How to Weed Out Problem Tenants

The last thing a landlord wants to do is rent to the wrong tenant. So for property managers who are taking care of the leasing details, they are the first line of defense in keeping problem tenants out of the building. Landlords are leaning on these property managers and expecting them to find renters who aren’t going to damage the property, be late with rent payments, or take the landlords to court.

So how do you ensure your tenants are the right ones? Global real estate network Lamudi offers five tips for selecting a good tenant.

1. Meet the applicants. This is about preventing problems before they start. The rapport you have with tenants will be crucial in enduring their happiness living in a property. Schedule face-to-face meetings with applicants to get a better sense of who they will be as tenants and how you can work with them. If you can’t meet face-to-face, schedule a phone call instead.
2. Be thorough with documentation. Keep a copy of tenants’ identity cards or passports, and require proof of income before administering a lease agreement. Ask for an employee contract as well as copies of their most recent pay-stubs. If you need extra confirmation of a tenant’s ability to pay, ask for them to provide previous landlords as references.
3. Check their credit history. This might seem like something more for a home buyer than a renter, but landlords/property managers should always check a tenant’s credit history. This will tell you how much outstanding debt they have, as well as whether they have a history of paying their bills on time. Even if they can afford the rent on their salary, other repayment obligations may affect their budget.
4. Look out for warning signs. Pay attention to a prospective tenant’s rental history. If they’ve moved around a lot, that could indicate issues between the tenant and their past landlords. Most landlords will want a tenant who can commit to staying for a longer period of time.
5. Listen to your instincts. Even if all the information and documentation a renter provided checks out, there may still be something holding you back from offering them a rental contract. If you feel uncomfortable renting to someone, listen to your gut — even if they look good on paper.

—REALTOR® Magazine

10 tips to help you get the best mortgage

So you’re looking for the best mortgage terms known to humankind. Well, chances are, you won’t find them. Or, even if you do, trust that the search won’t be easy. You will need to do a lot of looking to find rates that are even halfway decent. Often, what happens is this: you end up paying more for the interest than for the full amount of the principal or the loan itself.

Don’t dig yourself into that trap. Here are some of the best mortgage tips to cut down on your expenses.

1. Supposing all the terms are equal, choose the bank that provides you the lowest spread in interest formula. This results in smaller interest expenses.

2. Pick a fixed rate for the rest of your loan’s life. Do this only after you have found a rate you’re comfortable with. With a fixed rate, you won’t have to worry about ugly surprises or shocking increases down the line.

3. If you feel it’s better to get a loan with an adjustable rate, be sure to reprice quarterly. However, be sure to do this only if you believe the rates will drop lower in the short term and if your bank is offering a rate cap.

4. Increase either your down payment or your equity so you borrow very little. However, if you can invest more at a higher rate, go ahead and put down the smallest equity possible.

5. Lower your interest expenses by shortening your loan term.

6. Go with a declining-balance amortization schedule. The best mortgage experts in the business say this will help you pay lesser interest in the long haul.

7. Pay every two weeks. This may seem tedious to you but there’s a reason for it: it lets you pay off the loan quicker and lets you save on interest in the long run. Or, you can make pre-payments on the principal; this lowers your total interest expense.

8. Consider refinancing the loan if the rates drop. There is a right time and a wrong time to refinance. However, given that rates are lower now than they ever were, it makes a lot of sense to refinance while you can, when you can.

9. Negotiate for some fees to be waived. You may think it’s possible to get some of the settlement fees to be waived but it’s not. Just ask; you will be surprised what a few questions here and there can do.

10. Shop around. You will never find the best mortgage if you do not shop around. Different groups offer different terms. Here’s an insider’s tip to getting your bank to offer you lower interest rates: get the bank to consider the business relationship you have. If you have significant deposits, for example, they just might reduce the interest you need to pay.

There are mortgages, and there are mortgages. Why settle for anything less than the best? Use these 

10 tips to help you get the best mortgage. You won’t be sorry once your wallet starts feeling the difference.

By  Eric  Smith

Canadian real estate market outlook 2015

Sooner or later mortgage rates will rise and house prices will start to moderate. Why this is the year the market will finally start to turn. Buy a house. Don’t buy a house. Soft landing. Crash landing. As we start the new year, the question on everyone’s mind is: What can we expect from Canada’s housing market?

