could be early fall, a great time for planting because it gives the plant time to develop roots before the summer heat arrives.

Check alternate resources: Look beyond stores for bargains. Arboretums, botanical centers, plant societies and gardening clubs often hold plant sales.   

Buy small: Purchase small-sized plants; five 1-gallon Shasta daisies at $3 apiece cost the same as one 3-gallon plant at $15 purchased at a Nursery. Depending on the species, the smaller plants could double in size in two years, giving you more plant for your money.

Protect foundations: Roots can damage concrete blocks, driveways and sidewalks, so plant large trees at least 8 meters from those areas.

Divide: Look around your yard for any perennials that can be divided and used elsewhere in the landscape. A one-gallon perennial can cost about $9 at a nursery, but you can easily divide the one you planted last year into four plants, saving $27.

Compost: Save money on fertilizers and mulch by composting your own, using yard waste and food scraps. Compost piles can be made of recycled 2 x 4s and chicken wire. All you need is access to the pile and enough space to turn it every now and again. You'll pay as much as $5 per small bag of compost at your local home improvement store.

Think about maintenance: A large lawn is great if you don't mind mowing. But if paying a yard guy $50 a week is part of your plan, make sure that goes into your budget.

Be water smart: According the Environmental Protection Agency, outdoor water use constitutes almost 10% of total home water use. Look for plants that are drought-tolerant to save on your water bill.

Finally, be patient. Plants will not fully mature for a good two to three years, longer for trees and many shrubs. Enjoy the process - and the money you saved.

Grouped by city and residence type (condominium, detached, etc)

Purchasing a home can be a stressful experience for anyone, but especially for first-time buyers who may not be aware that there are a host of costs associated with buying a home other than the actual purchase price and real estate commissions. It helps to know what those costs are in advance rather than get an unexpected surprise at closing and add to an already stressful experience.

Many of the costs are a factor of the purchase price, the value of the home and/or the amount of financing you are obtaining.

Closing costs. These generally refer to legal fees, property tax and utility adjustment costs and, in some provinces, land transfer taxes.

Legal costs go to cover lawyer (notary in Quebec) fees and legal transactions such as reviewing the terms of the offer, preparing and signing a mortgage, conducting a title search on the property, registering a new title, obtaining relevant documentation and determining appropriate adjustment costs.

You should consider hiring a real estate lawyer to handle your transaction. If you don’t have or know of a lawyer, your best referral source is family or friends, or through the law society in your area. 

Land transfer tax. In some provinces this tax is levied when property changes hands. It varies with the purchase price of the property.

Other costs. Costs other than closing costs can include but are not limited to the following:

Property Survey. This is undertaken to verify the location of property’s boundaries, measurements and structures and identify any easements, rights of way or encroachments on your, or adjacent properties. Title insurance is often an alternative to a property survey.

Interest Adjustments. This covers any interest accrued between the closing date of the purchase and the first regular payment date of the mortgage.

Goods and Services and Sales Taxes. GST and sales taxes will depend on the type of property being purchased. Always ask if either or both of these taxes apply before signing an offer to purchase.

Service Charges. These are charges to hook up utilities such as electricity, gas, and telephone service.

Home Inspection. It can be a good idea to have an inspection done before completing the purchase to evaluate the structural and mechanical condition of the property. This could save you lots of money in future repairs.

Appraisal fees. Some purchasers want to ensure they are paying a reasonable market price for the home they are purchasing. You may want to condition your offer subject to a satisfactory appraisal by a member of the Appraisal Institute of Canada.

Mortgage Life Insurance. Special insurance coverage to cover the cost of discharging your mortgage in the event of death or severe illness is available from most lenders.

Moving costs. Although it may sound obvious, purchasers may not consider moving as a cost of buying a home. Moving costs will depend on the distance of the move and the amount of furniture and goods to be transported. Get several movers in to give you an estimate before choosing one.

Appliances. Check to see whether appliances are included in the purchase agreement. If not, you will need to go out and buy them.

Landscaping, Fencing, Decks, etc. If purchasing a newly constructed home, keep in mind that there will likely be a need to landscape and fence the yard in the first year or two.

