Welcome friends, today were will try to unravel the financial implications of condo vs freehold ownership. There is always confusion when we meet clients,  which is better and what it takes for owning these two diverse style of assets. Lets begin.

Condo Ownership: Long-Term Financial Implications

Maintenance Fees:

Condo owners pay monthly maintenance fees to cover shared amenities, building upkeep, and contributions to the reserve fund. These fees can increase over time due to inflation or unexpected repairs, as seen in the GTA where fees rose by 5.51% in 2023. Special assessments may also arise, requiring additional payments for major repairs or budget shortfalls.

Lower Upfront Costs:

Condos are often more affordable upfront compared to freehold properties, making them attractive for first-time buyers 14.

Predictable Expenses:

Maintenance fees provide predictability for shared expenses like utilities, landscaping, and building repairs, reducing the need for individual planning. However, these fees can offset the lower property taxes typically associated with condos.

Appreciation Potential:

While condos appreciate over time, their growth may be slower than freehold properties due to additional costs like maintenance fees and potential buyer hesitations about rising fees. This filters the buyers when we decide to dispense a condo, and it finally reflects in the appreciation. 

Freehold Ownership: Long-Term Financial Implications

No Maintenance Fees:

Freehold owners avoid monthly maintenance fees but are fully responsible for all property upkeep, including repairs and landscaping. This can lead to higher out-of-pocket costs over time. Maintenance costs for freehold homes can average $6,500–$10,000 annually for major repairs spread across decades (e.g., roof, windows, heating and cooling equipment etc).

Higher Upfront Costs:

Freehold properties generally require a larger initial investment but offer greater long-term value due to full ownership of both the land and the property.

Greater Appreciation Potential:

Freehold properties tend to appreciate more significantly over time because land value typically increases faster than building value. This makes freehold ownership a stronger option for long-term wealth accumulation.

Flexibility and Control:

Freehold owners have full control over their property without restrictions from condo boards or shared governance. This autonomy allows for renovations or upgrades that can further enhance property value.

Key Takeaways

Condos: Offer lower upfront costs and predictable shared expenses but come with rising maintenance fees and occasional special assessments that can impact long-term affordability.

Freeholds: Require higher initial investment and ongoing maintenance costs but provide greater appreciation potential, flexibility, and financial independence.

Which Is Right for You?

The choice between condo and freehold ownership depends on your financial goals, lifestyle preferences, and ability to manage ongoing costs. If you value convenience and shared amenities, a condo might suit you better. If long-term growth and full control are priorities, you have budget, a freehold property is likely the better option.

For personalized advice tailored to your situation, feel free to reach out and we will be happy to help. 

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome! Today, we’re discussing one of the most debated topics in real estate: What's more important when buying a home - location or size? This age-old dilemma has puzzled homebuyers for generations, often, when I work with clients, this question is asked, and I thought it would be good to create a vlog on this.

Why Location Matters

Let's start with the classic real estate mantra: "Location, location, location." There's a reason this phrase is repeated so often in the industry.

Property Value: A home's location is often the most important factor in determining its value. A great neighbourhood can help sell your home faster and for more money than similar houses in less attractive areas.

Quality of Life: Your home's location affects your overall quality of life, including school choices, commute times, and social opportunities.

Future Appreciation: Homes in desirable locations tend to appreciate more over time. As demand for a location increases, so does the property value.

Key Location Factors

When considering location, keep these points in mind:

Centrality: Cities with limited room for expansion, like Toronto, often have higher property values.

Amenities: Proximity to grocery stores, restaurants, entertainment, recreation centres, libraries, parks, trails and public transportation can significantly impact a home's value.

School Districts: Even if you don't have children, the quality of local schools can affect your home's value.

Safety: Low crime rates make neighbourhoods more desirable and can increase property values.

Future Development: Plans for new schools, hospitals, or commercial areas can improve property values in the future.

The Argument for Size

Now, let's look at why size matters in home buying.

Growing Families: If you're planning to start or expand your family, a larger home provides the space you need.

Entertaining: More space means more room for hosting guests and social gatherings.

Work from Home: With the rise of remote work in recent times, extra space for a home office can be critical for a family.

Storage: Larger homes offer more storage options, which can be a significant advantage for many buyers.

Size Considerations

Larger homes typically cost more, not just in purchase price but also in maintenance, utilities, and property taxes.

While size does affect value, it's not always proportional. A well-designed smaller home in a great location might be more valuable than a larger home in a less desirable area.

The Verdict: Location vs. Size

While both location and size are crucial factors in home buying, location often edges out size in terms of long-term value and lifestyle impact. However, the best choice for you will depend on your specific needs, budget, and future plans. Let’s explore some finer points,

Flexibility: You can always renovate or expand a home, but you can't change its location.

Long-term Value: Location tends to have a more significant impact on long-term property value.

Lifestyle Fit: Consider your daily life and what matters most to you - proximity to work, schools, or amenities versus having more space at home.

Remember, a home is more than just an investment - it's where you'll build your life. So, consider both factors carefully, but don't be afraid to follow your heart a little too!

That's all for today, folks! If you found this information helpful, don't forget to like, subscribe, and share your thoughts in the comments below. Take good care and I will see you soon!

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Today I want to share some big news that could affect many Canadian homeowners. The Office of the Superintendent of Financial Institutions, or OSFI, has just announced a significant change to mortgage stress test requirements. Let's break down what this means and why it matters.

The Big Announcement

On September 25, 2024, OSFI revealed that it will no longer require borrowers with uninsured mortgages to undergo a stress test when switching providers at renewal. This is a major shift in policy that could have far-reaching implications for the Canadian housing market.

What is the Mortgage Stress Test?

Before we dive into the changes, let's quickly recap what the mortgage stress test is:

Introduced in 2018, the stress test requires borrowers to qualify for a mortgage at a higher interest rate than their actual rate.

The qualifying rate is the higher of 5.25% or the contract rate plus 2%.

This test aims to ensure borrowers can handle their mortgage payments if interest rates rise significantly. Stress guidelines introduced in 2012, initially only for those with less than 20% down payment. In 2018 Stress test was expanded to all mortgages, insured as well as uninsured.

Under the existing rules:

Borrowers with uninsured mortgages (those with a down payment of 20% or more) must pass the stress test when switching lenders at renewal. This has often made it challenging for homeowners to shop around for better rates, potentially trapping them with their current lender.

The Change:

Now, here's what's changing:

OSFI will eliminate the stress test requirement for "straight switches" of uninsured mortgages. A straight switch means renewing with a different lender but keeping the same loan amount and amortization schedule. This change will take effect on November 21, 2024.

Why the Change?

OSFI cites two main reasons for this policy shift:

Addressing the imbalance between insured and uninsured mortgages at renewal. The uninsured mortgages are allowed to switch lenders upon renewal, whereas consumers with uninsured mortgages where they have in fact have 20% or more as their contribution towards the property had to go through the stress test on switches.

The second reason is the data showing that the risks this policy was meant to address haven't significantly materialized.

Impact on Homeowners: A Practical Example

Let's consider a practical example to illustrate the impact of this change:

Imagine a homeowner, Jane, who bought a house in 2019 with a $500,000 uninsured mortgage at 3% interest. Her monthly payments were about $2,366.

Fast forward to 2024, and Jane’s mortgage is up for renewal. Current rates have risen to 5.5%.

Under the old rules: If Jane stayed with her current lender, she wouldn't need to pass the stress test. If she wanted to switch lenders, she'd need to qualify at 7.5% (5.5% + 2%). This made it difficult for Jane to shop around, even if other lenders offered better rates.

With the new rules:

Jane can now switch lenders without the stress test, as long as she maintains her original loan amount and amortization. This gives her the freedom to find the best rate available, potentially saving thousands over her mortgage term.

Broader Implications

This change could have several effects on the Canadian mortgage market and would see increased competition among lenders. There would be more options for borrowers at renewal time. Potential for lower mortgage rates as lenders compete for business. There could be a possible increase in refinancing activity as homeowners take advantage of the new rules.

While this is a significant change, it's important to remember that the overall goal of financial stability remains. OSFI has stated they'll continue to monitor the market and make adjustments as needed.

