6 Ways to Pay for Unexpected Home Repairs

Emergency home repairs always pop up at the most inconvenient times – and almost always when you’re already in a financial bind. Coming up with the cash to pay for these repairs can feel daunting, but there are ways to cover to cost of these unexpected repairs. Here’s how:

1. Government Loan Programs

The government offers loans to assist with home repairs. The Limited 203(k) and FHA 203(k) allow borrowers to refinance or purchase property with additional funds for repairs and upgrades.

The Title I Property Improvement Loan program, which is offered by the Department of Housing and Urban Development, can also help with repairs. These loans are FHA-insured and issued by lenders. They’re a great option for homeowners that have little equity in their homes. Loan funds can be used for major repairs or even appliances and other items that will make the home “more livable and useful.”

The U.S. Department of Agriculture also offers a program that can assist with home repairs. The USDA Section 504 Home Repair program assists homeowners with very low incomes in rural areas improve, repair and modernize their homes. Grants are available to homeowners aged 62 and older.

2. Homeowners Insurance Claim

Some homeowner insurance policies also include repair emergencies. Check your policy to see if your insurer offers this coverage.

If your home’s roof, for example, is damaged by a recent storm, the cost to repair or replace it may be partially or completely covered.

3. Use Service Coupons and Financing

If you don’t qualify for a loan or grant program, shop around local service providers to see if any offer coupons or financing. If it’s a major repair, you can often find local companies that offer to finance the work through a third-party lender.

Most providers will have coupons that help reduce the cost of repairs and services. A discount may be all that you need to make the service more affordable.

4. HELOC

A home equity line of credit (HELOC) used to be one of the most popular ways homeowners covered the cost of home repairs. These lines of credit allow you to tap into your home’s equity to cover major repairs. Just keep in mind that the loan is backed by your home, so make sure that you can afford to take out this line of credit.

5. Disaster Relief

If the repair is disaster-related, you may be able to get assistance from relief organizations like the Federal Emergency Management Agency (FEMA) or the Red Cross. FEMA will often cover the cost of emergency repairs that homeowner’s insurance policies won’t cover.

These funds are only given for major repairs to restore safe and sanitary conditions.

6. Credit Card

A credit card may be the first thing you consider using when you need to cover emergency repairs. While credit can certainly help get you out of a bind, it should be considered as a last resort. Your available credit may not be enough to get the job done, and a high interest rate can have you paying off the repair for the next decade – or two.

3 Things to Look at When You’re House Hunting

House hunting can be an exciting experience, but it’s also one of the most stressful things you’ll do. After all, buying a property isn’t something you do every other week – it’s a huge investment and something you’ll have to live with for years to come. If you’re concerned that you don’t know enough about the real-estate market to make an informed decision going forward, you’ve come to the right place. Here we’re going to look at a few of the things you need to look at when you’re house hunting, so you don’t get stuck on the superficial details like the color of the paint, or the furniture in your living room.

Location

Location is probably the most important thing you can examine when it comes to making real estate choices. After all, while you can change the way your home is decorated, and you can add extra rooms if necessary, you can’t just pick your house up and move it to another part of Canada if you get tired of the view. Knowing exactly where you want to live in advance will help you to narrow down your choices a lot faster, as you’ll be able to browse listings of Toronto condos by neighborhoods, rather than just visiting every home in your price range. Remember to think about how close your new home will be to work, and any other amenities you need, like a school for the kids!

Size and Floorplan

Finding the ideal home can sometimes feel like a bit of a balancing act. You need to find a property that fits with your budget, but you also need something that’s big enough both for your current family, and the family you plan on having in the future. Think as practically as you can about things like size and space. For instance, you probably don’t need two bathrooms if you live alone. However, you can’t get by with two bedrooms if you have four kids. At the same time, don’t get carried away with the dream of having a bigger home. While a larger space does give you more room to play with, you will have to pay more for things like electricity, heating, and of course, your overall mortgage expenses.

