Toronto Income Property Newsletter
Happy Holidays everyone. I would like to wish all of you, your friends and family a very merry Christmas, Hanukkah, Kwaanza, Festivus (or whatever you celebrate) and a happy and prosperous new year. May all your hopes and dreams come to fruition in 2011. If you are travelling over the holidays, please be safe. Try not to eat too much holiday junk food and enjoy this time of year where we all get to see those who we care most about. I’ll be back to you on New Year’s Day where I’ll give you my forecasts for the Toronto residential income property market in 2011. All the best!
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In last month’s newsletter I talked about the new CREA agreement with the Canadian Competition Bureau and how this was going to open the door to more diversified buyers’ and sellers’ services in our industry. The time has come to re-examine commission based structures for those sellers who feel that they do not need the full-service approach that we all offer. These new MLS rules allow do-it-yourself sellers the opportunity to put their own contact information on their property listing and be contacted directly by interested parties as in a traditional “for sale by owner” model. The general public will not be granted access to MLS for the time being. All postings to the MLS system will still have to be entered by a licensed realtor.
I am pleased to announce that today we are launching a new flat fee $999 listing service. We will list your property on MLS, ensuring its accuracy and integrity and then you take care of everything else from that point on. You show your property, deal with potential buyers (and their agents) directly and ultimately negotiate and execute a contract.
A flat fee listing is ideally intended for those who have had some direct selling experience. Do-it-yourself sellers often have flexible schedules and ultimately feel that they can do honestly do the same (or better) job than a realtor who is going to charge them 2 or 2 ½ % of the sale price. My investor clients are always financially oriented and many tend to possess business and marketing backgrounds, so it will be a natural fit for some of them.
This service isn’t going to be the best selling alternative for everyone. Many sellers (especially of tenanted properties) will continue to need the full service approach, having all duties professionally performed from beginning to end by an experienced real estate professional.
For more information, please visit www.999dollarlisting.com. If you or any of any associates would like to chat more about how this service works in more detail, please feel free to send me an e-mail and I’ll be back in touch with you soon.
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The Toronto Real Estate Board reported 3,076 sales through the Multiple Listing Service during the first two weeks of November 2010. This represented a 16 per cent decrease compared to the 3,666 sales recorded during the same period in November 2009. Year-to-date sales amounted to 78,526 – up slightly from the 2009 total.
It is interesting that even though the number of sales declined, prices didn’t drop. In fact, they went up slightly. In the downtown core it seems like there is hardly any investment inventory at the moment, but that’s only because a year ago we were at the top of the market. When you have record breaking months, as we saw a year ago, where everyone is selling because the market is strong, eventually this has to subside. There are only so many people out there with duplexes to sell. Now a lot of sellers are being cautious and are waiting. There are still plenty of buyers out there though. When I start seeing cap rates that aren’t five point something, then I’ll believe that the demand has started to drop off. In the mean time, many buyers will still have to be patient for the right opportunity.
Monday, December 06, 2010
Monday, November 01, 2010
Toronto Income Property Newsletter - November 2010
Is it just me or does it seem like this year is just whipping by? It’s already November, the clocks get turned back soon, and the leaves are almost all gone. We’re just around the corner from X-mas and then into yet another new year. The Toronto income property market continues to challenge as there has been very little quality inventory around town with high enough rents to justify the sale prices. The ones that are decent do sell almost immediately and often for over-asking price. I fear that the days of good income properties in the core of the city for under half a million dollars may be behind us.
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Members of the Canadian Real Estate Association approved CREA’s agreement with the competition regulator over access to the Multiple Listing Service last week.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best – help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” CREA president Georges Pahud said in a release.
The Competition Bureau was concerned that the MLS system unfairly restricts competition and restricts the freedom of choice for consumers, pushing up costs as a result. That’s because to list a property through MLS the consumer also had to accept and pay for a broad range of services from a real estate agent even if they don’t want them. The current system also does not allow us to put the Sellers contact information on the listing so that they may be contacted by buyers (or their agents) directly. In the upcoming weeks, this is all going to change.
So what does this mean for our business? Do-it-yourself sellers who list their property on the MLS will still have to offer buying agents a typical 2.5% commission if they want to sell their home at a good price. The majority of serious buyers will still be represented by their own agents, who will still need to be compensated. In essence these sellers realistically stand to save only on the listing portion of the commission. The media normally states this is 2.5%, but there are plenty of discount brokerages and agents that are listing homes for 1%. This means a total of 1% if the listing agent finds the buyer and 3.5% if another agent brings the buyer.
I believe that the hardest hit agents are going to be those that offer a minimal level of service to their clients, but still charge a full 5% to list properties on the MLS. Quite often it is the MLS that sells the property and not the listing agent. Further to my personal frustration, some listing agents make the same amount of money on a transaction as I do for only a few hours work where I have often spent many months with my buyers. These agents need to be forced to change how they do business.
Regardless of what option they choose private sellers with MLS access will need to demonstrate that they can price their home effectively, disclose all necessary issues and negotiate in good faith. More importantly, all the information that they enter onto the MLS system will have to be vetted by a licensed real estate practitioner to ensure the accuracy of listings and the integrity of the system.
Discount brokerages have existed in the Toronto marketplace before but haven’t fared too well. Yet the landscape is obviously changing. Under these new CREA guidelines, expect a proliferation of “flat fee” or “a la carte” services to be offered. I think that skilled agents will be able to their tailor their services to best fit the marketplace. Stay tuned to this folks as it will be very interesting to see how all of this impacts commissions over the long run.
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I’d like to congratulate our new mayor-elect Rob Ford. This past election polarized a lot of folks in town, but I believe we have to support the people’s choice and wish him our best. If he is successful in repealing the municipal land transfer tax, I think that will be a very positive step forward for our business.
Is it just me or does it seem like this year is just whipping by? It’s already November, the clocks get turned back soon, and the leaves are almost all gone. We’re just around the corner from X-mas and then into yet another new year. The Toronto income property market continues to challenge as there has been very little quality inventory around town with high enough rents to justify the sale prices. The ones that are decent do sell almost immediately and often for over-asking price. I fear that the days of good income properties in the core of the city for under half a million dollars may be behind us.
*
Members of the Canadian Real Estate Association approved CREA’s agreement with the competition regulator over access to the Multiple Listing Service last week.
“This 10-year agreement brings a close to a long process of negotiation with the Competition Bureau and will allow CREA and realtors to do what they do best – help people with the biggest financial decision of their lives, buying and selling a home in these challenging economic times,” CREA president Georges Pahud said in a release.
The Competition Bureau was concerned that the MLS system unfairly restricts competition and restricts the freedom of choice for consumers, pushing up costs as a result. That’s because to list a property through MLS the consumer also had to accept and pay for a broad range of services from a real estate agent even if they don’t want them. The current system also does not allow us to put the Sellers contact information on the listing so that they may be contacted by buyers (or their agents) directly. In the upcoming weeks, this is all going to change.
So what does this mean for our business? Do-it-yourself sellers who list their property on the MLS will still have to offer buying agents a typical 2.5% commission if they want to sell their home at a good price. The majority of serious buyers will still be represented by their own agents, who will still need to be compensated. In essence these sellers realistically stand to save only on the listing portion of the commission. The media normally states this is 2.5%, but there are plenty of discount brokerages and agents that are listing homes for 1%. This means a total of 1% if the listing agent finds the buyer and 3.5% if another agent brings the buyer.
I believe that the hardest hit agents are going to be those that offer a minimal level of service to their clients, but still charge a full 5% to list properties on the MLS. Quite often it is the MLS that sells the property and not the listing agent. Further to my personal frustration, some listing agents make the same amount of money on a transaction as I do for only a few hours work where I have often spent many months with my buyers. These agents need to be forced to change how they do business.
Regardless of what option they choose private sellers with MLS access will need to demonstrate that they can price their home effectively, disclose all necessary issues and negotiate in good faith. More importantly, all the information that they enter onto the MLS system will have to be vetted by a licensed real estate practitioner to ensure the accuracy of listings and the integrity of the system.
Discount brokerages have existed in the Toronto marketplace before but haven’t fared too well. Yet the landscape is obviously changing. Under these new CREA guidelines, expect a proliferation of “flat fee” or “a la carte” services to be offered. I think that skilled agents will be able to their tailor their services to best fit the marketplace. Stay tuned to this folks as it will be very interesting to see how all of this impacts commissions over the long run.
*
I’d like to congratulate our new mayor-elect Rob Ford. This past election polarized a lot of folks in town, but I believe we have to support the people’s choice and wish him our best. If he is successful in repealing the municipal land transfer tax, I think that will be a very positive step forward for our business.
Friday, October 01, 2010
Toronto Income Property Newsletter - October 2010
Happy Thanksgiving everyone. The leaves are starting to turn into their fall colours and it’s getting close to that time to fire up your furnace. Please remember to change the filter on your furnace before you turn on the heat for the first time. This little preventative move will often improve the efficiency of your air flow. Also, it’s a good idea to turn off any exterior water taps, so that the pipes don’t freeze if it gets too cold. Since last winter was fairly tame, I expect a lot more snow and severe cold weather this year. Also, the municipal election is this month (October 25th), so try and get out there to cast your vote. I think this election is very important to the future direction of our city. Regardless of who you vote for, I think the political landscape in Toronto is going to get a whole lot more interesting. I won’t state who my personal choice is, but let’s just say I hate getting stuck behind streetcars.