This change represents a major shift in Canadian mortgage policy, potentially offering more flexibility and better options for many homeowners. As always, it's crucial to stay informed and consider your individual financial situation when making decisions about your mortgage.

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Today, let us explore a crucial concept in real estate investing: the Capitalization Rate, or Cap Rate. Whether you're a seasoned investor or just starting, understanding Cap Rate is essential for evaluating property investments. This episode will definitely help you understand this concept very well and will try to make it simple.

So, what exactly is Cap Rate, and why is it important?

Cap Rate helps investors assess the potential return on an income-generating property. It's a quick way to compare the profitability of different real estate investments. Cap Rate is a ratio that measures the annual return on investment, based on the property's net operating income (NOI) and its current market value.=

The formula is simple: Cap Rate equals to NOI divided by the property's value. In other words, Cap Rate shows what percentage of your investment you can expect to earn back in a year, excluding financing costs. It's expressed as a percentage, making it easy to compare different properties. For understanding NOI better you can review our last episode here.

To calculate the Cap Rate, you need two key numbers: the property's Net Operating Income and its current market value.

Suppose you have a property valued at $500,000, and its annual net operating income is $50,000. To find the Cap Rate, divide the NOI by the property value.

In this example, the Cap Rate is 10%. This means you're earning a 10% return on your investment annually, based on the property's income and value.

Now, how do you interpret the Cap Rate? Generally, a higher Cap Rate indicates a higher return and risk. Conversely, a lower Cap Rate suggests a lower return with less risk. It's essential to balance these factors based on your investment strategy.

For instance, a property with a Cap Rate of 10% might be in a less desirable area, implying higher vacancy rates or maintenance costs. On the other hand, a 5% Cap Rate property in a prime location might offer more stability and consistent income. For example, properties in emerging suburban markets might offer higher Cap Rates due to the increased risk, while properties in stable, high-demand areas might have lower Cap Rates due to lower risk.

In downtown Toronto, you might find properties with Cap Rates around 3-5%. These lower Cap Rates reflect the high demand and stable market conditions. On the other hand, properties in developing areas like Hamilton or Oshawa might offer higher Cap Rates, say around 6-8%, reflecting the potential for higher returns but also higher risk.

These examples highlight the importance of understanding the local market conditions when evaluating Cap Rates.

Several factors can affect a property's Cap Rate. These include the property's condition, location, market demand, and overall economic conditions. Improvements and renovations can also impact the NOI, thus affecting the Cap Rate. For instance, upgrading a property's amenities can increase its NOI, leading to a higher Cap Rate.

Cap Rate is a valuable tool for comparing investment opportunities. It helps you assess whether a property aligns with your investment goals. However, it's crucial to consider it alongside other metrics like cash flow, appreciation potential, and financing costs.

Now let us look at some scenarios from the Greater Toronto Area to see how Cap Rates play out.

A multi-family property in Mississauga is valued at $1,500,000 with an annual NOI of $105,000.

This property has a Cap Rate of 7%. It's a solid investment with a good balance between return and risk, considering Mississauga's growing population and job market.

A retail space in downtown Toronto is valued at $3,000,000 with an NOI of $180,000.

This gives us a Cap Rate of 6%. While the return is lower, the prime location in downtown Toronto offers excellent stability and potential for long-term appreciation.

An industrial property in Brampton is valued at $2,200,000 with an NOI of $198,000.

This property has a Cap Rate of 9%, indicating a higher return. However, industrial properties can have higher vacancy rates, so it's essential to consider all factors.

Several factors can influence Cap Rate, including location, property condition, and market conditions. Let's take a closer look.

1. Location: Prime locations generally have lower Cap Rates due to higher demand, higher value and lower risk.

2. Property Condition: Well-maintained properties attract better tenants and higher rents. This directly impacts the NOI and Cap Rates.

3. Market Conditions: Economic factors, interest rates, and local market trends impact Cap Rates.

4. Lease Terms: Long-term leases with stable tenants can lower risk, affecting the Cap Rate.

5. Vacancy Rates: Higher vacancy rates increase risk and can result in higher Cap Rates.

Let us also consider some ballpark estimates for various commercial real estate categories,

Office Buildings: Typically range from 4% to 8%, with higher cap rates for properties in secondary markets or with lower-quality tenants.

Retail Properties: Can vary widely from 4% to 12%, depending on location, tenant mix, and lease terms. High-street retail in prime locations often has lower cap rates.

Industrial Properties: Generally range from 5% to 9%, but can be higher for properties in less desirable locations or with older buildings.

Multifamily Residential: Typically between 4% and 8%, with lower cap rates for properties in desirable urban areas and higher cap rates for properties in suburban or rural areas.

Single-Family Homes: Cap rates can vary significantly based on location and market conditions. As an investment property, they typically range from 4% to 8%.

Understanding Cap Rate is crucial for making informed real estate investment decisions. It helps you evaluate the potential return and compare different properties effectively. Remember to consider all factors and use Cap Rate as a guide, not the sole determinant.

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Today, we're diving into an essential topic for real estate investors: Understanding Net Operating Income, or NOI. Whether you're a seasoned investor or just starting, grasping the concept of NOI is crucial for making informed decisions. So, let's break it down and I will try to make it simple for you to understand!

What is NOI and Why Does it Matter?

Net Operating Income is a key metric used to evaluate the profitability of an income-generating property. It helps investors determine the potential return on investment and make comparisons between different properties. But what exactly is NOI, and how do you calculate it?

First, let's define Net Operating Income. NOI is the total income generated from a property, minus the operating expenses required to maintain it. It excludes costs like taxes, mortgage payments, and depreciation. In other words, NOI focuses on the property's operational efficiency.

The formula for NOI is straightforward: Gross Operating Income minus Operating Expenses. Let's break this down further.

Gross Operating Income, or GOI, includes all the revenue generated from the property. This typically comes from rental income but can also include other sources like parking fees, laundry machines, advertising signs, or vending machines.

For example, if a property generates $80,000 in rental income, $2,500 from parking fees, $1,500 from laundry machines, and $1,000 from vending machines, the Gross Operating Income would be $85,000.

Next, we have Operating Expenses. These are the costs required to keep the property running efficiently. Common operating expenses include property management fees, maintenance and repairs, legal fees, utilities, property insurance, and marketing costs etc.

For instance, if in our example the property incurs $8,000 in management fees, $4,000 in maintenance, $3,000 in utilities, and $1,500 in insurance, the total operating expenses would be $16,500.

With a Gross Operating Income of $85,000 and operating expenses of $16,500, the NOI would be $68,500. So, the Net Operating Income for this property is $68,500. This figure gives us a clear picture of the property's profitability, excluding financing and tax expenses.

But why is NOI so important? For investors, NOI provides a snapshot of a property's financial health. It helps in comparing different properties, assessing potential returns, and making informed investment decisions. It's a measure of a property's ability to generate income from its operations. Understanding NOI is essential for:

Property Valuation: NOI is a key component in determining a property's value using capitalization rates or cap rates.

Investment Analysis: Comparing NOI from different properties helps investors assess potential returns.

Cash Flow Estimation: While not identical, NOI is closely related to cash flow, which is the ultimate goal for most real estate investors. To calculate cash flow, you subtract debt service (mortgage payments) and income taxes from NOI. Positive cash flow is essential for most real estate investors.

NOI and Capitalization Rates

The capitalization rate (cap rate) is a key metric in real estate investment. It's calculated by dividing the NOI by the property's value. A higher cap rate generally indicates a higher potential return, but it's essential to consider other factors like property location and market conditions.

Let's consider another example from the Greater Toronto Area. Suppose you own a multi-family rental property in downtown Toronto. The property generates $250,000 in rental income annually, with additional revenue from parking and storage fees totalling $25,000. Your total Gross Operating Income is $275,000. After accounting for operating expenses like property management, maintenance, and utilities amounting to $85,000, your NOI would be $190,000.

In this case, the NOI of $190,000 indicates the property's profitability, which you can use to compare with other investment opportunities in the GTA.

Understanding Net Operating Income is essential for anyone serious about real estate investing. It helps you evaluate properties, make informed decisions, and ultimately achieve your financial goals. If you have any questions about NOI or need help with your real estate investments, feel free to reach out.