Once again, experts agree that housing affordability is stretched, historically low interest rates will rise, and housing prices will drop. Rewind 365 days and you could be reading a forecast for 2014. But this time the experts agree: prices really will fall and it’s got everything to do with the recovery of the global economy.

Now, if the global economy were a ballgame we wouldn’t be in the World Series. Oil prices are depressed and Europe is still struggling with its credit crunch. But things are slowly improving in the U.S. and within Canada, and the important teams are still in the game: our employment rate is stable, oil prices are not (yet) low enough to cause real concern, and exports have picked up as the value of our dollar has dropped. All this leads most economists to believe we’ll see slightly higher bond and mortgage rates and a nation-wide cooling of the housing market over the next couple of years.

Robert Hogue, senior economist with RBC Bank, says he believes the coming year will be “a moderating phase for the market with a soft landing in 2016.” Hogue predicts national home prices will actually rise 1% or maybe 1.5% in 2015, as buyers race to get in the market before mortgage rates increase, after which prices will fall later in the year. “It’s one of the reasons why 2014 was such a strong year.”

But he cautions home owners: “Canada’s real estate market really is a multi-headed beast. It’s essentially very strong in Toronto, Vancouver and Calgary, but it’s balanced or soft in the majority of other markets.” As such, he predicts we’ll see a cooling of the three biggest markets by the end of the year in response to small mortgage rate hikes starting mid-year.

Now, if the prime rate were to climb from its current 3% level to 5% or 6% over the next year or two, many Canadians could find themselves in deep trouble, says Hogue. But he isn’t sure we’ll see rates shooting up that fast any time soon. Until recently, analysts and policy makers considered 5% to be the neutral or natural interest rate. It was the rate that allowed full employment, a stable inflation rate, and a sustainable growing economy. But Hogue, along with economists from Morgan Stanley and analysts from the C.D. Howe Institute, believe that the “new neutral rate” has actually dropped.

The primary reason is the impact baby boomers continue to have on the national economy. As boomers continue to age and leave the workforce, Canada can expect a slowing of the labour market, which will depress productivity growth, limit the economy, and suppress potential inflation, explains Hogue. “If the new normal is markedly below what we’re used to, then we won’t see as much downward pressure on housing prices,” he says.

The impact of demographics doesn’t stop there. According to a new report by Benjamin Tal, deputy chief economist with CIBC, analysts have been seriously underestimating the number of new immigrants in Canada. New immigrants account for 70% of the country’s population growth and about half are between the ages of 25 and 44—the key demographic that leads to household formations. According to Tal the under-estimated increase in the number of home-buying immigrants in Canada will help to offset a slowing economy, created by the boomer generation. “Immigration, itself, won’t be able to change this trajectory, but it will help to offset it,” explains Tal.

But David Madani from Capital Economics isn’t convinced. “Every good economist knows that immigration always fluctuates and it’s never prevented a housing cycle in the past.” He’s also not convinced that builders are out of the weeds when it comes to supply and demand. While he agrees that absorption rates are close to historical long-term averages, he’s confident that the market will suffer. “There are too many one-bedroom condo units being built when demand shows a need for family accommodation.”

So what’s a regular home buyer to do? The best advice is prepare for the worst, but if you’re ready to jump in and you can afford it, waiting for prices to fall might not be the best idea. Ted Rechtshaffen, president and CEO at TriDelta Financial, advises against trying to time the market in general. “It’s not about prices or the mortgage rate, it’s whether you can truly afford to own the home.” This means calculating whether or not you could still afford your monthly payments even if mortgage rates increased to 4% or 5% a few years from now. It also means deciding whether or not you can stomach a housing price drop. While many economists are predicting a 10% drop, the correction could be as great as 30% in some Canadian markets.

Of course, your home is more then equity and capital. It’s the place you spend time with friends and family, and the place you build memories. “Life and lifestyle is just as important,” says Rechtshaffen, so as long as you can afford your payments, “don’t be too concerned about the correction.” - by Romana King

The Myth of the Property Ladder (A Warning to Young Canadians)

Parents are great, they spend thousands of dollars and countless hours on their children and get almost nothing in return. Joking aside, my point is that parents usually mean well. There is one area however where I believe Canadian parents are leading their precious children astray, real estate.