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As suspected, the market is back in full speed. Now mind you it’s not the same craziness as last September but I don’t think anyone really expected that we’d exceed last year’s numbers. When the overall sales figures for September are released, there should be quite a drop from September 2009. Remember that the market last fall was one of the busiest times in recent memory. It was a real sellers’ market. I’d like to see how 2010 compares to 2008 & 2007 – that should give us a much more viable sense of what is going on.
In all the central MLS districts there were 15 sales of properties with three or more kitchens this past month. The average sale price was around $675K and the days on the market was approximately one month. Only one of these properties traded for over the asking price. Contrast this with September 2009, where there were 24 sales of income properties, the average price was closer to $750K and the average days on market was only 17 days. There were seven properties (as opposed to one this year) that traded for over asking price.
I think that in many cases, a lot of the existing unsold inventory is still a little bit over-priced. Whereas a year ago these overpriced properties may have traded, there seems to be a bit more reasonableness to the market this year. I believe that if quality income properties are priced correctly, they will trade fairly quickly in almost any market, since at any given time there are so few good ones to choose from.
*
The following article was sent to me this month by a mortgage broker who recommends that you stay on top of your credit history if you are contemplating a real estate purchase. I think it originally appeared in the personal finance section of one of our daily newspapers:
Who checks your credit report and credit score?
Big companies – banks, utilities and telecom firms – do so when you apply for credit. Some property insurance companies use creditworthiness as a factor in setting rates. So, why aren’t you checking your credit report and credit score to make sure they’re accurate and up to date?
No one else but you can find errors and correct them. It’s your duty to do it, despite the roadblocks you may encounter.
Canada has two credit reporting agencies, Equifax and TransUnion, which gather and store information about credit transactions in your name. Once you get a free copy of your credit report in the mail, look for any outdated information. Then, call your credit granters to ask them to update the credit bureaus on your status.
Consider the following thoughts:
“Credit reports do a great job of recording any loans or car leases you might take on, but are poor at removing them once paid or expired.”
“I had outdated loans and leases for cars I no longer possessed and on which I owed no money. The credit bureaus wanted a lot of documentation, which I didn’t have readily available, to remove these loans/leases.”
“I suspect most people don’t understand it’s their responsibility to provide evidence of paid off loans.”
LM and her husband discharged their mortgage two years ago and have no outstanding loans. They recently went to the Equifax website to check their credit reports and credit scores (for a $23.95 fee).
“Our scores weren’t bad, but should have been better,” LM says.
“Here’s why: We changed our credit cards quite a few times, chasing better air miles deals or in-store promotions. Many of these old cards remained on our reports, even though we cancelled them by phone years ago.
“Also, we foolishly allowed the three cards we do use to keep bumping up our credit limits, way beyond what we needed or would ever use.
“Having too much available credit can hurt you. Lenders may worry that you have the ability to spend more than you can possibly pay back.
“You might want to consider closing a few accounts or asking to have your credit limits reduced,” TransUnion says on its credit score report.
Take care, however, because closing too many accounts – especially the oldest accounts on your credit report – can also hurt your credit score.
Suppose you have three credit cards with total available credit of $20,000. Your balances never exceed more than $6,000, which means you’re using less than a third of your available credit.
“Since creditors like to see a credit utilization ratio of 30 to 35 per cent or less, you’re in good shape,” says Bankrate.com, a consumer advisory source.
Now, assume you cancel a card with a zero balance and a $10,000 limit. Suddenly, your utilization ratio jumps to 60 per cent and your credit score drops.
Impersonal credit scoring systems aren’t concerned so much with how much available credit you have, but with how you manage that credit. To them, a 30 per cent utilization rate is better than a 60 per cent one.
*
On a sadder note, my condolences to Toronto FC who had one of the worst seasons in our four year history. Five head coaches in four years – OUCH! I don’t know what it is with our Toronto sports teams, but we really do need one of them to step it up a notch.
Happy Thanksgiving everyone. The leaves are starting to turn into their fall colours and it’s getting close to that time to fire up your furnace. Please remember to change the filter on your furnace before you turn on the heat for the first time. This little preventative move will often improve the efficiency of your air flow. Also, it’s a good idea to turn off any exterior water taps, so that the pipes don’t freeze if it gets too cold. Since last winter was fairly tame, I expect a lot more snow and severe cold weather this year. Also, the municipal election is this month (October 25th), so try and get out there to cast your vote. I think this election is very important to the future direction of our city. Regardless of who you vote for, I think the political landscape in Toronto is going to get a whole lot more interesting. I won’t state who my personal choice is, but let’s just say I hate getting stuck behind streetcars.
*
As suspected, the market is back in full speed. Now mind you it’s not the same craziness as last September but I don’t think anyone really expected that we’d exceed last year’s numbers. When the overall sales figures for September are released, there should be quite a drop from September 2009. Remember that the market last fall was one of the busiest times in recent memory. It was a real sellers’ market. I’d like to see how 2010 compares to 2008 & 2007 – that should give us a much more viable sense of what is going on.
In all the central MLS districts there were 15 sales of properties with three or more kitchens this past month. The average sale price was around $675K and the days on the market was approximately one month. Only one of these properties traded for over the asking price. Contrast this with September 2009, where there were 24 sales of income properties, the average price was closer to $750K and the average days on market was only 17 days. There were seven properties (as opposed to one this year) that traded for over asking price.
I think that in many cases, a lot of the existing unsold inventory is still a little bit over-priced. Whereas a year ago these overpriced properties may have traded, there seems to be a bit more reasonableness to the market this year. I believe that if quality income properties are priced correctly, they will trade fairly quickly in almost any market, since at any given time there are so few good ones to choose from.
*
The following article was sent to me this month by a mortgage broker who recommends that you stay on top of your credit history if you are contemplating a real estate purchase. I think it originally appeared in the personal finance section of one of our daily newspapers:
Who checks your credit report and credit score?
Big companies – banks, utilities and telecom firms – do so when you apply for credit. Some property insurance companies use creditworthiness as a factor in setting rates. So, why aren’t you checking your credit report and credit score to make sure they’re accurate and up to date?
No one else but you can find errors and correct them. It’s your duty to do it, despite the roadblocks you may encounter.
Canada has two credit reporting agencies, Equifax and TransUnion, which gather and store information about credit transactions in your name. Once you get a free copy of your credit report in the mail, look for any outdated information. Then, call your credit granters to ask them to update the credit bureaus on your status.
Consider the following thoughts:
“Credit reports do a great job of recording any loans or car leases you might take on, but are poor at removing them once paid or expired.”
“I had outdated loans and leases for cars I no longer possessed and on which I owed no money. The credit bureaus wanted a lot of documentation, which I didn’t have readily available, to remove these loans/leases.”
“I suspect most people don’t understand it’s their responsibility to provide evidence of paid off loans.”
LM and her husband discharged their mortgage two years ago and have no outstanding loans. They recently went to the Equifax website to check their credit reports and credit scores (for a $23.95 fee).
“Our scores weren’t bad, but should have been better,” LM says.
“Here’s why: We changed our credit cards quite a few times, chasing better air miles deals or in-store promotions. Many of these old cards remained on our reports, even though we cancelled them by phone years ago.
“Also, we foolishly allowed the three cards we do use to keep bumping up our credit limits, way beyond what we needed or would ever use.
“Having too much available credit can hurt you. Lenders may worry that you have the ability to spend more than you can possibly pay back.
“You might want to consider closing a few accounts or asking to have your credit limits reduced,” TransUnion says on its credit score report.
Take care, however, because closing too many accounts – especially the oldest accounts on your credit report – can also hurt your credit score.
Suppose you have three credit cards with total available credit of $20,000. Your balances never exceed more than $6,000, which means you’re using less than a third of your available credit.
“Since creditors like to see a credit utilization ratio of 30 to 35 per cent or less, you’re in good shape,” says Bankrate.com, a consumer advisory source.
Now, assume you cancel a card with a zero balance and a $10,000 limit. Suddenly, your utilization ratio jumps to 60 per cent and your credit score drops.
Impersonal credit scoring systems aren’t concerned so much with how much available credit you have, but with how you manage that credit. To them, a 30 per cent utilization rate is better than a 60 per cent one.
*
On a sadder note, my condolences to Toronto FC who had one of the worst seasons in our four year history. Five head coaches in four years – OUCH! I don’t know what it is with our Toronto sports teams, but we really do need one of them to step it up a notch.
Thursday, September 02, 2010
Toronto Income Property Newsletter: September 2010
Back to work, back to school and back to showing income properties seven days a week. OK, maybe six days a week. I hope you all enjoyed your summer. I know many of my friends (and readers) traveled this summer. Lots of you enjoyed your cottages (and farms). We just came back from a driving trip from NYC, through Philadelphia down to Washington DC. Although it was non-stop, it was lots of fun. Philly, by the way, is a great town. The “City of Brotherly Love” reputation is indeed well-named.
I would also like to mention that my friend, real estate lawyer and musician extraordinaire, Martin Gladstone, is running for City Council in Ward 32 (the Beach riding) in the upcoming civic election. One of his platforms is repealing the second, municipal land transfer tax. We wish him all the best.