Resale Value

Finally, even if you adore your new home and you’re planning on staying in it for as long as possible, there’s a good chance that you will want to sell it someday. With that in mind, it’s important to ensure that your property has plenty of resale value. Consider looking into the amenities being built in the local area that might add additional value to your property. Alternatively, you can also think about asking your real estate agent for insights into what kind of prices other homes have sold for in the area. Remember, buyers often look for plenty of light and plenty of storage when they buy a new home. With that in mind, it’s a good idea to look for as much of these two things as possible when you’re buying your new property. This should increase your chances of a quick sale later on.

 

In-depth tips for beginners in real estate investing

Real estate investing is a niche which is not suitable for everybody because you need to have a specific set of skills in order to reach success. Apart from the fact that you need to master entrepreneurial skills in order to understand exactly how the market works, which investments are advantageous for you or not, and all the principles of finances, you also need to be a motivated person who does not give up when the challenges of the business might come across your way and have the courage to take risks in order to gain more. Real estate investing is a journey with ups and downs depending on the market and you can only succeed if you have all that it takes to find a suitable strategy to overcome any tight situation.

Know the market

First of all, when thinking about investing in real estate, you need to make sure you carefully do your research. If you want to become a successful entrepreneur who gains a lot of money from his or her investments, you need to be aware of the fact that good luck is not enough. All the knowledge and trends of the market, customer behavior, and the niche need to be a language which you understand completely in order to make smart investments which bring you a considerable profit and to avoid making bad investments in properties which will just won’t sell.

Buy properties to rent them

When investing in real estate, you need to be aware of the fact that there will be challenging moments when you will whether not find a good opportunity to invest in and gain more profit or the market trends will decrease the value of the properties which you own. Even if you consider investing in house flipping only, which means buying properties at a smaller price depending on the opportunity you come across with and selling them for a higher one, you need to make sure that you also have a sustainable cash flow. Sometimes, buying and selling properties is not bringing you any monetary advantage because of the mortgage rates, which means that for a while you will avoid making new investments since they do not bring you any profit. For moments like that, you need to have a constant cash flow in order to be able to remain in the market and not lose everything which you have worked so hard for. Any smart and precocious entrepreneur investing in real estate should know the importance of rental properties because they are the most secure way of making money even when the market seems to work against them.  

Work with professionals

If you want to be successful in real estate investing, you need to create a team of professionals to work with. All the people you choose to work with are going to contribute to your success or your failure, so, you need to be extremely careful with the people you choose to collaborate with. From mortgage lender, private lender, real estate broker, real estate closing agent, property inspector to electrician, plumber, and painter, you need to find the best ones in this niche and hire them. Even if the costs of their services might be higher compared with other ones from the market, you should choose to focus on the quality because the good work they do will have a huge influence on your success.

Make smart investments only

Apart from having the necessary knowledge and skills for the niche and market, success in real estate investing is mostly a matter of taking the risk and succeed with good luck. However, taking risks should be done with a strong and carefully planned strategy in the long run. Surely, you cannot foresee everything that can happen in the future with the property which you are planning to invest in because this depends on the trends of the market which are continuously changing. However, there are some things which you need to consider before making an investment which might be a risk. So, you have to make sure you understand the risks before taking them. For example, you have to make sure that before you buy a property for flipping it, you check everything about it in order to avoid being fooled and buy something which will make you waste your money. Make sure the property is in good condition or that the improvements you need to make will not leave you without any profit. Also, you should consider getting an asbestos inspection from a specialist for each property that you buy because it is a hidden problem of the old properties which might bring you problems in the future to sell or rent it. Asbestos is a dangerous and toxic construction material used before which can cause numerous health problems, so the buyers will definitely say no to a property which would put them and their families in danger.

Improve the properties

When buying or renting a property, considering the fact that it is a big investment you make for the long run, each of us wants to make sure there is no damage which might cost us a fortune to fix or to choose a good property which is advantageous from every point of view. You need to understand customer behavior in order to know exactly what they are looking for when buying or renting a property and improve the properties in order to satisfy their needs and expectations.

