Condo Assignments

Following a call with a client yesterday discussing assignments at Soba Condo Ottawa and Hideaway Condo Ottawa, I thought it would be helpful for readers and clients if I put together a few of my thoughts surrounding condo assignments and how HST can affect condo assignments and pre-construction purchases in general. Understanding the following will assist in underwriting your decision to purchase pre-construction and assist in setting up the purchase in the most profitable way.

For the sake of this discussion, units can be purchased in four ways. Each of which carries differing HST implications. The four options are:

  1. As an owner-occupied unit
  2. As a rental unit
  3. As an assignment
  4. As a flip

When completing the transaction via Option 1 – The statutory declaration at the time of closing will be owner-occupied. With this option, the property has zero HST implications associated to the purchase under the pre-construction purchase contract. Meaning the contract price is the full purchase price. This transaction will only be subject to standard closing adjustments.

When completing the transaction via Option 2 – The statutory declaration at the time of closing will be a rental property. With this option, the federal government has a program called the Rental Rebate Program, which in turn covers 98-99% of the HST that would have been included in Option 1. The purpose of the rebate is to encourage the addition of rental units to the market.

When completing the transaction via Option 3 – There will be no statutory declaration at the time of closing. This is because a title transfer closing never takes place. With this, the HST implications will be a consideration of the end Buyer that is purchasing the agreement. Other implications via capital gains and/or losses or other are another story.

When completing the transaction via Option 4 – To me, this signals a RED FLAG, basically this is a steer clear option. The reasoning is that it is difficult to pass the test of owner-occupied or rental while never occupying or renting the unit and subsequently turning over the title quickly following the official unit title transfer date. This can cause any included in purchase price HST or HST rebates to be called back or voided.

Condo Assignments Summary

If the intent is to flip a pre-construction condo, this will be best done via option 3 as an assignment prior to registration and unit title transfer. The only other way I would suggest entertaining the ‘flip’ option would be in the event a unit was occupied or intended to be occupied during the interim period but following unit title transfer, for some believable reason you have a change of heart, subsequently selling shortly after registration. This move may result in red flags as the title of the condo will have changed hands quickly and an audit will be likely.

Alternatively, and for the risk adverse, the best fall back strategy when talking condo assignments and understanding HST Implications surrounding pre-construction purchases, my opinion is to earmark the condo at the onset as a rental for at least one year, leaving no possibility of HST impacts outside of the Rental Rebate Program. This will lead you to sell the unit down the road while tenanted. While tenanted the unit can carry and cover. At this point, you can sit on your hands and wait the completion of the lease term. When the lease term approaches you can market the property for sale while it is lived in, collecting rent and carrying its own weight. Keep in mind finding a tenant at this point is key. Rents are great, but having a tenant with nice furniture and artwork is even better as their furniture will act as free staging 😉

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Investors are Entering the Student Condo Market

Investors across the country have taken note of student cities and have begun purchasing condos and renting them to students. With the number of enrolled students across Canada on the rise and the cost of an education reaching new heights, investors should definitely consider this strategy of entering the student condo market.

Since 2000, the number of enrolled students across Canada has grown by 44%, reaching more than a million, according to the Association of Universities and Colleges of Canada.  The cost of an education in Canada is also on the rise. Investors catering to this market are aware that they are renting not to the poor student, but effectively, to their wealthy parents. These are parents who are more and more prepared to pay a premium to ensure that nothing gets in the way of their children’s education. In fact, the key to building a profitable and manageable student-housing portfolio lies at the high end of the student condo market.  These property types are a great option to both student and their parents for a number of reasons.

Security

Student condos and purpose-built apartment buildings have cameras in all common areas, as well as onsite staff, which gives parents peace of mind.  They also have security systems to control entry, as well as 24/7 video monitoring that protects the premises.

Professional Property Management

Managing 18 and 19-year-olds who are enjoying their first taste of freedom can give Landlords a headache worse than a morning-after hangover.  But you can eliminate this burden by having a professional property management firm handle your rental property on your behalf.

Maintenance

All the maintenance is handled by the condo, including snow removal, gardening, and cleaning common areas.

Preferred by the City

Condos are a preferred structure for municipalities.  Compared to illegal rooming houses, this structure ensures the building isn’t at risk of being shut down.

Fewer Rooms

Condos typically have fewer rooms than student houses.  Fewer rooms mean fewer students per unit and a lower chance that damage and Tenant issues will arise.  Condos are more desirable than larger houses with more distractions.

 

Pre-construction condos are one of the best ways to invest in the student condo market.  Purchased several years before students apply to schools, investors aren’t competing with parents on resale properties.  They often come with full rental guarantees and free or low-cost property management, making them a hands-off investment option.