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Is it safe for the small-scale investors to come back out and play? We all know that June, July and August were down months. Will this fall let the non-occupiers
back into the duplex and triplex market without fears of multiple offers and $100K price escalations, like back in February? I think that you might have to wait just a little bit longer. The buyers of income properties that intend to live in the property are often able to justify paying a higher price. And I’ve come to the startling conclusion (it only took me ten years to figure this out), that this market never dries up. I always have someone in rotation looking to live in their income property. There is always more of a sense of urgency since everyone’s excited to get moving. So if the market continues to lull along, then the investors can get ready but I think that as soon as any quality income-generating inventory hits, provided it is priced right, it will get snapped up. I can’t speak about the 905 or outside of the city core, but in downtown Toronto there is still plenty of demand for quality income properties and nice houses in general. Interest rates are still quite low, so it seems to me like the Sellers will alright through to the end of the year.
*
We realtors we are always looking for new market opportunities and signs of up- and-coming areas. The core of Toronto is pretty much defined and has been for several years now. Yet it is still important to try and figure out which neighbourhoods are on the rise and where are property values are likely to see the sharpest increases? The three neighbourhoods of Toronto that were spoken about throughout the 2000s most often were Leslieville, Parkdale and the Junction. Today, we chat about Corktown, the Distillery and the Lansdowne corridor. There is still plenty to be optimistic about with Leslieville and Parkdale too. Dufferin being opened through to Queen will clean up that little stretch of Parkdale. The eventual Pan-Am games will and Smart Centre shopping area will be ultimately be a boon to lower Leslieville.
New businesses are moving into these areas and there has been a significant increase in the number of new real estate developments. Many streets in these neighbourhoods see homes being renovated and household values increase. The Drake, The Gladstone and The Beaconsfield taverns on Queen West are an obvious sign of older businesses cleaning themselves up and attracting new folks to come into the area. The question becomes are these areas over-done. Once an area has opportunity and everyone finds out about it, is it still an opportunity?
The dictionary defines “gentrification” as the restoration and upgrading of deteriorated urban property by middle-class or affluent people, often resulting in displacement of lower-income people. The term was coined in 1964 by a left-wing British sociologist named Ruth Glass. She used the word to refer to what was then taking place in a part of London called Islington. Islington originated as an affluent place, but had become a rough, working-class area. In the sixties, it experienced gentrification insofar as both the businesses and community began an intense “clean-up” process. The word "gentrification” first appeared in the New York Times in 1972, in reference to London. The article appeared on July of that year, explaining the intense boom in real estate values within the inflation driven economy of those years.
How can you tell when an area is starting to improve? Certainly higher real estate prices are an immediate indicator. For me the one sure-fire sign that an area is on the rise is that Starbucks opens in it. Real estate folks are happy when Starbucks decides to open a new location in a neighbourhood in which we work.
Market experts say the upscale coffee chain's choice of where to open its new stores is usually a harbinger of bidding wars to come. "When I see a Starbucks going in, I rub my hands together because I know property values are going up," an agent once said to me. In what could be called the "Venti Indicator" (named for what Starbucks calls a large coffee), it is even more effective if one can anticipate well in advance where the company will go next. Housing prices in Leslieville have nearly doubled in the past three years, and not surprisingly one of the first signs was the Starbucks going in at Logan & Queen. Starbucks is never on the leading edge of a dodgy neighbourhood turning the corner, but the company has the ability to solidify the process once it is under way. Starbucks first lets smaller, independent stores drive foot traffic to a future area, and when they feel that the area will support their demographic, they can build a store virtually overnight.
The opposite of all this is a process that can be described as degentrification. When I was growing up there, Scarborough was predominantly a white middle working class family neighbourhood, but with the influx of immigration certain neighbourhoods have changed considerably – some would even say for the worst. Today some of these neighbourhoods experience higher crime as a result of lower-class families coming into the area. If you compare the increase in house values at Kennedy & Eglinton, vs. say Yonge & Eglinton over the past ten years, you’ll see that the midtown area has seen much sharper price increases. There are quite a few areas in the GTA, predominantly in the suburbs that has seen this sort of decline.
Leslieville, Parkdale and the Junction are no longer a secret. The cat’s out of the bag. We can all see the cranes moving to the east side of the city. The question is what’s next? Astute investors will always be looking for neighbourhoods that are trending upwards. The secret in the future will be keeping an eye on the new condo developments, businesses cleaning themselves up and yes, Starbucks opening up cafes.
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Term Bank Rate Plex Client Rate
Variable 3.75 1.95
1 Year 6.95 2.50
2 Year 4.15 3.15
3 Year 4.65 2.90
4 Year 5.64 3.69
5 Year 5.49 3.59
7 Year 6.95 4.65
10 Year 7.10 5.00
Back to work, back to school and back to showing income properties seven days a week. OK, maybe six days a week. I hope you all enjoyed your summer. I know many of my friends (and readers) traveled this summer. Lots of you enjoyed your cottages (and farms). We just came back from a driving trip from NYC, through Philadelphia down to Washington DC. Although it was non-stop, it was lots of fun. Philly, by the way, is a great town. The “City of Brotherly Love” reputation is indeed well-named.
I would also like to mention that my friend, real estate lawyer and musician extraordinaire, Martin Gladstone, is running for City Council in Ward 32 (the Beach riding) in the upcoming civic election. One of his platforms is repealing the second, municipal land transfer tax. We wish him all the best.
*
Is it safe for the small-scale investors to come back out and play? We all know that June, July and August were down months. Will this fall let the non-occupiers
back into the duplex and triplex market without fears of multiple offers and $100K price escalations, like back in February? I think that you might have to wait just a little bit longer. The buyers of income properties that intend to live in the property are often able to justify paying a higher price. And I’ve come to the startling conclusion (it only took me ten years to figure this out), that this market never dries up. I always have someone in rotation looking to live in their income property. There is always more of a sense of urgency since everyone’s excited to get moving. So if the market continues to lull along, then the investors can get ready but I think that as soon as any quality income-generating inventory hits, provided it is priced right, it will get snapped up. I can’t speak about the 905 or outside of the city core, but in downtown Toronto there is still plenty of demand for quality income properties and nice houses in general. Interest rates are still quite low, so it seems to me like the Sellers will alright through to the end of the year.
*
We realtors we are always looking for new market opportunities and signs of up- and-coming areas. The core of Toronto is pretty much defined and has been for several years now. Yet it is still important to try and figure out which neighbourhoods are on the rise and where are property values are likely to see the sharpest increases? The three neighbourhoods of Toronto that were spoken about throughout the 2000s most often were Leslieville, Parkdale and the Junction. Today, we chat about Corktown, the Distillery and the Lansdowne corridor. There is still plenty to be optimistic about with Leslieville and Parkdale too. Dufferin being opened through to Queen will clean up that little stretch of Parkdale. The eventual Pan-Am games will and Smart Centre shopping area will be ultimately be a boon to lower Leslieville.
New businesses are moving into these areas and there has been a significant increase in the number of new real estate developments. Many streets in these neighbourhoods see homes being renovated and household values increase. The Drake, The Gladstone and The Beaconsfield taverns on Queen West are an obvious sign of older businesses cleaning themselves up and attracting new folks to come into the area. The question becomes are these areas over-done. Once an area has opportunity and everyone finds out about it, is it still an opportunity?
The dictionary defines “gentrification” as the restoration and upgrading of deteriorated urban property by middle-class or affluent people, often resulting in displacement of lower-income people. The term was coined in 1964 by a left-wing British sociologist named Ruth Glass. She used the word to refer to what was then taking place in a part of London called Islington. Islington originated as an affluent place, but had become a rough, working-class area. In the sixties, it experienced gentrification insofar as both the businesses and community began an intense “clean-up” process. The word "gentrification” first appeared in the New York Times in 1972, in reference to London. The article appeared on July of that year, explaining the intense boom in real estate values within the inflation driven economy of those years.
How can you tell when an area is starting to improve? Certainly higher real estate prices are an immediate indicator. For me the one sure-fire sign that an area is on the rise is that Starbucks opens in it. Real estate folks are happy when Starbucks decides to open a new location in a neighbourhood in which we work.
Market experts say the upscale coffee chain's choice of where to open its new stores is usually a harbinger of bidding wars to come. "When I see a Starbucks going in, I rub my hands together because I know property values are going up," an agent once said to me. In what could be called the "Venti Indicator" (named for what Starbucks calls a large coffee), it is even more effective if one can anticipate well in advance where the company will go next. Housing prices in Leslieville have nearly doubled in the past three years, and not surprisingly one of the first signs was the Starbucks going in at Logan & Queen. Starbucks is never on the leading edge of a dodgy neighbourhood turning the corner, but the company has the ability to solidify the process once it is under way. Starbucks first lets smaller, independent stores drive foot traffic to a future area, and when they feel that the area will support their demographic, they can build a store virtually overnight.
The opposite of all this is a process that can be described as degentrification. When I was growing up there, Scarborough was predominantly a white middle working class family neighbourhood, but with the influx of immigration certain neighbourhoods have changed considerably – some would even say for the worst. Today some of these neighbourhoods experience higher crime as a result of lower-class families coming into the area. If you compare the increase in house values at Kennedy & Eglinton, vs. say Yonge & Eglinton over the past ten years, you’ll see that the midtown area has seen much sharper price increases. There are quite a few areas in the GTA, predominantly in the suburbs that has seen this sort of decline.