Have a backup fund for bad days

When investing in real estate, you will definitely have to deal with bad days when the business will not bring you any profit for some time. In order to be ready to deal with those situations without going broke, you need to consider right from the beginning to create a backup fund which will help you go through these bad days and stay on the market.

Build your network

Like any other business, real estate requires you to know the right people in order to get the best opportunities which will bring you a consistent profit and success. Right from the beginning, you need to build your network with professionals who have a strong influence in the real estate niche. So, choose your clients, business partners, and real estate agents wisely.

 

SIX SIGNS YOU HAVE A BAD BUSINESS PARTNER

SIX SIGNS YOU HAVE A BAD BUSINESS PARTNER

I have been in business since I graduated from law school in 1993. My husband and I started our own tiny little law firm and we practiced law for eight years before entering the world of real estate development in 2001. Real estate went well for a dozen years, until I made the mistake of partnering with the wrong guy. That partnership has given me tremendous insights into what makes a bad business partner.

Sign # 1: An Unsavory Past

The first sign that you have a bad business partner is if you find out that your partner has an unsavory past. He associates with criminals and shady characters. He evades tax. He prefers the criminal element. He is comfortable with illegality.

My ex-partner was charged with conspiracy to commit murder along with two accomplices in the early 1990’s. He allegedly tried to hire a hit man to kill a former business partner of his with whom he had a falling out. He was arrested with $16,000 in cash in his sock. Soon thereafter, he was also charged with possession of $2 million of stolen property, including Rolex watches straight from the factory, paintings, and jewelry.

Sign # 2: Loves to Litigate

The second sign that you have a bad business partner is if he loves to litigate. It appears that your partner has sued every person with whom he previously went into business. He believes the courts are the place to resolve disputes.

My ex-partner launched ten lawsuits in the decade before I partnered with him. He sued his employees; he sued his lawyers; he sued his former business partners; he sued his competitors; he sued his wife.

Sign # 3: An Unethical Business

The third sign that you have a bad business partner is if he makes his money offering unethical services. His business provides no lasting value to its clients and customers. He makes money off a service that doesn’t work. He takes advantage of desperate people. He permits unethical behaviour in his business. He sells goods and services that are ineffective.

My ex-partner runs a business that does not work in the long run for the vast majority of his customers. The product has been called dangerous by many in his industry. He had to pay approximately $800,000 to a customer who died using his product.

Sign # 4: Denigrates Those Closest to Them

The fourth sign that you have a bad business partner is if he is prepared to denigrate the people that are closest to him. Rather than treasure his spouse, he puts her down and belittles her. Rather than be loyal to his friends, he talks ill of them behind their backs. Rather than give credit to others, he takes all the credit himself. If someone is prepared to do that to the people he “loves and respects”, imagine what he will do to you.

My ex-partner made derogatory statements about his wife even though he was still with her. He was unable to keep friends because he kept betraying them. He would end a long standing friendship over a few dollars. He didn’t value the people closest to him.

Sign # 5: A Vengeful Personality

The fifth sign that you have a bad business partner is if he demonstrates an overriding desire for retribution. Everything is personal. He doesn’t consider the sensible move or the logical solution. He must punish you for what he perceives you have done to him. And he will lie to accomplish his malign objectives.

My ex-partner refused to sell his half of the business back to me despite an offer that he would receive all of his money back plus a significant profit. He also refused to sell the business privately to maximize its value and ensure everyone was paid back and made a handsome profit. He preferred instead to destroy the value of the business to punish me and to ensure he got his revenge. And he lied to accomplish his objectives.

Sign # 6: No Remorse

The sixth sign that you have a bad business partner is if he shows no remorse. He is never wrong. He is prepared to spend whatever it takes for someone to say that he was right. He will manipulate the process through his high priced advisers for whatever the cost so long as it fulfills his malign objectives. He never wants to have to apologize. He never wants to be wrong. He will pay any price to not have to admit he was mistaken.

