Hardcore Renters

Recently, I have learned that renting an apartment can be as tough as buying a place in this city.   As a landlord,  I did minimal advertising for my main floor, recently renovated, one bedroom apartment in a house with no tenant parking in a west end neighbourhood. The response to my ad was the best I have ever had in my 10 years of being a landlord. Usually around 10 - 20 % of the folks who go through to see a given apartment express an interest. I had everyone who came through fill out an application form. I think the rent was set near market value, but I had folks offer me more than I was asking. No doubt it appears that the rental market can be competitive in this city. I had to pick from some pretty magnificent renters to the point where I felt bad telling certain people they cannot live in my available apartment. 

As a real estate salesperson, I'm overwhelmingly associated with buying a property, but there are some circumstances where it may be smarter to rent than to buy. If, for example, you are not sure if you will be staying in Toronto for a longer period of time, then you should probably rent. Maybe you are arriving in Toronto for the first time and you want to get to know the city neighbourhoods a little before buying. Then by all means, rent.  And it's possible that you don't like the stress of home maintenance or maintenance fees. Then you should be a renter.

Still, those are not the renters I usually come across. I come across the hardcore renter. Those who have the means to buy but who just don't want to pull the trigger. Some are concerned the market will crash. Many will say that they can find more space in a better location if they rent than if they get a mortgage. And to a certain extent, they're correct. However, over a ten year period, your rent will likely increase, and the principal on your mortgage will decrease. In other words, the unit that cost $1800 now to rent, may cost $2500 in 10 years. There's a very good chance it will cost more than your mortgage.

And then there are those who argue that they make more money by investing with a financial advisor in stocks or bonds instead of real estate. And though the returns have been weak for those investments over the past twenty years on average, I suppose there are still some out there who can rent and invest their money wisely. Not all equity is built in real estate. There are other options out there.

But let's be honest. Most renters are not avid savers.  When buyers purchase a property, they do pay a lot of their mortgage payment to interest, but a portion of their payment builds equity in their property. So, you are building equity instead of giving your landlord the money. And I'm a landlord. So, thank you renters.

Also, most renters who have been renting for forever and have the money to buy a property have some anxiety around commitment. Not to their significant others, but to committing to stay in the same place for five or more years. They may have rented the same place for 20 years, but they still don't want to have the responsibility.

My point with all this: Sometimes you have to rent. You don't have the money yet. You're retiring to make your life easier. You're not ready to commit to a long term plan or you are not planning on staying in Toronto. But if you do have money and you can get started, buy. If I could have bought earlier than I did, I would have. Sure, your place may feel smaller or further away than when you were a renter, but with enough time, you will have a nest egg and you'll be astonished at what some people pay in rent in future Toronto.

Zoning out: How Important are School Zones to Your Property Purchase?

Some parents are obsessed with school zones. And to some extent, they should be.  Those mouldable minds of your children are important tools to sharpen. In Toronto, for the most part, you go to the school to which you are zoned though some cities like Vancouver or Edmonton allow kids to go to the schools they want in any zone.

In my real estate experience, when it comes to looking for homes in the right zone, I usually come across two kinds of parents. The ones that don't look at school zones at all and those who are obsessed with it. Reality falls somewhere in the middle.

I can certainly understand why you may want your kids to be at a good school. A good school will better prepare them for the future with better tools for their life ahead. It will make them more competitive in a competitive world.

With that said, don't get too obsessed with school rankings. Yes, they do mean something when done right, but they can lead to some crazy moves to areas far from work in a house that is ill-fitted for the size of your family. 

Note that some methodology in these rankings leaves some schools ranked much higher one study over another. It also polarizes some of the schools making some appear much better or much worse than they are. 

Now, with that said, school zones are worth reviewing, especially if you want/have kids and you plan to be settling in for awhile. In parts of the Greater Toronto area, school rankings tend to be more steady and impressive in some of the suburbs. If you have a richer neighbourhood like Port Credit in Mississuaga, you have a good school to go with it. Same with somewhere like Glen Abbey in Oakville. In Toronto, the extremes seem a bit more pronounced. So, you do have the great schools like Jackman School in the wealthier Playter Estates, and lower ranking ones in more challenged neighbourhoods. Income data from Statistics Canada shows that the divide between higher and lower income groups is usually reflected in the higher and lower ranked schools  High-scoring elementary schools are primarily concentrated in high-income areas and vice-versa. In lower-income neighbourhoods, a higher percentage of students fail the reading, writing and math tests.