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome, we will explore a topic that many homebuyers struggle with Fixer-Uppers vs. Move-In Ready Homes. Which one is the right choice for you? Let's break it down and find out. Let's get started!

When it comes to buying a home, you generally have two primary options: a fixer-upper, which may need some tender love and care or in short TLC, and a move-in ready home, which is ready for you to settle in from day one. Each option has its own set of pros and cons, so let's explore them in detail.

First, let's talk about fixer-uppers. These homes typically need repairs or renovations but can offer unique opportunities. Here are some key benefits:

Lower Initial Costs

Fixer-uppers are usually priced lower than move-in-ready homes, which can make them more affordable upfront. Since the home would require updates, you will have the upper hand in negotiation and would be able to get it at a reasonable price, irrespective of the market conditions. There are always fewer takers of properties which need some work, and that is where you score if you have finances, resolve and time on your side to take up the project.

Customization:

You have the freedom to renovate and design the home to your exact preferences and needs. There is no need to settle with aesthetic choices which previous owners have made. The painting, flooring, kitchen cabinetry, bath vanities, lighting, ceiling finishes, door inserts, appliances etc. Everything would be based on your choice and how you want to define the aesthetic of the home.

Potential for Equity:

With the right improvements, you can significantly increase the home's value, building equity swiftly. At the time of dispensing the property, all of this equity can be realized.

When we speak about the challenges for Fixer-uppers, they have a fair share, they need a lot of cash and sweat equity which is needed to plan, manage and execute the renovations. This whole process requires money to pay for the labour plus material along with the opportunity cost during the vacation time when the property is empty and being built. In fixer-upper projects, there is also a fair potential of discovering some unforeseen issues, which might increase the overall project cost.

Now, let's shift our focus to move-in-ready homes. These properties are fully updated and require no immediate work. Here are the benefits of choosing a move-in ready home:

Convenience:

You can move in right away without worrying about renovations or repairs. The whole premium paid is for this ease of living right of the bat after closing on the property.

Predictable Costs

There are fewer surprises with move-in ready homes, so you can budget more accurately. With the renovations, the previous owners would have majorly taken care of other issues as they surfaced.

Of course, there are some downsides to consider as well: Move-in ready homes typically come with a higher price tag compared to fixer-uppers, there is always a premium for that shiny kitchen and quartz counters with built-in appliances, the custom glass shower enclosures in bath, or the spic and span interlocking on the driveway. The customization opportunity to tailor to your taste is limited, as you are less likely to delete a recently replaced floor or fresh painting with a new one, and would wait for some time to do any net new updates. And, finally, the potential for up-side is less, the possibility of increasing the price of the property with some updates is limited as already premium is paid for the reno's in the home.

Here you can see a quick comparison between these two approaches. There is no right or wrong answer, if you are willing to invest some sweat equity into the project want to have additions as per your liking, and have some cash on hand to implement the updates, its always beneficial to buy a non-updated asset.

If you are of the kind where you need something ready to possess and start enjoying from day one, or have limited cash reserves, the ready-to-move-in properties should be your go-forward path. At Elixir Real Estate, we're here to help you navigate the process and find the perfect home for your needs. Have any questions about fixer-uppers or move-in-ready homes? 

Remember, buying a home is a significant investment, so take your time and do your research. 

Wish you all the very best! Reach out to our dedicated team at Elixir with any queries you have about real estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome back, today, we're tackling a common question for homeowners: Seller's market vs. Buyer's market – what it means to deal with these markets. Whether you're thinking of selling or buying, understanding the market conditions can make a big difference.  So, let us examine the key differences and how we should navigate them as a buyer or seller.

Seller's Market:

Imagine a scene with multiple offers flying in, bidding wars commonplace, and homes selling above the asking price.  That's a seller's market in a nutshell!  Here's what it means for you:

High Demand, Low Supply: Buyers are plentiful, and homes are far few. This creates fierce competition, driving prices up. In the GTA region, this was the norm in the last quarter of 2021 and the first quarter of 2022.

Multiple buyers vying for your property can significantly increase your selling price, more often in such markets you will see classic multiple offers situations. 

Quick Sales: Your home is likely to sell quickly, sometimes within hours of listing coming up in the market.

Negotiation Power: The seller holds the upper hand. You have more leverage to negotiate terms favourable to you, like closing dates and inclusions.

If you are a Buyer in a Seller's Market, it can be challenging. You'll need to act fast and be prepared for competition. It’s crucial to have a cushion in the budget and be ready to make quick decisions. But, do not get overboard in the price you pay, as if the market subsides you have lost your immunity and pricing advantage. So, if you are a buyer in a sellers market, still remain as objective as possible in the whole process and do not get emotional on a property. 

Buyer's Market:

Now, picture a calmer scene with more houses on the market and less competition.  That's a buyer's market!  Here's how it plays out:

More Choice: Buyers have a wider selection of properties to choose from, allowing them to find their dream home. They can take their own sweet time to compare properties and settle for the best one that meets their aspirations.

Lower Prices: With less competition, sellers may be more open to negotiating a lower price for a credible buyer.

Better Negotiation: Buyers have more leverage in negotiation and in addressing deficiencies identified during the home inspection.

Objective Decision-Making: The urgency to buy or sell is lessened, allowing for more focused decision-making.

But what if you're a seller in a Buyer's Market? It can be tough. You may need to price your home more competitively, be patient with the selling process, and be prepared to make concessions to attract buyers. The marketing material, brochures, social media campaigns, staging elements - All of these become far more important for us as Sellers in a Buyer's market. As a seller, we need to make sure our listing stands out in the sea of listings.

If you are Selling? A seller's market is ideal. You can potentially sell quickly and for top dollar. And if you are in for Buying? A buyer's market offers more options, potentially lower prices, and greater negotiating power. The current market is more tuned towards Buyers, for both first-time home buyers and move-up. If you are a Seller in the current market and don’t want to buy or enter again, you should hold on and not sell at this time.

At Elixir Real Estate, we're here to help you navigate both Seller's and Buyer's Markets. Whether you're buying or selling, our team is dedicated to ensuring you get the best deal possible. Thanks for watching, and don't forget to like, share, and subscribe for more real estate tips and insights. See you next time on Elixir Talks!

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome back, today, we're tackling a common question for homeowners: Seller's market vs. Buyer's market – what it means to deal with these markets. Whether you're thinking of selling or buying, understanding the market conditions can make a big difference.  So, let us examine the key differences and how we should navigate them as a buyer or seller.

Move-Up Magic in a Slow Market

In a move-up scenario, homeowners upgrade to a larger or better property.  Maybe you're a family in a townhouse moving to a semi-detached home, or a semi-detached family transitioning to a detached home. Or moving from a Single Garage Detached to a Double Garage home. Or moving from a high-rise condo to a freehold asset.

Understanding the Current Market

First, let's get a sense of where we are. Here's a graph showing yearly TRREB MLS sales for the past 13 years. As you can see, 2023 and 2022 were slow years with significantly lower sales volumes, specially when compared to 2011, which saw around 89,000 units sold. Cut to 2023 and we had only 65,884 sales in the GTA. This highlights the market's sluggishness, even after thirteen years worth of population growth and new subdivision developments, the quantum of sales reduced dramatically.  Even in 2024, so far the first half saw only 36,586 transactions despite an interest rate cut announced in June, proving the slow nature of market.  Two more cuts are likely this year, and up to four expected in 2025.

This slower market allows us to negotiate well for buyer clients, with properties generally available at credible prices. So, if you've been contemplating a move-up, this could be the perfect opportunity!

The Move-Up Advantage

In a move-up scenario, you're selling your current home and buying a better one in terms of location, size, specifications and lot. Yes, your existing home will sell at the current market price, which might be lower than a peak market. However, the property you're purchasing will likely be at a higher price point, offering greater potential for appreciation. Ultimately, the gains you make on the purchase will outweigh the discount you might give on the sale, since both transactions occur in the same slow market.

Downsizing vs. Move-Up

This logic doesn't apply to downsizing.  In a downsizing scenario, you'd likely lose more on the sale of your larger home and gain less on the purchase of a smaller one due to the lower price point.

Benefits of Moving Up Now

The current market offers two key benefits for move-up buyers:

Price Saturation where Prices for larger properties are also saturated, minimizing the potential loss when selling your current home.

