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How to Invest in Ontario Real Estate – RE/MAX Canada – RE/MAX News

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Ontario real estate conditions can vary greatly, depending on the city or town you’re considering. From expensive markets like Toronto to affordable markets like Cornwall, as a real estate investor, each market offers different benefits and challenges.

Interest rates are at the lowest they’ve ever been, following a series of interest rate cuts by the Bank of Canada to bolster the economy during the Covid19 pandemic. Those who have job security could find that now is a good time to make an investment in Ontario real estate.

While open houses have taken a back seat during the pandemic, homebuyers and sellers have relied on technology to buy and sell homes. The key to success for real estate investing is choosing the right strategy and not overextending yourself financially.

Anybody can be a real estate investor. If you decide to invest in real estate and you do it right, you have an opportunity for a big payoff. Here’s how to invest in Ontario real estate.

Joint Investment

If you want to take advantage of current market conditions, but don’t have the capital to make an investment on your own, consider finding a partner and pool your resources. Ensure the partner you choose doesn’t overextend themselves financially and has good credit. Have a lawyer draw up a legal contract to outline the details of the partnership.

Rental Properties

Investors in the Ontario rental market have generally seen their property values increase over the years, all the while leasing their property to a renter in order to earn income. Look at desirable areas near public transit, employment and education hubs, where demand for rental units is high and consistent. If you do the math correctly and you continuously have tenants paying rent, you will have the cashflow to help cover your mortgage payments. Ensure that the rent you charge your tenants is enough to cover your mortgage payments and maintenance fees.

The Greater Toronto Area has been a popular area for people using this investment strategy. Since it is a highly desirable place to live with many lifestyle amenities, job opportunities, and proximity to public transit. Be strategic when choosing the right properties to increase your chances of renters being interested.

House Flipping

There’s no shortage of house flipping shows on tv that have popularized this real estate investment strategy. If done correctly, this can be a solid investment, but you may have to get your hands dirty. House flipping starts with finding properties in the province that are priced under market value. These properties may be undervalued because they need upgrades and require renovation. To flip a home, you need to see the potential of what the home could be.

If you swoop in and secure a property at a reduced sale price, to successfully flip the home, you will need to either do the renovations yourself or hire a contractor to do them. Strategic upgrades to key areas such as the kitchen and bathrooms will increase the value of the home. To be a successful house flipper, make sure you stay within budget. Under the right market conditions, when you sell the home it will hopefully be at a higher sale price than the amount of money you invested in it.

Buy and Hold

For homebuyers who are looking for an opportunity to dive into the market, starting the home-buying process while home prices are down could be a smart move – providing prices rebound again. The pandemic put a temporary pause on home sales in April 2020, however activity across Ontario real estate markets has picked up again quickly, and prices have remained resilient. With that being said, there are plenty of markets offering great investment opportunities.

An investor can purchase a house or condo that is priced below market value and hold onto it for the long term until the value increases again – and in Ontario, long-term values have been on an upward trajectory. During the time you maintain ownership of the property, you can have tenants rent it, and used the income to cover the mortgage payments. Eventually you can sell the property and get a high ROI from the increased value. By then, a good portion of your mortgage would have been payed off using rental income. Patience is key to this investment strategy!

Determining how to invest in Ontario real estate can be challenging. You can choose a straightforward buy-and-hold approach or undertake a renovation project and do a house flip. Consider your finances, the amount of time you would like to spend on the investment, your risk tolerance, the local economy and appetite for rental properties in the area. Take the right steps to do your research to choose the right investment strategy for you.

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CSA Publishes Proposed Amendments On Offering Memorandum Disclosure Requirements For Real Estate Activities – Real Estate and Construction – Canada – Mondaq News Alerts

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Canada:

CSA Publishes Proposed Amendments On Offering Memorandum Disclosure Requirements For Real Estate Activities

To print this article, all you need is to be registered or login on Mondaq.com.

On September 17, 2020, the Canadian Securities Administrators
(“CSA“) published proposed amendments
(“Proposed Amendments“) to National
Instrument 45-106 – Prospectus
Exemptions
 (“NI 45-106“),
which  investors who wish to rely on the Offering Memorandum
(“OM“) exemption set out in section 2.9
of NI-45-106 (“OM Exemption“).
 