Another thing to consider is the French factor. Whether you are in the suburbs or the city,French immersion schools often rank at the top. In some areas the Catholic Schools rank higher, and some people will have their kids go to these schools even though there is not a stitch of Catholic in them. 

Now, if you live in an inexpensive neighbourhood, it does not necessarily mean you have a low ranking school. It's worth doing your homework, even if you are only going to check the Fraser Institute‘s top schools in Ontario. If you are in an emerging neighbourhood, you may witness a rebirth of the commercial strip with yoga studios and indie coffee shops, but the schools will be the last to improve. Still, as the new families move in, the parents are more involved, and the schools do better. 

Some parents prefer that their kids be in a top academic school and will live in a shack for two million to ensure that, but some parents prefer that their kids go to a more diverse school with a more progressive curriculum and less formal approaches to learning. Some parents just want the school close by.

My suggestion: Do your research. Have an idea of how long you want to be in the neighbourhood. You may find a great elementary school, but a less stellar high school. Also, even if you do buy in a neighbourhood zoned for a top-notch school district, you may find yourself on a waiting list to get into the school because they are at capacity. Make sure you can get in. Also, take the ranking with a grain of salt. I think these rankings amplify some of the differences. Look for patterns from past years. Is the school improving from one year to the next? 

Now, if there is any one reading this who does not have kids and never plans to have any, I'm surprised you've made it this far. Nonetheless, you may want to pay attention to school districts as well. If you happen to buy in a great school zone, your property will be worth a lot more when it comes time to sell. It's a wise investment to buy in a good school zone.  As we have seen, there is no shortage of kids in Toronto. Downtown has probably seen more kids in the city than it has in decades. So, the demand for good schools will continue.

Can the Magic of Little Italy Strike Twice?

You have to love Italy. Sure, they messed up with Benito Mussilini, but wow, they sure know to make a meal and play (or cheer on) an outstanding soccer game.

It seems that wherever larger city you visit in North America,  you'll find a successful and bustling neighbourhood called "Little Italy".  It will be lined with busy restaurants,  though not always serving Italian food. It will be  surrounded by an established and impressive residential area, though not inhabited exclusively by Italians any longer. New York, Chicago, San Francisco - all have a thriving Little Italy. Just like here in Toronto.

So why is this Little Italy phenomenon such a success? Well, some of it has to do with timing. The first wave of Italian immigrants arrived in major North American cities at a time where the local mangiacakes were heading to the suburbs. When the Italians arrived, they were able to pick up real estate in areas of the city that were central and inexpensive at the time. Once they had a foothold in that area, the other Italian immigrants would follow them, and join their growing Italian community. They shared the same language, recipes and religion.

The second reason has to do with food. Italians make delicious food that appeals to almost everyone in the world. Italian food is almost a guaranteed success. People will travel to go to a good Italian restaurant. I would say that most restaurants in this city will default to an Italian cuisine because it is so universally beloved across most cultures.

So, it's not surprise that Toronto's Little Italy at College and Clinton is one of the most desirable neighbourhoods in this city to live if you want to be central and have great restaurants nearby.  Times have changed though.  I would say the majority of the Toronto residential population here is no longer Italian, though the commercial strip does have a strong Italian theme with many Italian restaurant options. (See this video for more on the first Little Italy)

But can the success of a Little Italy strike twice in the same city? Can there be two neighbourhoods with an Italian theme?

The short answer is yes, but the emerging neighbourhood named Corso Italia has some way to go before hitting the success of the first Little Italy. This neighbourhood runs along St. Clair from Lansdowne to just east of Dufferin. It is no College and Clinton. It is not as central, and does not have the strong Italian branding that Little Italy has had over the decades, but it does have a growing population of top notch Italian restaurants including some of the best pizza in the city. This strengthening commercial strip often attracts new homebuyers, whether they are Italian or not. The St. Clair streetcar has easy access to the Yonge line. So, it's not as far away as some people think.