Inventory Choice with less competition, you have a wider selection of properties to find your perfect fit.

Selling First, Buying Second is Key

Now the questions comes when in a Move-Up scenario should I Buy First or Sell First. In a slow market, prioritize selling your current home first. Secure a sale with a longer closing to give yourself time to find your ideal move-up property. Once your sale is firm, you can confidently purchase your new, bigger home. Listing your current home while searching allows for continued viewings and potential offers. This strategy minimizes pressure and ensures a smooth move-up experience. You will be in the commanding position, to sell your home at a reasonable market price, and then negotiate well for the move-up.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

 Today, we'll focus on the second type of appreciation in real estate: Forced Appreciation. Let’s go into the basics and see how this influences asset prices. 

In our last blog, we covered how natural growth in regions and economies, coupled with regular inflation, translates to price increases, known as 'Market Appreciation'. Conversely, 'Forced Appreciation' occurs when growth is driven by the owner's efforts to enhance its use and appeal. Let's explore the various ways an asset owner can induce Forced Appreciation, which I will clarify through several examples in addition to the property 

Increase the number of Baths

This is a typical case where a property gets functionally better when we enhance its specifications. Let us consider an example of a 2-storey 3-bedroom single garage home, which has 3 bedrooms at the upper level and has only 1 full bath. For such properties, if our upper floor plan allows us to add another full bath with a permit and if we implement that. This immediately does two things, firstly it enhances the usage of the property and pushes its market value upwards. With changes, the property is a 3-bedroom/2.5 Bath home. It is much more usable to a wide variety of buyer families/investors. They are willing to pay more for the same property, and this immediately increases its value. The second impact is that the change increases the property to attract more rent as now the tenant is willing to pay more for the same property. Due to the increase in rent potential now the investor community is better attracted to the property. 

Increase number of Bedrooms

This is a scenario where there is a potential to carve out an additional bedroom in the property. One of our clients purchased a detached 1,150 sq ft bungalow above grade which had only 2 bedrooms at the upper level, the owners had changed the original 3 bedrooms to a 2-bedroom setup to make them bigger. Our clients bought this specifically for this upside potential in an otherwise bigger home. They applied for building permits with the town and changed it back to a 3-bedroom layout and made it contemporary open concept plan. As you can see here, the old plan had a kitchen and that was changed to a bedroom and the huge living area in the newer plan now had an open-concept kitchen. This enhancement of one bedroom increased the appeal of the property and it impacted the market value positively as usability was enhanced.

Increase the Footprint of the property 

There are cases where the lot of a property is substantial enough that it allows you to increase the built area of the property. We recently had a similar instance where one of our excellent clients purchased a bungalow detached with had 3-bedroom 1 full bath at the upper level. They modified the plans to create a spacious ensuite for the primary bedroom with a complete walk-in closet, this addition of almost ~350 sq ft above grade, gave them an additional 350 sq ft of space in the basement as well. And it enhanced the usability of the property by leaps and bounds, for their living and also for future saleability. Almost, 700 plus sq. ft. of extra livable space was created. When lot is big and it allows as per zoning the ability to expand the current home, the new size increases its livability and appeal. These things are mostly possible in older bungalow-type dwellings where the lots are spacious both in terms of width and depth. This allows such lots to extend the current footprint of the dwelling and force appreciation. 

Kitchen Remodelling

A kitchen is another awesome way to increase the appeal of a property, as soon as you remodel and change the cabinetry, back splash and countertops of a kitchen, it immediately enhances the overall appeal and attraction. The kitchen is a sure centrepiece of any property and having an attractive Kitchen increases usability and gives an instant appreciation to the property. In my experience if the kitchen is updated in a home, it makes the sale process smoother and attracts best dollar for you as per the relevant market. 

The second Unit in the Basement

For major municipalities in the Greater Toronto Area, where the population is huge and there is a lot of rental demand. In such locations and in compliance with local zoning by-laws, if they allow for the creation of a second unit dwelling in the basement. It could be a very solid way to engage the upside potential of the dwelling. Here you can see the before/after plans for a typical basement and its evolution into a second-unit dwelling. This gives a possibility of an additional income stream from the lower unit and it serves as a mortgage helper for families buying the property for their own living. For investors, it gives them the benefit of dual cash-flows from upper and lower levels. Due to this increase in potential, the market price gets an immediate push with the creation of second units in the property.  There are also ADUs or additional unit dwellings which if permitted by the local municipality – planning and building departments, can add an upside potential. The discussion on ADUs would require a completed dedicated talk and we will create it in one of our upcoming episodes.

Curb Appeal Updates

This is a technique where you update the landscaping elements in the front/rear of the property and make them look more appealing. Or update the front façade of the home with stucco or stone chips and make it look more contemporary. Replace or paint the front door/garage doors to make them look appealing. These changes even though sound minor but they go a long way to help increase the value of a property when put on market. 

Here you got a glimpse of how the appreciation can be forced on a Real Estate asset and now let us discuss the requirements of such an endeavour, its something which is not made for everyone.

Capital Requirement

This form of appreciation is capital intensive, anything updates/additions you do to an asset require money to make it happen. This is the reason mostly you would see people not going for this route and just waiting for organic ‘market appreciation’  and building equity.

Under-Renting

During the time you do the updates/renovations to enhance the property, and specially when it is an investment property. It might mean that the property is vacant during the time of renovation. This is another financial loss due to the vacancy time. 

To round up our discussions on ‘Natural Appreciation’ and ‘Forced Appreciation’ I want to say that the ideal combination is a mix of both. If as a homeowner, you do some remodelling to enhance the appeal of assets and then also be in the market for the foreseeable future. It would reap the compound benefits of both forms of appreciation. And this is coming straight from my experience in dealing on ground and assisting our clients during the journey. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome back, friends! Today, we will start a two-part series exploring the basic forms of appreciation in real estate. We'll start with a market appreciation or natural appreciation, using real-life examples from the Greater Toronto Area to enrich our understanding of this topic.

Market appreciation refers to the organic growth a real estate asset undergoes over time, influenced purely by market forces. Let's examine the factors that impact the growth of an asset:

Inflation

Inflation is a primary driver of market appreciation in real estate. As the cost of services, goods, materials, and labour rises, so does the value of real estate assets. They become costlier to rebuild over time. This natural hedge against inflation makes real estate an excellent investment vehicle. As the perceived value of the asset is bound to rise with inflation dynamics. This reason alone make Real Estate a great investment vehicle as it provides an inbuilt inflation hedge.

Rental Rates

With the advent of time and inflation, the purchasing power of money decreases with time. The Rental rates increase and they are a second big reason which drives up the value of a Real Estate Asset. For an investor along with the monthly appreciation which happens in the asset due to inflation, they get to benefit from the rental payments to pay up their mortgage commitments. The principal repayment part in the mortgage increases their equity in the asset month over month. The increase in the rental prices, definitely helps the property appreciate.

Economic Growth

In good and progressing economies with the rise in inflation, there is also movement in terms of economic growth. New jobs and industry sectors are established pushing the economies which indirectly makes the Real Estate assets appreciate with the economic stimulus. More jobs mean higher income levels, which bolsters consumer confidence and ultimately leads to growth in the Real Estate sector.

Infrastructure Development

Properties in metro areas or regions anticipating significant infrastructure investment typically see greater market appreciation. Easy access to highways and public transit can significantly influence an area's growth compared to regions with less developed infrastructure. After spending almost a decade in real estate, I can confirm that 'location' is indeed critical to natural growth.

Population Growth

In a place like the Greater Toronto Area, there is a lot of population growth in the form of immigration which takes place in Canada. And GTA being the biggest job market in Canada, which makes a lot of net new people choose to live in such regions. This population growth is very simply put directly proportional to market appreciation. Another reason Location plays a key role is that population growth will be centred around in-demand locations where job opportunities and chances of growth for a newcomer are abundant.

Supply Constraints

Supply constraints are another reason price growth happens in Real Estate. If you observe major municipalities like Mississauga, Burlington, Richmond Hill and Brampton, their landscape doesn’t allow for more sub-divisions as already they are saturated with constructions to the boundary of these towns. When the land is saturated, and the market forces keep the area in demand. The progression of time makes the prices increase due to this saturation in the land development; as there is limited supply of new development. 

