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How To Get The Most Out Of Your Real Estate Investment
June 29, 2010 at 11:28 am 1
oz_house_streetlevel Today's post is from guest editor, Julia Stepanova, a local real estate expert who has done some great investments herself, and is on board to help guide us in our wealth building activities. --- In Toronto the real estate market has not been as affected as it is in the USA. In fact we've had a hot market for the past few months. Our 2010 Forecast called for a strong first half in sales and a slower second half due to three factors. Factor One - the introduction of the HST (which will NOT impact prices in the resale market but will increase the cost of services and new properties over $400,000). Factor Two - we are expecting a bump in Bank of Canada interest rates in the second half of the year, which will make it harder for some people to afford (and therefore fewer people will buy). Factor Three - more listings are coming to the market (particularly in the condo segment). Right now the market is still hot but will be softening towards the end of June/2010. And if you like to take your time looking for a place and multiple offers is not your thing this means it is your time to shine. If you are looking to get into the real estate market it's a great time. But how do you get the most out of it? First, make sure you're taking the right steps. 1. Get yourself preapproved by going to your local bank. 2. Decide on the area. 3. Write your wish list. 4. Find an agent specializing in your preferred area. 5. Do not forget to allocate 1.5% of the purchase price towards the closing cost. If you want a steady return on your money, houses can be a sure bet and it have two strong things going for them as an investment. First, any capital gains on your principal residence are tax-free. If your house appreciates by 6 per cent, you get to keep every cent of your gains. Now 6 per cent may not sound like much, but in terms of how much you end up with, you'd have to earn as much as 12 per cent on a fixed-income investment such as a GIC to match that return, after tax. Second, you don't have to come up with the full purchase price, meaning you're able to harness leverage. The conventional mortgages require a down payment of 25 per cent of a house's appraised value. Where as the High Ratio Mortgage, requires only 5% down payment. For example, if you buy a $200,000 home, you need to come up with around $50,000 for a conventional mortgage. If the home's value rises to $220,000, that's an increase of 10 per cent. But what's really happened is you've put up $50,000, and made $20,000. Your real gross return on your invested funds is around 40 per cent. But notice the word “gross”. Don't forget that your real return will be less. Buying a home and having a mortgage is also a tremendously powerful forced savings program. You need to pay for housing, whether you are renting, leasing, or paying your mortgage. So why not put your money towards a mortgage, and if you invest wisely when you sell you will get it all back. If you rent, you never get anythign back. ---- Julia is a real estate agent with Re/Max Condos Plus and you can find her here.
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Life
Investment Success: Condo Sale Pays Big
January 18, 2010 at 1:25 pm 5
Like many engaged women I will shortly be leaving my apartment to move in with my fiancé. The whole thing is very exciting, but even better because the recent sale of my condo turned out to be a big win. I bought my condo in 2007, and it was a major achievement for me. It was a dream that I’d had in my back pocket for so long, but it just seemed so hard to scrape together a down payment, and then the monthly payments that seemed to last forever were also extremely intimidating. But, despite it all, my dream came true. In August 2007 I bought my first place.

the messy kitchen that I bought

the messy kitchen that I bought



the messy sleeping area pre-renovation

the messy sleeping area pre-renovation

When I bought it I looked at it like an investment, a necessary step to get me to the next place in my investment goals. I planned on living in my place for 2.5 or 3 years, and then I would sell it – and hopefully make a big, fat profit – or I would rent it out while it continued to increase in value.

making improvements to the apt

making improvements to the apt

Two and a half years later I decided I would list it, and prey for the best. So, in the beginning of December I put my place on the market. While the real estate market may be suffering in most of North America, things are not so bad in Toronto. Actually they are pretty good. I wanted to make sure that I didn’t miss out this opportunity to make money off the sale of my apartment. What if things fell sharply in the Spring? What if the new buildings in my neighbourhood – set for construction to be completed in Spring 2010 - were more appealing than my 3 year old condo? What if the economy slipped into more of a recession and nobody was buying? I didn’t feel comfortable with waiting it out until the Spring market, so I listed it. Thank my lucky stars it sold in one week!!! At the end of January I will be closing the sale of my condo and moving into my fiancé’s place. And, I have to say, buying my condo was THE BEST INVESTMENT I’ve ever made. I made 275% return on my initial investment! I think I might just try this again…
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