The property ladder refers to when buyers attempt to get their first house, where they can than save up and subsequently trade up to a better house. The whole idea, is just to get on the first rung and according to baby boomers you'll be on your way. But just as getting good grades and a good University degree was once a sure fire way to success in the past, what worked for one generation might not work for the next.

Real Estate for most young Canadians is a leveraged investment. Well not just leveraged, but very leveraged. My generation is quick to scoff at the executives from the financial crisis who ran investment banks at sky high debt to equity ratio's of 20:1+. Yet, they think nothing of putting 5% down on a house (which of course is the exact same amount of leverage). A measly 5% drop in house prices and you are wiped out. That's if you can even put 5% down in the first place. Many can't. This is where the parents step in. 

Beyond the emotional push to buy a first house with the common (yet ridiculous argument) of "why pay somebody else's rent?"  I have seen many of my friends' parents routinely gift the 5-20% of the down payment of their first house. No, they are not just giving them free money but rather giving them the money on the condition of a house purchase (and saddling them with massive mortgage debt). It's kind of a like a drug dealer offering free cocaine but only once you get addicted. It's a terrible system so why do parents do it?

The biggest reason is because it worked very well for them.  There is a very stark difference however that will dramatically effect these housing returns going forward: interest rates.   Baby boomers have ridden a three decade wave of falling interest rates. This low cost of financing has lead to the record high price to income ratio. With the end of quantitative easing in the US these low rates are very possibly coming to an end. (Remember Canadians' don't have 30 year fixed mortgages, they reset after 5 years for most people.)

This house price to income ratio chart on the right is from a September 2014 Bank of Canada presentation. Note that although it once cost just a little over 2x your annual income to buy a house, now it is 5x. 

What is actually most disturbing about this chart  though is not the record high number but the linear trend line that CMHC was so kind to add. The price to income ratio over time will revert to its mean. If it didn't, you would have house prices continue to outpace incomes and consume well over take home pay. That's what makes this dotted black line so deceptive. To the casual observer (say the CMHC board which has a deep conflict of interest with its ties to the construction and finance industry) it makes it seem like 'everything is on track' when in reality the dotted line should stay relatively flat over time. Charlie Munger would probably call it 'bullshit graphing' or something along those lines. Anyways, if this graph were to revert to any where near its historical level there would be big problems for Canada and its record high debt binge.

Moral of the story to Canadian millennials: Don't let ma and pa get you unknowingly hooked on the debt cycle, a mortgage will ultimately be your debt, not theirs. Borrow accordingly or better yet, rent until prices make sense. - by hardcore value

How can I protect myself from mortgage fraud?

To avoid unknowingly taking part in a mortgage fraud, be suspicious if you are:

• asked to say that you make more money than you really do
• asked to lie about whether you will live in a property or rent it out
• asked to sign documents that have blanks, or asked not to fill out certain sections of a form or document
• offered a fee for the use of your name and credit information
• discouraged from visiting the property, or having it appraised or inspected 

If a registered real estate professional commits mortgage fraud, The Real Estate Council of Ontario (RECO) can take away their registration or prosecute them.

See RECO’s website for more information on mortgage fraud.

Six Questions to Ask Before Refinancing

Breaking your existing home mortgage and refinancing to take advantage of low interest rates or special promotions from lenders may sound like a good idea in theory, but it may not always be possible or desirable.

For starters, lenders have tightened up the approval process, making it more difficult to get a loan.

Homeowners today need to be triathletes to qualify for a loan, with great income, great credit and great value in their home.

In addition, refinancing may not make sense financially, particularly for borrowers who plan to sell their homes in the foreseeable future.

Before taking the leap and opting to refinance, homeowners should ask themselves these six questions.

1. Do I Have Equity in My Home?

Homeowners need to have a minimum of  20% equity in their home to qualify for a new loan without having to pay creditor mortgage insurance. Adding the additional cost of mortgage insurance to a new loan could negate the benefit of a refinance.

Homeowners can still apply for a refinance even if they have low equity, because there are some lender programs they may be eligible. The best way to find out if you fit into a program is to go to ask you lender.