My ex-partner hired lawyers, receivers, accountants and private detectives all to try to show the world that he was right and I was wrong. He showed no remorse for destroying our business. He was happy to cause personal damage. He seemed happy to destroy the financial lives of anyone who crossed him. He manipulated the facts with the sole objective of trying to show he was right.

Summary:

Due diligence about your proposed business partner is critically important. Ask his peers about him. Check out his past behaviour. Had I known beforehand about my ex-partner’s past and personality traits, I would like to think I would have chosen differently.

If you are thinking of partnering with someone who demonstrates the above characteristics, RUN AWAY…don’t walk, run! No matter how good the partnership sounds now, it will end badly. If you are already in business with one of them, plan your exit now, and quickly. People like I have described make very bad partners. They will destroy you if you partner with them.

Flipping a house. Cartoon woman in overalls, with construction tools standing in front of a house divided into before and after renovation parts

How to Estimate Repair Costs When Flipping a House

Flipping homes can be a lucrative business, but it can also be a bankrupting business when poor decisions are made. Knowing how to identify a good investment opportunity and accurately estimate the costs of repairs can help you avoid financial ruin.

Here’s how to estimate repair costs when flipping a home.

Home Repairs, General Contractor and Subcontractor Costs

The first thing to consider when estimating repair costs is the home itself. Is the home a serious fixer-upper, or does it only need a few repairs?

Keep in mind that there may be hidden repairs that you won’t know about until after you start digging into the project. We’ve all seen fixer-upper shows on TV where they take a sledgehammer to the wall and find decades-old mold.

Create a budget repair sheet, also known as a cost estimate form. These forms are essentially spreadsheets that will track the repairs needed in different areas of the house. As you walk through the home with your general contractor, make note of the things that need to be repaired.

You may not be able to spot the mold inside of the walls during the walk-through, but a budget repair sheet will allow you to at least estimate the physical repairs.

Material and Labor Costs

Once you have a list of estimated repairs needed for the home, you can begin building a list of materials and estimated costs. Additionally, you need to consider labor costs.

First, let’s look at materials. One way to estimate the cost of materials is to record a high and low price estimate for each item. Once that is complete, add the two totals and divide that number by two to get average cost.

Here are some examples:

  • Paint: High – $1,200; Low – $1,000
  • Doors: High – $400; Low – $200
  • Tile: High – $1,200; Low – $700
  • Carpet: High – $2,500; Low – $2,000
  • Windows: High – $400; Low – $300

On the low end, the total is $4,200 and on the high end, the total is $5,800.  The total comes to $10,000. We’d divide that number by two to get an average of $5,000.

If there are major repairs, such as plumbing work or roof issues, you may need to gather several estimates from local professionals to determine these costs, as the figures can fluctuate wildly. Additionally, as Miranda Home Services explains, you want it fixed quickly at a price you can afford.

Additionally, you’ll need to figure in the contractor’s and subcontractor’s fees. It’s important to remember that you’re not just looking for anyone to get the job done. You want to hire a contractor who is well-rated, will get the job done right and will not just abandon the project mid-way. If you plan to sell the home, it must pass inspections and impress potential buyers. Poor craftsmanship will show through and turn away potential buyers.

Expect to pay more for a good contractor, but the peace of mind and quality work is worth the cost.

Utilities, Insurance and Taxes

In addition to repair costs, you’ll need to consider the costs of utilities, insurance and taxes until the home is repaired and sold. These costs should be relatively easy to estimate and included in your total repairs estimate list.

Marketing Tips For Property Management Companies

Property management marketing techniques have rapidly changed in the past ten years.  Newspapers, radio spots, TV commercials, and telemarketing techniques have been rendered nearly obsolete by digital media.  

