1)  All changes are effective April 19, 2010 with exception to change # 7 & 8

2)  Qualifying rate – For loans with fixed term of less than 5 years and for all Variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of:  the benchmark rate and the contract interest rate.  (The benchmark rate will be the average of the 5 major banks posted 5 year rate. This will be posted each Monday on a website to be announced later.

3)  Refinance loan to value maximum will be 90%

4)  Maximum loan to value for rental (non owner occupied) will be 80% LTV 1 to 4 units.

5)  Rental income qualification.  50% of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purpose of calculating the borrower’s Total Debt Service Ratio.

6) Maximum numbers of Units under CMHC Second Home. Second home product only available for 1 unit owner occupied properties. 

7) Changes to CMHC Self Employed Product will be effective April 9.

• For purchase and portability the maximum LTV will be 90%. 
• For refinance the maximum LTV is 85%. 

Also qualification rules have changed for this product.  If a client has been self employed in the same business for more than 3 years, they are NOT eligible under the CMHC Self Employed Product without Traditional third party validation of income (qualified deal).  CMHC will continue to require that the borrower have a minimum of 2 years experience in the same field.  This can include time spent working as a non self employed worker in the same field.  Lenders are expected to obtain a copy of the business or GST license or Articles of Incorporation.  Therefore if a client is self employed over 3 years, then you cannot do a self employed product. It must be qualified.  If a client is self employed up to 3 years, you can do a self employed product.

8)  Commissioned income will no longer be eligible for the CMHC Self Employed Product without traditional third party validation of income.

Bottom Line

If you qualify under today’s standards for a loan for 1 or 2 investment properties (whether its a condo, townhouse, older home, student rental or apartment building) that you planned to rent out and hold as long term assets, come april 19, you may no longer qualify to purchase it. 

Let’s talk before then so you know all of your options.

PS – if we have an agreement of purchase and sale (a real estate contract) dated before april 19, and the mortgage is approved, the rental property can close after (they may set a timeframe, contact me for full details).  You don’t have to complete the purchase by april 19, just have the contract written and accepted.

If you’d like to talk to a mortgage broker to explore your options, I can recommend one who does a lot of work with real estate investors.

Leave me a comment below with any questions, and please contact me for more information at 519-772-4376 or via email at Benjamin@BenjaminBach.com.

Related posts:

1. CMHC Mortgage Regulations to Restrict Real Estate Investment
2. New Mortgage Rules for Real Estate Investment in Canada
3. CMHC *finally* returns to Student Housing Rentals in Waterloo

Hi Ben, I hope this message finds you and Sarah well and enjoying married life.

I’m sold on the value of Real Estate investing. We are generating positive cash flow from every property plus I just received my mortgage statements from last year. My tenants paid my mortgages down by over $25,000 in one year. Not including the cash flow or appreciation.

We are proceeding to build an addition onto 1234 Cedarbrae and by Sept.1st we will have two extra rooms available to rent. I owe you the credit for that property. You saw the value when I didn’t. Now I will gain over $100k in post-construction value plus the extra cash flow will pay for the construction in less than 5 years.

I am tinkering with my properties, trying to maximize the value. The property at 1234 Weber St. was purchased as a duplex for $222,000. I am considering trying to convert this into a triplex, with three 2 bedroom units. Would you be able to give me a rough ballpark as to what the value might be post-construction? This will help me in my decision process.

Thanks in advance, Larry

For information on how Larry and his wife have built their portfolio, contact me today. I’d love to serve you the way we’ve served Larry’s family over the years (yes, we help more than one generation of his family

You know where I am – Benjamin@BenjaminBach.com or call me at 519 772 4376

Related posts:

1. Illegal Real Estate Investments in Kitchener Waterloo
2. 2009 Kitchener Waterloo Investment Real Estate Market Update
3. Investing in New Construction Real Estate in Waterloo Region

Earlier this week we looked at the strength in the investment, student (Student Rental Market Update – Waterloo, Ontario) and commercial real estate (Commercial Real Estate Market Update – Kitchener Waterloo & Cambridge) markets in Kitchener Waterloo, Ontario. 

It’s not just KW – the commercial real estate (CRE) market is gearing up all over.  Let’s take a look at a few stories from the Canadian CRE world.

On Thursday, the New Brunswick Business Journal had a story about Kilam Properties Inc (listed on the TSX as KMP) looking to acquire up to $150 million in new properties this year. Kilam is a major owner of apartment buildings in Atlantic Canada, and is looking to potentially expand into areas including Kitchener Waterloo, Ontario

Fraser said the plan for Killam is to spend up to $150 million on acquisitions in each of the next five years.

