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A profile of Eastbridge in Kitchener Waterloo, Ontario

One of my favorite neighbourhoods in Kitchener Waterloo is Eastbridge. Located in the North East part of the city, there are parks, trails, beautiful homes (ranging from condos, semis and towns to luxury homes worth more than $1 million), shopping (Conestoga mall is close by), close to restaurants like Wildcraft, Ben Thahn, The Keg and more. It’s also close to the expressway, which means 401 access to Toronto is convenient to access. 

Friends (and clients) of ours live there, and I asked Darryl and Robin why they chose to buy a home in Eastbridge, as opposed to any of the other areas in KW.  Listen to what they had to say; they also discuss why they like investing in real estate vs other asset classes.

BONUS: Watch the video to find out what the best Thai restaurant in Kitchener Waterloo is:

Why we love living in Kitchener Waterloo’s Eastbridge area

The schools in the area are well respected and include:

Lester B Pearson Public School 520 Chesapeake Dr

St Luke Catholic Elementary School 550 Chesapeake Dr

Lexington Public School 431 Forestlawn Rd

KidsAbility School 500 Hallmark Dr

WRDSB Partners in Ed Adult Cont Ed

You can check out the Eastbridge Neighbourhood Association page here: http://www.eastbridge.info/

For more information on the area, or for a list of available homes and investment properties in the area, send me an email to “Benjamin AT BenjaminBach.com” or call me today at 519.772.4376

Why we invest in Kitchener Waterloo Real Estate

Yesterday I had the chance to sit down with two of our clients, Dr Robin Walsh and Darryl Kraemer to discuss why they invest in Real Estate, as opposed to any of the other investment vehicles available, like stocks, mutual funds, commodities, gold etc. 

Press play to hear what they had to say:

Darryl and Robin have a great portfolio of single family residential (including condo units) & student rental properties in Kitchener Waterloo, Ontario -all tenanted & performing well. 

If you’re interested in starting to invest and building a diversified property portfolio like theirs over time, send me an email. I’d love to help you

What to put in an offer when you’re buying investment real estate

A friend of mine asked me this morning what clauses we usually put in an offer, when we’re helping our clients buy and sell an investment property in Ontario. 

While every purchase and sale will have unique features demanding custom clauses – often a few Schedules worth of them – most of the time, we use the same base of conditions and clauses when our clients are buying a rental property.

Conditions:

Real estate agreements are either ‘firm’ or ‘conditional.’  A firm offer is one where the are no additional conditions on the part of the buyer, and conversely, a conditional offer is where the buyer has some time to do due diligence, such as needing to get approval for financing, having the property inspected, or making sure that the city will let you develop an apartment building on the parcel of vacant land.  Most of the time our clients put in conditional offers.

The typical conditions we use are: a financing condition, an inspection conditions, and verification of income and expenses & supporting documents.

If the property we were looking at was a potential development site, we’d probably put in a Zoning condition – allowing us to research and verify that we could develop and build what we wanted to – and an environmental inspection, to make sure that we weren’t buying a potentially contaminated site.

It’s important to verify the income and expenses, and review the actual leases and bills.  We want to run our own eyes over those documents; trust but verify!  Also, the bank or lending institution is going to want to see the information as well, as they do their own financial due diligence on the investment property.

Clauses:

In addition to the conditions, we usually will include a number of additional clauses in the Schedule A (and often we’ll append more Schedules, depending on the offer. The most I’ve written is 4 additional schedules to the agreement of purchase and sale.  The client was a lawyer ).

If you were purchasing an property that was already rented with tenants, one of the clauses would be that the rents and leases are all legal according to tenancy laws of Ontario, and that the landlord doesn’t have any pending or upcoming issues with the Landlord and Tenant Board.

I include a clause asking for the current lodging licence, if it is a student rental that requires one.  Also, make sure that the license is current when the property closes – If we don’t complete the transaction till August, I still want the license to be in place then!

I like clauses where the seller hands over all architectural & electrical plans, and any information they have on hand about possible expansions of the property. It’s amazing what owners have, and how useful it can be in a few yeas when you want to make some changes to the proeprty!

Depending on the type of property, there will be additional clauses; every property is unique, so each agreement of purchase and sale will vary.  We recommend all of our clients run offers by their lawyer, and it’s a good thing for you to do too.

What clauses and conditions do you include when you’re buying a property?

What Student Rental apartment buildings can you buy in Waterloo?

…and what return will you get on your money by investing in these student properties?

This is something I’ve been asked a lot recently, especially with the news that CMHC is now back in the student rental financing game.

In this video, we look at a 180 bedroom property that an investor is considering near both Universities in Waterloo. It is brand new, in a great location, and fully leased at favorable rates.