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Five common mistakes home buyers make to watch out

Buyers are often so focused on finding the desired property within their budget that they make unnecessary and costly mistakes.  Here are five common mistakes home buyers make to watch out for:

1. Not Hiring a Qualified Home Inspector

Just like any other profession – no two Home Inspectors are created equal.  Always be sure to research a variety of professionals.  Find out how they report back results and determine their level of knowledge with the type of home they are inspecting.  You want someone who will take detailed notes and pictures, provide guidance, and take the time to explain the various concerns/benefits of the home.

2. Ignoring the Value of the Neighbourhood

The neighbourhood in which a home is located in is often ignored.  The focus is usually on the features of the home, but what about access to transit, schools, shops, and highways?  How do the other homeowners maintain their properties?  Is the area in a state of growth, stability, or decline?  Does the house conform to the general area?  Is it the worst or best house on the street?  All of these factors can impact not only the current market value but its anticipated future value.

3. Getting Caught up in Multiple-Offer Situations

A number of local real estate markets across Canada are experiencing high buyer demand with relative lack of active listings.  Typically, this trend will push home prices upwards.  This is often compounded by homes that are being priced below market value, and sellers not accepting offers until a specific date.  The purpose of these selling strategies in a hot sellers’ market is to encourage multiple-offer situations.  All too often, the end result is a buyer paying too much for a home.  As a homebuyer, be prepared to walk away from such a situation.  Allowing your emotions to rule your thinking may end up costing you more money than you should be otherwise paying for a home.

4. Having Search Criteria that is too Broad

Home buying should involve the process of elimination, not addition.  It’s normal to begin the process with a fairly broad set of criteria in terms of home features, location and cost.  Once you’ve had the chance to view a couple of homes and build your knowledge base, then it’s time to make some decisions.  The more focused and efficient your search is, the more you’re likely to find the home you actually want.  When search criteria are too broad, we tend to get overwhelmed and have difficulty making meaningful decisions.

5. Not Hiring a Professional REALTOR®

As in the case with every professional service provider, not all REALTORS® are made the same.  Do your homework.  Review REALTOR® websites, ask friends and family and interview multiple Real Estate Sales, Professionals.  A referral to a reputable REALTOR® can be a great source, but just because your good friend has a parent in the business doesn’t mean they’re a good fit for you.

 

Keep these five common mistakes home buyers make in mind when you are looking for your next home.

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Market Update
Apr
14

Market Watch

Members of the Ottawa Real Estate Board sold 853 residential properties in February 2015 through the Board’s Multiple Listing Service® system, compared with 868 in February 2014, a decrease of 1.7%. In this February 2015 market update, the five-year average for February sales is 914.

“Even though we had one of the coldest months on record, resales for the month of February are only slightly down from last year. Looking at residential properties alone, 13 more properties were sold this February over last February – a 1.9% increase; while the condo market, on the other hand, has been a little slower to gain momentum. That being said, both residential and condo sales are up a total of 226 combined units since January.” – David Oikle, President of the Ottawa Real Estate Board

February’s market update noted 168 sales in the condominium property class and 685 in the residential property class. The average sale price of residential properties, including condominiums, sold in February in the Ottawa area was $358,206, an increase of 1.3% over February 2014. The average sale price for a condominium-class property was $267,880, an increase of 3.8% over February 2014. The average sale price of a residential-class property was $380,358, a decrease of 0.3% over February 2014.

The hottest segments of the Ottawa market update in February were sales between $300,000 to $400,000, followed by the $200,000 to $300,000 range, and $400,000 to $500,000 range. These price ranges continue to have the highest concentration of properties sold, while residential two-storey homes and bungalows continue to have the highest concentration of buyers.

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The Do's and Don'ts of Selling Your Home

Now that the Spring selling season is fast approaching it is important to consider these do’s and don’ts when selling your home.  First impressions are everything when it comes to selling your home. Most people make up their mind on whether or not they like a house within mere minutes of stepping foot inside. That is why it is crucial to make sure that you, and your home, put your best foot forward.

Don’t overdo it on the heat

People tend to overcompensate when they know that potential buyers are coming to look at their home in the winter time. They crank up the heat to make the place warm and welcoming – but that can backfire. The air will be dry and stale, plus buyers will probably be too warm, as they will be bundled up in coats. To solve this problem, keep the heat at a reasonable setting and have your humidifier set between 40-60 percent.

Do consider curb appeal

Curb appeal is a huge draw for buyers, even in February and March.  Consider creating a winter planter with cold-weather plants like winterberry, holly or noble fir. At the very least, invest in a new doormat and keep the driveway clear of ice and snow. Warm lights glowing in the window will also be welcoming.