The Halifax-based company is already one of the country’s largest residential landlords, with 118 apartment buildings in Atlantic Canada’s six major urban centres.

The company also runs 55 so-called manufactured home communities across Canada, with the majority of those trailer parks located in Ontario.

Overall, Killam owns and operates 18,150 units in 173 properties, representing total real estate assets of roughly $720 million.

But in 2009, the company’s pursuit of new properties came to a halt, largely because of the sagging economy.

On Wednesday, Fraser again said the company is examining the Toronto, Ottawa and Kitchener-Waterloo markets for buildings to pull under the Killam banner.

“We continue to see opportunities for Killam to grow in Ontario by focusing on high-quality properties, including newer buildings and more established properties in prime locations,” he said.

Thursday’s National Post has a story about $500 million worth of Real Estate Investment Trust (REIT) IPOs coming to market this year, including one by a landlord with significant holdings of apartment buildings in Kitchener Waterloo, Transglobe:

It’s been four years since the real estate investment trust sector last saw an initial public offering on the Toronto Stock Exchange but that is about to change, with IPOs worth about $500-million expected in coming weeks.

The Financial Post has learned TransGlobe Property Management will be the latest private company to go public, with an IPO estimated to be worth between $200-million to $250-million, in a deal led by CIBC World Markets. The TransGlobe deal will likely wait in the wings as the market consumes a $150-million IPO from Northwest Healthcare Properties that has already filed with regulators.

There are a couple of interesting tidbits about Transglobe throughout the article, including: “It’s not clear whether all of its buildings would be included because some of its properties may have too much leverage to be palatable for a REIT.” 

This has caused some people to say:

“We will sit down and listen to the story and see what happens, but these really are not of the quality I am looking for,” said Sandy McIntyre, chief investment officer of Sentry Select, about the current deals on the table. BPO Properties is another story. “I’d rather see a big industrial portfolio or office portfolio come forward. The BPO conversation could be used as an opportunity by Brookfield to sell down its position.”

Looking at why we’re seeing these offerings come to market now, and why the public will likely show alot of interest in them:

As it stands now the S&P/TSX 60 has no real-estate companies, something Mr. McIntyre figures could change.

“As we go into the next decade, real estate with yield is going to be a beneficiary.”

For now, the sector will have to be happy with some mid-priced initial public offerings.

The NorthWest deal, which includes 45 health care-related buildings, has been priced to yield 7.25% to 8.25%.

LeisureWorld is being priced in the 8%-to-9% range. Investment banking sources say both deals are attracting plenty of interest.

It’s not hard to understand why there would be demand for REIT product, when you consider the dearth of IPOs. Crombie REIT was the last TSX offering, in early 2006.

…

“I think real-estate investment trusts proved their worth in this dry spell. They kept their vacancy rates [low] and most of them continued their distribution,” said John O’Bryan, vice-chairman of CB Richard Ellis.

Also in the news:Tim Horton’s is renovating and expanding many of its stores, as well as adding new-format locations:

The iconic Ontario-based company known for its coffee, doughnuts and light meals says it expects 900 new stores of various formats by 2013.

They would include 600 stores in Canada where Tim Hortons already has more than 3,000 locations under its banner.

Up to 60 locations in Canada will be converted to include the Cold Stone Creamery concept in partnership with an American ice cream chain.

The restaurant operator says it plans to spend $180 million to $200 million this year to support its growth initiatives.

That’s a pretty big investment in commercial real estate infrastructure!

If you have questions or comments on the commercial real estate market, leave a comment below, or email me at Benjamin@BenjaminBach.com, or call me now at 519-772-4376

Related posts:

1. 2009 Kitchener Waterloo Investment Real Estate Market Update
2. Commercial Real Estate news heard on Twitter
3. Understanding Investment (and Commercial) Real Estate Terms

– a client who wanted to invest in a condo this weekend (2nd unit in this complex that sold inside 3 days too)

Homes and condo’s are moving very quickly in KW these days – our clients are involved in a multiple offer situations fairly regularly on smaller properties (condos, 5 bedroom student rental houses etc), and we’re even seeing multiple offers on apartment buildings that are in good shape, well rented and fairly priced.

So far in 2010, 56 homes have sold in 3 days on market or less, 144 residential properties have sold in less than 7 days, and 357 have sold in inside of two weeks (note: these Days on Market times include days where the property was tied up with a conditional offer, and due diligence periods).