Government Policies and Interest Rates

Any government or municipality should be instrumental to make it easier for first-time home buyers and investors in form of tax breaks and incentives. These policies help sustain the buy/sell of the assets and increase their demand, which pushes the appreciation. Schemes like First-time home buyer RRSP Advantage allow prospective homeowners to leverage interest-free money from their RRSP savings. There are couple of other policies like the Land Transfer Tax Credit on the first home for $4,000, or the First time home buyer tax credit. All of these policies help flourish and promote home ownership. 

Federal bank's interest rate policy changes are another major factor. They can go either way, as you would have noticed the historically lower interest rates in the Covid-times pushed the prices way above, and then the tightening of borrowing rates in 2022/2023 also brought them down. The fine balance of interest rate policy changes and the market prices continue. In the short term, they are inversely proportional. However, in the longer term with the above other reasons we laid down, the inflationary pressures, drive up the asset prices in a growing economy.

Real World Case-Study

Let us now consider an example where we can understand how natural appreciation can come into play. For this case study, I have chosen detached 2-storey single garage dwellings in couple of municipalities across GTA that got sold in June of 2010. The next step is to determine their median sold price and then look at the median sold price for similar categories of properties in June of 2023.  I have chosen this 13-year duration as it covers the highs/lows we observed in the 2017 market and similar occurrences we observed in the first quarter of 2022. 

This tabulation highlights the power of Market Appreciation in the Greater Toronto Area, just by virtue of the growing population base here in the GTA, booming economic considerations in the last 13 years overall, and sustained employment opportunities, all these have a combined reflection on the market prices. 

Based on the data we can safely say that GTA had almost ~200% of natural appreciation due to these factors and after surviving two market downturns, and this is all organic growth and ‘market appreciation’ in action. In the next episode I will continue our discussion to the second type of appreciation which is ‘Forced Appreciation’ the factors involved there and how it takes place in Real Estate. It would be an interesting one and will completion our discussion on the topic of appreciation. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome back, friends! Today, we're discussing a topical subject, the significant changes the federal government has proposed concerning Capital Gains Exemption limits. Let us understand these changes and explore their impact on us as individuals.

Before we begin, let's clarify the concept of the ‘Inclusion Rate’. This rate determines the portion of capital gains on which tax is paid. The upcoming changes affecting both individuals and corporations are set to take effect on June 25, 2024.

Existing Capital Gains Scenario (Pre-June 25, 2024)

Currently, homeowners selling their primary residence enjoy a complete exemption from capital gains tax, a policy that will continue unchanged. However, for second properties or investment properties, the inclusion rate currently stands at 50%. This means half of the gains are taxable and added to the individual's income for that year.

New Capital Gains Scenario (Post-June 25, 2024)

Under the new regulations, the inclusion rate for individual taxpayers will increase to 66.7% for gains exceeding $250,000 within a year. Gains up to $250,000 will remain at the 50% inclusion rate. Let us look at two example scenarios and it will make the impact very clear to you.

Example 1: 

Imagine an individual bought an investment property for $450,000 in 2010 and is now selling it for $750,000, realizing a gain of $300,000.

    •    Taxable gains calculation: 

    •    50% of $250,000 = $125,000 

    •    67.7% of balance $50,000 = $33,333 

Under the new rules, they will have to pay an income tax of $158,333, compared to $150,000 under the current rules.

Example 2: 

In our second example. Consider someone who bought an investment property in 2004 for $250,000 and is selling it in July 2024 for $800,000, realizing a total gain of $550,000.

    •    Taxable gains calculation: 

    •    50% of $250,000 = $125,000 

    •    67.7% of balance $300,000 = $200,000 

    •    Total taxable gains under the new rule would be $350,000, compared to $275,000 currently taxed. 

Assuming the effective tax rate of the individual is 31%, the new tax liability on the gains would be $108,500, compared to $85,250 previously—a difference of $23,250 on gains of $550,000.

This second example brings the point home and makes it pretty clear, that the changes introduced or effective from June 25th are not that bad how they sound to be when you initially review them and hear in the news portals and outlets. 

Impact on Corporations and Trusts: For corporations and trusts, the inclusion rate for all capital gains on asset sales will be 66.7%, applicable to gains realized on or after June 25, 2024.

What This Means for Real Estate

Since the announcement, the real estate market has experienced a slowdown, this we can evidently see in April 2024's market dynamics. While the direct impact of these changes may seem minimal, it will take time for the market to fully absorb and adjust to these new regulations.

The policy shift has undoubtedly dampened market sentiment, already weakened by slow economic conditions over the past few years. Such changes in policy timing could be debated for their effectiveness.

I encourage you to share this information with friends and family who might benefit from understanding these new rules. Also, feel free to comment on any real estate topics you'd like us to cover next.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome everyone, today we'll delve into an intriguing topic: understanding the difference between qualitative and quantitative attributes of a real estate asset and their importance in making sharp investment decisions.

Quantitative Attributes:

These are the measurable aspects or characteristics of a property that can be numerically defined. For example, consider the number of rooms, square footage above ground, basement square footage, number of bathrooms, the age of the property, lot frontage and depth, and neighbourhood metrics. These attributes are crucial as they directly affect the functionality and usability of a home.

These quantitative metrics are instrumental in evaluating and determining the fair market value of a real estate property. Without this objective data, it would be challenging for anyone to ascertain the correct value in the given market situation. Furthermore, these attributes enable us to objectively compare two different properties, assessing which one offers better value.

Qualitative Attributes:

On the other side, we have qualitative attributes, which are the subjective aspects of a real estate asset. These might include the architectural style – whether it's modern, contemporary, or traditional – the curb appeal of the property, and the neighbourhood vibe. These attributes define the livability for consumers, how much they enjoy their home, in other words, these are the attributes that add character and appeal to the property. They play a significant role in marketing and staging a home.

Achieving a fine balance between these two types of attributes is essential. For instance, a family might prefer a certain neighbourhood due to highly-rated schools in the area, a qualitative feature, as opposed to the more quantitative aspect like the size of the home.

Consider a young couple working in the downtown area who might favor a cozier downtown 1-bedroom plus den apartment over a conventional spacious low-rise suburban home. This is a classic example of a qualitative attribute taking precedence over a quantitative aspect.

Then, there could be a family who places significant importance on a landscaped front yard, and a backyard with an open ravine view. This is a qualitative attribute, as it is subjective and varies from family to family. Conversely, another family might prioritize a younger, newly-built home – a quantitative attribute – over a ravine outlook.

As a buyer, you always want to strike a balance between these two attributes. If you are buying for your own living, you would need to consider all the desired qualitative attributes as well. When purchasing an investment asset, on the other hand, the ROI and the age of the property might be more crucial than the qualitative aspects. In an ideal situation, it should be a mix of both attributes; not ignoring one completely in lieu of the other. A fine balance of both will help you in securing the perfect property.

As a seller, showcasing all your qualitative aspects in the listings is vital to make them stand out. High-quality photos highlighting such aspects of a property provide the much-needed marketing edge. For instance, a drone shot showcasing a big park near the home is a qualitative attribute that can significantly enhance the property's appeal when listed. The ease of commute and transit access, proximity to amenities – all of these can be leveraged to prepare compelling marketing material.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome friends today, I want to take you on a journey and share a distillation of one of my experiences in dealing with real estate. I'll share some insights that will help you make better decisions for your homeownership and investment goals in real estate.

Having been involved in numerous client discussions on real estate scenarios and meeting with them to solve their selling, buying, and investment goals, I've gained some interesting learnings. Today, I'd like to share one of those with you: how our psychology works when we are dealing in real estate and how we subconsciously do certain things without even realizing them. And how it impacts our better decision ability.

If a client or a family has lived in a certain location, maybe initially even as a tenant. Suppose a family comes to the Greater Toronto Area and has lived in a given location for 2 years. When the family is now ready to move to the next step of homeownership, they want to stay close to where they have lived. If you speak to them, they will advise how good and convenient the location is and the high points of being in that location, or particular pocket of the GTA. What is happening here is when we live in a certain location, we become comfortable and used to the surroundings of that area. We know where to bank, where to go for groceries, and other civic amenities like parks, libraries, shopping, recreation, theatres, etc. Our subconscious becomes comfortable with the road and traffic patterns, and everything seems familiar and at ease. Our brain develops reasons and gets adapted to the location for all activities. This holds good if the family is living in their first home for 3-5 years and now are moving up to a bigger property, they would want to be in the same location, fully understanding that they have the opportunity to break the status quo and can opt for any location.

