real estate

Investing in a Semi-Commercial Property: A Good or Bad Idea?

This week on Les Oranges Pressées on CIBL, we will be discussing investments in semi-commercial properties and whether they are worth the effort. Every real estate agent will tell you: there’s a big difference between buying a condo or duplex, and acquiring a property that is half commercial. Although Montreal has interesting commercial strips, it’s always a good idea to do some research before diving in.

Property Access

Becoming a commercial property owner is not as easy as owning a fully residential property. In the first case, you must dispose of funds equivalent to approximately 35% of the sale price of the property in question. Luckily the CMHC (Canada Mortgage and Housing Corporation)—whose mission is to assist Canadians seeking housing—can be of use to you if you decide to open your business at the ground level and live upstairs! In this case, the CMHC can provide you with insurance and fifteen down payments.

A Long-Term Investment

Leases for semi-commercial properties are of longer duration than residential buildings and are therefore excellent long-term investments. However, you must pay special attention to the quality of the commercial premises. In fact, some commercial strips found in Verdun, the Plateau Mont-Royal, or Hochelaga-Maisonneuve are characterized by neglected commercial buildings. Back in the day, shopkeepers did not necessarily live above their shops, which resulted in unkempt properties. But this trend has recently taken a turn, and shopkeepers are now increasingly living above their businesses.

Two Opportunities

When purchasing a semi-commercial property, two possibilities are available to you: you can either build your commerce on the ground floor and live above it, or you can live above and rent the commercial space to another business. In the second case, pay special attention to the price! Make sure to offer a reasonable rent to allow a business to settle in. Determine whether a shopkeeper would be compelled to move into your building. If this is not the case, the investment becomes much less interesting for you too! Also take into consideration the period between tenant occupancies, since a vacant space means additional fees and expenses for the property owner.

The acquisition of a semi-commercial property is a profitable and guaranteed investment if you plan to live there and establish a commercial business. Moreover, it protects you from rent increases! On the other hand, choosing to rent the space to another business can be tricky, since in this case, you will have to depend on finding tenants who will agree to your set prices.

In both cases, it’s important to conduct a market study to identify the trends of the commercial strip you will invest in. Bankers are a great resource on the subject, so feel free to consult with them when applying for your loan.

Do you have any real estate questions ?  Call or email us with your questions and we will make sure to answer all your questions.

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Real Estate Feature: Are Property Flips a Trend?

Retrouvez la chronique sur Soundcloud.comOn this week’s real estate feature on Les Oranges Pressées on CIBL, director of Via Capitale du Mont-Royal Nathalie Clément will be speaking to us about the recent wave of real estate flips in the United States and Canada. Our guest will also explain to us the difference between a prior notice and a home surrender.

For more information, read this article in La Presse:
Are Real Estate Flips Lucrative?

Read the transcript here:

Real Estate Feature: Are Property Flips a Trend?

Julien: It’s almost 8:08. We turn to Nathalie Clément, director of Via Capitale du Mont-Royal. Hello, Nathalie.

Nathalie: Hello.

Julien: Today you’ll be talking to us about property flips and flipping.

Nathalie: Yes. So these last two weeks I noticed an event on my Facebook feed called “Flipping Montreal.” The people behind the event have a television show in the United States, and they tour large American cities, or in this case Montreal, to explain how they do real estate flips. What is a flip? A flip constitutes of buying a property, renovating it, and then reselling it for profit within a year. That’s considered a flip. It’s a phenomenon that began in the United States and has been capturing many people’s imagination. There are plenty of television shows about it. We can start with my children who were watching the television show Méchant Changements… First it was changing up bedrooms, and then obviously it became flipping a house, and then that house, and all kinds of things of that nature.

Julien: For next to nothing. Not many resources.

Nathalie: Exactly. So you know it’s always going to be entertaining. There’s plenty of interest from people because it’s in our nature to be curious. Before and after photos of the houses— that catches our attention because it looks like an easy way to make money, but this is not the case. This is not the case, and I would like to set the context: why did this phenomenon start in the United States and why did it take on such magnitude? I’ll remind you that starting from 2007–2008–2009, there was the subprime mortgage crisis in the United States.

Julien: Yes.

Nathalie: Don’t forget that 6 million Americans lost their homes, which were then reclaimed by the banks. This is huge.

Julien: It’s almost equal to Quebec’s population.

Nathalie: Listen, this is incredible. I get shivers when I remember that. For me, this statistic is moving, important, and should not happen. In short, this gave way to a great deal of unoccupied homes which then became available for resell. Things settled down slowly and quietly, and then people who had renovation expertise started buying up properties. It was contractors—or people familiar with this type of work who had a workforce on hand—who renovated these properties and sold them for profit. And they followed all the television shows dealing with property flips and flipping. Even in Quebec, people speak of flips.

Julien: It really has become a very significant trend.