That means over 32% of homes sold in 2010 were listed on the MLS for less than 14 days (note: a small % of these homes may have been relisted)

The Record has some more insight:

It appears that homebuyers are trying to get a jump on the Harmonized Sales Tax (HST), which goes into effect July 1 and will boost the cost of buying a home. But the biggest factor sparking the surge in sales is historically low interest rates, said Ted Scharf, president of the Kitchener-Waterloo board.

“Consumers are taking advantage of current interest rates now before they are predicted to rise this summer,” Scharf said in a news release.

The Bank of Canada plans to keep the key bank rate at 0.25 per cent through June. However, in the wake of a report Monday that the Canadian economy is growing more rapidly than forecasted, economists say borrowing rates may increase sooner and rise more aggressively than had been expected.

With the strong sales, there was another double-digit increase in prices last month. The average sale price in Kitchener and Waterloo rose 12.2 per cent to $276,891; in Cambridge, it rose 14.3 per cent to $280,996.

Strong demand for homes in higher prices ranges contributed to the increases. For example, in Kitchener and Waterloo there were 75 sales in the $300,000 to $350,000 price range, an increase of 150 per cent from a year earlier.

Leave me a comment below with any questions, and please contact me for more information at 519-772-4376 or via email at Benjamin@BenjaminBach.com

Related posts:

1. Kitchener Waterloo Real Estate Market Update: October 2009
2. Canadian Real Estate Market Growth Based on Demand
3. 2009 Kitchener Waterloo Investment Real Estate Market Update

Over the last couple of weeks,we’re heard about raising the minimum downpayment (New Mortgage Rules for Real Estate Investment in Canada) that an investor would need to put down on a rental property (that wasn’t owner-occupied, meaning the owner or a close relative was living there), and that rates will be heading up come July 2010 (Interest rate updates from a mortgage broker).

This week I’ve learnt that CMHC is also planning to, effective April 19, 2010, change things a whole lots more.

Rental Offsets

Currently when you buy a rental property, CMHC will allow you to use a 80% rental offset, which means that they used to take 80% of the gross rental income that the income property generated, and subtract that from the borrowers total debt, to establish the total debt service (TDS) ratio. 

What that means is that you don’t have to have the household income to cover 100% of the value of the rental property, like you do with a home you live in, because the bank will let you offset the debt using 80% of the revenue the rental produces (does that make sense?).

They’re changing this amount to 50%, which makes it much tougher for people to qualify for investment properties, but the real kicker is that…

CMHC is also changing how they evaluate the current debt and income on your existing rental portfolio – they are treating the rental income here the same as other non-salaried income too, meaning your current portfolio, while it generates cash flow every month, might hinder the growth of your portfolio going forward.

We also think that most lenders are going to adopt these standards, even for non high ratio loans that are not CMHC insured, just to be cautious.

Bottom Line

If you qualify under today’s standards for a loan for 1 or 2 townhouses, come april 19, you may not.  Let’s talk before then so you know all of your options.

PS – if we have an agreement of purchase and sale (a real estate contract) dated before april 19, and the mortgage is approved, the rental property can close after.  You don’t have to complete the purchase by april 19, just have the contract written.

Leave me a comment below with any questions, and please contact me for more information at 519-772-4376 or via email at Benjamin@BenjaminBach.com

Related posts:

1. More on the new CMHC Mortgage Rules for Real Estate
2. New Mortgage Rules for Real Estate Investment in Canada
3. Ottawa hints at tighter mortgage regulations

3 properties on Bricker Avenue, directly across from Wilfrid Laurier University (WLU) sold for $8,450,000. There were 143 beds in the 3 properties, and per room revenues were lower than other comparably located properties.

A duplex on Hickory Street , very close to WLU, just sold at $630,000, after being on the market for 30 days.  The property is licenced for 10 students.

A 10 bedroom licenced lodging home on Regina sold for $550,000

Two detached 5 bedroom homes recently sold, both for above their asking prices. One sold at $333,500, the other traded at $336,000, 11K above the list price.  A client offered on one of these, but we felt the properties were not worth the above list price premium being paid.  You have to know when to walk away!