As humans, we do not want to get away from their BAU (Business As Usual); they don't want to upset the familiar conditions they have living in a given neighbourhood. Now for ownership for their own living or even for investment, they would always want to be closer to that location, for the same reason.

This holds good for the most part, and I have seen this umpteen number of times. A person who is living in the Far East of the GTA, say in the Durham Region or in East Toronto, will always want to stay in the east-end only, as they have gotten used to that part of town/region, and it's very difficult for them to have something distant from their home base. On the same lines, suppose a young family has stayed in downtown or uptown Toronto in a condo for 2-3 years, they are more than comfortable in that lifestyle. It's an uphill task for them to imagine themselves in a typical suburban low-rise setting. They are very much in tune with the hustle and bustle of a dense downtown neighbourhood and are not willing to trade that feeling. As another example, a person living in Brampton, Whitby, Mississauga, Hamilton, or Vaughan would want to continue to live or move up within the same geography.

When I look at the goals of a family for getting started with their first-time homeownership or a secondary asset as an investment, I am looking in an unbiased way and fully knowing the merits and demerits of various municipalities. It is my responsibility to advise them that it would be very natural that when they would want to upsize, they would always want to be in the same community or at least the same town. However, growth always comes with change. And when we take the decision for the biggest investment asset of our lives, we should be more objective and less emotional. If there is an opportunity to buy real estate, we should try to get away from these usual thought patterns and rather objectively review various municipalities where our budget can meet our property goals. And then go for the best town/area/property type/style which my budget allows me to purchase comfortably.

If I have lived in a certain area for my initial tenancy period or as my first home, that doesn't mean that the same area is the only defacto choice for me when I am ready for homeownership or executing a move-up scenario. There would be cases when it is the objective choice also, but mostly we see that it becomes more of an emotional decision where we don't want to disturb our familiar surroundings.

This phenomenon you will also see in terms of style of properties too. If as a family we have lived 2-3 years in a high-rise condo setting, I will always gravitate towards that property type when the time comes for ownership. Even though a low-rise dwelling would mean better space utilization for a growing family, I would still want to be in the familiar high-rise setting.

Right Approach - When Buying for Your Own Living:

For the correct approach to real estate homeownership when you are starting to shop for a home for your own living, you need to qualify your budget and then very objectively review the various towns where it is logistically sound for your living based on your work commute, schools, recreation, transit, amenities, etc. Things which are important for your family in the next 5-10 years. Don't be wary of new locations, neighbourhoods, towns, as there could be places which work even better than your last address. Now that you are ready to purchase, why not take the opportunity to explore other areas and invest your hard-earned money credibly in a very objective way.

Right Approach - When Buying for Investment:

For perfect decision-making when buying for a rental cash-flow property as an investment; in this scenario, you are far more flexible as you personally are not going to live there. The property need not be extremely close to your residence or closer to your work location. This would definitely call for thinking wide open; all areas as long as they are in a 20-50 km radius are open for your investment. It is again a myth that for a cash-flow rental property you would need to visit every now and then; the truth is that the visits are not that frequent as you might think. So, this should not deter us from investing in the best location and property type/class which gives me good growth and future upside potential.

I hope you are able to realize from this discussion how pre-conceived notions play a big role in our decision-making and impact our portfolio and living. Feel free to share it with your friends and colleagues who might benefit from this. For any objective advice in real estate, reach out to our team here at Elixir, and we will help in the best way possible. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome, friends. Today we will explore the world of pre-construction real estate, exploring key considerations for selecting and evaluating these opportunities. When approached correctly, pre-construction projects can offer a robust option for building your real estate portfolio.

What is Pre-Construction?

Pre-construction involves purchasing property from a builder or developer when it's still in the planning stages, essentially buying it on paper. This often presents cost-savings opportunities for the consumer, as you commit to a purchase before the physical structure is built.

Condo Projects

The pre-construction realm encompasses both high-rise and low-rise condos and low-rise freehold developments, each presenting unique benefits and challenges. High-density condo projects are typically located in transit-friendly and accessible areas, zoned by municipalities for a denser population. These locations often come with the convenience of amenities and transit options. However, the living spaces in high-rise condo projects tend to be more compact, which can be a drawback in terms of both livability and rental appeal. Additionally, these properties often incur monthly condo maintenance fees, impacting the overall yield from rental income if you consider them as investment properties. On the upside, their smaller footprint and associated fees can result in a lower entry price point. In the Greater Toronto Area, condominium projects may take anywhere from 3 to 4 years to complete, though this timeline can vary depending on the builder and the efficiency of their supply chain and subcontractors.

Freehold Projects

As an alternative, there are freehold subdivisions and builder projects, typically found in low-density neighborhoods. These developments might include exclusive detached subdivisions or mixed communities with detached, semi-detached, and townhome dwellings. Such properties usually offer limited transit and accessibility options, often necessitating a vehicle for commuting and errands due to less frequent transit services. However, the rental yield on these properties tends to be higher, thanks to their larger living spaces, leading to potentially higher rental rates. 

The trade-off is a higher price point due to these advantages. The timelines for freehold builder projects are generally shorter, ranging from 1.5 to 2 years, but, as with condos, it can vary from builder to builder.

Condo Project Evaluation

To determine if a builder's pricing offers value and qualifies as a sound investment, consider an example: a builder launches a high-rise project with a 2-bedroom, 2-bath unit measuring 760 sq ft, priced at $680,000, with occupancy scheduled three years hence. To evaluate, compare this to similar units in the 700-800 sq ft range within newer buildings (0-5 years old) which were sold in the same community within the last 90 days. If the median sold price for these units is around $610k, the project may not offer the expected value. Conversely, if the median price ranges between $660k-$700k, it would represent a fair opportunity, considering the potential for market growth over the three-year period before occupancy begins.

Freehold Project Evaluation

Similarly, for a freehold project where a 3-bedroom, 2.5-bath, 2-storey semi-detached home measuring 1,450 sq ft above grade is priced at $650k with completion in 18 months. Your broker can help to pull all comparable Semi-Detached properties in the community which got sold in last 90 days. If the median sold price for similar semi-properties is around $580k, the project might not offer the best value. However, if comparable homes are priced between $640k-$675k, it could be a worthwhile investment.

In our examples for price analysis, we explored the sales which took place in the last 90 days. This timeframe could change based on the market behavior. If the market is saturated and balanced, it can be increased to even six-months to get even better handle on similar spec properties. On the other hand, if the market is very dynamic or is in a declining or inclining state, the duration of sales data potentially would be shorter between 30–45 days to capture the correct median price of comparable units. Maintaining objectivity in property valuation is crucial when investing in real estate at any time.

Legal Due-Diligence and Review

It's also vital to have your contract reviewed by a lawyer, especially given Ontario's 10-day cooling-off period. This would help to ensure the agreement aligns with your interests and would also help to review the development charges capping, assignment considerations, delay mitigation, and any other charges which you can expect at the time of completion.

In addition to pricing analysis, conduct thorough research on the builder's background, considering their past projects and reviews to ensure their reliability and quality.

Thank you for your time today. If you find this information useful, please share it with friends and colleagues. Our dedicated team at Elixir is always here to offer personalized real estate advice. 

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome friends, today we're discussing a very distinct topic – Estate Sales. Imagine discovering a rare antique or a vintage piece of art for a reasonable price. This isn't just wishful thinking. It happens at estate sales every day. But what are they? And how can they be an excellent investment choice in real estate? We'll explore Estate Sales, their finer nuances, and the unique opportunities they present.

Welcome, friends. Imagine you are in a downtown area and come across a stunning Victorian home with exceptional curb appeal, transporting you back in time. The property displays a 'For Sale' sign. In today's talk, we'll discuss what it takes to buy a heritage property and the considerations involved in selling one.

Buying and selling a heritage property involves a unique set of considerations. A historically designated property contributes to the cultural heritage value and is recognized for its cultural, architectural, or historical significance.