Leslieville, Parkdale and the Junction are no longer a secret. The cat’s out of the bag. We can all see the cranes moving to the east side of the city. The question is what’s next? Astute investors will always be looking for neighbourhoods that are trending upwards. The secret in the future will be keeping an eye on the new condo developments, businesses cleaning themselves up and yes, Starbucks opening up cafes.
*
Term Bank Rate Plex Client Rate
Variable 3.75 1.95
1 Year 6.95 2.50
2 Year 4.15 3.15
3 Year 4.65 2.90
4 Year 5.64 3.69
5 Year 5.49 3.59
7 Year 6.95 4.65
10 Year 7.10 5.00
Monday, August 02, 2010
Toronto Income Property Newsletter - August 2010
I hope everyone is enjoying this very warm summer. Congratulations to Spain on winning their first World Cup. I hope all of you soccer fans enjoyed the tournament. Now we can turn our attention to TFC and their quest for a first-time playoff birth. With the dismal performance of the Maple Leafs, Raptors & Blue Jays over the past years, this town needs a winner. Hopefully our boys in red will get it done!
*
For the first time this year, June sales fell below 2009 numbers. This isn’t surprising given the spike that happened last year leading into the very robust fall sellers’ market. The Toronto Real Estate Board reported 8,442 sales of single family homes in June 2010. This sales volume represents an 11 percent decline from the sales volume for May 2010 as well as a 23 percent decline from the sales volume reported for June 2009. Declining sales volumes at this time of year are not unusual as they typically signal the end of the spring market and the onset of the summer slowdown. Some are saying that this slowdown will continue into September and prices may start to drop. I don’t think this will be the case at all. While I don’t expect the same number of trades as last year, I don’t think there will be any significant price decreases. At the moment, we are suffering a quality inventory shortage so I will be surprised if when more houses come up for sale, the prices don’t stay in line.
*
At Plex Realty, as many of you are aware, we are very active with duplexes, triplexes and multiplexes as well as “fixer-uppers” that may have profit potential. One other area that I have also done a lot of business in the past is with mixed-use buildings – retail storefronts with two or three apartments and/or offices above.
Most of these properties are on popular retail strips like Queen, Bloor, College and obviously Yonge St. There are also little strips like the Forest Hill Village, the shops on Bayview south of Eglinton or at the top of Coxwell in Leslieville. Many neighbourhoods have retail strips that offer every good and service imaginable. Some areas are more known for specialties – for instance restaurants on the Danforth, or on College in Little Italy. Most of the time these buildings fall under the I.C.I. umbrella (commercial rather than residential) even though there may be residential rental apartments above the main floor retail space.
These properties can be quite a decent for someone looking to live-in or for the absentee investor. These mixed-use buildings have been similar to strictly residential properties over the past few years insofar as lower bottom-line returns and lesser cap rates. My advice is to make sure that if you buy a mixed-use building that your main floor retail tenant is on a long lease and that their business is strong, unless of course you have a business to operate out of the main floor yourself. Most of the properties derive the bulk of their income form the main floor lease and it would be difficult to immediately make up that rent if your anchor tenant splits. It is much easier to find a residential tenant than a commercial one. Remember too that every user is going to want to build to suit, so that cost is likely cost you months of free rent. Also, most of these properties are on busy main streets, so keep that in mind if you intend to live in it.
Some of my clients have recently asked where the commercial market is going since each month my comments seem to be more focused on the residential resale side of the equation. Unlike houses in the prime areas of the core, I think that the prices of commercial properties and specific mixed-use retail storefronts may start to come down a little. It is believed that REITs (real estate investment trusts) are great indicators of where the commercial market is going. Experts say that the overall commercial prices have already started to drop and there may be a further decline to follow. This is quite interesting because there is no indication that this price “correction” is happening yet on the residential side.
Does that mean that a storefront with two units above it will be a better buy this year than a regular triplex? Quite often I will highlight duplexes or triplexes that trade for over-asking and comment on how the investment value gets thrown out the window. I think that the bottom line is if a mixed-use building is throwing off better numbers than a completely residential multiplex and has good lease(s) in place, then it should be considered seriously. I prefer all residential income properties just from a rentability point of view but remember that investment real estate is all about the returns. If cap rates start to get noticeably stronger on mixed-use buildings, I will start steering more of my clients in that direction. It hasn’t happened yet, but as I pointed out earlier, it may. So if you if you’ve been thinking about opening another up-scale coffee bar in your neighbourhood in your own building, then the time may be right.
*
(Q) There is a Used Car Salesman, a Realtor and a Lawyer. And you have a gun with two bullets… Which should you shoot?
(A) You should shoot the realtor twice… Just to be sure.
I hope everyone is enjoying this very warm summer. Congratulations to Spain on winning their first World Cup. I hope all of you soccer fans enjoyed the tournament. Now we can turn our attention to TFC and their quest for a first-time playoff birth. With the dismal performance of the Maple Leafs, Raptors & Blue Jays over the past years, this town needs a winner. Hopefully our boys in red will get it done!
*
For the first time this year, June sales fell below 2009 numbers. This isn’t surprising given the spike that happened last year leading into the very robust fall sellers’ market. The Toronto Real Estate Board reported 8,442 sales of single family homes in June 2010. This sales volume represents an 11 percent decline from the sales volume for May 2010 as well as a 23 percent decline from the sales volume reported for June 2009. Declining sales volumes at this time of year are not unusual as they typically signal the end of the spring market and the onset of the summer slowdown. Some are saying that this slowdown will continue into September and prices may start to drop. I don’t think this will be the case at all. While I don’t expect the same number of trades as last year, I don’t think there will be any significant price decreases. At the moment, we are suffering a quality inventory shortage so I will be surprised if when more houses come up for sale, the prices don’t stay in line.
*
At Plex Realty, as many of you are aware, we are very active with duplexes, triplexes and multiplexes as well as “fixer-uppers” that may have profit potential. One other area that I have also done a lot of business in the past is with mixed-use buildings – retail storefronts with two or three apartments and/or offices above.
Most of these properties are on popular retail strips like Queen, Bloor, College and obviously Yonge St. There are also little strips like the Forest Hill Village, the shops on Bayview south of Eglinton or at the top of Coxwell in Leslieville. Many neighbourhoods have retail strips that offer every good and service imaginable. Some areas are more known for specialties – for instance restaurants on the Danforth, or on College in Little Italy. Most of the time these buildings fall under the I.C.I. umbrella (commercial rather than residential) even though there may be residential rental apartments above the main floor retail space.
These properties can be quite a decent for someone looking to live-in or for the absentee investor. These mixed-use buildings have been similar to strictly residential properties over the past few years insofar as lower bottom-line returns and lesser cap rates. My advice is to make sure that if you buy a mixed-use building that your main floor retail tenant is on a long lease and that their business is strong, unless of course you have a business to operate out of the main floor yourself. Most of the properties derive the bulk of their income form the main floor lease and it would be difficult to immediately make up that rent if your anchor tenant splits. It is much easier to find a residential tenant than a commercial one. Remember too that every user is going to want to build to suit, so that cost is likely cost you months of free rent. Also, most of these properties are on busy main streets, so keep that in mind if you intend to live in it.
Some of my clients have recently asked where the commercial market is going since each month my comments seem to be more focused on the residential resale side of the equation. Unlike houses in the prime areas of the core, I think that the prices of commercial properties and specific mixed-use retail storefronts may start to come down a little. It is believed that REITs (real estate investment trusts) are great indicators of where the commercial market is going. Experts say that the overall commercial prices have already started to drop and there may be a further decline to follow. This is quite interesting because there is no indication that this price “correction” is happening yet on the residential side.
Does that mean that a storefront with two units above it will be a better buy this year than a regular triplex? Quite often I will highlight duplexes or triplexes that trade for over-asking and comment on how the investment value gets thrown out the window. I think that the bottom line is if a mixed-use building is throwing off better numbers than a completely residential multiplex and has good lease(s) in place, then it should be considered seriously. I prefer all residential income properties just from a rentability point of view but remember that investment real estate is all about the returns. If cap rates start to get noticeably stronger on mixed-use buildings, I will start steering more of my clients in that direction. It hasn’t happened yet, but as I pointed out earlier, it may. So if you if you’ve been thinking about opening another up-scale coffee bar in your neighbourhood in your own building, then the time may be right.
*
(Q) There is a Used Car Salesman, a Realtor and a Lawyer. And you have a gun with two bullets… Which should you shoot?
(A) You should shoot the realtor twice… Just to be sure.
Thursday, June 10, 2010
TORONTO INCOME PROPERTY NEWSLETTER - June 2010
The 2010 World Cup in South African starts in less than two weeks. I can’t wait! All of you who know me well know that soccer is my favourite sport and certainly one of my passions. Having been born in the UK I have been a staunch England supporter as far back as I can remember. I also am a card-carrying member of Toronto Football Club (who finally won their first away game this weekend). I know as a good Canadian, hockey should be #1 and I should be lamenting over the last Leaf victory in 1967. But I cry over the England World Cup drought since 1966. So what does soccer have to do with income properties? Nothing really, but since this is what’s on my mind, this is what I’m writing about. I’m also taking a bit of a sabbatical (hey, it’s one in every four years), so that I can watch as many matches as possible. I hope you all get a chance to watch some of the games and get to cheer on your favourite team. It’s surely to be a blast. Happy Father’s Day as well to all of the Dads out there.