Today’s successful marketing campaigns operate on a different wavelength; the digital highway of the internet.  Here is a brief look at some of the most effective digital marketing tips for property management companies today.  

Learn the basics of keyword marketing

The keywords and phrases you work into your digital content should be strategically formatted to help Google identify what your content is all about.  The goal is to find a way to determine the words most searched by web users seeking services/products similar to what your business offers.

The best tool for keyword research is Google Keyword Planner.  Get your marketing content to the next level of effectiveness with this fabulous textual tool.  The right keywords can mean the difference between 500 and 5,000 views per day.  

Cater everything towards mobile media

Mobile access to the web is  more prominent than ever before, and your digital content should take factors such as those into account.  Optimize everything you post online to fit the display format of the smaller screen of a mobile device.

The easiest way to take a step towards mobile optimization is to integrate media queries into your design coding.  Media queries will automatically detect and augment your content to fit the screen of the mobile device currently viewing your organization’s digital information.  

Work social media into your marketing plan

Social media should always be a part of your marketing plans.  Your business website should be the hub of your social media push, second only to your actual social media profiles.  

Work all of the most popular social media networks, and use social media sharing icons throughout your business website design.  Take a look at this property management website.  The placement of their social media sharing icons is ideal.  Web users need the ability to share on a whim.

Check out what the competition is doing

Before you lay out your digital marketing plan, it’s beneficial to do a bit of research on what the competition has to offer.  This is not to say that you should copy exactly what others are doing to grab the attention of consumers.

Use the information you find during your research to formulate your own well-rounded marketing plan centered around the benefits of property management services.  

Learn the ins and outs of SEO

Search engine optimization is a collection of concepts which will help you form more directly focused and effective digital content.  Learn how to get your digital creations at the top of the results list when web users search relevant terms to your organization.

Single Family Home vs Condo: Which is the Better Investment?

If you’re planning to invest in real estate, you may be wondering whether a single-family home or a condo will provide the best return. Both have their pros and cons, but ultimately, it comes down to your personal preference, the market and the location.

There are several things to consider when deciding which option is best for your investment portfolio.

Investment Return

Condos have long been favored by investors because they’re low maintenance and affordable. The idea is to park your money in the property with the idea that it will appreciate over the years without you having to spend a fortune on maintenance. Ideally, you would sell the condo in the future for a substantial gain.

If you’re buying with the prospect of renting, the fair cash-on-cash investment return tends to be higher with a condo compared to a single-family home (4-7% vs. 3-5%).

Just keep in mind that in the future, when you decide to sell, you may not see the substantial gains you were hoping for. Many potential homebuyers would rather not pay a higher sales price and then pricey condo fees on top of that.

Of course, this doesn’t apply to every market. Myrtle Beach, a hotspot for condo investment, was the second-fastest growing metro area last year. A growing market means a healthy economy and, usually, higher real estate prices. Location has a significant effect on an investment property’s return and appreciation rate.

Tenant Turnover Rate

When renting property, tenant turnover rate is an important thing to consider and will have a direct impact on your income stream. Whenever a tenant leaves, it’s up to you to find a new one.

Finding a new tenant can be a lot of work. It means having to take calls, show the property, do a credit check, pay for advertising and draft a lease. Even if the previous tenant left the home in good shape, you’ll still need to make some minor repairs, like carpet cleaning and paint.

Apartment and condo units, unfortunately, have higher turnover rates (usually every other year). With single-family homes, tenants tend to stay longer.

Of course, if the condo community offers excellent amenities, your tenants may stay longer. And if you can target people who prefer condo living, you may boost your chances of a longer-term stay.

Maintenance and Repairs

One attractive selling point of a condo – aside from its lower price – is the fact that they are low maintenance. With a condo, you pay an association fee that covers the cost of maintaining the exterior of the building.

If there are problems with the roof, the association will take care of it. They take care of mowing the grass, too.

With a single-family home, you’ll be responsible for everything. That includes the home’s exterior, the lawn, the roof, painting, landscaping, etc.