What is a Heritage Property?

A property is deemed to have heritage value if it contributes to an understanding of community or culture, has design value due to craft skills, is an early example of a style or construction method, or is associated with an event or person of historical significance. It may also have contextual value.

These designations help preserve history and ensure that future generations can witness and learn from the past, retaining the unique character and face of a town.

Heritage homes are generally designated at the municipal level as 'Special Heritage Interest'. A local heritage register will list properties considered culturally valuable. For example, the City of Mississauga has around 300 designated properties, the Town of Caledon about 165, and the City of Oakville roughly 170 heritage properties.

Type of Restrictions

These properties come with restrictions to preserve their historical integrity, often concerning the type and extent of renovations, mostly on the building's exterior. This includes the colors you can paint the exterior and the style of windows you can install.

Since the government aims to preserve the esthetics, it may require the use of non-standard materials, translating to marginally higher maintenance costs for the exterior, but then the municipalities generally provide grants for updates, more about grants later. The extent of renovations and limitations are governed by local municipal by-laws. It's prudent to do thorough due diligence when you sign on the dotted line.

City Approval for Changes

Typically, any exterior updates or changes to the heritage attributes of a building require a permit from the city. Changes to windows or doors, roofing materials, facade replacement, the positioning of exterior heating and cooling equipment, changes in masonry, significant landscape alterations, chimney additions or removals, and fence replacements all fall under this category.

However, actions like re-roofing with the same material, routine maintenance of gutters, downspouts, minor paint color changes, and internal modifications usually don't require a permit. It’s a myth that if I need to change light fixtures, interior painting or wall paper in the property it won’t be allowed, the truth is that for the most part interior elements are not included in designations. Primarily two reasons as they are difficult to monitor and secondly is the issue of privacy.

Benefits of Historic Properties

Heritage Grant Programs

Most municipalities allocate funds for heritage grants to help owners conserve exteriors and maintain heritage characteristics. These grants can be leveraged if available. [Grant photos in the background]

Municipal grants typically don't cover non-heritage attributes or property additions, and interior work generally falls outside government grants. If considering a heritage asset purchase, check your local municipal level grant programs for support. Often, the town requires owners to match the grants used for maintenance.

Property Taxes

Some municipalities offer property tax relief to heritage homeowners, ranging between 10-40%, depending on their budget.

Insurance Premiums

Insurance premiums shouldn't increase due to heritage designation. While premiums may be higher due to the building's age, the designation itself doesn't warrant additional requirements from the insurer and shouldn't impact premiums.

Lets focus on certain pointers if you are selling a historical property,

Effective Marketing

It's important to highlight the property's historical significance and unique features. Effective marketing for a historic home should detail the story and characters which property presents, appealing to buyers who appreciate heritage.

Disclosure Requirements

Full disclosure of heritage designation and restrictions is critical for transparency and legal clarity. As a buyer, it's wise to check the town’s heritage register to determine its actual status.

There is another myth which circulates that if I own a heritage property, it would mean I will have to restore my property. The truth is that by having a heritage designation doesn’t at all mean that the owner has to restore, the status is given on the as-is state of the property.

To recap, historic properties are an excellent asset to own, as we've seen. It’s a myth that they have unusually higher maintenance, its same as any other old property and how you would take care of them. They come with their own restrictions and advantages and are more heavy on the advantages side. It all depends on your personal goals and aspirations. If it aligns with them, by all means, go for it. Hope you enjoyed this talk. If you have any real estate queries, our dedicated team here at Elixir will be glad to assist. Take good care and talk to you soon!

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Welcome friends to a fresh episode of Elixir Talks. In this episode, we’re uncovering the layers on a topic at the heart of condo living—‘Reserve Funds.’ We will discuss how Reserve funds impact us as a both as a Buyer and Seller in dealing with our Real Estate transactions.

Imagine you’re about to start on the journey of condo ownership. One critical factor that can make or break your decision is the financial pulse of the condo corporation. It’s the cornerstone for a buyer eyeing a valuable investment and for a seller aiming for a hassle-free sale. The reserve fund is a clear indicator of a condo's fiscal fitness.

What is a Reserve Fund?

Picture a savings account for your home on a larger scale. Just as we stash away funds for rainy-day home repairs, a condo complex pools resources for its maintenance needs. Whether it’s the repair of common walkways or the overhaul of essential systems, this fund is the backbone that ensures smooth operation without imposing unexpected expenses on the residents.

To give you some more examples it could be maintenance and upkeep of shared parking lots, rooftop terraces, roof shingles, HVAC equipment, building foundation, balcony maintenance, swimming pools, tennis or squash courts, repaving of the parking lots, repairing or replacement of elevators, windows and doors, electrical and mechanical systems, hallway maintenance, light fixtures replacement etc. This essentially is a pool of money which is set assist for contingency and future major repairs. It avoids the incoming residents to pay for the usage and wear and tear by the previous residents, it ensures all residents to contribute for this throughout the existence of condo.

Here in province of Ontario all of the condo corporations are required to maintain at least one reserve fund as part of their collection of monthly fees from the unit holders. 

How Condo Reserves are Accumulated?

As part of a condo living, the unit holder pays a common expense fees, which is typically paid monthly to the condo corporation. This fees has multiple components like Operational expenses, management fees, concierge services, taxes, security personnel payroll etc  and a portion of this fees is attributed to generate a corpus of Reserve Funds. 

Every months this reserve fund grows and comes handy in case the condo management needs budget to do any major repairs or replacements of the common elements or any assets of the corporation. I should highlight here that this reserve fund can strictly be used only for repairs of existing common elements and maintain their state and is not a tool to improve or do addition to the common elements.

What happens if Reserve Fund is Low?

In the absence or underfunding of Reserve Fund pool, the corporation would need to rely on the special assessment and increase the monthly contributions of the residents to generate the necessary funds or look to borrow money in order to generate the funds which indirectly raises the fee as well. And if the maintenance projects which require Reserve Funds are postponed, they can become even costlier to fix at a later date and increase the overall cost for the owners. It might cause a safety risk also for the owners and residents. 

There is another indirect impact to the owners as if the long-term maintenance is not commissioned at due time, it would deteriorate the conditions of the building which has an impact on the value and saleability of units. The resale value as you see can be directly impacted if the conditions of proper maintenance of the complex don't happen due to a poorly funded Reserve Fund.

It's a common misconception to think that a hefty reserve fund negates the need for further contributions. However, regular input to the reserve is crucial. It acts as a financial shield for unexpected, often expensive, repairs that can emerge, particularly in older buildings and complexes.

Reserve Fund Study

A Reserve Fund Study is an activity which is done periodically by the condo corporation to assess their needs and determine if the reserve fund is adequate for the sustenance of the complex. For a newly formed condo corporation, it is done within a year of the creation of a condo declaration and description. There are three different types of reserve fund studies, Class 1 is the most comprehensive one and the first one to be completed where the study service provider does an in-person visit of the site to examine common elements, reviews documents and conducts in-person meetings with the stakeholders of the condo corporation. The legislated minimum for a Reserve Fund projection is 30 years. It depends upon the corporation if they want to do an even longer duration study with the service provider.

The updates to the Reserve Fund Study are in turn of two types: Class 2 is a study with a site inspection and Class 3 is a study without a site inspection. In the study, they build the entire inventory of all of the equipment and items of the condo corporation which might require an update and major repair or replacement within the next 30 years of the reserve fund study and where the replacement cost is at least $500.

In closing, I hope this talk sheds light on the significance of reserve funds in condominium ownership. Remember, it's not just about now; it's also about securing the future of your home and investment. If you have any topics in mind and would like us to discuss, drop in the comments and will certainly do. For any Real Estate matters reach out to our dedicated team here at Elixir and we will provide the best consultancy. Take good care and will talk to you soon!

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate, and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Are you interested in an Investment Property? This blog is for you:

What to Look for in a Rental Property Investment?

Location, Location, Location: 

When it comes to Rental Cashflow Properties, location reigns supreme. I've emphasized this in many of our discussions, and it can't be stressed enough. Location directly impacts the caliber of tenants you'll attract. A great location, with low crime rates, excellent schools, recreational amenities, and efficient transit options, draws in top-tier tenants. Plus, properties in prime locations have shorter turnover times, ensuring your investment stays consistently occupied. Moreover, a prime location can substantially boost your ROI over time. It's all about supply and demand, and in real estate, the demand is always high in prime locations.