*
There’s a great saying that I often use with my clients: “There’s no such thing as bad tenants, just bad landlords.” In my experience with landlords and tenants over the past decade, I have found that nine times out of ten that when a tenant is unhappy it is because the landlord has fallen short in their duties. It’s the most simplest of premises – when something breaks down in your rental unit, fix it! Do not expect the tenant to do your job for you.
If a light bulb needs to be changed, then it is reasonable for the tenant to take care of that. But if the light fixture itself breaks, then that is your responsibility. Do exactly as you would do in your own home. Don’t let a problem get worse by not tending to it. Where do you draw the line between landlord and tenants’ obligations? Use common sense folks. If it is a quick, easy and inexpensive fix, see if your tenant can handle it. If not, be at the ready to deal with it yourself. Unless your tenant is a plumber, don’t assume that they will be able to fix a leaky faucet. Unless you have it stipulated in your lease, don’t assume that your tenant will maintain the exterior of your property. It is your responsibility as a landlord to provide “quiet enjoyment”, meaning a clean and hassle-free rental suite for your tenants.
If the tenant sees that you care, then they will too. They will be happier to cut your rent cheque each month and your overall experience of being a landlord will be that much more enjoyable and profitable.
*
Is the Toronto real estate market overheated? I’ve read a few American articles lately saying that the Canadian real market can’t sustain itself and is heading for a crash. The market does seem like it is finally slowing down a little – but it always does when we get into June. It has many of you asking if this is the beginning of the end.
My opinion is that there won’t be dramatic price decreases (at least not with quality income properties in the core), but prices should stop going up. We ought to see some sort of leveling off as demand gets a little more in sync with the available inventory of properties. In other words, what your house was worth at the beginning of 2010 was probably the max number that you might see for awhile. Note too how interest rates are rising slowly and in fact some banks are still dropping their mortgage rates. I believe that the even though it hasn’t been reflected in the Toronto housing market, the recession is still on and we’ve got a ways to go yet. There are still a lot of folks out of work. Retail is suffering (unless you are Winners or Wal-Mart). I know this first hand. The personal debt numbers are very high as well, so it only seems logical that the Toronto market would have to calm down sooner or later. Remember that income properties often are less impervious to market swings because they are cash generators.
I also think that real estate markets in Toronto, Vancouver and other large metropolitan areas have seen most of the action. I would bet that smaller towns and rural areas haven’t seen the same level of increased activity over the past year. Thus I don’t really think the traditional “bubble” term applies here just because prices in Toronto may have increased. The summer is usually a little slower and then things heat up for the fall. Last fall, things went through the roof. I certainly don’t expect a repeat of 2009 but I don’t think I’ll be sitting around in September either. Time will tell I suppose.
The 2010 World Cup in South African starts in less than two weeks. I can’t wait! All of you who know me well know that soccer is my favourite sport and certainly one of my passions. Having been born in the UK I have been a staunch England supporter as far back as I can remember. I also am a card-carrying member of Toronto Football Club (who finally won their first away game this weekend). I know as a good Canadian, hockey should be #1 and I should be lamenting over the last Leaf victory in 1967. But I cry over the England World Cup drought since 1966. So what does soccer have to do with income properties? Nothing really, but since this is what’s on my mind, this is what I’m writing about. I’m also taking a bit of a sabbatical (hey, it’s one in every four years), so that I can watch as many matches as possible. I hope you all get a chance to watch some of the games and get to cheer on your favourite team. It’s surely to be a blast. Happy Father’s Day as well to all of the Dads out there.
*
There’s a great saying that I often use with my clients: “There’s no such thing as bad tenants, just bad landlords.” In my experience with landlords and tenants over the past decade, I have found that nine times out of ten that when a tenant is unhappy it is because the landlord has fallen short in their duties. It’s the most simplest of premises – when something breaks down in your rental unit, fix it! Do not expect the tenant to do your job for you.
If a light bulb needs to be changed, then it is reasonable for the tenant to take care of that. But if the light fixture itself breaks, then that is your responsibility. Do exactly as you would do in your own home. Don’t let a problem get worse by not tending to it. Where do you draw the line between landlord and tenants’ obligations? Use common sense folks. If it is a quick, easy and inexpensive fix, see if your tenant can handle it. If not, be at the ready to deal with it yourself. Unless your tenant is a plumber, don’t assume that they will be able to fix a leaky faucet. Unless you have it stipulated in your lease, don’t assume that your tenant will maintain the exterior of your property. It is your responsibility as a landlord to provide “quiet enjoyment”, meaning a clean and hassle-free rental suite for your tenants.
If the tenant sees that you care, then they will too. They will be happier to cut your rent cheque each month and your overall experience of being a landlord will be that much more enjoyable and profitable.
*
Is the Toronto real estate market overheated? I’ve read a few American articles lately saying that the Canadian real market can’t sustain itself and is heading for a crash. The market does seem like it is finally slowing down a little – but it always does when we get into June. It has many of you asking if this is the beginning of the end.
My opinion is that there won’t be dramatic price decreases (at least not with quality income properties in the core), but prices should stop going up. We ought to see some sort of leveling off as demand gets a little more in sync with the available inventory of properties. In other words, what your house was worth at the beginning of 2010 was probably the max number that you might see for awhile. Note too how interest rates are rising slowly and in fact some banks are still dropping their mortgage rates. I believe that the even though it hasn’t been reflected in the Toronto housing market, the recession is still on and we’ve got a ways to go yet. There are still a lot of folks out of work. Retail is suffering (unless you are Winners or Wal-Mart). I know this first hand. The personal debt numbers are very high as well, so it only seems logical that the Toronto market would have to calm down sooner or later. Remember that income properties often are less impervious to market swings because they are cash generators.
I also think that real estate markets in Toronto, Vancouver and other large metropolitan areas have seen most of the action. I would bet that smaller towns and rural areas haven’t seen the same level of increased activity over the past year. Thus I don’t really think the traditional “bubble” term applies here just because prices in Toronto may have increased. The summer is usually a little slower and then things heat up for the fall. Last fall, things went through the roof. I certainly don’t expect a repeat of 2009 but I don’t think I’ll be sitting around in September either. Time will tell I suppose.
Saturday, May 01, 2010
TORONTO INCOME PROPERTY NEWSLETTER - May 2010
In last month's newsletter, I addressed the current controversy surrounding opening up the MLS to the public and dissecting what many think are very high realtor commissions. First off thanks to all of you who wrote in supporting me and commenting that I very much earn what I make based on the time and service I offer. I really appreciate it. This month I am going to expand on the story by reprinting an article I orginally wrote in early 2006. I'd also like to mention that it is my ten year anniversary in this business, so thanks to all of you for keeping me at this for so long.
There is an on-going controversy that has been in the news regarding our proprietary rights as Realtors to have exclusive access to MLS data. Some regional consumer and trade boards contend that the national real estate body’s tight and strict control over MLS listings is anti-competitive. The National Association of Realtors in the U.S. and the Canadian Real Estate Association (CREA) in Canada have sole administrative power over the MLS and the Realtor trademarks. They are the ones who through reciprocal agreements with local real estate boards allow only real estate agents sole access to all the listings. While there are consumer sites like www.realtor.com or www.mls.ca, it is widely acknowledged that these sites are watered down versions of the real thing.
I don’t think that this is necessarily a new issue. This has always been a difficult question to answer. When you as a Seller put your house on MLS who owns that data? Is it the seller himself, the listing brokerage, or the real estate regulatory bodies at the provincial or national levels? I am oversimplifying the issue by focusing just on the MLS data. The current debate encompasses a much wider range of concerns but at the heart of it still lays the MLS usage controversy.
The issue came to the forefront some months ago in the U.S. when a private seller was denied the ability to post his FSBO (For sale by Owner) on the MLS. Under the current system, essentially in order to be added to the MLS, a realtor has to be involved. Since we charge for our services and there seems to be a tacit agreement with respect to commissions, this has been deemed unfair and anti-competitive. In a free market with competitive forces at work, supply and demand ought to determine compensation levels. Yet, regardless of economic or market conditions, our commission rates fluctuate very little. Discount brokerages have tried to mess around with this formula but by and large these low-commission business models have failed. Here’s why: I know that when I find a property for my buyer client, I should receive 2.5% of the purchase price. If a private seller decides instead that he only wants to pay me $500, how hard am I going to work to sell his house? Many companies offering lower buyers fees get blackballed by the agents at large because they threaten how much money we can make. I’m not saying that this is right, it just is.
Studies show that most new entrants into the real estate market do their preliminary research on-line, often spending their initial time on the consumer listings sites. When we list a property, we are given the option to have the listing appear on the Internet or not. This, in effect, limits the usefulness of the consumer site. If I don’t put a listing on the free Internet sites, then the only way it is going to get exposed is through MLS, ultimately from a real estate agent. There is also the lag time between actual market activity and the consumer sites. If I enter a listing as conditionally sold on the MLS, the database is updated within seconds. This information may not get to the consumer site for a day or two, if at all. There is also the fact that only the real MLS list sales data. You can call the consumer site mls.ca, but it is only a fraction of the information on the real MLS. In fact, they are now contemplating changing the name of mls.ca to avoid this confusion. It is all the real data, entered for the most part by agents, that as an industry we are trying to protect. I guess in reality, protect and not willingly share.