In my opinion, Corso Italia and the bordering areas of Silverthorn to the north and Ealscourt to the west, are going to be neighbourhoods to watch for home price appreciation, especially when you consider the future Eglinton Crossway that will be going in to improve transit in the area. In my opinion, these neighbourhoods are a little undervalued right now and do need some improvements, but with the pressure on the houses we have continued to see in Toronto year after year, this is becoming the new frontier of new homebuyers who cannot afford a million dollar home closer to downtown. It is a neighbourhood that has already shown us some of the best price appreciations over the past year.

So, if you are looking for a house and you love Italian food (and Portuguese food too), then you may want to focus on the Toronto's other Little Italy for your search.

The Art of Bullying

I know, I know... bullying is bad. And these days there is less and less tolerance for bullies out there. And rightly so! Long live the nerds and the bullied! They deserve better, and will come out stronger and richer in the end.

 Of course, the use of the word "bully" can mean something a little different than calling someone a bad name in the school yard in my line of work. In real estate, being a bully can sometimes work for you in the right set of circumstances and the right market, but you better pack a pretty good punch.

When you choose to be a bully in real estate, you are deciding to put in an offer on a property before the seller has indicated they are willing to review offers. So, you would bully the seller into reviewing your offer before their preferred date. 

Now unlike the classic bully, you don't want to be cruel to the seller, but you want to offer to buy a property in demand before other buyers bid on it.

But are bully offers the way to go? Well, that depends on the angle from which you are approaching. There are really two ways to look at it: From a buyer's perspective and a seller's perspective.

BUYER'S PERSPECTIVE

If you have been losing out on one bidding war after another, and you finally discover the house of your dreams that you just know you gotta have, you may want to consider a bully offer. It doesn't always work, but it can land you a house after a lot of frustration built up from lost bidding wars and doing battle with 10-20 people in a bidding war. 

The best way to illustrate the advantage of a bully offer is to give an example. Let's say you would like to purchase a house that has had a great deal of interest situated in a great neighbourhood. The owner is holding back offers until a certain day, likely in the anticipation of getting several offers well above the listed price. So, instead of waiting until the day where the owner is accepting offers - let's say  a Wednesday - you put forth an offer on a Monday and only make your offer good until 11pm that Monday evening.

If it's the kind of neighbourhood where the listing agent likes to list below market value, keep in mind that you will need to have a  price comparable to recent sold prices of a similar property in the area. If you are going to be a bully, you have to impress the seller enough so that they would take your offer before the offer date. Also, keep in mind that the selling agent is obligated to let everyone that has gone through to see the property know that you have submitted a bully offer, and allow them to bring forth an offer with the new time frame. This strategy could catch some curious buyers off guard. They may not have time to get in an offer to compete with yours by the Monday night. However, just because you bully, doesn't mean the fellow buyers cannot move quickly to produce more offers on the desired property. 

Of course none of this matters if the sellers say they are not interested in a bully offer. If the seller is not interested, then he or she can refuse to review it until the offer day they selected. Also, they may review the offer and still say no.

So, if you decide to take the bully route, make sure the property you are giving a bully offer on is worth it.

SELLER'S PERSPECTIVE

Let's say you have one awesome house in one awesome neighbourhood. You and your selling agent, say me, will be holding back offers for one week from Wednesday to the following Wednesday. Then, we receive a call on Monday that someone wants to put in a bully offer that is only good until the end of Monday.

Now, all offers are worth considering and circumstances differ from property to property, but from my experience I generally feel that someone who would like to bring you a bully offer on Monday will likely come to offer night on Wednesday.  Simply put, if you say no to a bully offer, they will likely appear on offer night with a good offer in hand. In addition, you may see other offers that Wednesday night of your choice that are even better than the bully offer. 

Usually, I would not recommend taking bully offers. There are exceptions of course. Maybe you have not had a lot of interest in your house, and you feel the bully offer may be better than the offers you will receive on offer night. Maybe the buyers with the bully offer won't or cannot present on offer night. Perhaps they have an interest in another home that has an earlier offer night, like Tuesday. Still, in most cases, bullies will wait. It's really the seller who is calling the shots when there is a lot of interest in their property. Use your powers wisely.