In particular, the Proposed Amendments set out new disclosure
requirements for issuers engaged in “real estate
activities”, and those operating “collective investment
vehicles”. A discussion of the amendments relating to
“collective investment vehicles” is the subject of a
separate paper.

According to the CSA, the OM Exemption was originally designed
to be used by small, less sophisticated businesses, to raise early
stage capital from a large pool of investors without having to
comply with the costlier prospectus regime.

In practice, however, the CSA has found that the OM Exemption is
being used by large sophisticated issuers in specific industries,
such as real property ownership or development. In 2017, for
example, roughly 40% of the issuers relying on the OM Exemption had
assets of $100 million or more, with 17% of issuers being engaged
in “real estate activities” (as such term is defined
below).

Issuers Engaged in Real Estate Activities

Real Estate Activities” is defined
in the Proposed Amendments as an undertaking, the purpose of which
is primarily to generate income for shareholders, or other gains
from the lease, sale or other disposition of real property, but
does not include, mining activities, oil and gas
activities, and in Quebec, certain contracts and rights relating to
immovables.[1]

Under the Proposed Amendments, an issuer engaged in Real Estate
Activities would be subject to new disclosure requirements,
including:

  • providing an independent appraisal in
    circumstances where (i) the issuer has acquired or proposes to
    acquire an interest in real property from a Related Party (as such
    term is defined in NI-45-106); (ii) the OM discloses a value for an
    interest in real property (other than in its financial statements);
    or (iii) the issuer intends to spend a material amount of the
    proceeds of the offering to acquire an interest in real
    property;
  • providing a general description of
    the real property, including the nature of the interest held,
    whether there are any encumbrances on the property, any
    environmental liabilities, hazards or contamination, any tax
    arrears, how the property is serviced by utilities, the current and
    proposed use of the property and a statement why the issuer
    considers the real property to be suitable for its plans, and if
    there are any buildings on real property, the type of construction,
    age and condition, and a description of any units for sale or
    rental, and occupancy rates therein;
  • if the issuer will be developing the
    real property, it will be required to provide comprehensive
    disclosure on such development, including the estimated costs to
    complete the development, any significant assumptions that underlie
    the cost estimates, when the costs will be incurred, and the
    milestones and objectives of the project, including the expected
    timeline, the costs for completing each objective, and the
    consequences of failing to meet one or more objectives;
  • disclosure of penalties, sanctions,
    bankruptcy, insolvency and criminal or quasi-criminal convictions
    for parties other than the issuer, such as a developer or
    manager;
  • disclosure of any historical
    transactions involving the issuer and any Related Party, so
    investors can better evaluate transactions involving Related
    Parties;
  • disclosure of any future cash calls
    required by the investors; and
  • disclosure of the terms and
    conditions of any Rental Poll or Rental Management Agreement.

These disclosure obligations would not apply to real property
that when taken together would not be significant to a reasonable
investor. This exception is intended to ensure that issuers are not
subject to an undue disclosure burden.

Compliance reviews conducted by the CSA on issuers engaging in
Real Estate Activities indicate that these issuers are often unsure
of the disclosure required in an OM.   The Proposed
Amendments appear to set out a clear disclosure framework for these
issuers, giving them greater certainty as to what they must
disclose.  Given the complexity of these entities, the
proposals appear reasonable in the circumstances, and will
hopefully lead to investors making more informed investment
decisions.

Comment Period

The Comment Period for the Proposed Amendments will be open
until December 16, 2020. If you are interested in submitting
comments or for further information on navigating NI 45-106, please
contact: James
Leech
 at (416) 643-8819 or jleech@torkinmanes.com.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Real Estate and Construction from Canada

Asserting Privilege In The Condominium Context

Field LLP

The issue of asserting solicitor-client privilege in the condominium context is an interesting one, especially as between the condominium corporation and the individual unit owners

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PSP investing in UK real estate, OTPP issuing green bond – Benefits Canada

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The Public Sector Pension Investment Board and Aviva Investors are jointly funding a new office building in Cambridge, England.

The six-storey building has been fully pre-let to a flexible workspace provider, according to a press release that noted construction is expected to be completed in 2023. It’s the latest investment in Cambridge real estate by the partnership, which agreed in November 2019 to invest up to £250 million in commercial property across the 26-acre CB1 Estate.