Don’t expect people to use their imagination

If you have a crazy colour choice in one or more of your rooms, you might think that people will look past this, but that can prove difficult for buyers. Bright paint and wacky décor choices will make them uneasy, no matter how beautiful your home. Paint over wild colours and put away any crazy items that might garner a laugh or a raised eyebrow.

Do invest in updates that matter

People will pay top dollar for homes with updated kitchens and bathrooms. If you can make even the barest improvements to these rooms, you will see a huge return. Update the yellowing tile in the bathroom or invest in new cabinetry. At the very least, purchase new shower curtains, bath rugs, and the like.

Do keep it bright

Open all curtains and turn on all the lights, even if it is the afternoon. Replace all dead light bulbs. Crack open doors to the pantry or laundry room so people won’t be afraid to peek inside. And tidy up in forgotten places like inside the fridge or oven.  People will be looking in there, and if they see mould or burnt food, they will be very turned off.

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Parking Spots are Falling out of Favor with Many Condo Buyers

Parking spots are falling out of favour with many condo Buyers, thanks to the proliferation of car-sharing services, a greater emphasis on transit and walkability by city dwellers.

Louie Santaguida, president and chief executive of Stanton Renaissance, had planned to build up to four levels of underground parking at his On The GO Mimico project, a condo development under construction in the western part of Toronto. However, Santaguida says most buyers snatching up the units pre-construction aren’t keen to shell out for parking spots, given that one of the building’s selling points is that it’s situated right next to a GO Train Station that can transport residents downtown in minutes.

Santaguida is planning to apply to the city to have the building’s parking spots requirement reduced.

“We’re hearing more and more about developments that are coming up along good transit nodes that are actually asking for leniency around no parking spots, or minimal parking spots,” he said. “The trend is moving away from vehicle ownership, especially in urban centres like downtown Hamilton, downtown Montreal, downtown Toronto and downtown Vancouver. Because there’s adequate infrastructure to get you where you need to go on a timely basis and quite frankly, in most cases, sooner than you can using a vehicle.” – Louie Santaguida

Vancouver developer Jon Stovell, president of Reliance Properties, says the City of Vancouver has been encouraging developers to reduce the amount of parking that they build, in order to reduce traffic congestion and encourage other forms of transportation including walking, biking and public transit.

“The parking ratios have been going down steadily for a long time, and they’re getting to some really low levels now.” – Jon Stovell

He also noted that developers used to build up to two parking stalls per unit. Now, many are only building one parking stall for every two, condominium units.

In Toronto, Tribute Communities has erected a 42-storey condo tower with no permanent resident parking — just nine spots reserved for a car-share service. Knightsbridge Homes is proposing a similar development in Calgary.

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Gotham Condos Ottawa is Move-in Ready

The countdown to occupancy in on!

Gotham Condos Ottawa is move-in ready for even the pickiest of condo connoisseurs. Built by Lamb Developments, the highly anticipated Gotham Condo Ottawa development is set to occupy this coming April 2015. I had the pleasure to walk through the project last week (March 15th, 2015) and the project is certainly everything it was cracked up to be after all the hype three years ago when the building sales launched.

The attention to detail throughout this building is without a doubt, pound for pound the best in the city. With the prevalence of builders consistently fighting to keep costs down, it is a breath of fresh air to see all of the extras that the Gotham Condo Ottawa is offering. From the subtle accents, elevator ceiling heights of 10+ft, gas appliances, tinted exterior glass with a bluish hue, gas lines on all of the balconies and terraces, solid core doors, details in the casings and door trim, to the in your face 10ft glass doors that usher you into the building, you will have no choice but to appreciate that Ottawa’s condo scene is growing up.

In terms of availability, the building is mostly sold out, but units will come up for resale in the coming years. The select units that remain unsold are a combination of builder units and assignment units. These unit are set to be ready to view and/or occupy in the next few weeks. My Coles Notes to keep in mind if you are considering a purchase in this building:

  1. The 4th floor offers an extra foot of ceiling height; and
  2. Contact us for more information 😉

Gotham Condos Ottawa is move-in ready and priced from the low $200k’s up to the Mid $600k’s. The floor plans offer from 400 sq ft to over 1.400 sq ft of living space, plus balconies and/or terraces.

The photos attached to this blog feature a couple completed units that I walked through as well as the buildings party room with outdoor terrace. Gotham Condos Ottawa is move-in ready, so what are you waiting for?

Check back in for an update!

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Hideaway at Central

Hideaway Condo Ottawa or ‘Hideaway at Central’ is now gearing up for final closing and title transfers. This is when the units are officially transferred from the Developer to the Purchaser. The latest updates from the Developer are estimating a registration and final closing date of April 25th, 2015. Hideaway Condo Ottawa has been in interim closing since November 2014. Interim closing is the time in between when occupants begin moving into their units and when they officially close on the unit (title transfer date). During this time the soon to be Owners pay the Developer a fee for access to their units. This fee is a sort of rent and is comprised of property tax, interest, and condo fees. This fee is not credited back to the Purchaser on title transfer date.