A few licenced condo units have sold recently. One traded at $228,000, another at $186,000

If you have any questions about how you can start investing in student housing, email me at Benjamin@BenjaminBach.com or call me at 519-772-4376

Related posts:

1. What Student Rental apartment buildings can you buy in Waterloo?
2. State of the Student Housing (investment) Market
3. Market Update: Real Estate selling fast in Kitchener Waterloo

We’re seeing some properties selling for $10,000+ above list price in multiple offer situations; 

There are units and buildings available that are good real estate investors, ranging from $125,000 to several million dollars.  Contact me for full details, and a cash flow & return on investment analysis

If you are looking to buy, sell or invest, send me an email or give me a call.

Related posts:

1. Market Update: Real Estate selling fast in Kitchener Waterloo
2. 2009 Kitchener Waterloo Investment Real Estate Market Update
3. Kitchener Waterloo Real Estate Market Update: October 2009

This morning Finance Minister Jim Flaherty made the following three announcements to mortgage insurance rules

1. Variable mortgages qualified at five year fixed rate;

2. Refinancing limited to 90% instead of 95%;

3. Non owner occupied residences [I read this as single family properties bought for rental purposes -BB] require 20% down payment;

This announcement is the result of a review process on debt levels undertaken by the federal government that CAAMP has been actively engaged.  We released Will Dunning’s debt report, consulted with members  and took a position with decision makers in Ottawa that while we opposed changes to the current 5% down payment rule and 30 35 year amortization rates for primary residences, we were open to other changes if the government deemed there to be a problem.  The changes announced this morning reflect CAAMP’s position and do not affect primary mortgages except for the first point where many lenders are already qualifying at 5 years anyway.

Jeff is being told that these rules will be effective april 19th, 2010, so we may be able to still take advantage of the current terms and rates if you’d like.  Contact me for more information regarding that.

Jeff also sent me this article from the Canadian Press, which came out before the initial announcement, so it contains speculation, not fact:

New mortgage rules introduced to lessen mortgage crunch risks: sources say

By Julian Beltrame, The Canadian Press

OTTAWA – The federal government is expected to announce new rules Tuesday that would make it more difficult for first-time buyers to enter Canada’s hot housing market.

Sources have told The Canadian Press that Finance Minister Jim Flaherty is ready to move on the issue because of concern Canadians may be taking on too much debt.

Economists have advised the minister the best way to protect Canadians is to institute a debt affordability test in order to qualify for a Canadian Mortgage and Housing Corp. insured mortgage.

Currently, prospective home owners can qualify for a CMHC insured mortgage if they put at least five per cent down on the cost of a home.

But bank officials say they usually apply a cushion to ensure home buyers have sufficient income to meet payment requirements if floating rates rise, in some cases by more than two percentage points.

Flaherty is expected to make such an income test a condition for acquiring an CMHC insured mortgage.

Another possibility is for the minister to reduce the amortization period from 35 years to 30, which would have the effect of raising monthly payments. [note: it does not appear this happened -BB]

It is believed Flaherty rejected more radical measures to cool the housing market, which has reached record levels in sales and near record levels in average home prices despite the weak economy.

Economists have cautioned the minister against putting on the brakes too strongly. They say raising the minimum downpayment requirement to 10 per cent, one of the suggestions given the minister, could cause a crash in a key mainstay of the fragile economic recovery.

The Bank of Canada has been warning for months that homeowners should ensure they can absorb an increase in their floating rate mortgages once rates start rising, likely as early as this summer.

By the central bank’s own stress test calculation, almost one in 10 households would have a debt-service ratio that makes them vulnerable to economic shocks by the middle of 2012 if current trend continue.

In an address written for deputy governor Timothy Lane last month, the bank suggested the government has all the tools it needs to address the problem.

"An array of supervisory and regulatory instruments can be used by the government to restrain a buildup of systemic risks," said notes the address.

Related posts:

1. Flaherty talks more about Canadian Real Estate & Mortgage Markets
2. What is the Bank of Canada doing with mortgage rates?
3. Ottawa hints at tighter mortgage regulations

Even a lot of our clients who live in the KW area use property management to take care of their rental properties; it’s just easier, and can be very affordable (depending on who you deal with)

Here’s a bit of info for you:

Contant me “Benjamin AT BenjaminBach.com” for a referral to a great management company

Related posts:

1. Investors agree: Use a Realtor when buying an investment property
2. What to put in an offer when you’re buying investment real estate
3. Commercial and Investment Real Estate Market Heating Up

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:

Related posts:

1. Student Rental Market Update – Waterloo, Ontario
2. Illegal Real Estate Investments in Kitchener Waterloo
3. How profitable can investing in Kitchener Waterloo Real Estate be?