It’s much less work owning and maintaining a condo.

HOA

Speaking of the association, condo owners pay a monthly HOA fee for maintenance of the building and grounds. It also covers maintenance of amenities, like pools and gyms (another nice perk of condo living).

But with an HOA, there are restrictions – some very strict. If your tenant breaks the rules, you’re the one that has to deal with the fallout.

That being said, these same rules are what help the community maintain its image.

These are just a few of the many things to consider when deciding whether to invest in a condo or single-family home. Both can offer great returns if the right opportunity presents itself.

 

Why Canadians are Investing in Real Estate Abroad

Affordability is a serious issue in Canada’s housing market. In Toronto, the average Canadian family would have to spend 45.9% of its income to cover the cost of home ownership.

Many Canadians are heading south or abroad where housing markets are more affordable.

Between April 2016 and March 2017, Canadians spent $19 billion on real estate in the United States. Experts say the exorbitant housing prices in popular cities like Vancouver and Toronto have driven many Canadians to America.

Much of the investment activity is taking place in Florida, California and Texas. We’re also seeing Canadians investing in South Carolina in cities like Myrtle Beach, which offers 60 miles of beaches, and Charleston, which is a booming market overall for investors.

Lack of inventory has pushed housing prices in the U.S. higher, but prices have increased more quickly in Canada. The market is reaching a point where real estate in the U.S. is competitive.

Canadians purchasing real estate in the U.S. spent, on average, $560,844 on property in 2017. The median purchase price also increased to $288,615 last year, up from $223,310 the previous year.

More high-net-worth Canadians are taking their real estate investments overseas. A survey from Sotheby’s International Realty found that 80% of high-net-worth clients owned at least two properties, and one-in-five owned property outside of their home country. That statistic holds true for wealthy Canadians.

Wealthy Canadians are looking to achieve long-term capital appreciation and steady yields from rental income.

Along with the United States, Canadians are buying real estate in Europe and other parts of the world. London is a favorite city for investment, although prices have increased by double-digit percentages in recent years.

Brexit has some investors fleeing the London market for more favorable areas, like Geneva or Berlin. Real estate prices in Berlin increased by 10% in 2016.

Portugal has quickly become a popular investment destination for wealthy Canadians. Villa prices have increased by almost 4% year-over-year and rental yields have exceeded 5%.

Some Canadian investors are turning to Turkey, where a penthouse apartment can be purchased for $200,000 in Istanbul. An authoritarian government and political instability may turn off some investors, but others are finding the reward is worth the risk.

In the eastern Caribbean, investors are buying properties in St. Martin, St. Barth’s and Anguilla. The Dominican Republic is another favored spot for investment, but it’s still a developing nation with “improving infrastructure.”

Turks and Caicos offers a solid high-end rental market, and is a popular destination with Canadian travelers.

Investors with even higher budgets are moving further south to South America. Panama’s stable real estate market attracts many wealthy investors.

Outside of Panama, the gateway to South America, Chile offers Canadians more for less. While the country’s currency has fallen significantly in recent years, it’s capital city of Santiago is clean and modern.

While some investors are venturing out into these higher-risk markets, experts say that most wealthy Canadian investors are sticking to tried-and-true markets, or choosing new ones based on business or ancestry.

End of Toys R Us Leaving Glut of Vacant Space in Lower Quality Locations

The glut of vacant retail real estate space is only going to grow as consumers’ preference for the online versus brick-and-mortar shopping experience continues to claim victims. Toys R Us is the latest and not unexpected retailer demise, and its planned liquidation of as many as 700 stores across the United States is expected to leave millions of square feet of space vacant.

Nothing’s certain about the extent of the potential damage, though, as the company is still trying to negotiate possible rescues. One would combine its 200 top U.S. performers with its Canadian operations, for example.