If you’re interested in buying, selling or developing a student rental property in Kitchener Waterloo, I’d love to talk to you.  Call me at 519-772-4376 or email me for a complimentary no-obligation investment consultation

PS – Make sure you’re following our updates here http://twitter.com/BenjaminBach

CMHC *finally* returns to Student Housing Rentals in Waterloo

The day is upon us.  Many of our clients have been waiting for this since 2008, when the tap of money for student rental properties seemingly dried up. CMHC stopped insuring loans on this asset, and when CMHC gets out of the game, banks tighten up their available financing terms and start looking for much larger down payments, shorter amortizations, and higher fees.  Yuck

Well, CMHC (Canada’s Mortgage and Housing Corporation) announced a new program, creatively titled CMHC Multi Unit Student Housing.  Watch the video embedded below for details on what CMHC is looking for before loaning you money to buy, refinance, or develop a student property

Some notes:

This program is for refinance, take-out, construction& new purchase loans for purpose built student housing projects “located on campus of within walking distance” from the universities (WLU, Conestoga College & University of Waterloo if you’re investing in Kitchener Waterloo).  CMHC will insure up to 85% of their lending value, which depending on the asset, will probably be between 70% and 80% LTV of the purchase price.  There is the option for fixed interest rates or a floating rate with a ceiling. Second (or pari passu) mortgages are permitted on title (presumably with CMHC and lender in 1st positions permission).

Additionally, CMHC wants to see that the borrowers have a track record of running similar projects, and in the case of a construction or development loan, that the borrower has the personal net worth to sustain the debt payments (mortgage) for a full year, in the case that the property isn’t completed for September and sits vacant (not a pretty scenario, and rare with an experienced developer).

For construction loans, CMHC will advance up to 75% of the value or cost during construction, and increase the loan to an 85% LTV (of lending value) once the property is complete and the rental income stabilizes.

If you’re interested in how you can get into the student rental market, contact me at Benjamin@BenjaminBach.com or 519-772-4376. I’d love to sit down with you for a free, no-obligation consultation. 

PS – Make sure you’re following our updates here http://twitter.com/BenjaminBach

Kitchener Waterloo named in “Areas Set to Boom” by Canadian Real Estate mag

The recent issue of Canadian Real Estate magazine has a profile of Kitchener Waterloo, Ontario in the cover story on Areas set to boom. There is a lot of great content in it.
CRE-Feb

Canadian Real Estate Market Growth Based on Demand

An interesting article on the national real estate market in Canada appeared in the Kitchener Record this morning. While 2009’s market ended the year very strong, economists caution people from thinking we may be in or entering a ‘bubble’ like we saw in the US market.

Record home sales capping 2009 due to supply and demand, not bubble

By Sunny Freeman, The Canadian Press

TORONTO — Record home sales last month are based on low supply and high demand and are more likely to drop off this year than inflate a housing bubble that could threaten a fragile recovery, economists say.

A Canadian Real Estate Association report released Friday said December and the 2009 fourth quarter were the best periods on record for home resales, while prices also rose sharply from their year-earlier levels.

…

A bubble occurs when prices increase without any sound underlying fundamentals, he explained, and that’s not the case in Canada’s housing market, which is closely tied to changing interest rates and economic fundamentals.

“We still do have a relatively tight supply situation and exceptionally low interest rates and a mild recovery in the economy, so there are a lot of good reasons why home prices are rising.”

“What we’re seeing is almost textbook recovery,” he said. “The speed of the recovery is mind-boggling, the fact that housing is leading the recovery is really not a surprise… it’s exactly what you’d expect to happen.”

Finance Minister Jim Flaherty said Friday he does not see a housing bubble yet, but he noted the government has many tools at its disposal — from raising down payment requirements on insured mortgages, to lowering amortization periods and urging the banks to be more cautious in their lending — to prevent such a thing from happening.

“We don’t want to have a group of house purchasers who purchased houses now at insured mortgages at relatively low rates who would not be able to manage them if rates were to increase later on,” Flaherty said in an interview with Business News Network, a cable TV business channel in Toronto.

“I’ve looked at the numbers with CMHC,” he added. “We’re monitoring it. I do not see evidence of a bubble right now, but we’re going to keep watching it. There are some steps we can take that we will take if it’s necessary.”

The association said 27,744 units were sold across Canada in December, up 72 per cent from the same month in 2008. The year-earlier period saw the lowest sales in a decade in the wake of a global credit crunch and the start of the recession in Canada.

…

Klump believes the market will balance out in 2010 because consumer demand will be met with a supply side rise as the number of new homes increases and cautious homeowners become confident about selling, which will add more homes on the market and help drive prices down.

Porter said Friday’s report signals that Canadians have regained their confidence in the economy and the surge in demand is beginning to be met with a serious supply response, citing a notable uptick in December housing starts.

“Builders had been very cautious and they’re only now starting to crank up their output again, but even so, the comeback in new housing starts has been much more modest than the rebound we’ve seen in sales,” he said. “And people who own homes have also been a little reluctant to put their house up for sale because of the broader uncertainty that we’ve seen.”

He said that the demand in housing was most pronounced in B.C. and Ontario, where home buyers might be hoping to beat the introduction of the HST, the harmonized sales tax which is set to replace provincial taxes in those provinces later this year.

