First time homebuyer alert-shifting market

Attention first time homebuyers- the market is shifting

It’s the middle of October in Hamilton real estate land and if the stats from September are any indication, October and November could prove to be excellent buying months for the first time homebuyer.

The inventory of homes on the market in the Hamilton-Burlington area has made a rapid climb back up to early 2015 levels. From early 2015 to mid 2017 the market experienced record breaking sales, yet at the same time there was a constant reduction in number of homes listed for sale. Inventory levels fell to a critical level in the spring of 2017. At the end of March 2017, there were only 1,641 properties on the market; down 35% from March of 2016.First time homebuyer - Hamilton real estate market information September 2017

Demand went up- supply went down

As the inventory dropped, buyers who had a home to sell became very leery about listing their home before they had successfully purchased another one. That exasperated the inventory problem. In a nutshell, the market became very skewed; competition for the homes that were on the market went thru the roof; prices escalated at a record pace. Faced with new lending regulations and increased competition from well funded investors, the first time homebuyer ended up being kicked to the curb

The shifting market

It was only a matter of time before things turned around. For most people, real estate is much more than an investment- it’s the roof over their head. For most people, their real estate purchase will be the place where they raise their family and put down roots in their community. There’s merit in the saying “Home Sweet Home”.

When is it time for a first time homebuyer to jump in?

As a first time homebuyer when do you know that it’s time to buy? The answer is simple- when you can afford it. A good way to determine if you should buy or not is to use a occupancy cost approach. Can you rent the same place cheaper than you can buy it? The calculations are simple.

Consider the purchase price of $300,000 which requires approximately $20,000 in your bank account; $15,000 for the downpayment and $5,000 for closing costs and incidentals. That leaves a mortgage of approximately $285,000. High ratio borrowers must qualify at the banks “posted 5 year rate”. Today that’s approximately 4.8%.

CMHC Mortgage Calculator

With a $285,000 mortgage stress tested at 4.8%,  you’ll need to qualify for $1,625 a month, however, most banks are offering a 5 year mortgage at 3.5%. A 3.5% , 5 year fixed rate mortgage will really cost you $1,422 a month: interest and principle. That rate will stay the same for the term of your mortgage- in this case, 5 years. Over the course of 5 years, you will have paid $46,273. in interest; and $39,102.00 off of the principle, leaving  a $246,606 mortgage at the end of 5 years.

Now, lets do a bit of math

Take the total interest cost for the 5 years and add on property taxes for the full 5 year term. For this example I’m using 1% of the purchase price- $3,000/year. Be safe and assume that taxes will increase by $200/year, so total property tax paid over 5 years would be 3000 + 3200 + 3400 + 3600+ 3800 ($14,000)

Add on the total interest cost for the 5 years: $46,273 + $14,000= $60,273.

Divide the total amount by 60- the total number of months of your mortgage term. 60,273/60 = $1,004/month. This figure is your true cost. The amount that you’re paying down your mortgage is actually increasing your net worth because you’re reducing  your mortgage debt.

Is it worth it to you?

The question any buyer has to ask themselves is “can I get the same thing…either by buying or renting in this area for less?” When you buy, you have a lot more control and stability; you never have to worry about your landlord not renewing your lease. You’re able to settle into a neighbourhood, improve your property and reap the rewards from doing so.  Buying has a lot of benefits.

Home inspections and the first time homebuyer

First time home buyers should have a thorough home inspection that provides them with a detailed report covering life expectancy of the:

  • roof
  • furnace
  • decks/patio’s
  • driveway surfaces
  • windows
  • flooring

The inspection report should also cover the condition of the

  • basement
  • attic
  • exterior
  • electrical
  • plumbing
  • kitchen
  • bathrooms

Any deferred maintenance should be noted.

If the life expectancy of anything is less than 5 years then it must be taken into consideration. These are things that you’re going to have to do sooner than later and you’re going to need the funds to replace or repair.

A commitment to 5 years

When buying your first home, try to make sure that it is a home that you can stay in for 5 years. Selling a home is expensive and there’s no guarantee as to how much any home will appreciate year over year. In a normal balanced real estate market there’s also no guarantee that you’ll receive a full return on any improvements you make when it’s time to sell.  Residential real estate should be viewed as a long term investment that can provide you with great stability over your living costs.