Research on Vacancy Rates/Rent Demand

Before making any investment, it's wise to conduct a fair market rent analysis. Even in great neighborhoods, this analysis provides a benchmark for what you can expect in monthly cash flow. It's also crucial to assess how long properties have been on the market before being leased. A prolonged "days on market" trend may indicate lower rental demand, something you want to avoid.

Prefer Freehold over Condo 

If your budget as an investor allows to purchase a freehold property, you should try to see you do that; even if it means changing your location and going further west or east. It has a multifold benefit, just by doing this there is no leakage on your monthly cash-flow from the asset. In the residential rental market here in the GTA the monthly condo fee maintenance is borne by the landlord. Let take an example that you buy a 1-bedroom plus Den condo in Square One area of Mississauga and your monthly rent is coming as $2,700. Your maintenance fee is $550, so your effective rent remains $2,150 only. In addition, freehold properties tend to appreciate at a faster pace, making them more attractive for future resale.  Also, due to the same reason of monthly fees the time comes to sell, a general buyers would prefer freehold, as they feel the amount going towards the condo fee could might as well contribute in their mortgage payment. If that gets them a better asset with more space and no fees. 

This is coming purely from my on ground experience and dealing with multiple clients and investors with varying needs and price points and also analyzing multiple properties as case studies to see their purchase price and disposition prices, and reviewing same in multiple asset classes in similar time span. 

Also, I want to point out that today's topics is for investments, condos would work if you want to use it for your own living and there may be situation where for your job accessibility you would want to live in downtown or north York areas or Vaughan etc. Or it could be that a family budget ceiling is less and they want to be within the GTA for job prospects, so they will have to go with a condo purchase. For investments the location can be flexible, as you would understand, and that's the very reason for my recommendation. The real estate investments should be done in a very detached way, with no emotional involvement. Its a pure business decision, you may like a certain town as you have lived there for 15 years, that doesn't mean that when it comes to investment you cannot invest in a town which is 20-30 kms away, if it makes business sense, then why not.

Cash Flow Analysis 

You as an investor should take into account and commission for the yearly property tax which you pay to the municipality, the condo fees, if you invested in a condo and some budget earmarked for the maintenance and up-keep for the asset. These costs are part and parcel of Real Estate investments, and your rental revenue should balance more or less with the expenses and in the ideal situation still generate a positive cashflow for you. However, at times you will see that will not hold good, and you might be paying some amount from your pocket per month, but when you see the mortgage principal contribution as well which largely gets paid by your rental revenue, you will be net positive. This precise point sometime investors fail to acknowledge and they are only looking at the positive cash flow. With the emerging Real Estate market like GTA you will always have equity built into the asset provided you don't decide to sell in the short order. Real Estate is a long term investment and if anyone shows you a get rich quick scheme, be vary as there is nothing like that. It would require from you a lot of patience and perseverance to carry a property for a foreseeable future to ensure that you can bank on the equity built. 

Property Management

For investors with multiple properties, hiring a property management company can be a game-changer. While it's an additional cost, it offers peace of mind and allows you to focus on your core responsibilities and work.

With the effort and time spent to build an investment portfolio, with time you can leverage on the asset not just by selling the asset. But you would also refinance the asset and get the equity out of it as a secured line of credit, this will help you to utilize and further expand your portfolio. The real estate market is a very dynamic market and things change dramatically, but if you ensure you provide seeding time to a property and carry it as a rental for 5-7 years minimum, believe me, you will do very well! Real estate is a long-term game. There are no get-rich-quick schemes, but with patience and dedication, your investments will flourish.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.

Mudit Mehta 

Broker of Record

ELIXIR REAL ESTATE INC.

Five common mistakes to steer clear from when you're dipping your toes into real estate, whether for personal living or investment purposes.

Skipping the Mortgage Pre-Approval:
One essential step before venturing into property ownership is obtaining a pre-approval from a reliable lender or financial institution. This pre-approval establishes your budget based on your income flow, enabling informed decision-making regarding your investment. With a clear budget in place, your realtor can tailor the search to meet your aspirations as an investor or homeowner. A pre-approval boosts your confidence during negotiations and streamlines the screening process.

Lack of Investment Strategy:
In any realm, meticulous planning paves the way for optimal outcomes. The same holds true for real estate. As an investor, clarity regarding your investment horizon - that is, when you intend to sell or dispose of the asset - is crucial. Depending on this timeframe, your property choices, including the style, location, and age, will vary. Therefore, it's advisable to consult with a market-savvy realtor who can guide you based on your objectives and timelines. A planned approach rather than a random one can make all the difference.

Overlooking Closing Costs - LTT, Lawyer, Property Insurance, Moving:
The thrill of shopping for your property can sometimes distract you from accounting for the closing costs, an essential part of the purchase. In real estate, Land Transfer Tax (LTT) is a significant closing cost, typically ranging from 1.5-2% of the property's purchase price. If you're a first-time home buyer in Ontario, a $4,000 LTT rebate is available.  For example if the purchase is say $800,000 the LTT payable on closing will be $12,475, if you were a first time home-buyer it would be $8,475.

Apart from LTT, other expenses include legal fees, home insurance, moving costs, title insurance etc. Accurate budgeting for all this will avoid you any surprises at the final completion.

Overpaying for a Property:
Ensure you don't end up overpaying for a property. The purchase price should reflect the current market conditions, and emotional attachment to a property should never inflate its cost. A patient approach can save you from paying an inordinate price, even if it means losing out on a specific property. The abundance of real estate inventory means there's always another property just around the corner. Overpaying can compromise your financial safety if the market shifts downward.

Embracing a 'Get Rich Quick' Mentality:
This mindset can be a significant pitfall in real estate. It's a long-term commitment rather than a ticket to immediate profits and positive cash flow. Giving your property time to mature allows you to build equity in your investment. Immediate profits might occur with impeccable market timing, but patience is generally your best ally for reaping substantial benefits.

?Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta 
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]
 

This strategy involves purchasing a solid real estate asset in a desirable location and holding onto it for an extended period of time to build equity.

Recurring Cashflow
One of the key advantages of this strategy is that it can generate a recurring cash flow. Once you make the initial investment for the down payment and closing costs, you can expect to start earning rental income from the very next month. In the Greater Toronto Area market, rental rates have been steadily increasing over the last decade, making this a lucrative opportunity for investors. In all other forms of investments like stocks, bonds, mutual funds, the recurring cash flow component is not that prevalent and the reason why Real Estate investments top in the list of wealth creating assets. 

Equity Growth
Another benefit of the Buy & Hold approach is the potential for equity growth. Over time, the value of your property can appreciate, leading to increased equity. The Toronto real estate market has shown consistent growth over the last 45 years, making it a sound investment opportunity for those willing to hold onto their assets for an extended period.

Hedge against inflation 
Inflation is an unfortunate reality that we all have to deal with, but the Buy & Hold strategy offers a natural hedge against it. By investing in tangible assets like real estate, you can create a reliable source of income that will help protect against inflation over time.

Handoff Approach of Real Estate Investment
Once you've secured a solid property and a reliable tenant, the Buy & Hold approach requires minimal effort on your part. With only periodic upkeep and management needed, this strategy allows you to enjoy consistent passive income without having to constantly monitor the market.

Capitalize on Refinance
One of the biggest advantages of the Buy & Hold approach is the potential for refinancing. After your property has had time to appreciate in value, you can refinance it to take out the built-up equity and use that money to invest in additional assets. Due to the inherent build up of equity over time, you are able to realize that equity and create alternate assets without impacting the consistent cash flow from this asset. 

Tax Deduction Benefits
Finally, the Buy & Hold approach offers significant tax deduction benefits. The interest component of your mortgage payments can be written off against the rental revenue you receive, reducing your taxable income and saving you money in the long run.

In conclusion, the Buy & Hold approach is a sound investment strategy for those who want to build equity and generate consistent revenue over time. It's a subjective choice that depends on your investment objectives, but it's definitely worth considering if you're looking for a less capital-intensive, long-term investment plan.

?Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta 
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]