Either way, there’s still going to be a lot of retail space available, even though landlords should have anticipated the closing given the chain’s long-standing issues. What will make the outlook murkier, though, is the patchwork strategy Toys R Us has used in choosing sites for its stores.

Many of the holes that will be created with the Toys R Us closing will be at strip shopping centers. A percentage of strip malls in the U.S. are in fact doing well – like those that have managed a solid tenant mix of Internet-resistant stores and other concerns like restaurants and specialized medical services like physical therapy services.

But over half of the Toys R Us locations in the U.S. are in what the real estate industry considers low quality, and that will be troublesome to landlords looking to fill their space at similar rates (if they are able to fill them at all).

And it’s not just the quality of the malls that’s an issue. The average Toys R Us space is around 30,000 square feet, when the biggest retail demand seems to be for 25,000 square feet or less. Retailers of a similar size to the chain that might otherwise be interested in the better locations are staying where they are and remodeling or refocusing on their digital capabilities. And while smaller stores are in Target’s sights, it’s eyeing cities and college towns for its expansion – not necessarily where Toys R Us has been situated.

Meanwhile, if the future of the chain’s Canadian operations seems appreciably brighter than in the U.S., it may be due to the “location, location, location” emphasis of the expansion strategy that started in the 1980s.

The Toys R Us Canadian footprint has been far different than in the U.S., with many in prime locations and a mix of big and smaller stores. While some of the properties may have below-market rents, landlord exposures would still be far less than they would be with such older retailers as Sears.

The slow demise of Toys R Us is a story that is still unfolding, and the impact on the commercial real estate market is just one of its various complications. It will be interesting to see how much creative use is made of the space – and how many and for how long lesser locations stay vacant.

Secondary Mortgage Market in GTA – Weighing the Pros and Cons

Home sales in the Greater Toronto Area (GTA) have decreased this year compared to last. The Toronto Real Estate Board reported that sales were down almost 35 percent in February 2018 compared to February 2017. In addition, prices have dropped, with the average sales price falling 12.4 percent for all housing types.

As 2018 moves forward, buyers are getting used to the new mortgage rules and the government regulations that went into effect on January 1 of this year. Home buyers are adjusting to the new housing market measures and have had to recalibrate their plans because of the higher interest rates and new mortgage stress testing guidelines.

What that means is that realtors have to be creative if they’re going to make sales in this market.

For both buyers and realtors, the secondary mortgage market can provide an alternative to traditional bank mortgages, one that in many instances, should be considered. Obtaining a mortgage from an alternative lender is frequently easier and quicker than getting a traditional mortgage. While it is true that buyers often need to have a larger down payment, and the loans are generally more expensive, the secondary mortgage market can provide a solution for buyers who are looking for a different course of action and for realtors who want to help their clients.

One of the great advantages of the secondary mortgage market is that it can provide a short-term solution for buyers who can then, at a later date, make different arrangements, perhaps through a traditional bank mortgage.

For example, a GTA home might have been selling for $1.4million a year ago, and today that same home will likely go for $1.05 million. If a buyer is putting 25 percent down, they will carry a mortgage of $787,500. Most secondary mortgages have a duration of one year or less. So, at 8 percent per year, the buyer is paying in one year 4 percent extra on the mortgage, or $31,496. That means effectively that the property costs an extra $31,496. That’s not really significant since the buyer could close in a buyer’s market that’s discounted. In a year’s time, the buyers can investigate refinancing with a traditional bank mortgage, and will hopefully be in a much better situation.

Realtors who want to guide buyers towards the secondary mortgage market should exercise caution, however, and recommend alternative lenders only to those buyers who can carry such a mortgage and have the financial resources and income ability to refinance within a year.

I would also recommend that GTA realtors who are interested in offering advice about the secondary mortgage market establish direct relationships with alternative lenders rather than with mortgage brokers; brokers will often charge substantial fees, which can add to the costs incurred by the buyers.

Although sales in the GTA market have taken a downturn, there are still a number of ways for both buyers and realtors to take advantage of the market conditions.