Nathalie: Yes, it’s a trend, except that the economic situation is not the same in Quebec. So, when I watch these shows…in the United States, there are clues, journalists, and people who follow these flips. There are statistics about them. For example, I recently came across an article titled

“What are the Ten Best American Cities to Make a Return on Your Investment Through a Real Estate Flip?” It requires factors such as a lower-than-average unemployment rate. It takes, for example, cities where there are students. A university with over 20,000 students for example—and I’m not talking about New York, Chicago, or any big city of that sort—but a city which is suited to large populations, where students work in the university, will land good jobs, and will buy properties. And then there’s the turnover rate…

Julien: A booming market.

Nathalie: Yes, a booming market. It also takes a certain foreclosure rate. Now this is not what we have in Quebec. There were articles that circulated last year about the rise of prior notices and repossessions. I just want to explain the difference between the two. To give an example, a prior notice occurs when you don’t pay your mortgage to the bank, and the bank notes a prior notice stating that if you are still in default after 60 days, they will own your house or go to the courts to force a sale under judiciary control. This is a prior notice. Otherwise, there is home surrender, which is when a bank takes back the property. Annually in Quebec, there are less than 9,000 prior notices, and at least 2,000 houses in surrender. There were articles going around lately that claimed a rise of prior notices and home surrenders in 2014. However, statistics are always compared to the previous year, and 2013 was an extremely low year. So do people think there are more prior notices and opportunities in Montreal’s market?

Julien: It can give that impression, but this is not entirely the case.

Nathalie: It might give this impression, but I don’t really think it will be the case. Besides, JLR Solutions publishes monthly statistics on the subject, and according to their January 2015 findings, there was a 17% decrease of prior notices. We’re actually moving more toward the opposite trend. Taking into consideration all the factors needed to carry out a flip, I’m not convinced that Montreal is a place where real estate flips will be carried out with such ease.

Julien: I think we need to step away from this formula, which, as you were saying, is often promoted through television, and falsely presents real estate flips as an equation concerned only with property costs. We invested $50,000–$60,000 dollars in renovations, and in the end, we resold the property for x amount. One and one make two; we made an incredible profit. It’s a lot more complicated than that.

Nathalie: It’s way more complicated than that, and it’s not really aimed at everyday people. You need a strong financial backing. You must be able to take on a home, which will be empty for months, while also obtaining a mortgage. Making payments, paying contractors, and also properly calculating the final sale price of the property. We know that Montreal is currently a buyers’ market, so we are not experiencing price increases. Extremely minimal increases, which means…

Julien: The margin is reduced.

Nathalie: The margin is reduced. So I tell people: be careful.

Julien: Be careful. Thank you for all the precautions that you carefully detailed for us this morning, Nathalie Clément, director of Via Capitale du Mont-Royal. Thank you for being with us.

Nathalie: It’s my pleasure.

Julien: See you soon.

Nathalie: Goodbye.

Real Estate Purchase: Financing Terms

Real-Estate-Purchase-Financing-TermsFor many of us, buying a home is a major and significant event in our life, more of a rite of passage than a simple administrative and financial procedure. The road to achieving this milestone can feel uncertain and is often full of obstacles and surprises. And yet, there’s nothing to it! Beyond its symbolic meaning, buying a property is actually quite simple—at least on paper. The various steps are very clear and well-defined.

No need to panic, just read the article below and you’ll learn everything you need to know about real estate purchases, and who knows, maybe you’ll feel ready to take the plunge yourself!

Buying and financing a property in 7 steps:

1. Assess your mortgage affordability:

At this stage, the simplest step is to visit a financial institution and speak with a mortgage advisor, who can then help you determine your ability to repay a mortgage loan. Your advisor will establish the amount you are able to put toward repayment each month. Various online tools are also made available to you through different banking and financial institutions, and can help you calculate the estimated costs. This first contact with the world of mortgage loans will give you a clearer picture of the process, and will help you move on to the next step. You’ll have a better idea of your budget, which will guide you in your search.

2. Determine your down payment:

The math is simple: the bigger your down payment, the less you’ll need to borrow. In Quebec, it is recommended to have a down payment equivalent to at least 20% of your property’s value. Thanks to this down payment, you’ll qualify for a conventional (meaning uninsured) loan, which will help you avoid extra costs. However, be sure to properly assess your needs and budgets, since there can always be unexpected surprises or expenses to take into account. The 20% down payment can come from various sources, such as donations, inheritances, liquid assets, investments, or even your RRSPs. If you don’t have the 20%, the law requires banking institutions to obtain mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada. In this case, a mortgage insurance premium must be paid. The smaller the down payment, the higher the premium.

3. Anticipate additional costs:

Remember that there are many additional expenses related to purchasing a home. Here are some of the biggest expenses—be sure to keep these in mind!