Richard Taylor, the deputy commissioner of competition for the Canadian Competition Bureau stated “CREA has the right the right to exclude others from using the MLS trademark, but not to leverage that right into restricting competition in the provision of real estate brokerage services.” In other words, we created this system, but should we should solely be the ones to continue to benefit from it?
Thus far the Toronto Real Estate Board has, not surprisingly, shown widespread support for CREA continuing to administer and protect the trademark and MLS rights. But is this self-serving? On the surface, it may certainly seem like it. Time will tell how widespread the support is on the other side of the real estate business to allow more open access to non-licensed persons.
What does this mean in the larger sense? If a seller is able to post their own listing on MLS and deal directly with buyer agents, they are going to potentially save thousands of dollars by not using a listing broker. This is obviously what Realtors are trying to avoid.
My position, by the way, is that as a Realtor specializing in a niche segment of the business (residential income properties) that the services I provide have value. However, unlike many other agents, I do not mind giving more informational power to the consumer. I earn my pay by offering valuable advice and insight based on years of practical experience in the field. It doesn’t bother me when a client finds a property on the consumer site and sends it to me for my feedback. Some feel that this is our job, whereas I feel that my role is more of an advisor. Anybody can open a lockbox. I advise clients to buy a property, or as is more often the case, to not buy a given property. I also believe that I pay a lot of fees to the local, provincial and federal real estate associations so there should be something to show for these affiliations. If you take away my preferred access to MLS, then I would have to question what purpose they would continue to serve.
This on-going debate is likely to carry on for some time. There’s obviously a lot of money at stake and any changes would have far-reaching consequences to the way organized real estate is handled in North America. It will be interesting to watch and see if any concessions are made to bring the MLS data closer to the hands of the general public. I’ll still be out there selling you income properties regardless of how the flow of property information advances. If you’d like more information or direct links to arguments on both sides of this argument, please drop me a line at paul@plex.ca.
In last month's newsletter, I addressed the current controversy surrounding opening up the MLS to the public and dissecting what many think are very high realtor commissions. First off thanks to all of you who wrote in supporting me and commenting that I very much earn what I make based on the time and service I offer. I really appreciate it. This month I am going to expand on the story by reprinting an article I orginally wrote in early 2006. I'd also like to mention that it is my ten year anniversary in this business, so thanks to all of you for keeping me at this for so long.
There is an on-going controversy that has been in the news regarding our proprietary rights as Realtors to have exclusive access to MLS data. Some regional consumer and trade boards contend that the national real estate body’s tight and strict control over MLS listings is anti-competitive. The National Association of Realtors in the U.S. and the Canadian Real Estate Association (CREA) in Canada have sole administrative power over the MLS and the Realtor trademarks. They are the ones who through reciprocal agreements with local real estate boards allow only real estate agents sole access to all the listings. While there are consumer sites like www.realtor.com or www.mls.ca, it is widely acknowledged that these sites are watered down versions of the real thing.
I don’t think that this is necessarily a new issue. This has always been a difficult question to answer. When you as a Seller put your house on MLS who owns that data? Is it the seller himself, the listing brokerage, or the real estate regulatory bodies at the provincial or national levels? I am oversimplifying the issue by focusing just on the MLS data. The current debate encompasses a much wider range of concerns but at the heart of it still lays the MLS usage controversy.
The issue came to the forefront some months ago in the U.S. when a private seller was denied the ability to post his FSBO (For sale by Owner) on the MLS. Under the current system, essentially in order to be added to the MLS, a realtor has to be involved. Since we charge for our services and there seems to be a tacit agreement with respect to commissions, this has been deemed unfair and anti-competitive. In a free market with competitive forces at work, supply and demand ought to determine compensation levels. Yet, regardless of economic or market conditions, our commission rates fluctuate very little. Discount brokerages have tried to mess around with this formula but by and large these low-commission business models have failed. Here’s why: I know that when I find a property for my buyer client, I should receive 2.5% of the purchase price. If a private seller decides instead that he only wants to pay me $500, how hard am I going to work to sell his house? Many companies offering lower buyers fees get blackballed by the agents at large because they threaten how much money we can make. I’m not saying that this is right, it just is.
Studies show that most new entrants into the real estate market do their preliminary research on-line, often spending their initial time on the consumer listings sites. When we list a property, we are given the option to have the listing appear on the Internet or not. This, in effect, limits the usefulness of the consumer site. If I don’t put a listing on the free Internet sites, then the only way it is going to get exposed is through MLS, ultimately from a real estate agent. There is also the lag time between actual market activity and the consumer sites. If I enter a listing as conditionally sold on the MLS, the database is updated within seconds. This information may not get to the consumer site for a day or two, if at all. There is also the fact that only the real MLS list sales data. You can call the consumer site mls.ca, but it is only a fraction of the information on the real MLS. In fact, they are now contemplating changing the name of mls.ca to avoid this confusion. It is all the real data, entered for the most part by agents, that as an industry we are trying to protect. I guess in reality, protect and not willingly share.
Richard Taylor, the deputy commissioner of competition for the Canadian Competition Bureau stated “CREA has the right the right to exclude others from using the MLS trademark, but not to leverage that right into restricting competition in the provision of real estate brokerage services.” In other words, we created this system, but should we should solely be the ones to continue to benefit from it?
Thus far the Toronto Real Estate Board has, not surprisingly, shown widespread support for CREA continuing to administer and protect the trademark and MLS rights. But is this self-serving? On the surface, it may certainly seem like it. Time will tell how widespread the support is on the other side of the real estate business to allow more open access to non-licensed persons.
What does this mean in the larger sense? If a seller is able to post their own listing on MLS and deal directly with buyer agents, they are going to potentially save thousands of dollars by not using a listing broker. This is obviously what Realtors are trying to avoid.
My position, by the way, is that as a Realtor specializing in a niche segment of the business (residential income properties) that the services I provide have value. However, unlike many other agents, I do not mind giving more informational power to the consumer. I earn my pay by offering valuable advice and insight based on years of practical experience in the field. It doesn’t bother me when a client finds a property on the consumer site and sends it to me for my feedback. Some feel that this is our job, whereas I feel that my role is more of an advisor. Anybody can open a lockbox. I advise clients to buy a property, or as is more often the case, to not buy a given property. I also believe that I pay a lot of fees to the local, provincial and federal real estate associations so there should be something to show for these affiliations. If you take away my preferred access to MLS, then I would have to question what purpose they would continue to serve.
This on-going debate is likely to carry on for some time. There’s obviously a lot of money at stake and any changes would have far-reaching consequences to the way organized real estate is handled in North America. It will be interesting to watch and see if any concessions are made to bring the MLS data closer to the hands of the general public. I’ll still be out there selling you income properties regardless of how the flow of property information advances. If you’d like more information or direct links to arguments on both sides of this argument, please drop me a line at paul@plex.ca.
Thursday, April 01, 2010
Toronto Income Property Newsletter - April 2010
Spring is here. This is traditionally our busiest time of the year as folks start making their real estate moves so that they can be situated by the end of the summer. Since the income property market was so robust in the first quarter of 2010, I can only predict that the demand and excitement for these kinds of properties will continue unabated for some months to come. Interest rates will be rising soon, so that ought to eventually slow things down a little. As always, if you have any market or investment questions, please feel free to reach out to me at any time. It would be my pleasure to help you out in any way possible.
*
There has been a lot of press lately about current real estate practices and how agents go about servicing the public. In case you haven't heard, the Canadian Competition Bureau is looking into how the Canadian Real Estate Association has a "monopoly" on the MLS data that we use to share information with each other about properties. Critics are crying out that the system should be opened up to the public so that you are not forced to pay high commissions by having to use a realtor. This is a very interesting debate that will rage on for quite some time to come. I'm all for allowing public access to MLS data, provided there are checks and balances in place to ensure the data's accuracy and integrity. It's a problem we face now without opening the data up to an inexperienced public. I don't think the real issue that upsets most folks is about sharing the MLS anyway. I think that it is more so about how certain real estate practices may not always be in the best interest of the general public, and obviously this has to change.
*
There has been some confusion with respect to the HST that will arrive in July. Here are the main guidelines:
i. HST will come into effect on July 1st, 2010
ii. HST will not apply on the purchase price of resale homes
ii. HST will apply on services such as moving costs, home inspections, lawyers fees and real estate commissions
iii. HST will apply to the purchase of newly constructed homes. Homes under $400,000 may be eligible for certain rebates from the province
Enjoy the warm weather folks and go TFC go!
P.A.
Spring is here. This is traditionally our busiest time of the year as folks start making their real estate moves so that they can be situated by the end of the summer. Since the income property market was so robust in the first quarter of 2010, I can only predict that the demand and excitement for these kinds of properties will continue unabated for some months to come. Interest rates will be rising soon, so that ought to eventually slow things down a little. As always, if you have any market or investment questions, please feel free to reach out to me at any time. It would be my pleasure to help you out in any way possible.
*
There has been a lot of press lately about current real estate practices and how agents go about servicing the public. In case you haven't heard, the Canadian Competition Bureau is looking into how the Canadian Real Estate Association has a "monopoly" on the MLS data that we use to share information with each other about properties. Critics are crying out that the system should be opened up to the public so that you are not forced to pay high commissions by having to use a realtor. This is a very interesting debate that will rage on for quite some time to come. I'm all for allowing public access to MLS data, provided there are checks and balances in place to ensure the data's accuracy and integrity. It's a problem we face now without opening the data up to an inexperienced public. I don't think the real issue that upsets most folks is about sharing the MLS anyway. I think that it is more so about how certain real estate practices may not always be in the best interest of the general public, and obviously this has to change.