So back to the Hamilton real estate market! With Hamilton real estate inventory levels rebounding and competition staying low, it’s definitely time to get pre-qualified and start the search for your first home today!

Local real estate stats 

Hamilton Real Estate Market Update: June 2016

Hamilton real estate market update June 2016

June 2016 Hamilton and area real estate stats show that prices continued their upward climb in June 2016 ;  number of sales and inventory declined.

 

REALTORS® Association of Hamilton-Burlington June 2016 Statistics Chart

Turnkey Investment; McMaster University area-Hamilton

 

•  2 bath, 4+2  bdrm 1 1/2  story – $487,900.
MLS® #H3185180

–  This is a Mac Investment dream; great cap rate! Deluxe updated and maintained 1 1/2 storey with extra long side drive and solid concrete block garage, minutes to Mac. Updates include: kitchen, thermo windows & steel doors, upper level gutted, re-insulated and drywalled, basement waterproofing, front and back porches replaced, central air, rebuilt roof on garage, recent siding and garage door, plus both bathrooms have just received a facelift. Newer stove, washer & dryer, 2 fridges. Good high, dry basement with large windows and side door access. Current rental agreement includes monthly cleaning service, internet & utilities. Contact Listing Agent for tenant details.

SOLD

Student rentals: Finance update April 2016

Financing Student Rental properties in Hamilton

Student rentals are investment properties; the problem is most banks do not want to finance them. Regardless if you’re buying a single family home or a multi unit rental building to rent, the banks underwriting departments want to make sure that #1- you have a reasonable expectation of collecting the amount you’re renting it for and #2- the property can be legally used for the rents you’re collecting. A home rented to a family is rarely a problem. With 2-6 unit buildings, the bank wants to make sure the property is zoned for the number of units you’re renting. Most banks just don’t like student rentals!

How the bank sees a Student Rental

So what’s the problem with student rentals anyhow? For the most part, they’re just single detached houses- aren’t they? Well, the banks do have a problem with them;  even though these properties are in fact single family homes, “the tenant” is usually a group of unrelated 18-23 year old students.

Then there’s negative publicity around student rentals. Residents are constantly trying to cope with being neighbours to properties filled to the brim with fun loving students and absentee landlords. This means no lack of publicity for this type of housing as the City is constantly trying to balance the need for student housing with the rights of non-student residents. Complaints are constant: properties that are housing too many students, lack of fire safety, illegal construction/building of bedrooms along with property standards and parking bylaw violations.

Student Rentals vs. Lodging Homes

The rules around renting to a collective of students can be complex. First of all, students are a protected group under the Human Rights Code. Cities have been told they’d be wise to avoid any type of zoning that could be considered “people zoning”.  The Human Rights Commissioner has stated that groups of students who want to live together as a family unit while attending school away from home, have the same rights under the act as any other family unit and municipalities must respect this right. At the same time, municipalities have the right to enforce their zoning bylaws.

 

Illegal development

Just because it’s there, doesn’t mean it’s legal and it certainly doesn’t mean that you can get it legalized on the basis that it’s already there. Doesn’t work that way. For example, if the original house is a 2 bedroom house with a kitchen and living room, you cannot assume that the 4 bedrooms in the basement are legal. If they do not comply with the Ontario building code, that is if the ceiling height is below the requirement or there isn’t adequate light (windows) they may in fact be “illegal”.

Rules and regulations are in place for a reason. The City has a right to be concerned about over intensification along with owners circumventing the building permit process and creating additional bedrooms and bathrooms without inspections, approvals or permits.

Sometimes Buyers and Sellers will go through great effort to “de-student” properties, trying to convince the appraiser and bank that it’s not what it is. They take all the locks off the doors and try to clean it up in an effort to make it look as “single family” as possible, but it seldom passes the scrutiny of an appraiser familiar with the area. Even though the Buyer swears on their life that they’re going to be renting this property to a nice young couple with 4 kids, most banks decline.

