Investing - Orientation

Pre-Qualification

When we initially contact each other the most important question we will ask is what price range you will be able to afford. Whether the finances come in the form of a loan, cash, or other investment, this is important to know so that we don’t waste time looking for something you cannot afford. If you have the cash or finances invested in something else at the moment then that’ll be fine; we will just need to know what price range you’re looking at. But if the financing will come in the form of a loan then you should be pre-approved before we start looking so that you know what you can afford. A pre-approval is also beneficial, because it locks in an interest rate for you for a few months. A locked in interest rate is optional; it does not have to be used. For example, if the current interest rate goes up you would most likely like to use the one you have locked in, but if it were to go down, you can choose not to use it and use the new current interest rate.

We have references to mortgage brokers you can use in the Helpful Tools page.

Our Available Inventory

We usually have an inventory of properties that we have done the due diligence for already and recommend to our investors. They are featured in the slides at the top of this page. If nothing there strikes any interest in your preferences then we can always find something that does.

Realtor/Client Relationship

When we get together for an orientation we will present papers that outline what exactly our responsibilities as agents are to you and how we form a realtor/client relationship. These responsibilities are actually outlined by the Real Estate and Business Broker’s Act (REBBA) as fiduciary duties and are composed of six duties, which can be remembered by the two words “OLD CAR”:

Obedience - The agent should follow the client’s lawful instructions even against their own reasonable judgement.
Loyalty - The agent must place the client’s interests above all else excluding the law. The agent is only allowed to act for one client in the transaction unless they are given permission to do otherwise in writing. So in the case were the agent would represent both sides of the seller and the buyer the agent must have permission from both sides to do so on paper. In the case of multiple representation the seller and buyer should not disclose their final price so that the agent can pertain to his duties as best as they can.

Disclosure - The agent must disclose any information that is relevant to the transaction so that the client can utilize all of it fairly and make the best decisions.

Confidentiality - An agent must not use any information acquired from a client to cause them harm or interfere in their personal business.

Accounting - The agent must provide complete details of all funds held in trust.

Reasonable Care (Competence) - An agent should have sufficient knowledge and skill to carry out duties. The agent must show care and skill in their work and be able to carry out their duties professionally.

To receive all of these fiduciary duties from the agent a Buyer Representation Agreement must be signed. The agreement can be limited to a certain time frame (a week, month or a few months), or a specific location (specific property address, community, municipality or area) so our relationship can vary depending on how comfortable you are having us represent you in these two aspects. Once we both sign the agreement all of the duties above bind us to you and we will be able to serve you most effectively, because you have shown a sign of commitment.

Closing Costs

The closing costs for a buyer consist of Land Transfer Tax (LTT), lawyer, mortgage broker, and inspector fees, commission, and a possible CMHC premium.

In Ontario the LTT is calculated using this system:

• 0.5% of the value of the consideration up to and including $55,000,
• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and
• 1.5% of the value of the consideration which exceeds $250,000, and
• 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.

First time buyers have a deduction of up to $2,500.00 for their LLT from the government to help them buy their first home. However property in Toronto is also charged a Municipal Land Transfer Tax (MLTT), which also has a higher government deduction for first time buyers. You can use the LTT calculator we provide in our Helpful Tools section to calculate the tax or just by clicking this link here.

Lawyer fees on average range around $1000 and some also include title insurance, which covers any issues that may have slipped through the cracks in regards to the title (the papers holding all the information about the purchased property) after closing. The lawyer’s responsibility is to find any possible errors or areas that should be addressed on title that may defer from what the property initially seemed to imply. We include references to different lawyers in our Helpful Tools page.

The mortgage broker’s fee varies on the size of the mortgage and it is added onto the mortgage. Mortgage broker’s have already been outline in the Mortgage Lender’s section and it may give you an idea of why you might choose one over a bank. We also include references to different mortgage brokers in our Helpful Tools page.

Inspector’s are hired to check the physical condition of the property. If anything is wrong with the home a good inspector should be able to find it. An inspector is an optional choice (a friendly contractor can be asked to check the property instead), but he is a professional that can in the long run save you a lot of money. They cost around $400-$500, but if they find anything serious they can actually bring up a serious reason to ask for a deduction on the price of the home, or you might just want to avoid purchasing the house if the issue is too serious and look for another (NOTE: when an inspector is used an inspection clause in the agreement between the seller and buyer must be used to make adjustments to the price again or to terminate the agreement). We also include references to different inspectors in our Helpful Tools page.

As a buyer the commission does not have to be paid by you. The seller is always the one to pay the commission for the real estate agents in the transaction (unless the buyer would like to pay an additional commission for better service or to show their gratitude after our service has been produced). The reason the seller pays the commission for the buying agent as well is to attract them and their buyers to view their property. The seller can therefore use the commission as a marketing campaign to attract more buyers.

The reason for the CMHC premium is explained in the Mortgage Lender’s section. The cost for the premium is as high as 2.75 percent of the mortgage, which is added on top the mortgage. The percentage becomes lower as the downpayment increases. The CMHC calculator can be found in our Helpful Tools page or by clicking this link here.

Outlining the Market Search and Market Trends

After we are done outlining the realtor relationship and cost factors to you, we will try to narrow down what exactly you are looking for and what you can expect out of the market when you’re looking for your intended investment. The market trends can be found in our Market Search section on our Helpful Tools page. It will show you the change in the price of the average home in our market and we can draw conclusions from there on where it will be directed towards from there along with other current market factors. You have to explain what you are expecting from the investment the most, whether it be a good cash-flow, low vacancy, a flip, long term investment, location, etc. so we can narrow down the search criteria. If you are new to investing you must keep in mind that an investment property will not be able to provide all of best worlds to you. For example if you want low vacancy rates, you have to expect the property to be in a low income class neighbourhood (the poor comprise the highest ratio of renters demographically), which usually indicates higher levels of crime and older homes. This is why its important for you to explain what you expect from your investment property the most so we can find the best deals according to your preferences.