    • Mortgage transaction fees: inspection fees, taxes on the mortgage loan insurance premium, and federal and provincial sales taxes (with the purchase of a new house)
    • Property taxes: municipal and school taxes, welcome tax (Quebec), etc.
    • Other expenses: moving costs, home insurance, labour, etc.

4. Request a preauthorized loan:

Getting preapproved will lend more credibility to your purchasing offer and will increase your negotiating power. You can speak with a mortgage loan advisor at your financial institution before you even begin your search.

5. Find your property:

And that’s it: you’re all set! Time to spring into action! Determine what type of housing you want (house, condo, duplex, etc.), and where (city, countryside, suburbs), and then start your search! You can do it on your own by looking through various websites or newspapers, but you can also get a helping hand by consulting with a real estate agent.

6. Make your purchase offer:

Found a real gem? The house of your dreams? Then it’s time to get down to business and make your purchase offer. Your offer must contain the following information:

    • The purchase price
    • The property’s transfer date
    • The transaction’s included and/or excluded assets
    • The conditions relating to the purchase offer (inspection, etc.)

7. Obtain your mortgage loan!

The much-anticipated (and sometimes slightly dreaded) moment has arrived! Thanks to all the previous steps, this final stage should technically be nothing more than a simple formality. Now that you’ve found your ideal home, it’s time to go back to see your advisor so you can make your dream a reality.

Here are the highlights of this final stage:

    • During your first meeting with your advisor, you were able to assess your needs and establish a mortgage financing solution best suited to your budget. You were also able to determine if you should resort to a mortgage insurance (to reiterate, this is only necessary for buyers with a down payment of less than 20% of the value of the property. See step 2.)
    • Then, for the funding application, you’ll need the following documents:
        • The purchase offer
        • The confirmation of employment and income
        • The confirmation of down payments and assets
        • The assessment of loan insurance needs
        • Any other required documents (e.g. lease, proof of other income, etc.)
    • To ensure a fair market value of the property you wish to purchase, it is important to conduct an assessment. The appraiser will be contracted by the bank and certain fees will be involved.
    • Your loan has been granted! You’re going to be a homeowner!
    • You now have to formalize everything with a notary. The seller must provide the notary with:
        • The location certificate (there may be unique cases where the certificate is not provided by the seller)
        • The municipal and school tax accounts
    • On your end, you will need to sign:
        • The deed of sale
        • The mortgage deed
        • A document certifying the adjustment of municipal and school taxes
        • The credit agreement
    • The bank has transferred the funds to the notary to pay the seller. You’re now officially a homeowner!!!
    • Following this final step, your advisor will continue to look after you and will be there to address all your questions and needs, so don’t hesitate to get in touch.

The Meaning of Real Estate Symbols and Traditions

This week on our Les Oranges Pressées radio show on CIBL, we are having fun travelling and discussing real estate traditions. One of the most known superstitions revolves around the idea that a broken mirror can bring about seven years of bad luck. Yet very few people know that the spell can be broken by burying the shattered mirror pieces under moonlight. Stories dealing with superstitions are abundant in the world of real estate, and each one has a specific meaning according to its country of origin.

Exterior Symbols

In Anglo-Saxon culture, a red door signifies that homeowners have successfully paid off their mortgage. While long ago in the United States, a red door was seen as a welcoming sign for travellers, indicating a secure location where globetrotters could rest in full tranquillity. In China, the colour red symbolizes good luck and is seen as an entry point where the chi—a fundamental concept which forms and animates life in the universe—can enter a home.

The lion statues spotted throughout Montreal and its greater area also have their traditional histories. In Vietnam, they protect and empower people. In China, they act as guardians, defending homes against accidents and theft. For Buddhists, lion statues are said to bring peace and prosperity, while in Italy, they symbolize power and prestige. In Quebec, homeowners traditionally place one or two lions in front of their house once their mortgage is paid off. Whether placed in front of a door or by a staircase, the lion remains true to itself as a symbol of honour, respect, and power, and can even be seen in popular buildings in Paris and New York.

Interior Symbols

In certain cultures, tripping while walking up a staircase is seen as a sign of good luck or a possible upcoming wedding. In contrast, stumbling while walking down the stairs or crossing paths with someone signifies bad luck. Apparently crossing your fingers is the only way to ward off this spell!

Even less known in popular culture are superstitions surrounding brooms! According to tradition, when moving into a home, one must always have a new broom and some bread on hand. When leaving an old property, it is also customary to burn all your old rags, to bring good luck to your new home. In England, placing a broom behind your front door will deter people with ill intentions from entering. In Sicily, placing a broom outdoors on the night of Saint Jean-Baptiste will bring about good luck and chase away evil spirits. At one time, people would even hang a broom in front of their main entrance to indicate the presence of a young girl to marry in the house. And finally, saving the best for last: in certain customs, placing a broom on the ground in front of your guests signifies that time has come for them to leave! Who would have thought that a broom could mean so many things?

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