Getting a mortgage for a Student Rental in Hamilton

The Royal Bank is one of the few major banks interested in financing Student Rental properties in Hamilton. This is not an ad campaign for the Royal Bank, nor do I collect a referral from them for promoting their services- just passing on the info!  The good news is that the Royal Bank has expanded their student rental finance program: increasing the number of properties from 5 to 9 and reducing the down payment required from 30% to 20%. When the Royal Bank’s appraiser shows up at the property, they know it’s being used as a student rental; no need to try to pull the wool over their eyes or lie about what you’re going to be using it for- which by the way is really “mortgage fraud”, but that’s another subject!

Insurance:

Also, make sure your insurance company knows that the property they’re insuring is a Student Rental. Just like banks, many companies will not insure these properties. If you experience a loss, you may face issues making a claim.

Summary

So, if you’re purchasing a Student rental keep in mind that the City “usually” doesn’t have a problem if the property contains eight habitable rooms and houses 6 students. If you’re creating more living space, make sure you obtain a building permit. The City also “usually” doesn’t have a problem if you have one lease on the property, even though there may be 6 individuals signing on the lease. And lastly, if you need a mortgage, DO NOT try to pull the wool over the eyes of your financial institution. Ask them straight up if they will finance a student rental- if they don’t, contact Katie Morrison, Mortgage Specialist for the Royal Bank in Hamilton.

 

 

 

 

 

 

 

 

 

 

Creating legal Hamilton rental units

Since 2008, the City of Hamilton has volleyed around the idea of licensing residential rental units in buildings that contain 1-6 units. In September 2014 the City tabled it’s draft Licensing By-Law until they were able to get feedback from a task force of a stakeholders and concerned Councillors. The task force started to meet in late 2015 and discussions continue. Hamilton has a shortage of good affordable housing options. The creation of legal rental units in Hamilton is a win/win.

Chances are if you’re reading this you’ve got one or you’re thinking of buying one- an illegal duplex or triplex aka two or three family home in Hamilton. If you already own one you may be losing sleep thinking about the illegal status of your investment. If you’re thinking about buying one, you may be weighing the pro’s and con’s of handing over hard cold cash for something that’s not legal and gambling with your investment dollars. Perhaps you’re trying to figure out if you can even make it legal and what it’s going to cost.

6  Important things you’ll need to know, do or get

1) What is the current City of Hamilton recognized use.

You’ll need to order a Zoning Verification Certificate. Two family: Cost: $111 and you get it in 10 days or $167 for express 2 day service. Three or Four Family: $227 & $344 respectively.

2) Do you qualify for a Section 19 Conversion?

  • Minimum lot size of 270 square meters or 2906 square feet.
  • Minimum unit size: 699 square feet
  • Parking: cannot use more than 50% of your front yard for parking even if it’s already being used as parking. Currently Hamilton requires 2.7m x 6 m for a parking spot. (8.85827 ft x 19.685 ft) 2 front parking spaces will require 17.7 feet. Since parking can only be 50% of front lawns, a property would  require a minimum of 35.4 feet frontage. Anything less will require Committee of Adjustment approval and that’s not a guaranteed process. (Toronto’s parking requirement is 2.6m x 5.6 (8.53 ft x 18.37 ft) meaning 2 front parking spaces would require a total of 17.06 feet. Under Toronto’s Zoning By-law, 2 parking spots on a 35′ lot would not require Committee of Adjustment approval)
  • Parking cannot be tandem. Rear parking is permitted.

3) Drawings showing the units you’re creating (or the unit(s) that are already there)

  • Architectural Drawings (may be required)
  • Floor plans for each floor
  • Structural Drawings (cross section/materials)
  • Electrical Drawings
  • HVAC Drawings
  • Survey or Plot Plan drawn to scale showing all structures and lot lines.

City of Hamilton : Understanding Building Permits and Zoning Verification Brochure

4) Obtain a Building Permit

If you’re lucky enough to meet all the requirements of a Section 19 conversion, you’ll be able to take all of your drawings and Building Permit Application to the Building Department at Hamilton City Hall. Tip: Save time by calling the Building Department in advance to set up an appointment.  If you do not meet ALL of the requirements for a Section 19 conversion, you will be directed to attempt to obtain a minor variance from the Committee of Adjustment. (note the key word here is “attempt”)

5) Patience, knowledge and money.