Unlike the real world, being a bully in real estate is not always such a bad thing, though you have to pick your bullying targets very wisely. There are some advantages to being a bully from a buyer's perspective. You can throw off your competition, namely, the other buyers. This strategy can also backfire. Some sellers don't appreciate pre-emptive offers.  From a seller's perspective, it's rarely wise to accept the bully offer before offer night.  Finally, I should point out that bully offers are not the norm, even in the current Toronto housing market. Most properties don't pull in that kind of frenzied interest, and even if they do, most buyers prepare for offer day before offering.

Why is Toronto Real Estate #1 in All the World?

The numbers have been crunched, the data has been reviewed and now it's official. Toronto is number one! Not for the most livable city (where we placed 4th), not for the most economic-competitive city ( where we placed a respectable 10th) and no, not for the crackiest mayor in all the land (though that may be #1 as well).  This number one position that we could take some pride in has to do with real estate market. According to a London-based real estate firm, Toronto has the real estate market that will have the best resiliency and the best prospect for future investment in the long term.

Now, I'm as skeptical as anyone about these international studies. We all know that we can find a new article each week expressing the view that Toronto is unstoppable in the real estate department or studies that have called Toronto one of the frothiest real estate markets in the world.  What I like about this study, though, is its ability to look at the long term, and not short term guess work.

I'm sure that still leaves many Torontonians and Garth Turner followers, scratching their heads. How can that be? We can be hopeful about Toronto real estate? Should we not be concerned about an inevitable crash at any moment? Are we not due for a long-awaited correction like the rest of the world?

Well, I don't think so. But if any correction does occur, which is not predicted, this study is suggesting that we will recover, and recover well.  It does not talk about the short term changes that can happen in any city, but only the long term goal. So, if you are planning on using this study to buy a house and flip it in two years, then this study should not be your guide. 

But why Toronto real estate for the long term? Well, it is a Canadian thing. All of the three Canadian cities in the study have  ranked in the top three. Right behind Toronto, you'll find Vancouver and Calgary. From an international point of view, we are very well governed as well as well planned when it come to our cities. Here in Toronto we may be surprised to hear such things considering the amount of attention our infrastructure needs and the lack of leadership at a municipal level. Still, the city is seen as golden in the eyes of others. It succeeds despite the municipal politics we've experienced these past few years.

We also have easy access to resources like water and energy. I'm sure Los Angeles cannot say the same thing. That will lend a certain stability that will keep Toronto as a steady and desirable place to live. 

The other key finding: Toronto really isn't that expensive. I know this may be a little shocking to hear when you consider the endless year-over-year price appreciations the real estate market has shown us when it comes to houses in this city. Increasingly, Toronto will become a city that is more expensive to live in, without a doubt, and that does put certain pressures on us.  Still, when you are up against places like London and Sydney, we start to feel like a bit of a bargain. From an international perspective, we're more like No Frills against the Loblaws and Whole Foods of the world. 

The key word in this study is resiliency - the ability to bounce back and grow. Yes we have a lot of work to do in the transit and traffic department. It took me an hour and 20 minutes to cross the city yesterday! And yes, we need to have much stronger leadership at a municipal level, someone who understands what Toronto is becoming instead of trying to preserve a vision of Toronto as just another Canadian city. 

Are There Too Many Real Estate Agents?

The number are astonishing. For the Toronto Real Estate Board, there are nearly 40,000 real estate agents int this city this year. To put that into perspective. That is 1 real estate agent for every 140 Torontonians, twice as many as ten years ago.  Four thousand more than last year. If you are looking for a way to not feeling special in this city, become a real estate agent.

So, the question has to be: Why are there so many?

The number one reason: There is a public perception out there that selling real estate is easy money. If you have a winning personality and half a brain, you can be rich and self-employed. There is a belief that any one can do it. But the same stats that show us just how many real estate agents there are here in the city also tell us that a great proportion of the Toronto real estate agents are not making this easy money. I'm sure some may be surprised to find out that almost 27% of all agents in Toronto have not done a single sale last year. To put that into perspective, they are paying their yearly dues, thousands of dollars, to the Canadian Real Estate Board, the Real Estate Council of Ontario, the Ontario Real Estate Board and the Toronto Real Estate Board, and not making a dime. In fact, two thirds of all agents in Toronto have done less than three deals in a year. Of course, people at the top do much better than this, but still the median salary for a real estate agent right now in Toronto is less than miminum wage.