2. Do I Have Good Enough Credit?

Borrower credit scores play a big role in securing a good mortgage rate. In fact, you'll need a good credit score to qualify for any type of mortgage at all.

Mortgage rates operate on a sliding scale, with the lowest rates going to applicants with the highest credit scores.

Borrowers with scores below 620 may have trouble qualifying for a mortgage at any rate.

3. What Are My Financial Goals?

Many homeowners refinance to lower their monthly payments. A good mortgage calculator gives borrowers a sense of what their new payment would be after refinancing.

Others choose a shorter-term loan with higher monthly payments so they can reduce overall interest payments and own their homes faster.

Some people are restructuring their loan payments to pay their mortgages off quicker, which may work well for people with plenty of disposable income. But some folks may be too focused on paying off their mortgage and not integrating this decision with their overall financial plan.

Borrowers should also consider contributing to retirement savings and college savings, paying off high-interest debt, and saving 6 to 12 months of expenses before opting more expensive mortgage payments.


How Long Do I Plan to Stay in This Home?

Mortgage professionals generally tell borrowers to expect a home refinance to cost 1.5% to 3% of the loan amount. A simple calculation shows how long it will take to reach the break-even point when the savings outweigh the costs.

What Are the Terms of My Current Loan?

Borrowers with adjustable-rate mortgages or interest-only loans should consider the potential benefit of switching to a fixed-rate loan.

Breaking your mortgage early usually incurs a pepayment penalty and other expenses which could reduce the financial gain of a refinance.

Do I Have a Second Mortgage or Line of Credit?

Borrowers with a second mortgage or secured line of credit will face additional complexity when refinancing.

Borrowers can either pay off the second loan / line of credit or combine the two loans into a larger first mortgage. Otherwise, the lender holding that second loan /line of credit must agree to stay in second position behind the lender of the first mortgage, which the lender may or may not be willing to do.

Steven Porter, Mortgage Advisor with CIBC, steven.porter@cibc.com

Retiring with a Mortgage?

Throughout our working careers the goal most often is to own our home, mortgage free at least by the time we retire.

Here are a few considerations for you if you have reached your retirement, still have a mortgage and want a little extra money to enjoy your retirement years.

Downsize
By selling you your larger or higher priced home with a mortgage you may be able to purchase a smaller or lower priced home in another area and eliminate or reduce the size of your current mortgage.

Refinance
If monthly cash flow is a concern, refinancing your mortgage to a lesser rate and.or extending your mortgages amortization period could reduce you monthly payment obligations.

Alternative Cash Flow
Your home may lend itself to creating an income suite to generate monthly rental income. The money required to complete such a project my be accessed through the equity in your home.

Reverse Mortgage
Switching your current mortgage to a reverse mortgage with no monthly payments may also be a beneficial consideration.

Changes like the ones listed above should not be taken lightly. Be sure to discuss these options with you financial professionals and your mortgage lender.

Steven Porter, Mortgage Advisor with CIBC. steven.porter@cibc.com

5 Important Things You Must Know Before You Invest in Property

With extremely high returns on investment, it’s no wonder why more and more people today are hopping on the bandwagon, expecting to make a fortune from buying and renting property.

Just look around you and you’ll probably find a few friends, colleagues or relatives investing in property. That’s how big the market is today.

Before you plonk your hard-earned money on a piece of real estate, bear in mind that property investment is not a decision to be made on impulse – especially if everybody’s doing it.

There is a substantial amount of information that you should research and a sensible strategy to adopt if you ever want to be successful.

According to Robert Kiyosaki’s Rich Dad Real Estate Advisor, Ken McElroy, there are 5 important things you must know before you decide upon your investment.

First of all, you must know the type of property you want to invest in:
The choices can range from residential to private housings, commercial property, or even land that is waiting to be developed. You need to know the type of property you’re interested in before you can even think about financing, and other areas in the investment process.

The second thing you must know is the geographic area of your property:
According to Ken, this is called “Level 1 Research”. This level determines whether you want to invest in property within your state, city, or somewhere else in your country. Level II and III Research narrows that decision down to even greater detail, concentrating on the particular housing estate in which you want the property to be located.