This is not a cheap, quick nor guaranteed process. Being super prepared and educated in the process can save time and money. Over the past year, the City of Hamilton has come a long way in providing information to property owners looking to legalize or create additional living units in their buildings.

6) Is it going to be worth it?

For the answer to this question, you’re best to consult a local Realtor® to find out if the expense incurred to create and/or attempt to legalize an additional unit will add the expected value to the property.


 

FAQ

Question: What is a Habitable Room?

Answer:

Hamilton Zoning By-Law definition (Page 2-34) : “Habitable Room means any room of a residential building or an institutional building, used or capable of being used by one or more persons for living, eating or sleeping, or as a kitchen serving a dwelling unit; but does not include a bathroom, water-closet compartment, laundry, serving or storage pantry, corridor or other space not for use frequently or during extended periods. (9451/61) (08-228) 

Hamilton Property Standards By-Law definition (Page 4) : “habitable room” means a bedroom, living room, dining room, kitchen, family room, recreation room, basement, bath or shower room, toilet room, laundry room and any other room or space in a dwelling or dwelling unit used for living, eating or sleeping

Question: How high does a basement have to be to get a building permit to create or legalize a “habitable” room?

Answer:

Room heights are covered in the City of Hamilton Property Standards By-Law

OCCUPANCY STANDARDS for a Habitable Room: Section 34(2) Page 21

Height Requirements for Living room, dining room, kitchen & bedrooms

  • 1.9 meters (74.5”) over the required floor area and in any location that would normally be used as a means of egress; or
  • 2 meters (78”) over at least 50% of required floor area. Nothing under 1.4 m is considered in square footage measurements.

Question: Can you convert a “legal non-conforming two family home” into a “legal three family home” by adding a unit under Section 19?

Answer: The simple answer is “NO”. As a rule, a “non conforming use” does not have the requirements to be considered for “legal two family use” nor has it obtained legal two family status under Section 19. To continue with a legal non conforming use, there’s a requirement that the property owner is able to prove that the property has had been continuously used as the non-conforming use since it obtained the “legal non-conforming” status. In most cases in Hamilton, this will go back to the 1950’s.

The property is “legal non-conforming” for a reason. The City recognizes the fact that the property does not meet the Zoning By-law and have authorized its use at some point in history: lot size, parking and zoning are the most popular reasons why it never became a “legal two family”. Once you go to apply for a change of use to a three family home, you’ll need to meet all the requirements under the regular three family zoning in the current By-law and cannot use Section 19 for this type of conversion. The City will treat it as if it’s going from single family to three family use. At the end of the day, you may still have a hard time getting it converted to a “Legal two family home” under Section 19.  You should retain the services of a professional.

Question:

The assessment report from MPAC shows it as a duplex- does that not mean anything?

Answer:

NO- it means absolutely nothing in the eyes of the City. MPAC assessment reports are simply what MPAC uses to determine what mill rate will be applied to the property. This is one of the biggest mistakes I see people make- home owners, buyers and real estate colleagues. The only way to find out the legal use of the property is by obtaining a Zoning Verification Certificate. 

Question: 

What’s the worse thing that can happen to me if I own something that’s not legal?

Answer:

If you own a property that is not in line with the City’s recognized use you can run into issues on more than one front. Tenants and neighbours may complain to the City about your property or you may get caught up in one of the neighbourhood blitzes that the City of Hamilton By-law Enforcement team conduct. If the City does not recognize the use, you’ll have a choice- either convert it back to the legal use, which may involve trying to evict a tenant, or try to convert it under Section 19. The City may proceed to take legal action against you for a Zoning By-law infraction.

Also, insurance companies and financial institutions are becoming a lot more concerned about the legal status of income properties.


 *****When asked about the implications of the April/15 By-law change allowing development of cellars, I received the following interpretation from the “Open for Business” department at City Hall.

“The result in the revisions are that basements and cellars are to be treated the same in the Hamilton zoning by-law and the Ontario Building Code will determine if a conversion is to be permitted.”

Something really sticks out here- the reference to the Ontario Building Code and not the City of Hamilton’s Building Code. In the case of ceiling heights, the Ontario Building Code is actually more stringent.