The other shocking statistic: 71% of all real estate agents on the Toronto Real Estate Board are part time. That means that most real estate agents have another job beit a fireman, a part-time teacher or they just don't clock in enough deals to be considered full time.

If you are someone who wants to buy or sell a house or condo, you should find these stats concerning, to say the least. If you are dealing with a salesperson that has less than three transactions a year, then you are dealing with someone who has cultivated little expertise. Now, I know we have all been there. We've all had to start somewhere. And I personally think it's important to support new real estate salespersons as they learn, but it's another thing to have most agents in this city with such limited experience. And I see this on a daily basis. Salespersons who do not know how to write up a deal, who don't understand the conditions I have included. Real estate salespersons who price something incorrectly or market something poorly.

The inexperienced work force does not only come from those salespersons who think they can make easy money and have it as a part-time career. The Ontario Real Estate Council, who provides the educational framework to become a real estate salesperson, also makes it very easy to obtain this real estate salesperson designation. Tougher than the old days, but still fairly easy. The more real estate salespersons there are, the more money OREA makes from providing the educational courses.

Even though it's not a bad idea at all, I don't want to be that guy who says it should be tougher to become a real estate salesperson by increasing the standards of education. A lot of what I learned, I learned from buying and selling property. And if most agents are not turning over more than three transactions a year then I would think the learning curve doesn't curve very much. There is simply not  enough opportunity to learn for many.

So, what does this mean for those of us who are not real estate salespersons? For the consumer, make sure you do your homework on your salesperson. Ideally, you would seek out someone who has some skills and some experience, works well with your personality, and who is, most importantly,  full time in their career. If you want to give your cousin or best friend a chance who has just become a real estate agent, maybe have him or her work with someone more experienced on the transaction. As for part-time agents, I don't know if they can be as effective as a full time one. Would you prefer a part-time doctor over a full-time one? I think with any profession, whether you're a brain surgeon or a tambourine player, full time will make you better at your job.

Does a National Real Estate Market Truly Exist?

People love real estate statistics. And I'm included in this group of people. It's almost a leisure activity for me like playing tennis or watching Game of Thrones. Still, as with any statistics, you always should be a little skeptical of how the statistics come about. I often find there are many reasons to be doubtful with the real estate statistics from a national perspective. It's just too simple. Not every city and neighbourhood function in the same way all over Canada.  Often, I'll hear things like "The average price for a Canadian home went up such and such a percentage point last year." The truth is, markets across the country function in very different ways. A sweet bungalow in a declining small town in New Brunswick does not function the same way as a micro condo in downtown Vancouver.

When it came to the financial crisis that triggered the American housing collapse in 2007, you may think that real estate across one country can change all at once. And you would be partially right. It would appear that almost every real estate market in the U.S. slipped in price. Though a closer look will show you that the drops in Texas were minimal and the collapses in California, Nevada and Florida were colossal, like Godzilla strutting through town.

Still, there are practices and policies that can affect all real estate markets across one country. In Canada, federal policies about tightening lending practice will influence how buyers buy properties across the country, no matter where you are. A change in interest rates can certainly have a bearing on anyone who wants to buy a property or renew a mortgage.

For the most part, though, the things that affect the real estate market tend to be local, even hyper-local. This year alone we can see Vancouver, Toronto, Edmonton and Calgary all enjoy healthy gains in home prices. Montreal, Victoria and Halifax, have gained very little.

Toronto, for example has very specific housing policies that only affects this city. We have a provincial and Toronto land transfer tax. The double land transfer tax deters many people from selling since it becomes too expensive to sell and pay the two taxes. This, in turn, causes few listings to come to market, and more competition and higher prices.

Even within Toronto, the condo market functions differently than the market for houses. Even condos in the same neighbourhood that are relatively the same size and age will function differently from one another. All you need is one very well managed building compared to one that is poorly run to show you the difference. Well run condos will have much more appeal that is reflected in the price. The board will use their reserve fund wisely and take care of the building. A poorly run condo will have a low reserve fund, possibly some issues with the builders, or insanely high maintenance fees that don't reflect the work that has been done or the amenities included.

So, the next time you see the word "national" and "real estate" together, take this statistic with a grain of salt. Though there are some factors that truly affect all properties across the country, the local and hyper-local factors have a much stronger influence.