In case you are not familiar, Hideaway at Central is the final part of a three-phase condominium building developed by Urban Capital in Ottawa, ON Canada. The building is jam-packed with amenities and located in the trendy Centretown neighbourhood. The amenities include an outdoor pool with cabanas, a large BBQ at the terrace, a gym, media room, concierge and a party room. Hideaway at Central is the third phase of the Central condominium development in Ottawa. Central Phase 1 Condo Ottawa is freestanding building between Gladstone Ave and McLeod St. Just across McLeod St, Central Phase 2 Condo Ottawa and Hideaway Condo Ottawa stand. Central Phase 2 Condo Ottawa and Hideaway Condo Ottawa are connected.  Despite the buildings being separate and unique condo corporations, Central Phase 2 Condo Ottawa and Hideaway Condo Ottawa do share a few common elements. Namely the outdoor swimming pool and the common terrace. These shared elements are documented in the condo bylaws.

Units are priced between $220,000 and $420,000 and typically rent in the range of $1400 – $2300 per month. In the Hideaway Condo Ottawa, the smallest one-bedroom floor plans are branded as the ‘Blue Palace’ units at 410 sq ft. One of the more mid-size and likely the most popular floor plans are the ‘Lalu’ units at 609 sq ft.

There are always units for sale and also for rent popping up between these three buildings. If you or anyone you know is interested in these developments, please reach out to us!

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Opportunities in Understanding Zoning in the City of Ottawa

Opportunities lurk… with this, there are many Opportunities in Understanding Zoning in the City of Ottawa.  As part of the city of Ottawa’s attempts to re-intensify (increase density) in the city centre, they published new zoning by laws and regulations in 2011. These bylaws can drastically affect the highest and best use of properties. Hence, knowing and understanding these by laws opens doors to the possibility of extracting value where it was not before, or others do not know exists.

Residential zones in our city are divided into 4 main zones. R1, R2, R3, & R4. Each of these zones have sub-zones that further classify the usability of the subject property that you may be interested in.

City of Ottawa R3 Zoning

Click here to learn more about my favourite money-making zone – R3. This Zone is not overly complex, the barriers to entry are relatively achievable, and scope of understanding/proficiency needed to navigate profitably is definitely attainable. As you read through the zone, you will find yourself looking at a chart that outlines the available uses of a specific parcel, as well as lot area requirements, minimum frontage requirements, set back requirements, etc.

At a glance, this may seem like numbers on a page. If you look closer and really try to absorb this information you may find yourself (as I did) driving up and down streets in mature R3 zones. You will be looking for large side yards that may be severable and sellable, side by side duplex’s that may be able to be subdivided and sold separately, the list goes on and on.

In summary, opportunities are out there. Understanding zoning regulations will definitely help with making smart real estate investments. Even if you are just purchasing your primary residence, understanding that there may be fall back development potential can turn out to be a huge financial gain. Increased knowledge reduces risks, and I would say, understanding zoning is a must.

As always, feel free to shoot me any questions you may have, whether about opportunities in understanding zoning in the City of Ottawa, condos in Ottawa, or anything real estate.

Jeff

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Residential Negotiations

Deal-making is at the center of a Real Estate Professionals job every day when taking part in residential negotiations. With this, there have been noticeable similarities and common denominators present in the majority of residential properties that our Buyers have picked up at what can be viewed as a “steal”.

The three most critical pieces of information that need to be understood prior to entering into nonemotional residential negotiations are:

  1. Don’t even consider a negotiation without this piece of info: “How much did the seller pay for the property and when did they buy it?” Thinking rationally, it should not matter what the Seller bought a property for because in a perfect world market price would find itself. But since the world isn’t perfect, if you are a deal seeker and you combine a property that was purchased 10 years ago for $200k that is now worth $315k with a Seller that is motivated a deal COULD be on the table at $300k or north. The thought of cashing out or moving on, combined with a nice profit, will typically help facilitate the transaction. Versus the exact same property, except the Seller just purchased it last year for $298k and would be taking a loss at $300k. The second Seller may be more inclined to sit tight and wait for $315k to cover their loses.
  2. How many days has the property been on the market for? This element is pretty obvious – Days on market combined with motivating mitigating factors can often lead to a low ball offer being looked at more seriously than if the property had been on the market for two weeks.
  3. Has the Seller purchased another property yet? Or any other motivating factors for them to move? The thought of carrying two properties can lead consumers to act irrationally. If possible, look into this. Even if the Seller holds their hand close, have your Agent test their position with the old ‘offer and walk’ technique. This approach will likely lead to a call back in a few days and a possible deal!

Deals are in the details!

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