Notes:

1. In April 2015, Hamilton City Council approved a zoning bylaw amendment whereby cellars and basements would be treated the same and the Ontario Building Code would be used to determine if a conversion is possible.  As a result, cellars may now be used in square footage calculations for living units subject to the ability to obtain a building permit. City of Hamilton Council Meeting

2. Section 19 Conversions- City of Hamilton Zoning By-Law– Page 306


Window requirements for bedrooms and other living areas fall under the Ontario Building Code. Following excerpt taken from Page 475 of the Ontario Building Code

Ceiling HeightsOntario Building Code– page 470


Donna Bacher, Broker, with Royal LePage State Realty Brokerage has been representing Buyers and Sellers in the Hamilton area since 1983. The information provided in this article is for information purposes only and should not be considered a legal opinion. Donna has been involved with the Hamilton Rental Licensing debate and affordable housing issues in the City of Hamilton since 2008. Even though all efforts have been made to make sure the information provided is accurate as of the date of this article, the writer does not guarantee that rules, policies and By-laws have not been changed by the City of Hamilton or Province of Ontario. If you are interested in creating additional units or legalizing existing units, please consult a Designer/Architect who is licensed in the City of Hamilton to explore your options.

Secondary Suite Requirements in Toronto

Countertops add value

the value of quality countertops

Quality countertops are definitely not a fad

For well over a decade, homebuyers have been showing their love for high end countertops.  When you consider that many homeowners don’t start thinking about spending money on updates and upgrades until it’s time to put up a “For Sale” sign, it shouldn’t be a surprise that one question homeowners frequently ask is  “should we put in granite countertops?”

Can a countertop add value?

That depends on the material. Standard ones, the kind you’ll find in cookie cutter new home construction and on the shelves at your local Home Depot or Lowes are laminate- a composite material covered in a decorative paper and melamine coating. They’re definitely at their prime during the first 5 years of their life (or until someone forgets what a cutting board is for) and are prone to nicks, cuts and burns by regular use or accident. With careful use, they can look great for decades but very few make it through a growing family without taking a hit or two. Even a new laminate counter many not add the value you would expect since it’s the bare minimum that buyers expect. Solid surface and stone countertop options are considered to be definite upgrades and tend to add value because their function and lifespan are so appealing to Buyers.

An alternative to a full kitchen reno

Most homeowners dread tackling kitchen renovations. The thoughts of spending tens of thousands of dollars and living without a functioning kitchen for a week or two can be overwhelming-emotionally and financially. The good news is that it may take you longer to select a new countertop than it will take to have it installed. Just like other renovation projects, the more prepared you are the better. Perhaps that new granite counter will be best served with a new under mount sink and that sink will probably be best served with a new faucet and maybe, that faucet is going to need new plumbing. You may want to accent your new countertop with new back splash and perhaps even a new slide-in range. The key is to make a plan and set a budget, keeping in mind that the end result will be well worth it.

Buyers love quality countertops

There’s absolutely no doubt in this Realtors® mind that decor and staging definitely helps sell a home, but one of the most fascinating trends I’ve seen over the past decade in the Hamilton real estate market, is Buyer attraction to quality countertops like quartz, granite and brand names like Corian and Caesarstone. And, it doesn’t matter what the price range of the home is, buyers seem to be willing to look past other issues when the kitchen and baths have awesome countertops. At first I thought it was a whole kitchen thing happening, but I don’t believe that’s the case. Seems like refurbished, painted or even original cabinetry take on a whole new life once they’re capped with a high quality counter.

Enjoy your countertop investment

At $60-$90 a square foot, decking your kitchen out with quartz, granite or one of the other materials may seem to be an expensive option especially if you’re going to be moving out of the house in the near future. But then again- why wait until you’re moving? Select the right product and it’ll look just as good 5 years from now as it does the day you have it installed. The true value may be in you getting to enjoy your investment.

Countertops & Technology

If you’re going to start shopping for counters make sure you check out Dupont’s charging stations- one of the solid surface technologies we’re bound to see more of in the future.