*
There has been some confusion with respect to the HST that will arrive in July. Here are the main guidelines:
i. HST will come into effect on July 1st, 2010
ii. HST will not apply on the purchase price of resale homes
ii. HST will apply on services such as moving costs, home inspections, lawyers fees and real estate commissions
iii. HST will apply to the purchase of newly constructed homes. Homes under $400,000 may be eligible for certain rebates from the province
Enjoy the warm weather folks and go TFC go!
P.A.
Tuesday, March 02, 2010
Toronto Income Property Newsletter - March 2010
We did it! We won the gold medal in hockey. Wasn't it awesome!! I'd like to congratulate all of our Canadian athletes who I feel did a superb job. There was a lot of chatter about owning the podium ... with 14 gold medals I think we accomplished that goal. Now if only some of that winning spirit could rub off on the Maple Leafs....
*
On February 16, Finance Minister Jim Flaherty announced new mortgage rules intended to help ensure homebuyers can handle their debt load when interest rates rise, as well as to slow down real estate speculation.
"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," commented Minister Flaherty.
The new rules take effect April 19, 2010. Here is a quick look at the changes, which apply to government-backed insured mortgages:
1. Borrowers must now qualify based on a five-year fixed rate even if they choose a mortgage with a lower interest rate and shorter term. The government’s rationale for this change is that it will help borrowers prepare for higher rates, although it may squeeze the purchasing power of home buyers. It remains unclear whether borrowers must qualify at the five-year posted rate or the five-year discounted rate.
2. The maximum amount Canadians can withdraw in refinancing their mortgages will be reduced to 90 per cent of the value of their homes, instead of 95 per cent. The government’s rationale for this change is that it will help ensure home ownership is a more effective way to save. The impact of this change is expected to be minimal as relatively few homeowners withdraw equity from their homes to this extent.
3. A minimum down payment of 20 per cent will be needed for government-backed mortgage insurance on non-owner-occupied properties “purchased for speculation,” which realistically means rental properties. While this measure is intended to hamper the speculative buying of properties by reducing the leverage of buyers, it will also impact those buying real estate for general investment purposes.
I have taken a few calls from my investor clients asking how about these rules will affect them. In my opinion, all these moves are positive. The current overwhelming demand for income properties in Toronto needs to subside somewhat. People with only 5% down shouldn’t be buying income properties unless they have other significant assets that improve their mortgage eligibility. There will be ways to get around the 20% minimum but again this will only be for investors that have resources. Be sure to talk to your mortgage professional about how these changes could affect you and for advice on the mortgage strategy that fits your needs.
I have already started to use 20% down instead of 10% down as the expectation for a property to cover itself fully by the rental stream. This will be more reflective of reality and weed out the folks that have been trying to jump in without any cash.
*
There has been some confusion with respect to the HST that will arrive in July. Here are the main guidelines:
i. HST will come into effect come into effect on July 1st, 2010
ii. HST will not apply on the purchase price of resale homes
iii. HST will apply on services such as moving costs, home inspections, lawyers fees and real estate commissions
iv. HST will apply to the purchase of newly constructed homes. Homes under $400,000 may be eligible for certain rebates from the province
Spring is coming soon. Let's hope we've seen the last snow from winter 2010.
P.A.
We did it! We won the gold medal in hockey. Wasn't it awesome!! I'd like to congratulate all of our Canadian athletes who I feel did a superb job. There was a lot of chatter about owning the podium ... with 14 gold medals I think we accomplished that goal. Now if only some of that winning spirit could rub off on the Maple Leafs....
*
On February 16, Finance Minister Jim Flaherty announced new mortgage rules intended to help ensure homebuyers can handle their debt load when interest rates rise, as well as to slow down real estate speculation.
"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," commented Minister Flaherty.
The new rules take effect April 19, 2010. Here is a quick look at the changes, which apply to government-backed insured mortgages:
1. Borrowers must now qualify based on a five-year fixed rate even if they choose a mortgage with a lower interest rate and shorter term. The government’s rationale for this change is that it will help borrowers prepare for higher rates, although it may squeeze the purchasing power of home buyers. It remains unclear whether borrowers must qualify at the five-year posted rate or the five-year discounted rate.
2. The maximum amount Canadians can withdraw in refinancing their mortgages will be reduced to 90 per cent of the value of their homes, instead of 95 per cent. The government’s rationale for this change is that it will help ensure home ownership is a more effective way to save. The impact of this change is expected to be minimal as relatively few homeowners withdraw equity from their homes to this extent.
3. A minimum down payment of 20 per cent will be needed for government-backed mortgage insurance on non-owner-occupied properties “purchased for speculation,” which realistically means rental properties. While this measure is intended to hamper the speculative buying of properties by reducing the leverage of buyers, it will also impact those buying real estate for general investment purposes.
I have taken a few calls from my investor clients asking how about these rules will affect them. In my opinion, all these moves are positive. The current overwhelming demand for income properties in Toronto needs to subside somewhat. People with only 5% down shouldn’t be buying income properties unless they have other significant assets that improve their mortgage eligibility. There will be ways to get around the 20% minimum but again this will only be for investors that have resources. Be sure to talk to your mortgage professional about how these changes could affect you and for advice on the mortgage strategy that fits your needs.
I have already started to use 20% down instead of 10% down as the expectation for a property to cover itself fully by the rental stream. This will be more reflective of reality and weed out the folks that have been trying to jump in without any cash.
*
There has been some confusion with respect to the HST that will arrive in July. Here are the main guidelines:
i. HST will come into effect come into effect on July 1st, 2010
ii. HST will not apply on the purchase price of resale homes
iii. HST will apply on services such as moving costs, home inspections, lawyers fees and real estate commissions
iv. HST will apply to the purchase of newly constructed homes. Homes under $400,000 may be eligible for certain rebates from the province
Spring is coming soon. Let's hope we've seen the last snow from winter 2010.
P.A.
Monday, February 01, 2010
TORONTO INCOME PROPERTY NEWSLETTER - February 2010
The Toronto duplex and triplex market is off to a strong start in 2010. The demand that we saw last quarter hasn't subsided at all. Multiple offers and sales over asking price are still the norm. Even though it has been cold, there hasn't been a lot of snow. This makes it a lot easier for us realtors to get out there and show properties. Interest rates are also still very low. If you are thinking about getting into the income property market, I'd do so now to take advantage of these attractive borrowing rates. To discuss this further with me, please don't hesitate to get in touch.
*
Nowadays, cap rates in between 5 and 5 ½ are quite common. Is it unreasonable to expect such a low rate of return on an income-generating property? For the seasoned investor the answer may be yes, but certainly not for the first time live-in investor. Owner occupiers often get the locational benefits of a great neighbourhood without paying the same net mortgage as their single family neighbours. This is a fantastic way to get into an area inexpensively and still enjoy a potential capital gain sometime in the future.
If you can’t afford the net out-of-pocket costs in an income property where your tenants pay upwards of 60% of your mortgage, then you might want to reconsider living in downtown Toronto. It seems nowadays that any decent duplex or triplex is going to trade for over $500,000. Unfortunately, market rents haven’t risen commensurate with house prices so our overall returns have dropped. It still makes sense for the owner-occupier to look at these income properties, so long as their out-of-pocket each month doesn’t exceed the market value for the suite they are occupying. I suppose the days of live for free are long gone, but living for market rent with only 10% down is indeed still a possibility.
*
2009 was a banner year for income property sales in the GTA. Whilst the year got off to a slow start, by May business was booming. As I commented throughout the year, multiple offers and over-asking bids were commonplace. Now obviously not all income properties sold for over-asking price – there were some duss in there. Yet it seemed that all the good ones (great locations not needing a lot of work), always were in high demand.
For my year-end wrap up, I have selected a group of sales from 2009 from four distinct neighbourhoods. Please click the link below each to take a look at ten sales from 2009 that illustrated the intense demand for properties with lat least three kitchens.
E01 - Riverdale & Leslieville
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130637.002800&t=l&fm=F
C01 - Downtown west of Yonge, South of Bloor
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130694.002800&t=l&fm=F
C02 - Downtown east of Yonge, North of Bloor
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130737.002800&t=l&fm=F
W01 - Roncesvalles & High Park
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130819.002800&t=l&fm=F
The Toronto duplex and triplex market is off to a strong start in 2010. The demand that we saw last quarter hasn't subsided at all. Multiple offers and sales over asking price are still the norm. Even though it has been cold, there hasn't been a lot of snow. This makes it a lot easier for us realtors to get out there and show properties. Interest rates are also still very low. If you are thinking about getting into the income property market, I'd do so now to take advantage of these attractive borrowing rates. To discuss this further with me, please don't hesitate to get in touch.
*
Nowadays, cap rates in between 5 and 5 ½ are quite common. Is it unreasonable to expect such a low rate of return on an income-generating property? For the seasoned investor the answer may be yes, but certainly not for the first time live-in investor. Owner occupiers often get the locational benefits of a great neighbourhood without paying the same net mortgage as their single family neighbours. This is a fantastic way to get into an area inexpensively and still enjoy a potential capital gain sometime in the future.
