Purchasing Property: A Long-Term Investment

This week on CIBL’s Les Oranges Pressées, we will shed light on a subject that has a lot of people talking: reselling condos for profit. Our discussion will be based on an article from La Presse titled One in Three Condos are Sold at a Loss. We will qualify certain remarks made in the article, including those based on statistics from the firm JLR.

Market Transitions
The real estate sector used to be idle, but has moved from a seller’s market to a buyer’s market. Consequently, this growing buyer’s market has led to an abundance of condos in Montreal’s central neighborhoods.

Delays Between Purchasing and Reselling
Analyses from the firm JLR found that 33% of condos purchased in 2012–2013 and resold before December 31, 2015, was put up for sale for an equal or inferior price than originally listed. We must interpret these values on the level of the micro real estate market, that is to say, to take into consideration the costs associated to reselling. In reality, a two-year period between purchasing and reselling is too short to be able to get a return. Typically, a minimum period of five years is needed to generate a profit.

When it comes time to resell a property, owners must bear in mind all the associated costs, such as notary fees, welcome taxes, brokerage fees, and transfer taxes. Together, these costs represent an expense of nearly $20,000. Therefore, in order to resell a home without any loss just two years after its purchase, the market would have to increase at a rate of 3.5% per year, which represents a total augmentation of 7% over two years to make a $22,000 profit. In this case, the associated costs at the resale stage would be met and there would be no loss.

Think about property investments the same way you would think about adopting a pet: when you commit yourself to an animal, it’s for the long haul! It’s unrealistic to think that you can make money on a short-term basis by investing in real estate. Purchasing a home is not a magic formula that will automatically generate quick profits. For example, investing in duplexes and triplexes will only become profitable after twenty years or so, once all the debt is taken care of and a revenue is generated. In other words, buying a condo is never so clear-cut; it can take a lot of time and effort before your investment gets profitable.

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Professional Liability Insurance Fund of the Quebec Real Estate Brokerage

Spring has finally arrived! And like many people at this time of the year, real estate fever has taken hold. A desire for change and novelty drives you to seek out a completely different living environment- a new home. You may be wondering if taking on a broker to help you in the sale or purchase of your next property is really worth it.

In the “For” column you have many useful benefits: expertise, efficiency, time-saving, access to a network of real estate professionals, etc. But there’s one factor you are probably unaware of that you absolutely must add to that list. And that’s the FARCIQ !

What exactly is the FARCIQ ? It stands for Fonds d’Assurance Responsabilité professionnelle du Courtage Immobilier du Québec. In English it means the Professional Liability Insurance Fund of Quebec Real Estate Brokerage. FARCIQ is responsible for dealing with public claims as well as instructing license holders of the process for managing their titles. The FARCIQ therefore ensures the professional liability of all real estate brokers and mortgage agencies in Quebec.

Its role is divided into three parts:

• First, it provides protection in the event of misconduct, error, negligence or omission that may be committed by a brokerage licensee in the course of his or her professional activities.

• Secondly, it ensures compensation for the resulting loss when professional liability occurs.

• Finally, it addresses the needs and concerns of the brokers with respect to their liability insurance while helping them to prevent risks associated with professional mistakes. It also provides them a service that offers assistance and advice to answer all their questions and cover all their cases. No matter what your buying or selling situation may be, you can be assured that your broker will have the right information and knowledge to ensure that your transaction takes place in the best possible conditions.

In addition, this insurance, mandatory since 2006, is reserved for real estate brokers or mortgage holders who possess a permit issued by the OACIQ (Organisme d’autoréglementation du courtage immobilier du Québec), a self-regulating body for Quebec Real Estate Brokerage. This organization legally protects the public that uses Real estate brokerage and mortgage services.

That’s why, when you’re dealing with a professional broker, you (and all your transactions) get double protection! Reassuring isn’t it?

That should tip the balance on the “For” side!

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