Annual maintenance. Homes like other possessions require care and maintenance to maintain their value. You need to plan for future painting, and replacement of any needed items like roof shingles, appliances, furnaces, depending on the age of the home you are buying.

CLOSING COSTS SAMPLE CALCULATION FORM

To assist you in preparing for closing costs, Dominion Lending Centres has created this document so that there won’t be any surprises come closing time. Please contact me with any questions you have regarding any of the below items. Costs will vary.

By Don R. Campbell

Suddenly it seems everyone you meet at a summer BBQ is a real estate expert and they want to share with you all of their extensive knowledge about how the world will end.

If you have seen the Lotto commercial with the two snobby 'rich' people talking about what to wear at a BBQ and what to speak about you will understand that the ad is funny because it has a base of truth to it.

Their one comment is while at the BBQ with those who haven't won a lotto, they should "talk about fuel costs because they like that." Well that commercial should now be changed to 'talk about interest rates and property values."

Here is part 1 of an overview of these hot topics and some analysis of each one.  I trust you'll find it useful to have some perspective based in the reality of the market.

You would think by some comments I've heard and read from people not really active in the real estate market that this was one of the signs of the apocalypse when in reality the elimination of these came as no surprise at all and not that much of a big deal.

Only a VERY, VERY few investors ever took advantage of these two options during the time they were available, and many banks didn’t even offer the program (despite CMHC's backing).

These changes will not have much of an effect on the market. I find it quite entertaining to watch the gyrations and pontifications of people who have never used these products stating that it is the end of the financing world, when in fact it was a brand new product and the market has done very well over the last 100 years without it. It also ensures that the Canadian market won’t set itself up to be like the US and UK; a smart move by all concerned.

Anyone investing based on national average prices isn’t really investing, they are guessing and speculating. Sophisticated investors focus on the economics behind a specific market not generalization (like national averages). When prices were up in some areas, they were down in others – hence the reason the overall average is down.

That being said, as we discuss just about every month in REIN™ – Prices and markets never run on straight lines (although that would make life a lot less exciting). There will always be fluctuations in the market… it is just that so many beginning investors believe the concept that the markets should skyrocket every year (like they had the last 3 years) and so as soon as the inevitable pause occurs, panic sets in.

Markets that have gone up at a too fast rate, will always adjust to find their new normal based on the real economics of the region, and then begin once again to build from their new base.

The only way to be a true investor (rather than a speculator) is to study the unbiased economics that we present every month and because we aren’t in the business of selling real estate, and don’t profit whether you buy, sell or hold we can cut through the positive and negative hype and get to the truth.

Those who actually understand the importance of research have had an amazingly relaxing summer knowing that their decisions are based on long-term fundamentals – not month to month (or even year-to-year) gyrations of the market. And that is why we have so many members who have been coming out every month for 16+ years!

Financing properties, even for the average home owner is taking more effort than it did over the previous 3 years. So, remember not to get mad at your banker or mortgage broker – the goalposts have moved and they are just the messengers of this change.

During inflationary periods, hard assets perform the best as their values increase along with inflation. Property values ride the inflation wave, rents increase (as many of the rent controlled areas increases are based on the CPI) and as an informed investor you will have chosen your properties in areas where demand is to continue because of job increases and in-migration.

The other thing that occurs during times of inflation is that wages increase more rapidly (and there is more labour unrest, strikes etc as more people demand more money to fight inflation).

Inflation can also drive interest rates up, so ensure that you keeping listening at the REIN™ Workshops as we discuss whether it is time to lock in or not.

In the next post I’ll be discussing other hot topics of the summer BBQ season:

• The US housing markets,
• The US economy,
• Energy & commodity prices and how they are going to affect certain markets in Canada,
• How a Saudi Arabia investment will affect Canadian real estate demand
• How REIN™ predicted the massive changes to the automotive industry in Ontario (June 5th 2005) and how that past prediction can help you today.
•  How market sentiment can affect your property values even when economics don’t change
• And other hot BBQ topics important to investors

Enjoy and we will see you on the online discussion forums at www.myREINspace.com

Average House Prices in Canada for the Second Quarter of 2008...

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