Speaking of HGTV- their 13 favourite countertop materials

Check out the difference in countertop materials at Popular Mechanics!

 

 

 

 

 

 

The Illusive Perfect House

It starts with a little spark of desire. Perhaps it get’s bantered back and forth around the dinner table as you squeeze the high chair into an already crowded space. Maybe, it’s the realization that you continuously clean a couple thousand square feet of house that you never really use. Or, perhaps you’ve decided that it’s time to move out of your cramped apartment and embark on home ownership. Regardless why, once the desire to move gets sparked, how quickly you find yourself stacking moving boxes depends on how quickly you can align your desires and budget to a house you can call home.

If your home is already sold and you have a closing date looming, or if your current house is causing you grief because it’s either too big or too small, finding another place to call home quickly becomes a top priority. To you, the perfect house is one that is simply going to give you a better quality of life. You go full steam ahead, find a home that fits in your budget and as long as the pro’s outweighs the con’s, you’re filling out the new address notifications pretty fast.

But, what if you’re a Buyer who doesn’t really have an urgent need to move? You’re quite happy living in your spacious apartment or parents’ basement. Life is good and even though it would be a notch in the success belt to buy a home, your standards are high and you’re looking for a house just like the one on “8 pm HGTV Street”. It’s got absolutely everything you need, want and deserve-hardwood floors, custom window treatments, top of the line appliances and large, spacious rooms…complete with closet organizers. It also has updated heating, wiring and plumbing. And…face it, if there’s one thing you’re not going to do is buy a lemon!! After all, you’ve never miss an episode of Holmes on Homes, and you’re more than aware of the “money pits” that unsuspecting homeowners find themselves living in everyday- it’s simply not going to happen to you.

The problem is that Buyers looking for the “Perfect House” may be looking for quite a while. It may be months, years…or even forever. Houses, regardless how beautiful, start aging from the day they are built. Mother Nature whips them from the exterior and human lifestyles wear them down from inside. Windows, furnaces, roofs and everything else are only really new for one day and after that, they start down the road toward being outdated, worn out and obsolete.

The belief that you will eventually find the “Perfect House” may have you thinking that you will save thousands of dollars and a life of grief because you have expectations and standards you need met. This mindset is noble, but can end up costing you thousands of dollars because like everything else in your life, the cost of housing constantly creeps up by inflation. The house that you looked at last year for $200,000 may be worth $220,000 today. Once you’re in the market, these increases won’t affect you as much. The value of your home will go up as well!

Homes are an investment with an extra bonus-you can live in them. Does a house need new thermo-pane windows when the old wood sash ones have been well maintained, still open and close and have good storms in place? Does a house need a new kitchen when there’s a perfectly fine, yet older kitchen in place? Does a house always need a new bath? No, no, no. These desires are based on consumer marketing. You don’t need them to create the perfect home. What you do need is to make sure that you will not be behind the financial 8-ball days, months or a year or so down the road. The electrical, plumbing and heating/cooling systems need to be current and safe. The foundation and roof need to be sound. A problem in these areas can cost you thousands of dollars that you haven’t budgeted for and may not add any value to your home because they’re maintenance items.

Want to see “cosmetic marketing” in action? Take a trip to a “new home” site. The model home is always decked out with all the bells and whistles. That’s what people are mentally buying…but when they actually buy, many discover that their budget doesn’t support the hardwood floors thru-out, the solid wood stair case and the upgraded kitchen. They end up buying what they can afford: carpeting, laminate counters and lower end kitchen cabinets.

The key to finding the perfect home is truly understanding your needs, matching those with your budget and working within a 3-6 month time frame.

Remember, you make the home. It will look like you and your style as soon as you move in, so don’t get too caught up in the decor of the homes you’re looking at.

Decide how much you can comfortably afford for the next 5 years and get pre-approved for a mortgage.

Find a home in an area that you like, at a price you can afford.

Make sure that it has a good roof, foundation, plumbing and wiring. (If it doesn’t, ask your mortgage advisor about getting a house plus improvement mortgage)

Home ownership is the foundation of financial stability. It’s the largest investment most people make in their lifetime. Forget about finding the perfect home…just focus on making the financially sensible house your own perfect “Home Sweet Home”.