Read: PSP investing in U.K. real estate; Caisse in medical startup fund, Indian infrastructure

“The continuation of our partnership with Aviva Investors in Cambridge reflects our confidence in the city’s long-term performance potential as a centre of innovation,” said Stéphane Jalbert, managing director for Europe and Asia Pacific real estate investments at the PSP, in the release. “Cambridge’s world-leading education and research institutions act as a hub and anchor for the artificial intelligence and life science disciplines, making the region a key knowledge cluster driving future performance.”

In other investment news, the Ontario Teachers’ Pension Plan’s finance trust is issuing a €750 million 10-year green bond.

An amount equal to the net proceeds from this issuance will be allocated to assets that are environmentally and socially responsible and tackle critical issues like climate change, according to a press release. This marks the inaugural green bond issued under the Ontario Teachers’ green bond framework.

“We believe a transition to a net-zero economy is underway,” said Ziad Hindo, chief investment officer at the Ontario Teachers,’ in the release. “This is expected to bring a host of attractive investments to Ontario Teachers’ that enable and support this transition, with the objective of earning strong risk-adjusted returns while also having a positive impact. OTFT’s green bond issuance allows us to access capital to support the much-needed investments to transition towards a sustainable future.”

Read: OTPP in private equity investments, Caisse encourages diversity with new fund

Meanwhile, the Canada Pension Plan Investment Board, through its wholly-owned subsidiary CPPIB Credit Investments Inc., is committing US$98 million to a bilateral financing transaction in India.

The transaction will support a strategic investment by JSW Projects Ltd. in iron producer BMM Ispat Ltd. and represents the first direct onshore credit exposure in India by the CPPIB, according to a press release.

“The transaction marks a significant milestone for CPP Investments’ credit investment program in India,” said Raymond Chan, the organization’s managing director and head of Asia Pacific credit, in the release. “Emerging markets are a significant part of our long-term strategy and India is a key component of that. We see great opportunities in providing long-term, stable capital to finance India’s growth cycle.”

And the Caisse de dépôt et placement du Québec is part of a consortium of global investors contributing to an $800-million capital raise by Inigo Ltd., a new insurance group.

The funds will provide a capital base for Inigo to open, subject to approvals, in 2021, said a press release. The consortium also includes Enstar Group Ltd., J.C. Flowers & Co., Oak Hill Advisors, Qatar Investment Authority, Stone Point Capital and Inigo’s management team.

Read: Caisse, CPPIB, Ontario Teachers’ invest in insurance company

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Canadian Real Estate Prices Surge In Growth… Except For Condos – Better Dwelling

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Canadian real estate saw prices surge across the country, but not in all segments. Canadian Real Estate Association (CREA) data show the national index saw price growth speed up in October. A breakdown of the index reveals a different picture though. Since the beginning of the pandemic, single-family home prices experienced a price surge. Meanwhile, condo apartments have seen markets rapidly cool, falling from all-time highs.

Canadian Real Estate Prices Rise Almost 1% In October

CREA’s aggregate index is making large gains across the country. The price of a typical home reached $643,000 in October, up 0.78% from the month before. This represents a 10.86% increase compared to the same month last year. Single-family homes are responsible for all of the monthly gains, as condo apartments continue to slide lower.

Canadian Real Estate Prices

The national benchmark price for a typical home, single-family, and condo apartment.

Source: CREA, Better Dwelling.

Single-Family Homes Increased More Than 1%

Single-family homes, such as detached units, have seen price growth accelerate. CREA’s benchmark price reached $701,400 in October, up 1.12% from the previous month. Compared to the same month last year, this is 12.87% higher. The rate of price growth really started to accelerate at the beginning of the pandemic.

Canadian Real Estate Price Change

The 12-month percent change in the national benchmark price for a typical home, single-family, and condo apartment.

Source: CREA, Better Dwelling.

Canadian Condo Apartment Prices Fell 0.21%

Condo apartments on the other hand, are seeing a lot less interest these days. CREA’s benchmark price for condos slipped to $477,900 in October, down 0.21% from the previous month. Compared to the same time last year, this represents a 5.68% increase. Prices have mostly been sliding lower, after peaking at the start of the pandemic.

Home prices are rising at the national level, however not all segments are created equal. The trend of higher prices, and accelerated price growth is due entirely to detached homes in the index weight. Condo apartments on the other hand, have been slipping since the pandemic. Both segments are expected to see a change of direction once things go back to normal. However, some analysts feel the brunt of the declines will be felt in condo apartments.

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