If you can’t afford the net out-of-pocket costs in an income property where your tenants pay upwards of 60% of your mortgage, then you might want to reconsider living in downtown Toronto. It seems nowadays that any decent duplex or triplex is going to trade for over $500,000. Unfortunately, market rents haven’t risen commensurate with house prices so our overall returns have dropped. It still makes sense for the owner-occupier to look at these income properties, so long as their out-of-pocket each month doesn’t exceed the market value for the suite they are occupying. I suppose the days of live for free are long gone, but living for market rent with only 10% down is indeed still a possibility.
*
2009 was a banner year for income property sales in the GTA. Whilst the year got off to a slow start, by May business was booming. As I commented throughout the year, multiple offers and over-asking bids were commonplace. Now obviously not all income properties sold for over-asking price – there were some duss in there. Yet it seemed that all the good ones (great locations not needing a lot of work), always were in high demand.
For my year-end wrap up, I have selected a group of sales from 2009 from four distinct neighbourhoods. Please click the link below each to take a look at ten sales from 2009 that illustrated the intense demand for properties with lat least three kitchens.
E01 - Riverdale & Leslieville
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130637.002800&t=l&fm=F
C01 - Downtown west of Yonge, South of Bloor
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130694.002800&t=l&fm=F
C02 - Downtown east of Yonge, North of Bloor
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130737.002800&t=l&fm=F
W01 - Roncesvalles & High Park
http://www.torontomls.net/PublicWeb/CL_BF.asp?link_no=29130819.002800&t=l&fm=F
Tuesday, January 05, 2010
Toronto Income Property Newsletter: January 2010
I'd like to take this opportunity to wish you and your family all my best wishes for a safe and prosperous new year.
As this new decade dawns, the Toronto income property market remains as robust as ever. I anticipate 2010 to be a strong year with sales comparable to 2009.
If you every have any questions about real estate investing in Toronto, or would like general information on the duplex and triplex market, please don't hesitate to get in touch with me.
The following article on interest rate predictions for this coming year is courtesy of mortgage broker Marcus Tzaferis. www.mortgagemarcus.com.
The Bank of Canada must soon decide whether or not to increase interest rates. It is the Canadian Housing Market, the American Dollar and the American Consumer, that will have great influence over this decision in 2010.
This decision will not be easy. We are wedged between a sizzling housing market, being driven by our extremely low borrowing rates on one side and a badly beaten USD, which is affecting our exports to the US.
The stream of rhetoric from the Bank of Canada and our Federal Government over the past several months illustrates that there are few tools left to influence our economy short of increasing interest rates. The Governor of the Bank of Canada and the Minister of Finance are warning of a real estate bubble, we are being told that mortgage rates are too low and perhaps that some of the tools provided to Canadians to buy homes may be taken away but this is far from likely. These attempts to cool an overheating housing market are not working; interest rates will have to be increased, but what about the strength of our dollar? (Have a look at the related interview of Marcus on CBC's, The National, available on our website.)
If the Bank of Canada decides to increase interest rates to slow the Canadian housing market our Canadian Dollar will increase in value relative to the USD. As our currency increases relative to the American Dollar the goods we sell become more expensive in the US. This leads to fewer Canadian goods being purchased south of the border. This decreases our exports and reduces the demand for labor domestically. The only way our Central Bank will be able to increase rates while the Americans keep theirs on hold would be if we see a relative appreciation in the USD.
If the Worlds' economy continues to go over speed bumps, such as the recent problems in Greece, Spain, Italy and Portugal, or the credit problems experienced by Dubai, the quandary that The Governor of the Bank of Canada and the Minister of Finance find themselves in, will likely subside.
If these problems with sovereign debt continue to surface around the world the USD will become the best of the worst options for investors worldwide. Regardless of the extremely low rate of return paid out by its Government on debt, investors will flock to its safety for lack of a better option. This will increase the relative price of the USD and provide the Bank of Canada with the wiggle room it needs to increase interest rates.
If the world begins once again to see the United States of America as a ray or light in a dark and stormy world economy, The Bank of Canada will be able to increase interest rates without worrying about the relative appreciation that this causes in the Canadian Dollar and therefore further erosion to our export numbers and already struggling GDP.
This all rests in the hands of the American Consumer. A lot has been said for the resiliency of the American economy. The American Government has doled out trillions of dollars in the hopes of jumpstarting an economy on the verge of collapse. Now we must see how efficiently this capital was absorbed by the economy.
If 2010 brings us an American economy that continues to fire on all cylinders, as it has been for the last part of 2009, interest rates will go up faster than anticipated.
But wait, don't lock in just yet! It is our belief that this resurgence we are seeing is simply the effect of stimulus plans that will soon run their course. There is an argument to be made that there are only so many clunkers that can be bought for cash, and a person can only take advantage of home buying incentives so many times. Eventually the mounting consumer debt load will have to be addressed and with unemployment at record highs someone will have to pay for the government stimulus. Although the American economy seems to be chugging along right now, as evidenced by the ever increasing stock market and claims that the recession is long gone, the American's have promises to keep, and many miles before they sleep.
We as Canadian mortgage holders must continue to be careful as we always are. Although we are recommending that our clients stick with some of the great variable rate mortgages that are available it is important to be cautious. We do not see interest rates increasing dramatically in 2010, but caution that if some of the events discussed in this newsletter occur we could very well see fixed rates and variable rates move to the upside.
Next month, I will share my annual year-end wrap up of income property sales in 2009broken down by Toronto neighbourhoods.
We will also look at how the market has started off in January, as well have a look at current fire retrofit laws.
P.A.
I'd like to take this opportunity to wish you and your family all my best wishes for a safe and prosperous new year.
As this new decade dawns, the Toronto income property market remains as robust as ever. I anticipate 2010 to be a strong year with sales comparable to 2009.
If you every have any questions about real estate investing in Toronto, or would like general information on the duplex and triplex market, please don't hesitate to get in touch with me.
The following article on interest rate predictions for this coming year is courtesy of mortgage broker Marcus Tzaferis. www.mortgagemarcus.com.
The Bank of Canada must soon decide whether or not to increase interest rates. It is the Canadian Housing Market, the American Dollar and the American Consumer, that will have great influence over this decision in 2010.
This decision will not be easy. We are wedged between a sizzling housing market, being driven by our extremely low borrowing rates on one side and a badly beaten USD, which is affecting our exports to the US.
The stream of rhetoric from the Bank of Canada and our Federal Government over the past several months illustrates that there are few tools left to influence our economy short of increasing interest rates. The Governor of the Bank of Canada and the Minister of Finance are warning of a real estate bubble, we are being told that mortgage rates are too low and perhaps that some of the tools provided to Canadians to buy homes may be taken away but this is far from likely. These attempts to cool an overheating housing market are not working; interest rates will have to be increased, but what about the strength of our dollar? (Have a look at the related interview of Marcus on CBC's, The National, available on our website.)
If the Bank of Canada decides to increase interest rates to slow the Canadian housing market our Canadian Dollar will increase in value relative to the USD. As our currency increases relative to the American Dollar the goods we sell become more expensive in the US. This leads to fewer Canadian goods being purchased south of the border. This decreases our exports and reduces the demand for labor domestically. The only way our Central Bank will be able to increase rates while the Americans keep theirs on hold would be if we see a relative appreciation in the USD.
If the Worlds' economy continues to go over speed bumps, such as the recent problems in Greece, Spain, Italy and Portugal, or the credit problems experienced by Dubai, the quandary that The Governor of the Bank of Canada and the Minister of Finance find themselves in, will likely subside.
If these problems with sovereign debt continue to surface around the world the USD will become the best of the worst options for investors worldwide. Regardless of the extremely low rate of return paid out by its Government on debt, investors will flock to its safety for lack of a better option. This will increase the relative price of the USD and provide the Bank of Canada with the wiggle room it needs to increase interest rates.
If the world begins once again to see the United States of America as a ray or light in a dark and stormy world economy, The Bank of Canada will be able to increase interest rates without worrying about the relative appreciation that this causes in the Canadian Dollar and therefore further erosion to our export numbers and already struggling GDP.
This all rests in the hands of the American Consumer. A lot has been said for the resiliency of the American economy. The American Government has doled out trillions of dollars in the hopes of jumpstarting an economy on the verge of collapse. Now we must see how efficiently this capital was absorbed by the economy.
If 2010 brings us an American economy that continues to fire on all cylinders, as it has been for the last part of 2009, interest rates will go up faster than anticipated.
But wait, don't lock in just yet! It is our belief that this resurgence we are seeing is simply the effect of stimulus plans that will soon run their course. There is an argument to be made that there are only so many clunkers that can be bought for cash, and a person can only take advantage of home buying incentives so many times. Eventually the mounting consumer debt load will have to be addressed and with unemployment at record highs someone will have to pay for the government stimulus. Although the American economy seems to be chugging along right now, as evidenced by the ever increasing stock market and claims that the recession is long gone, the American's have promises to keep, and many miles before they sleep.
We as Canadian mortgage holders must continue to be careful as we always are. Although we are recommending that our clients stick with some of the great variable rate mortgages that are available it is important to be cautious. We do not see interest rates increasing dramatically in 2010, but caution that if some of the events discussed in this newsletter occur we could very well see fixed rates and variable rates move to the upside.
Next month, I will share my annual year-end wrap up of income property sales in 2009broken down by Toronto neighbourhoods.
We will also look at how the market has started off in January, as well have a look at current fire retrofit laws.
P.A.
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