The third thing you must know is your financing strategy:
How are you going to pay for your investment property? Small properties are usually paid for completely, but bigger properties typically require investors or a major loan from a bank. There are banks that will even loan you the money for smaller properties as long as the real estate has a proven record of profitability.

The fourth thing that you must have is a team:
Do you have a team of professionals who can help you manage the work involved in your investment? Typically, your team should include an accountant, mortgage broker, lawyer and a property manager. Later, you might also want to welcome on board architects, engineers, surveyors and tax consultants.

The final thing you must consider are the necessary costs for repairs even before the property can begin to earn a profit:
The value of your property is affected by the state of its interior and you will have to consider arranging for minor or major repairs before you can lease it out and get a return on your investment.

With these 5 important things in mind, you can then build a solid foundation for your investment strategy and avoid the risks that beginner investors commonly make.

Request a FREE, Hot List of Cashflow Properties with pictures and descriptions in Halton Region. Visit www.HaltonInvestmentProperties.com to request your copy.

This article is based on the teachings of Rich Dad Real Estate Advisor, Ken McElroy

Meaningful change coming to home inspection industry

Happy Holidays to all of my subscribers. Thank you for all of your emails and good wishes throughout the year. I wish all of you and your families good health and continued success in 2014.

Today anyone can call themselves a home inspector in Ontario. That is a scary proposition since most consumers depend on the opinion of a home inspector before making one of the biggest purchases of their lives. There are over 1500 home inspectors operating in the Province yet there are no mandatory training or technical standards for them to meet. The results are often a leaky roof, cracked foundation or outdated electrical wiring or plumbing that was missed and which ends up costing unwary consumers thousands of dollars to repair after closing. In extreme situations, consumers have lost their homes. Many inspectors do not carry errors and liability insurance, meaning that if they make a mistake, even if you win a lawsuit, you may recover nothing later.

The Ontario Minister of Consumer Services formed a panel of industry experts to make recommendations to change the home inspection industry, which included home inspectors, educators, a Realtor, a lawyer, educators, engineers and an insurance broker.

Their report is aptly titled "A Closer Look: Qualifying Ontario's Home Inspectors".

The main goal of the recommendations is consumer protection. This is proposed to be achieved through the following main principles:

• Home inspectors should be regulated and called "Licensed Home Inspectors";
• There will be minimum qualifications to become a licensed home inspector, including a written exam, a field test and experience requirements. Ongoing professional development and education will also be required so that home inspectors stay up to date;
• Increasing consumer awareness by providing information as to what service is or is not provided by a home inspector; for example, some inspectors may provide additional services such as energy audits, new home warranty inspections, chimneys, well, septic, mold, drainage or termite testing, while others may not. Home inspectors should not be required to enter any area of a home that is unsafe or not readily accessible.
• Access to a centralized registry of licensed home inspectors;
• A code of ethics that outlines expected behavior of home inspectors, including disclosure of any referral fees or incentive programs.
• Mandatory errors and omissions and general liability insurance to be carried by any licensed home inspector;
• A complaint and dispute resolution process for consumers; and
• A delegated administrative authority, similar to the Real Estate Council of Ontario that regulates real estate agents, overseen by the government, to license and regulate home inspectors; For example, the code of ethics referred to above would be written by the government, but the administrative authority would enforce it, with the power to penalize or suspend any home inspector who violates the code of ethics. This authority would pay for itself through the fees charged for licensing and education.

The goal is to move to this new regulatory environment within the next 18 months, to permit home inspectors to become licensed.

I spoke with Graham Clarke, an experienced home inspector with Carson Dunlop who was on the panel. As Graham indicated, almost everyone involved with the home building and selling business, from real estate agents, lawyers, mortgage brokers, lenders, builders and appraisers are all regulated by the government in some manner. It is time for the home inspection industry to become similarly licensed and regulated.

The government is also asking for feedback. If you go to the government website at

http://www.ontariocanada.com/registry/view.do?postingId=14645&language=en

then scroll down, you can get a copy of the form to complete.

If you have your own views on this important issue, send in your feedback to the government now. Change is coming to the home inspection industry, and the consumer should be the winner.

Mark Weisleder, Lawyer, Author

Steven Porter

Real Estate Broker

RE/MAX Aboutowne Realty Corp., Brokerage

www.PorterRealEstateSystem.com