As we talked about last week (Few more quick stats on the ‘09 Kitchener Waterloo Real Estate Market) 2009 was a very busy year for sales of homes on the KW real estate board’s Multiple Listing Service (MLS), with ‘09 being the area’s second busiest year ever behind 2007.  The second and third quarter of 2009 were the busiest ever on record, as mentioned in What happened in Kitchener Waterloo Real Estate in ‘09?.

What is the Bank of Canada doing with mortgage rates?

Many people are speculating that the Bank of Canada will be raising rates.  While the consensus amongst those I speak to is that rates have nowhere to go but up (and we are closing on a loan with a 2.4% interest rate on friday, so that’s a pretty solid perspective), the question seems to be when they will go up.  The Bank of Canada is indicating that they won’t be raising rates any time soon.

Bank of Canada Won’t Raise Rates in Short Term

Mr. Lane said the bank understands the concern, but it uses its lending rate to keep inflation in check for the whole economy and the housing market is “only one of several factors” that influence inflation.

Other sectors could be adversely affected if the rate jumped before the broader economy was ready, he said.

“If the Bank were to raise interest rates to cool the housing market now – when inflation is expected to remain below target for the next year and a half – we would, in essence, be dousing the entire Canadian economy with cold water just as it emerges from recession.”

Instead, he said, the government could increase capital requirements for lending institutions, adjust loan-to-value ratios and change the terms and conditions required to obtain mandatory mortgage insurance.

“These instruments can be targeted to risks to the entire financial system that stem from particular markets or institutions,” he said. “Ultimately, it is the Minister of Finance who is responsible for the sound stewardship of the financial system.”

In an end-of-year interview with CTV, Finance Minister Jim Flaherty said the government would consider raising the minimum down payment from 5 per cent “to a higher figure” and reducing the amortization period of 35 years to "something less."

But the Minister stressed that the government has not yet made that decision.

If you want to invest in real estate and take advantage of the current low rates and generous financing terms, lock your rates in now. If you are dealing with a mortgage broker or bank that is familiar with helping investors, let them know you want to lock in a commitment for as long as possible (likely 60-90 days), and then call me to find a profitable investment opportunity. 

Money will be getting more expensive.  Look at borrowing some now if you had an investment goal on your list in 2010.

2009 Kitchener Waterloo Investment Real Estate Market Update

2009 was an interesting year to be buying, selling, and brokering investment real estate.

The turbulence in the global credit markets put a halt on a lot of lending, especially mortgages for student housing.  When CMHC stopped insuring loans on ‘student housing,’ many lending institutions and banks stopped lending against those assets, since without CMHC insurance the loans were harder to sell on the secondary market. 

There were 148 Multi Family & Apartment sales on MLS or $94 million volume in 2009, which is down 21.7% from last year.

While volume was off more than 20% from 2008, the value of Multi Family sales was down just 2% this year, reflecting a number of larger sales.

Specifically, there were nine apartment buildings, student rental towers and townhouse complexes that closed for over $1,000,000 in ‘09 on the KW MLS, including a $28 million dollar tower on King Street in Waterloo that was purchased by investors represented by our firm, Keller Williams in Kitchener.

In addition to a lack of financing, another reason that sales were down last year was that buyer’s were looking for higher cap rates, while sellers still wanted top dollar.  In Canada very few owners of Multi Family properties are ‘distressed’ and need to sell like we sometimes see in the US; that means they have cash flow coming in, rental income from their tenants, and can often afford to wait for a buyer to recognize the value and reach an agreement on price and terms.

There were 398 Multi Family listings processed through the MLS in 09 down 22%

Commentary on the Canadian Real Estate Market

Keller Williams released our monthly This Month in Real Estate report today, and there is some terrific information in it:

All around signs appear to be brighter than they were this time last year – banks are profitable, confidence is up, employment is on the upswing lately, and the housing market is moving. Ottawa’s Centre for the Study of Living Standards reports shows that consumption has grown in “leaps and bounds” from $30,000* per person in 1981 to $50,000* in 2008. That’s per person, with the average Canadian family being 2.37 people. That brings consumption per family to $118,500 for the average family.

The upcoming Olympics are expected to provide a beneficial influx of money for Canada and for Vancouver. The small business sector in British Columbia has the most optimistic outlook of all provinces in the country, most likely due to the games. The dramatic 253% increase in home sales in the Greater Vancouver area could also be partly fueled by the Olympics.

01 This Month In Real Estate Canada 2010

View more presentations from Keller Williams Realty.

The country appears to have traveled quite a distance over the past year – from the verge of the next depression last year to what appears to be an economy that’s found its way to firmer footing. One example is that most consumers planned on spending more this year on gifts for the holidays this year than last year.

With some concerns that the housing market has rebounded too much, too fast; it is important to keep in mind is that year-over-year increases are compared to an unusually weak year.

Read more

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